8-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): December 20, 2011

FIRSTCITY FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	033-19694	76-0243729
(State of incorporation)	(Commission File No.)	(IRS Employer Identification No.)

6400 Imperial Drive
Waco, Texas 76712

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code:  (254) 761-2800

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligations of the registrant under any of the following provisions:

oWritten communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

oSoliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

oPre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

oPre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Section 1 — Registrant’s Business and Operations

Item 1.01  Entry into a Material Definitive Agreement.

Bank of Scotland Credit Facility Refinancing

On December 20, 2011, FirstCity Commercial Corporation (“FC Commercial”), as borrower, and FLBG Corporation (“FLBG Corp.”), as guarantor, both of which are subsidiaries of FirstCity Financial Corporation (“FirstCity”), and Bank of Scotland plc (“Bank of Scotland”), acting through its New York Branch as agent, collateral agent and lender, entered into an Amended and Restated Reducing Note Facility Agreement (the “Amended & Restated BoS Agreement”) that amended and restated the Reducing Note Facility Agreement that these parties had executed previously on June 25, 2010 (the “Reducing Note Facility”), along with FH Partners LLC (“FH Partners”), as borrower, a FirstCity subsidiary, and BOS (USA) Inc. (“BOS-USA”), as lender.

The Reducing Note Facility had an unpaid principal balance of approximately $173.9 million on December 20, 2011. FC Commercial’s obligation under the Amended & Restated BoS Agreement (defined as “BoS Facility A” and described below), was reduced by the assumption of $25.0 million of debt (defined as “BoS Facility B” and described below) by FLBG2 Holdings LLC (“FLBG2”), a newly-formed subsidiary of FirstCity, combined with a $50.0 million reduction from proceeds obtained under a new credit facility between FH Partners, as borrower, and Bank of America, N.A. (“Bank of America”), as lender (defined as “BoA Loan” and described below), and $3.4 million of reductions at closing primarily from cash payments made by other FirstCity subsidiaries.

BoS Facility A

The primary terms and conditions of FC Commercial’s $103.5 million loan facility with Bank of Scotland (as lender) under BoS Facility A, which includes the $95.5 million debt obligation, are as follows:

·Release of assets of FH Partners (the “FH Partners Assets”) which secured the Reducing Note Facility to allow FH Partners to pledge the FH Partners Assets as collateral for the BoA Loan (Bank of Scotland was granted a subordinated security interest in these assets);

·Repayment will be made over time as cash flows are realized from the pledged assets (primarily loans, real estate and equity investments) other than the FH Partners Assets;

·Additional repayment will be made from residual cash flows from the FH Partners Assets from excess cash flow released to FH Partners under the loan facility for the BoA Loan (“FH Partners Excess Cash Flow”) and after the payment of the BoA Loan;

·Fixed annual interest rate equal to 0.25%;

·Maturity date of December 31, 2014;

·Unlimited guaranty provided by FirstCity for the repayment of the indebtedness under BoS Facility A;

·No advances will be made under this loan facility, except for draws on an outstanding letter of credit in the amount of $8.0 million;

·FirstCity will receive a management fee after payment to Bank of Scotland of interest and fees, certain expenses and other items, which is equal to 10% of the monthly collections from the underlying pledged assets other than the FH Partners Assets, and 5% of the of the monthly collections from the FH Partners Assets as FH Partners Excess Cash Flow is paid to Bank of Scotland (i.e. cash “leak-through”), which fees are not required to be applied to the debt owed to Bank of Scotland; the 5% management fee related to the FH Partners Assets is in addition to a 5% servicing fee paid under the loan facility for the BoA Loan and is deferred on a cumulative basis until the FH Partners Excess Cash Flow is paid to Bank of Scotland;

·After payment of the BoA Loan, FirstCity will receive a management fee equal to 10% of any monthly collections from the FH Partners Assets, after payment to Bank of Scotland of interest and fees, certain expenses and other items;

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·FirstCity may designate a portion of the aggregated outstanding balance under this loan facility to be denominated in Euros up to a maximum amount equivalent to $27.5 million (USD);

·FirstCity must maintain a minimum tangible net worth (as defined in the Amended & Restated BoS Agreement) of $90.0 million;

·Release of FC Commercial, FH Partners, FLBG Corp, FirstCity, and certain FirstCity subsidiaries obligated under the Reducing Note Facility from liability for payment to Bank of Scotland or BoS-USA for the $25.0 million loan principal amount assumed by FLBG2 (under BoS Facility B with BoS-USA); and

·Guaranty provided by FLBG Corp. and a substantial majority of its subsidiaries, which are the entities that were primarily subject to the obligations of the Reducing Note Facility (the “Covered Entities”). This loan facility is secured by substantially all of the assets of the Covered Entities. FH Partners provides a subordinated guaranty of the BoS Facility A (subordinated to the BoA Loan) and a subordinated security interest in the FH Partners Assets.  FirstCity Servicing Corporation (“FC Servicing”), a FirstCity subsidiary which is not a subsidiary of FLBG Corp., does not guarantee the BoS Facility A, but does provides a non-recourse security interest in certain equity interests owned by it and in most of the servicing fees from agreements entered into prior to the execution of the Reducing Note Facility.

In addition to the foregoing, BoS Facility A contains representations and warranties of FC Commercial and FLBG Corp. that are typical for a loan facility of this type. The representations and warranties made by FirstCity in BoS Facility A are qualified by reference to certain exceptions and matters contained in schedules delivered to Bank of Scotland. Accordingly, the representations and warranties contained in BoS Facility A and its related agreements should not be relied upon by third parties who have not reviewed the disclosure schedules and the documentation surrounding the transaction as a whole.

BoS Facility A contains covenants on the part of FirstCity, FC Commercial and FLBG Corp. that are typical for a loan facility of this type.

BoS Facility A contains customary events of default, including, failure to make required payments, failure to comply with certain agreements or covenants, failure to pay, or default under, certain other indebtedness, certain events of bankruptcy and insolvency, and failure to pay certain judgments. In the event that an event of default occurs and is continuing, Bank of Scotland may accelerate the indebtedness under this loan facility.

The foregoing descriptions of the BoS Facility A and FirstCity’s related guaranty under this loan facility are qualified in their entirety by reference to the full text of such agreements attached hereto as Exhibits 10.1 and 10.2, respectively, and are incorporated herein by this reference.

BoS Facility B

The primary terms and conditions of FLBG2’s $25.0 million debt obligation with BoS-USA (as lender) under BoS Facility B are as follows:

·Source of repayment will be derived solely from future cash flows, if any, from the assets of FLBG2 (loans with nominal value — see discussion below);

·No interest accrues or is payable until after maturity;

·Maturity date of December 31, 2014 (see discussion below); and

·FirstCity will receive a management fee equal to 10% of the monthly collections on the assets of FLBG2 (i.e. cash “leak-through”), if any, after payment to BoS-USA of any fees.

The assets of FLBG2 consist of loan transferred to it by the Covered Entities for nominal consideration. FirstCity has not received any significant cash flows from the assets of FLBG2 and has not allocated any value to such assets for the past two years. FLBG2 has no assets other than the loans pledged to this loan facility, and has no intent to actively pursue collection of these assets. FLBG2 has no alternative sources of income or liquidity.

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FirstCity and its other subsidiaries are not obligated to provide any additional funds or capital to FLBG2, do not guaranty the repayment of BoS Facility B, and do not intend to contribute any funds to FLBG2 or pay any amounts owed by FLBG2 under BoS Facility B (before or after its maturity).

At maturity of the BoS Facility B, there will likely be a default by FLBG2 as no collections are projected by FirstCity to be received from the assets of FLBG2. The sole recourse of Bank of Scotland on any such default will be to foreclose on the assets of FLBG2. Any default will not have a material adverse effect on FirstCity, as this loan will not be carried at any significant value on the financial statements of FLBG2 or FirstCity.

In addition to the foregoing, BoS Facility B contains limited representations and warranties in light of the nature of the assets of FLBG2 and its lack of liquidity. The provisions of the BoS Facility B recognize the nature of the assets and acknowledge that FLBG2 has limited assets and liquidity, and that FirstCity and its other affiliates and subsidiaries are not liable for debt under the BoS Facility B and are not obligated to make contributions to FLBG2.

BoS Facility B contains limited covenants on the part of FLGB2 in light of the nature of the assets of FLBG2 and the lack of liquidity or sources of funds for FLBG2.

BoS Facility B contains customary events of default, including, failure to make required payments, failure to comply with certain agreements or covenants, failure to pay, or default under, certain other indebtedness, certain events of bankruptcy and insolvency, and failure to pay certain judgments. In the event that an event of default occurs and is continuing, Bank of Scotland may accelerate the indebtedness under this loan facility.

The foregoing description of the BoS Facility B is qualified in its entirety by reference to the full text of such agreement attached hereto as Exhibit 10.3 and is incorporated herein by this reference.

Nature of Material Relationship with Bank of Scotland and BoS-USA

FirstCity has had a significant relationship with Bank of Scotland, BoS-USA and certain of their affiliates since 1997. Since such time, Bank of Scotland, BoS-USA and certain of their affiliates have provided credit facilities to FirstCity and its wholly-owned subsidiaries. Bank of Scotland and BoS-USA provided FirstCity and its subsidiaries financing under the $268.6 million Reducing Note Facility prior to the entry into the loan facilities described above.

Bank of America Credit Facility Financing

On December 20, 2011, FH Partners, as borrower, and Bank of America, as lender, entered into a $50.0 million term loan facility (“BoA Loan”) that allows for repayment over time as cash flows from the underlying assets securing this loan facility are realized. FirstCity used the proceeds from this loan facility to reduce the principal balance outstanding under the Reducing Note Facility which was amended and restated by the Amended & Restated BoS Agreement (as described above). The primary terms and conditions under the BoA Loan are as follows:

·Minimum principal payments through maturity so that the total principal balance outstanding does not exceed the following amounts on the dates indicated: $45.0 million at June 30, 2012; $30.0 million at December 31, 2012; $25.0 million at June 30, 2013; $20.0 million at December 31, 2013; $15.0 million at June 30, 2014; and $10.0 million at December 31, 2014 (initial maturity);

·Initial maturity date of December 31, 2014, which may be extended one year (subject to certain terms and conditions);

·Variable annual interest rate based on LIBOR daily floating rate plus 2.75%;

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·FirstCity will receive a servicing fee equal to 5% of the monthly collections (i.e. cash “leak-through”) from the pledged assets after payment to Bank of America of interest, fees and required principal payment reductions;

·Minimum debt service coverage ratio (defined) of 1.4 to 1.0 (beginning with the quarterly period ended March 31, 2012); and

·FC Servicing must maintain a minimum net worth of $1.0 million.

In addition to the foregoing, the BoA Loan contains representations and warranties of FH Partners that are typical for a loan facility of this type. The representations and warranties made by FH Partners in connection with the BoA Loan are qualified by reference to certain exceptions and matters contained in schedules delivered to Bank of America. Accordingly, the representations and warranties contained in the BoA Loan and its related agreements should not be relied upon by third parties who have not reviewed the disclosure schedules and the documentation surrounding the transaction as a whole.

The BoA Loan contains covenants on the part of FH Partners that are typical for a loan facility of this type.

The BoA Loan contains customary events of default, including, failure to make required payments, failure to comply with certain agreements or covenants, failure to pay, or default under, certain other indebtedness, certain events of bankruptcy and insolvency, and failure to pay certain judgments. In the event that an event of default occurs and is continuing, Bank of America may accelerate the indebtedness under this loan facility.

The foregoing description of the BoA Loan is qualified in its entirety by reference to the full text of such agreement attached hereto as Exhibit 10.4 and is incorporated herein by this reference.

Section 2 — Financial Information

Item 2.03  Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

Bank of Scotland Credit Facility Refinancing and Bank of America Credit Facility Financing

The obligations of FC Commercial and FH Partners LLC, as borrowers, and FirstCity, FLBG Corp. and certain of its subsidiaries, as guarantors, under BoS Facility A[, BoS Facility B], BoA Loan and related loan documents, constitute direct financial obligations that are material to FirstCity. As to such direct financial obligations, the information included in Item 1.01 of this Current Report on Form 8-K is hereby incorporated by reference.

Item 9.01.  Financial Statements and Exhibits

(d)Exhibits:

10.1Amended and Restated Reducing Note Facility Agreement, dated as of December 19, 2011, among FirstCity Commercial Corporation, as borrower, FLBG Corporation, as guarantor, and Bank of Scotland plc, as lender, agent and collateral agent

10.2Amended and Restated Guaranty Agreement, dated as of December 19, 2011, by FirstCity Financial Corporation, for the benefit Bank of Scotland plc, as lender and party to the Amended and Restated Reducing Note Facility Agreement dated December 19, 2011

10.3Reducing Note Facility Agreement, dated as of December 19, 2011, among FLBG2 Holdings LLC, as borrower, BOS (USA) Inc., as lender, and Bank of Scotland plc, as agent and collateral agent

10.4Term Loan Agreement, dated as of December 19, 2011, among FH Partners LLC, as borrower, and Bank of America, N.A., as agent and lender

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	FIRSTCITY FINANCIAL CORPORATION
Date: December 23, 2011	By:	/s/ J. Bryan Baker
		J. Bryan Baker
		Senior Vice President and Chief Financial Officer

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EXHIBIT INDEX

Exhibit No.		Description
	10.1	Amended and Restated Reducing Note Facility Agreement, dated as of December 19, 2011, among FirstCity Commercial Corporation, as borrower, FLBG Corporation, as guarantor, and Bank of Scotland plc, as lender, agent and collateral agent
	10.2	Amended and Restated Guaranty Agreement, dated as of December 19, 2011, by FirstCity Financial Corporation, for the benefit Bank of Scotland plc, as lender and party to the Amended and Restated Reducing Note Facility Agreement dated December 19, 2011
	10.3	Reducing Note Facility Agreement, dated as of December 19, 2011, among FLBG2 Holdings LLC, as borrower, BOS (USA) Inc., as lender, and Bank of Scotland plc, as agent and collateral agent
	10.4	Term Loan Agreement, dated as of December 19, 2011, among FH Partners LLC, as borrower, and Bank of America, N.A., as agent and lender

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EX-10.1

Exhibit 10.1

_________________________________________________________________

AMENDED AND RESTATED REDUCING NOTE FACILITY AGREEMENT

among

FIRSTCITY COMMERCIAL CORPORATION

as Borrower

and

FLBG CORPORATION

as a Guarantor

BANK OF SCOTLAND PLC
as Lender,

with

BANK OF SCOTLAND PLC,

acting through its New York Branch,

as Agent and Collateral Agent

Dated as of December 19, 2011

_________________________________________________________________

AMENDED AND RESTATED REDUCING NOTE FACILITY AGREEMENT

AMENDED AND RESTATED REDUCING NOTE FACILITY AGREEMENT, dated as of December 19, 2011 among FIRSTCITY COMMERCIAL CORPORATION, a Texas corporation, as Borrower (the “Borrower”), FLBG CORPORATION, a Texas corporation, as Guarantor (“FLBG”), BANK OF SCOTLAND PLC, acting through its New York branch, as lender (the “Lender”), the financial institutions from time to time party hereto as Lender (together with the Lender, the “Lenders”), and BANK OF SCOTLAND PLC, acting through its New York branch, as agent for Lenders (in such capacity, “Agent”) and as collateral agent for Lenders (in such capacity, “Collateral Agent”).

W I T N E S S E T H :

WHEREAS, the Borrower, FH Partners LLC, a Texas limited liability company (“FH Partners”), FLBG, the Lender, BOS (USA) INC., a Delaware corporation (“BOS (USA)”), and the Agent are parties to a certain Reducing Note Facility Agreement dated as of June 25, 2010 (as the same has been amended from to time to time (the “Reducing Note Facility Agreement”) evidencing loans thereunder (such loans, collectively, the “Loans”);

WHEREAS, the Borrower and the Borrower’s Affiliate, FirstCity Financial Corporation, a Delaware corporation (“FCFC”), have requested that the Lender and BOS (USA) permit the Reducing Note Facility Agreement to be amended and restated in its entirety by this Agreement to reflect the restructuring of the Loans as described in this Agreement;

WHEREAS, simultaneously with the execution and delivery of this Agreement, FH Partners is executing and delivering a Term Loan Agreement (the “BA Credit Agreement”) with Bank of America N.A. (“BA”) with the amount loaned thereunder to be paid to the Lenders to reduce the principal amount of the Loans;

WHEREAS, in connection with the execution and delivery of the BA Credit Agreement, FH Partners is pledging to BA, as security for the obligations under the BA Credit Agreement, all of the collateral identified on Schedule 1 to this Agreement (the “Released Collateral”), and the Lender is consenting to such pledge and to the subordination of the Lenders’ lien on the Released Collateral;

WHEREAS, simultaneously with the execution and delivery of this Agreement, BOS (USA) and FLBG2 Holdings LLC, a Texas limited liability company (“FLBG2”), are executing and delivering a Reducing Note Facility Agreement (the “RNF2”) to evidence the complete and absolute assumption by FLBG2 of an aggregate of $25,000,000 in principal of the Loans (the “FLBG2 Loans”) and the reduction by such amount of the principal amount of the Loans and absolute release of Borrower, FCFC, FH Partners, all Primary Obligors, all other Guarantors and all other Loan Parties from liability for payment to Agent and Lender and BOS (USA) of any claims to recover such released amount either directly or indirectly;

WHEREAS, FLBG2 is pledging to the Lender and BOS (USA), as security for the FLBG2 Loans and the Loans, all of the Collateral identified on Schedule 2 to this Agreement (the “FLBG2 Collateral”);

WHEREAS, it is the intent of the parties hereto that this Agreement shall be an amendment of the Reducing Note Facility Agreement and not a novation thereof;

WHEREAS, the Lender is willing to permit the Reducing Note Facility Agreement to be amended and restated in its entirety by this Agreement and Borrower hereby shall assume the obligations under the Reducing Note Facility Agreement as amended and restated in its entirety by this Agreement;

WHEREAS, as a condition hereof, FCFC is delivering a Guaranty in favor of the Lender of all amounts owing under this Agreement as reflected in Section 2.1(e);

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

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

Section 1.DEFINITIONS.

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

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

(c)All references to Sections in this Agreement or in Annex I hereto shall be deemed references to Sections in this Agreement unless otherwise specified.

(d)As used in this Agreement and the other Loan Documents, the terms “including” and “such as” are illustrative and not limitative.

Section 2.THE OUTSTANDING LOANS.

2.1The Outstanding Loans and Letters of Credit.

(a)Immediately prior to the execution and delivery hereof, the outstanding principal balances of the Loans and Letters of Credit under the Reducing Note Facility Agreement are as follows:

Reducing Note Facility Agreement Prior to Closing:	-	$	173,882,310
LC Outstandings	-	$	8,000,000
Total:		$	181,882,310

(b)On and as of the date hereof, the outstanding principal balance of the Loans is being reduced by a cash payment in the amount of $50,947,486 by FH Partners from funds received under the BA Credit Agreement and from Borrower related to a loan made by BA to WAMCO 30, Ltd. related to the Released Collateral pledged to BA under an existing Approved Portfolio Leverage Arrangement, the additional advance having been approved by Agent and the Lender.

(c)On and as of the date hereof, the outstanding principal balance of the Loans is being further reduced by a payment in the amount of $2,388,151 by Borrower from funds received under the Reducing Note Facility Agreement as “Leak-Through Allowance” during the period from October 7, 2011 through the date of this Agreement.

(d)On and as of the date hereof, the outstanding principal balance of the Loans that shall be absolutely assumed by FLBG2 under the RNF2 and deducted from the indebtedness due under this Agreement is $25,000,000.

(e)On and as of the date hereof after application of the payments set forth in subparts (b), (c) and (d) above, the outstanding principal balances of the Loans and Letters of Credit under the Reducing Note Facility Agreement are as follows:

Reducing Note Facility Agreement following Closing:	-	$	95,546,673
LC Outstandings	-	$	8,000,000
Total:		$	103,546,673

(f)On and as of the date hereof, the outstanding balance of Loans made in Euros is €13,913,088 (the equivalent of $18,815,087 US Dollars).  The aggregate outstanding principal amount of Loans made in Euros under this Agreement shall not exceed the equivalent of $27,500,000.  Unless otherwise provided herein, all Loans denominated in Euros shall bear interest at the Contract Rate.

(g)The Lender has no obligation under this Agreement, under the Reducing Note Facility Agreement or under any other agreement, instrument or Loan Documents to make any additional Loans to the Borrower or to any Affiliates of the Borrower, except as provided in Section 2A.4(b).

(h)FCFC and FH Partners will have no obligation or liability for payment of the Loans or any other obligations under this Agreement or the Reducing Note Facility

Agreement, except as set forth in and pursuant to the FCFC Guaranty or the FH Partners Subordinated Guaranty, as the case may be.

(i)Agent and Lenders agree that the assumption by FLBG2 of the amount of $25,000,000 of the indebtedness due under the Reducing Note Facility Agreement (the “Assumption”) is an absolute and unconditional obligation of FLBG2 under the RNF2 and that the payment of $25,000,000 (the “FLBG2 Payment”) on the Loans due under this Agreement as a result of the Assumption is a permanent reduction of the Loans in the amount of the FLBG2 Payment which shall not be, directly or indirectly, recovered by Agent or Lenders from Borrower, FLBG, FCFC, FH Partners, FirstCity Servicing Corporation, any Guarantor and any other Affiliate of any such Person other than from FLBG2, or payable, either directly or indirectly by any such Persons (other than FLBG2) to Agent and Lenders.  Agent and Lenders expressly intend to and do forever release, discharge and waive any and all claims they may have to recover the FLBG2 Payment or the FLBG2 Loans or any damages related thereto or related to FLBG2 from Borrower, FLBG, FCFC, FH Partners, FirstCity Servicing Corporation, any Guarantor and any Affiliate of any such Person (other than FLBG2) whether arising (i) under this Agreement or any guaranty or any instrument or loan document executed in connection with this Agreement, (ii) under the Reducing Note Facility Agreement or any guaranty or loan document executed in connection with the Reducing Note Facility Agreement, (iii) under the servicing agreement to be entered into between FirstCity Servicing Corporation and FLBG2 with respect to the servicing of loans transferred to FLBG2 which constitute the FLBG2 Collateral, (iv) claims as a creditor of FLBG2 related to the failure of FLBG2 to pay the FLBG2 Loans, the condition or value of the FLBG2 Collateral, the failure to recover the indebtedness owed to them by FLBG2 under the FLBG2 Loans, or the failure to obtain recoveries from or collections related to the FLBG2 Collateral, (v) with respect to any claims of Agent or Lenders that the transfer of assets to FLBG2 and the Assumption constitutes a fraud upon creditors of FLBG2, causes FLBG2 to be inadequately capitalized, results in FLBG2 being insolvent and having a negative net worth, causes damage to Agent and Lenders as the only creditors of FLBG2 or any other claims of Agent and Lenders relating to such matters that might give rise to any claim or cause of action in favor of Agent and Lenders under applicable state or federal law or under the United States Bankruptcy Code, or (vi) with respect any other claims, demands, actions, causes of action, suits, debts, liabilities, and accounts of any nature whatsoever, known or unknown, including, without limitation, any claims of fraud or fraudulent inducement in connection with the formation of FLBG2, the transfer of the FLBG2 Collateral by Affiliates of the Borrower to FLBG2, the Assumption, the FLBG2 Payment, or the giving of this release, discharge and waiver (all such claims in the foregoing subparts (i) through (vi) being together, the “FLBG2 Claims”), under any theory of liability whether arising under contract, tort, statute, equitable remedy or otherwise, which the Agent or Lenders or any of them ever had, now have or hereafter might have against Borrower, FLBG, FCFC, FH Partners, FirstCity Servicing Corporation, any Guarantor and any Affiliate of any such Person (other than FLBG2) relating to the FLBG2 Claims.  Agent and Lenders acknowledge that they have consented to and agreed with the transfer of the FLBG Collateral to FLBG2, the Assumption and the making of the FLBG2 Loans and that Agent and Lenders have been advised and are aware and acknowledge that: (A) FLBG2 is a newly formed entity that (i) owns no assets other than the loans which are the FLBG2 Collateral, (ii) will receive a contribution only from FLBG, its sole member, in the amount of $1,000.00, (iii) has no right to receive any funds or additional capital from FLBG, the sole member of FLBG2, and FLBG has no other obligation to contribute any funds or capital to

FLBG2, (iv) the sole activity, business or operations of which will be the ownership of the loans transferred to FLBG2 by the Affiliates of the Borrower and limited activity related to those loans, (v) has no source of income or revenues other than collections from or proceeds of the loans constituting the FLBG2 Collateral, if any, (vi) will provide notice of the transfer of the loans to each obligor of the loans at the last address of each obligor in the records of FLBG2, (vii) will enter into a servicing agreement with FirstCity Servicing Corporation that provides for FC Servicing to process any payments on or proceeds received by FLBG2 on the loans, to respond to inquiries related to the loans or any collateral for the Loans and FirstCity Servicing Corporation makes no representations regarding any collections to be received from the loans and is not obligated under the servicing agreement to actively attempt to collect the loans, and (viii) has no intent to pursue active collection of the loans in light of its lack of funds available to FLBG2 and the condition of the Loans; (B) the loans which have been transferred to FLBG2 by Affiliates of the Borrower (i) have, for the past two years been valued as having no value in the computations of the Net Present Equity Vale of the Portfolio Entities that own the loans and as a result there has been no value for these loans included in the valuation certificates provided by Borrowers under the Reducing Note Facility Agreement, (ii) are loans that may not be enforceable due to the expiration of applicable statutes of limitation, (iii) are either not secured by any collateral or, in the opinion of the Borrower, the collateral is in such condition as a result of prior liens or other issues that the collateral is not likely to have any value to justify efforts being made to pursue the collateral, and (iv) that the Affiliates of the Borrower have not received any significant payments on the loans in over two years; and (C) that the loans to be transferred to FLBG2 are valued by FLBG2 as having no value in the valuation certificate being simultaneously provided to Agent and Lenders, as the agent and lenders under the RNF2, in connection with the advance of the FLBG2 Loans because the loans (i) may not be enforceable due to the expiration of applicable statutes of limitation, (ii) are either not secured by any collateral or, in the opinion of the Borrower, the collateral is in such condition as a result of prior liens or other issues that the collateral is not likely to have any value to justify efforts being made to pursue the collateral, and (iii) that the Affiliates of the Borrower have not received any significant payments on the loans in the last two years.  The foregoing does not in any way limit the obligations undertaken by FLBG2 under the Reducing Note Facility Agreement, the representations and warranties made by FLBG2 under the Reducing Note Facility Agreement as to the legal, valid and binding nature of such obligations, the obligations undertaken by FLBG2 in connection with its pledge of the FLBG2 Collateral to secure the obligations under this Agreement and under the Reducing Note Facility Agreement and the representations and warranties of FLBG2 as to the legal, valid and binding nature of such pledge, the rights of the Lenders and of BOS (USA) to seek to enforce such pledge and to collect the FLBG2 Collateral when and as permitted by such pledge or the rights of the Lenders to deal in any manner permitted by applicable agreement or applicable law with the FLBG2 Collateral.

2.2The Note.  Borrower’s obligation to pay the principal of, and interest on, the Loans of the Lender shall be evidenced by promissory notes payable to the order of Lender, substantially in the form of Exhibit A (the “Note”).

(a)The Note delivered to the Lender shall be: (i) dated the Effective Date; (ii) in the principal amount of $103,546,673; and (iii) payable in full on the Maturity Date.

(b)The Note shall be, and hereby is, secured by the Collateral, the FLBG2 Collateral and the Security Documents.

2.3Repayments of Loans.

(a)Borrower shall repay the unpaid principal amount of all Loans, together with all unpaid interest thereon and all other fees and amounts due with respect thereto, in accordance with Section 5.3 and in full on the Maturity Date.

(b)In the event the aggregate outstanding principal amount of Loans made in Euros under this Agreement exceeds the equivalent of $27,500,000, Borrower shall prepay such Loans until the aggregate outstanding principal amount of Loans made in Euros under this Agreement no longer exceeds the equivalent of $27,500,000.

(c)No amounts prepaid or repaid in accordance with the provisions of this Section 2.3 may be reborrowed.

2.4Voluntary Prepayments of Loans.  Borrower may, upon not less than three (3) Business Days prior written notice to Agent (which notice Agent shall promptly transmit to Lender in writing or by telephone, and if by telephone, confirmed as soon as possible thereafter in writing) prepay the Loans in whole at any time, or from time to time in part in amounts of not less than 250,000 units of the relevant currency equal to or greater than an amount of the Dollar Equivalent of which is $250,000 (and, if greater, in integral multiples of 50,000 units of the relevant currency), without premium or penalty; provided that at the time of any such prepayment, Borrower shall pay all interest accrued on the principal amount so prepaid and all other fees and amounts (including, without limitation, the Upfront Fee and any breakage costs to Lender) due hereunder or under the Loan Documents.  All notices pursuant to this Section 2.4 shall be irrevocable and result in the principal amount of Loans specified therein becoming due and payable on the prepayment date specified therein.  In no event may amounts prepaid under this Section 2.4 be reborrowed.

2.5Currency Fluctuations, etc.

(a)Not later than 1:00 p.m., New York City time, on each Payment Date, Agent shall (i) determine the Exchange Rate as of such date if at such time there are outstanding Loans denominated in Euros and (ii) give notice thereof to Lender and Borrower.  The Exchange Rate so determined shall be effective on the first Business Day immediately following the relevant Payment Date (a “Reset Date”) and shall remain effective until the next succeeding Reset Date.

(b)Not later than 5:00 p.m., New York City time, on each Reset Date, Agent shall (i) determine the Dollar Equivalent of the Loans denominated in Euros then outstanding (after giving effect to any Loans denominated in Euros to be made or repaid on such date) and (ii) notify Lender and Borrower of the results of each determination.

SECTION 2A.  LETTERS OF CREDIT

SECTION 2A.1.  Outstanding Letters of Credit.  Set forth on Schedule 2A.1 is a list of all irrevocable letters of credit (each a “Letter of Credit” and collectively, the “Letters of Credit”)

outstanding in connection with the Reducing Note Facility Agreement, setting forth the principal amount, beneficiary and maturity date of each thereof.  The Lender has no obligation under this Agreement, under the Reducing Note Facility Agreement or under any other agreement, instrument or Loan Documents to issue additional Letters of Credit.

SECTION 2A.2.  No Extensions.  The parties acknowledge that, notwithstanding any contrary provision set forth in the Letters of Credit or any other agreement, the Letters of Credit shall not be subject to any extension beyond their respective expiry dates, except as consented to by the Agent.  The parties further acknowledge that this Agreement shall constitute notice under any Letter of Credit that the expiry date of such Letter of Credit shall not be extended, except as consented to by the Agent.

SECTION 2A.3.  Fees and Expenses.  (a) Borrower agrees to pay to Agent for distribution to the Lenders (pro rata, based upon their pro rata shares of the LC Outstandings as determined in accordance with Section 2A.6) a non-refundable letter of credit fee with respect to each Letter of Credit equal to, per annum (calculated on the basis of a 360-day year and the actual number of days elapsed), (x) 0.25%, times (y) the Stated Amount of such Letter of Credit, such fee to be paid quarterly in advance on the fourth Business Day of each March, June, September and December thereafter (each a “Letter of Credit Fee”).  In addition, Borrower further agrees to pay to the Issuer for its own account the Issuer’s standard, documentary and processing charges and all other administrative expenses of the Issuer in connection with the maintenance of each Letter of Credit.

(b)  If any Regulatory Change shall at any time (i) impose, modify or deem applicable any reserve, special deposit or similar requirement against letters of credit issued by the Issuer or participated in by any Lender or Lender Assignee, or (ii) subject letters of credit issued by the Issuer or participations therein held by any Lender or Lender Assignee to any assessment or other cost or (iii) impose on the Issuer or any Lender or Lender Assignee any other or similar condition regarding any Letter of Credit, the commitment or obligation of the Issuer to issue Letters of Credit hereunder or any Lender’s or Lender Assignee’s participation therein and the result of any event referred to in clause (i), (ii) or (iii) above shall be to increase the cost to the Issuer or any Lender or Lender Assignee of agreeing to issue, issuing or maintaining any Letter of Credit or its participation therein by an amount which the Issuer or such Lender or Lender Assignee shall deem to be material (which increase in cost shall be the result of the reasonable allocation by the Issuer or such Lender or Lender Assignee of the aggregate of such cost increases resulting from such events), then and in each case upon demand from time to time by the Issuer or such Lender or Lender Assignee (furnished to Borrower by Agent), provided such demand is made no later than six months after such Issuer, Lender or Lender Assignee obtains knowledge of such Regulatory Change, Borrower shall promptly pay to Agent (for the account of such Issuer, Lender or Lender Assignee, as the case may be) additional amounts which shall be sufficient to compensate the Issuer (or such Lender or Lender Assignee) for such increased cost from the date of such change, together with interest on each such amount from the date demanded by the Issuer (or such Lender or Lender Assignee) until payment in full thereof (after as well as before judgment) at a rate per annum equal to the Applicable Rate from time to time in effect.  A certificate of the Issuer (or such Lender or Lender Assignee) submitted to Borrower as to any additional amount or amounts (including calculations thereof, in reasonable detail) shall, in the absence of manifest error, be conclusive and binding on Borrower.  In determining such

amount or amounts, the Issuer (or such Lender or Lender Assignee) may use any method of averaging and attribution as it (in its reasonable discretion) shall deem applicable.

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

SECTION 2A.4.  Disbursements.  (a) The Issuer will notify Borrower and Agent promptly of the presentment for payment of any Letter of Credit together with notice of the date (the “Disbursement Date”) such payment shall be made.  Subject to the terms and provisions of such Letter of Credit and this Agreement, the Issuer shall make such payment to the beneficiary (or its designee) of such Letter of Credit.

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

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

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

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

(c) failure of the beneficiary to comply fully with conditions required in order to demand payment under any Letter of Credit;

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

(e) any loss or delay in the transmission or otherwise of any document or draft required in order to make a Disbursement under any Letter of Credit or of the proceeds thereof.

None of the foregoing shall affect, impair, or prevent the vesting of any of the rights or powers granted the Issuer, Agent or Lenders hereunder.  In furtherance and extension and not in limitation or derogation of any of the foregoing, any action taken or omitted to be taken by the Issuer in good faith shall be binding upon Borrower, Agent, Lenders and each Lender Assignee and shall not put the Issuer (except to the extent of its own gross negligence or willful misconduct), Agent or any Lender or Lender Assignee under any resulting liability to Borrower nor put the Issuer under any resulting liability to Agent or any Lender or Lender Assignee.  Nothing herein shall constitute a waiver by Borrowers of any of its rights against any beneficiary of any Letter of Credit.

2A.6  Other Lenders’ Participation.  Each Letter of Credit is deemed issued on behalf of the Lenders (including the Issuer), pro rata, based upon the percentage that each Lender’s outstanding Loans and participations in Letters of Credit represents of all Lenders’ Loans and participations in Letters of Credit), and each Lender is deemed to have irrevocably purchased from the Issuer a participation in such Letter of Credit equal to such Lender’s pro rata share of the Stated Amount.  Each Lender shall, to the extent of such pro rata share, promptly reimburse the Issuer for any Reimbursement Obligation which has not been promptly funded by a Loan by the Lenders in accordance with Section 2A.4(b).  For the avoidance of doubt, any such Loan to the Issuer by Lenders shall (notwithstanding that Borrowers may at the time be the subject of a proceeding of the type described in Section 9.8) be treated as Loans made by the Lenders to Borrower for all purposes of this Agreement.

Section 3.INTEREST.

3.1Rate of Interest.  Subject to the provisions of Sections 3.3 and 3.4, Borrower agrees to pay interest in respect of the unpaid principal amount of the Loans from the date hereof until maturity (whether by acceleration or otherwise) for each period from and including each Payment Date to but excluding the immediately following Payment Date at a rate per annum equal to 0.25% (such rate, the “Contract Rate”).

3.2Interest Payment Dates.  Interest on and prior to maturity in respect of each Loan shall be payable in arrears (i) on each Payment Date; (ii) upon any repayment or prepayment (to the extent accrued on the principal amount so repaid or prepaid); and (iii) at maturity (whether by acceleration or otherwise) and, after maturity, on demand.

3.3Past Due Rate.  Each Loan (and any overdue interest in respect of each Loan) shall bear interest for each day on which an Event of Default exists (after as well as before judgment), payable on demand, at a rate per annum equal to 5.25% (such rate, the “Past-Due Rate”).

3.4Intentionally Omitted.

3.5Capital Adequacy.  If Lender shall have determined that the applicability of any law, rule, regulation or guideline adopted after the date hereof, it being agreed that “adopted after the date hereof” shall include compliance by Lender or any lending office or holding company of Lender with any Basel Law whether or not such Basel Law was in effect, applicable or phased in on or prior to or after the date hereof pursuant to or arising out of the July 1988 report of the

Basel Committee on Banking Regulations and Supervisory Practices entitled “International Convergence of Capital Measurement and Capital Standards” or pursuant to or arising out of any report, agreement or convention of any international banking group adopted subsequent to such 1988 report (said laws, rules, regulations and guidelines pursuant to or arising out of such 1988 report or any such subsequently adopted report, agreement or convention being sometimes collectively herein referred to as “Basel Laws”), or the adoption after the date hereof of any other law, rule, regulation or guideline regarding capital adequacy (any such other law, rule, regulation or guideline being sometimes herein referred to as “Other Laws”), or any change in any of the foregoing (after the date hereof in respect of Other Laws; before or after the date hereof in respect of Basel Laws) or in the enforcement or interpretation or administration of any of the foregoing (after the date hereof in respect of Other Laws; before or after the date hereof in respect of Basel Laws) by any Government Authority, central bank or comparable agency charged with the enforcement or interpretation or administration thereof, or compliance by Lender (or any lending office of Lender) or any holding company of Lender with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on Lender’s capital or on the capital of Lender’s holding company, if any, as a consequence of its Loans or any of its obligations hereunder to a level below that which Lender or Lender’s holding company could have achieved but for such applicability, adoption, change or compliance (taking into consideration Lender’s policies and the policies of Lender’s holding company with respect to capital adequacy) by an amount deemed by Lender to be material, then, upon demand by Lender (or by Agent on such Lender’s behalf), Borrower shall pay to Lender from time to time such additional amount or amounts as will compensate Lender or such Lender’s holding company for any such reduction suffered, together with interest on each such amount from the date demanded until payment in full (after as well as before judgment) thereof at the Contract Rate. Lender shall endeavor to give Borrower notice of its intention to require compensation under this Section 3.5 within a reasonable time after the loan officer of Lender with responsibility for this Agreement becomes aware of its entitlement to such compensation under this Section 3.5, but no failure to give any such notice shall affect or relieve Borrower of any of Borrower’s obligations under this Section 3.5 or under any other provision of this Agreement or any other Loan Document or result in any obligation or liability of Agent or Lender to Borrower or any other Person.  A certificate of Lender as to the amount required to be paid by Borrower under this Section 3.5 and showing in reasonable detail the basis for the calculation thereof shall, absent manifest error, be final and conclusive (it being understood that in no event shall any Lender be required to disclose in such certificate or otherwise any non-public information). In determining such amount or amounts, Lender may use any method of averaging and attribution as it (in its sole and absolute discretion) shall deem applicable.  Notwithstanding the foregoing, Lender shall not be entitled to make a demand for and Borrower shall not be liable for payment of any amount under the terms of this provision following payment in full of the Obligations.

Section 4.Intentionally Omitted.

Section 5.PAYMENTS; PERMITTED DISTRIBUTIONS.

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

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

5.3Payment Date and Distribution of Funds.

(a)Except following the occurrence and during the continuation of an Event of Default, in which case the distribution of Cash Flow shall be controlled by the Agent, all funds in the Cash Flow Cash Collateral Account, the Cash Collateral Account-Servicing and the FCI Distribution Account (“Cash Flow”) shall be distributed by Borrower or the Agent on the fourth to last Business Day of each month (each, a “Payment Date”) pursuant to the distribution statement prepared by Borrower and approved in writing by Agent (or at any other times as may be agreed upon from time to time by Borrower, Agent and Lender) in accordance with the following priority and amounts and applied as follows and as illustrated in Schedule 5.3(a) to this Agreement:

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

(ii)Second, to the payment to Agent, for the account of Lender, an amount equal to all of any fees, late charges and other fees and expenses (other than those paid in Section 5.3(a)(i) above), which are then due and payable to Agent and/or Lender under this Agreement or any of the other Loan Documents or which will become so due and payable on or before the last day of the calendar month in which the Payment Date in question occurs;

(iii)Third, to the Cold Back-up Servicer and/or Back-Up Servicer, if any, pursuant to Section 7.20 of this Agreement (up to a maximum of $12,000 for the Cold Back-up Servicer during any twelve month period and an aggregate maximum amount of $75,000 for both the Cold Back-up Servicer and/or Back-Up Servicer during any twelve month period);

(iv)Fourth, to FC Commercial as requested by it to fund the FC Commercial Protective Advance Account up to the maximum amount of $750,000 on deposit or such greater amount approved in writing by the Agent and Lender;

(v)Fifth, to FCIH, an amount equal to the Management Fee (with any shortfall in an amount payable to FCIH carried over to and paid in the next month’s distribution of Cash Flow under this Section 5.3(v));

(vi)Sixth, to the payment to Agent, for the account of Lender.

5.4Net Payments; Application.

(a)All payments hereunder and under the Loan Documents (including, without limitation, repayments and prepayments pursuant to Section 2) shall be made by Borrower to Agent, except as otherwise provided in this Agreement in freely transferable U.S. dollars, and in same day funds at the Closing Office without setoff or counterclaim and in such amounts as may be necessary in order that all such payments (after (i) withholding for or on account of any present or future taxes, levies, imposts, duties or other similar charges of whatsoever nature imposed on the amounts described above by any government or any political subdivision or taxing authority thereof, other than any tax (other than such taxes referred to in clause (ii) below) imposed on Lender pursuant to the income tax laws of the jurisdiction where Lender’s principal or lending office or offices are located (collectively, the “Taxes”) and (ii) deduction of an amount equal to any taxes on or measured by the net income payable to Lender with respect to the amount by which the payments required to be made by this Section 5.4 exceed the amount otherwise specified to be paid under this Agreement and the Notes) shall not be less than the amounts otherwise specified to be paid under this Agreement and the Notes.  With respect to each such deduction or withholding imposed in respect of any payment by or on behalf of Borrower, Borrower shall promptly (and in no event later than thirty (30) days thereafter) furnish to Agent such certificates, receipts and other documents as may be required to establish any tax credit, exemption or reduction in rate to which Lender or holder of a Note may be entitled.  Lender, other than a Lender organized and existing under the laws of the United States of America or any political subdivision thereof, agrees to furnish Borrower, as soon as practicable after any written request of Borrower to such effect, any executed form reasonably requested by Borrower such as IRS Form W-8BEN or W-8ECI, and any other applicable form as to such Lender’s entitlement, if any, to exemption from, or a reduced rate of, or its subjection to, United States withholding tax on amounts payable to it hereunder by Borrower or under the Notes of Borrower and each such Lender undertakes to use its best efforts promptly to notify Borrower of any material change in any information, statement or form so furnished to Borrower; provided, however, that any failure on the part of Lender to furnish any such information, statements or forms shall in no way affect the obligations of Borrower or the rights of Lender under the terms of this Agreement or of the Notes.

5.5Distribution by Agent.  All payments received by Agent on behalf of Lender on account of principal and interest under this Agreement or the Notes or on account of any fees payable for the account of Lenders shall be promptly distributed by Agent to Lender (in the type of funds received by Agent) as follows: (i) if in respect of principal of any Loans made to Borrower, then to Lender; (ii) if in respect of interest on the Loans, then to Lender; (iii) if in respect of Letter of Credit Fees, then to Lender in accordance with their entitlement thereto; and (iv) if in respect of a payment under Section 3 other than an interest payment hereof, to Lender in accordance with its entitlement thereto.

Section 6.CONDITIONS PRECEDENT TO EFFECTIVENESS

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

6.1Default, etc.  On the Effective Date (both before and after giving effect to the occurrence of the Effective Date assuming such Effective Date has occurred) there shall exist no Default or Event of Default and all representations and warranties made by the Loan Parties herein or in the other Loan Documents or otherwise by the Loan Parties in writing in connection herewith or therewith shall be true and correct in all material respects with the same effect as though such representations and warranties have been made at and as of such time.

6.2Notes.  Agent shall have received for Lender the Note, duly executed and completed by Borrower.

6.3Supporting Documents of Borrower.  There shall have been delivered to Agent (with sufficient copies for the Lender) such information and copies of documents (if any), approvals (if any) and records (certified where appropriate) of corporate and legal proceedings (if any) in addition to those listed on the Closing Checklist as Agent or Lender may have reasonably requested relating to the Loan Parties’ entering into and performance of the Loan Documents or any other agreements or documents related thereto or contemplated thereby.

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

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

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

6.7Legal Opinions.  Agent shall have received legal opinions (in sufficient counterparts for Lender) dated the Effective Date from Haley & Olson P.C., counsel to Borrower and each other Loan Party, in form and substance satisfactory to Agent.

6.8Adverse Change.  There shall have been, in Agent’s opinion, no Material Adverse Change since December 31, 2010.  Neither Agent nor any Loan Party shall have become aware of any previously undisclosed information with respect to any Loan Party which, in Agent’s opinion, would have a Material Adverse Effect.

6.9Change in Law; No Opposition.  (i) No change shall have occurred in applicable law or in applicable regulations thereunder or in the interpretations thereof by any Governmental Authority which, in the opinion of Lender, would make it illegal for such Lender to make one or more Loans hereunder; and (ii) no suit, action or proceeding shall be pending or threatened before or by any Governmental Authority seeking to restrain or prohibit the making of any Loan or the consummation of the transactions contemplated hereby.

6.10All Proceedings to be Satisfactory.   All corporate, partnership, limited liability company and legal proceedings and all instruments, documents and papers in connection with the transactions contemplated by this Agreement and the other Loan Documents and the other documents referred to herein shall be satisfactory in form and substance to Agent, and Agent and Lender shall have received all such information and copies of all documents which Agent or Lender may reasonably have requested in connection herewith, such documents where appropriate to be certified by proper corporate officials or Governmental Authorities.

6.11Checklist Documents.  The documentation set forth on the Closing Checklist (Schedule 6.11), including, without limitation, the Guaranties, including, without limitation, the FCFC Guaranty, the FH Partners Subordinated Guaranty and the FLBG2 Guaranty, Pledge Agreements, including, without limitation, the Subordinated Pledge Agreement, the FH Partners Release, Security Agreements and the Intercreditor Agreement satisfactory to Agent in form and substance, shall have been delivered to Agent, and such other actions referred to on such Schedule and in such documentation shall have been taken.

6.12Intercompany Security Agreements.  Each Primary Obligor shall have delivered (i) intercompany security agreements (or confirmations thereof) in form and substance satisfactory to Agent securing each such Person’s obligations under its Pledged Note together with such other documents and instruments relating thereto and records of company proceedings and (ii) if requested by Agent, legal opinions, as Agent may reasonably request.

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

6.14Fees and Expenses.  The legal fees and expenses of Agent’s New York counsel and (if any) local or special counsel in connection with the transactions contemplated by this Agreement and an aggregate of $150,000 of expenses (the “Promethean Expenses”) owing to the Agent’s financial consultant, Promethean Investments LLP, in connection with the transactions

contemplated by this Agreement and the RNF2 shall have been paid in full out of operating accounts of the Borrower.

6.15Release by FCFC.  Borrower shall have caused the execution and delivery by FCFC and its Affiliates to the Lender of a release in form, scope and substance satisfactory to the Lender (the “Release”).

6.16Collateral Assignment of Service Bureau.  FC Servicing and the Lender shall have executed and delivered a confirmation of collateral assignment of that certain Information Technology Services Agreement, dated February 7, 2006, between Fidelity Information Services, Inc. and FC Servicing (the “ITSA Agreement”), such collateral assignment to be in form, scope and substance satisfactory to the Lender.

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

6.18BA Credit Agreement; Prepayment.  The parties to the BA Credit Agreement shall have executed and delivered the BA Credit Agreement on terms consistent with Approved Portfolio Leverage Arrangements and prior loan agreements provided by the Lender and current market terms, and the Lender shall have received a principal payment under the Loans of $50,947,486, together with a principal payment of $2,388,151 representing previously permitted leak-through payments.

6.19Intercreditor Agreement.  The Lender, the Agent, the Collateral Agent, BA, Borrower and FH Partners shall have executed and delivered an Intercreditor Agreement in form, scope and substance satisfactory to the Lender.

6.20RNF2.  BOS(USA), the Agent, the Collateral Agent and FLBG2 shall have executed and delivered the RNF2 and all documents and instruments required under the RNF2, all in form, scope and substance satisfactory to the Lender.

Section 7.AFFIRMATIVE COVENANTS.

Each of the Borrower and FLBG warrants, represents and covenants to the Lender and Agent that, so long as this Agreement is in effect and until all of the Loans, together with interest and all other obligations (including Deemed Disbursements and Reimbursement Obligations and fees and disbursements in connection therewith) are paid in full, Borrower will (unless it shall have first procured the written consent of the Majority Lenders to do otherwise) (i) perform the obligations set forth in this Section 7, (ii) cause each Primary Obligor, Wholly-Owned Subsidiary and other Loan Party to perform the obligations set forth in this Section 7 which are applicable to such Person and (iii) exercise commercially reasonable efforts to cause each Material Portfolio Entity to perform the obligations set forth in this Section 7 which are applicable to such Person.

For the purposes of this Section 7, the terms Primary Obligor, Subsidiary, Loan Party, Related Entity, Portfolio Entity and Portfolio Entity-50% shall not mean or include FLBG2.

7.1Financial Statements.  Borrower will furnish to Agent and Lender:

(a)As soon as available and in any event within forty-five (45) days after the close of each calendar month, as at the end of such month and for the period commencing at the end of the previous Fiscal Year and ending with the end of such month, a consolidated and consolidating balance sheet of FC Commercial and the other members of the Consolidated Group, and the related statement of operations for such period, all certified by the CFO of Borrower and of each other member of the Consolidated Group as being prepared in accordance with GAAP and to present fairly the financial position and results of operation of such Person for such period;

(b)As soon as available but not later than one hundred five (105) days after the close of each Fiscal Year of FC Commercial, as at the end of and for the Fiscal Year just closed, an audited consolidated balance sheet of FC Commercial and the other members of the Consolidated Group, the related statement of operations (including income statement) and a reconciliation of capital for such year, all certified on an unqualified basis by a firm of independent certified public accountants selected by Borrower and acceptable to Agent in Agent’s sole and absolute discretion;

(c)As soon as available but not later than one hundred five (105) days after the close of each Fiscal Year of FC Commercial, as at the end of and for the Fiscal Year just closed, an unaudited consolidating balance sheet of FC Commercial and the other members of the Consolidated Group, the related statements of operations (including income statement) and a reconciliation of capital for such year, prepared by the CFO of Borrower;

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

(e)Concurrently with delivery to its stockholders, copies of all financial and other information delivered by FCFC or Borrower, as the case may be, to such Persons, including without limitation, its proxy statements and annual reports to stockholders.  Within two (2) Business Days after delivery to the SEC by FCFC or Borrower, as the case may be, which in all cases shall be on a timely basis in accordance with the applicable document and the Securities Laws, copies of all reports and other filings filed by FCFC or Borrower, as the case may be with the SEC, including without limitation, all reports on Forms 10K, 10Q or 8K promulgated under the Securities Exchange Act of 1934, as amended, and all registration statements filed under the Securities Act of 1933, as amended;

(f)Concurrently with delivery of the financial statements required pursuant to Section 7.1(a) and (b) hereof, a certificate executed by the President, Treasurer or CFO of Borrower that (A) no Event of Default or Default has occurred and is continuing under this Agreement, (B) Borrower is in compliance with the covenants set forth in Section 8.17 hereof; and (C) no event of default and no event or condition which, with the passage of time or the

giving of notice or both, would constitute an event of default has occurred and is continuing under any other Indebtedness Instrument (“Other Indebtedness Instrument Unmatured Default”) or, if an Event of Default or Default has occurred under this Agreement or an event of default or Other Indebtedness Instrument Unmatured Default has occurred under any other Indebtedness Instrument, setting forth the details of such event and the action which each Borrower proposes to take with respect thereto;

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

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

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

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

(k)Promptly and in any event within five (5) Business Days after receipt thereof by a Loan Party or any of its ERISA Affiliates from a Multiemployer Plan sponsor, a copy of each notice received by such Person concerning (x) the imposition or amount of withdrawal liability under Subtitle E of Title IV of ERISA or (y) any determination by a Multiemployer Plan sponsor that such Multiemployer Plan is, or is expected to be, in “reorganization” (within the meaning of Section 4241 of ERISA) or “insolvent” (within the meaning of Section 4245 of ERISA), or has incurred or is expected to incur an “accumulated funding deficiency” (within the meaning of Section 302 of ERISA or Section 412 of the Code);

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

(m)With reasonable promptness, such other information respecting the business, properties, operations, prospects or condition (financial or otherwise) of any member of

the Consolidated Group and any other Primary Obligor and, to the extent reasonably available, any other Related Entity as Agent or Lender may from time to time in writing reasonably request provided, that Borrower shall not be required to furnish to Agent or any Lender any such information relating to a Portfolio Entity if (i) the Charter Documents of, or Shareholder Agreement relating to, such Person, in each case as in effect on the date of formation of such Person, prohibit such disclosure and (ii) notice of such prohibition on disclosure is provided to Agent within five days of formation of such Person (any such restriction, a “Disclosure Restriction”).

7.2Other Required Notices and Covenants.

(a)Borrower and FLBG shall notify Agent promptly after obtaining knowledge of:

(i)except as otherwise previously disclosed, any event or occurrence which Borrower has determined could have a Material Adverse Effect as a result of a loss or decline in value of the Assets of Borrower, FLBG, any other Primary Obligor, any Portfolio Entity or any Related Entity due to casualty or any other adverse occurrence and the estimated (or actual, if available) amount of such loss or decline;

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

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

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

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

(vi)the occurrence of (x) a default by Borrower, FLBG, FH Partners, FCFC, any other Primary Obligor, any Portfolio Entity, any Related Entity or any other Loan

Party under any agreement, document or instrument to which such Person is a party which could reasonably be expected to have a Material Adverse Effect, or (y) any default by a Borrower, FLBG, FCFC, any other Primary Obligor or any other Loan Party which could reasonably be expected to materially and adversely affect any such Person’s ability to perform its respective obligations under the Loan Documents;

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

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

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

(x)the issuance or sale of any Securities by Borrower, FLBG, any other Primary Obligor or any Portfolio Entity, whether or not permitted pursuant to the terms hereof.

(b)On the twentieth (20th) day of each month, Borrower shall deliver to Agent (i) Waterfall Certificates in respect of each Asset Pool and Portfolio Entity, certified by an Executive Officer of Borrower; and (ii) a Summary Waterfall Certificate in respect of all Asset Pools; and (iii) a report in the form attached hereto as Exhibit B setting forth the computation of the Aggregate Undistributed Funds of all Portfolio Entities.

(c)(i)  Borrower shall give Agent notice that a Portfolio Entity has become a Material Portfolio Entity (due to the amount of Assets contributed to it on the date of its formation or an increase in Assets thereafter) within thirty (30) days of such Person becoming a Material Portfolio Entity.

(ii)Borrower shall give Agent notice that an Immaterial Entity has ceased to constitute an Immaterial Entity (due to an increase in the fair market value of its assets or such company engaging in any business) within thirty (30) days of such Person ceasing to constitute an Immaterial Entity and shall promptly deliver to Lender a revised Schedule 10.34 to reflect such change.

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

(d)On or before the fourth to last Business Day of each month, Borrower shall deliver to Agent a Portfolio Protection Expense Report in the form of Schedule 7.2(d)

hereto (the “Portfolio Protection Expense Report”) showing as of the close of business on the last Business Day of the preceding calendar month the balances of the FC Commercial Protective Advance Account and the FCI Distribution Account, the aggregate amount retained by Portfolio Entities to pay Portfolio Protection Expenses not theretofore paid, the aggregate amount of Portfolio Protection Expenses theretofore paid and the aggregate amount of Portfolio Protection Expenses withheld (in the aggregate) by such Persons during the immediately preceding calendar month.  Borrower shall provide to the Agent such other information with respect thereto as Agent may reasonably request.

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

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

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

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

(i)On or before the fourth to last Business Day of each month, Borrower shall notify Agent if the amount of Aggregate Undistributed Funds exceeds $1,000,000.

7.3Payment of Charges.

(a)Other than charges payable by First X or First B, Borrower, each Primary Obligor, each Material Portfolio Entity, and each Wholly-Owned Subsidiary other than any REO Affiliate shall pay promptly when due and discharge all Charges.  In the event a Borrower, Primary Obligor, any Material Portfolio Entity or any Wholly-Owned Subsidiary other than an REO Affiliate, at any time or times hereafter, shall fail to pay the Charges or to obtain such discharges as required herein, Borrower shall so advise Agent thereof in writing.  Agent may, without waiving or releasing any obligation, covenant or agreement of Borrower or any Event of Default or Default, in its sole and absolute discretion, at any time or times thereafter, make such payment, or any part thereof, or obtain such discharge and take any other action with respect thereto which Agent deems advisable.  All sums so paid by Agent and any expenses relating thereto, including reasonable attorneys’ fees, court costs, expenses and other charges, shall be part of the Obligations, payable by Borrower to Agent on demand.  Notwithstanding the foregoing, Borrower, any Primary Obligor, any Material Portfolio Entity or any Wholly-Owned Subsidiary may permit or suffer the Charges to attach to its Assets on the conditions that: (i) Borrower or the applicable Primary Obligor, Material Portfolio Entity or Wholly-Owned Subsidiary, in good faith, shall be contesting the same in an appropriate proceeding diligently pursued; (ii) enforcement thereof against any Assets of Borrower or any applicable Material

Portfolio Entity or Wholly-Owned Subsidiary shall be stayed; and (iii) appropriate reserves therefor shall have been established on the Records of Borrower or the applicable Primary Obligor, Material Portfolio Entity or Wholly-Owned Subsidiary in accordance with GAAP.

7.4Insurance.  Borrower, FLBG, each Primary Obligor, each Portfolio Entity (other than any Foreign Portfolio Entity), each REO Affiliate and each Wholly-Owned Subsidiary at each of such respective Person’s sole cost and expense, shall keep and maintain: (i) policies of insurance against all hazards and risks ordinarily insured against by other owners or users of properties in similar business or as reasonably requested in writing by Agent; and (ii) public liability insurance relating to such Person’s ownership and use of its Assets; provided, however, no such Person shall be required to maintain the insurance referred to in clause (i) as to any Asset if the Net Present Value of the Asset is less than $100,000.  All such policies of insurance shall be in form, with insurers and in such amounts as may be satisfactory to Agent.  Borrower shall deliver to Agent the original (or certified) copy of each policy of insurance and evidence of payment of all premiums for each such policy.  Such policies of insurance of Borrower, Primary Obligors and Wholly-Owned Subsidiaries (except those of public liability) shall contain an endorsement, in form and substance acceptable to Agent, showing losses payable to Agent for the ratable benefit of Lenders (excluding any losses payable to the lenders under any Approved Portfolio Leverage Arrangement).  Such endorsement or an independent instrument furnished to Agent, shall provide that all insurance companies will give Agent at least thirty (30) days prior written notice before any such policy or policies of insurance shall be altered or canceled and that no act or default of Borrower or any other Person shall affect the right of Agent for the ratable benefit of Lenders, to recover under such policy or policies of insurance in case of loss or damage (excluding any losses payable to the lenders under any Approved Portfolio Leverage Arrangement).  Upon request by Agent and, whether or not such request is made, upon the occurrence of an Event of Default or Default, Borrower hereby directs all insurers under such policies of insurance (except those of public liability) to pay all proceeds payable thereunder directly to Agent (excluding any losses payable to the lenders under any Approved Portfolio Leverage Arrangement).  Upon request by Agent and upon the occurrence of an Event of Default or Default, Borrower, irrevocably, appoints Agent (and all officers, employees or agents designated by Agent) as Borrower’s true and lawful agent and attorney-in-fact for the purpose of making, settling and adjusting claims under such policies of insurance, endorsing the name of Borrower on any check, draft, instrument or other item of payment for the proceeds of such policies of insurance and for making all determinations and decisions with respect to such policies of insurance.  In the event Borrower, any Primary Obligor, any Portfolio Entity, any REO Affiliate or any Wholly-Owned Subsidiary at any time or times hereafter shall fail to obtain or maintain any of the policies of insurance required above or to pay any premium in whole or in part relating thereto, then Agent, without waiving or releasing any obligation, covenant or agreement of Borrower or any Event of Default or Default, may at any time or times thereafter (but shall be under no obligation to do so) obtain and maintain such policies of insurance and pay such premium and take any other action with respect thereto which Agent deems advisable.  All sums so disbursed by Agent, including reasonable attorneys’ fees, court costs, expenses and other charges relating thereto, shall be part of the Obligations, payable by Borrower to Agent on demand.  Agent shall also be named as an additional insured with respect to Borrower’s, each Primary Obligor’s and each Wholly-Owned Subsidiary’s liability insurance.

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

7.6Preservation of Existence.  Borrower, FLBG, each other Primary Obligor, each Material Portfolio Entity, and each Subsidiary of a Borrower other than an Immaterial Entity or an REO Affiliate, will maintain and preserve its respective corporate, limited liability company or partnership existence, rights, privileges and franchises in its jurisdiction of organization, and qualify and remain qualified to do business in, and maintain its rights, privileges and franchises in each other jurisdiction which in the opinion of the respective board of directors, manager, general partner or other governing Person thereof continue to be advantageous to it and shall comply in all material respects with all applicable Legal Requirements.  Without limiting the generality of the foregoing, Borrower agrees to (and to cause each such other Person to) qualify to do business as a foreign corporation in each jurisdiction where the character of its assets or the nature of its activities make such qualification necessary and in which the failure to so qualify could have a Material Adverse Effect; provided that notwithstanding the foregoing, Agent and Lenders acknowledge that it is contemplated that the Borrower, Primary Obligors and Portfolio Entities will be liquidating their assets and that a Primary Obligor or any Portfolio Entity may be dissolved or merged into another Primary Obligor or Portfolio Entity upon the liquidation of all assets of any such Person that can be reasonably expected to be collected or sold.

7.7Preservation of Assets.  Borrower, FLBG and each other Primary Obligor will keep its property material to the conduct of its business in good repair, working order and condition and from time to time make all needful and proper repairs, renewals, replacements, extensions, additions, betterments and improvements thereto, so that the business carried on by it may be conducted at all times in accordance with prudent business management.

7.8Inspection of Books and Assets.  Borrower, FLBG and each other Primary Obligor shall permit Agent, Lenders and each of their respective representatives reasonable access during normal business hours to its properties and personnel, and shall disclose and make available to Agent and Lenders all books, papers and records relating to the Assets, stock ownership, properties, operations, obligations, and liabilities of Borrower, FLBG, each other Primary Obligor and their respective Subsidiaries (and shall use commercially reasonable efforts to cause each other Portfolio Entity to do the same), including, but not limited to, all books of account (including the general ledger), tax records, minute books of meetings of boards of directors (and any committees thereof) and shareholders, organizational documents, bylaws, material contracts and agreements, filings with any regulatory authority, accountants’ work papers (other than those that are the property of its independent outside auditors), litigation files, loan files, plans affecting employees, and any other business or prospects in which Lenders may have a reasonable interest in connection with the Loans, provided that such access shall be reasonably related to the transactions contemplated hereby and not unduly interfere with normal operations, and provided further that in the event that any of the foregoing are in the control of any third party, Borrower, FLBG and each other Primary Obligor shall use its reasonable best efforts to cause such third party to provide access to such materials to Agent and Lender who

shall request the same.  In the event that Borrower, FLBG or any other Primary Obligor is prohibited by law from providing any of the access referred to in the preceding sentence to Agent and Lender, it shall use its commercially reasonable efforts to obtain waivers thereof promptly so as to permit such access.  Borrower, FLBG and each other Primary Obligor shall make the directors, officers, employees and agents and authorized representatives (including counsel and independent public accountants) of Borrower, FLBG, other Primary Obligor, and their respective Subsidiaries (and shall use its commercially reasonable efforts to cause each other Portfolio Entity to do the same) to confer with Agent and Lender and their respective representatives, provided that (i) such access shall be reasonably related to the transactions contemplated hereby and not unduly interfere with normal operations and (ii) unless a Default or Event of Default exists, counsel to Borrower, FLBG and each other Primary Obligor shall be permitted to be present at any meeting among Borrower’s, FLBG’s or such Primary Obligor’s independent public accountants and Agent or Lender.

7.9Payment of Indebtedness.  Borrower, FLBG, each other Primary Obligor, each Material Portfolio Entity and, subject to the final sentence of this Section 7.9, each Wholly-Owned Subsidiary will duly and punctually pay, or cause to be paid, the principal of and the interest on all Indebtedness heretofore or hereafter incurred or assumed by such Person, when and as the same shall become due and payable, provided that neither Borrower, nor any Primary Obligor, any Wholly-Owned Subsidiary or any Material Portfolio Entity shall be required to pay any Indebtedness (other than Indebtedness incurred under this Agreement or any other Loan Document) while the same is being contested by it in good faith and by appropriate proceedings so long as Borrower or such Primary Obligor or Wholly-Owned Subsidiary or Material Portfolio Entity (as the case may be) shall have set aside on its books appropriate reserves in accordance with GAAP with respect thereto and title to any property of Borrower or the applicable Primary Obligor or Wholly-Owned Subsidiary or Material Portfolio Entity is not jeopardized.  The provisions of this Section 7.9 do not relate to Indebtedness of FC Capital or other Wholly-Owned Subsidiaries which are REO Affiliates.

7.10Further Assurances.  Borrower, FLBG, each other Primary Obligor, each Wholly-Owned Subsidiary and each other Loan Party will, and will cause each of its respective Subsidiaries to, make, execute or endorse, and acknowledge and deliver or file, all such vouchers, invoices, notices, and certifications and additional agreements, undertakings, conveyances, transfers, assignments, or further assurances, and take any and all such other action, as Agent or Lender may, from time to time, deem necessary or proper in connection with this Agreement, the obligations of such Person hereunder or under the Notes or any of the other Loan Documents to which such Person is a party, or for the better assuring and confirming unto Collateral Agent or Agent on behalf of Lender, with the first priority, all or any part of the security for the Obligations.

7.11Notice of Default.  Forthwith and in any event within five (5) days after Borrower shall have obtained knowledge of the existence of a Default or Event of Default, Borrower will deliver to Agent a certificate signed by an Executive Officer of Borrower setting forth the details of such event, the period of existence thereof, and what action Borrower proposes to take with respect thereto.

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

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

(a)To the extent any representation or warranty contained herein refers to an event or state of facts which exists on or after the date hereof, on or after the Execution Date or on or after the Effective Date or on or after the date of any Loan and which exists during the term hereof or at the time of any or each Loan hereunder, to the extent not already a covenant, said representation or warranty shall be deemed to be an affirmative covenant by Borrower to take all actions, omit to take such actions or cause such actions to be taken which shall be necessary or desirable to cause such representation or warranty to be true and accurate at all times during the term hereof.  To the extent any representation, warranty or covenant herein (including the covenants set forth in Section 8 and in this Section 7) relates to any Primary Obligor, other Subsidiary or any other Loan Party, it shall be deemed to be a covenant of Borrower to cause such Person to comply with or otherwise perform such representation, warranty or covenant, whether or not Borrower has the legal, corporate or other ability to cause such compliance or performance.  To the extent any representation, warranty or covenant herein (including the covenants set forth in Section 8 and in this Section 7) relates to any Person other than a Primary Obligor, other Subsidiary or any other Loan Party it shall be deemed to be a covenant of Borrower to exercise commercially reasonable efforts to cause such Person to comply with or otherwise perform such representation, warranty or covenant, whether or not Borrower has the legal, corporate or other ability to cause such compliance or performance.

(b)No delivery of any new or supplemented Schedule to this Agreement (whether or not such delivery is required by this Agreement or any other Loan Document) shall waive or cure any Default or Event of Default which would occur absent such delivery (other than a Default or Event of Default arising solely from the breach of an obligation to deliver such Schedule and other than as may be set forth in writing in a consent or amendment (if any) pursuant to which any such new or supplemented Schedule is delivered).

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

7.15Cooperation.  At Agent’s request, Borrower will meet from time to time with (and provide then available financial information to) other financial institutions to which Lender may wish to grant participations in the Loans, including potential Lender Assignees and potential Purchasing Lenders.

7.16Approvals and Consents.  In the event that any approval, consent or non-objection need be obtained by Borrower, FLBG, any other Primary Obligor or other Loan Party from, or a notice or other filing need be filed by Borrower or any such other Person, with, any Governmental Authority in connection with the execution, delivery and performance of this Agreement or any Loan Document by Borrower or any such other Person, Borrower and FLBG shall take and cause such other Person (as applicable) to take, all actions reasonably necessary to obtain any such approval, consent or non-objection or file such notice or other filing as promptly as practicable, and Lender agrees to cooperate with Borrower and FLBG in obtaining or filing the same.

7.17Payment of Dividends from Primary Obligors and Subsidiaries.  In furtherance and not in limitation of other provisions hereof (including Section 8.22) regarding required distributions, to the extent necessary to enable it to make payments of the Obligations in accordance with the terms hereof, unless prohibited by applicable law, Borrower shall cause dividends to be paid to it by each Primary Obligor and each other Wholly-Owned Subsidiary of Borrower (whether in existence as of the date hereof or hereafter formed or acquired) in amounts which are sufficient to enable Borrower to satisfy its payment obligations under the terms hereof.

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

7.19Compliance with Laws.  Borrower shall comply with, and shall cause each Primary Obligor, each other Subsidiary and each other Loan Party to comply with, and shall exercise commercially reasonable efforts to cause each Portfolio Entity to comply with, all laws, rules, regulations and governmental orders (federal, state and local), including all Environmental Laws, having applicability to it or to the business or businesses at any time conducted by it, where the failure to so comply would have, or could reasonably be expected to have, a Material Adverse Effect.

7.20Back-Up Servicer.  A Cold Back-Up Servicer selected by the Lender shall be paid, pursuant to Section 5.3(a)(iii), up to a maximum of $12,000 during any twelve month period to provide services (limited to obtaining and accessing FC Servicing’s (as servicer for the Portfolio Entities) data related to the RNF Asset Pool and testing the most current operating version of the software on the Cold Back-up Servicer’s data processing platform and maintaining a state of readiness to assume the loan accounting functions provided by FC Servicing for certain Portfolio Entities pursuant to servicing agreements) as a back-up servicer to FC Servicing and the Borrower shall use commercially reasonable efforts to cooperate with, and provide all information reasonably requested by, such Cold Back-Up Servicer, all subject to and as contemplated by the Back-up Servicing Agreement entered into by Borrower, First National Bank of Central Texas, as Cold Back-Up Servicer, FH Partners LLC, First X Realty, MPortfolio Corp., WAMCO XXIV, Ltd., Diversified Financial Systems L.P., Bosque Leasing Corp., and FirstCity Denver Investment Corp. in connection with the Reducing Note Facility Agreement

(the “Cold Back-up Servicing Agreement”) or other agreement with a Cold Back-Up Servicer which provides substantially the same terms as the Cold Back-up Servicing Agreement, which in each case has been or will be collaterally assigned to the Collateral Agent.  The Lenders may further, at any time during the term of this Agreement, elect to designate a third party to act as a back-up servicer to FC Servicing, either in replacement of or in addition to the Cold Back-Up Servicer, and the Borrower shall use commercially reasonable efforts to cooperate with, and provide all information reasonably requested by, such back-up servicer selected by the Lender; provided, however, that the Borrower shall only be responsible for payment of fees to the Cold Back-up Servicer and any back-up servicer as provided in Section 5.3(a)(iii), which are limited to a maximum of $12,000 for the Cold Back-up Servicer during any twelve month period and an aggregate maximum amount of $75,000 for both the Cold Back-up Servicer and/or Back-Up Servicer during any twelve month period.  The Borrower shall cooperate with, and permit, Lender to designate a back-up servicer, and Borrower shall cooperate with, and permit, Lender to designate a replacement for the Cold Back-Up Servicer.

7.21FH Partners Cash Leak-Through.  Borrower shall provide, or cause FH Partners to provide, to the Lender each month a report showing the calculation of and application of Excess Net Cash Flow, as defined in the BA Credit Agreement.  Borrower shall cause FH Partners to distribute to Borrower, and Borrower shall pay on to the Lender, all FH Partners Available Cash Leak-Through less any Management Fee then owing to FCIH.

7.22Notification of BA LTV.  Borrower shall promptly notify the Lender after the end of each month, and in no event more than twenty (20) days after the end of a month, if the BA LTV Ratio for the immediately preceding month is seventy-five percent (75%) or more and Borrower shall promptly notify the Lender after the end of each month, and in the event that the BA LTV Ratio for the immediately preceding month is eighty percent (80%) or more. Borrower shall specifically provide a call notice to Agent and Lender advising them of their right to exercise the right to purchase from BA the obligations of FH Partners under the BA Credit Agreement pursuant to the terms of the Intercreditor Agreement.

Section 8.NEGATIVE COVENANTS.

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

For the purposes of this Section 8, the terms Primary Obligor, Subsidiary, Loan Party, Related Entity, Portfolio Entity and Portfolio Entity-50% shall not mean or include any Crestone Portfolio Entities or any Person owned by a Crestone Portfolio Entity, FC Capital (or any of its Subsidiaries), MCS, Servicios Integrales de Cobranza, S.A. Chile, UBN, or any Portfolio Entity in which MCS and/or UBN owns fifty percent (50%) or more of the Equity Interests of such

entity; provided that Borrower will provide notice to Agent of any event, occurrence or action by any such Person that would otherwise constitute a breach of this Section 8 and Agent and Lender may prohibit such event, occurrence or action if such event, occurrence or action would, in the opinion of the Lender, have a Material Adverse Effect on the Borrower.

For the purposes of this Section 8, the terms Primary Obligor, Subsidiary, Loan Party, Related Entity, Portfolio Entity and Portfolio Entity-50% shall not mean or include FLBG2.

8.1Amend Charter Documents; Engage in Same Type of Business.

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

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

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

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

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

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

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

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

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

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

(vii)Indebtedness to the extent permitted by Section 8.12(a)(i)-(vi);

(viii)Indebtedness of Portfolio Entities in respect of loans permitted to be made by FC Servicing and FirstCity Mexico, S.A. de C.V. pursuant to Section 8.12(a)(iii);

(ix)Indebtedness of any Subsidiary or Portfolio Entity-50% payable to Borrower or a Wholly-Owned Subsidiary;

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

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

(xii)Up to $3,000,000 in aggregate principal Indebtedness incurred by FCS Creamer, Ltd., FCS Lancaster, Ltd., FCS Wood Ltd., FCS Wildhorse Ltd. and Brazos River Partnership One, L.P. or other REO Affiliates to finance developmental expenses of real property owned by such entities.

8.4Sell Assets.  Other than the transfer of the FLBG2 Collateral contemporaneously herewith and as contemplated by the RNF2, none of Borrower, any Subsidiary or any Portfolio Entity-50% shall assign, sell or transfer any of its Assets to any Person, other than in the ordinary course of business and for fair and adequate consideration (and, in the case of Assets constituting Equity Interests, only to the extent permitted by Section 8.8(a)); provided that the foregoing shall not restrict (i) an REO Affiliate from transferring its Assets to the Person which owns all of its equity interests or to any other Person which is not a Subsidiary or Affiliate of Borrower or such REO Affiliate or (ii) any Person which owns all of the equity interests in an REO Affiliate from transferring distressed notes secured by real estate (and such real estate security) to such REO Affiliate.

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

8.6Receiver.  None of Borrower, any Subsidiary or any Portfolio Entity-50% shall permit or suffer any receiver, trustee or assignee for the benefit of creditors, or any other custodian to be appointed to take possession of all or any of its Assets, or for all or any of its Assets to come within the possession of any receiver, trustee, assignee for the benefit of creditors

or custodian, other than a custodian pursuant to a Non-Default Voluntary Custodial Arrangement, if the same would have a Material Adverse Effect.

8.7Mergers, Acquisitions.  Other than the transfer of the FLBG2 Collateral contemporaneously herewith and as contemplated by the RNF2, none of Borrower, any Primary Obligor (other than FLBG) or any Material Portfolio Entity shall wind up, liquidate or dissolve its affairs or merge or consolidate with, be acquired by or acquire the stock or assets of or make any investment in (other than a capital contribution to provide for payment of Portfolio Protection Expenses), any Person, whether by merger, consolidation, purchase of stock or assets or otherwise, or create any new Subsidiary other than an REO Affiliate (or agree to do any of the foregoing at any future time) or fail to maintain its corporate, partnership or limited liability company or other formal existence, provided that notwithstanding the foregoing, Agent and Lenders acknowledge that it is contemplated that Borrower, Primary Obligors and Portfolio Entities will be liquidating their assets and that any Primary Obligor or any Portfolio Entity may be dissolved or merged into another Primary Obligor or Portfolio Entity upon the liquidation of all assets of any such Person that can be reasonably expected to be collected or sold.

8.8Stock Transfers.

(a)Except (i) as permitted pursuant to Section 8.8(b), (ii) for the sale of Equity Interests in a Subsidiary for fair market price, the proceeds of which are distributed pursuant to Section 5.3 hereof, (iii) with respect to quotas issued to FirstCity Chile II in connection with direct and indirect contributions of capital from distributions or dividends from NPL Fund Two, Private Investment Fund, or (iv) for options, warrants or other rights to purchase Equity Interests in Borrower pursuant to plans or instruments described in Schedule 10.5(c) as amended from time to time with Majority Lenders’ written consent and for Equity Interests in Borrower issued upon exercise thereof, none of Borrower, any Subsidiary or any Portfolio entity-50% shall (x) grant any option, warrant or other right to purchase any Equity Interest in Borrower, any Subsidiary or any Portfolio Entity-50% or (y) issue any other Equity Interests, or (ii) transfer any Equity Interests (whether its own or Equity Interests issued by any Person other than itself) without, in each case, the prior written consent of Majority Lenders.

(b)Notwithstanding anything to the contrary contained herein, Borrower shall have the right to offer and sell equity Securities of Borrower under the following terms and conditions: (x) Borrower shall deliver notice to Agent, within twenty-four (24) hours of any filing with the SEC; (y) Borrower shall fully and timely comply with all Securities Laws and with all terms and provisions of the underwriting agreement pursuant to which such Securities are offered for sale; and (z) the prospectus and all other selling materials used by Borrower in such offering shall not contain any misstatement of material fact or omit to state any fact which would render the statements contained therein false or misleading.

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

8.10Investments.

(a)Other than the transfer of the FLBG2 Collateral contemporaneously herewith and as contemplated by the RNF2, subject to the further limitations set forth in Sections 8.10(b) and (c), after the Execution Date, neither Borrower, any Subsidiary nor any Portfolio Entity-50% shall make any investment in Equity Interests of any Person other than (i) investments in Equity Interests owned as of the date of this Agreement, (ii) direct or indirect contributions by Primary Obligors to capital of Portfolio Entities to be used by such entities (x) to pay development expenses related to real estate or (y) to pay Portfolio Protection Expenses, (iii) investments by any such Person (other than by a Portfolio Entity) in the ordinary course of business or (iv) with respect to quotas issued by FirstCity Chile II in connection with direct and indirect contributions of capital from distributions or dividends from NPL Fund Two, Private Investment Fund.

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

(c)Other than the transfer of the FLBG2 Collateral contemporaneously herewith and as contemplated by the RNF2, in furtherance, and not in limitation, of other restrictions herein and in the other Loan Documents on contributions, loans, gifts, investments and Guaranty Equivalents, none of Borrower, any Subsidiary or any Portfolio Entity-50% shall make capital contributions, loans or gifts to, investments in or enter into or issue any Guaranty Equivalent with respect to the obligations of any entity identified on Schedule 10.34 or any other Immaterial Entity at any time during the term hereof.

8.11Dividends.  Borrower will not, and Borrower will not permit any Subsidiary or any Portfolio Entity-50% to, authorize, declare, or pay any dividends or return any capital to its stockholders as such or authorize or make any other distribution, payments or delivery of property or cash to its stockholders as such, or redeem, retire, purchase or otherwise acquire, directly or indirectly, for a consideration any shares of any class of its capital stock now or hereafter outstanding or any options, warrants or other securities (now or hereafter outstanding) convertible into or exercisable for any equity or other securities of Borrower, any Subsidiary or any Portfolio Entity-50% or set aside funds for any of the foregoing and Borrower will not permit any Subsidiary or any Portfolio Entity-50% to purchase any Equity Interests of Borrower, or set aside funds for any of the foregoing (any such authorization, declaration, payment, dividend, return of capital, distribution, delivery, redemption, retirement, purchase, acquisition or setting aside of funds, a “Dividend”), provided, that (i) any Subsidiary or Portfolio Entity-50% may declare or pay Dividends to Borrower or any Wholly-Owned Subsidiary and (ii) any Subsidiary or Portfolio Entity-50% may pay cash Dividends to holders of its shares of stock, partnership interests, limited liability company interests or similar equity interests generally so long as Borrower or its Subsidiaries which own such equity interests in the Person paying such Dividends receives at least its proportionate share thereof (based on its relative holdings of such equity interests in the Person paying such Dividends).

8.12Loan; Guaranty Debt.

(a)Except as set forth on Schedule 8.12(a), none of Borrower, any Subsidiary or any Portfolio Entity-50% shall make any loan to any Person, or otherwise invest in or acquire any note, bond, other debt instruments or obligations of or issued by any Person except [(i) the

acceptance by a Subsidiary or a Portfolio Entity-50% of a note from its one hundred percent (100%) owned REO Affiliate evidencing the deferred purchase price of a mortgage note sold to such REO Affiliate such Subsidiary or Portfolio Entity-50% or a portion of the purchase price for the real property in the event that the REO Affiliate acquires the real property (1) at a foreclosure sale or through a foreclosure proceeding, (2) from the mortgagor in either full or partial satisfaction of the related debt, or (3) by purchase from the Subsidiary or Portfolio Entity-50%; (ii) the acceptance by an REO Affiliate, a Latin American Acquisition Entity or a European Acquisition Entity of a note from the transferee of real property sold by such REO Affiliate, Latin American Acquisition Entity or European Acquisition Entity (as the case may be) in the ordinary course of business evidencing a portion of the deferred purchase price of such property; (iii) in the case of FC Servicing and FirstCity Mexico, S.A. de C.V., short term servicer advances in the ordinary course of business with respect to portfolios which they are servicing in aggregate principal amount at any one time outstanding not in excess of $2,000,000, on a combined basis; and (iv) direct or indirect loans by Primary Obligors to Subsidiaries and Portfolio Entities to be used by such entities (x) to pay development expenses related to real estate or (y) to pay Portfolio Protection Expenses; (v) SBA Loans made by ABL in accordance with the SBA Rules and Regulations; and (vi) loans made by FC Commercial to FirstCity Denver Investment Corp. to enable FirstCity Denver Investment Corp. to fund loans to Crestone Portfolio Entities under the Crestone Facility for Portfolio Protection Expenses.

(b)Except as set forth on Schedule 8.12(b), none of Borrower, any Subsidiary or any Portfolio Entity-50% shall enter into or issue any Guaranty Equivalents.

8.13Issue Power of Attorney.  Except pursuant to the other provisions of this Agreement or the Security Documents to which Agent is a party, none of Borrower, any Subsidiary or any Portfolio Entity-50% shall issue any power of attorney or other contract or agreement giving any Person power or control over the day-to-day operations of any such Person’s business; provided that, any Primary Obligor, any Portfolio Entity, FirstCity do Brazil, Ltda., FirstCity Argentina Corporation, First South America LLC, FirstCity Recovery S.A., FirstCity Mexico, S.A. de C.V. and Servicios Efectivos de Recuperacion, S. de R.L. de C.V. shall have the right to grant powers of attorney necessary to conduct business outside the United States, to pursue or consummate asset acquisitions outside the United States and to collect or liquidate Assets or pursue litigation related Assets outside the United States, which are undertaken in the ordinary course of such respective company’s business.

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

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

8.16Limitations on Dividends and Other Payment Restrictions Affecting Subsidiaries.  Except as herein provided, Borrower shall not, and Borrower shall not permit any Subsidiary, or any Portfolio Entity-50% to, create, assume or otherwise cause or suffer to exist or to become effective any consensual encumbrance or restriction on the ability of any such Person to:

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

(ii)make payments on or in respect to any Indebtedness owed to Borrower, any Subsidiary; or

(iii)make loans or advances to Borrower or any of its Subsidiaries or to guarantee Indebtedness of Borrower or any of its Subsidiaries;

other than, in the case of (i), (ii) and (iii),

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

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

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

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

(5)restrictions under this Agreement;

(6)Permitted Restrictions imposed under Approved Portfolio Leverage Arrangements;

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

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

and other than in the case of (iii), a consensual encumbrance or restriction on the ability of any Subsidiary other than a Wholly-Owned Subsidiary or any Portfolio Entity-50% to make a loan or advance to or guarantee Indebtedness of Borrower or any of its Subsidiaries.

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

8.18Accounting Changes.  None of Borrower, any Subsidiary or any Portfolio Entity-50% will make any significant change in (i) accounting treatment and reporting practices except as permitted or required by GAAP or Legal Requirements or (ii) unless Agent consents thereto in writing (which consent shall not be unreasonably withheld), its Fiscal Year; provided that in any such case, if any such change would affect any computation required by Section 8.17 hereof or any amount required to be paid by Section 2.3 hereof, appropriate amendment shall have been made to this Agreement with respect thereto (or, in the case of change required at such time by a Legal Requirement, appropriate amendment is made to this Agreement contemporaneous with such change and, and if such amendment is not made, Borrower shall be deemed in default under Section 8.17).

8.19Related Transactions.  Borrower does not have and Borrower shall not, and Borrower shall not permit any Subsidiary or any Portfolio Entity-50% to, enter into any transactions with any Affiliate or Associate, including, without limitation, agreements for the purchase, sale or exchange of property or the rendering of any services to or by any Affiliate or Associate of Borrower or any Parent (other than existing Fee Agreements between FC Servicing and certain Portfolio Entities and additional Fee Agreements entered into between FC Servicing and Portfolio Entities related to the servicing of Assets upon terms and conditions consistent with the existing servicing agreements), or enter into, assume or suffer to exist any employment, management, administration, advisory or consulting contract with any Affiliate or Associate of Borrower or any Parent or, in each of the foregoing cases, with any officer, director or partner of any Affiliate or Associate of Borrower or any Parent or modify any Fee Agreement unless, in any such case, such transaction (a) is otherwise not in violation of this Agreement or any other

Loan Document and (b) is in the ordinary course of its business and is upon fair and reasonable terms no less favorable to Borrower, such Subsidiary or such Portfolio Entity-50% (as the case may be) than such Person would obtain in a comparable arm’s-length transaction with a Person not an Affiliate or Associate; provided, that the foregoing shall not restrict a Subsidiary from entering into a transaction contemplated by the definition of “REO Affiliate” to sell real estate (or distressed notes secured by real estate) to its wholly owned REO Affiliate.

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

8.21Compliance with ERISA.  Neither Borrower nor any Subsidiary (each, an “Applicable Person”) will (i) terminate, or permit any of its Subsidiaries to terminate, any Pension Plan so as to result in any material (in the opinion of Agent or the Majority Lenders) liability of any such Person or Subsidiary to the PBGC, (ii) permit to exist the occurrence of any Reportable Event (as defined in Section 4043 of ERISA), or any other event or condition, which presents a material (in the opinion of Agent or the Majority Lenders) risk of such a termination by the PBGC of any Pension Plan, (iii) allow, or permit any of its Subsidiaries to allow, the aggregate amount of “benefit liabilities” (within the meaning of Section 4001(a)(16) of ERISA) under all Pension Plans of which any Applicable Person or any ERISA Affiliate is a “contributing sponsor” (within the meaning of Section 4001(a)(13) of ERISA) to exceed $100,000, (iv) allow, or permit any of its Subsidiaries to allow, any Plan to incur an “accumulated funding deficiency” (within the meaning of Section 302 of ERISA or Section 412 of the Code), whether or not waived, (v) engage, or permit any of its Subsidiaries or any Plan to engage, in any “prohibited transaction” (within the meaning of Section 406 of ERISA or Section 4975 of the Code) resulting in any material (in the opinion of Agent or the Majority Lenders and considered by itself or together with all other such liabilities of Borrower and all ERISA Affiliates) liability to any Applicable Person or any ERISA Affiliate, (vi) allow, or permit any of its Subsidiary to allow, any Plan to fail to comply with the applicable provisions of ERISA and the Code in any material respect, (vii) fail, or permit any of its Subsidiaries to fail, to make any required contribution to any Multiemployer Plan, or (viii) completely or partially withdraw, or permit any of its Subsidiaries to completely or partially withdraw, from a Multiemployer Plan, if such complete or partial withdrawal will result in any material (in the opinion of Agent or the Majority Lenders) withdrawal liability under Title IV of ERISA.  No Loan Party or Subsidiary, other than Borrower and Subsidiaries that are not Portfolio Entities has or shall at any time have any employees.

8.22Distributions to Primary Obligors and Borrower.

(a)Each calendar month, Borrower shall (i) cause each Portfolio Entity and each REO Affiliate to distribute to a Primary Obligor, on or prior the Payment Date occurring in such month, the Portfolio Entity Proceeds, and (ii) cause each such Primary Obligor to pay to

Borrower, upon receipt, each such Dividend received by such Primary Obligor under clause (i) above by prepaying the applicable Pledged Note or intercompany receivable and, if no amount then remains outstanding thereunder, by distributing any remaining portion of such distribution as a Dividend (in accordance with Section 8.11) to Borrower.

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

8.23Capital Expenditures.  Borrower will not make any Capital Expenditures and Borrower will not permit any of its Subsidiaries to make any Capital Expenditures without the prior written consent of the Lenders, except that Borrower and its Subsidiaries may make Capital Expenditures in an aggregate amount (excluding the capitalization of insurance premiums) not in excess of $2,000,000, net of any reimbursement for Capital Expenditures made to Regional Rail, LLC, East Penn Railroad LLC or Middletown & New Jersey Railroad, LLC and other Persons owned by the Crestone Portfolio Entities during each fiscal year.

8.24Servicing.

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

(b)Borrower shall (i) cause FC Servicing to deposit all fee income and all other funds received by it relating to servicing of the RNF Asset Pool and not constituting Servicing Restricted Funds or FH Partners Servicing Fees to the Cash Collateral Account-Servicing upon receipt of each such amount and (ii) cause Minn Servicing to distribute to FC Servicing all fee income and all other funds received by it not constituting Servicing Restricted Funds by wiring all such amounts directly to the Cash Collateral Account-Servicing upon receipt of each such amount.

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

8.26Activities of Portfolio Entity.  In furtherance and not in limitation of the other restrictions set forth in this Agreement, Borrower shall ensure that no Subsidiary which is a Portfolio Entity and no Portfolio Entity-50% engages in any activity other than owning Asset Pools and shall have no Assets other than such Asset Pools, collections thereon and interests in REO Affiliates of which it is the REO Owner, or the ownership of Incidental Equity Interests, provided that, (i) a Subsidiary or a Portfolio Entity-50% doing business outside the United States may own the type of assets an REO Affiliate would own (if it had an REO Affiliate of which it

were the REO Owner); (ii) each REO Affiliate shall be formed in respect of a specific REO Owner and shall not hold assets other than from such REO Owner; (iii) ABL may originate and service SBA Loans in accordance with the SBA Rules and Regulations; and (iv) Crestone Portfolio Entities and any Person owned by Crestone Portfolio Entities may continue to engage in the activities in which they are presently engaging.

Section 9.EVENTS OF DEFAULT.

For the purposes of this Section 9, the terms Primary Obligor, Subsidiary, Loan Party, Related Entity, Portfolio Entity and Portfolio Entity-50% shall not mean or include FLBG2.

Upon the occurrence of any of the following specified events (each an “Event of Default”):

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

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

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

9.4Other Covenants.  Borrower shall fail to perform or observe, or shall fail to cause Subsidiary, Portfolio Entity, other Loan Party or other Person covered thereby to perform or observe, any term, covenant or agreement to be performed or observed by Borrower or such Subsidiary, Portfolio Entity, other Loan Party or other Person, as the case may be, pursuant to any of the provisions of this Agreement, including, without limitation, Section 2.3 (other than those referred to in Sections 9.1, 9.2 or 9.3) or any other Loan Document and such default (which shall be capable of cure) shall continue unremedied for a period of thirty (30) days, after the earlier of the date on which (x) Agent or any Lender gives Borrower notice thereof, or (y) Borrower obtains knowledge of such default; or

9.5Other Indebtedness of Borrower.  Any Applicable Indebtedness of Borrower (i) shall be declared to be or shall become due and payable prior to the stated maturity thereof or (ii) shall not be paid as and when the same becomes due and payable; or any other event of default

shall occur and be continuing under any other Indebtedness Instrument (other than a Loan Document) relating to any Indebtedness of Borrower in excess of $15,000,000 and, if a cure period is applicable thereto, such default shall not be cured within fifteen (15) days after the occurrence thereof; or

9.6Other Indebtedness of other Loan Parties.

Any Applicable Indebtedness of any Primary Obligor or other Loan Party (i) shall be declared to be or shall become due and payable prior to the stated maturity thereof or (ii) shall not be paid as and when the same becomes due and payable; or any other event of default shall occur and be continuing under any other Indebtedness Instrument (other than a Loan Document) relating to any Indebtedness of such Person in excess of $15,000,000 and, if a cure period is applicable thereto, such default shall not be cured within fifteen (15) days after the occurrence thereof; or

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

9.8Insolvency.  (i) Borrower, any Primary Obligor or any other Loan Party (Borrower and each of the other foregoing Persons other than any Non-Covered Entity being a “Section 9.8 Entity”) shall make an assignment for the benefit of creditors or a composition with creditors; or (ii) any Section 9.8 Entity shall admit in writing its inability to pay its debts as they mature, shall file a petition in bankruptcy, shall be adjudicated insolvent or bankrupt, shall petition or apply to any tribunal for the appointment of any receiver, liquidator, trustee or custodian of or for it or any of its Assets; or (iii) any application is made by any other Person for the appointment of any receiver, liquidator, trustee or custodian for any Section 9.8 Entity or for any of the Assets of any Section 9.8 Entity; or (iv) any Section 9.8 Entity shall commence any proceedings relating to it under any bankruptcy, reorganization, arrangement, readjustment of debt, receivership, dissolution or liquidation law or statute of any jurisdiction, whether now or hereafter in effect; or (v) there shall be commenced against any Section 9.8 Entity any such proceeding which shall remain undismissed for a period of sixty (60) days or more, or any order, judgment or decree approving the petition in any such proceeding shall be entered; or (vi) any Section 9.8 Entity shall by any act or failure to act indicate its consent to, approval of or acquiescence in, any such proceeding or in the appointment of any receiver, liquidator, trustee or custodian (other than a custodian under Non-Default Voluntary Custodial Arrangements) of or for it or any of its Assets, or shall suffer any such appointment to exist; or (vii) any Section 9.8 Entity shall take any action for the purpose of effecting any of the foregoing; or any court of competent jurisdiction shall assume jurisdiction with respect to any such proceeding or a receiver or trustee or other officer or representative of a court or of creditors, or any court, governmental officer or agency, shall under color of legal authority, take and hold possession of any substantial part of the property or Assets of any Section 9.8 Entity; or (viii) any Section 9.8 Entity shall

become insolvent (howsoever such insolvency may be evidenced) or shall be unable to pay its debts as they mature (except that the occurrence of any condition set forth in this clause (viii) with respect to FC Mexico, so long as FC Mexico is paying its debts as they mature, shall not constitute an Event of Default under this Section 9.8 unless the occurrence of any such condition with respect to FC Mexico is an Event of Default under any other clause of this Section 9.8); or

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

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

9.11Judgments.

(a)Any final non-appealable judgment for the payment of money in excess of $1,000,000 (after giving effect to any amount covered by insurance as to which the insurer shall not have denied or questioned its obligation to pay) shall be rendered against Borrower or any Primary Obligor and the same shall remain in effect for a period of ten (10) days after entry of such judgment; or

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

(c)If for the purpose of obtaining judgment in any court it is necessary to convert a sum due from Borrower in the currency expressed to be payable herein (the “specified currency”) into another currency, the parties hereto agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures Agent could purchase the specified currency with other such currency at Agent’s New York branch on the Business Day that is on or immediately following the day on which final judgment is entered.  The obligations of Borrower in respect of any sum due to any Lender or Agent hereunder shall, notwithstanding any judgment in a currency other than the specified currency, be discharged only to the extent that on the Business Day following receipt by such Lender or Agent, as the case may be, of any sum adjudged to be so due in such other

currency such Lender or Agent as the case may be, may in accordance with normal banking procedures purchase the specified currency with such other currency.  If the amount of the specified currency so purchased is less than the sum originally due to such Lender or Agent, as the case may be, in the specified currency, Borrower agrees, to the fullest extent it may effectively do so, as a separate obligation and notwithstanding any such judgment, to indemnify such Lender or Agent, as the case may be, against such loss, and if the amount of the specified currency so purchased exceeds the sum originally due to any Lender or Agent, as the case may be, in the specified currency, such Lender or Agent, as the case may be, agrees to remit such excess to Borrower.

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

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

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

9.15Change in Control.  A Change in Control shall occur (for purposes hereof, a “Change in Control” shall mean the occurrence of any of the following events after the date hereof:  (i) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), is or becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly, or indirectly, of more than fifty percent (50%) of the aggregate voting power of all classes of Capital Stock of Borrower or of FCFC entitled to vote generally in an election of directors; (ii) Borrower or FCFC is merged with or into another corporation or another corporation is merged with or into Borrower or FCFC with the effect that immediately after such transaction the stockholders of Borrower or FCFC, as the case may be, immediately prior to such transaction hold less than a majority in interest of the total voting power entitled to vote in the election of directors, managers or trustees of the entity surviving the transaction; or (iii) to the extent not otherwise then constituting an Event of Default, all or substantially all of the Assets of Borrower, FCFC or another Primary Obligor are sold to any person or persons (as an entirety in one transaction or a series of related transactions).  In the event that the Borrower or any Affiliate at any time proposes entering into a transaction which, if consummated, would constitute a Change in Control and therefore an Event of Default under this Section 9.15, and seeks from the Agent a consent to such transaction and waiver of such Event of Default, if the Agent, in its sole and absolute discretion, agrees to grant such consent and waiver, the Agent shall not condition such grant on an increase in the Contract Rate.  For the avoidance of doubt, in no event does the

immediately preceding sentence obligate the Agent to deliver such consent and waiver, which may be granted only in the Agent’s sole and absolute discretion. For purposes of this Section 9.15, “Capital Stock” of any Person means any and all shares, interests, participations or other equivalents in the equity (however designated) of such Person and any rights (other than debt securities convertible into an equity interest), warrants or options to acquire an equity interest in such Person; or

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

9.17Court Orders.  To the extent not otherwise constituting an Event of Default, if Borrower, any Primary Obligor or any other Loan Party is enjoined, restrained or in any way prevented by court order from conducting all or any material part of its business or affairs and such Person consents (by action, inaction or otherwise) to such order or such order remains in effect for a period of thirty (30) days; or

9.18Dissolution.  If Borrower, any Primary Obligor or any other Loan Party shall dissolve, fully liquidate or suspend or discontinue its business other than as contemplated by this Agreement; then, and in any such event, and at any time thereafter, if any Event of Default shall then be continuing, Agent may (and shall, if instructed in writing by the Majority Lenders) by written notice to Borrower declare the principal of and accrued interest on the Loans of Borrower to be, whereupon the same shall forthwith become, due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by Borrower; provided that, if any Event of Default described in Section 9.8 shall occur with respect to Borrower, the result which would otherwise occur only upon the giving of written notice by Agent to Borrower as herein described shall occur automatically, without the giving of any such notice; further provided that notwithstanding the foregoing, Agent and Lenders acknowledge that it is contemplated that the Borrower, Primary Obligors, Loan Parties and Portfolio Entities will be liquidating their assets and that any Primary Obligor, Loan Party or Portfolio Entity may be dissolved or merged into another Primary Obligor, Loan Party or Portfolio Entity upon the liquidation of all assets of any such Person that can reasonably be expected to be collected or sold and that no such action will be a violation of this Section or a Default or Event of Default.

Section 10.GENERAL REPRESENTATIONS AND WARRANTIES AND RELATED COVENANTS.

In order to induce Lenders to enter into this Agreement, to maintain the Loans and to maintain the Letters of Credit, provided for herein, each Loan Party party hereto makes the following representations, covenants and warranties, both as of the Execution Date and (after giving effect to the transactions contemplated hereby to occur on the Effective Date) as of the Effective Date (unless otherwise specified), which representations, covenants and warranties shall survive the execution and delivery of this Agreement and the other documents and instruments referred to herein:

10.1Organization.

(a)Borrower, each Primary Obligor, and FLBG is and at all times hereafter shall be a corporation or limited liability company, as the case may be, duly organized and validly existing and in good standing under the laws of its jurisdiction or organization and qualified or licensed to do business and in good standing in all states in which the laws thereof require Borrower to be so qualified and/or licensed and in which the failure to so qualify could have a Material Adverse Effect, including, without limitation, the State of Texas.  Schedule 10.1(a) identifies each jurisdiction in which Borrower has qualified or been licensed to do business and describes the nature and current status of any such qualification or license.

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

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

(d)Each Portfolio Entity is and at all times hereafter shall be qualified or licensed to do business and in good standing in all states in which the laws thereof require such Portfolio Entity to be so qualified and/or licensed and in which the failure to so qualify could have a Material Adverse Effect.  Schedule 10.1(d) identifies each jurisdiction in which each Primary Obligor, Portfolio Entity, Related Entity and each other Loan Party has qualified or been licensed to do business and describes the nature and current status of any such qualification or license.

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

10.2Entity Power.

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

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

10.3Violation of Charter Documents.

(a)The execution, delivery and/or performance by Borrower of this Agreement and the other Loan Documents to which it is a party and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate and

shareholder action and none of such execution, delivery, performance or consummation shall, by the lapse of time, the giving of notice or otherwise, constitute a violation of any Legal Requirement or a breach of any provision contained in the Charter Documents of Borrower, or contained in any agreement, instrument or document to which Borrower is now or hereafter a party or by which it or any of its Assets is or may become bound, other than agreements, instruments or documents that are immaterial to Borrower and the breach of which could not have a Material Adverse Effect.

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

10.4Enforceability.

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

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

10.5Ownership.

(a)Schedule 10.5(a) sets forth all classes of Stock of Borrower, as of December 31, 2010, the shareholders thereof (other than members of the general public), addresses of each shareholder, and number of shares owned by each Shareholder as of such date;

(b)Schedule 10.5(b) sets forth all classes of Stock and/or other Equity Interests (other than options, warrants and rights to acquire Stock or other Equity Interests) issued by each Primary Obligor, each Portfolio Entity and each Related Entity, the shareholders

and other equity holders thereof, and the addresses, number of shares and/or partnership interests owned by each Shareholder or equity holder.

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

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

10.6Fictitious Names.

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

(b)Each of the fictitious names, if any, used by each Primary Obligor, Material Portfolio Entity and any other Loan Party, during the five (5) year period preceding the Execution Date is set forth on Schedule 10.6 attached hereto (as amended from time to time), and none of such fictitious names are registered trademarks or trade names with the U.S. Patent and Trademark Office; provided that, variations on the corporate name of any Primary Obligor, Portfolio Entity or any other Loan Party in states where used solely for qualifying to do business therein shall and have been excluded from such schedule, with Lender’s consent and approval.

10.7Title.

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

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

(c)Borrower, each Primary Obligor, Portfolio Entity and other Loan Party shall at all times have indefeasible and merchantable title to and ownership of all of its Assets except to the extent the failure to do so could not reasonably be expected to have a Material Adverse Effect.

10.8Financial Warranty.  Except as set forth on Schedule 10.8, Borrower (a) is paying its debts as they mature, (b) owns property which, at a fair valuation, is greater than the sum of its debt, and (c) has capital sufficient to carry on its business and transactions and all businesses and transactions in which it is about to engage. Except as set forth on Schedule 10.8, each Primary Obligor and each Material Portfolio Entity: (i) is paying its respective debts as they mature, (ii) owns property which, at a fair valuation, is greater than the sum of its debt and (iii)

has capital sufficient to carry on its business and transactions and all businesses and transactions in which it is about to engage.

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

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

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

10.12Government Permits; Approvals and Consents.

(a)Except for matters which could not result in a Material Adverse Effect, Borrower and each Primary Obligor, each Portfolio Entity and each other Loan Party has been and is in good standing with respect to and has obtained all governmental permits, certificates, consents and franchises necessary to continue to conduct its business as previously conducted prior to the date hereof and prior to the Execution Date and to own or lease and operate its properties as now owned or leased by it.  None of said permits, certificates, consents or franchises contain any term, provision, condition or limitation more burdensome than such as are generally applicable to Persons engaged in the same or similar business as the applicable Person.

(b)Except for those consents and other items set forth on Schedule 10.12, neither Borrower nor any Primary Obligor, Material Portfolio Entity or other Loan Party requires the approval, consent, waiver, order, permission, license, authorization, registration or validation of, or filing with or exemption by, any Government Authority or any other Person (including but not limited to shareholders, partners, members, equity owners, holders of Indebtedness Instruments, or any owner of any lien upon the Assets of any one or more of them or their Affiliates) for the execution and delivery of, and the consummation of the transactions contemplated by, this Agreement and the other Loan Documents, including but not limited to the borrowing of any Loans, the pledge of the Collateral, and the payment and performance of all Obligations.  Each Borrower and each other Primary Obligor, Material Portfolio Entity and other Loan Party have received the consents and other items described on Schedule 10.12 and has delivered a copy thereof to Agent, which consents are in full force and effect, unmodified and unamended on the date hereof and on the Execution Date.

10.13Charge; Restrictions.

(a)On the Execution Date and on the Effective Date, none of Borrower, any Primary Obligor, any Portfolio Entity or any other Loan Party is a party to (nor are any of such

Person’s Assets otherwise subject to) any contract or agreement or restriction, judgment, decree or order that could have a Material Adverse Effect.

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

10.14Compliance with Laws.  Except for matters which could not result in a Material Adverse Effect, neither Borrower nor any Primary Obligor nor any Portfolio Entity nor any other Loan Party is in violation of any applicable statute, regulation, order or ordinance of the United States of America, of any state, city, town, municipality, county or of any other jurisdiction, or of any agency thereof, including the Federal Reserve Board, in any respect.

10.15Compliance with Indebtedness Instruments.  Other than those defaults set forth on Schedule 10.15, Borrower is not in default under any Indebtedness Instrument or any other material agreement to which it is a party.  Other than those defaults set forth on Schedule 10.15, no Primary Obligor, Material Portfolio Entity, or any other Loan Party is in default under any Indebtedness Instrument.

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

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

10.18No Material Adverse Change.  Except as set forth in Schedule 10.18, since December 31, 2010, no event or circumstance has occurred that had, has or could reasonably be expected to have a Material Adverse Effect.

10.19No Indebtedness.  None of Borrower, any Primary Obligor, Portfolio Entity, Wholly-Owned Subsidiary or other Loan Party (i) has any Indebtedness except for Indebtedness described in Schedule 10.19, Schedule 10.20 and Schedule 8.12(a) and except for Indebtedness permitted by this Agreement which (other than in the case of MCS, any Latin American Acquisition Entity  or any European Acquisition Entity) is reflected in the most recent Financial Statements delivered pursuant to 7.1(a) or (b) (except for any such Indebtedness permitted by this Agreement (x) incurred since such most recent Financial Statements were delivered, or (y) constituting unsecured trade payables arising in the ordinary course of business since the dates reflected in the December 31, 2010 Financial Statements that is not Indebtedness for borrowed

money or Indebtedness of any REO Affiliate to its REO Parent evidenced by a note payable to such REO Parent and in each case, only to the extent, if any, not required by GAAP to be reflected in Financial Statements) or (ii) has guaranteed any indebtedness or entered into or issued any Guaranty Equivalent (other than as a result of the endorsement of any instrument of items of payment for deposit or collection in the ordinary course of business or as otherwise expressly permitted pursuant to the terms hereof) in respect of the obligations of any Person.

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

10.21No Liability on Lenders or Agent.  None of the execution, delivery and performance by Borrower or any other Loan Party of this Agreement and/or the other Loan Documents will impose on or subject any of the Lenders or the Agent to any liability, whether fixed or contingent, in respect of any Environmental Law, whether relating to the operation of Borrower’s business or otherwise.  None of the Lenders’ or the Agent’s exercise of any of the rights or remedies described in this Agreement or in any of the other Loan Documents shall constitute a breach of any provision contained in any agreement, instrument or document concerning the assignment or license of, or the payment of royalties for, any patents, patent rights, trade names, trademarks, trade secrets, know-how, copyrights or any other form of intellectual property now or at any time or times hereafter protected as such by any applicable law.

10.22Affiliates.  Schedule 10.22 attached hereto is a true, accurate and complete schedule of Borrower’s Affiliates as of the Effective Date, together with a description of Borrower’s relationship to each such Affiliate.

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

10.24Investment Company Act and Public Utility Holding Company Act.  Neither Borrower nor any Primary Obligor nor any other Loan Party or the entering into of any Loan Documents, nor the issuance of the Notes is subject to any of the provisions of the Investment Company Act of 1940, as amended.  Neither Borrower nor any Primary Obligor or any other Loan Party is a “holding company” as defined in the Public Utility Holding Company Act of

1935, as amended, or subject to any other federal or state statute or regulation limiting its ability to incur Indebtedness for money borrowed.

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

10.26Qualification.

(a)Solely by reason of (and without regard to any other activities of Lender and/or Agent in any state in which Assets of Borrower, any Primary Obligor, any Portfolio Entity, any Related Entity or other Loan Party are located) the entering into and performance of this Agreement, the Notes, the other Loan Documents and the documents, instruments and agreements delivered in connection therewith by Lender and/or Agent will not constitute doing business by Lender and/or Agent in any of such states or result in any liability of Lender and/or Agent for taxes or other governmental charges; and qualification by Lender and/or Agent to do business in such jurisdiction is not necessary in connection with, and the failure to so qualify will not affect, the enforcement of, or exercise of any rights or remedies under, any of such documents.

(b)No “business activity,” “doing business” or similar report or notice is required to be filed by the Lender and/or Agent in any such jurisdiction in connection with the Loans or the transactions contemplated by this Agreement or any other Loan Document, and the failure to file any such report or notice will not affect the enforcement of, or the exercise of any rights or remedies under, this Agreement or any of the other Loan Documents.

(c)SEC Filings.  Borrower has made available to the Agent and Lender each form, registration statement, schedule, report, proxy statement and document required to be filed by FCFC with the SEC since January 1, 2006 (collectively, the “SEC Reports”).  Except as set forth on Schedule 10.26, the SEC Reports (i) at the time filed, complied in all material respects with the applicable requirements of the Securities Laws and (ii) did not at the time they were filed (or if amended or superseded by a filing prior to the date of this Agreement, then on the date of such filing) contain any untrue statement of a material fact or omit to state a material fact required to be stated in the SEC Reports or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.  FCFC is the only Loan Party required to file pursuant to the Exchange Act.  Since January 1, 2006, FCFC has made all filings with the SEC in a timely manner (except as set forth on Schedule 10.26, each of which filing deficiencies was subsequently cured in a manner that brought FCFC into full compliance with law) as required by law and no event has occurred that requires an additional filing or any amendment to a prior filing, which has not been made or filed.

10.27Federal Reserve Margin Regulations; Use of Proceeds.

(a)Neither Borrower nor any Primary Obligor, any Portfolio Entity, any Related Entity or any other Loan Party or member of the Consolidated Group or Subsidiary of any of the foregoing is engaged principally, or as one of its important activities, in the business of extending credit 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).  No part of the proceeds of any Loan will be used to purchase or carry any such margin stock or to extend credit to others for the purpose of purchasing or carrying any such margin stock.

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

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

10.29Compliance with ERISA.  No Loan Party or Subsidiary, other than FC Servicing or Borrower and Subsidiaries that are not Portfolio Entities has or shall at any time have any employees.  Schedule 10.29 describes the Pension Plans to which Borrower or any ERISA Affiliates may have obligations.  Each Loan Party and each ERISA Affiliate and each Plan and the trusts maintained pursuant to such plans are in compliance in all material respects with the presently applicable provisions of Sections 401 through and including 417 of the Code and of ERISA and (i) no event which constitutes a Reportable Event as defined in Section 4043 of ERISA has occurred and is continuing with respect to any Plan which is or was covered by Title IV of ERISA, (ii) no Plan which is subject to Part 3 of Subtitle B of Title 1 of ERISA has incurred any “accumulated funding deficiency” (within the meaning of Section 302 of ERISA or Section 412 of the Code) whether or not waived, and (iii) no written notice of liability has been received with respect to any Loan Party or any Subsidiary for any “prohibited transaction” (within the meaning of Section 4975 of the Code or Section 406 of ERISA), nor has any such prohibited transaction resulting in liability to any Loan Party or ERISA Affiliate occurred.

Neither any Loan Party nor any ERISA Affiliate (i) has incurred any liability to the PBGC (or any successor thereto under ERISA), or to any trustee of a trust established under Section 4049 of ERISA, in connection with any Plan (other than liability for premiums under Section 4007 or ERISA), (ii) has incurred any withdrawal liability under Subtitle E of Title IV of ERISA in connection with any Plan which is a Multiemployer Plan, nor (iii) has contributed or has been obligated to contribute on or after September 26, 1980, to any “multiemployer plan” (within the meaning of Section 3(37) of ERISA) which is subject to Title IV of ERISA.

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

10.30The Security Documents.

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

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

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

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

10.33Securitization Agreements.  Attached hereto as Schedule 10.33 is a true, accurate and complete schedule as of the Execution Date of all sales and servicing agreements and similar

agreements relating to securitizations to which Borrower, any Primary Obligor or any other Subsidiary of Borrower is a party.

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

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

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

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

10.38Material Portfolio Entities.  Attached hereto as Schedule 10.38 is a true and complete list, as of the Effective Date, of each Material Portfolio Entity.

10.39Subordinated Pledge Agreement.  The Subordinated Pledge Agreement executed contemporaneously herewith grants a Lien in the Released Collateral which is subordinate to the liens securing the indebtedness under the BA Credit Agreement pursuant to the terms of the Intercreditor Agreement and which (i) will constitute a valid and enforceable security interest under the Uniform Commercial Code of the State (x) in which the Collateral is located and (y) by which the Subordinated Pledge Agreement is governed (as applicable, the “UCC”), (ii) will be entitled to all of the rights, benefits and priorities provided by the UCC subject to the terms of the Intercreditor Agreement, and (iii) when such Subordinated Pledge Agreement or financing statements with respect thereto are filed and recorded as required by the UCC, will be superior and prior to the rights of all third Persons now existing or hereafter arising whether by way of mortgage, pledge, lien, security interest, encumbrance or otherwise, except for the senior Lien granted pursuant to the BA Credit Agreement and related loan documents, security agreements and filings as contemplated by the BA Credit Agreement and the Intercreditor Agreement.  All such action as is necessary in law has been taken, or prior to the Effective Date will have been taken, to establish and perfect the security interest of Agent and Lenders in the Released Collateral and to entitle Lenders or Agent on behalf of Lenders to exercise, subject to the terms of the Intercreditor Agreement, the rights and remedies provided in the Subordinated Pledge Agreement and the UCC, as applicable, and no filing, recording, registration or giving of notice or other action is required in connection therewith except such as has been made or given or will have been made or given prior to such dates.  All filing and other fees and all recording or other

tax payable with respect to the recording of any of the Subordinated Pledge Agreement and UCC financing statements have been paid or provided for.

Section 11.AGENT.

11.1Appointment.  Lender hereby irrevocably appoints Bank of Scotland plc, acting through its New York branch, to act as Agent hereunder and as Collateral Agent, subject to the Collateral Agency Agreement (in such capacity, the “Collateral Agent”), “Assignee” and “Secured Party” (or in any other similar representative capacity designated in any Security Document) under the Security Documents.  Lender hereby irrevocably authorizes, and each holder of any Note by the acceptance of such Note shall be deemed irrevocably to authorize, Agent to take such action on its behalf under the provisions of this Agreement, the Note, the Security Documents, the other Loan Documents and any other instruments and agreements referred to therein and to exercise such powers thereunder as are specifically delegated to or required of it by the terms thereof and such other powers as are reasonably incidental thereto; provided that, Agent shall not take any action to realize upon any security interest in any of the Collateral, or release any substantial portion of the Collateral, without the consent of the Majority Lenders.  Agent may perform any of its duties under any of the Loan Documents by or through its agents or employees.

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

11.3Lack of Reliance.  Independently and without reliance on Agent, Lender to the extent it deems appropriate has made and shall continue to make (i) its own independent investigation of the financial condition and affairs of the Loan Parties in connection with the making and the continuance of the Loans hereunder and the taking or not taking of any action in connection herewith, (ii) its own appraisal of the creditworthiness of the Loan Parties and (iii) its own independent investigation and appraisal of the Collateral; and, except as expressly provided in the Loan Documents, Agent shall have no duty or responsibility, either initially or on a continuing basis, to provide Lender with any credit or other information with respect thereto, whether coming into its possession before the date hereof or at any time or times thereafter.  Agent shall not be responsible to Lender for any recitals, statements, representations or warranties herein or in any certificate or other document delivered in connection herewith or for the authorization, execution, effectiveness, genuineness, validity, enforceability, perfection, collectibility, or sufficiency of any of the Loan Documents, the financial condition of the Loan

Parties or the condition of any of the Collateral, or be required to make any inquiry concerning either the performance or observance of any of the terms, provisions or conditions of any of the Loan Documents, the financial condition of the Loan Parties or the existence or possible existence of any Event of Default or Default.

11.4Certain Rights.  If Agent requests instructions from Lender or Majority Lenders with respect to any interpretation, act or action (including failure to act in connection with this Agreement or any of the other Loan Documents) Agent shall be entitled to refrain from such act or taking such actions unless and until it shall have received instructions from Lender or the Majority Lenders, as the case may be; and Agent shall not incur liability to any Person by so refraining.  Without limiting the foregoing, Lender shall not have any right of action whatsoever against Agent as a result of Agent acting or refraining from acting hereunder or under any of the other Loan Documents in accordance with the instructions of the Majority Lenders (as to matters requiring the consent of the Majority Lenders) or all Lenders (as to matters requiring the consent of all Lenders).  Agent shall be fully justified in failing or refusing to take any action under any Loan Document unless, if it requests, it shall first be indemnified to its satisfaction by Lender against any and all liability and expense which may be incurred by it by reason of taking, continuing to take or not taking any such action.

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

11.6Indemnification.  To the extent Agent is not reimbursed or indemnified by Borrower, Lenders will reimburse and/or indemnify Agent, in proportion to the aggregate amount of their respective Loans outstanding under this Agreement, for and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred or sustained by or asserted against Agent, acting pursuant hereto or any of the other Loan Documents in its capacity provided for in this Section 11, in any way relating to or arising out of this Agreement, or any of the other Loan Documents, provided, however, that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from Agent’s gross negligence or willful misconduct.  The obligations of Lender under this Section 11.6 shall survive the repayment of the Notes and the Loans and the termination of this Agreement and the other Loan Documents.

11.7Agent, Individually.  With respect to its obligations under this Agreement, the Loans made by it and any Note issued to or held by it, Agent shall have and may exercise the same rights and powers hereunder and is subject to the same obligations and liabilities as and to the extent set forth herein for any other Lender or holder of a Note.  The terms “Lender”, “holders of Notes” or any similar terms shall, unless the context clearly otherwise indicates, not exclude Agent in its individual capacity as a Lender or holder of a Note.  Agent may accept deposits from, lend money to, and generally engage in any kind of banking, trust or other business with the Loan Parties and their Subsidiaries as if it were not acting pursuant hereto, and may accept fees and other consideration from the Loan Parties and their Subsidiaries for services

as Agent in connection with this Agreement and the other Loan Documents and for services otherwise than as Agent without having to account for the same to Lender.

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

11.9Resignation.  Agent may resign at any time from the performance of all its functions and duties hereunder and under the other Loan Documents by giving thirty (30) days prior written notice to Borrower and Lender.  Such resignation shall take effect upon the expiration of such 30-day period or upon the earlier appointment of a successor.  Notwithstanding any such resignation, the provisions of Sections 11.6 and 12.3 shall inure also to the benefit of each Agent who has so resigned with respect to the period it served as Agent.  In case of the resignation of Agent, the Majority Lenders, with the prior consent of Borrower, which consent may not be unreasonably withheld, may appoint a successor by a written instrument signed by the Majority Lenders.  Any successor shall execute and deliver to Agent an instrument accepting such appointment, and thereupon such successor, without further act, shall become vested with all the estates, properties, rights, powers, duties and trusts of Agent hereunder and with like effect as if originally named as “Agent” herein and therein, and upon request, the predecessor Agent shall take all actions and execute all documents necessary to give effect to the foregoing.  In the event Agent’s resignation becomes effective at a time when no successor has been named, all notices, other communications and payments hereunder required to be given by or to Agent shall be sufficiently given if given by the Majority Lenders (or all Lenders, if the consent of all Lenders is required therefor hereunder) or to Lender, as the case may be.  In such event, all powers specifically delegated to Agent may be exercised by the Majority Lenders and the Majority Lenders shall be entitled to all rights of Agent hereunder.

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

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

(b)reimburse Agent for the additional amount certified by Agent as being necessary to indemnify Agent against any funding or other cost, loss, expense or liability sustained or incurred by Agent as a result of paying out the sums before receiving it; provided, however, that if such funds were made available to Lender, such additional amount shall be limited to interest on the sum to be repaid, for each day from the date such amount was disbursed until the date repaid to Agent, at (for the first three (3) days) the customary rate set by Agent for

correction of errors among banks, and thereafter at the Contract Rate (or, if greater and in respect of a Loan, the rate from time to time prevailing on such Loan).

Section 12.MISCELLANEOUS.

12.1Calculations and Financial Data.  Calculations hereunder (including, without limitation, calculations used in determining, or in any certificate of any Loan Party delivered reflecting compliance by any Loan Party with the provisions of this Agreement) shall be made and financial data required hereby shall be prepared both as to classification of items and as to amount in accordance with GAAP, consistent with the audited Financial Statements described in Section 10.16; provided that, for purposes of Section 8.17 no effect shall be given to any change in GAAP from those in effect on December 31, 2010.

12.2Amendment and Waiver.  Except as otherwise provided, no provision of any of the Loan Documents may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the Majority Lenders (or Agent on their behalf) and, if Borrower is a party thereto, Borrower, except that waivers of provisions relating to a Loan Party’s performance or non-performance of its obligations hereunder or thereunder need not be signed by such Loan Party or any other Loan Party; provided, however, that the written consent of Agent shall also be required to change, waive, discharge or terminate provisions of Section 11 and the written consent of the Issuing Bank shall also be required to change, waive, discharge or terminate provisions of Section 2A; and provided, further, that without the consent of all of Lenders (or Agent on their behalf) no change, waiver, discharge or termination may be made that would increase the amount of any Loans of any Lender, decrease the principal of any Loan; decrease the interest rate payable on any Loan; decrease the amount of any fee; extend the Maturity Date of any Loan; change the definition of “Majority Lenders” or modify this Section 12.2.  Any such change, waiver, discharge or termination shall be effective only in the specific instance and for the specific purposes for which made or given.

12.3Expenses; Indemnification.

(a)Whether or not the transactions hereby contemplated shall be consummated, Borrower and FLBG, jointly and severally agree to pay all out-of-pocket costs and expenses of (x) Agent incurred in connection with the preparation, execution, delivery, negotiation administration, filing and recording of, and (y) Agent and Lender incurred in connection with the amendment (including any waiver or consent) or modification of (including any amendment, waiver, consent or modification at any time requested by Borrower, whether or not same is finalized or executed), any failure of Borrower to perform or observe any provision of, and enforcement of or preservation of any rights under, this Agreement, the other Loan Documents, the making and repayment of the Loans, and the payment of all interest and fees, including, without limitation, (A) the fees and expenses of Sullivan & Worcester LLP, counsel for Agent, and any special or local counsel retained by Agent Lenders, and with respect to enforcement, the reasonable fees and expenses of counsel for Agent or any Lender, (B) the reasonable fees and expenses of accountants, other consultants, appraisers and other professionals retained by Agent in connection with the transactions contemplated hereunder, and (C) printing, travel, title insurance, mortgage recording, filing, communication and signing taxes and costs.

(b)Borrower and FLBG, jointly and severally, agree to pay, and to save Agent and Lenders harmless from (x) all present and future stamp, filing and other similar taxes, fees or charges (including interest and penalties, if any), which may be payable in connection with the Loan Documents or the issuance of the Notes or any modification of any of the foregoing, and (y) all finder’s and broker’s fees in connection with the transactions contemplated by this Agreement or the other Loan Documents.

(c)Borrower and FLBG, jointly and severally, agree to indemnify, pay and hold harmless Agent, Lender, any Lender Assignee and each holder of a Note and their respective present and future officers, directors, employees and agents (collectively, the “Indemnified Parties”) from and against all liability, losses, damages and expenses (including, without limitation, legal fees and expenses) arising out of, or in any way connected with, or as a result of (i) the execution and delivery of this Agreement or the other Loan Documents or the documents or transactions contemplated hereby and thereby or the performance by the parties hereto or thereto of their respective obligations hereunder and thereunder or relating thereto; or (ii) any claim, action, suit, investigation or proceeding (in each case, regardless of whether or not the Indemnified Party is a party thereto or target thereof) in any way relating to Borrower, any Primary Obligor, any Portfolio Entity, any Related Entity or Subsidiary of any thereof or any Collateral or any Affiliate of Borrower or any Subsidiary of any such Affiliate or in any way relating to any of the foregoing Persons or any other Loan Party, or any Affiliate of any of the foregoing in respect of this Agreement, any other Loan Documents or any other document or transaction in connection herewith or therewith or relating hereto or thereto; or (iii) any actual or alleged violation by Borrower, any Primary Obligor, any Portfolio Entity, any Related Entity, any Loan Party, any Affiliate of any of the foregoing Persons or any Subsidiary of any of the foregoing Persons (or any predecessor in interest of any of them) of any Environmental Law; provided that, neither FLBG nor Borrower shall be liable to an Indemnified Party for any portion of such liabilities, losses, damages and expenses sustained or incurred as a direct result of the gross negligence or willful misconduct of Agent, Lender or such Indemnified Party.  Lender shall endeavor to give Borrower and FLBG notice of any material claim, action, suit or proceeding (if not restricted by applicable law, regulation or Government Authority from so doing or unless the same would be inconsistent with a request from a Government Authority) referred to in clause (ii) which has been filed against Lender within a reasonable time after the loan officer of Lender with responsibility for this Agreement becomes aware of the same, but no failure to give any such notice shall affect, or relieve Borrower or FLBG of, any of Borrower’s or FLBG’s obligations under this Section 12.3 or under any other provision of this Agreement or any other Loan Document or result in any obligation or liability of Agent or Lender to Borrower or FLBG or any other Person.

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

12.4Benefits of Agreement; Descriptive Headings.

(a)This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors and assigns, and, in particular, shall inure to the benefit of the holders from time to time of the Notes; provided, however, that

no Loan Party that is party hereto may assign or transfer any of its rights or obligations hereunder without the prior written consent of Agent and Lender and any such purported assignment or transfer shall be void.  In furtherance of the foregoing, each Lender shall be entitled at any time to grant participations in the whole or any part of its rights and/or obligations under this Agreement, the Loan Documents or any Loan or Note to any Person; provided, however, that no Lender Assignee shall be permitted by the terms of its participation agreement with the relevant Lender to require such Lender to take or omit to take any action hereunder except to the extent that if Lender Assignee were a Lender hereunder, its consent to taking or omitting to take such action would be required by the terms of the second proviso of Section 12.2 hereto.  No such participation pursuant to this Section 12.4(a) shall relieve any Lender from its obligations hereunder and Borrower need deal solely with Agent and Lenders with respect to waivers, modifications and consents to this Agreement, the Loan Documents or the Notes.  Any such participant is referred to in this Agreement as a “Lender Assignee”.  Borrower agrees that the provisions of Sections 3.5, 5.4 and 12.3 shall run to the benefit of each Lender Assignee and its participations or interests herein, and any Lender may enforce such provisions on behalf of any such Lender Assignee; provided, however, that if any Lender grants a participation in the whole or any part of its rights and/or obligations pursuant to this Section 12.4(a), then the amounts that Borrower is required to pay pursuant to this Agreement (including, without limitation, additional amounts made pursuant to Section 5.4) shall not exceed the amounts that Borrower would have been required to pay to such Lender pursuant to this Agreement had Lender not granted such participation.  Borrower hereby further agrees that any such Lender Assignee may, to the fullest extent permitted by applicable law, exercise the right of setoff with respect to such participation (and in an amount up to the amount of such participation) as fully as if such Lender Assignee were the direct creditor of Borrower.  Upon the grant of a participation in accordance with the foregoing, Borrower shall execute such documents and do such acts as any Lender may reasonably request to effect such assignment.  Lender may furnish any information concerning the Loan Parties in its possession from time to time to Lender Assignees (including prospective Lender Assignees) and prospective Purchasing Lenders.  Lender shall notify Borrower of any participation granted by it pursuant to this Section 12.4(a) but neither the approval of Borrower nor that of any other Loan Party shall be required for any such participation.  Borrower shall not be responsible for any due diligence costs or legal expenses of such Lender Assignees in connection with their entering into such participation.

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

(c)Lender may at any time assign to any other Lender or any affiliate of any Lender, or (subject to obtaining the prior written consent of Borrower (but no other Loan Party), such consent not to be unreasonably withheld) to one or more additional banks or financial institutions (“Purchasing Lenders”), all or any part of its Loans and corresponding Note pursuant to a Transfer Supplement (“Transfer Supplement”), the form and substance satisfactory to Agent; provided, however, that each such assignment shall be for an amount not less than $1,000,000 (or, if Lender’s Loan at the time is less, such amount) and integral multiples of $500,000 above such amount, or such other amount or multiple to which Agent may consent.  Upon (i) such execution of such Transfer Supplement, (ii) delivery of an executed copy thereof to Borrower and Agent, (iii) payment by such Purchasing Lender to such transferor Lender of an amount

equal to the purchase price agreed between such transferor Lender and such Purchasing Lender, (iv) payment by the Purchasing Lender to Agent of a $3,000 processing fee, and (v) any consent of Borrower required by the first sentence of this Section 12.4(c), such Purchasing Lender shall for all purposes be a Lender party to this Agreement and shall have all the rights and obligations of a Lender under this Agreement to the same extent as if it were an original party hereto and thereto with the percentage share of the Loans set forth in Schedule I to such Transfer Supplement, and no further consent or action by Borrower, any other Loan Party, Lenders or Agent shall be required.  Such Transfer Supplement shall be deemed to amend this Agreement to the extent, and only to the extent, necessary to reflect the addition of such Purchasing Lender and the resulting adjustment of the percentage of the Notes and Loans (and related rights and obligations) held by the transferor Lender and the Purchasing Lender arising from the purchase by such Purchasing Lender of all or a portion of the rights and obligations of such transferor Lender pursuant to the Transfer Supplement.  Upon the consummation of any transfer to a Purchasing Lender pursuant to this Section 12.4(c), the transferor Lender, Agent and Borrower shall make appropriate arrangements so that, if required, a replacement Note or Notes (dated the same date as the Note or Notes being replaced) is issued to such Purchasing Lender and a new Note or Notes (dated the same date as the Note or Notes being replaced) or, as appropriate, a replacement Note or Notes (dated the same date as the Note or Notes being replaced) is issued to such Purchasing Lender, in each case in principal amounts reflecting their  outstanding Loans, as adjusted pursuant to such Transfer Supplement.

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

12.5Notices, Requests, Demands, etc.  Except as otherwise expressly provided herein, all notices, requests, demands or other communications to or upon the respective parties hereto shall be deemed to have been duly given or made when delivered if sent by Federal Express or other similar overnight delivery service, or three (3) Business Days after mailing (when mailed, postage prepaid, by registered or certified mail, return receipt requested) or (in the case of telex, telegraphic, telecopier or cable notice) when delivered to the telex, telegraph, telecopier or cable company, or (in the case of telex or telecopier notice sent over a telex or telecopier owned or operated by a party hereto or electronic mail) when sent; in each case addressed as follows, except that notices and communications to Agent pursuant to Section 2 and Section 9 shall not be effective until received by Agent: (i) if to Agent, at the Closing Office, (ii) if to a Lender, at the address specified with its signature below or (if a Purchasing Lender) on the applicable Transfer Supplement, and (iii) if to a Loan Party, at its address specified with its signature below (Attention: President), or to such other addresses as any of the parties hereto may hereafter specify to the others in writing, provided that communications with respect to a change of address shall be deemed to be effective when actually received.

12.6Governing Law.  THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE

WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO THE EXTENT LAWFUL TO CHOICE OF LAW DOCTRINE THAT WOULD RESULT IN THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION, except (as to any other Loan Document) to the extent specifically set forth otherwise in that Loan Document.

12.7Counterparts; Telecopies.  This Agreement and the other Loan Documents may be executed in any number of counterparts, and by the different parties hereto and thereto on the same or separate counterparts, each of which when so executed and delivered shall be deemed to be an original; all the counterparts for each such Loan Document shall together constitute one and the same agreement.  Telecopied signatures hereto and to the other Loan Documents shall be of the same force and effect as an original of a manually signed copy.

12.8Waiver; Remedies Cumulative; Payment of Claims; Full Recourse.

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

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

(c)In furtherance and not in limitation of the other rights and remedies of Agent and the Lender, upon the occurrence of an Event of Default or Default, Agent, in its sole and absolute discretion, without waiving or releasing any covenant, agreement or other obligation of Borrower or any Default or Event of Default, may at any time or times hereafter, but shall be under no obligation to, pay, acquire and/or accept an assignment of any security interest, lien, encumbrance or claim asserted by any Person against the Assets of Borrower, or any Primary Obligor, or any Wholly-Owned Subsidiary.  All sums paid by Agent in respect thereof and all reasonable costs and expenses (including, without limitation, fees and expenses of counsel to Agent) relating thereto incurred by Agent or for which Agent becomes obligated on account thereof shall be part of the Obligations payable by Borrower to Agent on demand and any amount not paid on demand shall bear interest at the Past-Due Rate.

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

Cash Flow Cash Collateral Account shall be applied to payment of the Loans as provided in this Agreement.

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

12.10Recoveries; Pro Rata Sharing.

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

(b)Lenders agree among themselves that, with respect to all sums received by Lenders applicable to the payment of the principal of or interest on the Notes (except as otherwise provided in Section 3.5, 5.4 or 5.5), equitable adjustment will be made between Lenders so that, in effect, all such sums shall be shared ratably by each of Lenders (in accordance with the outstanding principal amount of their respective applicable Loans) whether received by voluntary payment, by realization upon security, by the exercise of the right of set-off or banker’s lien, by counterclaim or cross-action or by the enforcement of any or all of the Notes or otherwise.  If any Lender receives any payment on its Notes of a sum or sums in excess of its pro rata portion (except as otherwise provided in Section 3.5, 5.4 or 5.5), then such Lender receiving such excess payment shall purchase for cash from the other Lenders with outstanding Loans to Borrower an interest in their Note or Notes in such amount as shall result in a ratable participation by all of Lenders in the aggregate unpaid amount of applicable Notes then outstanding; provided, however, that if all or any portion of such excess payment is thereafter recovered by such Lender, the purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest.  Borrower hereby agrees that any Lender so purchasing a participation from another Lender pursuant to this Section 12.10(b) may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of setoff) with respect to such participation as fully as if such Lender were the direct creditor of Borrower in the amount of such participation.  The foregoing Section 12.10(b) shall in all events be subject to the Subordination Agreement.

12.11Jurisdiction.  EACH OF BORROWER AND FLBG HEREBY AGREES THAT ANY LEGAL ACTION OR PROCEEDING AGAINST IT WITH RESPECT TO THIS AGREEMENT, THE NOTES OR ANY OF THE OTHER LOAN DOCUMENTS OR THE DOCUMENTS DELIVERED IN CONNECTION HEREWITH OR THEREWITH MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK AS AGENT OR ANY LENDER MAY ELECT, AND, BY EXECUTION AND DELIVERY HEREOF, BORROWER AND FLBG ACCEPTS AND CONSENTS FOR ITSELF AND IN RESPECT TO ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS AND AGREES THAT SUCH JURISDICTION SHALL BE EXCLUSIVE, UNLESS WAIVED BY AGENT AND THE MAJORITY LENDERS IN WRITING, WITH RESPECT TO ANY ACTION OR PROCEEDING BROUGHT BY IT

AGAINST AGENT OR ANY LENDER AND ANY QUESTIONS RELATING TO USURY.  BORROWER AGREES THAT SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK SHALL APPLY TO THE LOAN DOCUMENTS AND WAIVES ANY RIGHT TO STAY OR TO DISMISS ANY ACTION OR PROCEEDING BROUGHT BEFORE SAID COURTS ON THE BASIS OF FORUM NON CONVENIENS.  EACH OF BORROWER AND FLBG HEREBY IRREVOCABLY CONSENTS THAT ALL PROCESS SERVED OR BROUGHT AGAINST BORROWER WITH RESPECT TO ANY SUCH PROCEEDING IN ANY SUCH COURT IN NEW YORK SHALL BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT IF SENT BY REGISTERED MAIL, OR (IF PERMITTED BY LAW) BY FEDERAL EXPRESS OR OTHER SIMILAR OVERNIGHT COURIER SERVICE, TO SUCH LOAN PARTY AT ITS ADDRESS SET FORTH BELOW ITS SIGNATURE TO THIS AGREEMENT (OR SUCH OTHER ADDRESS AS AGENT IS NOTIFIED OF IN ACCORDANCE WITH THE PROVISIONS OF SECTION 12.5).  NOTHING HEREIN SHALL AFFECT THE RIGHT OF AGENT OR LENDERS TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST ANY LOAN PARTY IN THE COURTS OF ANY OTHER JURISDICTION.

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

12.13Right of Set-off.  In addition to any rights now or hereafter granted under applicable law or otherwise and not by way of limitation of any such rights, upon the occurrence of an Event of Default Lender is hereby authorized at any time or from time to time, without notice to any Loan Party or to any other Person, any such notice being hereby expressly waived, to set-off and to appropriate and apply any and all deposits (general or special, time or demand, provisional or final) and any other indebtedness at any time held or owing by such Lender to or for the credit or the account of such Loan Party against and on account of the obligations and liabilities of such Loan Party now or hereafter existing under any of the Loan Documents irrespective of whether or not any demand shall have been made thereunder and although said obligations, liabilities or claims, or any of them, shall be contingent or unmatured.  Lender exercising any rights granted under this Section 12.13 shall thereafter notify the affected Loan Party and Agent of such action; provided that, the failure to give such notice shall not affect the validity of such set-off and application.

12.14No Third Party Beneficiaries.  This Agreement is solely for the benefit of Agent and Lender and Borrower and the respective successors and assigns of Agent and Lender and nothing contained herein shall be deemed to confer upon anyone other than Borrower any right to insist on or to enforce the performance or observance of any of the obligations of Agent or Lender contained herein.  All conditions to the obligations of Lender to make Loans hereunder are imposed solely and exclusively for the benefit of Lender and their respective successors and assigns and no other Person shall have standing to require satisfaction of such conditions in accordance with their terms and no other Person shall under any circumstances be deemed to be beneficiary of such conditions.

12.15Survival; Integration.

(a)Each of the representations, warranties, terms, covenants, agreements and conditions contained in this Agreement shall specifically survive the execution and delivery of this Agreement and the other Loan Documents and the making of the Loans and shall, unless otherwise expressly provided, continue in full force and effect until the Loans together with interest thereon, the fees and compensation of Agent, and all other sums payable hereunder or thereunder have been indefeasibly paid in full.

(b)This Agreement, together with the other Loan Documents, comprises the complete and integrated agreement of the parties on the subject matter hereof and thereof and supersedes  all prior agreements, written or oral, on the subject matter hereof and thereof.  In the event of any direct conflict between the provisions of this Agreement and those of any other Loan Document, the provisions of this Agreement shall control and govern; provided that, the inclusion of supplemental rights or remedies in favor of Agent or Lenders in any other Loan Document shall not be deemed a conflict with this Agreement.  Each Loan Document was drafted with the joint participation of the respective parties thereto and shall be construed neither against nor in favor of any party, but rather in accordance with the fair meaning thereof.

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

12.17No Usury.  It is expressly stipulated and agreed to be the intent of Agent, Lender and Borrower to comply at all times with applicable usury laws.  If at any time such laws would ever render usurious any amount called for under any of the Loan Documents, then it is the express intention of the parties hereto that such excess amount be immediately credited on the applicable Notes, or if the applicable Notes have been fully paid, refunded by Lenders (pro rata in accordance with their respective principal amount of the affected Loans), to Borrower (and Borrower shall accept such refund) and the provisions hereof and thereof be immediately deemed to be reformed to comply with the then applicable laws, without the necessity of the execution of any further documents, but so as to permit the recovery to the fullest amount otherwise called for hereunder and thereunder.  Any such crediting or refunding shall not cure or waive any default by Borrower under the Loan Documents.  If at any time following any such reduction to the interest rate payable by Borrower there remains unpaid any principal amounts under the Notes and the maximum interest rate permitted by applicable law is increased or eliminated, then the interest rate payable to Lender shall be readjusted, to the full extent permitted by applicable law, so that the total amount of interest thereunder payable by Borrower to Lender shall be equal to the amount of interest which would have been paid by Borrower without giving effect to applicable usury laws.  Borrower agrees, however, that in determining whether or not any interest payable under the Notes or any of the other Loan Documents exceeds the highest rate permitted by law, any non-principal payment (except payments specifically stated in the Notes or such other Loan Documents to be “interest”), including fees and commissions and all other sums payable hereunder or thereunder or in connection herewith or therewith, shall be deemed, to the full extent permitted by law, to be an expense, fee, premium or penalty rather than interest.

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

12.19Waiver by Borrower.  EXCEPT AS OTHERWISE PROVIDED FOR IN THIS AGREEMENT OR REQUIRED BY LAW, EACH OF BORROWER AND FLBG WAIVES (A) PRESENTMENT, DEMAND AND PROTEST, NOTICE OF PROTEST, NOTICE OF PRESENTMENT, DEFAULT, NON-PAYMENT, MATURITY, RELEASE, COMPROMISE, SETTLEMENT, EXTENSION OR RENEWAL OF ANY OR ALL COMMERCIAL PAPER, ACCOUNTS, CONTRACT RIGHTS, DOCUMENTS, INSTRUMENTS, CHATTEL PAPER AND GUARANTIES AT ANY TIME HELD BY ANY OF LENDERS AND/OR AGENT ON WHICH BORROWER MAY IN ANY WAY BE LIABLE; (B) ALL RIGHTS TO NOTICE AND A HEARING PRIOR TO AGENT’S TAKING POSSESSION OR CONTROL OF, OR TO  REPLEVY, ATTACHMENT OR LEVY UPON THE COLLATERAL OR ANY BOND OR SECURITY WHICH MIGHT BE REQUIRED BY ANY COURT PRIOR TO ALLOWING ANY OF LENDERS AND/OR AGENT TO EXERCISE ANY OF ITS RESPECTIVE REMEDIES; AND (C) THE BENEFIT OF ALL VALUATION, APPRAISEMENT, EXTENSION AND EXEMPTION LAWS.

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

12.21Waiver of Claims; Release by Borrower.

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

(b)Each of Borrower and FLBG hereby acknowledges, agrees and affirms, as of the Execution Date and as of the Effective Date, that it possesses no claims, defenses, offsets, recoupment or counterclaims of any kind or nature against or with respect to the enforcement of this Agreement, any other Loan Document or any amendments thereto, or any of the Existing Credit Agreements, as amended, or documents delivered pursuant thereto (collectively, the “Claims”), nor does Borrower and FLBG now have knowledge of any facts that would or might give rise to any Claims.  If facts now exist which would or could give rise to any Claim against or with respect to the enforcement of this Agreement or any other Loan Document, as may have been amended by the amendments thereto, or any of the Existing Credit Agreements, as

amended, or documents delivered pursuant thereto, each of Borrower and FLBG hereby unconditionally, irrevocably and unequivocally waives and fully releases any and all such Claims as if such Claims were the subject of a lawsuit, adjudicated to final judgment from which no appeal could be taken and therein dismissed with prejudice.

12.22Confidentiality.  Agent and Lender, severally and with respect to itself only, covenants and agrees that any information obtained by Agent or Lender pursuant to this Agreement shall be held in confidence (it being understood that documents provided to Agent hereunder may in all cases be distributed by Agent to Lender) except that Agent or Lender may disclose such information (i) to its officers, directors, employees, agents, counsel, accountants, auditors, advisors or representatives, (ii) to the extent such information has become available to the public other than as a result of a disclosure by or through Agent or Lender, (iii) to the extent such information was available to Agent or such Lender in a capacity other than Agent or Lender hereunder or on a nonconfidential basis prior to its disclosure to Agent or such Lender hereunder, (iv) with the consent of Borrower, (v) to actual or prospective Lender Assignees or Purchasing Lenders or (vi) to the extent Agent or such Lender should be (A) required in connection with any legal or regulatory proceeding or (B) requested by any Government Authority to disclose such information.

Section 13.FINAL AGREEMENT.

THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES HERETO WITH RESPECT TO THE MATTERS COVERED HEREBY AND THEREBY AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.

THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

Section 14.NON-COVERED ENTITIES.

Notwithstanding any other provision of this Agreement, no provision of this Agreement shall be applicable to FC Investment Holdings Corporation, FC Diversified Holdings LLC, FC Highway 6 Holdings LLC, FC Imperial Holdings LLC, VFC Partners 4 LLC, VFC Partners 5 LLC, VFC Partners 6 LLC, VFC Partners 7 LLC, VFC Partners 8 LLC, VFC Partners 9 LLC, VFC Partners 10 LLC, VFC Partners 11 LLC, VFC Partners 12 LLC, VFC Partners 13 LLC, VFC Partners 14 LLC, VFC Partners 15 LLC, VFC Partners 16 LLC, FC Capital, or, until the Coverage Date, FH Partners (except as to Sections 2.1(d), 6.19 and 7.2(a)(vi) which provisions will be applicable prior to the Coverage Date) or any of their subsidiaries or other entities in which such Persons own any equity interest and no such Person (other than FH Partners after the Coverage Date) shall be a Primary Obligor, Subsidiary, Loan Party, Portfolio Entity, Portfolio Entity-50%, Affiliate, Associate, Guarantor, Immaterial Entity, Parent, Pledged Entity, Related Entity or Wholly-Owned Subsidiary for any purpose of this Agreement.  In addition, this Agreement shall not be applicable or refer to FirstCity Financial Corporation or FC Servicing except to the extent expressly provided herein by reference to FirstCity Financial Corporation or FCFC, in the former case, and FirstCity Servicing Corporation or FC Servicing, in the latter case.  In addition, this Agreement shall not be applicable or refer to FLBG2 Holdings LLC and no

action, failure to act, omission or status of FLBG2 shall be the basis for any Default or Event of Default under this Agreement, nor shall FLBG2 be a Primary Obligor, Subsidiary, Loan Party, Portfolio Entity, Portfolio Entity-50%, Affiliate, Associate, Guarantor, Immaterial Entity, Parent, Pledged Entity, Related Entity or Wholly-Owned Subsidiary for any purpose of this Agreement.  FLBG2 will be responsible for complying with (i) its obligations under the FLBG2 Guaranty and the Amended and Restated Security Agreement (Multiparty) executed in connection with this Agreement and (ii) its obligations with respect to the FLBG2 Loans and the loan documents and security documents executed in connection with the FLBG2 Loans, but no failure on the part of FLBG2 to comply with any of such obligations shall be the basis for or cause any Default or Event of Default under this Agreement.

Section 15.USA PATRIOT ACT NOTICE.

Each Lender and Agent (for itself and not on behalf of any Lender) hereby notifies Borrower that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (as amended, the “Patriot Act”), it is required to obtain, verify and record information that identifies Borrower, which information includes the name and address of Borrower and other information that will allow such Lender or Agent, as applicable, to identify Borrower in accordance with the Patriot Act.

[remainder of page intentionally left blank]

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

FIRSTCITY COMMERCIAL CORPORATION

a Texas corporation, as Borrower

By:

Title:

6400 Imperial Drive (delivery only)

Waco, Texas 76710

P.O. Box 8216 (mail)

Waco, Texas 76714-8216

254-761-2953 (telecopier)

jholmes@fcfc.com (electronic mail)

FLBG CORPORATION

a Texas corporation, as Guarantor

By:

Title:

6400 Imperial Drive (delivery only)

Waco, Texas 76710

P.O. Box 8216 (mail)

Waco, Texas 76714-8216

254-761-2953 (telecopier)

jholmes@fcfc.com (electronic mail)

[signature page to Reducing Note Facility Agreement]

BANK OF SCOTLAND PLC, acting through its New York branch, individually as Lender and as Collateral Agent and Agent

By:

Title:

1095 Avenue of the Americas

35th Floor

New York, New York 10036

212-682-0764 (telecopier)

(adrian.Knowles@lbusa.com)

FACILITY A ANNEX I

DEFINITIONS

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

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

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

“ABL Facility” shall mean that certain Loan Agreement between ABL and Wells Fargo Foothill, LLC, dated as of December 15, 2006, together with the “Loan Documents” as therein defined, as the same may be amended, restated or otherwise modified from time to time with the prior written consent of the Lenders.

“Adverse Waterfall Event” shall mean with respect to any Portfolio Entity owning more than one Asset Pool or Assets in addition to those contained in its initial Asset Pool, that any lender to such Portfolio Entity has for any reason diverted (whether to make up for a shortfall with respect to any other pool or asset or otherwise) any portion of collections from any Asset Pool of such Portfolio Entity to a different  asset or asset pool (or waterfall with respect thereto) of such Portfolio Entity or otherwise subsidized any other such asset or asset pool with collections from any Asset Pool or otherwise restricted distributions from, or reduced waterfall amounts arising from, collections of any Asset Pool on account of any condition or occurrence other than a condition or occurrence arising directly from such Asset Pool.

“Affiliate” shall mean any Person, other than a Non-Covered Entity, (i) in which Borrower and/or any Parent, individually, jointly and/or severally, now or at any time or times hereafter, have an equity or other ownership interest equal to or in excess of twenty—five percent (25%) of the total equity of or other ownership interests in such Person, and/or (ii) which directly or indirectly through one or more intermediaries controls or is controlled by, or is under common control with either or both Borrowers and/or (iii) which is an officer or director of either Borrower or any Primary Obligor.  For purposes of this definition, “control” shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of Stock, by contract or otherwise, and in any case shall include direct or indirect ownership (beneficially or of record) of, or direct or indirect power to vote, 25% or more of the outstanding shares of any class of capital stock of such Person (or in the case of a Person that is not a corporation, 25% or more of any class of equity interest).

“Agent” — introductory paragraph.

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

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

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

“Applicable Indebtedness” of any Person shall mean all Indebtedness of such Person other than trade payables incurred in the ordinary course of business which are not evidenced by an Indebtedness Instrument.

“Applicable Person” — Section 8.21.

“Approved Portfolio Leverage Arrangement” shall mean (i) each borrowing arrangement between a Portfolio Entity and a financial institution existing as of the Effective Date, (ii) each future borrowing arrangement between a Portfolio Entity and a financial institution on terms and conditions reasonably satisfactory to Agent (as indicated in writing by Agent), and (iii) the borrowing arrangement between FH Partners and BA pursuant to the BA Credit Agreement. Without limiting the scope of Agent’s discretion pursuant to the preceding sentence, (i) no borrowing arrangement shall be deemed an Approved Portfolio Leverage Arrangement if such arrangement cross—defaults to a credit arrangement of any other Portfolio Entity or contains any provisions which would in any way restrict, reduce or prohibit distributions by a Portfolio Entity on account of any event or condition with respect to any Affiliate of such Portfolio Entity; and (ii) references herein to an Approved Portfolio Leverage Arrangement shall be limited to such borrowing arrangements governed by the terms of the loan agreement and other documents in the form delivered to Agent at the time such arrangements were approved by Agent, as amended, supplemented or otherwise modified with the written consent of Agent.

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

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

“Asset Pool Acquisition Certificate” shall mean a certificate from an Executive Officer of Borrower in the form of Exhibit C to the Agreement, to which is attached (as contemplated by the form of such certificate) the asset purchase agreement relating to the Assets proposed to be

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purchased, and, if not previously provided to Agent or if amended, restated or otherwise modified since previously provided, the Charter Documents for the purchasing Portfolio Entity and any Shareholders Agreement entered into or proposed to be entered into by the holders of the Equity Interests of such Portfolio Entity.

“Associate”, when used to indicate a relationship with a Person, shall mean (i) another Person (other than a Loan Party or a Subsidiary thereof) of which such Person is an officer or partner or is, directly or indirectly, the beneficial owner of 10 percent or more of any class of equity securities, (ii) any trust or other estate in which such Person has a substantial beneficial interest or as to which such Person or an immediate member of his family serves as trustee or in a similar capacity, and (iii) any relative or spouse of such Person or any relative of such spouse.  “Associate” shall not include any Non-Covered Entity.

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

“BA” — Recitals.

“BA Asset Pool” shall mean all Assets of any Person securing the BA Loan.

“BA Asset Pool Proceeds” shall mean with respect to any BA Asset Pool securing the BA Loan, the gross aggregate amount received by FH Partners on account of the Assets comprising such BA Asset Pool or collateral therefor.

“BA Credit Agreement” — Recitals.

“BA Loan” shall mean the loan under and all obligations owing by FH Partners under the BA Credit Agreement.

“BA Loan Repayment Date” shall mean the date on which the BA Loan is paid in full.

“BA LTV Ratio” shall mean a ratio determined by dividing (1) the outstanding principal balance of the loans under the BA Credit Agreement, by (2) the net present value of all reasonably projected future collections from the assets owned by FH Partners reduced by reasonable and necessary collection expenses related to those assets and discounted using the “ASR NPV” discount rate assignments used by FC Servicing with respect to its servicing of those Assets under the terms of the BA Credit Agreement.

“Basel Laws” — Section 3.5.

“Borrower” — introductory paragraph.

“Borrower Pledge Agreements” shall mean (i) the Pledge Agreement, dated as of the date hereof, by and between FC Commercial and Collateral Agent and (ii) the Subordinated Pledge Agreement.

“BoS (USA)” — Recitals.

“Business Day” shall mean any day that is not a Saturday, Sunday or legal holiday in the State of New York,  the State of Texas, the State of Connecticut (or any other State where the CFCCA is maintained) or a day on which banking institutions chartered by the State of New

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York, the State of Texas, the State of Connecticut (or any other State where the CFCCA is maintained) or the United States are legally required or authorized to close, and, when used in connection with LIBOR, means any such Business Day which is also a day on which deposits in Dollars and Euros may be dealt in on the London interbank market.

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

“Capital Stock” — Section 9.15.

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

“Cash Collateral Account-Servicing” shall mean shall mean the account at the Depositary specified in the Cash Collateral Agreement-Servicing and in the letter agreement between the Collateral Agent and the Depositary relating thereto or such other account, if any, which is specified in a cash collateral agreement (in form and substance satisfactory to Agent) between FC Servicing and Collateral Agent and related letter agreement (in form and substance satisfactory to the Collateral Agent) between the Collateral Agent and the depositary bank with respect to such other account.

“Cash Flow” — Section 5.3(a).

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

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

“Change in Control” — Section 9.15.

“Charges” shall mean all national, Federal, state, county, city, municipal and/or other governmental (or any instrumentality, division, agency, body or department thereof, including without limitation the PBGC) taxes, levies, assessments, charges, liens, claims or encumbrances upon and/or relating to the Obligations, a Person’s Assets, a Person’s business, a Person’s ownership and/or use of any of its Assets, a Person’s income and/or gross receipts and/or a Person’s ownership and/or use of any of its Assets.

“Charter Document” shall mean (i) with respect to a corporation: its certificate or articles of incorporation or association and its by—laws or comparable documents under non—US laws;

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(ii) with respect to a partnership: its partnership agreement, certificate of partnership (if a limited partnership) and its certificate of doing business under an assumed name (if a general partnership); (iii) with respect to a trust: its trust agreement or declaration of trust; and (iv) with respect to a limited liability company: its certificate of formation and operating agreement or analogous documents; in each case, with such other similar documents as Agent shall request or specify.

“Claims” — Section 12.21(b).

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

“Closing Office” shall mean the office of Agent at 1095 Avenue of the Americas, New York, New York 10036 or such other office as may be designated in writing to Borrower by Agent.

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

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

“Cold Back-up Servicer” shall mean (1) an entity engaged principally in providing data collection in connection with servicing loan portfolios and other investment vehicles or (2) a banking institution.

“Cold Back-up Servicing Agreement” — Section 7.20.

“Collateral” — Section 10.30.

“Collateral Agency Agreement” shall mean that certain Collateral Agency Agreement, dated as of the date hereof, between Agent, Collateral Agent, Lender and Borrower.

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

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

“Consolidated Group” shall mean FC Commercial and its consolidated Subsidiaries.

“Contract Rate” — Section 3.1.

“Coverage Date” shall mean the earlier of (i) the BA Loan Repayment Date or (ii) the date on which the Lenders, or either of them, acquire the BA Loan.

“Crestone Facility” shall mean a $32 million line of credit provided by FirstCity Denver Investment Corp. to Crestone Portfolio Entities used for the acquisition and origination of Assets and payment of expenses related to those Assets which is secured by a first priority lien on all assets of the Crestone Portfolio Entities and a $2 million line of credit to be provided by

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FirstCity Denver Investment Corp. to FirstCity Crestone LLC to be used exclusively for working capital purposes.

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

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

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

“Disbursement” — Section 2A.4(b).

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

“Disclosure Restriction” — Section 7.1 (m).

“Dividend” — Section 8.11.

“Dollar Equivalent” shall mean, on any date of determination, with respect to any amount in Euros, the equivalent in Dollars of such amount, determined by Agent using the Exchange Rate then in effect.

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

“Effective Date” — Section 6.

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

“Eligible Portfolio Entity” shall mean a partnership, corporation, trust, or limited liability company or, if not formed in the United States, a similar foreign organized entity which is a Portfolio Entity of which (i) if such Portfolio Entity is a US Person, not less than 50% of each class of Equity Interests is owned directly or indirectly by Borrower or a Primary Obligor, (ii) no Equity Interests thereof owned directly or indirectly by Borrower or a Primary Obligor are pledged to any Person other than Agent, for the benefit of the Lenders, provided that the Equity Interests of a Crestone Portfolio Entity may be pledged to secure the Crestone Facility, so long as the Crestone Notes and documents securing the Crestone Facility are assigned to Agent to secure the obligations of Borrower herein, (iii) the Charter Documents and Shareholder Agreements result in Permitted Shareholder Arrangements, (iv) which has no Indebtedness other than Indebtedness under an Indebtedness Instrument (a) pursuant to Approved Portfolio Leverage Arrangements, or with respect to ABL, the ABL Facility, (b) incurred to pay development expenses related to real estate, or (c) loaned to it by the owners of the Equity Interests of the Portfolio Entity to pay Property Improvement Expenses, and (vi) in respect of which no Disclosure Restriction exists.

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

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

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

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

“Euro” and “E” shall mean the lawful currency of the European Monetary Union.

“European Acquisition Entity” shall mean a Foreign Portfolio Entity which has acquired Assets that originated in Europe.

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

“Exchange Act” — Section 9.15.

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

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

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

“Execution Date” shall mean the date on which all parties to this Agreement shall have signed a copy this Agreement (whether the same or different copies) and shall have delivered the same to Agent.

“Executive Officer” shall mean the President of Borrower, the CFO of Borrower or any Senior Vice President of Borrower.

“Existing Credit Agreements” — Recitals.

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

“FC Commercial” shall mean FirstCity Commercial Corporation, a Texas corporation.

“FC Commercial Protective Advance Account” shall mean an account maintained by FC Commercial for deposit of funds to be used for payment of Portfolio Protection Expenses of the Portfolio Entities.

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

“FC Percentage” (x) with respect to any Portfolio Entity or any other Person shall mean the percentage of outstanding shares of stock, limited liability company interests or partnership interests (or, in the case of a non-US entity, similar equity interests) of such Portfolio Entity or Person owned directly or indirectly by FLBG or FC Servicing, (y) with respect to any Asset Pool or any Asset owned by an Portfolio Entity, the FC Percentage with respect to such Portfolio Entity, and (z) with respect to any Asset Pool or any Asset owned by any REO Affiliate, the FC Percentage of the Portfolio Entity which is the parent of the REO Affiliate.

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

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

“FCFC” — Recitals.

“FCFC Guaranty” shall mean the Guaranty dated as of the date hereof by FCFC in favor of the Lenders.

“FCI Distribution Account” shall mean account number FR76 3000 4008 1800 0121 9939 227 maintained by FCI at BNP Paribas for deposit of Portfolio Entity Proceeds of European Acquisition Entities and any distributions from MCS.

“FCIH” shall mean FC Investment Holdings Corporation, a Texas corporation.

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

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“Fee Agreements” shall mean any partnership agreement, management agreement, consulting agreement, or other agreement pursuant to which Borrower, any Primary Obligor or any Related Entity is to be paid fees, distributions, allocations, expense reimbursements, consideration, salary or other compensation in consideration for providing management, personnel or services, in any form whatsoever, from any Affiliate or from any other Person.  Services to be rendered under Fee Agreements may include, but not be limited to consulting, collecting revenues, paying operating expenses not paid directly by others, and providing clerical and bookkeeping services.

“FH Partners” — Recitals.

“FH Partners Available Cash Leak-Through” shall mean the cash available to FH Partners on a monthly basis under §5.2.1(j) or 5.2.2(b) of the BA Credit Agreement.

“FH Partners Release” shall mean the Release Agreement dated as of the date hereof by the Lenders in favor of FH Partners as to its obligations in respect of the Loans and as to the Released Collateral.

“FH Partners Servicing Fees” shall mean servicing fees payable to FC Servicing for servicing of assets of FH Partners pursuant to the terms of the servicing agreement entered into between FH Partners and FC Servicing in connection with the BA Credit Agreement in an amount equal to five percent (5%) of the collections and proceeds from the assets of FH Partners.

“FH Partners Subordinated Guaranty” shall mean the Subordinated Guaranty dated as of the date hereof by FH Partners in favor of the Lenders.

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

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

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

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

“FLBG” — Introductory paragraph.

“FLBG2” — Recitals.

“FLBG2 Claims” — Section 2.1(i).

“FLBG2 Collateral” — Recitals.

“FLBG2 Guaranty” shall mean the Guaranty dated as of the date hereof by FLBG2 in favor of the Lenders.

“FLBG2 Loans” — Recitals.

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“FLBG2 Pledge Agreement” shall mean the Pledge Agreement dated as of the date hereof between FLBG2, as pledgor, and the Agent.

“Foreign Portfolio Entity” shall mean a Portfolio Entity domiciled in or with a principal place of business in a country other than the United States or which has acquired Assets located outside of the United States.

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

“Government Authority” shall mean any nation or government, any state or political subdivision thereof, any agency, authority, regulatory body, bureau, central bank, commission, department or instrumentality of any of the foregoing or any other entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

“Guarantor” shall mean each Primary Obligor and any other Person which is a guarantor under any Guaranty other than FCFC, FLBG2 or, prior to the Coverage Date, FH Partners.  “Guarantor” shall not include any Non-Covered Entity.

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

“Guaranty Equivalent” shall mean any agreement, document or instrument pursuant to which a Person directly or indirectly guarantees, becomes surety for, endorses, assumes, agrees to indemnify the obligee of any other Person against, or otherwise agrees, becomes or remains liable (contingently or otherwise) for, such obligation, other than (i) by endorsements of instruments in the ordinary course of business or (ii) indemnification of sellers of assets related to breaches of confidential agreements and obligations related to performance of purchase and sale agreements in the conduct of the Asset acquisition business.  Without limitation, a Guaranty Equivalent shall be deemed to exist if a Person agrees, becomes or remains liable (contingently or otherwise), directly or indirectly: (i) to purchase or assume, or to supply funds for the payment, purchase or satisfaction of, an obligation; (ii) to make any loan, advance, capital contribution or other investment in, or a purchase or lease of any property or services from, a Person; (iii) to maintain the solvency of such Person; (iv) to enable such Person to meet any other financial condition; (v) to enable such Person to satisfy any obligation or to make any payment; (vi) to assure the holder of an obligation against loss; (vii) to purchase or lease property or services from such Person regardless of the non—delivery of or failure to furnish of such property or services; or (viii) in respect of any other transaction the effect of which is to assure the payment or performance (or payment of damages or other remedy in the event of nonpayment or nonperformance) of any obligation.

“Immaterial Entity” shall mean each Person listed on Schedule 10.34; provided, that if any such Person engages in business or has assets with an aggregate fair market value of $100,000 or more, such Person shall cease to constitute an Immaterial Entity.  “Immaterial Entity” shall not include any Non-Covered Entity.

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

“Indebtedness” shall mean, with respect to any Person (without duplication): (i) all obligations on account of money borrowed by, or credit extended to or on behalf of, or for or on account of deposits with or advances to, such Person; (ii) all obligations of such Person evidenced by bonds, debentures,  notes or similar instruments; (iii) all obligations of such Person for the deferred purchase price of property or services other than trade payables incurred in the ordinary course of business and on terms customary in the trade; (iv) all obligations secured by a Lien on property owned by such Person (whether or not assumed); and all obligations of such Person under Capitalized Leases (without regard to any limitation of the rights and remedies of the holder of such Lien or the lessor under such Capitalized Lease to repossession or sale of such property); (v) the face amount of all letters of credit issued for the account of such Person and, without duplication, the unreimbursed amount of all drafts drawn thereunder, and all other obligations of such Person associated with such letters of credit or draws thereon; (vi) all obligations of such Person in respect of acceptances or similar obligations issued for the account of such Person; (vii) all obligations of such Person under a project financing or similar arrangement; (viii) all obligations of such Person under any interest rate or currency protection agreement, interest rate or currency future, interest rate or currency option, interest rate or currency swap or cap or other interest rate or currency hedge agreement; and (ix) all obligations and liabilities with respect to unfunded vested benefits under any “employee benefit plan” or with respect to withdrawal liabilities incurred under ERISA by Borrower or any ERISA Affiliate to a “multiemployer plan”, as such terms are defined under the Employee Retirement Income Security Act of 1974.

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

“Indemnified Party” — Section 12.3(c).

“Intercreditor Agreement” shall mean the Intercreditor Agreement dated as of the date hereof among BA, the Lenders, Borrower and FH Partners.

“Issuer” shall mean the Bank of Scotland in its capacity as a Lender hereunder and not in its capacity as Agent.  References to the Lenders in this Agreement and the other Loan Documents (when used to refer to Bank of Scotland) shall (without duplication) include such Lender as Issuer.

“ITSA Agreement” — Section 6.16.

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

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

“LC Obligations” shall mean the aggregate amount (without duplication) of all LC Outstandings.

“LC Outstandings” shall mean the aggregate Stated Amount (as reduced from time to time) of all Letters of Credit issued hereunder and outstanding at any point in time.

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

“Lender Assignee” — Section 12.4(a).

“Lenders” — introductory paragraph.

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

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

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

“Loan Documents” shall mean, individually and collectively, this Agreement, the Notes, the Letters of Credit, the Guaranties, the Pledge Agreements, the Security Agreements, the other Security Documents and all other instruments and agreements heretofore or from time to time hereafter executed by or on behalf of Borrowers, any Primary Obligor, any Related Entity or any other Loan Party in connection herewith or therewith, in each case as amended, extended, restated, supplemented or otherwise modified from time to time.  Without limiting the generality of the foregoing, each amendment to (or constituting part of) this Agreement or any other Loan Document and each instrument and agreement (including, without limitation, consents or waivers, but excluding any amendment, consent or waiver executed prior to the Effective Date) executed in connection with any Loan Document shall be deemed to be a Loan Document for all purposes of the Agreement and the other Loan Documents.

“Loan Party” shall mean, individually and collectively, Borrowers, each Primary Obligor and each other Person, which has executed any Security Document as a pledgor or grantor of collateral thereunder.  “Loan Party” shall not include any Non-Covered Entity.

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“Loan(s)” — Recitals.

“Majority Lenders” as of a particular date shall mean the holders of at least 51% of the aggregate unpaid principal amount of all Loans at the particular time outstanding.

“Management Letter” shall mean any correspondence or report submitted by the Auditors to a Loan Party’s chief executive officer, its Board of Directors or any committee thereof containing comments and suggestions concerning a Loan Party’s accounting procedures and systems based upon the work done by the Auditors during their annual or other audit.

“Management Fee” shall mean (1) ten percent (10%) of the RNF Asset Pool Proceeds plus (2) until the BA Loan Repayment Date, five percent (5%) of the BA Asset Pool Proceeds (such 5% referred to as the “Deferred Management Fee”) from funds released to FH Partners under the BA Credit Agreement (the “BA Leak-Through”) and distributed to the Borrower by FH Partners, and after the BA Loan Repayment Date, ten percent (10%) of the BA Asset Pool Proceeds.  Any shortfall in the Deferred Management Fee shall accumulate and be paid out of the BA Leak-Through until such shortfall is covered.

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

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

“Material Portfolio Entity” shall mean each Portfolio Entity, each Person listed on Schedule 10.38—(MPE) and each other Portfolio Entity (other than a Foreign Portfolio Entity) with a Net Present Equity Value of $5,000,000 or more.  Each such  Person, which at any time constitutes a Material Portfolio Entity shall continue to constitute a Material Portfolio Entity until the time (if any) when Borrower sends to Agent written notice (a “Redesignation Notice”) executed by an Executive Officer of Borrower certifying, as to such Person that the Net Present Equity Value of such Person (the “Subject MPE”) is below $5,000,000 and has been below $5,000,000 for the preceding period of 90 consecutive days or more, and requesting that such Subject MPE no longer constitute a Material Portfolio Entity.   Provided that Borrower provides such additional information, if any, that Agent may request with respect to such Subject MPE and that Agent has not given Borrower notice that it disputes such redesignation of such Subject MPE  within 30 days after receiving such Redesignation Notice or, if later, within 30 days after Agent received additional information (if any) requested by it with respect to such requested redesignation, the Subject MPE shall cease to constitute a Material Portfolio Entity (until, the time, if any, that such Subject MPE  again satisfies the criteria applicable to Material Portfolio Entities).

“Maturity Date” shall mean December 19, 2014.

“MCS” shall mean MCS et Associes S.A.

“Minn Servicing” shall mean FirstCity Serving of Minnesota, Inc.

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

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

“Net Collections” with respect to a Portfolio Entity for any applicable period shall mean the gross aggregate amount received during such period by the Portfolio Entity on account of the Assets of the Portfolio Entity (including, in addition, amounts received by any REO Affiliate of such Portfolio Entity) or collateral therefor, and including amounts received on account of such Assets prior to the commencement of such period which were paid to or for the benefit of such Portfolio Entity during such period, reduced by (a) amounts which were paid directly to the Permitted Portfolio Company Creditor of such Portfolio Entity under an Approved Portfolio Leverage Arrangement or amounts which were remitted to such Creditor, in either case pursuant to the requirements of such Approved Portfolio Leverage Arrangement, which, in any such case, have not been released by such Creditor to (or for the benefit of) such Portfolio Entity (and/or any REO Affiliate thereof), (b) servicing fees, custodial fees and lockbox bank fees related to such Assets paid by such Portfolio Entity during such period, (c) escrow payments or deposits made by any obligor related to an Asset, (d) reasonable accounting and legal fees paid by the Portfolio Entity related to the operation of the Portfolio Entity, and (e) Portfolio Protection Expenses related to the Assets of the Portfolio Entity or its related REO Affiliate.

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

“Net Present Value” as to any Asset or Asset Pool, the net present value of all reasonably projected future collections from such Asset(s) reduced by reasonable and necessary collection expenses and discounted using the “ASR NPV” discount rate assignments utilized by the Portfolio Entity in making such determinations for each Asset as set forth on Exhibit F to the Agreement, as adjusted from time to time with the approval of Agent; all of which determinations must be reasonably satisfactory to Agent.

“Non-Covered Entity” shall mean FC Investment Holdings Corporation, FC Diversified Holdings LLC, FC Highway 6 Holdings LLC, FC Imperial Holdings LLC, VFC Partners 4 LLC, VFC Partners 5 LLC, VFC Partners 6 LLC, VFC Partners 7 LLC, VFC Partners 8 LLC, VFC Partners 9 LLC, VFC Partners 10 LLC, VFC Partners 11 LLC, VFC Partners 12 LLC, VFC Partners 13 LLC, VFC Partners 14 LLC, VFC Partners 15 LLC, VFC Partners 16 LLC, FC Capital Corp., FLBG2 or, until the Coverage Date, FH Partners or any of their subsidiaries or other entities in which such persons own any equity interest.

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

“Notes” — Section 2.2.

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

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

“Other Laws” — Section 3.5.

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

“Past—Due Rate” — Section 3.3.

“Payment Date” — Section 5.3(a).

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

“Pension Plan” shall mean any employee pension benefit plan subject to Title IV of ERISA and maintained by any Loan Party or any ERISA Affiliate of any Loan Party or any such plan to which any Loan Party or any ERISA Affiliate is or has been required to contribute on behalf of any of its employees, other than a Multiemployer Plan.

“Permitted Liens” shall mean (i) any liens created pursuant to the Loan Documents in favor of Agent for the benefit of Lender and Agent to secure the Obligations; (ii)  liens for Charges which are not yet due and payable, or claims and unfunded liabilities under ERISA not yet due and payable or which are being contested in good faith by appropriate proceedings diligently pursued; (iii) liens arising in connection with worker’s compensation, unemployment insurance, old age pensions and social security benefits which are not overdue or are being contested in good faith by appropriate proceedings diligently pursued, provided that in the case of any such contest any proceedings commenced for the enforcement of such lien shall have been duly suspended and such provision for the payment of such lien has been made on the books of Borrower (or the applicable Affiliate) as may be required by GAAP; (iv) liens incurred in the ordinary course of business to secure the performance of statutory obligations arising in

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connection with progress payments or advance payments due under contracts with the United States Government or any agency thereof entered into in the ordinary course of business; (v) any liens securing Indebtedness of Borrower (or any Affiliate) to any Persons in an amount not greater than $250,000 for each such Person, provided, the aggregate amount of Indebtedness secured by all such liens shall not exceed $500,000; (vi) Charges relating to Assets of First B and First X; (vii) as to any Affiliate, other than Borrower, a Primary Obligor or a Portfolio Entity, purchase money liens securing permitted indebtedness incurred in connection with the acquisition of Assets and other indebtedness incurred under the credit agreement under which such permitted indebtedness to acquire such Assets was incurred so long as such liens encumber only the Assets acquired, (viii) as to any Affiliate, other than Borrower or a Primary Obligor or a Portfolio Entity, liens relating to permitted Indebtedness incurred in connection with the warehousing of Assets or the securitization of Assets, so long as such liens encumber only the Assets warehoused or securitized; (ix) those liens disclosed on Schedule (PL); (x) liens on Assets of a Portfolio Entity in favor of the Person providing financing under an Approved Portfolio Leverage Arrangement in respect of the acquisition of Assets acquired pursuant to such Approved Portfolio Leverage Arrangement to the extent such liens are required by, and secure only obligations under, such Approved Portfolio Leverage Arrangement; (xi) liens on real property of a Portfolio Entity or an REO Affiliate in favor of a Person providing financing of development expenses related to such real property which is permitted under Section 8.3(x) and (xii) liens granted to BA in the BA Asset Pool, including without limitation the assets of FH Partners, to secure indebtedness under the BA Credit Agreement.

“Permitted Portfolio Company Creditor” shall mean those creditors of a Portfolio Entity which have provided loans pursuant to Approved Portfolio Leveraged Arrangement.

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

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

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

“Permitted Shareholder Agreement” shall mean a Shareholder Agreement with terms permitted by Exhibit E.

“Permitted Shareholder Arrangements” shall mean arrangements which would arise from a Permitted Shareholder Agreement.

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

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

“Pledge Agreement” means each of (or, as the context requires, any of) the Borrower Pledge Agreements, Multiparty Pledge Agreement, Collateral Assignment of Contract, the FLBG2 Pledge Agreement and any other pledge agreement made for the benefit of the Lenders by the Borrowers or the Affiliates.

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

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

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

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

“Portfolio Entity Proceeds” for any Portfolio Entity in respect of any Payment Date shall mean the sum of (I) the FC Percentage of the Net Collections, plus (II) any proceeds from a sale or transfer of any Equity Interests issued by such Portfolio Entity to FC Commercial or other Wholly Owned Subsidiary, as applicable, plus (III) the FC Percentage of any proceeds of a sale or transfer of any Equity Interests issued by any REO Affiliate related to such Portfolio Entity; (it being understood that any reference in this definition to any sale or transfer of Equity Interests issued by any Portfolio Entity or REO Affiliate shall not be construed to affect or modify any prohibition thereof or requirement for the obtaining of any consent relating thereto set forth elsewhere in this Agreement).

“Portfolio Protection Expense Report” — Section 7.2(d).

“Portfolio Protection Expenses” with respect to a Portfolio Entity shall mean expenses or other amounts which (w) such Portfolio Entity has reasonably determined are necessary to advance to one of its REO Affiliates for reasonable and necessary expenses to preserve or protect real property owned by such REO Affiliate, or (x) constitute reasonable and customary, necessary leasing commissions, reasonable and necessary tenant improvement costs paid by such Portfolio Entity or REO Affiliate pursuant to a written lease or capital improvements to such property required in order for the property to be so leased, or (y) such Portfolio Entity has reasonably determined are necessary to protect other Assets securing indebtedness owed to such Portfolio Entity, or (z) constitute obligor funding obligations, such expenses or other amounts to

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constitute Portfolio Protection Expenses when amounts therefor are retained by such Portfolio Entity or REO Affiliate or, if earlier, when such expenses or other amounts are paid.

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

“Purchasing Lenders” — Section 12.4(c).

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

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

“Reducing Note Facility Agreement” — Recitals.

“Regulatory Change” means, relative to any Lender, Collateral Agent or Agent, any change after the Effective Date in any (or the adoption after the Effective Date of any new):

(a)United States Federal, state or local law or foreign law applicable to Agent, Collateral Agent or Lender; or

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

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

“Related Entity” shall mean each entity identified on Schedule  I—(RE), as well as, subject to the final sentence of this definition, any other entity, other than a Primary Obligor, Portfolio Entity, or Immaterial Entity, any Equity Interest of which is owned by Borrower, any Primary Obligor, any Portfolio Entity, any Immaterial Entity or any other Related Entity. Notwithstanding the foregoing, no Immaterial Entity shall constitute a Related Entity.  “Related Entity” shall not include any Non-Covered Entity.

“Release” — Section 6.15.

“Released Collateral” — Recitals.

“REO Affiliate” shall mean a Person, other than Borrower, a Primary Obligor or a Material Portfolio Entity, which is a corporation, limited liability company or partnership 100% of the Equity Interests in which are owned by a Portfolio Entity (the “REO Owner”) (or, in the case of such an entity which is a limited partnership, 100% of the limited partnership interest of

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which is owned by the REO Owner and 100% of the interest in the general partner is owned by the REO Owner), which Person has been established solely to acquire, from the REO Owner or a seller from which the Portfolio Entity is acquiring other Assets, title to (and owns no Assets other than) parcels of real property (or distressed notes secured by real property for purposes of obtaining title to real property securing such loans) in exchange for, with respect to each such parcel, a promissory note in a principal amount no less than 96% of the value (as reasonably determined by the REO Owner and the REO Affiliate) of the property; provided  that no Person shall constitute or continue to constitute an REO Affiliate if (A) such Person acquires property from any Person other than (x) the REO Owner or a Person from whom the REO Owner is acquiring other Assets, or (y) in the case where it has acquired a note from the REO Owner solely for purposes of acquiring title to the real property securing such note, the obligor of such note; or (B) engages in any business other than business incidental to owning and selling the parcels of real property so acquired by such REO Affiliate.

“REO Parent” shall mean the entity(ies) which own(s) 100% of the equity interests in an REO Entity.

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

“Requisite Consents” — Section 6.6.

“Reset Date” — Section 2.5(a).

“RNF Asset Pool Proceeds” shall mean with respect to any Asset Pool, the gross aggregate amount received by Borrower on account of the Assets comprising such Asset Pool or collateral therefor excluding any BA Asset Pool Proceeds.

“RNF2” — Recitals.

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

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

“SBA Loans” shall mean any loans made by ABL to small businesses and partially guaranteed by SBA, all originated in accordance with the SBA Rules and Regulations and pursuant to the authorization contained in Section 7(a) of the SBA Act.

“SBA Rules and Regulations” shall mean the SBA Act, any other legislation binding on the SBA relating to financial transactions, and any loan guaranty agreement and rules and regulations promulgated from time to time under the SBA Act, and any SBA Standard Operating Procedures and Official Notices, all as from time to time in effect.

“SEC” shall mean the Securities and Exchange Commission.

“SEC Reports” — Section 10.26(c).

“Section 9.8 Entity” — Section 9.8.  “Section 9.8 Entity” shall not include any Non-Covered Entity.

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

“Securities Laws” shall mean all applicable Federal and state securities laws and regulations promulgated pursuant thereto.

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

“Security Documents” shall be the collective reference to (x) each of the agreements referred to in Section 6 (or on the Closing Checklist referred to therein) pursuant to which Collateral is or was granted or is or was intended to be granted, directly or indirectly, to Agent on behalf of the Lenders, (y) each agreement entered into after the Execution Date pursuant to which any collateral is or was granted or is or was intended to be granted, directly or indirectly, to Agent on behalf of the Lenders and any other Person (if any) sharing an interest in such collateral, and (z) all amendments, supplements or other modifications to such agreements or replacements thereof.  Without limiting the generality of the foregoing, each Security Agreement, each Pledge Agreement, each cash collateral agreement securing any Obligation, each depositary bank acknowledgement relating to any bank account of any Loan Party, each other agreement pursuant to which any obligations are subordinated to any of the Obligations (whether pursuant to a subordination agreement, subordination provisions in any other agreement or instrument or otherwise), each Pledged Note, and each security agreement securing the obligations under any Pledged Note shall constitute Security Documents.  However, as to a Loan Party, the term “Security Document” shall not include any such document as to which such Loan Party is released from all its obligations thereunder by Agent or the Lenders in accordance with the terms hereof or thereof.

“Servicing Restricted Funds” means funds received by FC Servicing or Minn Servicing in the ordinary course of such company’s servicing business for the account of Persons other than FC Servicing, Minn Servicing, Borrower or any other Subsidiary of Borrower.

“Senior Lender” — introductory paragraph.

“Senior Loan” — Section 2.1(a).

“Senior Note” — Section 2.2.

“Shareholder Agreement” shall mean any agreement (other than a certificate of incorporation, customary by—laws, a limited liability company formation certificate or a partnership formation certificate but including resolutions of any Person owning any Equity Interests in such Person) among any holders of Equity Interests issued by Borrower, any Primary Obligor or any Related Entity relating to the management of any such Person or any of the rights or privileges of any holders of Equity Interests of any such Person.

“Stated Amount” shall mean, as to each Letter of Credit, the maximum amount payable thereunder to the beneficiary thereof upon compliance with the terms and conditions stated therein, as such amount may be reduced from time to time.

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

“Subordinated Lender” — Introductory paragraph.

“Subordinated Loan” — Section 2.1(a).

“Subordinated Note” — Section 2.2.

“Subordinated Pledge Agreement” shall mean the Subordinated Pledge Agreement, dated as of the date hereof, between FH Partners and Collateral Agent.

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

“Subsidiary” of any Person (the “First Person”) shall mean any other Person more than 50% of the indicia of equity rights (whether capital stock or otherwise) of which is at the time owned, directly or indirectly by the First Person and/or by one or more of such First Person’s Subsidiaries other than Immaterial Entities.  Unless otherwise indicated, references to Subsidiaries shall refer to Subsidiaries of Borrower.  “Subsidiary” shall not include any Non-Covered Entity.

“Summary Waterfall Certificate” shall mean a certificate in a form approved by Agent which sets forth summary information as to all Waterfall Certificates being delivered on or about the same day as such certificate

“Taxes” — Section 5.4(a).

“Termination Event” shall mean (i) a Reportable Event described in Section 4043 of ERISA and the regulations issued thereunder (other than a Reportable Event not subject to the provision for 30—day notice to the PBGC under such regulations), or (ii) the withdrawal of any Loan Party or any of its ERISA Affiliates from a Pension Plan during a plan year in which it was a “substantial employer” as defined in Section 4001(a)(2) of ERISA, or (iii) the issuance of a notice of intent to terminate a Pension Plan or the treatment of a Pension Plan amendment as a termination under Section 4041 of ERISA, or (iv) receipt by any Loan Party or any ERISA Affiliate of notice of the PBGC’s intention to terminate any Pension Plan or to have a trustee or the PBGC appointed to administer any Pension Plan or (v) any other event or condition which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan.

“Transfer Supplement” — Section 12.4(c).

“UBN” shall mean UBN a French société par actions simplifiée, organized under the laws of Republic of France, with a share capital of EUR 693,000, having its registered offices at 96, avenue Raymond Poincaré 75116 Paris, registered with the Commercial and Companies Register of Paris under the number 382.312.700.

“UCC” — Section 10.30(a).

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“United States”, “US” or “U.S.” shall mean the United States of America.

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

“Valuation Certificate” — Section 6.17.

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

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

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EX-10.2

Exhibit 10.2

AMENDED AND RESTATED GUARANTY AGREEMENT

This AMENDED AND RESTATED GUARANTY AGREEMENT (this “Agreement”) made as of December 19, 2011 by FirstCity Financial Corporation, a Delaware corporation (the “Guarantor”), in favor of Bank of Scotland Plc, acting through its New York Branch, as Agent (in such capacity, and including its successors and assigns in such capacity, the “Agent”), for the benefit of the lender (the “Lender”) party to the Amended and Restated Reducing Note Facility Agreement referred to below.  Unless otherwise defined herein, capitalized terms shall have the respective meanings assigned to them in the Amended and Restated Reducing Note Facility Agreement.

W I T N E S S E T H :

WHEREAS, FirstCity Commercial Corporation, a Texas corporation (the “Borrower”), FLBG Corporation, a Texas corporation, Bank of Scotland Plc, acting through its New York Branch (the “Agent”), and the financial institution party thereto (the “Lender”) are party to the Amended and Restated Reducing Note Facility Agreement dated as of the date hereof (the “Amended and Restated Reducing Note Facility Agreement”);

WHEREAS, the Guarantor will derive substantial direct and indirect benefit from the execution and delivery by the Borrower of the Amended and Restated Reducing Note Facility Agreement;

WHEREAS, in connection with the execution and delivery of the Amended and Restated Reducing Note Facility Agreement, and as a condition precedent to the effectiveness thereof, the Guarantor is required to enter into this Agreement; and

WHEREAS, this Agreement amends and restates in its entirety that Limited Guaranty Agreement dated as of June 25, 2010 by the Guarantor in favor of the Agent;

NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each party hereto hereby agrees as follows:

1.The Guaranty.  (a)  Subject to the limitation of Section 1(b), the Guarantor hereby unconditionally and irrevocably guarantees as primary obligor and not merely as surety the full and prompt payment when due and payable (whether upon maturity, by acceleration or otherwise) of the obligations of the Borrower (including without limitation all interest which may be payable thereon prior to or during the pendency of any insolvency or similar proceeding with respect to the Borrower) with respect to payment of the indebtedness under the Amended and Restated Reducing Note Facility Agreement as evidenced by the notes executed pursuant to the terms of the Amended and Restated Reducing Note Facility Agreement and letters of credit under the Amended and Restated Reducing Note Facility Agreement (the “Guarantied Obligations”).  If any or all of such Guarantied Obligations become due and payable, the Guarantor unconditionally promises to pay such indebtedness to the Agent on behalf of the Lender, or order, on demand, together with any and all expenses which may be incurred by the

Lender or the Agent in collecting any of the indebtedness which is part of the Guarantied Obligations, subject to the terms of Section 1(b).  If the Agent or the Lender are prevented by law from accelerating any of the indebtedness in accordance with the terms of any agreement or instrument governing same, the Agent shall be entitled to receive hereunder from the Guarantor, upon demand therefor, the sum which would have otherwise been due had such acceleration occurred.  The word “indebtedness” is used in this Agreement in its most comprehensive sense and includes any and all advances, debts, obligations and liabilities of the Borrower which are part of the Guarantied Obligations, in each case heretofore, now or hereafter made, incurred or created, whether voluntarily or involuntarily, absolute or contingent, liquidated or unliquidated, determined or undetermined, whether or not such indebtedness is from time to time reduced, or extinguished and thereafter increased or incurred, whether the Borrower may be liable individually or jointly with others, whether or not recovery upon such indebtedness may be or hereafter become barred by any statute of limitations, and whether or not such indebtedness may be or hereafter become otherwise unenforceable.  Without limiting the generality of the foregoing, the Guarantor acknowledges that this guaranty is a guaranty of payment, not a guaranty of collection.

(b)Anything herein or in any other Loan Document to the contrary notwithstanding, the maximum liability of the Guarantor hereunder and under the other Loan Documents (said maximum liability, its “Maximum Guarantied Amount”) shall in no event exceed the amount which can be guaranteed by the Guarantor under applicable federal and state laws relating to the insolvency of debtors.

(c)The Guarantor agrees that the indebtedness may at any time and from time to time exceed the Maximum Guarantied Amount without impairing this Agreement or affecting the rights and remedies of the Agent and the Lender hereunder; provided that under no circumstance shall the liability of the Guarantor exceed the Maximum Guarantied Amount.

(d)No payment or payments made by the Borrower, any other guarantor or any other Person or received or collected by the Agent or any Lender from the Borrower, any other guarantor or any other Person by virtue of any action or proceeding or any set-off or appropriation or application at any time or from time in reduction of or in payment of the indebtedness shall be deemed to modify, reduce, release or otherwise affect the liability of  the Guarantor hereunder which shall, notwithstanding any such payment or payments other than payments made to the Agent by the Guarantor or payments received or collected by the Agent from the Guarantor, remain liable for the indebtedness up to its Maximum Guarantied Amount until the indebtedness is indefeasibly paid in full; provided that all such payments are applied to the Guarantied Obligations.

(e)Notwithstanding any other provision of this Agreement, the Guarantor and the Agent agree that payments made to the Guarantor, FC Investment Holdings Corporation (“FCIH”) or FirstCity Servicing Corporation pursuant to Section 5.3 of the Amended and Restated Reducing Note Facility Agreement are not in violation of this Agreement, and that no such payment shall increase the liability of Guarantor to pay the Guarantied Obligations, nor shall any such payment be required to be returned, paid or delivered to the Agent for any reason.

2.Bankruptcy.  Additionally, the Guarantor unconditionally and irrevocably guarantees the payment of any and all Guarantied Obligations of the Borrower, subject to the Maximum Guarantied Amount, whether or not due or payable, upon the occurrence in respect of the Borrower of any of the events specified in Section 9 of the Amended and Restated Reducing

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Note Facility Agreement (including, without limitation, Section 9.8 thereof) and unconditionally promises to pay such Guarantied Obligations, subject to the Maximum Guarantied Amount, to the Agent on behalf of the Lender, or order, on demand, in lawful money of the United States, without setoff or counterclaim.

3.Nature of Liability.  The liability of the Guarantor hereunder is exclusive and independent of any security or other guaranty of the indebtedness of the Borrower whether executed by the Guarantor or by any other party, and the liability of the Guarantor hereunder shall not be affected or impaired by (a) any direction as to application of payment by the Borrower or by any other party, (b) any other continuing or other guaranty, undertaking or maximum liability of a guarantor or of any other party as to the indebtedness of the Borrower, (c) any payment on or in reduction of any such other guaranty or undertaking, (d) any dissolution or termination of the Borrower, or (e) any payment made to the Agent or to the Lender on the indebtedness which such Agent or Lender is required to repay to the Borrower, whether pursuant to a court order, in any bankruptcy, reorganization, arrangement, moratorium or other debtor relief proceeding and the Guarantor waives any right to the deferral or modification of its obligations hereunder by reason of any such proceeding.

4.Independent Obligation.  (a)  The obligations of the Guarantor hereunder are independent of the obligations of any other guarantor or the Borrower, and any security for or other guarantee of the indebtedness of the Borrower, and a separate action or actions may be brought and prosecuted against the Guarantor whether or not action is brought against any other guarantor or the Borrower or any security held by the Agent and without pursuing any other remedy, and whether or not any other guarantor or the Borrower be joined in any such action or actions.  The Guarantor waives to the fullest extent permitted by law, the benefit of any statute of limitations affecting its liability hereunder or the enforcement thereof.  Any payment by the Borrower or other circumstance which operates to toll any statute of limitations as to the Borrower shall operate to toll the statute of limitations as to the Guarantor.  The rights of the Agent and the Lender under this Agreement will not be exhausted by any action or inaction by the Agent or the Lender until all of the indebtedness has been indefeasibly paid in full.

(b)The liability of the Guarantor hereunder is not affected or impaired by any direction or application of payment by the Borrower or by any other party, or by any other guarantee or undertaking of any other guarantor or any other party as to the indebtedness of the Borrower, by any payment on, or in reduction of, any such other guarantee or undertaking, by the termination, revocation or release of any obligations under the Amended and Restated Reducing Note Facility Agreement or of any other guarantor, or by any payment made to the Agent or the Lender on the indebtedness which the Agent or the Lender repay to the Borrower or any other guarantor or other person or entity, whether pursuant to court order, in any bankruptcy, reorganization, arrangement, moratorium or other debtor relief proceeding or any other fact or circumstance which would otherwise excuse the obligation of a guarantor or surety, and the Guarantor waives any right to the deferral or modification of the Guarantor’s obligations hereunder by reason of any such proceeding, fact or circumstance.  This Agreement shall continue to be effective in accordance with its terms, or be reinstated, as the case may be, if at any time payment, or any part thereof, of or with respect to any of the indebtedness is rescinded or must otherwise be restored or returned by the Agent or the Lender upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Borrower or any other payor thereof, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Borrower or any other payor thereof or any substantial part of its property, or otherwise, all as though such payments had not been made.

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5.Authorization.  The Guarantor authorizes the Agent and the Lender without notice or demand, and without affecting or impairing the Guarantor’s liability hereunder, from time to time to (a) renew, compromise, extend, increase, accelerate or otherwise change the time for payment of, or otherwise change the terms of, the Guarantied Obligations of the Borrower or any part thereof, including any increase or decrease of the rate of interest thereon, (b) take and hold security from the Borrower, any guarantor or any other party for the payment of this guaranty or the indebtedness and subordinate, compromise, exchange, enforce, waive and release any such security or accept additional or substituted security, (c) apply such security and direct the order or manner of sale thereof as the Agent or Collateral Agent in its discretion may determine and (d) release, add or substitute any one or more endorsers, guarantors or other obligors.  Any modifications, renewals and extensions of the indebtedness may be made at any time by the Agent on behalf of the Lender, and the Guarantor shall be fully liable for any such modifications, renewals or extensions.  The Agent, on behalf of the Lender, may take any of the foregoing actions upon any terms and conditions as the Agent may elect, without giving notice to the Guarantor or obtaining the consent of the Guarantor and without affecting the liability of the Guarantor to the Agent or the Lender.

6.Reliance.  It is not necessary for the Lender or the Agent to inquire into the capacity or powers of the Borrower or the officers, directors, partners or agents acting or purporting to act on its behalf, and any indebtedness made or created in reliance upon the professed exercise of such powers shall be guaranteed hereunder.  The Guarantor assumes full responsibility for keeping fully informed of the financial condition of the Borrower and all other circumstances affecting the Borrower’s ability to perform its obligations to the Agent and the Lender, and agrees that neither the Agent nor the Lender will have any duty to report to the Guarantor any information which the Agent or the Lender receives about the Borrower’s financial condition or any circumstances bearing on its ability to perform, and expressly waives any right to receive such information and any defense based upon failure to receive such information.

7.Subordination.  Notwithstanding the indebtedness of the Borrower as set forth in the Amended and Restated Reducing Note Facility Agreement, any indebtedness of the Borrower now or hereafter held by the Guarantor, whether in connection with this Agreement or whether completely independent of this Agreement and the indebtedness, is hereby subordinated to the indebtedness of the Borrower to the Lender; and such indebtedness of any Borrower to the Guarantor shall be collected, enforced and received by the Guarantor as trustee for the Lender and be paid over to the Lender on account of the indebtedness of the Borrower to the Lender, but without affecting or impairing in any manner the liability of the Guarantor under the other provisions of this Agreement.  The Guarantor further agrees that it will not assert any claim against the Borrower until all indebtedness to the Agent and the Lender has been completely satisfied.  Prior to the transfer by the Guarantor of any note or negotiable instrument evidencing any indebtedness of the Borrower to the Guarantor, the Guarantor shall mark such note or negotiable instrument with a legend that the same is subject to this subordination.

8.Waivers of Defenses.  The Guarantor waives, except as otherwise provided in this Agreement:

(a)all statutes of limitation as to the indebtedness, this Agreement or otherwise as a defense to any action brought against the Guarantor by the Agent or the Lender, to the fullest extent permitted by law;

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(b)any defense based upon any legal disability of the Borrower or any discharge or limitation of the liability of the Borrower to the Agent or the Lender, whether consensual or arising by operation of law or any bankruptcy, insolvency, or debtor-relief proceeding, or from any other cause;

(c)presentment, demand, protest and notice of any kind;

(d)any defense based upon or arising out of any defense which the Borrower may have to the payment or performance of any part of the indebtedness (other than payment by the Borrower);

(e)any defense based upon any disbursements by the Agent or the Lender to the Borrower pursuant to any agreements or instruments governing the indebtedness whether same be deemed an additional advance or be deemed to be paid out of any special interest or other fund accounts, as constituting unauthorized payments hereunder or amounts not guaranteed by this Agreement;

(f)all rights to participate in any security held by the Agent or the Lender for the indebtedness;

(g)irregularity or unenforceability of any agreement or instrument representing or governing the indebtedness;

(h)any request that the Agent or the Lender be diligent or prompt in making demands hereunder or under any agreement or instrument representing or governing the indebtedness; and

(i)any other defense in law or equity (except the defense that the indebtedness has been indefeasibly paid in full) which, under applicable law, would release the obligation of a guarantor or surety, until the indebtedness has been indefeasibly paid in full.

9.Representations and Warranties.  In order to induce the Lender to accept this Agreement the Guarantor makes the following representations, covenants and warranties, which representations, covenants and warranties shall survive the execution and delivery of this Agreement and the other documents and instruments referred to herein:

9.1Organization.

The Guarantor is and at all times hereafter shall be a corporation, duly organized and validly existing and in good standing under the laws of the State of Delaware and qualified or licensed to do business and in good standing in all states in which the laws thereof require the Guarantor to be so qualified and/or licensed and in which the failure so to qualify could have a Material Adverse Effect, including, without limitation, the State of Texas.  Schedule 9.1(a) identifies each jurisdiction in which the Guarantor has qualified or been licensed to do business and describes the nature and current status of any such qualification or license.

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9.2Entity Power.

The Guarantor has the right, power and capacity and is duly authorized and empowered to enter into, execute, deliver and perform this Agreement.

9.3Violation of Charter Documents.

The execution, delivery and/or performance by the Guarantor of this Agreement and the consummation of the transactions contemplated hereunder have been duly authorized by all necessary corporate and shareholder action and none of such execution, delivery, performance or consummation shall, by the lapse of time, the giving of notice or otherwise, constitute a violation of any Legal Requirement or a breach of any provision contained in the Charter Documents of the Guarantor, or contained in any agreement, instrument or document to which the Guarantor is now or hereafter a party or by which it or any of its Assets is or may become bound, other than agreements, instruments or documents that are immaterial to the Guarantor the breach of which could not have a Material Adverse Effect.

9.4Enforceability.

This Agreement is and will be the legal, valid and binding agreement of the Guarantor, enforceable in accordance with its terms, except as enforcement thereof may be subject to the effect of applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally, and to general principles of equity (regardless of whether such enforcement is sought in a proceeding in equity or at law).

9.5Ownership.

(a)Schedule 9.5(a) sets forth all classes of stock of the Guarantor, as of December 31, 2010, the shareholders thereof (other than members of the general public), addresses of each shareholder, and number of shares owned as of such date.

(b)Schedule 9.5(b) sets forth all classes of stock and/or other Equity Interests (other than options, warrants and rights to acquire Stock or other Equity Interests) issued by each Primary Obligor, each Portfolio Entity and each Related Entity, the shareholders and other equity holders thereof, and the addresses, number of shares and/or partnership interests owned.

(c)Schedule  9.5(c) sets forth all options, warrants and other rights to acquire Stock or other Equity Interests of the Guarantor, any Primary Obligor, any Portfolio Entity, any Related Entity and any other Pledged Entity, the nature of such option, warrant or right and the conditions for the exercise thereof.  Lender hereby expressly consents to the transfer, issuance or conveyance of Stock and/or other Equity Interests of the Guarantor in accordance with such options, warrants and rights; provided that the same does not result in a Change of Control.

(d)All Equity Interests of the Guarantor, each Primary Obligor, each Portfolio Entity, each Related Entity and each other Loan Party have been duly and validly issued, are fully paid and are non-assessable.

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9.6Financial Warranty.

The Guarantor (i) is paying its debts as they mature, (ii) owns property which, at a fair valuation, is greater than the sum of its debt, and (iii) has capital sufficient to carry on its business and transactions and all businesses and transactions in which it is about to engage.

9.7Proceedings.

Except as set forth on Schedule 9.7, there are no actions or proceedings which are pending or threatened against the Guarantor which could reasonably be expected to have a Material Adverse Effect.  None of the actions or proceedings referred to on Schedule 9.7 could have a Material Adverse Effect.

9.8Adequate Licenses.

The Guarantor possesses adequate Assets, licenses, patents, copyrights, trademarks and tradenames to continue to conduct its business as previously conducted by it and as contemplated in the foreseeable future except such licenses, patents, copyrights, trademarks and trade names the failure of which to obtain could not be reasonably expected to have a Material Adverse Effect.

9.9Government Permits;  Approvals and Consents.

(a)Except for matters which could not result in a Material Adverse Effect, the Guarantor has been and is in good standing with respect to all governmental permits, certificates, consents and franchises necessary to continue to conduct its business as previously conducted prior to the date hereof to own or lease and operate its properties as now owned or leased by it.  None of said permits, certificates, consents or franchises contain any term, provision, condition or limitation more burdensome than such as are generally applicable to Persons engaged in the same or similar business as the applicable Person.

(b)The Guarantor does not require the approval, consent, waiver, order, permission, license, authorization, registration or validation of, or filing with or exemption by, any Government Authority or any other Person (including but not limited to shareholders, partners, members, equity owners, holders of Indebtedness Instruments, or any owner of any lien upon the Assets of any one or more of them or their Affiliates) for the execution and delivery of, and the consummation of the transactions contemplated by, this Agreement.

9.10Restrictions.

(a)The Guarantor is not a party to (nor are any of its Assets otherwise subject to) any contract or agreement or restriction, judgment, decree or order that could have a Material Adverse Effect.

(b)The Guarantor is not subject to (nor are any of its Assets otherwise subject to) any Charge.

9.11Compliance with Laws.

Except for matters which could not result in a Material Adverse Effect, the Guarantor is not in violation of any applicable statute, regulation, order or ordinance of the United States of

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America, of any state, city, town, municipality, county or of any other jurisdiction, or of any agency thereof, including the Federal Reserve Board, in any respect.

9.12Compliance with Indebtedness Instruments.

The Guarantor is not in default under any Indebtedness Instrument or any other material agreement to which it is a party.

9.13Financials.

The Financial Statements delivered by the Guarantor to Agent fairly and accurately present the Assets, liabilities and financial conditions and results of operations of the Guarantor, and such other Persons described therein as of and for the periods ending on such dates and have been prepared in accordance with GAAP and such principles have been applied on a basis consistently followed in all material respects throughout the periods involved.

9.14Tax Returns.

The Guarantor has filed or caused to be filed all tax returns which are required to be filed, and has paid all Charges shown to be due and payable on said returns or on any assessments made against it or any of its property, and all other Charges imposed on it or any of its properties by any Governmental Authority.

9.15No Material Adverse Change.

Since December 31, 2010, no event or circumstance has occurred that had, has or could reasonably be expected to have a Material Adverse Effect.

9.16No Indebtedness.

The Guarantor (i) has no Indebtedness except for Indebtedness reflected in the most recent Financial Statements (except for any such Indebtedness (x) incurred since such most recent Financial Statements were delivered and identified on Schedule 9.15, or (y) constituting unsecured trade payables arising in the ordinary course of business since the dates reflected in the December 31, 2010 Financial Statements) or (ii) has guaranteed any indebtedness or entered into or issued any Guaranty Equivalent (other than as a result of the endorsement of any instrument of items of payment for deposit or collection in the ordinary course of business or as otherwise expressly permitted pursuant to the terms hereof) in respect of the obligations of any Person.

9.17Affiliates.

Schedule 9.17 attached hereto is a true, accurate and complete schedule of the Guarantor’s Affiliates, together with a description of the Guarantor’s relationship to each such Affiliate.

9.18Investment Company Act and Public Utility Holding Company Act.

Neither the Guarantor nor the issuance of this Agreement is subject to any of the provisions of the Investment Company Act of 1940, as amended.  The Guarantor is not a “holding company” as defined in the Public Utility Holding Company Act of 1935, as amended,

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or subject to any other federal or state statute or regulation limiting its ability to incur Indebtedness for money borrowed.

9.19SEC Filings.

The Guarantor has filed and made available to the Agent and Lender each form, registration statement, schedule, report, proxy statement and document required to be filed by the Guarantor with the SEC since January 1, 2006 (collectively, the “SEC Reports”).  Except as set forth on Schedule 9.19, the SEC Reports (i) at the time filed, complied in all material respects with the applicable requirements of the Securities Laws and (ii) did not at the time they were filed (or if amended or superseded by a filing prior to the date of this Agreement, then on the date of such filing) contain any untrue statement of a material fact or omit to state a material fact required to be stated in the SEC Reports or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.  Since January 1, 2006, the Guarantor has made all filings with the SEC in a timely manner (except as set forth on Schedule 9.19, each of which filing deficiencies was subsequently cured in a manner that brought the Guarantor into full compliance with law) as required by law and no event has occurred that requires an additional filing or any amendment to a prior filing, which has not been made or filed.

10.Waiver of Subrogation; Certain Covenants of Guarantor.

(a)The Guarantor hereby irrevocably waives (but only until the final indefeasible payment and satisfaction of all Guarantied Obligations due to the Agent and the Lender) any claim or other rights which it may now have or hereafter acquire against the Borrower or any other guarantor that arise from the existence, payment, performance or enforcement of the Guarantor’s obligations under this Agreement or any other Loan Document, including (without limitation) any right of subrogation, reimbursement, exoneration, contribution, indemnification, any right to participate in any claim or remedy of the Lender and the Agent against the Borrower or any other guarantor or any collateral which the Agent or the Lender now has or hereafter acquires, whether or not such claim, remedy or right arises in equity, or under contract, statute or common law including (without limitation) the right to take or receive from such Borrower, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim or other rights.  If any amount shall be paid to the Guarantor in violation of the preceding sentence and the Guarantied Obligations shall not have been paid in full, such amount shall be deemed to have been paid to the Guarantor for the benefit of, and held in trust for the benefit of, the Lender and the Agent and shall forthwith be paid to the Agent on behalf of the Lender to be credited and applied upon the Guarantied Obligations, whether matured or unmatured in accordance with the terms of the Amended and Restated Reducing Note Facility Agreement.  The Guarantor acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by the Amended and Restated Reducing Note Facility Agreement and that the waiver set forth in this Agreement is knowingly made in contemplation of such benefits.

(b)The Guarantor and the Agent agree that any payments made to Guarantor, FCIH and FirstCity Servicing Corporation pursuant to Section 5.3 of the Amended and Restated Reducing Note Facility Agreement are not paid in violation of this Section 10(a) and no such payment shall be required to be returned, paid or delivered to the Agent or the Lender for any reason.

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(c)The Guarantor hereby agrees that it shall, at the end of each fiscal quarter maintain a Tangible Net Worth equal to or greater than an amount equal to $90,000,000 for the last day of the fiscal quarter then ended.  “Tangible Net Worth” shall mean, at any time, the total of shareholders’ equity (including capital stock (both common and preferred), additional paid—in capital and retained earnings after deducting treasury stock of a Person), less the sum of the total amount of any intangible Assets, which, for purposes of this definition, shall include, without limitation, general intangibles and, if applicable, all accounts receivable not incurred in the ordinary course of business from any Affiliate of such Person or any loans to directors or officers of any Affiliate of such Person, unamortized deferred charges and good will, all as determined in accordance with GAAP.

(d)The Guarantor hereby agrees that it shall give Agent notice within forty-five (45) days after it merges with or acquires an interest in any Person.

(e)The Guarantor shall at all times cause the Consolidated Group to be comprised of the entities constituting the Consolidated Group as of the date hereof and shall permit only those mergers, dispositions or other transactions among such entities as are permitted by the Amended and Restated Reducing Note Facility Agreement; provided that this provision shall not prohibit the formation of REO Affiliates.

(f)Concurrently with delivery to its stockholders, the Guarantor shall deliver to Agent copies of all financial and other information delivered by the Guarantor to such stockholders, including, without limitation, its proxy statements and annual reports to stockholders.  Within two (2) Business Days after delivery to the SEC by the Guarantor, which in all case shall be on a timely basis in accordance with the applicable document and the Securities Laws, copies of all reports and other filings filed by the Guarantor with the SEC, including, without limitation, all reports on Forms 10K, 10Q or 8K promulgated under the Securities Exchange Act of 1934, as amended, and all registration statements and amendments thereto filed under the Securities Act of 1933, as amended.

(g)The Guarantor shall notify Agent promptly after obtaining knowledge of:

(i)any event or occurrence which the Guarantor has determined could have a Material Adverse Effect.  “Material Adverse Effect” shall mean an effect that would result in a Material Adverse Change.  “Material Adverse Change” shall mean a material adverse change in the business, properties, operations, prospectus or condition (financial or otherwise) of the Guarantor;

(ii)the institution of (x) any suit or administrative proceeding which if determined adversely to the Guarantor is reasonably likely to or could reasonably be expected to result in a Material Adverse Effect, and (y) any other suit or administrative proceeding against the Guarantor in which the uninsured amount involved is $5,000,000 or more, such notice to be given on or prior to the end of the calendar month in which the applicable event occurs;

(iii)The Guarantor becoming subject to any Charge, restriction, judgment, decree or order which could reasonably be expected to have a Material Adverse Effect;

(iv)the commencement of any lockout, strike or walkout relating to any labor contract to which the Guarantor is a party, if the same could reasonably be expected to have a Material Adverse Effect;

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(v)any event or occurrence in respect of the Guarantor which could reasonably be expected to have a Material Adverse Effect;

(vi)the occurrence of (x) a default by the Guarantor under any agreement, document or instrument to which the Guarantor is a party which could reasonably be expected to have a Material Adverse Effect, or (y) any default by the Guarantor which could reasonably be expected to materially and adversely affect the Guarantor’s ability to perform its obligations under this Agreement;

(vii)the filing of a petition by or against the Guarantor under any section or chapter of the United States Bankruptcy Code or any similar law or regulation or if the Guarantor shall make an assignment for the benefit of its creditors or if any case or proceeding is filed by or against the Guarantor for its dissolution or liquidation; and

(viii)the making of an application for the appointment of a receiver, trustee or custodian for any of the Assets of the Guarantor.

(h)Insurance.  The Guarantor, at its sole cost and expense, shall keep and maintain: (i) policies of insurance against all hazards and risks ordinarily insured against by other owners or users of properties in similar business; and (ii) public liability insurance relating to the Guarantor’s ownership and use of its Assets; provided, however, the Guarantor shall not be required to maintain the insurance referred to in clause (i) as to any Asset if the Net Present Value of the Asset is less than $100,000.

(i)Preservation of Existence.  The Guarantor will maintain and preserve its corporate existence, rights, privileges and franchises in the State of Delaware, and qualify and remain qualified to do business in, and maintain its rights, privileges and franchises in each other jurisdiction which in the opinion of its board of directors continue to be advantageous to it and shall comply in all material respects with all applicable Legal Requirements.  Without limiting the generality of the foregoing, the Guarantor agrees to qualify to do business as a foreign corporation in each jurisdiction where the nature of its business and the operations conducted by it therein require it to be so qualified and in which the failure to do so could have a Material Adverse Effect.

(j)Preservation of Assets.  The Guarantor will keep its property material to the conduct of its business in good repair, working order and condition and from time to time make all needful and proper repairs, renewals, replacements, extensions, additions, betterments and improvements thereto, so that the business carried on by it may be conducted at all times in accordance with prudent business management.

(k)Inspection of Books and Assets.  The Guarantor shall permit Agent, Lender and each of their respective representatives reasonable access during normal business hours to its properties and personnel, and shall disclose and make available to Agent and Lende all books, papers and records relating to the Assets, stock ownership, properties, operations, obligations, and liabilities of the Guarantor, including, but not limited to, all books of account (including the general ledger), tax records, minute books of meetings of boards of directors (and any committees thereof) and shareholders, organizational documents, bylaws, material contracts and agreements, filings with any regulatory authority, accountants’ work papers (other than those that are the property of its independent outside auditors), litigation files, loan files, plans affecting employees, and any other business or prospects in which Lender may have a reasonable interest in connection with the Facility Agreement and this Agreement, provided that such access shall be

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reasonably related to the transactions contemplated hereby and not unduly interfere with normal operations, and provided further that in the event that any of the foregoing are in the control of any third party, the Guarantor shall use its reasonable best efforts to cause such third party to provide access to such materials to Agent and Lender who shall request the same.  In the event that the Guarantor is prohibited by law from providing any of the access referred to in the preceding sentence to Agent and Lender, it shall use its commercially reasonable efforts to obtain waivers thereof promptly so as to permit such access.  The Guarantor shall make its directors, officers, employees and agents and authorized representatives (including counsel and independent public accountants) to confer with Agent and Lender and their respective representatives, provided that (i) such access shall be reasonably related to the transactions contemplated hereby and not unduly interfere with normal operations and (ii) unless a Default or Event of Default exists, counsel to the Guarantor shall be permitted to be present at any meeting between the Guarantor’s independent public accountants and Agent or Lender.

(l)Compliance with Laws.  The Guarantor shall comply with all laws, rules, regulations and governmental orders (federal, state and local), including all Environmental Laws, having applicability to it or to the business or businesses at any time conducted by it, where the failure to so comply would have, or could reasonably be expected to have, a Material Adverse Effect.

(m)Dissolution; Existence.  The Guarantor shall not wind up, liquidate or dissolve its affairs or fail to maintain its corporate, existence.

(n)Adverse Transactions.  The Guarantor shall not enter into any transaction which materially and adversely affects its ability to perform its obligations under this Agreement.

(o)Accounting Changes.  The Guarantor will not make any significant change in (x) accounting treatment and reporting practices except as permitted or required by GAAP or Legal Requirements or (y) unless Agent consents thereto in writing (which consent shall not be unreasonably withheld), its Fiscal Year.

(p)Dividends.  At any time that the Guarantor is in breach of Section 10(c) of this Agreement or any action taken by the Guarantor pursuant to this Section 10(p) will cause a breach of Section 10(c) of this Agreement, the Guarantor will not authorize, declare, or pay any dividends or return any capital to its stockholders as such or authorize or make any other distribution, payments or delivery of property or cash to its stockholders as such, or redeem, retire, purchase or otherwise acquire, directly or indirectly, for a consideration any shares of any class of its capital stock now or hereafter outstanding or any options, warrants or other securities (now or hereafter outstanding) convertible into or exercisable for any equity or other securities of the Guarantor or set aside funds for any of the foregoing and the Guarantor will not permit any Subsidiary or any Portfolio Entity-50% to purchase any Equity Interests of the Guarantor, or set aside funds for any of the foregoing.  Without limiting the foregoing, in no event shall any permitted distribution or other payment under this Section 10(c) be derived from any assets pledged to the Lender in connection with the Amended and Restated Reducing Note Facility Agreement or the RNF2.

(q)Tax Returns.  The Guarantor shall timely file or caused to be filed all federal tax returns which are required to be filed, and pay all Charges shown to be due and payable on said returns or on any assessments made against it or any of its property.

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11.Default.  The Agent may declare the Guarantor in default under this Agreement, and may exercise all of its rights hereunder and demand payment of the Guarantied Obligations subject to the Maximum Guarantied Amount; if:

(a)the Guarantor fails to perform any of its obligations under, or meet any covenant of the Guarantor provided in, Section 10(c), 10(p) or 10(q) of this Agreement, or fails to perform any of its other obligations under this Agreement or meet any other covenant of the Guarantor provided for herein, which as to any such other obligation or other covenant other than a monetary payment obligation of the Guarantor could be reasonably expected to materially and adversely affect the Guarantor’s ability to perform its payment obligations under this Agreement;

(b)any Event of Default under any other Loan Document occurs and is continuing that involves a payment default by the Borrower or that results in the acceleration of the Guarantied Obligations;

(c)any Indebtedness of the Guarantor in excess of $30,000,000 (whether evidenced by a single facility or in the aggregate by more than one facility) (i) shall be declared to be or shall become due and payable prior to the stated maturity thereof and, if a cure period is applicable thereto, such default shall not be cured within the applicable cure period, or (ii) shall not be paid as and when the same becomes due and payable, and, in either case, could be reasonably expected to materially and adversely affect the Guarantor’s ability to perform its payment obligations under this Agreement, and;

(d)the Guarantor becomes the subject of any bankruptcy, insolvency, arrangement, reorganization, moratorium, or other debtor-relief proceeding under any law, whether now existing or hereafter enacted, or upon the appointment of a receiver for, or the attachment, restraint of or making or levying of any order of court or legal process affecting, the property of such Guarantor; or

(e)any representation, warranty, statement, report or certificate made or delivered by the Guarantor or any officer, director, manager or authorized employee or agent thereof herein or in any other Loan Document or otherwise in writing by such Person in connection with any of the foregoing or in any certificate, report or other statement furnished pursuant to or in connection with any of the foregoing, shall be breached or shall prove to be untrue in any material respect, but only in the event that such breach or falsity could be reasonably expected to materially and adversely affect the Guarantor’s ability to perform its payment obligations under this Agreement; or

(f)a Change in Control shall occur (for purposes hereof, a Change in Control shall mean the occurrence of any of the following events after the date hereof:  (i) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), is or becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly, or indirectly, of more than fifty percent (50%) of the aggregate voting power of all classes of Capital Stock of the Guarantor entitled to vote generally in an election of directors; (ii) the Guarantor is merged with or into another corporation or another corporation is merged with or into the Guarantor with the effect that immediately after such transaction the stockholders of the Guarantor immediately prior to such transaction hold less than a majority in interest of the total voting power entitled to vote in the election of directors, managers or trustees of the entity surviving the transaction; or (iii) to the extent not otherwise then constituting an Event of Default, all or substantially all of the Assets of

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the Guarantor are sold to any person or persons (as an entirety in one transaction or a series of related transactions) (for purposes hereof, “Capital Stock” of any Person means any and all shares, interests, participations or other equivalents in the equity (however designated) of such Person and any rights (other than debt securities convertible into an equity interest), warrants or options to acquire an equity interest in such Person).

12.Right of Setoff.  In addition to all rights of setoff or lien against any moneys, securities or other property of the Guarantor given to the Agent and the Lender by law, upon the occurrence of any default under any agreement or instrument governing any of the Indebtedness or under this Agreement, the Agent and the Lender is authorized at any time and from time to time following an Event of Default, without notice to the Guarantor or to any other person or entity, any such notice being hereby expressly waived by the Guarantor, to set-off and apply any and all deposits (general) and any other indebtedness at any time held or owing by the Agent or the Lender to or for the credit or the account of the Guarantor against and on account of the obligations of the Guarantor under this Agreement, irrespective of whether or not the Agent or the Lender shall have made any demand hereunder or any demand for payment of any Indebtedness and although said obligations, liabilities or claims, or any of them, shall be contingent or unmatured.

13.Costs and Expenses.  Guarantor agrees to pay the Agent’s and the Lender’s reasonable and documented out-of-pocket costs and expenses, including but not limited to reasonable legal fees and disbursements, incurred in any effort to collect or enforce this Agreement, whether or not any lawsuit is filed (the “Enforcement Costs”).

14.Cumulative Remedies.  No delay or failure by the Agent or the Lender to exercise any right or remedy against, or to require performance by, the Borrower or the Guarantor or any other party shall be construed as a waiver of that right, remedy or requirement.  All remedies of the Agent and the Lender against the Borrower and the Guarantor are cumulative.  All powers of the Agent and the Lender to exercise any right or remedy against, or to require performance by, any Loan Party shall remain in full force and effect until specifically waived or released by an instrument in writing executed by the Agent and the Lender.

15.Governing Law.  THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO CHOICE OF LAW DOCTRINE THAT WOULD RESULT IN THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.

16. Jurisdiction.  The Guarantor hereby agrees that ANY LEGAL ACTION OR PROCEEDING AGAINST THE GUARANTOR WITH RESPECT TO THIS AGREEMENT OR ANY OTHER AGREEMENTS OR DOCUMENTS CONTEMPLATED HEREBY OR REFERRED TO HEREIN MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK AS THE AGENT MAY ELECT, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT THE GUARANTOR ACCEPTS AND CONSENTS FOR ITSELF AND IN RESPECT TO ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS AND AGREES THAT SUCH JURISDICTION SHALL BE EXCLUSIVE, unless waived by the Agent in writing, with respect to any action or proceeding brought by it against the Agent or the Lender and any questions relating to usury, and further consents (to the extent permitted by applicable law) to the service of process in any such action or proceeding being made upon the Guarantor by mail at the

14

address stated alongside its name on the signature page hereof or at such other address as the Agent is notified of in writing in accordance with Section 19 hereof.  Nothing herein shall limit the right of the Agent or the Lender to bring proceedings against the Guarantor in the courts of any other jurisdiction.  The Guarantor covenants that it is and will remain subject to service of process in the State of New York so long as any of the indebtedness is outstanding.

17.Severability.  If any one or more of the provisions contained in this Agreement or any document executed in connection herewith shall be invalid, illegal or unenforceable in any respect under any applicable law, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired.

18.Taxes.  All payments hereunder shall be made by the Guarantor to the Agent without setoff or counterclaim and in such amounts as may be necessary in order that all such payments received by the Agent, after withholding for or on account of any present or future taxes, levies, imposts, duties or other similar charges of whatsoever nature imposed on the amounts payable by the Guarantor hereunder by any government or any political subdivision or taxing authority thereof (other than any tax imposed on the Agent pursuant to the income tax laws of the jurisdiction where Agent’s principal office or lending office is located) shall not be less than the amount required to be received by the Agent hereunder.  In addition, the Guarantor shall on demand indemnify the Agent for all income taxes on additional amounts paid pursuant to the preceding sentence.  With respect to each such deduction or withholding, the Guarantor shall promptly (and in no event later than 30 days thereafter) furnish to the Agent such certificates, receipts and other documents as may be required to establish any tax credit, exemption or reduction in rate related thereto.

19.Notices, Requests, Demands, Etc.  Except as otherwise expressly provided herein, all notices, requests, demands or other communications to or upon the respective parties hereto shall be deemed to have been duly given or made when delivered if sent by Federal Express or other similar overnight delivery service, or three Business Days after mailing (when mailed, postage prepaid, by registered or certified mail, return receipt requested) or (in the case of telex, telegraphic, telecopier or cable notice) when delivered to the telex, telegraph, telecopier or cable company, or (in the case of telex or telecopier notice sent over a telex or telecopier owned or operated by a party hereto) when sent; in each case addressed to the party entitled to receive same to the address stated alongside its name on the signature page hereto (or to such other address as any party hereto may hereafter specify to the other in writing); provided that communications with respect to a change of address shall be deemed to be effective when actually received.

20.Amendment.  No provisions of this Agreement shall be waived, amended or supplemented except by a written instrument executed by the Agent and the Guarantor.

21.Miscellaneous.  The provisions of this Agreement will bind and benefit the successors and assigns of the Guarantor, the Agent and the Lender.  The term “Borrower” will mean the named Borrower and any other person or entity at any time assuming or otherwise becoming primarily liable on all or any part of the Indebtedness.  The descriptive headings used in this Agreement are for convenience only and shall not be deemed to affect the meaning or construction of any provision hereof.

22.Waiver of Claims.  The Guarantor hereby acknowledges, agrees and affirms that it possesses no claims, defenses, offsets, recoupment or counterclaims of any kind or nature

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against or with respect to the enforcement of this Agreement or any other Loan Document or any amendments thereto (collectively, the “Claims”), nor does the Guarantor now have knowledge of any facts that would or might give rise to any Claims.  If facts now exist which would or could give rise to any Claim against or with respect to the enforcement of this Agreement or any other Loan Document, as any of the foregoing may have been amended by the amendments thereto, the Guarantor hereby unconditionally, irrevocably and unequivocally waives and fully releases any and all such Claims as if such Claims were the subject of a lawsuit, adjudicated to final judgment from which no appeal could be taken and therein dismissed with prejudice.

23.Counterparts.  This Agreement may be executed in any number of counterparts, and by the different parties hereto on the same or separate counterparts, each of which shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.  Telecopied signatures hereto shall be of the same force and effect as an original of a manually signed copy.

24.WAIVER OF JURY TRIAL.  EACH OF THE AGENT AND THE GUARANTOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY AND ALL RIGHTS EITHER MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER AGREEMENT OR DOCUMENT RELATED HERETO, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OF THE AGENT, THE LENDERS, THE BORROWER, THE GUARANTOR OR ANY OTHER LOAN PARTY.  THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENT ENTERING INTO THIS AGREEMENT AND SUCH OTHER AGREEMENTS AND DOCUMENTS AND FOR THE LENDER AND THE AGENT ENTERING INTO THE AMENDED AND RESTATED REDUCING NOTE FACILITY AGREEMENT REFERRED TO ON THE FIRST PAGE HEREOF.

25.Attorney’s Fees.  If any legal action is brought by the Guarantor or the Agent, it is expressly agreed that the prevailing party in such legal action shall be entitled to recover from the other party reasonable attorneys’ fees in addition to any other relief that may be awarded.

26.Integration.

THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES HERETO WITH RESPECT TO THE MATTERS COVERED HEREBY AND THEREBY AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.

THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

[remainder of page intentionally left blank]

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IN WITNESS WHEREOF, each party hereto has caused this Agreement to be duly executed as of the date first above written.

Address:

6400 Imperial Drive (delivery only)		FIRSTCITY FINANCIAL CORPORATION
Waco, Texas 76710
		By:
P.O. Box 8216 (mail)			Name:
Waco, Texas 76714-8216			Title:
254-761-2953 (telecopier)
ACCEPTED BY:
Bank of Scotland Plc, acting through its New York Branch, in its capacity as Agent under this Agreement and agent under the Amended and Restated Reducing Note Facility Agreement.		1095 Avenue of the Americas New York, New York 10036 (212) 883-6610 (telecopier)
By:
	Name:
	Title:

[Signature page to Guaranty Agreement]

EX-10.3

Exhibit 10.3

_________________________________________________________________

REDUCING NOTE FACILITY AGREEMENT

among

FLBG2 HOLDINGS LLC

as Borrower

and

BOS (USA) INC.

as Lender,

with

BANK OF SCOTLAND PLC,

acting through its New York Branch,

as Agent and Collateral Agent

Dated as of December 19, 2011

_________________________________________________________________

REDUCING NOTE FACILITY AGREEMENT

REDUCING NOTE FACILITY AGREEMENT, dated as of December 19, 2011 among FLBG2 HOLDINGS LLC, a Texas limited liability company, as Borrower (the “Borrower”), BOS (USA) INC. a Delaware corporation (the “Lender”), the financial institutions from time to time party hereto as Lenders (together with the Lender, the “Lenders”), and BANK OF SCOTLAND PLC, acting through its New York branch, as agent for Lender (in such capacity, “Agent”) and as collateral agent for Lender (in such capacity, “Collateral Agent”).

W I T N E S S E T H :

WHEREAS, FirstCity Commercial Corporation, a Texas corporation (“FCCC”), FH Partners LLC, a Texas limited liability company (“FH Partners”), FLBG Corporation, a Texas corporation (“FLBG”), the Lender and the Agent are parties to a certain Reducing Note Facility Agreement dated as of June 25, 2010 (as the same has been amended from to time to time (the “Reducing Note Facility Agreement”) evidencing loans thereunder (such loans, collectively, the “RNF Loans”);

WHEREAS, FCCC and FCCC’s Affiliate, FirstCity Financial Corporation, a Delaware corporation (“FCFC”), have requested that the Lender and the Agent permit the Reducing Note Facility Agreement to be amended and restated in its entirety by an Amended and Restated Reducing Note Facility Agreement dated as of the date hereof (the “Amended and Restated RNF”) among FCCC, FLBG, the Lender and the Agent;

WHEREAS, simultaneously with the execution and delivery of this Agreement, FH Partners is executing and delivering a Term Loan Agreement (the “BA Credit Agreement”) with Bank of America N.A. (“BA”) with the amount loaned thereunder to be paid to the Lender and Bank of Scotland plc to reduce the principal amount of the RNF Loans;

WHEREAS, as part of the restructuring of the RNF Loans and as a condition to the execution and delivery of the Amended and Restated RNF, the Lender and the Borrower are executing and delivering this Agreement (the “RNF2”) to evidence the assumption by the Borrower of an aggregate of $25,000,000 in principal of the RNF Loans (the “FLBG2 Loans” or the “Loans”) and the reduction by such amount of the principal amount of the RNF Loans;

WHEREAS, the Borrower is pledging to the Lender, as security for the FLBG2 Loans and the Loans, all of the Collateral identified on Schedule 2 to this Agreement (the “FLBG2 Collateral” or the “Collateral”);

WHEREAS, the parties hereto agree that the Lender and the Agent shall have no obligation to provide any additional FLBG2 Loans under this Agreement;

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

Section 1.DEFINITIONS.

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

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

(c)All references to Sections in this Agreement or in Annex I hereto shall be deemed references to Sections in this Agreement unless otherwise specified.

(d)As used in this Agreement and the other Loan Documents, the terms “including” and “such as” are illustrative and not limitative.

Section 2.THE FLBG2 LOANS.

2.1Loan Assumption.

(a)Simultaneously with the execution and delivery of this Agreement, FCCC and the Borrower are executing and delivering the Assignment and Assumption Agreement substantially in the form of Exhibit 1 to evidence the Borrower’s assumption of the principal amount of $25,000,000 of the RNF Loans.

(b)Intentionally Omitted.

(c)The Lender has no obligation under this Agreement or under any other agreement, instrument or Loan Documents to make any additional FLBG2 Loans to the Borrower.

(d)Neither FCFC, FCCC, FH Partners, any guarantors under the Reducing Note Facility Agreement or the Amended and Restated RNF, nor any of the Affiliates of any such Persons other than Borrower shall have any obligation or liability for payment of the FLBG2 Loans or any other obligations under this Agreement.

(e)Agent and Lender agree that the assumption by Borrower of the amount of $25,000,000 of the indebtedness due under the Reducing Note Facility Agreement (the “Assumption”) is an absolute and unconditional obligation of Borrower under this Agreement and that the payment of $25,000,000 (the “FLBG2 Payment”) on the loans due under the Reducing Note Facility Agreement as a result of the Assumption is a permanent reduction of the such loans under the Reducing Note Facility Agreement in the amount of the FLBG2 Payment which shall not be, directly or indirectly, recovered by Agent or Lender from FCCC, FLBG, FCFC, FH Partners, FC Servicing, any guarantor under the Reducing Note Facility Agreement or the Amended and Restated RNF, or any other Affiliate of any such Person (other than Borrower), or payable, either directly or indirectly by any such Persons (other than Borrower) to Agent and Lender.  Agent and Lender expressly intend to and do forever release, discharge and waive any and all claims they may have to recover the FLBG2 Payment or the FLBG2 Loans or

any damages related thereto or related to Borrower from FCCC, FLBG, FCFC, FH Partners, FC Servicing, any guarantor under the Reducing Note Facility Agreement or the Amended and Restated RNF or any Affiliate of any such Person (other than Borrower) whether arising (i) under this Agreement or any guaranty or any instrument or loan document executed in connection with this Agreement, (ii) under the Reducing Note Facility Agreement or any guaranty or loan document executed in connection with the Reducing Note Facility Agreement, (iii) under the servicing agreement to be entered into between FC Servicing and Borrower with respect to the servicing of the FLBG2 Collateral, (iv) as claims as a creditor of Borrower related to the failure of Borrower to pay the FLBG2 Loans, the condition or value of the FLBG2 Collateral, the failure to recover the indebtedness owed to them by Borrower under the FLBG2 Loans, or the failure to obtain recoveries from or collections related to the FLBG2 Collateral, (v) with respect to any claims of Agent or the Lender that the transfer of assets to Borrower and the Assumption constitutes a fraud upon creditors of Borrower, causes Borrower to be inadequately capitalized, results in Borrower being insolvent and having a negative net worth, causes damage to Agent and the Lender as the only creditors of Borrower or any other claims of Agent and the Lender relating to such matters that might give rise to any claim or cause of action in favor of Agent and the Lender under applicable state or federal law or under the United States Bankruptcy Code, or (vi) with respect any other claims, demands, actions, causes of action, suits, debts, liabilities, and accounts of any nature whatsoever, known or unknown, including, without limitation, any claims of fraud or fraudulent inducement in connection with the formation of Borrower, the transfer of the FLBG2 Collateral by Affiliates of the Borrower to Borrower, the Assumption, the FLBG2 Payment, or the giving of this release, discharge and waiver (all such claims in the foregoing subparts (i) through (vi) being together, the “FLBG2 Claims”), under any theory of liability whether arising under contract, tort, statute, equitable remedy or otherwise, which the Agent or Lender or any of them ever had, now have or hereafter might have against FCCC, FLBG, FCFC, FH Partners, FC Servicing, guarantor under the Reducing Note Facility Agreement or the Amended and Restated RNF or any Affiliate of any such Person (other than Borrower) relating to the FLBG2 Claims.  Agent and Lender acknowledge that they have consented to and agreed with the transfer of the FLBG Collateral to Borrower, the Assumption and the making of the FLBG2 Loans and that Agent and Lender have been advised and are aware and acknowledge that: (A) Borrower is a newly formed entity that (i) owns no assets other than the loans which are the FLBG2 Collateral, (ii) will receive a contribution only from FLBG, its sole member, in the amount of $1,000.00, (iii) has no right to receive any funds or additional capital from FLBG, the sole member of Borrower, and FLBG has no other obligation to contribute any funds or capital to Borrower, (iv) the sole activity, business or operations of which will be the ownership of the loans transferred to Borrower by the Affiliates of the Borrower and limited activity related to those loans, (v) has no source of income or revenues other than collections from or proceeds of the loans constituting the FLBG2 Collateral, if any, (vi) will provide notice of the transfer of the loans to each obligor of the loans at the last address of each obligor in the records of Borrower, (vii) will enter into a servicing agreement with FC Servicing that provides for FC Servicing to process any payments on or proceeds received by Borrower with respect to the FLBG2 Collateral, to respond to inquiries related to the FLBG2 Collateral or any collateral for the FLBG2 Collateral and FC Servicing makes no representations regarding any collections to be received from the FLBG2 Collateral and is not obligated under the servicing agreement to actively attempt to collect the FLBG2 Collateral, and (viii) has no intent to pursue active collection of the FLBG2 Collateral in light of Borrower’s lack of funds

available to collect and pursue the FLBG2 Collateral and the condition of the FLBG2 Collateral; (B) the FLBG2 Collateral which has been transferred to Borrower by Affiliates of the Borrower (i) has, for the past two years been valued as having no value in the computations of the “Net Present Equity Value” of the entities that own the loans and as a result there has been no value for these loans included in the valuation certificates provided by the borrowers under the Reducing Note Facility Agreement, (ii) are loans that may not be enforceable due to the expiration of applicable statutes of limitation, (iii) are either not secured by any collateral or, in the opinion of Borrower, the collateral is in such condition as a result of prior liens or other issues that the collateral is not likely to have any value to justify efforts being made to pursue the collateral, and (iv) that the Affiliates of the Borrower have not received any significant payments on the loans in over two years; and (C) that the FLBG2 Collateral to be transferred to Borrower is valued by Borrower as having no value in the valuation certificate being simultaneously provided to Agent and Lenders, as the agent and lenders under the Amended and Restated RNF because the FLBG2 Collateral (i) may not be enforceable due to the expiration of applicable statutes of limitation, (ii) are either not secured by any collateral or, in the opinion of Borrower, the collateral is in such condition as a result of prior liens or other issues that the collateral is not likely to have any value to justify efforts being made to pursue the collateral, and (iii) that the Affiliates of the Borrower have not received any significant payments on the loans in the last two years.  The foregoing does not in any way limit the obligations undertaken by the Borrower under this Agreement, the representations and warranties made by the Borrower under this Agreement as to the legal, valid and binding nature of such obligations, the obligations undertaken by the Borrower in connection with its pledge of the FLBG2 Collateral to secure the obligations under this Agreement and under the Amended and Restated RNF and the representations and warranties of FLBG2 as to the legal, valid and binding nature of such pledge, the rights of the Lenders under this Agreement and under the Amended and Restated RNF to seek to enforce such pledge and to collect the FLBG2 Collateral when and as permitted by such pledge or the rights of the Lenders to deal in any manner permitted by applicable agreement or applicable law with the FLBG2 Collateral.

2.2The Note.  Borrower’s obligation to pay the principal of and, under limited circumstances, interest on, the Loans of the Lender shall be evidenced by a promissory note payable to the order of the Lender, substantially in the form of Exhibit A (the “Note”).

(a)The Note delivered to the Lender shall be: (i) dated the Effective Date; (ii) in an original principal amount of $25,000,000; and (iii) payable in full on the Maturity Date.

(b)The Note shall be, and hereby is, secured by the FLBG2 Collateral and the Pledge Agreement.

2.3Repayments of Loans.

(a)Borrower shall repay the unpaid principal amount of all Loans, together with all unpaid interest thereon and all other fees and amounts due with respect thereto, in accordance with Section 5.3 and in full on the Maturity Date.

(b)Intentionally Omitted.

(c)No amounts prepaid or repaid in accordance with the provisions of this Section 2.3 may be reborrowed.

2.4Intentionally Omitted.

2.5Intentionally Omitted.

Section 3.INTEREST.

3.1No Current Interest.  Subject to the provisions of Sections 3.2, Borrower shall not be liable for the payment of any interest on the Loans.

3.2Past Due Rate.  Each Loan shall bear interest for each day on which an Event of Default exists (after as well as before judgment), payable on demand, at a rate per annum equal to 5.25% (such rate, the “Past-Due Rate”).

3.3Intentionally Omitted.

3.4Intentionally Omitted.

Section 4.Intentionally Omitted.

Section 5.PAYMENTS; PERMITTED DISTRIBUTIONS.

5.1Currency of Payments.  All payments of principal and interest on Loans and under the Note shall be made to Agent in immediately available funds in U.S. Dollars.

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

5.3Payment Date and Distribution of Funds.

(a)Except following the occurrence and during the continuation of an Event of Default, in which case the distribution of Cash Flow shall be controlled by the Agent, all funds in the Cash Flow Cash Collateral Account derived from collections on and in respect of the FLBG2 Collateral (“Cash Flow”) shall be distributed by Borrower or the Agent on the fourth to last Business Day of each month (each, a “Payment Date”) pursuant to the distribution statement prepared by Borrower and approved in writing by Agent (or at any other times as may be agreed upon from time to time by Borrower, Agent and Lender) in accordance with the following priority and amounts and applied as follows and as illustrated in Schedule 5.3(a) to this Agreement:

(i)First, to the payment to Agent, for the account of Lender, an amount equal to all of any fees, late charges and other fees and expenses (other than those paid in Section 5.3(a)(i) above), which are then due and payable to Agent and/or Lender under this Agreement or any of the other Loan Documents or which will become so due and payable on or before the last day of the calendar month in which the Payment Date in question occurs;

(ii)Second, to FC Servicing, an amount equal to the Servicing Fee and Third Party Expenses as defined in the Servicing Agreement;

(iii)Third, to the payment to Agent, for the account of Lender.

5.4Net Payments; Application.

(a)All payments hereunder and under the Loan Documents (including, without limitation, repayments and prepayments pursuant to Section 2) shall be made by Borrower to Agent, except as otherwise provided in this Agreement in freely transferable U.S. dollars, and in same day funds at the Closing Office without setoff or counterclaim.

5.5Distribution by Agent.  All payments received by Agent on behalf of Lender under this Agreement or the Notes or on account of any fees payable for the account of Lender shall be promptly distributed by Agent to Lender (in the type of funds received by Agent) in accordance with the Subordination Agreement.  For the avoidance of doubt, the Borrower shall not have any liability to the Agent or the Lender arising from the manner in which the funds are allocated among the Lenders by the Agent.

Section 6.CONDITIONS PRECEDENT TO EFFECTIVENESS

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

6.1Default, etc.  On the Effective Date (both before and after giving effect to the occurrence of the Effective Date assuming such Effective Date has occurred) there shall exist no Default or Event of Default and all representations and warranties made by the Borrower herein or in the other Loan Documents or otherwise by the Borrower in writing in connection herewith or therewith shall be true and correct in all material respects with the same effect as though such representations and warranties have been made at and as of such time.

6.2Notes.  Agent shall have received for each of Lenders the Notes, each duly executed and completed by Borrower.

6.3Supporting Documents of Borrower.  There shall have been delivered to Agent (with sufficient copies for each of the Lenders) such information and copies of documents (if any), approvals (if any) and records (certified where appropriate) of corporate and legal proceedings (if any) in addition to those listed on the Closing Checklist as Agent or Lender may

have reasonably requested relating to the Borrower’s entering into and performance of the Loan Documents or any other agreements or documents related thereto or contemplated thereby.

6.4Officer’s Certificate.  There shall have been delivered to Agent (with sufficient copies for Lender) a certificate of an Executive Officer of Borrower certifying, as of the Effective Date, compliance with the conditions of Section 6.1.

6.5Certifications; Financial Statements.  Borrower shall have delivered to Agent such unaudited financial statements and certifications of financial statements as Agent may have requested.

6.6Approvals and Consents.  All orders, permissions, consents, approvals, licenses, authorizations and validations of, and filings, recordings and registrations with, and exemptions by (all of the foregoing, “Requisite Consents”), any Government Authority, or any other Person, required to authorize or required in connection with the execution, delivery and performance of this Agreement or the other Loan Documents and the transactions contemplated hereby and thereby by Borrower shall have been obtained (and, if so requested, furnished to Agent, with sufficient copies for Lender).

6.7Intentionally Omitted.

6.8Intentionally Omitted.

6.9Change in Law; No Opposition.  (i) No change shall have occurred in applicable law or in applicable regulations thereunder or in the interpretations thereof by any Governmental Authority which, in the opinion of Lender, would make it illegal for the Lender to make one or more Loans hereunder; and (ii) no suit, action or proceeding shall be pending or threatened before or by any Governmental Authority seeking to restrain or prohibit the making of any Loan or the consummation of the transactions contemplated hereby.

6.10All Proceedings to be Satisfactory.   All corporate, partnership, limited liability company and legal proceedings and all instruments, documents and papers in connection with the transactions contemplated by this Agreement and the other Loan Documents and the other documents referred to herein shall be satisfactory in form and substance to Agent, and Agent and Lender shall have received all such information and copies of all documents which Agent or such Lender may reasonably have requested in connection herewith, such documents where appropriate to be certified by proper corporate officials or Governmental Authorities.

6.11Checklist Documents.  The documentation set forth on the Closing Checklist (Schedule 6.11), including, without limitation, the Pledge Agreement satisfactory to Agent in form and substance, shall have been delivered to Agent, and such other actions referred to on such Schedule and in such documentation shall have been taken.

6.12UCC Statements.  Lien search results confirming the absence of any perfected Liens prior to Lender’s and of any other Liens other than Liens permitted hereunder shall have been delivered to Agent and all actions with respect to the Liens created by the Pledge Agreement as are necessary or appropriate to perfect such Liens shall have been taken.

6.13Fees and Expenses.  The legal fees and expenses of Agent’s New York counsel and (if any) local or special counsel in connection with the transactions contemplated by this Agreement and an aggregate $150,000 of expenses (the “Promethean Expenses”) owing to the Agent’s financial consultant, Promethean Investments LLP, in connection with the transactions contemplated by this Agreement and the Amended and Restated RNF shall have been paid in full out of operating accounts of FCCC.

6.14Valuation Certificate.  Borrower shall have delivered to the Lender a Valuation Certificate in the form of Schedule 6.15 (the “Valuation Certificate”) signed by the Treasurer of the Borrower which will set forth the Collateral Value.

6.15Amended and Restated RNF.  The Lender, the Agent, the Collateral Agent and FCCC shall have executed and delivered the Amended and Restated RNF and all documents and instruments required under the Amended and Restated RNF, all in form, scope and substance satisfactory to the Lender.

Section 7.AFFIRMATIVE COVENANTS.

Borrower warrants, represents and covenants to the Lender and Agent that, so long as this Agreement is in effect and until all of the Loans, together with interest and all other obligations (including Deemed Disbursements and Reimbursement Obligations and fees and disbursements in connection therewith) are paid in full, Borrower will (unless it shall have first procured the written consent of the Majority Lenders to do otherwise) perform the obligations set forth in this Section 7; provided that Borrower shall not be required to take any action or perform any obligation set forth in this Section 7 which is inconsistent with Section 2.1(e).

7.1Financial Statements.  Borrower will furnish to Agent and Lender:

(a)As soon as available and in any event within forty-five (45) days after the close of each calendar month, as at the end of such month and for the period commencing at the end of the previous Fiscal Year and ending with the end of such month, unaudited Financial Statements of the Borrower, all certified by the CFO of Borrower as being prepared in accordance with GAAP and to present fairly the financial position and results of operation of such Person for such period;

(b)As soon as available but not later than one hundred five (105) days after the close of each Fiscal Year of the Borrower, as at the end of and for the Fiscal Year just closed, an unaudited Financial Statements of the Borrower, and a reconciliation of capital for such year, prepared by the CFO of Borrower;

(c)Intentionally Omitted.

(d)Concurrently with delivery of the financial statements required pursuant to Section 7.1(a) and Section 7.1(b) hereof, a certificate executed by the President, Treasurer or CFO of Borrower that (A) no Event of Default or Default has occurred and is continuing under this Agreement, (B) Borrower is in compliance with the covenants set forth in Section 8.16 hereof; and (C) no event of default and no event or condition which, with the passage of time or the giving of notice or both, would constitute an event of default has occurred and is continuing

under any other Indebtedness Instrument (“Other Indebtedness Instrument Unmatured Default”) or, if an Event of Default or Default has occurred under this Agreement or an event of default or Other Indebtedness Instrument Unmatured Default has occurred under any other Indebtedness Instrument, setting forth the details of such event and the action which each Borrower proposes to take with respect thereto;

(e)Intentionally Omitted;

(f)Within fifteen (15) days after the end of each month, a Valuation Certificate showing values as of the end of the immediately preceding month; and

(g)With reasonable promptness, such other information respecting the business, properties, operations, prospects or condition (financial or otherwise) of the Borrower as the Agent may reasonably request.

7.2Other Required Notices and Covenants.

(a)Borrower shall notify Agent promptly after obtaining knowledge of:

(i)Intentionally Omitted;

(ii)the institution of (x) any suit or administrative proceeding which if determined adversely to Borrower, is reasonably likely to or could reasonably be expected to result in a Material Adverse Effect, and (y) any other suit or administrative proceeding against Borrower, in which the uninsured amount involved is $750,000 or more, such notice to be given on or prior to the end of the calendar month in which the applicable event occurs;

(iii)Borrower becoming subject to any Charge, restriction, judgment, decree or order which could reasonably be expected to materially adversely affect the operations, financial conditions or business of Borrower if the same could reasonably be expected to materially adversely affect the operations, financial conditions or business of Borrower;

(iv)Intentionally Omitted;

(v)except as otherwise previously disclosed or as to any matter addressed in Section 2.1(e), any event or occurrence in respect of Borrower which could reasonably be expected to have a Material Adverse Effect;

(vi)the occurrence of (x) a default by Borrower under any agreement, document or instrument to which the Borrower is a party which could reasonably be expected to have a Material Adverse Effect, or (y) any default by a Borrower which could reasonably be expected to materially and adversely affect the Borrower’s ability to perform its respective obligations under the Loan Documents;

(vii)the filing of a petition by or against Borrower under any section or chapter of the United States Bankruptcy Code or any similar law or regulation or if the Borrower

shall make an assignment for the benefit of its creditors or if any case or proceeding is filed by or against the Borrower for its dissolution or liquidation;

(viii)the making of an application for the appointment of a receiver, trustee or custodian for any of the Assets of Borrower;

(ix)the exercise by any holder of any option, warrant or right to purchase any Equity Interest in Borrower; and

(x)the issuance or sale of any Securities by Borrower, whether or not permitted pursuant to the terms hereof.

(b)On the twentieth (20th) day of each month, Borrower shall deliver to Agent Waterfall Certificates in respect of the FLBG2 Collateral, certified by an Executive Officer of Borrower.

(c)Intentionally Omitted.

(d)On or before the fourth to last Business Day of each month, Borrower shall deliver to Agent a Valuation Certificate signed by the Treasurer of Borrower.

7.3Payment of Charges.

Borrower shall pay promptly when due and discharge all Charges.  In the event Borrower, at any time or times hereafter, shall fail to pay the Charges or to obtain such discharges as required herein, Borrower shall so advise Agent thereof in writing.  Agent may, without waiving or releasing any obligation, covenant or agreement of Borrower or any Event of Default or Default, in its sole and absolute discretion, at any time or times thereafter, make such payment, or any part thereof, or obtain such discharge and take any other action with respect thereto which Agent deems advisable.  All sums so paid by Agent and any expenses relating thereto, including reasonable attorneys’ fees, court costs, expenses and other charges, shall be part of the Obligations, payable by Borrower to Agent on demand.  Notwithstanding the foregoing, Borrower may permit or suffer the Charges to attach to its Assets on the conditions that: (i) Borrower in good faith, shall be contesting the same in an appropriate proceeding diligently pursued; (ii) enforcement thereof against any Assets of Borrower shall be stayed; and (iii) appropriate reserves therefor shall have been established on the Records of Borrower in accordance with GAAP

7.4Intentionally Omitted.

7.5Maintenance of Records.  Borrower will keep at all times books of record and account in which full, true and correct entries will be made of all dealings or transactions in relation to its business and affairs, and Borrower will provide adequate protection against loss or damage to such books of record and account.

7.6Preservation of Existence.  Borrower will maintain and preserve its corporate existence in its jurisdiction of organization.

7.7Intentionally Omitted.

7.8Inspection of Books and Assets.  Borrower shall permit Agent, Lender and each of their respective representatives reasonable access during normal business hours to its properties and personnel, and shall disclose and make available to Agent and Lender all books, papers and records relating to the Assets, stock ownership, properties, operations, obligations, and liabilities of Borrower, including, but not limited to, all books of account (including the general ledger), tax records, minute books of meetings of boards of directors (and any committees thereof) and shareholders, organizational documents, bylaws, material contracts and agreements, filings with any regulatory authority, accountants’ work papers (other than those that are the property of its independent outside auditors), litigation files, loan files, plans affecting employees, and any other business or prospects in which Lender may have a reasonable interest in connection with the Loans, provided that such access shall be reasonably related to the transactions contemplated hereby and not unduly interfere with normal operations, and provided further that in the event that any of the foregoing are in the control of any third party, Borrower, shall use its reasonable best efforts to cause such third party to provide access to such materials to Agent and Lender who shall request the same.  In the event that Borrower, is prohibited by law from providing any of the access referred to in the preceding sentence to Agent and Lender, it shall use its commercially reasonable efforts to obtain waivers thereof promptly so as to permit such access.  Borrower shall make the directors, officers, employees and agents and authorized representatives (including counsel and independent public accountants) of Borrower to confer with Agent and Lender and their respective representatives, provided that (i) such access shall be reasonably related to the transactions contemplated hereby and not unduly interfere with normal operations and (ii) unless a Default or Event of Default exists, counsel to Borrower, shall be permitted to be present at any meeting among Borrower’s, independent public accountants and Agent or Lender.

7.9Intentionally Omitted.

7.10Further Assurances.  Borrower will make, execute or endorse, and acknowledge and deliver or file, all such vouchers, invoices, notices, and certifications and additional agreements, undertakings, conveyances, transfers, assignments, or further assurances, and take any and all such other action, as Agent or Lender may, from time to time, deem necessary or proper in connection with this Agreement, the obligations of Borrower hereunder or under the Notes or any of the other Loan Documents to which Borrower is a party, or for the better assuring and confirming unto Collateral Agent or Agent on behalf of Lender, with the first priority, all or any part of the security for the Obligations.

7.11Notice of Default.  Forthwith and in any event within five (5) days after Borrower shall have obtained knowledge of the existence of a Default or Event of Default, Borrower will deliver to Agent a certificate signed by an Executive Officer of Borrower setting forth the details of such event, the period of existence thereof, and what action Borrower proposes to take with respect thereto.

7.12Intentionally Omitted.

7.13Intentionally Omitted.

7.14Perform Obligations.  Borrower shall duly and punctually pay and perform each of its obligations under the Loan Documents to which it is a party, in accordance with the terms hereof and thereof.

7.15Intentionally Omitted.

7.16Approvals and Consents.  In the event that any approval, consent or non-objection need be obtained by Borrower from, or a notice or other filing need be filed by Borrower, with, any Governmental Authority in connection with the execution, delivery and performance of this Agreement or any Loan Document by Borrower, Borrower shall take all actions reasonably necessary to obtain any such approval, consent or non-objection or file such notice or other filing as promptly as practicable, and Lenders agree to cooperate with Borrower in obtaining or filing the same.

7.17Stay, Extension and Usury Laws.  Borrower covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive it from paying all or any portion of the principal of, premium, if any, or interest on the Notes, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of its obligations under the Note, and Borrower (to the extent it may lawfully do so) hereby expressly waives all benefits or advantages of any such law.

7.18Compliance with Laws.  Borrower shall comply with all laws, rules, regulations and governmental orders (federal, state and local), including all Environmental Laws, having applicability to it or to the business or businesses at any time conducted by it, where the failure to so comply would have, or could reasonably be expected to have, a Material Adverse Effect.

7.19Intentionally Omitted.

Section 8.NEGATIVE COVENANTS.

Borrower warrants and represents to and covenants to Lender and Agent that, so long as this Agreement is in effect and all of the Loans, together with interest and all other obligations incurred hereunder are paid in full, Borrower will perform the obligations set forth in this Section 8 (unless it shall have first procured the written consent of the Majority Lenders to do otherwise).

8.1Amend Charter Documents; Engage in Same Type of Business.

(a)Borrower, shall not (i) make or consent to any change: (i) in its Charter Documents, in any Shareholder Agreement or in its capital structure or (ii) make any change in any of its business objectives, purposes and operations, including by undertaking additional business activities or (iii) waive any material right under its Charter Documents or any Shareholder Agreement.  Borrower shall not engage in any business not of the same general type as those conducted by it on the Execution Date.

(b)Borrower shall not enter into any Shareholder Agreement after the Execution Date.

8.2Liens.  Borrower, will not grant, contract, create, incur, assume or suffer or permit to exist any Lien upon or with respect to, or by transfer or otherwise subject to the prior payment of any indebtedness (other than the Loans), any of its Assets, whether now owned or hereafter acquired, except Permitted Liens.

8.3Other Indebtedness.  Borrower, will not contract, create, incur, assume or suffer to exist any Indebtedness, except:

(i)the Loans; and

(ii)unsecured trade payables incurred in the ordinary course of business;

8.4Sell Assets.  Borrower shall not assign, sell or transfer any of its Assets to any Person, other than in the ordinary course of business and for fair and adequate consideration.

8.5Attachment.  Borrower shall not permit or suffer any levy, attachment, seizure, or restraint to be made of, upon or affecting any of its Assets or permit any of its Assets to be subject to a writ of distress, if the same would have a Material Adverse Effect.

8.6Receiver.  Borrower shall not permit or suffer any receiver, trustee or assignee for the benefit of creditors, or any other custodian to be appointed to take possession of all or any of its Assets, or for all or any of its Assets to come within the possession of any receiver, trustee, assignee for the benefit of creditors or custodian, if the same would have a Material Adverse Effect.

8.7Mergers, Acquisitions.  Borrower, shall not wind up, liquidate or dissolve its affairs or merge or consolidate with, be acquired by or acquire the stock or assets of or make any investment in, any Person, whether by merger, consolidation, purchase of stock or assets or otherwise, or create any Subsidiary (or agree to do any of the foregoing at any future time) or fail to maintain its corporate existence.

8.8Stock Transfers.

(a)Borrower shall not (x) grant any option, warrant or other right to purchase any Equity Interest in Borrower or (y) issue any other Equity Interests, or (ii) transfer any Equity Interests (whether its own or Equity Interests issued by any Person other than itself) without, in each case, the prior written consent of Majority Lenders.

8.9Adverse Transactions.  Borrower, shall not enter into any transaction which materially and adversely affects its ability to perform its obligations under the Loan Documents or to pay any other Indebtedness.

8.10Investments.

(a)Subject to the further limitations set forth in Sections 8.10(b) and (c), after the Execution Date, Borrower shall not make any investment in Equity Interests of any Person.

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

(c)In furtherance, and not in limitation, of other restrictions herein and in the other Loan Documents on contributions, loans, gifts, investments and Guaranty Equivalents, Borrower, shall not make capital contributions, loans or gifts to, investments in or enter into or issue any Guaranty Equivalent with respect to the obligations of any Person.

8.11Dividends.  Borrower will not, authorize, declare, or pay any dividends or return any capital to its stockholders as such or authorize or make any other distribution, payments or delivery of property or cash to its stockholders as such, or redeem, retire, purchase or otherwise acquire, directly or indirectly, for a consideration any shares of any class of its capital stock now or hereafter outstanding or any options, warrants or other securities (now or hereafter outstanding) convertible into or exercisable for any equity or other securities of Borrower, or set aside funds for any of the foregoing (any such authorization, declaration, payment, dividend, return of capital, distribution, delivery, redemption, retirement, purchase, acquisition or setting aside of funds, a “Dividend”).

8.12Loan; Guaranty Debt.

(a)Borrower, shall not make any loan to any Person, or otherwise invest in or acquire any note, bond, other debt instruments or obligations of or issued by any Person.

(b)Borrower shall not enter into or issue any Guaranty Equivalents, other than the guaranty by Borrower of the indebtedness and obligations under the Amended and Restated RNF and the pledge of the FLBG2 Collateral to secure the indebtedness and obligations under the Amended and Restated RNF.

8.13Issue Power of Attorney.  Except pursuant to the other provisions of this Agreement or the Pledge Agreement to which Agent is a party, Borrower shall not issue any power of attorney or other contract or agreement giving any Person power or control over the day-to-day operations of any such Person’s business.

8.14Intentionally Omitted.

8.15Intentionally Omitted.

8.16Financial Covenants.  In the event that any Financial Statement required to be delivered pursuant to Section 7.1(a) or any certificate required to be delivered pursuant to Section 7.1(d) hereof (in the case of any such certificate required in connection with monthly financial statements, at the end of any month which is also a fiscal quarter end date) is not delivered within ten (10) days after the date required therefor pursuant to such Section and a written demand therefor by Agent, Borrower shall be deemed to be in default of this Section 8.16 for purposes of Section 9.3 hereof.

8.17Accounting Changes.  Borrower will not make any significant change in (i) accounting treatment and reporting practices except as permitted or required by GAAP or Legal Requirements or (ii) unless Agent consents thereto in writing (which consent shall not be

unreasonably withheld).  Agent and Lender acknowledge that Borrower will, in accordance with GAAP, fair-value the FLBG2 Loans and record the fair value of the FLBG2 Loans as of the Closing Date and that the fair-valued debt amounts (which will likely recorded at $0.00) will be recorded to the books of FLBG2 and represent the carrying value of the debt by the Borrower.

8.18Related Transactions.  Borrower does not have and Borrower shall not enter into any transactions with any Affiliate or Associate, including, without limitation, agreements for the purchase, sale or exchange of property or the rendering of any services to or by any Affiliate or Associate of Borrower or any Parent, except the Services Agreement between FC Servicing and Borrower of even date, or enter into, assume or suffer to exist any employment, management, administration, advisory or consulting contract with any Affiliate or Associate of Borrower or any Parent or, in each of the foregoing cases, with any officer, director or partner of any Affiliate or Associate of Borrower or any Parent or modify any Fee Agreement unless, in any such case, such transaction (a) is otherwise not in violation of this Agreement or any other Loan Document and (b) is in the ordinary course of its business and is upon fair and reasonable terms no less favorable to Borrower than Borrower would obtain in a comparable arm’s-length transaction with a Person not an Affiliate or Associate.

8.19Intentionally Omitted.

8.20Intentionally Omitted.

8.21Intentionally Omitted.

8.22Intentionally Omitted.

Section 9.EVENTS OF DEFAULT.

Upon the occurrence of any of the following specified events (each an “Event of Default”):

9.1Principal and Other Amounts.  Borrower shall fail to make due and punctual payment of any principal or other amount due hereunder or under the Note or any other Loan Document; or

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

9.3Negative and Certain Other Covenants.  Borrower shall fail to perform or observe, any term, covenant or agreement to be performed or observed by Borrower pursuant to Section 7.11 or 7.19; or

9.4Other Covenants.  Borrower shall fail to perform or observe any term, covenant or agreement to be performed or observed by Borrower pursuant to any of the provisions of this

Agreement, including, without limitation, Section 2.3 (other than those referred to in Sections 9.1, 9.2 or 9.3) or any other Loan Document and such default (which shall be capable of cure) shall continue unremedied for a period of thirty (30) days, after the earlier of the date on which (x) Agent or any Lender gives Borrower notice thereof, or (y) Borrower obtains knowledge of such default; or

9.5Other Indebtedness of Borrower.  Any Indebtedness of Borrower (i) shall be declared to be or shall become due and payable prior to the stated maturity thereof or (ii) shall not be paid as and when the same becomes due and payable; or any other event of default shall occur and be continuing under any other Indebtedness Instrument; or

9.6Amended and Restated RNF.  The breach by FCCC or FLBG of any term or provision of, or the occurrence of any event of default under, the Amended and Restated RNF or other agreement, instrument or document delivered in connection therewith, which breach or default is in the opinion of Agent, material, or any other such breach or default (other than such a material breach or default) occurs and is not cured within the time, if any, specified therefor therein or fifteen (15) days thereafter, if no such time is specified or such time is less than fifteen (15) days;

9.7Insolvency.  (i) Borrower, shall make an assignment for the benefit of creditors or a composition with creditors; or (ii) Borrower shall file a petition in bankruptcy, shall be adjudicated insolvent or bankrupt, shall petition or apply to any tribunal for the appointment of any receiver, liquidator, trustee or custodian of or for it or any of its Assets; or (iii) any application is made by any other Person for the appointment of any receiver, liquidator, trustee or custodian for Borrower or for any of the Assets of Borrower; or (iv) Borrower shall commence any proceedings relating to it under any bankruptcy, reorganization, arrangement, readjustment of debt, receivership, dissolution or liquidation law or statute of any jurisdiction, whether now or hereafter in effect; or (v) there shall be commenced against Borrower any such proceeding which shall remain undismissed for a period of sixty (60) days or more, or any order, judgment or decree approving the petition in any such proceeding shall be entered; or (vi) Borrower shall by any act or failure to act indicate its consent to, approval of or acquiescence in, any such proceeding or in the appointment of any receiver, liquidator, trustee or custodian of or for it or any of its Assets, or shall suffer any such appointment to exist; or (vii) Borrower shall take any action for the purpose of effecting any of the foregoing; or any court of competent jurisdiction shall assume jurisdiction with respect to any such proceeding or a receiver or trustee or other officer or representative of a court or of creditors, or any court, governmental officer or agency, shall under color of legal authority, take and hold possession of any substantial part of the property or Assets of Borrower.

9.8Pledge Agreement.  The breach by Borrower of any term or provision of, or the occurrence of any default under, the Pledge Agreement or other Loan Document (other than this Agreement) or other agreement, instrument or document delivered in connection therewith to which such Person is a party, which breach or default is in the opinion of Agent, material, or any other such breach or default (other than such a material breach or default) occurs and is not cured within the time, if any, specified therefor therein or fifteen days thereafter, if no such time is specified or such time is less than fifteen (15) days; or if the Pledge Agreement or Loan

Document is at any time not in full force and effect; or the Pledge Agreement shall fail to grant to Agent on behalf of Lenders the Liens (if any) intended to be created thereby; or

9.9Notice of Charge.  If a notice of any Charge is filed of record with respect to all or any of the Assets of Borrower; or

9.10Judgments.

(a)Any final non-appealable judgment for the payment of money in excess of $100,000 (after giving effect to any amount covered by insurance as to which the insurer shall not have denied or questioned its obligation to pay) shall be rendered against Borrower and the same shall remain in effect for a period of ten (10) days after entry of such judgment; or

(b)Final judgment for the payment of money in excess of $100,000 shall be rendered against Borrower and the same shall remain undischarged for a period of thirty (30) days during which execution shall not be effectively stayed or diligently contested in good faith by appropriate proceedings; or

(c)If for the purpose of obtaining judgment in any court it is necessary to convert a sum due from Borrower in the currency expressed to be payable herein (the “specified currency”) into another currency, the parties hereto agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures Agent could purchase the specified currency with other such currency at Agent’s New York branch on the Business Day that is on or immediately following the day on which final judgment is entered.  The obligations of Borrower in respect of any sum due to Lender or Agent hereunder shall, notwithstanding any judgment in a currency other than the specified currency, be discharged only to the extent that on the Business Day following receipt by Lender or Agent, as the case may be, of any sum adjudged to be so due in such other currency Lender or Agent as the case may be, may in accordance with normal banking procedures purchase the specified currency with such other currency.  If the amount of the specified currency so purchased is less than the sum originally due to Lender or Agent, as the case may be, in the specified currency, Borrower agrees, to the fullest extent it may effectively do so, as a separate obligation and notwithstanding any such judgment, to indemnify Lender or Agent, as the case may be, against such loss, and if the amount of the specified currency so purchased exceeds the sum originally due to Lender or Agent, as the case may be, in the specified currency, Lender or Agent, as the case may be, agrees to remit such excess to Borrower.

9.11Intentionally Omitted.

9.12Material Effect Defaults.  To the extent that the same does not constitute an Event of Default under any other provision of this Section 9, a default by Borrower shall occur under any agreement, document or instrument (other than this Agreement or any of the other Loan Documents) now or hereafter existing, to which Borrower is a party and the effect of such default could reasonably be expected to have a Material Adverse Effect; or

9.13Change in Control.  Any Equity Interests in Borrower are transferred by FLBG Corporation to any other Person; or

9.14Intentionally Omitted.

9.15Court Orders.  To the extent not otherwise constituting an Event of Default, if Borrower is enjoined, restrained or in any way prevented by court order from conducting all or any material part of its business or affairs and Borrower consents (by action, inaction or otherwise) to such order or such order remains in effect for a period of thirty (30) days; or

9.16Dissolution.  If Borrower, shall dissolve, fully liquidate or suspend or discontinue its business; then, and in any such event, and at any time thereafter, if any Event of Default shall then be continuing, Agent may (and shall, if instructed in writing by the Majority Lenders) by written notice to Borrower declare the principal of and accrued interest on the Loans of Borrower to be, whereupon the same shall forthwith become, due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by Borrower; provided that, if any Event of Default described in Section 9.7 shall occur with respect to Borrower, the result which would otherwise occur only upon the giving of written notice by Agent to Borrower as herein described shall occur automatically, without the giving of any such notice.

Section 10.GENERAL REPRESENTATIONS AND WARRANTIES AND RELATED COVENANTS.

In order to induce Lender to enter into this Agreement and to maintain the Loans Borrower makes the following representations, covenants and warranties, both as of the Execution Date and (after giving effect to the transactions contemplated hereby to occur on the Effective Date) as of the Effective Date (unless otherwise specified), which representations, covenants and warranties shall survive the execution and delivery of this Agreement and the other documents and instruments referred to herein:

10.1Organization.

(a)Borrower is and at all times hereafter shall be a limited liability company, duly organized and validly existing and in good standing under the laws of the State of Texas. Borrower has not qualified or been licensed to do business in any other state.

(b)Borrower is not a party to any Shareholder Agreements.

10.2Entity Power.

Borrower has the right, power and capacity and is duly authorized and empowered to enter into, execute, deliver and perform this Agreement and the other Loan Documents to which it is a party.

10.3Violation of Charter Documents.

The execution, delivery and/or performance by Borrower of this Agreement and the other Loan Documents to which it is a party and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate and shareholder action and none of

such execution, delivery, performance or consummation shall, by the lapse of time, the giving of notice or otherwise, constitute a violation of any Legal Requirement or a breach of any provision contained in the Charter Documents of Borrower, or contained in any agreement, instrument or document to which Borrower is now or hereafter a party or by which it or any of its Assets is or may become bound, other than agreements, instruments or documents that are immaterial to Borrower and the breach of which could not have a Material Adverse Effect.

10.4Enforceability.

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

10.5Ownership.

(a)FLBG Corporation owns one hundred percent (100%) of the Equity Interests of Borrower.

(b)Borrower has no Subsidiaries.

10.6Fictitious Names.

Borrower has not used any fictitious names;

10.7Title.

(a)There are no Liens relating to the Collateral on the Execution Date and Effective Date except those granted to Collateral Agent to secure the FLBG2 Loans and those arising from the pledge executed by Borrower to secure the obligations under the Amended and Restated RNF.

(b)Borrower shall at all times have indefeasible title to and ownership of all of its Assets except to the extent the failure to do so could not reasonably be expected to have a Material Adverse Effect.

10.8Intentionally Omitted.

10.9Proceedings.  There are no actions or proceedings which are pending or threatened against Borrower which could reasonably be expected to have a Material Adverse Effect.

10.10Government Contracts.  Borrower is not a party to any government contracts.

10.11Licenses.  Borrower has no licenses, patents, copyrights, trademarks and trade names.

10.12Intentionally Omitted.

10.13Charge; Restrictions.  On the Execution Date and on the Effective Date, Borrower is not subject to (nor are any of Borrower’s Assets otherwise subject to) any Charge.

10.14Compliance with Laws.  Except for matters which could not result in a Material Adverse Effect, Borrower is not in violation of any applicable statute, regulation, order or ordinance of the United States of America, of any state, city, town, municipality, county or of any other jurisdiction, or of any agency thereof, including the Federal Reserve Board, in any respect.

10.15Compliance with Indebtedness Instruments.  Borrower is not in default under any Indebtedness Instrument or any other material agreement to which it is a party.

10.16Financials.  The Financial Statements delivered by Borrower to Agent, fairly and accurately present the Assets, liabilities and financial conditions and results of operations of Borrower, as of and for the periods ending on such dates and have been prepared in accordance with GAAP applied on a basis consistently followed in all material respects throughout the periods involved.

10.17Tax Returns.  Borrower has filed or caused to be filed all tax returns which are required to be filed, and has paid all Charges shown to be due and payable on said returns or on any assessments made against it or any of its property, and all other Charges imposed on it or any of its properties by any Governmental Authority.

10.18Intentionally Omitted.

10.19No Indebtedness.  Borrower has no Indebtedness except for the FLBG2 Loans.

10.20Intentionally Omitted.

10.21No Liability on Lenders or Agent.  None of the execution, delivery and performance by Borrower of this Agreement and/or the other Loan Documents will impose on or subject any of the Lenders or the Agent to any liability, whether fixed or contingent, in respect of any Environmental Law, whether relating to the operation of Borrower’s business or otherwise.  None of the Lender’s or the Agent’s exercise of any of the rights or remedies described in this Agreement or in any of the other Loan Documents shall constitute a breach of any provision contained in any agreement, instrument or document concerning the assignment or license of, or the payment of royalties for, any patents, patent rights, trade names, trademarks, trade secrets, know-how, copyrights or any other form of intellectual property now or at any time or times hereafter protected as such by any applicable law.

10.22Intentionally Omitted.

10.23  Real Property; Environmental Issues.  Borrower does not own or lease or at any time has owned or leased any real property.  Borrower has not received a summons, citation, notice, or directive from the Environmental Protection Agency or any other Governmental

Authority concerning any action or omission resulting in the releasing, or otherwise disposing of hazardous waste or hazardous substances into the environment with respect to any real property.

10.24Intentionally Omitted.

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

10.26Qualification.

(a)Solely by reason of (and without regard to any other activities of Lenders and/or Agent in any state in which Assets of Borrower are located) the entering into and performance of this Agreement, the Note, the other Loan Documents and the documents, instruments and agreements delivered in connection therewith by Lender and/or Agent will not constitute doing business by Lender and/or Agent in any of such states or result in any liability of Lender and/or Agent for taxes or other governmental charges; and qualification by Lender and/or Agent to do business in such jurisdiction is not necessary in connection with, and the failure to so qualify will not affect, the enforcement of, or exercise of any rights or remedies under, any of such documents.

(b)No “business activity,” “doing business” or similar report or notice is required to be filed by the Lender and/or Agent in any such jurisdiction in connection with the Loans or the transactions contemplated by this Agreement or any other Loan Document, and the failure to file any such report or notice will not affect the enforcement of, or the exercise of any rights or remedies under, this Agreement or any of the other Loan Documents.

10.27Federal Reserve Margin Regulations; Use of Proceeds.

(a)Borrower is not engaged principally, or as one of its important activities, in the business of extending credit 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).  No part of the proceeds of any Loan will be used to purchase or carry any such margin stock or to extend credit to others for the purpose of purchasing or carrying any such margin stock.

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

10.28Intellectual Property.  Borrower has no patents, trademarks, registered copyrights, or trade names.  If the Borrower at any time acquires, establishes, invents or develops any patent,

trademark, copyright or trade name that is or becomes material to such Person’s business or operations, it will promptly notify Agent of same and take such action as Agent shall request to grant to Collateral Agent or Agent on behalf of Lender a perfected, first priority security interest in the same.

10.29Compliance with ERISA.  Borrower does not have and at no time shall have any employees.

10.30The Pledge Agreement.

(a)The Pledge Agreement grants a Lien in the Collateral which (i) will constitute a valid and enforceable security interest under the Uniform Commercial Code of the State (x) in which the Collateral is located and (y) by which the Pledge Agreement is governed (as applicable, the “UCC”), (ii) will be entitled to all of the rights, benefits and priorities provided by the UCC, and (iii) when such Pledge Agreement or financing statements with respect thereto are filed and recorded as required by the UCC, will be superior and prior to the rights of all third Persons now existing or hereafter arising whether by way of mortgage, pledge, lien, security interest, encumbrance or otherwise, except for Permitted Liens, and will provide Agent and Lender the first priority.  All such action as is necessary in law has been taken, or prior to the Effective Date will have been taken, to establish and perfect the security interest of Agent and Lender in the Collateral and to entitle Lender or Agent on behalf of Lender to exercise the rights and remedies provided in the Pledge Agreement and the UCC, as applicable, and no filing, recording, registration or giving of notice or other action is required in connection therewith except such as has been made or given or will have been made or given prior to such dates.  All filing and other fees and all recording or other tax payable with respect to the recording of the Pledge Agreement and UCC financing statements have been paid or provided for.

(b)In furtherance (and not in limitation) of Section 10.30(a), after giving effect to the Pledge Agreement, Borrower will have granted Collateral Agent a Lien of the first priority on the FLBG2 Collateral.

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

10.32Fee Agreements.  Borrower is not a party to any Fee Agreement.

10.33Intentionally Omitted.

Section 11.AGENT.

11.1Appointment.  Lender hereby irrevocably appoints Bank of Scotland plc, acting through its New York branch, to act as Agent hereunder and as Collateral Agent, subject to the Collateral Agency Agreement (in such capacity, the “Collateral Agent”), “Assignee” and “Secured Party” (or in any other similar representative capacity designated in the Pledge Agreement) under any Loan Documents.  Lender hereby irrevocably authorizes, and each holder of any Note by the acceptance of such Note shall be deemed irrevocably to authorize, Agent to take such action on its behalf under the provisions of this Agreement, the Notes, the Pledge

Agreement, the other Loan Documents and any other instruments and agreements referred to therein and to exercise such powers thereunder as are specifically delegated to or required of it by the terms thereof and such other powers as are reasonably incidental thereto; provided that, Agent shall not take any action to realize upon any security interest in any of the Collateral, or release any substantial portion of the Collateral, without the consent of the Majority Lenders.  Agent may perform any of its duties under any of the Loan Documents by or through its agents or employees.

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

11.3Lack of Reliance.  Independently and without reliance on Agent, Lender to the extent it deems appropriate has made and shall continue to make (i) its own independent investigation of the financial condition and affairs of the Borrower in connection with the making and the continuance of the Loans hereunder and the taking or not taking of any action in connection herewith, (ii) its own appraisal of the creditworthiness of the Borrower and (iii) its own independent investigation and appraisal of the Collateral; and, except as expressly provided in the Loan Documents, Agent shall have no duty or responsibility, either initially or on a continuing basis, to provide Lender with any credit or other information with respect thereto, whether coming into its possession before the date hereof or at any time or times thereafter.  Agent shall not be responsible to Lender for any recitals, statements, representations or warranties herein or in any certificate or other document delivered in connection herewith or for the authorization, execution, effectiveness, genuineness, validity, enforceability, perfection, collectibility, or sufficiency of any of the Loan Documents, the financial condition of the Borrower or the condition of any of the Collateral, or be required to make any inquiry concerning either the performance or observance of any of the terms, provisions or conditions of any of the Loan Documents, the financial condition of the Borrower or the existence or possible existence of any Event of Default or Default.

11.4Certain Rights.  If Agent requests instructions from Lender or Majority Lenders with respect to any interpretation, act or action (including failure to act in connection with this Agreement or any of the other Loan Documents) Agent shall be entitled to refrain from such act or taking such actions unless and until it shall have received instructions from Lender or the Majority Lenders, as the case may be; and Agent shall not incur liability to any Person by so refraining.  Without limiting the foregoing, Lender shall not have any right of action whatsoever

against Agent as a result of Agent acting or refraining from acting hereunder or under any of the other Loan Documents in accordance with the instructions of the Majority Lenders (as to matters requiring the consent of the Majority Lenders) or all Lenders (as to matters requiring the consent of all Lenders).  Agent shall be fully justified in failing or refusing to take any action under any Loan Document unless, if it requests, it shall first be indemnified to its satisfaction by Lender against any and all liability and expense which may be incurred by it by reason of taking, continuing to take or not taking any such action.

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

11.6Indemnification.  To the extent Agent is not reimbursed or indemnified by Borrower, Lender will reimburse and/or indemnify Agent, in proportion to the aggregate amount of their respective Loans outstanding under this Agreement, for and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred or sustained by or asserted against Agent, acting pursuant hereto or any of the other Loan Documents in its capacity provided for in this Section 11, in any way relating to or arising out of this Agreement, or any of the other Loan Documents, provided, however, that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from Agent’s gross negligence or willful misconduct.  The obligations of Lender under this Section 11.6 shall survive the repayment of the Notes and the Loans and the termination of this Agreement and the other Loan Documents.

11.7Agent, Individually.  With respect to its obligations under this Agreement, the Loans made by it and any Note issued to or held by it, Agent shall have and may exercise the same rights and powers hereunder and is subject to the same obligations and liabilities as and to the extent set forth herein for any other Lender or holder of a Note.  The terms “Lender”, “holders of Notes” or any similar terms shall, unless the context clearly otherwise indicates, not exclude Agent in its individual capacity as a Lender or holder of a Note if the same becomes the case.  Agent may accept deposits from, lend money to, and generally engage in any kind of banking, trust or other business with the Loan Parties and their Subsidiaries as if it were not acting pursuant hereto, and may accept fees and other consideration from the Loan Parties and their Subsidiaries for services as Agent in connection with this Agreement and the other Loan Documents and for services otherwise than as Agent without having to account for the same to Lenders.

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

11.9Resignation.  Agent may resign at any time from the performance of all its functions and duties hereunder and under the other Loan Documents by giving thirty (30) days prior written notice to Borrower and Lender.  Such resignation shall take effect upon the expiration of such 30-day period or upon the earlier appointment of a successor.  Notwithstanding any such resignation, the provisions of Sections 11.6 and 12.3 shall inure also to the benefit of each Agent who has so resigned with respect to the period it served as Agent.  In case of the resignation of Agent, the Majority Lenders, with the prior consent of Borrower, which consent may not be unreasonably withheld, may appoint a successor by a written instrument signed by the Majority Lenders.  Any successor shall execute and deliver to Agent an instrument accepting such appointment, and thereupon such successor, without further act, shall become vested with all the estates, properties, rights, powers, duties and trusts of Agent hereunder and with like effect as if originally named as “Agent” herein and therein, and upon request, the predecessor Agent shall take all actions and execute all documents necessary to give effect to the foregoing.  In the event Agent’s resignation becomes effective at a time when no successor has been named, all notices, other communications and payments hereunder required to be given by or to Agent shall be sufficiently given if given by the Majority Lenders (or all Lenders, if the consent of all Lenders is required therefor hereunder) or to each Lender, as the case may be.  In such event, all powers specifically delegated to Agent may be exercised by the Majority Lenders and the Majority Lenders shall be entitled to all rights of Agent hereunder.

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

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

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

Section 12.MISCELLANEOUS.

12.1Calculations and Financial Data.  Calculations hereunder (including, without limitation, calculations used in determining, or in any certificate of Borrower delivered reflecting compliance by Borrower with the provisions of this Agreement) shall be made and financial data required hereby shall be prepared both as to classification of items and as to amount in

accordance with GAAP, consistent with the audited Financial Statements described in Section 10.16.

12.2Amendment and Waiver.  Except as otherwise provided, no provision of any of the Loan Documents may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the Majority Lenders (or Agent on their behalf) and, if Borrower is a party thereto, Borrower, provided, however, that the written consent of Agent shall also be required to change, waive, discharge or terminate provisions of Section 11; and provided, further, that without the consent of all of Lenders (or Agent on their behalf) no change, waiver, discharge or termination may be made that would increase the amount of any Loans of any Lender, decrease the principal of any Loan; decrease the interest rate payable on any Loan; decrease the amount of any fee; extend the Maturity Date of any Loan; change the definition of “Majority Lenders” or modify this Section 12.2.  Any such change, waiver, discharge or termination shall be effective only in the specific instance and for the specific purposes for which made or given.

12.3Expenses; Indemnification.

(a)Whether or not the transactions hereby contemplated shall be consummated, Borrower agrees to pay all out-of-pocket costs and expenses of (x) Agent incurred in connection with the preparation, execution, delivery, negotiation administration, filing and recording of, and (y) Agent and Lender incurred in connection with the amendment (including any waiver or consent) or modification of (including any amendment, waiver, consent or modification at any time requested by Borrower, whether or not same is finalized or executed), any failure of Borrower to perform or observe any provision of, and enforcement of or preservation of any rights under, this Agreement, the other Loan Documents, the making and repayment of the Loans, and the payment of all interest and fees, including, without limitation, (A) the fees and expenses of Sullivan & Worcester LLP, counsel for Agent, and any special or local counsel retained by Agent or Lender, and with respect to enforcement, the reasonable fees and expenses of counsel for Agent or Lender, (B) the reasonable fees and expenses of accountants, other consultants, appraisers and other professionals retained by Agent in connection with the transactions contemplated hereunder, and (C) printing, travel, title insurance, mortgage recording, filing, communication and signing taxes and costs.

(b)Borrower agree to pay, and to save Agent and Lender harmless from (x) all present and future stamp, filing and other similar taxes, fees or charges (including interest and penalties, if any), which may be payable in connection with the Loan Documents or the issuance of the Note or any modification of any of the foregoing, and (y) all finder’s and broker’s fees in connection with the transactions contemplated by this Agreement or the other Loan Documents.

(c)Borrower agree to indemnify, pay and hold harmless Agent, Lender, any Lender Assignee and each holder of a Note and their respective present and future officers, directors, employees and agents (collectively, the “Indemnified Parties”) from and against all liability, losses, damages and expenses (including, without limitation, legal fees and expenses) arising out of, or in any way connected with, or as a result of (i) the execution and delivery of this Agreement or the other Loan Documents or the documents or transactions contemplated hereby and thereby or the performance by the parties hereto or thereto of their respective

obligations hereunder and thereunder or relating thereto; or (ii) any claim, action, suit, investigation or proceeding (in each case, regardless of whether or not the Indemnified Party is a party thereto or target thereof) in any way relating to Borrower, or any Collateral or any Affiliate of Borrower or any Subsidiary of any such Affiliate or in any way relating to any of the foregoing Persons, or any Affiliate of any of the foregoing in respect of this Agreement, any other Loan Documents or any other document or transaction in connection herewith or therewith or relating hereto or thereto; or (iii) any actual or alleged violation by Borrower, any Affiliate of Borrower or any Subsidiary of any of the foregoing Persons (or any predecessor in interest of any of them) of any Environmental Law; provided that, Borrower shall not be liable to an Indemnified Party for any portion of such liabilities, losses, damages and expenses sustained or incurred as a direct result of the gross negligence or willful misconduct of Agent, Lender or such Indemnified Party.  Lender shall endeavor to give Borrower notice of any material claim, action, suit or proceeding (if not restricted by applicable law, regulation or Government Authority from so doing or unless the same would be inconsistent with a request from a Government Authority) referred to in clause (ii) which has been filed against Lender within a reasonable time after the loan officer of such Lender with responsibility for this Agreement becomes aware of the same, but no failure to give any such notice shall affect, or relieve Borrower of, any of Borrower’s obligations under this Section 12.3 or under any other provision of this Agreement or any other Loan Document or result in any obligation or liability of Agent or any Lender to Borrower or other Person.

(d)All obligations provided for in this Section 12.3 and Sections 5.2, 5.4 and 11.6 shall survive any termination of this Agreement and the Loans and the payment in full of the Obligations.

12.4Benefits of Agreement; Descriptive Headings.

(a)This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors and assigns, and, in particular, shall inure to the benefit of the holders from time to time of the Notes; provided, however, that Borrower may not assign or transfer any of its rights or obligations hereunder without the prior written consent of Agent and Lender and any such purported assignment or transfer shall be void.  In furtherance of the foregoing, each Lender shall be entitled at any time to grant participations in the whole or any part of its rights and/or obligations under this Agreement, the Loan Documents or any Loan or Note to any Person; provided, however, that no Lender Assignee shall be permitted by the terms of its participation agreement with the relevant Lender to require such Lender to take or omit to take any action hereunder except to the extent that if Lender Assignee were a Lender hereunder, its consent to taking or omitting to take such action would be required by the terms of the second proviso of Section 12.2 hereto.  No such participation pursuant to this Section 12.4(a) shall relieve any Lender from its obligations hereunder and Borrower need deal solely with Agent and Lenders with respect to waivers, modifications and consents to this Agreement, the Loan Documents or the Notes.  Any such participant is referred to in this Agreement as a “Lender Assignee”.  Borrower agrees that the provisions of Sections 5.4 and 12.3 shall run to the benefit of each Lender Assignee and its participations or interests herein, and any Lender may enforce such provisions on behalf of any such Lender Assignee; provided, however, that if any Lender grants a participation in the whole or any part of its rights and/or obligations pursuant to this Section 12.4(a), then the amounts that

Borrower is required to pay pursuant to this Agreement (including, without limitation, additional amounts made pursuant to Section 5.4) shall not exceed the amounts that Borrower would have been required to pay to such Lender pursuant to this Agreement had Lender not granted such participation.  Borrower hereby further agrees that any such Lender Assignee may, to the fullest extent permitted by applicable law, exercise the right of setoff with respect to such participation (and in an amount up to the amount of such participation) as fully as if such Lender Assignee were the direct creditor of Borrower.  Upon the grant of participation in accordance with the foregoing, Borrower shall execute such documents and do such acts as any Lender may reasonably request to effect such assignment.  Any Lender may furnish any information concerning Borrower in its possession from time to time to Lender Assignees (including prospective Lender Assignees) and prospective Purchasing Lenders.  Each Lender shall notify Borrower of any participation granted by it pursuant to this Section 12.4(a) but the approval of Borrower shall not be required for any such participation.  Borrower shall not be responsible for any due diligence costs or legal expenses of such Lender Assignees in connection with their entering into such participation.

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

(c)Any Lender may at any time assign to any other Lender or any affiliate of any Lender, or (subject to obtaining the prior written consent of Borrower), such consent not to be unreasonably withheld) to one or more additional banks or financial institutions (“Purchasing Lenders”), all or any part of its Loans and corresponding Note pursuant to a Transfer Supplement (“Transfer Supplement”), the form and substance satisfactory to Agent; provided, however, that each such assignment shall be for an amount not less than $1,000,000 (or, if Lender’s Loan at the time is less, such amount) and integral multiples of $500,000 above such amount, or such other amount or multiple to which Agent may consent.  Upon (i) such execution of such Transfer Supplement, (ii) delivery of an executed copy thereof to Borrower and Agent, (iii) payment by such Purchasing Lender to such transferor Lender of an amount equal to the purchase price agreed between such transferor Lender and such Purchasing Lender, (iv) payment by the Purchasing Lender to Agent of a $3,000 processing fee, and (v) any consent of Borrower required by the first sentence of this Section 12.4(c), such Purchasing Lender shall for all purposes be a Lender party to this Agreement and shall have all the rights and obligations of a Lender under this Agreement to the same extent as if it were an original party hereto and thereto with the percentage share of the Loans set forth in Schedule I to such Transfer Supplement, and no further consent or action by Borrower, Lender or Agent shall be required.  Such Transfer Supplement shall be deemed to amend this Agreement to the extent, and only to the extent, necessary to reflect the addition of such Purchasing Lender and the resulting adjustment of the percentage of the Note and Loans (and related rights and obligations) held by the transferor Lender and the Purchasing Lender arising from the purchase by such Purchasing Lender of all or a portion of the rights and obligations of such transferor Lender pursuant to the Transfer Supplement.  Upon the consummation of any transfer to a Purchasing Lender pursuant to this Section 12.4(c), the transferor Lender, Agent and Borrower shall make appropriate arrangements so that, if required, a replacement Note or Notes (dated the same date as the Note or Notes being replaced) is issued to such Purchasing Lender and a new Note or Notes (dated the same date as the Note or Notes being replaced) or, as appropriate, a replacement Note or Notes (dated the

same date as the Note or Notes being replaced) is issued to such Purchasing Lender, in each case in principal amounts reflecting their outstanding Loans, as adjusted pursuant to such Transfer Supplement.

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

12.5Notices, Requests, Demands, etc.  Except as otherwise expressly provided herein, all notices, requests, demands or other communications to or upon the respective parties hereto shall be deemed to have been duly given or made when delivered if sent by Federal Express or other similar overnight delivery service, or three (3) Business Days after mailing (when mailed, postage prepaid, by registered or certified mail, return receipt requested) or (in the case of telex, telegraphic, telecopier or cable notice) when delivered to the telex, telegraph, telecopier or cable company, or (in the case of telex or telecopier notice sent over a telex or telecopier owned or operated by a party hereto or electronic mail) when sent; in each case addressed as follows, except that notices and communications to Agent pursuant to Section 2 and Section 9 shall not be effective until received by Agent: (i) if to Agent, at the Closing Office, (ii) if to a Lender, at the address specified with its signature below or (if a Purchasing Lender) on the applicable Transfer Supplement, and (iii) if to Borrower, at its address specified with its signature below (Attention: President), or to such other addresses as any of the parties hereto may hereafter specify to the others in writing, provided that communications with respect to a change of address shall be deemed to be effective when actually received.

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

12.7Counterparts; Telecopies.  This Agreement and the other Loan Documents may be executed in any number of counterparts, and by the different parties hereto and thereto on the same or separate counterparts, each of which when so executed and delivered shall be deemed to be an original; all the counterparts for each such Loan Document shall together constitute one and the same agreement.  Telecopied signatures hereto and to the other Loan Documents shall be of the same force and effect as an original of a manually signed copy.

12.8Waiver; Remedies Cumulative; Payment of Claims; Full Recourse.

(a)No failure or delay on the part of Agent or Lender in exercising any right, power or privilege under this Agreement or any other Loan Document, and no course of dealing between Borrower and Agent or Lender shall operate as a waiver thereof; nor shall any single or

partial exercise of any right, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege.  No notice to or demand on Borrower shall entitle Borrower to any other or further notice or demand in similar or other circumstances or constitute a waiver of the right of Agent or Lender to any other or further action in any circumstances without notice or demand.

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

(c)In furtherance and not in limitation of the other rights and remedies of Agent and the Lenders, upon the occurrence of an Event of Default or Default, Agent, in its sole and absolute discretion, without waiving or releasing any covenant, agreement or other obligation of Borrower or any Default or Event of Default, may at any time or times hereafter, but shall be under no obligation to, pay, acquire and/or accept an assignment of any security interest, lien, encumbrance or claim asserted by any Person against the Assets of Borrower.  All sums paid by Agent in respect thereof and all reasonable costs and expenses (including, without limitation, fees and expenses of counsel to Agent) relating thereto incurred by Agent or for which Agent becomes obligated on account thereof shall be part of the Obligations payable by Borrower to Agent on demand and any amount not paid on demand shall bear interest at the Past-Due Rate.

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

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

12.10Recoveries; Pro Rata Sharing.

(a)Any Recoveries (after deduction and payment of all expenses and costs permitted by this Agreement, the Pledge Agreement or applicable law) shall be applied pro rata against the Loans held by Lenders until satisfaction in full of all amounts due thereunder.

(b)Lenders agree among themselves that, with respect to all sums received by Lenders applicable to the payment of the principal of or interest on the Notes (except as otherwise provided in Section 5.4 or 5.5), equitable adjustment will be made between Lenders so that, in effect, all such sums shall be shared ratably by each of Lenders (in accordance with the outstanding principal amount of their respective applicable Loans) whether received by voluntary payment, by realization upon security, by the exercise of the right of set-off or banker’s lien, by counterclaim or cross-action or by the enforcement of any or all of the Notes or otherwise.  If any Lender receives any payment on its Notes of a sum or sums in excess of its pro

rata portion (except as otherwise provided in Section 5.4 or 5.5), then such Lender receiving such excess payment shall purchase for cash from the other Lenders with outstanding Loans to Borrower an interest in their Note or Notes in such amount as shall result in a ratable participation by all of Lenders in the aggregate unpaid amount of applicable Notes then outstanding; provided, however, that if all or any portion of such excess payment is thereafter recovered by such Lender, the purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest.  Borrower hereby agrees that any Lender so purchasing a participation from another Lender pursuant to this Section 12.10(b) may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of setoff) with respect to such participation as fully as if such Lender were the direct creditor of Borrower in the amount of such participation.  The foregoing Section 12.10(b) shall in all events be subject to the Subordination Agreement.

12.11Jurisdiction.  BORROWER HEREBY AGREES THAT ANY LEGAL ACTION OR PROCEEDING AGAINST IT WITH RESPECT TO THIS AGREEMENT, THE NOTES OR ANY OF THE OTHER LOAN DOCUMENTS OR THE DOCUMENTS DELIVERED IN CONNECTION HEREWITH OR THEREWITH MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK AS AGENT OR ANY LENDER MAY ELECT, AND, BY EXECUTION AND DELIVERY HEREOF, BORROWER AND FLBG ACCEPTS AND CONSENTS FOR ITSELF AND IN RESPECT TO ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS AND AGREES THAT SUCH JURISDICTION SHALL BE EXCLUSIVE, UNLESS WAIVED BY AGENT AND THE MAJORITY LENDERS IN WRITING, WITH RESPECT TO ANY ACTION OR PROCEEDING BROUGHT BY IT AGAINST AGENT OR ANY LENDER AND ANY QUESTIONS RELATING TO USURY.  BORROWER AGREES THAT SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK SHALL APPLY TO THE LOAN DOCUMENTS AND WAIVES ANY RIGHT TO STAY OR TO DISMISS ANY ACTION OR PROCEEDING BROUGHT BEFORE SAID COURTS ON THE BASIS OF FORUM NON CONVENIENS.  BORROWER HEREBY IRREVOCABLY CONSENTS THAT ALL PROCESS SERVED OR BROUGHT AGAINST BORROWER WITH RESPECT TO ANY SUCH PROCEEDING IN ANY SUCH COURT IN NEW YORK SHALL BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT IF SENT BY REGISTERED MAIL, OR (IF PERMITTED BY LAW) BY FEDERAL EXPRESS OR OTHER SIMILAR OVERNIGHT COURIER SERVICE, TO SUCH LOAN PARTY AT ITS ADDRESS SET FORTH BELOW ITS SIGNATURE TO THIS AGREEMENT (OR SUCH OTHER ADDRESS AS AGENT IS NOTIFIED OF IN ACCORDANCE WITH THE PROVISIONS OF SECTION 12.5).  NOTHING HEREIN SHALL AFFECT THE RIGHT OF AGENT OR LENDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF AGENT OR LENDER TO BRING PROCEEDINGS AGAINST ANY LOAN PARTY IN THE COURTS OF ANY OTHER JURISDICTION.

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

12.13Right of Set-off.  In addition to any rights now or hereafter granted under applicable law or otherwise and not by way of limitation of any such rights, upon the occurrence of an Event of Default Lender is hereby authorized at any time or from time to time, without notice to Borrower or to any other Person, any such notice being hereby expressly waived, to set-off and to appropriate and apply any and all deposits (general or special, time or demand, provisional or final) and any other indebtedness at any time held or owing by Lender to or for the credit or the account of Borrower against and on account of the obligations and liabilities of Borrower now or hereafter existing under any of the Loan Documents irrespective of whether or not any demand shall have been made thereunder and although said obligations, liabilities or claims, or any of them, shall be contingent or unmatured.  Lender or Lenders exercising any rights granted under this Section 12.13 shall thereafter notify the Borrower and Agent of such action; provided that, the failure to give such notice shall not affect the validity of such set-off and application.

12.14No Third Party Beneficiaries.  This Agreement is solely for the benefit of Agent, Lenders and Borrower and the respective successors and assigns of Agent and Lender and nothing contained herein shall be deemed to confer upon anyone other than Borrower any right to insist on or to enforce the performance or observance of any of the obligations of Agent or Lenders contained herein.  All conditions to the obligations of Lender to make Loans hereunder are imposed solely and exclusively for the benefit of Lender and its successors and assigns and no other Person shall have standing to require satisfaction of such conditions in accordance with their terms and no other Person shall under any circumstances be deemed to be beneficiary of such conditions.

12.15Survival; Integration.

(a)Each of the representations, warranties, terms, covenants, agreements and conditions contained in this Agreement shall specifically survive the execution and delivery of this Agreement and the other Loan Documents and the making of the Loans and shall, unless otherwise expressly provided, continue in full force and effect until the Loans together with interest thereon, the fees and compensation of Agent, and all other sums payable hereunder or thereunder have been indefeasibly paid in full.

(b)This Agreement, together with the other Loan Documents, comprises the complete and integrated agreement of the parties on the subject matter hereof and thereof and supersedes all prior agreements, written or oral, on the subject matter hereof and thereof.  In the event of any direct conflict between the provisions of this Agreement and those of any other Loan Document, the provisions of this Agreement shall control and govern; provided that, the inclusion of supplemental rights or remedies in favor of Agent or Lenders in any other Loan Document shall not be deemed a conflict with this Agreement.  Each Loan Document was drafted with the joint participation of the respective parties thereto and shall be construed neither against nor in favor of any party, but rather in accordance with the fair meaning thereof.

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

12.17No Usury.  It is expressly stipulated and agreed to be the intent of Agent, Lender and Borrower to comply at all times with applicable usury laws.  If at any time such laws would ever render usurious any amount called for under any of the Loan Documents, then it is the express intention of the parties hereto that such excess amount be immediately credited on the applicable Note, or if the Note has been fully paid, refunded by Lender (pro rata in accordance with their respective principal amount of the affected Loans), to Borrower (and Borrower shall accept such refund) and the provisions hereof and thereof be immediately deemed to be reformed to comply with the then applicable laws, without the necessity of the execution of any further documents, but so as to permit the recovery to the fullest amount otherwise called for hereunder and thereunder.  Any such crediting or refunding shall not cure or waive any default by Borrower under the Loan Documents.  If at any time following any such reduction to the interest rate payable by Borrower there remains unpaid any principal amounts under the Note and the maximum interest rate permitted by applicable law is increased or eliminated, then the interest rate payable to Lender shall be readjusted, to the full extent permitted by applicable law, so that the total amount of interest thereunder payable by Borrower to Lender shall be equal to the amount of interest which would have been paid by Borrower without giving effect to applicable usury laws.  Borrower agrees, however, that in determining whether or not any interest payable under the Note or any of the other Loan Documents exceeds the highest rate permitted by law, any non-principal payment (except payments specifically stated in the Note or such other Loan Documents to be “interest”), including fees and commissions and all other sums payable hereunder or thereunder or in connection herewith or therewith, shall be deemed, to the full extent permitted by law, to be an expense, fee, premium or penalty rather than interest.

12.18Waiver of Jury Trial.  EACH OF BORROWER, AGENT AND LENDER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OF BORROWER, AGENT OR LENDER.  THIS PROVISION IS A MATERIAL INDUCEMENT FOR AGENT AND LENDER ENTERING INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.

12.19Waiver by Borrower.  EXCEPT AS OTHERWISE PROVIDED FOR IN THIS AGREEMENT OR REQUIRED BY LAW, BORROWER WAIVES (A) PRESENTMENT, DEMAND AND PROTEST, NOTICE OF PROTEST, NOTICE OF PRESENTMENT, DEFAULT, NON-PAYMENT, MATURITY, RELEASE, COMPROMISE, SETTLEMENT, EXTENSION OR RENEWAL OF ANY OR ALL COMMERCIAL PAPER, ACCOUNTS, CONTRACT RIGHTS, DOCUMENTS, INSTRUMENTS, CHATTEL PAPER AND GUARANTIES AT ANY TIME HELD BY ANY OF LENDERS AND/OR AGENT ON WHICH BORROWER MAY IN ANY WAY BE LIABLE; (B) ALL RIGHTS TO NOTICE AND A HEARING PRIOR TO AGENT’S TAKING POSSESSION OR CONTROL OF, OR TO REPLEVY, ATTACHMENT OR LEVY UPON THE COLLATERAL OR ANY BOND OR SECURITY WHICH MIGHT BE REQUIRED BY ANY COURT PRIOR TO ALLOWING ANY OF LENDERS AND/OR AGENT TO EXERCISE ANY OF ITS RESPECTIVE REMEDIES; AND (C) THE BENEFIT OF ALL VALUATION, APPRAISEMENT, EXTENSION AND EXEMPTION LAWS.

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

12.21Waiver of Claims; Release by Borrower.

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

(b)Borrower hereby acknowledges, agrees and affirms, as of the Execution Date and as of the Effective Date, that it possesses no claims, defenses, offsets, recoupment or counterclaims of any kind or nature against or with respect to the enforcement of this Agreement, any other Loan Document or any amendments thereto, or any of the Existing Credit Agreements, as amended, or documents delivered pursuant thereto (collectively, the “Claims”), nor does Borrower now have knowledge of any facts that would or might give rise to any Claims.  If facts now exist which would or could give rise to any Claim against or with respect to the enforcement of this Agreement or any other Loan Document, as may have been amended by the amendments thereto, or any of the Existing Credit Agreements, as amended, or documents delivered pursuant thereto, Borrower hereby unconditionally, irrevocably and unequivocally waives and fully releases any and all such Claims as if such Claims were the subject of a lawsuit, adjudicated to final judgment from which no appeal could be taken and therein dismissed with prejudice.

12.22Confidentiality.  Agent and Lender, severally and with respect to itself only, covenants and agrees that any information obtained by Agent or such Lender pursuant to this Agreement shall be held in confidence (it being understood that documents provided to Agent hereunder may in all cases be distributed by Agent to Lender) except that Agent or Lender may disclose such information (i) to its officers, directors, employees, agents, counsel, accountants, auditors, advisors or representatives, (ii) to the extent such information has become available to the public other than as a result of a disclosure by or through Agent or Lender, (iii) to the extent such information was available to Agent or Lender in a capacity other than Agent or Lender hereunder or on a nonconfidential basis prior to its disclosure to Agent or Lender hereunder, (iv) with the consent of Borrower, (v) to actual or prospective Lender Assignees or Purchasing Lenders or (vi) to the extent Agent or Lender should be (A) required in connection with any legal or regulatory proceeding or (B) requested by any Government Authority to disclose such information.

Section 13.FINAL AGREEMENT.

THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES HERETO WITH RESPECT TO THE MATTERS COVERED HEREBY AND THEREBY AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.

THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

Section 14.Limitation on Recourse.  Notwithstanding anything to the contrary contained in this Agreement, the Note or any of the other Loan Documents, the recourse of Agent, Collateral Agent and Lenders under and with respect to the Loan Documents shall be limited solely to the Borrower, the Collateral and all other assets now or hereafter owned by Borrower or in which Borrower has an interest, and neither FLBG Corporation, FCCC, FH Partners, FCFC, any guarantors under the Amended and Restated RNF, nor any of the Affiliates of any such Persons other than Borrower shall have any other liability to Agent or Lender under or with respect to the FLBG2 Loans or the Loan Documents, whether directly or indirectly, whether by contract or by operation of law and whether in their respective capacities as a member of Borrower or otherwise.

Section 15.USA Patriot Act Notice.  Each Lender and Agent (for itself and not on behalf of any Lender) hereby notifies Borrower that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (as amended, the “Patriot Act”), it is required to obtain, verify and record information that identifies Borrower, which information includes the name and address of Borrower and other information that will allow such Lender or Agent, as applicable, to identify Borrower in accordance with the Patriot Act.

[remainder of page intentionally left blank]

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

FLBG2 HOLDINGS LLC

a Texas limited liability company, as Borrower

By:

Title:

6400 Imperial Drive (delivery only)

Waco, Texas 76710

P.O. Box 8216 (mail)

Waco, Texas 76714-8216

254-761-2953 (telecopier)

jholmes@fcfc.com (electronic mail)

BOS (USA) INC.

a Delaware corporation, as Lender

By:

Title:

1095 Avenue of the Americas

35th Floor

New York, New York 10036

212-682-0764 (telecopier)

(adrian.Knowles@lbusa.com)

[signature page to Reducing Note Facility Agreement]

BANK OF SCOTLAND PLC, acting through its New York branch, as Collateral Agent and Agent

By:

Title:

1095 Avenue of the Americas

35th Floor

New York, New York 10036

212-682-0764 (telecopier)

(adrian.Knowles@lbusa.com)

FLBG2 REDUCING NOTE FACILITY ANNEX I

DEFINITIONS

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

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

“Agent” — introductory paragraph.

“Agreement” shall mean this Reducing Note Facility Agreement, as it may from time to time be amended, extended, restated, supplemented or otherwise modified.

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

“Associate”, when used to indicate a relationship with a Person, shall mean (i) another Person (other than a Loan Party or a Subsidiary thereof) of which such Person is an officer or partner or is, directly or indirectly, the beneficial owner of 10 percent or more of any class of equity securities, (ii) any trust or other estate in which such Person has a substantial beneficial interest or as to which such Person or an immediate member of his family serves as trustee or in a similar capacity, and (iii) any relative or spouse of such Person or any relative of such spouse.

“Borrower” — introductory paragraph.

“BOS (USA)” — introductory paragraph.

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

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

“Capital Stock” — Section 9.15.

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

“Cash Flow” — Section 5.3(a).

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

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

“Charges” shall mean all national, Federal, state, county, city, municipal and/or other governmental (or any instrumentality, division, agency, body or department thereof, including without limitation the PBGC) taxes, levies, assessments, charges, liens, claims or encumbrances upon and/or relating to the Obligations, a Person’s Assets, a Person’s business, a Person’s ownership and/or use of any of its Assets, a Person’s income and/or gross receipts and/or a Person’s ownership and/or use of any of its Assets.

“Charter Document” shall mean (i) with respect to a corporation: its certificate or articles of incorporation or association and its by—laws or comparable documents under non—US laws; (ii) with respect to a partnership: its partnership agreement, certificate of partnership (if a limited partnership) and its certificate of doing business under an assumed name (if a general partnership); (iii) with respect to a trust, its trust agreement or declaration of trust; and (iv) with respect to a limited liability company, its certificate of formation and operating agreement or analogous documents; in each case, with such other similar documents as Agent shall request or specify.

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“Claims” — Section 12.21(b).

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

“Closing Office” shall mean the office of Agent at 1095 Avenue of the Americas, New York, New York 10036 or such other office as may be designated in writing to Borrower by Agent.

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

“Collateral” — Fifth Recital.

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

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

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

“Dividend” — Section 8.11.

“Dollar Equivalent” shall mean, on any date of determination, with respect to any amount in Euros, the equivalent in Dollars of such amount, determined by Agent using the Exchange Rate then in effect.

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

“Effective Date” — Section 6.

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

“Equity Interests” shall mean any equity interests issued by any Person, including, without limitation, Stock (including, without limitation, common stock and preferred stock),

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partnership interests or limited liability company interests, any other securities convertible into, or exercisable for, any of the foregoing or other securities of such Person, and options and warrants or other rights to acquire any of the foregoing.

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

“Execution Date” shall mean the date on which all parties to this Agreement shall have signed a copy this Agreement (whether the same or different copies) and shall have delivered the same to Agent.

“Executive Officer” shall mean the President of Borrower, the CFO of Borrower or any Senior Vice President of Borrower.

“FCCC” — Recitals.

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

“FCFC” — Recitals.

“Fee Agreements” shall mean any partnership agreement, management agreement, consulting agreement, or other agreement pursuant to which Borrower is to be paid fees, distributions, allocations, expense reimbursements, consideration, salary or other compensation in consideration for providing management, personnel or services, in any form whatsoever, from any Affiliate or from any other Person.  Services to be rendered under Fee Agreements may include, but not be limited to consulting, collecting revenues, paying operating expenses not paid directly by others, and providing clerical and bookkeeping services.

“FH Partners” — Recitals.

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

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

“FLBG” — Recitals.

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

“Government Authority” shall mean any nation or government, any state or political subdivision thereof, any agency, authority, regulatory body, bureau, central bank, commission, department or instrumentality of any of the foregoing or any other entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

“Guaranty Equivalent” shall mean any agreement, document or instrument pursuant to which a Person directly or indirectly guarantees, becomes surety for, endorses, assumes, agrees to indemnify the obligee of any other Person against, or otherwise agrees, becomes or remains

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liable (contingently or otherwise) for, such obligation, other than (i) by endorsements of instruments in the ordinary course of business or (ii) indemnification of sellers of assets related to breaches of confidential agreements and obligations related to performance of purchase and sale agreements in the conduct of the Asset acquisition business.  Without limitation, a Guaranty Equivalent shall be deemed to exist if a Person agrees, becomes or remains liable (contingently or otherwise), directly or indirectly: (i) to purchase or assume, or to supply funds for the payment, purchase or satisfaction of, an obligation; (ii) to make any loan, advance, capital contribution or other investment in, or a purchase or lease of any property or services from, a Person; (iii) to maintain the solvency of such Person; (iv) to enable such Person to meet any other financial condition; (v) to enable such Person to satisfy any obligation or to make any payment; (vi) to assure the holder of an obligation against loss; (vii) to purchase or lease property or services from such Person regardless of the non—delivery of or failure to furnish of such property or services; or (viii) in respect of any other transaction the effect of which is to assure the payment or performance (or payment of damages or other remedy in the event of nonpayment or nonperformance) of any obligation.

“Indebtedness” shall mean, with respect to any Person (without duplication): (i) all obligations on account of money borrowed by, or credit extended to or on behalf of, or for or on account of deposits with or advances to, such Person; (ii) all obligations of such Person evidenced by bonds, debentures,  notes or similar instruments; (iii) all obligations of such Person for the deferred purchase price of property or services other than trade payables incurred in the ordinary course of business and on terms customary in the trade; (iv) all obligations secured by a Lien on property owned by such Person (whether or not assumed); and all obligations of such Person under Capitalized Leases (without regard to any limitation of the rights and remedies of the holder of such Lien or the lessor under such Capitalized Lease to repossession or sale of such property); (v) the face amount of all letters of credit issued for the account of such Person and, without duplication, the unreimbursed amount of all drafts drawn thereunder, and all other obligations of such Person associated with such letters of credit or draws thereon; (vi) all obligations of such Person in respect of acceptances or similar obligations issued for the account of such Person; (vii) all obligations of such Person under a project financing or similar arrangement; (viii) all obligations of such Person under any interest rate or currency protection agreement, interest rate or currency future, interest rate or currency option, interest rate or currency swap or cap or other interest rate or currency hedge agreement; and (ix) all obligations and liabilities with respect to unfunded vested benefits under any “employee benefit plan” or with respect to withdrawal liabilities incurred under ERISA by Borrower or any ERISA Affiliate to a “multiemployer plan”, as such terms are defined under the Employee Retirement Income Security Act of 1974.

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

“Indemnified Party” — Section 12.3(c).

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

“Legal Requirements” shall mean, with respect to any Person, all laws, common law, statutes, rules and regulations of any Government Authority to which such Person or any of its

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assets is subject or any judgment, decree, franchise, order or permit of any Government Authority applicable to such Person or any of its assets.

“Lender Assignee” — Section 12.4(a).

“Lenders” — introductory paragraph.

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

“Loan Documents” shall mean, individually and collectively, this Agreement, the Notes, the Pledge Agreement, and all other instruments and agreements heretofore or from time to time hereafter executed by or on behalf of Borrower, in connection herewith or therewith, in each case as amended, extended, restated, supplemented or otherwise modified from time to time.  Without limiting the generality of the foregoing, each amendment to (or constituting part of) this Agreement or any other Loan Document and each instrument and agreement (including, without limitation, consents or waivers, but excluding any amendment, consent or waiver executed prior to the Effective Date) executed in connection with any Loan Document shall be deemed to be a Loan Document for all purposes of the Agreement and the other Loan Documents.

“Loan(s)” — Recitals.

“Majority Lenders” as of a particular date shall mean the holders of at least 51% of the aggregate unpaid principal amount of all Loans at the particular time outstanding.

“Material Adverse Change” shall mean a material adverse change in (i) the business, properties, operations, prospects or condition (financial or otherwise) of Borrower, or (ii)  the ability of Borrower to perform, or of Agent to enforce, any of the Obligations.

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

“Maturity Date” shall mean December 19, 2014.

“Note” — Section 2.2.

“Obligations” shall mean all obligations of Borrower with respect to the repayment or performance of obligations (monetary or otherwise) arising under or in connection with this Agreement, the Notes, the Pledge Agreement or any other Loan Document.

“Other Indebtedness Instrument Unmatured Default” — Section 7.1(d).

“Parent” shall mean any Person now or at any time hereafter owning or controlling (alone or with Borrower, any Subsidiary and/or any other Person) at least a majority of the issued and outstanding Stock or other ownership interest of Borrower or any Subsidiary.  For purposes of this definition, “control” shall have the same meaning ascribed to such term in the definition of

6

“Affiliate”.  Notwithstanding the forgoing, no Person shall be a Parent which is not a Parent of Borrower or a 51% or more owned subsidiary, directly or indirectly, of Borrower.

“Past-Due Rate” — Section 3.2.

“Payment Date” — Section 5.3.

“Permitted Liens” shall mean (i) any liens created pursuant to the Loan Documents in favor of Agent for the benefit of Lender and Agent to secure the Obligations; (ii)  liens for Charges which are not yet due and payable, or claims and unfunded liabilities under ERISA not yet due and payable or which are being contested in good faith by appropriate proceedings diligently pursued; (iii) liens arising in connection with worker’s compensation, unemployment insurance, old age pensions and social security benefits which are not overdue or are being contested in good faith by appropriate proceedings diligently pursued, provided that in the case of any such contest any proceedings commenced for the enforcement of such lien shall have been duly suspended and such provision for the payment of such lien has been made on the books of Borrower (or the applicable Affiliate) as may be required by GAAP; (iv) liens incurred in the ordinary course of business to secure the performance of statutory obligations arising in connection with progress payments or advance payments due under contracts with the United States Government or any agency thereof entered into in the ordinary course of business; or (v) any liens securing Indebtedness of Borrower (or any Affiliate) to any Persons in an amount not greater than $250,000 for each such Person, provided the aggregate amount of Indebtedness secured by all such liens shall not exceed $500,000.

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

“Pledge Agreement” shall mean the Pledge Agreement, dated as of the date hereof, by and between the Borrower and Collateral Agent.

“Purchasing Lenders” — Section 12.4(c).

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

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

“Requisite Consents” — Section 6.6.

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

“Servicing Agreement” shall mean the Services Agreement entered into between.

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“Servicing Fee” shall mean servicing fees payable to FC Servicing for servicing of assets of Borrower pursuant to the terms of the Services Agreement in an amount equal to ten percent (10%) of the collections and proceeds from the assets of Borrower.

“Shareholder Agreement” shall mean any agreement (other than a certificate of incorporation, customary by—laws, a limited liability company formation certificate or a partnership formation certificate but including resolutions of any Person owning any Equity Interests in such Person) among any holders of Equity Interests issued by Borrower, any Primary Obligor or any Related Entity relating to the management of any such Person or any of the rights or privileges of any holders of Equity Interests of any such Person.

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

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

“Subsidiary” of any Person (the “First Person”) shall mean any other Person more than 50% of the indicia of equity rights (whether capital stock or otherwise) of which is at the time owned, directly or indirectly by the First Person and/or by one or more of such First Person’s Subsidiaries.

“Taxes” — Section 5.4.

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

Transfer Supplement” — Section 12.4(c).

“UCC” — Section 10.30.

“United States”, “US” or “U.S.” shall mean the United States of America.

“Valuation Certificate” — Section 6.18.

“Waterfall Certificate” in respect of any Payment Date shall mean a completed certificate made by Borrower in a form approved by Agent which sets forth information with respect to collections under any FLBG2 Collateral during the preceding period to which such certificate is applicable and such other information as Agent shall require.

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EX-10.4

Exhibit 10.4

$50,000,000 TERM LOAN

LOAN AGREEMENT

among

FH Partners LLC as Borrower,

and

BANK OF AMERICA, N.A.

as Agent and as a Lender

and

The Other Lenders Now or Hereafter Parties Hereto

Dated as of December 19, 2011

TABLE OF CONTENTS

Preliminary Statement

1.	GENERAL DEFINITIONS		1
	1.1.	Defined Terms	1
	1.2.	Accounting and Other Terms	24
	1.3.	Certain Matters of Construction	24
2.	CREDIT FACILITY		25
	2.1.	The Loan	25
	2.2.	Term of Loan; Extension Right	26
	2.3.	Conditions to Extending Loan	26
	2.4.	Manner of Borrowing	27
3.	CONDITIONS PRECEDENT AND CONDITIONS SUBSEQUENT		27
	3.1.	Conditions Precedent	27
	3.2.	Conditions Subsequent	30
	3.3.	Additional Conditions Subsequent	31
4.	INTEREST, PRINCIPAL REPAYMENT AND FEES		31
	4.1.	Interest	31
	4.2.	Principal Repayment	33
	4.3.	Intentionally Omitted	35
	4.4.
	4.4.	Cost Protection	35
	4.5.	Term of Agreement	37
	4.6.	Special Libor Loan Provisions	37
	4.7.	Loan Fees	37
5.	CASH FLOW DISTRIBUTIONS AND OPERATIONAL ISSUES		39
	5.1.	Net Cash Flow	39
	5.2.	Excess Net Cash Flow	39
	5.3.	If any Default Exists	39
	5.4.	Operational Issues and Operating Reserve	39
6.	COLLATERAL: GENERAL TERMS		43
	6.1.	Security Interest in Personal Property	43

	6.2.	Lien on REO Properties	44
	6.3.	Insurance of Collateral	45
	6.4.	Audits	45
	6.5.	Release of Assets	46
	6.6.	Termination of Security Interests	47
7.	REPRESENTATIONS AND WARRANTIES		48
	7.1.	General Representations and Warranties	48
	7.2.	Reaffirmation and Survival of Representations	52
8.	COVENANTS AND CONTINUING AGREEMENTS		52
	8.1.	Affirmative Covenants	52
	8.2.	Negative Covenants	62
9.	EVENTS OF DEFAULT: RIGHTS AND REMEDIES ON DEFAULT		65
	9.1.	Events of Default	65
	9.2.	Remedies	70
	9.3.	Security Interest and Set-Off	72
	9.4	Remedies Cumulative; No Waiver	73
10.	DEBT SERVICE COVERAGE RATIO AND CASH RESERVE ACCOUNT		73
	10.1	Debt Service Coverage Ratio and Cash Reserve Account	73
11.	THE AGENT AND THE LENDERS		75
	11.1	Rights, Duties and Immunities of the Agent	75
	11.2	Lenders’ Pro Rata Shares	80
	11.3	Respecting Loans and Payments	80
12.	ASSIGNMENT AND PARTICAPTION PROVISIONS AND CERTAIN ADMINISTRATIVE MATTERS		83
	12.1.	Assignment and Participation Provisions	83
	12.2.	Certain Administrative Matters	88
	12.3.	Certain Lender Representations	89
13.	MISCELLANEOUS		89
	13.1.	Power of Attorney	89
	13.2.	Amendments	90
	13.3.	Costs and Expenses	90
	13.4.	Indulgences Not Waivers	91

ii

13.5.	Severability	92
13.6.	Cumulative Effect: Conflict of Terms	92
13.7.	Execution in Counterparts	92
13.8.	Notices	92
13.9.	Agent’s or Lenders’ Consent	93
13.10.	Time of Essence	94
13.11.	Entire Agreement	94
13.12.	Interpretation; Integration	94
13.13.	No Preservation or Marshaling	94
13.14.	Governing Law; Consent to Forum	94
13.15.	Waivers by Borrower	95
13.16.	JURY TRIAL WAIVER	96
13.17.	DTPA Waiver	96
13.18.	Oral Agreements Ineffective	97
13.19.	Limitations on Claims Against Agent and Lenders	97
13.20.	Obligations Absolute	97
13,21,	Successors and Assigns	98
13.22.	Limitations on Recourse	98
13.23.	Non-Covered Entities	98
13.24.	USA Patriot Act Notice	98

SIGNATURES

EXHIBITS:

EXHIBIT A	-	Allocated Loan Amounts
EXHIBIT A-1	—	Collateral Codes and Discount Factors
EXHIBIT B	-	New BOS Loan Documents
EXHIBIT C	-	Ownership Interests, Authorized Representatives and Taxpayer Identification Numbers
EXHIBIT D	-	Request for Disbursement From Owner Collection Account
EXHIBIT E	-	Lenders’ Pro Rata Shares And Agent’s And Lenders’
		Notice Addresses And Wire Transfer Instructions
EXHIBIT F	-	Form of Substitution Agreement
EXHIBIT G	-	Form of Compliance Certificate
EXHIBIT H	-	Form of Release Request
EXHIBIT I	-	Additional Conditions Subsequent

iii

EXHIBIT J	-	Schedule of Excluded Assets
EXHIBIT K	-	Schedule of Excluded Pledged Notes

iv

LOAN AGREEMENT

THIS LOAN AGREEMENT (“Agreement”) is made as of the 19th day of December, 2011, by and among (a) FH Partners LLC, a Texas limited liability company having a principal place of business at 6400 Imperial Drive, P.O. Box 8216, Waco, Texas 76712 (“Borrower”), (b) BANK OF AMERICA, N.A., a national banking association organized under the laws of the United States having an address at 111 Westminster Street, Suite 1200, Mail Stop: RI1-102-12-06, Providence, Rhode Island 02903 (hereinafter sometimes referred to as “Agent” and sometimes as “Bank of America”) as a Lender and in its capacity as Agent for itself and for each of the other Lenders who now or hereafter become parties to this Agreement pursuant to the terms of Section 12 hereof, and (c) all such Lenders.

PRELIMINARY STATEMENT

Borrower is the owner of a portfolio of 592 Assets” (as hereinafter defined) and more particularly identified on Exhibit A attached hereto and incorporated herein by reference.  Borrower has requested that Lenders provide Borrower with senior debt financing for the refinance of the Assets (as hereinafter defined) and Lenders, subject to the terms and conditions set forth below, have severally agreed to provide such financing in accordance with this Agreement.  Borrower hereby warrants and represents to Agent and to Lenders (a) that Borrower is the current owner and holder of all Collateral Loans (as hereinafter defined), (b) that all REO Properties (as hereinafter defined) are and will be owned by the “REO Affiliates” (as hereinafter defined) and (c) that all Collateral Loans (including REO Notes) are listed in Exhibit A attached hereto and incorporated herein.

SECTION 1.  GENERAL DEFINITIONS

1.1Defined Terms.  When used herein, the following terms shall have the following meanings (terms defined in the singular to have the same meaning when used in the plural and vice versa):

AAC Agreement - that certain Assignment, Assumption and Consent Agreement of even date herewith by and among Borrower, Bank of America, in its capacity as Depository Bank, and Agent governing disbursements out of the Owner Collection Account, as such Agreement may hereafter be amended or supplemented from time to time together with any replacement or substitution therefor.

Account Debtor - the “borrower” (or other “obligor”) under each of the Collateral Loans, including each REO Affiliate.

Additional Conditions Subsequent — as defined in Section 3.3.

Advance Documents - as defined in Section 2.4.3.

A.M. - a time from and including 12 o’clock midnight to and excluding 12 o’clock noon on any day using Providence, Rhode Island time.

Affidavit of Lost Note - as to any Pledged Note which has been lost, an affidavit executed by a seller, a prior owner or other holder of such Pledged Note or by Borrower certifying that such Pledged Note has been lost and that such Pledged Note remains in full force and effect and an outstanding obligation of the Account Debtor thereunder and attaching thereto a copy of such lost Pledged Note, if a copy is available, or if no copy is available other evidence of the indebtedness and obligation of the Account Debtor that is evidenced thereby.

Affiliate - of any Person shall mean any other Person which, directly or indirectly, controls or is controlled by or is under common control with such first-mentioned Person, or any individual, in the case of a Person who is an individual, who has a relationship by blood, marriage or adoption to such first-mentioned Person not more remote than first cousin, and, without limiting the generality of the foregoing, shall include (a) any Person beneficially owning or holding 35% or more of any class of voting stock, partnership interests or limited liability company membership interests of such first-mentioned Person or (b) any Person of which such first-mentioned Person owns or holds 35% or more of any class of voting stock, partnership interests or limited liability company membership interests.  For the purposes of this definition, “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting stock, partnership interests or limited liability company membership interests, or by contract or otherwise.

Agent - means Bank of America or any other Person which is at the time in question serving as the agent under the terms of Section 11 hereof and the other Loan Documents.

Agreement - as defined in the Preamble.

Allocated Loan Amount - with respect to each Asset, the “Allocated Loan Amount” for such Asset as set forth on Exhibit A attached hereto and incorporated herein by reference.

Approved Operating Reserve Budget -  As defined in Section 5.4.4.

Assets - collectively, each and every Collateral Loan and each and every REO Property, including, without limitation, the Collateral Loans set forth on Exhibit A attached hereto and incorporated herein by reference.

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Asset File - As defined in the Custodial Agreement.

Assignment — as to each Collateral Loan, a separate assignment of even date herewith from the Borrower to Agent in such form and content as Agent may reasonably require in its sole discretion, whereby Borrower assigns all Liens securing payment of such Collateral Loan and all material documents evidencing, securing or executed or delivered in connection with such Collateral Loan to Agent for the benefit of the Lenders.

Authorized Representatives - as defined in Section 7.1.19 and listed on Exhibit C.

Bank of America — as defined in the Preamble.

Banking Day - shall mean, in respect of any city, any date on which commercial banks are open for business in that city.

Bankruptcy Code - the United States Bankruptcy Code, 11 U.S.C. _01, et seq., as the same now exists or may hereafter be amended.

Bankruptcy Remote Entity — as to the Borrower, such terms shall mean that the Borrower (i) is a single purpose entity which owns no assets other than (a) the Assets, (b) related assets and (c) its ownership interests in REO Affiliates, and (d) the Excluded Assets and (ii) has no Indebtedness and in the future will not incur any Indebtedness other than Indebtedness that is expressly permitted pursuant to the terms of Section 8.2.3 of this Agreement.  As to each REO Affiliate, such term means that such REO Affiliate (i) is a single purpose entity which owns no assets other than (a) its respective REO Properties and (b) related assets and ownership interests in other REO Affiliates and (ii) has no Indebtedness and in the future will not incur any Indebtedness other than Indebtedness arising under its REO Notes and REO Security Documents.

BBA LIBOR — as defined in the definition of BBA LIBOR Daily Floating Rate.

BBA LIBOR Daily Floating Rate - a fluctuating rate of interest per annum equal to the British Bankers Association LIBOR Rate (“BBA LIBOR”), as published by Reuters (or other commercially available source providing quotations of BBA LIBOR as selected by Agent from time to time) as determined for each Business Day at approximately 11:00 a.m. London time two (2) London Banking Days prior to the date in question, for U.S. Dollar deposits (for delivery on the first day of such interest period) with a one month term, as adjusted from time to time in Agent’s sole discretion for reserve requirements, deposit insurance assessment rates and other regulatory costs.

Borrower — as defined in the Preamble.

BOS — collectively, Bank of Scotland PLC and its affiliate, BOS (USA) Inc.

Business Assets - accounts receivable, inventory, general intangibles, equipment,

3

furniture and other personal property which were pledged/given as security for a Business Loan (i.e., all assets securing a Collateral Loan other than real estate).

Business Day - every day other than Saturday, Sunday and any other day which is a legal holiday under the laws of the State of Rhode Island or is a day on which banking institutions in Rhode Island are required or authorized to close.

Business Loan - each and every loan (or interest therein) which is secured by Liens on Business Assets and which is now or at any time hereafter owned by Borrower.

Calculation Date — such day as may be selected by Agent during the two (2) week period prior to the last Business Day of each May, August, November and February during the term of the Loan.

Calculation Period - the one (1) calendar quarter period immediately preceding the calendar month in which a Calculation Date falls (e.g. the Calculation Period with respect to the Calculation Date in each May shall be the period commencing on the preceding January 1 and ending on the preceding March 31).

Capitalized Lease Obligations - all lease obligations which have been or should be, in accordance with GAAP, capitalized on the books of the lessee.

Cash Collateral - all deposits, credits, collateral and property, now or hereafter in the possession, custody, safekeeping or control of Agent or any Lender or any Affiliate of Agent or any Lender (including without limitation any Affiliate of Bank of America Corporation and its successors and assigns) or in transit to any of them; which term includes, without limitation, all funds now or hereafter deposited in the Owner Collection Account, the Cash Reserve Account and the Operating Account and any cash collateral pledged to Agent pursuant to any provision of this Agreement or any of the other Loan Documents.

Cash Reserve Account — an interest-bearing account which Borrower is required to establish with Agent, as Depository Bank, prior to the first date that any funds are required to be deposited in such account pursuant to the terms of this Agreement, which account shall be (a) funded and disbursed in accordance with Section 10.1 of this Agreement and (b) pledged and assigned to Agent as additional security for the payment, performance and observance of the Obligations.

CERCLA - the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (42 U.S.C. 9601, et seq.), as amended from time to time, which for purposes of this definition shall include, without limitation, the Superfund Amendments and Reauthorization Act.

Closing Date - the date of this Agreement, as shown on page 1 hereof.

4

Code - the Uniform Commercial Code as adopted and in force in the State of Rhode Island, as from time to time in effect.

Collateral - All presently owned or hereafter acquired or existing property of the Borrower, except for the Excluded Assets which are not part of the Collateral, as follows:

(i)All Goods, Equipment, Inventory, Accounts, Instruments, Documents, Chattel Paper, General Intangibles, Payment Intangibles, Fixtures and other personal property;

(ii)All “Pledged Loan Documents” consisting of:

(a)  All promissory notes (together with all Affidavits of Lost Note), bonds, other Instruments, Chattel Paper and Participation Interests owned or acquired by Borrower, including, without limitation, the promissory notes evidencing the Collateral Loans (including all REO Notes), and any renewals, modifications and extensions thereof and all promissory notes, Instruments, Chattel Paper and other property delivered in substitution therefor (collectively, the “Pledged Notes”) (the Pledged Notes specifically include each of the Excluded Pledged Notes); and

(b)  All security agreements, mortgages, deeds of trust, assignments of rents or leases, UCC-1 Financing Statements and REO Security Documents which secure the payment of the Pledged Notes, whether or not such documents have been recorded or filed with the appropriate records of land evidence or other filing offices applicable to the real or personal property (as the case may be) covered thereby (collectively, the “Pledged Security Documents”); and

(c)  All guaranties, bonds, title or hazard insurance policies (together with the proceeds thereof) commitments, leases, letters of credit, and other agreements now existing or hereafter arising that provide collateral security or financial or other support for the payment of the Pledged Notes (collectively, the “Other Pledged Documents”);

All of which Pledged Notes, Pledged Security Documents and Other Pledged Documents are hereinafter collectively called the “Pledged Loan Documents”;

(iii)All money, bank accounts and deposits in the name of or for the benefit of the Borrower, whether or not evidenced by any certificates of deposit, passbooks or other documents; all money, deposits, funds and balances from time to time in any bank accounts or deposits maintained by Borrower with Agent or any Lender, whether Agent or such Lender maintains such bank accounts or deposits as agent, escrow holder, custodian or otherwise

5

or for its own account, including, without limitation, the Cash Reserve Account, the Operating Account and the Owner Collection Account; all Instruments or Items now or hereafter submitted as deposits or additions to any bank accounts and deposits described herein; and all revenues, income, interest, dividends, issues and profits added to, earned or accrued on any bank accounts and deposits described herein;

(iv)All contract and other rights of the Borrower pursuant to the Pledged Notes or the other Pledged Loan Documents, the Lock-Box Agreement, the Custodial Agreement and the Services Agreement, including, without limitation, all claims and causes of action arising from or pertaining to such contract rights;

(v)All Judgments;

(vi)All land, improvements, fixtures and other interests in real estate and leases thereof, including without limitation, all REO Properties;

(vii)All books and records describing, used in connection with or pertaining to any of the property described in paragraphs (i) through (vii) hereof including, without limitation, all credit files, correspondence, computer programs, printouts, tapes and other records (collectively referred to as the “Books and Records”); and

(viii)All accessions to, substitutions for, replacements of, products of and Proceeds of any of the Collateral described in paragraphs (i) through (viii) hereof including, without limitation, all Non-Cash Proceeds (whether in the form of personal property, real property or interests therein), Cash Proceeds, investments of Collateral or Proceeds thereof, and the revenues, income, interest, dividends, issues and profits thereof.

As used herein, the term Goods, Equipment, Inventory, Accounts, Chattel Paper, Instruments, Documents, General Intangibles, Payment Intangibles, Fixtures, Proceeds, Cash Proceeds and Non-Cash Proceeds shall have the respective meanings assigned to them in Chapter 9 of the Code and the term Items has the meaning assigned to it in Chapter 4 of the Code.

Collateral Loan - each now existing or hereafter arising Business Loan and Real Estate Loan and each and every other loan (or interest therein) now or at any time hereafter owned by Borrower.

Collateral Loan Documents - all promissory notes evidencing Collateral Loans (including all REO Notes), all mortgages, deeds of trust, security agreements, guarantees and other documents securing Collateral Loans (including all REO Security Documents) and all loan agreements and other documents executed by Account Debtors in connection with Collateral Loans.

6

Collateral Loan Pool - the entire pool of (i.e., all) Collateral Loans (which may from time to time include real and personal property that has been foreclosed upon).

Collateral Loans Report - as defined in Section 8.1.12.

Commitment - the obligation of Lenders to lend to Borrower under this Agreement, on a several and not on a joint basis, an aggregate principal amount not to exceed Fifty Million and 00/100 Dollars ($50,000,000.00).

Commitment Fee — as defined in Section 4.7.1.

Compliance Certificate - as defined in Section 8.1.10.

Contract Rate - the interest rate(s) applicable to the Loan as determined in accordance with Section 4.1 below, which interest rate(s) shall be (i) the Libor Rate or (ii) subject to the limitations set forth in Section 4.1.1 (b), Effective Prime.

Custodial Agreement - that certain Custodial Agreement by and among Custodian, Borrower, Agent, Servicer and BOS whereby Custodian agrees to act as bailee for the documents evidencing certain of the Collateral Loans, as such Custodial Agreement may hereafter be amended or supplemented from time to time, together with any replacement or substitution therefor.

Custodian — U.S. Bank National Association, in its capacity as custodian under the Custodial Agreement.

Debt Service Coverage Interest Rate - an interest rate equal to the greater of (a) the Libor Rate in effect on the Calculation Date in question or (b) a rate of 7.0% per annum, or (c) a rate 2.75% in excess of the Debt Service Coverage Treasury Rate in effect on the Calculation Date in question.

Debt Service Coverage Net Cash Flow - an amount equal to four (4) times the sum of the combined Performing Net Cash Flows for the Calculation Period immediately preceding the Calculation Date in question of all Assets which, on the Calculation Date in question, remain subject to the Security Documents.  To the extent that the Debt Service Coverage Ratio is being utilized in connection with a release of an Asset, the Performing Net Cash Flow of the Asset being released shall be excluded from the Debt Service Coverage Net Cash Flow calculation.

Debt Service Coverage Principal Balance - the outstanding principal balance of the Loan on a Calculation Date.  To the extent that the Debt Service Coverage Ratio is being utilized in connection with a release of an Asset, the Debt Service Coverage Principal Balance shall be the outstanding principal balance of the Loan on such Calculation Date minus the Release Price which Agent reasonably determines will be received by Lenders in connection with the release of such Asset (as calculated by

7

Agent).

Debt Service Coverage Ratio - (x) the Debt Service Coverage Net Cash Flow divided by (y) the sum of (1) the Debt Service Coverage Principal Balance multiplied by the Debt Service Coverage Interest Rate, plus (2) an amount equal to the annual principal amortization payments that would be required during the one year period following the Calculation Date in question with respect to a loan in an amount equal to the Debt Service Coverage Principal Balance, based on a thirty (30) year amortization schedule and the Debt Service Coverage Interest Rate then in effect, all as calculated on the date hereof and on and as of the Calculation Date in question.

Debt Service Coverage Treasury Rate - as of the Calculation Date in question, the latest published rate for United States Treasury Notes (but the rate on Treasury Notes issued on a discounted basis shall be converted to a bond equivalent) as published weekly in the Federal Reserve Statistical Release H.15 (519) of Selected Interest Rates having a ten (10) year maturity (or the closest thereto) from such Calculation Date and in an amount which approximates (as determined by Agent) the then Debt Service Coverage Principal Balance.

Default - an event or condition the occurrence of which would, with the lapse of time or the giving of notice, or both, become an Event of Default.

Default Rate - a fluctuating rate of interest per annum which from day to day is equal to the lesser of: (i) the Prime Rate plus four percent (4%) or (ii) the Maximum Legal Rate.

Delinquent Lender - as defined in Section 11.3.7.

Depository Bank — Bank of America, in its capacity as the banking institution at which all bank accounts required to be established by Borrower under this Agreement are to be opened and maintained.

Distribution Date - as defined in Section 5.1.1.

Dollars and $ - currency of the United States of America.

Effective Prime — on any day, a simple rate per annum equal to the lesser of (i) the sum of the Prime Rate plus 2.75% or (ii) the Maximum Legal Rate.  Without notice to Borrower or anyone else, Effective Prime shall automatically fluctuate upward or downward as and in the amount by which the Prime Rate fluctuates.

Eligible Assignee - shall mean (a) any Lender or any Affiliate or subsidiary of a Lender, and (b) any other Person consented to as such by the Agent; provided, however, so long as no Event of Default exists, any such other Person must be a commercial bank, investment fund, financial institution or other institutional lender which has an office in the United States and which is not subject to United States withholding

8

tax requirements on account of interest payments made to it by Borrower.

Environmental Laws - all federal, state or local laws, statutes, ordinances, or regulations pertaining to health, industrial hygiene, environmental conditions or the existence, release, generation, storage or disposal of any Hazardous Substance, including but not limited to, CERCLA and RCRA.

Environmental Site Assessment - an environmental site assessment report conforming to the standards for Phase I Environmental Site Assessments in ASTM Standard Procedures for Environmental Site Assessments, E 1527-93 or other standards reasonably satisfactory to Agent (either of which is herein called the “Acceptable Standards”), which is in all respects satisfactory to Agent and which has been prepared by a qualified environmental firm reasonably satisfactory to Agent: (a) indicating that, on the basis of an investigation conducted in accordance with the Acceptable Standards, (i) it found no Hazardous Substances present on or in the property that is the subject of its report at levels that require reporting or remediation, or both, pursuant to any Environmental Laws that are applicable to such property (“Prohibited Hazardous Substances”), (ii) it did not learn of any conditions on or in the land adjacent to the property that is the subject of its report that would cause it to believe that there might be Prohibited Hazardous Substances present on or in the property that is the subject of its report, and (iii) no notice of violation of any of the Environmental Laws, or other claim or order issued pursuant to any of the Environmental Laws, has been duly filed against such property by any governmental authority; or (b) if any Prohibited Hazardous Substance is present on such property or if any such notice of violation, claim or order has been filed, providing evidence satisfactory to Agent as to the extent and nature of the environmental problem caused thereby and the likely costs and duration of any recommended remediation.  Notwithstanding anything to the contrary in this Agreement, the Acceptable Standards for conducting an Environmental Site Assessment for a single family residence or multifamily residential property with four (4) or less units (“Residential 1-4’s”) shall, absent any known, suspected or observable environmental risks (other than the potential presence of radon, lead paint and/or asbestos containing materials), not require the Borrower to obtain an Environmental Site Assessment which conforms to the ASTM Standard Procedures for Environmental Site Assessments, E 1527-93.  Unless a known, suspected or observable environmental risk exists, the Acceptable Standards for Residential 1-4’s shall be complied with by the Borrower’s preparing, or causing the Servicer to prepare or direct the preparation of, a preliminary environmental evaluation using a standardized evaluation form.

ERC or Estimated Remaining Collections — as to each Asset, the estimated remaining collections reasonably projected by Borrower; which projections must be reasonably satisfactory to Agent.  The initial ERC of each Asset is shown under the column entitled “Net ERC” on Exhibit A attached hereto and incorporated herein by reference.  In connection with the submission by Borrower of each Compliance Certificate, Borrower shall submit to Agent an updated calculation of the Estimated Remaining Collections of all Assets then remaining subject to the Security Documents.

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Each such re-calculated Estimated Remaining Collections will be subject to Agent’s reasonable approval.

ERISA - the Employee Retirement Income Security Act of 1974, as amended, and all rules and regulations from time to time promulgated thereunder.

Event of Default - as defined in Section 9.1.

Excess Net Cash Flow - as defined in Section 5.2.1.

Excluded Assets — all of Borrower’s interest in those certain Affiliates of Borrower (if any) as are listed in Exhibit J and in the Excluded REO Notes and related security documents (if any) as are listed in Exhibit J attached hereto.

Excluded Pledged Notes — as defined in Section 3.1.3.

Excluded REO Notes — those certain REO Notes comprising a portion of the Excluded Assets (if any), which are listed in Exhibit J attached hereto.

Exhibit - means, when followed by a letter, the exhibit attached to this Agreement bearing that letter and by such reference is fully incorporated in this Agreement.

Existing BOS Loans — The loans previously made by BOS to Borrower and FirstCity Commercial Corporation, as co-obligors, currently having an outstanding balance totaling approximately $200,000,000, which are secured (in part) by liens on the Assets and are guaranteed by certain affiliates of Borrower and FirstCity Commercial Corporation.

Extended Maturity Date — as defined in Section 2.2.

Extended Term — as defined in Section 2.2.

Extension Fee — as defined in Section 2.3.6.

Extension Notice — as defined in Section 2.3.1.

Following Business Day Convention - shall mean the convention for adjusting any relevant date if it would otherwise fall on a day that is not a Business Day.  When used in connection with a date the term, “Following Business Day Convention” shall mean that an adjustment will be made if that date would otherwise fall on a day that is not a Business Day so that the date will be the first following day that is a Business Day.

Future Commitment - as defined in Section 11.3.7.

GAAP - generally accepted accounting principles in the United States of America in effect from time to time.

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Hazardous Substance - one or more of the following substances:

(a)those substances included within the definitions of “hazardous substances,” “hazardous materials” or “toxic substances,” in CERCLA, RCRA, Toxic Substances Control Act, Federal Insecticide, Fungicide and Rodenticide Act and the Hazardous Materials Transportation Act (49 U.S.C. _801, et seq.);

(b)such other substances, materials and wastes which at the time in question are regulated as hazardous or toxic under applicable local, state or federal law, or which are classified as hazardous or toxic under federal, state, or local laws or regulations; and

(c)any material, waste or substance which is (i) asbestos, (ii) polychlorinated biphenyls, (iii) designated as a “hazardous substance” pursuant to Section 311 of the Clean Water Act, 33 U.S.C. Sections 1251 et seq. (33 U.S.C. 1321) or listed pursuant to Section 307 of the Clean Water Act (33 U.S.C. 1317), (iv) explosives, (v) radioactive materials, or (vi) petroleum, petroleum products or any fraction thereof.

Improper Distributions - any payments or distributions of any kind whatsoever (whether of cash or property) made by or on behalf of Borrower from any of its assets, income or profits to or for the benefit of any Member of Borrower or to or for the benefit of any Affiliate of any Member of Borrower, at any time (i) when there shall exist any Event of Default (i.e., after the expiration of any applicable grace or notice period, if any), or (ii) when there shall be any outstanding amounts of principal or interest that are then past due and payable to Lenders in connection with the Loan.

Indebtedness - as applied to a Person means, without duplication (a) all items which in accordance with GAAP would be included in determining total liabilities as shown on the liability side of a balance sheet of such Person on the date as of which Indebtedness is to be determined, including, without limitation, Capitalized Lease Obligations, (b) all obligations of other Persons which such Person has guaranteed and (c) in the case of Borrower (without duplication), the Obligations.

Indemnified Liabilities - as defined in Section 8.1.15.

Indemnified Parties - as defined in Section 8.1.15.

Initial Term — as defined in Section 2.2

Investment - the acquisition of any real or tangible personal property or of any stock or other security, any loan, advance, bank deposit, money market fund, contribution to capital, extension of credit (except for accounts receivable arising in the ordinary course of business and payable in accordance with customary terms), or purchase or commitment or option to purchase or otherwise acquire real estate or

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tangible personal property or stock or other securities of any party or any part of the business or assets comprising such business, or any part thereof.

Judgment - a verdict or order obtained in a legal proceeding to enforce any Instrument, note or mortgage, including without limitation any and all verdicts or orders obtained by Borrower or any REO Affiliate or any of their predecessors in interest with respect to any of the Pledged Notes or any of the other Pledged Loan Documents.

LTV Ratio - as determined on the date hereof and on each Calculation Date will be the percentage arrived at by dividing (i) the outstanding principal balance of the Loan on such date by (ii) the combined Net Present Value of all Assets then remaining subject to the Security Documents, excluding, however, (in the case of a release of an Asset) the Asset then subject to a Release Request.

Lease-Up Expenses - as to any REO Property, (i) all reasonable and customary leasing commissions, (ii) all reasonable tenant improvement costs actually paid by Borrower or the REO Affiliate in question with respect to the leasing of space in such REO Property pursuant to a written lease and (iii) all capital expenditures actually paid by Borrower or the REO Affiliate in question with respect to other improvements to such REO Property, provided that such capital expenditures are expended in accordance with a budget for such REO Property which has been approved in writing by Lenders; all as evidenced by invoices and such other back-up information as Lenders may require.

Lender or Lenders - Lender - means Bank of America, N.A. or any other Person which is a signatory hereto under the caption “Lenders” on the signature pages hereto or any other Person which hereafter becomes a party hereto pursuant to the terms of Section 11.1, each in their individual capacity, and Lenders means Bank of America, N.A. and each such other Person.

Lenders’ Transaction Costs - (i) all of Lenders’ and Agent’s reasonable due diligence and travel expenses, (ii) all of Lenders’ and Agent’s reasonable attorneys’ fees, (iii) all disbursements of Lenders’ and Agent’s attorneys, and (iv) all reasonable title costs, recording costs, appraisal fees, environmental fees and other related costs incurred by Lenders and by Agent.

LIBOR Loan — any Loan Proceeds bearing interest at the LIBOR Rate.

LIBOR Rate - a simple rate per annum equal to the lesser of (i) the sum of the BBA LIBOR Daily Floating Rate plus the LIBOR Rate Margin or (ii) the Maximum Legal Rate.

LIBOR Rate Margin — two and seventy-five hundredths percent (2.75%) per annum.

Lien - any interest in property securing an obligation owed to, or a claim by, a Person other than the owner of the property, whether such interest is based on the

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common law, statute or contract, and including, but not limited to, the security interest, security title or lien arising from a security agreement, mortgage, deed of trust, deed to secure debt, encumbrance, pledge, conditional sale or trust receipt or a lease, consignment or bailment for security purposes.

Loan - the loan made by Lenders to Borrower pursuant to this Agreement and evidenced by the Notes.

Loan Advances — as defined in Section 2.4.2.

Loan Documents - this Agreement, the Notes, the Advance Documents, the Other Agreements, and the Security Documents, all as amended, renewed, modified, replaced, extended or restated from time to time.

Loan Proceeds - all proceeds of the Notes advanced by Lenders.

Lock-Box - one or more post office boxes opened by Bank of America, in its capacity as Lock-Box Bank, with the United States Postal Service pursuant to the Lock-Box Agreement for the receipt of payments under Collateral Loans and all other payments with respect to all other Assets of the Borrower.

Lock-Box Bank — Bank of America, in its capacity as Lock-Box Bank, under the Lock-Box Agreement.

Lock-Box Agreement — collectively, all agreements with respect to the Lock-Box, including agreed upon procedures, between or among Bank of America as Lock-Box Bank, and Borrower and/or Servicer, as such Agreement may hereafter be amended or supplemented from time to time together with any replacement or substitution therefor.

London Banking Day — a day on which banks in London are open for business and dealing in offshore dollars.

Majority Lenders — means Lenders holding an aggregate Pro Rata Share of the outstanding principal balance of the Loan in an amount in excess of 66.67% of the total outstanding principal balance of the Loan; provided that the outstanding principal balance of the Loan that is held by any Delinquent Lender shall be excluded for purposes of making a determination of Majority Lenders.

Master List — as defined in Section 3.1.8.

Maturity — the Maturity Date, or, if the Maturity Date has been extended pursuant to the provisions of this Loan Agreement, the Extended Maturity Date, or in any instance, upon acceleration of the Loan, if the Loan has been accelerated as a result of the occurrence of an Event of Default.

Maturity Date - subject to the Borrower’s right to extend the same on the terms and

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conditions set forth in Section 2.2 below, the 31st day of December, 2014, being the date on which the Notes are due and payable in full.

Maximum Legal Rate - on any day, the highest non-usurious rate of interest permitted by applicable law on such day, computed on the basis of the actual number of days elapsed over a year of 360 days.

Maximum Outstanding Loan Amount- as defined in Section 4.2.1(a).

Maximum Loan Amount — as defined in Section 2.1.1.

Member — FirstCity Commercial Corporation, a Texas Corporation which is the sole member of Borrower.

Multi-Employer Plans - has the meaning set forth in Section 4001(a)(3) of ERISA.

Net Cash Flow - all funds of every type and nature received by Borrower, each REO Affiliate, the Servicer or any of their respective agents with respect to the Collateral, including, without limiting the generality of the foregoing:  (a) all interest, principal and other payments and collections received on or with respect to the Collateral Loans, (b) all Net Operating Income from REO Properties, (c) all Net Sales Proceeds from the sales of REO Properties, Collateral Loans and any other items of Collateral, (d) all Net Insurance and Condemnation Proceeds (e) all Net Collection Proceeds, and (f) all interest, dividends and other earnings directly or indirectly paid to Borrower on funds, accounts and investments of Borrower.  Notwithstanding anything to the contrary contained in this Agreement, all Net Operating Income from any REO Property with respect to any calendar month shall not be deemed to be Net Cash Flow which has been “received by Borrower” until the first to occur of (i) the payment of such Net Operating Income by the respective Property Manager to Borrower, the REO Affiliate in question or the Servicer, or (ii) the 15th day of the next following calendar month.

Net Collection Proceeds - with respect to the (i) payment in full of any Collateral Loan, (ii) the Settlement of any Collateral Loan or (iii) any other collection on a Collateral Loan (including pursuant to a foreclosure or other legal proceedings against the Account Debtor in question or any guarantor), all proceeds received in connection with such payment/collection (whether from the Account Debtor, a guarantor, pursuant to a foreclosure, or otherwise) less reasonable and customary costs of collection actually paid by the Borrower to Unrelated Third Parties.

Net Insurance and Condemnation Proceeds - all insurance and condemnation proceeds paid to Borrower, Servicer or REO Affiliates with respect to the Collateral (including any of the REO Properties) less reasonable and customary costs of collection actually paid by Borrower or the REO Affiliate in question to Unrelated Third Parties.

Net Operating Income - with respect to each REO Property, for any period, such

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property’s “Gross Income” for such period, minus all “Operating Expenses” paid during such period and minus all Permitted Lease-Up Expenses paid during such period.  “Gross Income” is defined as all cash receipts (exclusive of Tenant Security Deposits) generated by the REO Property in question of whatever kind, including all rents, reimbursements from tenants for Operating Expenses and other revenues.  “Operating Expenses” is defined as all reasonable and customary expenses actually paid during such period which, in accordance with GAAP, would be classified as operating expenses for a similar type of property, including utilities, taxes, insurance, repairs and maintenance, janitorial and reasonable property management fees actually paid by Borrower or the REO Affiliate in question to Unrelated Third Parties.

Net Present Value or NPV — as to each Asset, the net present value of all reasonably projected future Net Cash Flow from such Asset determined utilizing the “ASR NPV” discount rate assignments utilized by Borrower in making the determinations of NPV for each Asset set forth on Exhibit A-1 attached hereto and incorporated herein by reference; all of which determinations must be reasonably satisfactory to Agent.  As of the date hereof, the “NPV” or “Net Present Value” of each Asset is as set forth on Exhibit A attached hereto and incorporated herein by reference.  On each Calculation Date, Borrower shall submit to Agent an updated calculation of the Net Present Value of all Assets then remaining subject to the Security Documents; which updated calculation shall be determined utilizing the “ASR NPV” discount rate assignments then utilized by Borrower in making such determination and approved by Agent.  Each such re-calculated Net Present Value will be subject to Agent’s reasonable approval.

Net Sales Proceeds - with respect to the sale or conveyance of any REO Property, Collateral Loan, or other Collateral, the gross proceeds of such sale minus reasonable and customary broker’s commissions and other closing costs of the sale actually paid by the Borrower or the REO Affiliate in question to Unrelated Third Parties.

New BOS Loan — a new amended and restated loan by BOS in the amount of approximately $104,000,000 with FirstCity Commercial Corporation, as the borrower, which is a restructure of the remaining balance of the Existing BOS Loans.

New BOS Loan Documents — those certain agreements, including the New FHP — BOS Subordinated Guaranty and the BOS Security Documents, which are listed on Exhibit B hereto.

New FHP — BOS Subordinated Guaranty — that certain guaranty of the New BOS Loan by Borrower which is fully subordinated to the Obligations.

New BOS Security Documents — those certain documents securing Borrower’s obligations under the New FHP — BOS Subordinated Guaranty which are listed on Exhibit B hereto.

Non-U.S. Lender - as defined in Section 12.1.9.

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Note — any individual promissory note of Borrower payable to the order of Agent, as agent for the Lenders or to a Lender and evidencing all or a portion of the Loan, and Notes means all of the Notes, collectively; together with any renewals, extensions or modifications thereof and substitutions therefor, including, without limitation, that certain $50,000,000.00 Promissory Note of even date herewith.  To the extent that at any time there is only one Note in effect, all references in this Agreement to the “Notes” shall be deemed to refer to such single Note.

Notice of Borrowing - as defined in Section 2.4.1.

Obligations - all liabilities and obligations of Borrower to Lenders and/or Agent under and with respect to the Loan, the Notes, this Agreement, and the other Loan Documents, and all renewals, increases, extensions, modifications, rearrangements or restatements thereof, and all other advances, debts, liabilities, obligations, covenants and duties owing, arising, due or payable from Borrower to Lenders and/or to Agent of any kind or nature, present or future, whether or not evidenced by any note, guaranty or other instrument, arising under or with respect to this Agreement or any of the other Loan Documents, whether direct or indirect, absolute or contingent, primary or secondary, due or to become due, now existing or hereafter arising.  The term includes, without limitation, all principal, interest, charges, expenses, fees, attorneys fees and any other sums chargeable to Borrower under any of the Loan Documents.

Operating Account — a non-interest-bearing checking account established by Borrower with Agent, as Depository Bank, which account shall be (a) maintained in accordance with Section 5.4.4(b) of this Agreement and (b) pledged and assigned to Agent as additional security for the payment, performance and observance of the Obligations.

Operating Reserve — as defined in Section 5.4.4.

Operating Reserve Limit — as defined in Section 5.4.4.

Operating Reserve Report — as defined in Section 5.4.4.

Other Agreements - any and all agreements, instruments and documents (other than this Agreement, the Note, and the Security Documents), heretofore, now or hereafter executed by Borrower and/or delivered to Agent and/or Lenders with respect to the transactions contemplated by this Agreement (including, without limitation, the Services Agreement), together with related documentation, all as amended, renewed, modified, extended or restated from time to time.

Owner Collection Account —  a non-interest-bearing account to be established and maintained by Borrower with Bank of America, in its capacity as Depository Bank; into which all payments received by the Lock-Box will be deposited.  The Owner Collection Account shall be governed by this Agreement and the AAC Agreement and pledged and

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assigned to Agent as additional security for the payment, performance and observance of the Obligations.

Participation Agreement - a Participation Agreement pursuant to which Borrower owns a Participation Interest in a loan.

Participation Interest - the interest of Borrower in a loan evidenced by a Participation Agreement where Borrower is not the “lead” lender with respect to such loan.

Performing Net Cash Flow — for any Calculation Period, all interest payments and all regularly scheduled principal payments that were received by Borrower during such Calculation Period with respect to Assets that have a payment record (for at least the six (6) consecutive months prior to the last day of the Calculation Period in question) of paying within thirty (30) days after the scheduled payment date.

Permitted Lease-Up Expenses - all Lease-Up Expenses with respect to any REO Property which do not exceed, in the aggregate and on a cumulative basis, the lesser of (i) $100,000 or (ii) ten percent (10%) of the Allocated Loan Amount of the REO Property in question, or such other limit as may be agreed to in writing by Agent.

Permitted Liens - (i) Liens at any time granted in favor of Agent and/or Lenders; (ii) Liens on REO Properties at any time granted in favor of Borrower (with the consent of Agent) with respect to which Assignments have been delivered to Agent; (iii) Liens for taxes (excluding any Lien imposed pursuant to any of the provisions of ERISA); provided, however, that all taxes or assessments that are a Lien on any REO Property or any real property securing a Collateral Loan shall be paid by Borrower before any scheduled tax sale or any action to foreclose such Lien;  (iv) Liens securing the claims or demands of materialmen, mechanics, carriers, warehousemen, landlords and other like Persons for labor, materials, supplies or rentals incurred in the ordinary course of Borrower’s business, but only if such Liens are in all respects junior and subordinate to the Liens in favor of Agent and to all advances at any time to be made by Lenders; (v) Liens resulting from deposits made in the ordinary course of business in connection with workmen’s compensation, unemployment insurance, social security and other like laws; (vi) attachment, judgment and other similar non-tax Liens arising in connection with court proceedings, but only if and for so long as (a) such Liens are in all respects junior and subordinate to the Liens in favor of Agent and to all advances at any time to be made by Lenders or (b) the execution or other enforcement of such Liens is and continues to be effectively stayed and bonded on appeal in a manner satisfactory to Agent for the full amount thereof, and in either case (i.e., either (a) or (b)) the validity and amount of the claims secured thereby are being actively contested in good faith and by appropriate lawful proceedings, and such Liens do not, in the aggregate, materially detract from the value of the Collateral or materially impair the use thereof in the operation of Borrower’s business; (vii) encumbrances consisting of zoning restrictions, easements or other restrictions on the use of real property, provided that such restrictions do not impair the use of such property for the uses intended, and none of

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which restrictions are violated by existing or proposed structures or land use; (viii) such other Liens as the Majority Lenders may hereafter approve in writing and (ix) all Permitted Prior Liens; and (x) the subordinated liens in the Assets granted to BOS pursuant to the New BOS Security Documents to secure the New FHP — BOS Subordinated Guaranty.

Permitted Prior Liens - Liens and encumbrances upon any asset securing payment of a Collateral Loan which have priority (are senior and superior) to the Lien of the mortgage or deed of trust or security interest securing such Collateral Loan and which are existing on the date the Collateral Loan is purchased by Borrower or granted to Borrower by an REO Affiliate, as the case may be, provided such prior Liens are disclosed to Agent by Borrower in writing prior to the Closing Date.

Person - an individual, limited liability company, partnership, corporation, joint stock company, trust or unincorporated organization, or a governmental agency or political subdivision thereof.

Plan - an employee benefit plan now or hereafter maintained for employees of Borrower that is covered by Title IV of ERISA.

Pledge Agreement — singly and collectively, as to each REO Affiliate, a Pledge and Security Agreement from Borrower and/or all other REO Affiliate Owners, as the holders of 100% of the ownership interests in the REO Affiliate in question (except as to FH Arizona Properties LLC, in which case the pledged ownership interest shall be 51.675%) to Agent for the benefit of Lenders whereby such ownership interests are pledged to Agent and Agent is granted a security interest in all of such ownership interests in the REO Affiliate in question.  Each such Pledge Agreement shall be in form and substance satisfactory to Agent.

Pledged Loan Documents - as defined in the definition of Collateral under this Agreement.

Pledged Notes - as defined in the definition of Collateral under this Agreement.

Pledged Security Documents - as defined in the definition of Collateral under this Agreement.

P.M. - a time from and including twelve o’clock noon to and excluding twelve o’clock midnight on any day using Providence, Rhode Island time.

Power of Attorney - an irrevocable Power of Attorney to be delivered by Borrower to Agent on the Closing Date, as more specifically defined in Section 13.1 of this Agreement.

Prepaid Principal — as defined in Section 4.2.4.

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Prime Rate - means, on any day, the rate of interest per annum then most recently established by Agent as its “prime rate”, it being understood and agreed that such rate is set by Agent as a general reference rate of interest, taking into account such factors as Agent may deem appropriate, that it is not necessarily the lowest or best rate actually charged to any customer or a favored rate, that it may not correspond with future increases or decreases in interest rates charged by other lenders or market rates in general, that Agent may make various business or other loans at rates of interest having no relationship to such rate.  As to any Prime Rate Loan, each time the Prime Rate changes, the per annum rate of interest on such Prime Rate Loan shall change immediately and contemporaneously with such change in the Prime Rate.  If Agent (including any successor Agent) ceases to exist or to establish or publish a prime rate from which the Prime Rate is then determined, the applicable variable rate from which the Prime Rate is determined thereafter shall be instead the prime rate reported in The Wall Street Journal (or the average prime rate if a high and a low prime rate are therein reported), and the Prime Rate shall change without notice with each change in such prime rate as of the date such change is reported.

Prime Rate Loan - any Loan Proceeds bearing interest at Effective Prime.

Principal Debt — the aggregate unpaid principal balance of the Loan at the time in question.

Principal Reduction Payments - as determined on any date, the total amount of principal payments that have been paid to and applied by Lenders in reduction of the outstanding principal balance of the Loan as of such date.

Prohibited Transaction - any transaction set forth in Section 406 of ERISA or Section 4975 of the Internal Revenue Code of 1986.

Property Manager - an independent management firm which has been retained by Servicer or by an REO Affiliate to manage an REO Property.

Property Management Agreement - as to each REO Property, an agreement between Servicer or the respective REO Affiliate and the respective Property Manager which contains provisions whereby such Property Manager agrees (i) to collect all Gross Income with respect to such REO Property, (ii) to pay when due all Operating Expenses (exclusive of taxes) with respect to such REO Property, (iii) by not later than fifteen (15) days after the end of each calendar month, to pay to Servicer or such REO Affiliate all Net Operating Income from such REO Property with respect to the calendar month in question, (iv) to render such other services as may be agreed upon by Servicer or such REO Affiliate and such Property Manager and (v) that such Property Management Agreement may be terminated by Agent upon the occurrence of an Event of Default hereunder and, upon such termination and upon Agent’s written request, to deliver to Agent all funds, books, records, leases and other documents in such Property Manager’s possession with respect to the REO Property in question.

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Pro Rata Share - the percentage interest in the Loan owned by each Lender, as more particularly defined in Section 11.2 of this Agreement.

Protective Advance - an advance of funds by Borrower (from funds provided to Borrower by Borrower’s Member and not from the Collateral or proceeds thereof), to pay (i) an expense which in the reasonable determination of Borrower is necessary to preserve and protect any REO Property or any asset securing payment of a Collateral Loan; such expenses include, but are not limited to, ad valorem taxes, environmental assessments or inspections, environmental remediation expenses (not to exceed $25,000 for any single Asset) and insurance expenses and (ii) Permitted Lease-Up Expenses; which Protective Advances, as to each Asset, may not exceed, in the aggregate on a cumulative basis, an amount equal to (i) the lesser of $100,000 or ten percent (10%) of the Allocated Loan Amount of the Asset in question, or as otherwise may be approved by Agent in writing plus (ii) Permitted Lease-Up Expenses with respect to the Asset in question.

Real Estate Loan - each loan owned by Borrower which is secured by Liens (e.g. a deed of trust, mortgage, etc.) on real estate.

RCRA - the Resource Conservation and Recovery Act of 1976 (42 U.S.C. Sections 6901, et seq.), as amended from time to time.

Register - as defined in Section 12.1.3.

Regulation D - as defined in Section 4.4.1.

Release Price - as defined in Section 6.5.2.

Release Request — as defined in Section 6.5.3.

Released Asset - as defined in Section 6.5.1.

REO Affiliate — (a) FH Properties, LLC, a Texas limited liability company, (b) FH Arizona Properties, LLC, an Arizona limited liability company of which FH Properties, LLC. owns 51.675% and the remainder of the membership interests are owned by California Bank and Trust, and (c) any other entities which are 100% owned, directly or indirectly, by Borrower and of which all ownership interests of Borrower and its Affiliates have been pledged to Agent pursuant to a Pledge Agreement.

REO Affiliate Owner — the Borrower, any Bankruptcy Remote Entity owned by Borrower and formed to serve as the general partner of any REO Affiliate and any other Affiliate, which own all of the voting stock, partnership interests or limited liability company membership interests of an REO Affiliate, owned by Affiliates of Borrower.  California Bank and Trust is not an REO Affiliate Owner for any purpose of this Agreement.

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REO Note - as to each REO Property (other than the REO Property owned by FH Arizona Properties, LLC, an Arizona limited liability company), (a) a demand promissory note which has been executed prior to the date hereof by an REO Affiliate and which is payable to the order of Borrower (or to Borrower’s predecessor in interest), or (b) as to any REO Notes executed after the date hereof, a demand promissory note which (i) is in form and substance satisfactory to Agent (ii) is executed and delivered to Borrower by the REO Affiliate in question which owns the REO Property in question, (iii) is in an amount equal to not less than ninety-six percent (96%) of the then “NPV” of the REO Property in question (as set forth on Exhibit A attached hereto, as amended pursuant to the most recent report from Servicer received and approved by Agent), (iv) bears interest at Effective Prime with a provision whereby such interest rate shall increase to the Default Rate upon the occurrence of a default thereunder, (v)  requires a monthly  payment in an amount equal to all Net Operating Income received by such REO Affiliate with respect to each calendar month and (vi) contains provisions whereby the occurrence of an Event of Default hereunder shall constitute an event of default under such REO Note.

REO Property - any real property, or any interest therein, now or hereafter legally or beneficially owned by Borrower or by an REO Affiliate related to an Asset now or hereafter legally or beneficially owned or acquired by Borrower or an REO Affiliate including, without limitation, any real property which has been or is foreclosed upon by Borrower or by an REO Affiliate or their respective predecessors in interest or which was conveyed to Borrower or to an REO Affiliate by a deed in lieu of foreclosure; which REO Property shall in all respects be deemed to be proceeds of the Collateral.

REO Security Documents - those certain mortgages or deeds of trust, assignments of leases and rents, security agreements and appropriate UCC financing statements, all in form and substance satisfactory to Agent, as required by Agent in its sole discretion for each REO Property (other than the REO Property owned by FH Arizona Properties, LLC, an Arizona limited liability company), to be executed by REO Affiliate(s) in favor of Borrower and pursuant to the terms of which, as security for the applicable REO Note (and, at Agent’s option, the Notes), there shall be (a) granted and conveyed to Borrower Liens upon each such REO Property (including, all personal property associated therewith) owned by REO Affiliate(s) from time to time as is described therein and (b) assigned to Borrower all leases and rents with respect thereto; as the same may be amended, renewed, modified, extended or restated from time to time with the consent of Agent.

REO Tax Escrow Payments - All payments made by REO Affiliates to Borrower for a specified purpose (such as real estate tax payments, insurance premiums, etc.) other than payments of principal, interest, fees and other amounts owed to Borrower with respect to the Loan evidenced the respective REO Note.

Reportable Event - any of the events set forth in Section 4043(b) of ERISA.

Required Owner Collection Account Amount — as defined in Section 6.5.1.

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Required Principal Payment Date — as defined in Section 4.2.1.

Responsible Officer - for each entity which is required to provide reports hereunder, the chief executive officer, chief financial officer or other vice president designated in writing to Agent as a “Responsible Officer”.

Security Agreement - that certain Security Agreement and Assignment of Rights of even date herewith from Borrower to Agent for the benefit of Lenders whereby Borrower grants Agent a security interest in the Collateral; together with any modifications thereof, additions thereto and substitutions therefor.

Security Documents - The following documents:  the (i) Security Agreement, (ii) Assignments, (iii) Custodial Agreement, (iv) AAC Agreement, (v) Servicer Indemnity Agreement,  (vi) UCC-1 Financing Statements; (vi) Pledge Agreement and (vii) all other agreements and documents executed by Borrower, Servicer or any other party now or at any time hereafter securing the whole or any part of the Obligations, as amended, renewed, modified, extended or restated from time to time.

Servicer — FirstCity Servicing Corporation, a Texas corporation or any replacement servicer designated by Borrower and approved in writing by Majority Lenders.  All references to Servicer shall be deemed to refer to each of such parties, all of such parties and any of such parties.

Servicer Indemnity Agreement - that certain Servicer Indemnity Agreement from Servicer to Agent and Lenders of even date herewith.

Services Agreement - that certain Services Agreement of even date herewith between Servicer and Borrower or any replacement to such agreement which is entered into by Borrower with a replacement servicer and which is approved in writing by Majority Lenders.

Settlement - with respect to any Collateral Loan, the satisfaction of Borrower’s claims against the respective Account Debtor in connection with such Collateral Loan, whether pursuant to a full or discounted repayment.

Six Month Cash Reserve Amount — as defined in Section 10.1.1.

Subordination Agreement — that certain subordination agreement, which shall be in form and substance acceptable to Agent, among BOS, Borrower and its sole Member, FirstCity Commercial Corp., and Agent, providing for the complete subordination of all liens in the Assets securing the New BOS Loan to the liens in the Assets and other Collateral granted by Borrower to Agent and Lenders and pursuant to which all rights and remedies of BOS under the New FHP — BOS Subordinated Guaranty and the New BOS Security Documents will be in all respects subject and subordinate to the Lender’s Security Documents and the other Lender Loan

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Documents.

Substitute Note(s) - as defined in Section 8.1.30.

Substituted Lender - as defined in Exhibit F.

Substitution Agreement - as defined in Section 12.1.1.

Tax Escrow Account - an account established by Servicer with Agent as Depository Bank, into which Tax Escrow Payments are to be deposited.

Tax Escrow Payments - all payments made by Account Debtors (including REO Affiliates ) for a specified purpose (such as real estate tax payments, insurance payments, etc.) other than payments of principal, interest, fees and other amounts owed to Borrower with respect to the Collateral Loans and all Net Insurance and Condemnation Proceeds received by Borrower which are not available to be applied to the outstanding balance under the Collateral Loan in question but, rather, are required by the Collateral Loan Documents in question to be used for purposes of repairing or rebuilding of the real property in question.

Tenant Security Deposit — all security deposits paid to Servicer or Property Managers by tenants of space in one of the REO Properties.

Term — the period commencing on the Closing Date and ending on the Maturity Date, or, if the Maturity Date has been extended pursuant to the provisions of this Agreement, the Extended Maturity Date.

Title Certificate - (i) as to any REO Property, a Certificate issued by the Title Company to Agent (a) showing title to the REO Property in question to be vested in the applicable REO Affiliate, (b) reflecting the recording of the respective REO Security Documents thereon, (c) to the extent recorded, reflecting the recording of the Assignment of such REO Security Documents to Agent, (d) showing no Liens or encumbrances except the Permitted Prior Liens and (e) being in all respects otherwise reasonably satisfactory to Agent; and (ii) as to each parcel of real property securing a Collateral Loan, a Certificate issued by the Title Company to Agent (a) reflecting the recording of the respective mortgage or deed of trust which secures such Collateral Loan, (b) reflecting the assignment of such mortgage or deed of trust to Borrower, (c) reflecting, to the extent recorded, the recording of the Assignment thereof to Agent (d), showing no Liens or encumbrances except the Permitted Liens and (e) being in all respects otherwise reasonably satisfactory to Agent.

Title Company - such title insurance company(s) as are reasonably satisfactory to Agent.

Title Insurance Policy - (i) as to any REO Property, an ALTA (or ALTEX) Standard-Form Mortgagee Title Insurance Policy issued by the Title Company (a) naming

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Borrower as the “Insured” and, when and if the respective Assignment to Agent is recorded, also naming Agent as the “Insured”, (b) showing title to the REO Property in question to be vested in the applicable REO Affiliate, (c) reflecting the recording of the respective REO Security Documents thereon, (d) reflecting, to the extent recorded, the recording of the Assignment of such REO Security Documents to Agent, (e) showing no Liens or encumbrances except Permitted Prior Liens and (f) being in all respects otherwise reasonably satisfactory to Agent; and (ii) as to each parcel of real property securing a Collateral Loan, an ALTA (or ALTEX) Standard Form Mortgagee Title Insurance Policy issued by the Title Company (a) naming Borrower as the “Insured” and, when and if the respective Assignment to Agent is recorded, also naming Agent as the “Insured”, (b)  reflecting the recording of the respective mortgage or deed of trust which secures such Collateral Loan and the assignment of such mortgage or deed of trust to Borrower, (c) reflecting, to the extent recorded, the recording of the Assignment thereof to Agent, (d) showing no Liens or encumbrances except the Permitted Liens and (e) being in all respects otherwise reasonably satisfactory to Agent.

Twelve Month Cash Reserve Amount — as defined in Section 10.1.1.

UCC-1 Financing Statements - UCC-1 Financing Statements showing Borrower, and the REO Affiliate Owners, as applicable, as “Debtor” and Agent as “Secured Party”, and listing all of the Collateral; each of which UCC-1 Financing Statements shall be in form and substance satisfactory to Agent.

UCC Filing Offices - each of the following filing offices with which UCC-1 Financing Statements are to be filed:

(i)Texas Secretary of State; and

(ii)All filing offices required in connection with any REO Security Documents or any Pledge Agreement.

Unrelated Third Party - any Person who or which is not an Affiliate of Borrower, of any REO Affiliate, of any Member, of any REO Affiliate Owner, or of Servicer.

1.2Accounting and Other Terms.  All accounting terms not specifically defined herein shall be construed in accordance with GAAP consistent with that applied in preparation of the financial statements referred to in Section 8.1.10, and all financial data pursuant to the Agreement shall be prepared in accordance with such principles.  All other terms contained in this Agreement shall have, when the context so indicates, the meanings provided for by the Code to the extent the same are used or defined therein.

1.3Certain Matters of Construction.  The terms “herein”, “hereof” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular section, paragraph or subdivision.  Any pronoun used shall be deemed to cover all genders.  The section titles, table of contents and list of exhibits

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appear as a matter of convenience only and shall not affect the interpretation of this Agreement.  All references to statutes and related regulations shall include any amendments of same and any successor statutes and regulations. All references to any instruments or agreements, including, without limitation, references to any of the Loan Documents, shall include any and all modifications or amendments thereto and any and all extensions or renewals thereof.

SECTION 2.  CREDIT FACILITY

2.1The Loan

2.1.1Commitment of Lenders.  Notwithstanding the fact that the principal amount of the Note is $50,000,000.00, subject to the terms and conditions of this Agreement and the other Loan Documents, Lenders severally agree to make advances of their respective Pro Rata Shares of the proceeds of the Loan to Borrower in an aggregate maximum amount (the “Maximum Loan Amount”) equal to the lesser of (a) an amount that would result in a Debt Service Coverage Ratio greater than or equal to 1.4:1 or (b) an amount that would result in a LTV Ratio of not more than 60% or (c) $50,000,000.00; which Maximum Loan Amount shall be the maximum aggregate amount of the proceeds of the Loan which Lenders shall be obligated to advance.  The proceeds of the Loan shall be used solely to (a) refinance the Assets and (b) pay costs incurred by Borrower in connection with the closing of the Loan.

Any Loan Proceeds that are repaid shall not be readvanced and the amount of the Commitment shall be reduced by the amount of any such payments.

2.1.2The Loan to Constitute One Obligation.  The Loan shall constitute one general obligation of Borrower to Lenders, and shall be secured by Agent’s security interests in and Liens upon all of the Collateral, and by all other security interests and Liens heretofore, now or at any time or times hereafter granted by Borrower to Agent and/or Lenders.  Lenders shall enter the Loan and all advances made by Lenders thereunder as debits to loan accounts established on the books of Lenders and shall also record in such loan accounts all payments made by Borrower on any Obligations and all proceeds of Collateral which are finally paid to Lenders, and may record therein, in accordance with customary accounting practice, all charges and expenses properly chargeable to Borrower and any other Obligation.  Absent manifest error, each Lender’s books and records with respect to the loan account shall be conclusive and binding evidence of the outstanding amount of the Obligations and such books and records may be admitted in evidence in any proceeding to enforce the Agent’s and Lenders’ rights with respect to the Obligations.

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2.2Term of Loan; Extension Right. The Loan shall be for a term (the “Initial Term”) commencing on the date hereof and ending on the Maturity Date.  The Initial Term may be extended for an “Extended Term” ending on the 31st day of December, 2015 (the “Extended Maturity Date”) upon satisfaction of the conditions set forth in Section 2.3

2.3Conditions to Extending Loan.  Subject to the satisfaction of each of the following conditions, Borrower, at its option, may elect to extend the Maturity Date of the Loan until the Extended Maturity Date:

2.3.1Notice From Borrower.  Borrower shall have given Agent written notice (an “Extension Notice”) of Borrower’s request to exercise its extension right at least ninety (90) days, but not more than one hundred twenty (120) days, before the Maturity Date;

2.3.2No Default.  No Default shall exist;

2.3.3Debt Service Coverage Ratio.  The Debt Service Coverage Ratio as of September 30, 2014 shall be greater than 1.5:1;

2.3.4Minimum Required Principal Reduction.  Borrower shall have made principal repayments on the Loan during the Initial Term in an amount that is sufficient to reduce the outstanding principal balance of the Loan to less than Ten Million and no/100 Dollars ($10,000,000.00);

2.3.5Conditions Satisfied.  All of the conditions set forth in Section 3 of this Agreement, to the extent applicable, shall continue to be satisfied;

2.3.6Extension Fee.  An extension fee in an amount equal to one quarter of one percent (.25%) of the then outstanding Loan Proceeds (the “Extension Fee”) shall have been paid to the Agent, for the pro rata account of each Lender, at least five (5) Business Days prior to the Maturity Date;

2.3.7Additional Documents.  Borrower shall have executed and/or delivered to Agent and Lenders such agreements and documents as Agent or the Majority Lenders may reasonably require incident to the extension; and

2.3.8Before End of Initial Term.  Each of the foregoing conditions shall be satisfied on the date of receipt of Borrower’s notice under Section 2.3.1, (other than the condition described in Section 2.3.6, which shall be required to be satisfied five (5) Business Days prior to the Maturity Date) and on the Maturity Date.

If all of the conditions to extension have been satisfied, other than payment of the Extension Fee, Agent shall so notify Borrower and, upon Agent’s receipt of the Extension Fee for the pro rata account of Lenders not later than five (5) Business Days prior to the Maturity Date, so long as no Default exists, the Loan Term shall be extended

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until the Extended Maturity Date.

2.4Manner of Borrowing.

2.4.1Request for Loan. In connection with the closing of the Loan, Borrower shall give Agent written notice (a “Notice of Borrowing”) specifying (a) the amount of Loan Proceeds which Borrower is requesting be advanced, (b) the requested borrowing date, and (c) if Borrower requests Lenders to wire all or a portion of such Loan Proceeds (whether to Borrower or to a third party), the relevant wiring instructions.  Such Notice of Borrowing shall be (a) accompanied by an appropriate Compliance Certificate, and (b) irrevocable and binding on Borrower.

2.4.2Advance of Loan Proceeds.  Each Lender shall severally, subject to compliance with all of the other terms, conditions and provisions of this Agreement, make a disbursement of its respective Pro Rata Share of the Loan Proceeds (“Loan Advances”) entirely at closing.

2.4.3Delivery of Advance Documents.  On or before the Closing Date, Borrower shall execute and deliver or cause to be executed and delivered, or cause to be delivered all of the “Documentation” described in Section 3 of this Agreement and Borrower shall also execute and deliver or cause to be executed and delivered or cause to be delivered to Agent such other documents and statements as Agent deems advisable (collectively, the “Advance Documents”).

2.4.4Funding.  If, and only if, Borrower satisfies all the conditions set forth in Section 3 of this Agreement, Lenders shall make available their respective Pro Rata Shares of the requested Loan Proceeds to or on behalf of Borrower.

SECTION 3.  CONDITIONS PRECEDENT AND CONDITIONS SUBSEQUENT

3.1Conditions Precedent.  Notwithstanding any other provision of this Agreement or any of the other Loan Documents, and without affecting in any manner the rights of Agent and/or Lenders under the other sections of this Agreement, it is understood and agreed that Lenders shall be under no obligation to advance the Loan Proceeds, as contemplated under this Agreement, unless and until Agent shall have received each of the following documents and each of the following conditions has been and continues to be satisfied, all in form and substance satisfactory to Agent and its counsel:

3.1.1  Loan Documents.  This Agreement and the other Loan Documents (including all of the Other Agreements), duly executed and delivered by the parties thereto.

3.1.2  Perfection of Personal Property Liens.  With regard to all Collateral comprised of personal property, current lien searches from each of the UCC Filing

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Offices in each case evidencing that the respective UCC-1 Financing Statement has been filed and constitutes valid and perfected, first priority, security interests in the Collateral, subject only to (i) Permitted Prior Liens with respect to security interests in assets securing payment of a Collateral Loan; and (ii) the liens created pursuant to the New BOS Security Documents securing Borrower’s obligations under the New FHP — BOS Subordinated Guaranty, all of which liens shall be subordinated pursuant to the Subordination Agreement in connection with the advance of the Loan Proceeds.

3.1.3   Delivery of Pledged Notes and Allonges.

(a)  Except for the Pledged Notes evidencing Collateral Loans having an ERC of zero that are described on the schedule which is attached hereto as Exhibit K and incorporated herein ( the “Excluded Pledged Notes”), custody of which Excluded Pledged Notes shall be retained by the Servicer subject to the terms of Section 8.1.29 below, receipt by Custodian of one hundred percent (100%), measured both in number and in dollar amount, of the original Pledged Notes (or, as to each such Pledged Note which has been lost, an original Affidavit of Lost Note attached to which is a copy of such lost Pledged Note), each of which notes shall have been duly endorsed thereon or on an allonge attached thereto (by a complete chain of endorsements from the original holder thereof) to Borrower..

(b)  With respect to each Pledged Note (excluding the Excluded Pledged Notes), receipt by Agent of one (1) original allonge executed by Borrower endorsing each such Pledged Note to Agent, or, at Agent’s option, endorsing each such Pledged Note in blank.

(c)  Notwithstanding the foregoing, in the case of any Excluded Pledged Note which was executed by a maker in conjunction with a transaction that includes another Pledged Note which is not an Excluded Pledged Note, each such Excluded Pledged Note shall be delivered to Custodian together with its associated Pledged Note which is not an Excluded Pledged Note.

3.1.4  Organizational Documents.

(a)  As applicable, a copy of the Certificate of Formation, partnership agreement, operating agreements and articles of formation of Borrower, and each REO Affiliate, and the Articles/Certificate of Incorporation of the Servicer, and any amendments thereto, and all certified to as of the Closing Date by the Borrower and by the REO Affiliate Owners and the Servicer; and;

(b)  Appropriate partnership, limited liability company and corporate resolutions, as applicable, on behalf of the Member of Borrower and each REO Affiliate and the Servicer; and

(c)  Certificates of existence/subsistence and/or good standing from the Secretary of State of Texas, relating to the continuing existence of Borrower, the

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Member, the Servicer and each REO Affiliate.

3.1.5  Legal Opinions. Agent shall have received and approved legal opinion letters from counsel representing Borrower, Servicer and each REO Affiliate  which meet Agent’s legal opinion requirements.

3.1.6  Other Documents.  Such other documents, instruments and agreements as Agent or Lenders shall reasonably request in connection with the transaction contemplated hereby, including, without limitation, a Power of Attorney and such other documents, instruments and agreements as Agent or Lenders reasonably determine are necessary at any time to perfect any of their security interests in the Collateral.

3.1.7  Information Concerning the Collateral Loan Pool.  Any and all information and documentation Agent or Lenders deem necessary to conduct Lenders’ analysis of the Collateral Loan Pool.

3.1.8  Collateral Loan Documents.

(a)  Evidence satisfactory to Agent that all Collateral Loan Documents not previously owned by Borrower (excluding, however, those related to the Excluded Pledged Notes) have been assigned to Borrower and that assignments have been recorded with the applicable land records evidencing each such assignment;

(b) Evidence satisfactory to Agent that (i) the Custodian has received one hundred percent (100%) of Asset Files excluding, however, the Asset Files for the Excluded Pledged Notes, and (ii) Agent has received one (1) set of originals of all Assignments; and

(c) As to all Collateral Loans (except for those Collateral Loans which are evidenced by Excluded Pledged Notes), Borrower shall deliver to Agent (i) a “master” listing of all Collateral Loan Documents and noting whether each Collateral Loan Document is an original or a photocopy (the “Master List”); which Master List shall have been certified to as being accurate and complete by the Servicer, and (ii) an electronic file containing copies of all Collateral Loan Documents as set forth on the Master List, including copies of the Asset Files delivered to the Custodian.

3.1.9   Bank of Scotland Documents. Agent shall have received evidence satisfactory to Agent that the liens securing the Existing BOS Loans have been released and Agent, Borrower and BOS  shall have entered into the Subordination Agreement.

3.1.10   Other Conditions.  The following other conditions have been and shall continue to be satisfied:

(a)  Defaults.  No Default or Event of Default shall exist hereunder or under the Services Agreement;

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(b)  Material Adverse Changes.  Since formation of Borrower, there shall not have occurred any material adverse change in the business, financial condition or results of operations of Borrower, or the existence or value of any Collateral, or any event, condition or state of facts which would reasonably be expected materially and adversely to affect the business, financial condition or results of operations of Borrower;

(c)  Proceedings, Etc.  No action, proceeding, investigation, regulation or legislation shall have been instituted, threatened or proposed before any court, governmental agency or legislative body to enjoin, restrain or prohibit, or to obtain damages in respect of, or which is related to or arises out of this Agreement or the consummation of the transactions contemplated hereby or which, in Agent’s judgment, would make it inadvisable to consummate the transactions contemplated by this Agreement or any of the other Loan Documents;

(d)  Payment of Commitment Fee and Lender’s Transaction Costs.  Borrower shall have paid (i) the Commitment Fee described in Section 4.7 below, and (ii) all of Lenders’ Transaction Costs;

(e)  Representations and Warranties.  All representations and warranties made to Agent or Lenders by Borrower or the Member in connection with the application for, processing of and closing of the Loan shall be true and correct as if made on the Closing Date.

3.2Conditions Subsequent.  In addition to the Conditions Precedent to funding set forth in Section 3.1 above, Agent shall have received the following within the time periods listed below:

3.2.1   Perfection of Real Property Liens.  With regard to Collateral comprised of real property (including Collateral Loans secured by real property)  Title Certificates or Title Insurance Policies in accordance with Section 8.1.20 hereof;

3.2.2  Collateral Loan Documents.

(a)  Within fifteen (15) days after Borrower’s receipt of same, the originals of all Assignments which have been recorded with the appropriate records of land evidence pursuant to Section 8.1.20 below;

(b) Within fifteen (15) days after Borrower’s receipt of same, a copy of a receipt or acknowledgement by the Custodian confirming that it has received the original REO Notes that are identified in such receipt or acknowledgement; it being agreed that, subject to Section 6.2(b), all REO Security Documents will be recorded with the appropriate recording offices pursuant to Section 8.1.20 below and Borrower shall provide evidence to Agent and  Custodian of said recordation promptly after their return from the appropriate recording offices; and

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(c) Within fifteen (15) days after Agent’s request, originals of such Collateral Loan Documents as Agent, in its discretion, may from time to time request.

3.3Additional Conditions Subsequent.  Attached hereto as Exhibit I is a listing of additional items to be delivered to Agent and additional conditions to be satisfied by Borrower subsequent to the Closing Date (the “Additional Conditions Subsequent”).  Within the respective time periods set forth on such Exhibit I, Agent shall have received all items set forth thereon and Borrower shall have satisfied all Additional Conditions Subsequent set forth thereon.

SECTION 4.  INTEREST, PRINCIPAL REPAYMENT AND FEES .

4.1Interest

4.1.1Contract Rate(s).

(a)The unpaid principal balance of the Loan from time to time outstanding shall bear interest at the Contract Rate calculated on a daily basis (computed on the actual number of days elapsed over a year of 360 days) from the date of advance to Maturity, at the Contract Rate.

(b)For so long as the LIBOR Rate is available pursuant to the terms of this Agreement, the Contract Rate shall be the LIBOR Rate.  During any period that the LIBOR Rate is unavailable pursuant to the terms of this Agreement, the Contract Rate shall be Effective Prime or the Default Rate (as the case may be).  Except in cases covered by this Section 4.1.1(b) and Section 4.6, Borrower shall have no right to elect to have Effective Prime apply to all or any portion of the outstanding Loan Proceeds.

(c)As to any Loan Proceeds with respect to which the Contract Rate is the LIBOR Rate, the LIBOR Rate shall be increased or decreased, as the case may be, by an amount equal to any increase or decrease in the BBA LIBOR Daily Floating Rate, with such adjustments to be effective on the Business Day that any such change in the BBA LIBOR Daily Floating Rate becomes effective, without notice or demand of any kind.  As to any Loan Proceeds with respect to which the Contract Rate is Effective Prime, Effective Prime shall be increased or decreased, as the case may be, by an amount equal to any increase or decrease in the Prime Rate, with such adjustments to be effective on the Business Day that any such change in the Prime Rate becomes effective, without notice or demand of any kind.

4.1.2Intentionally omitted.

4.1.3Default Rate.  Notwithstanding anything to the contrary set forth in this Agreement, from and after the occurrence of an Event of Default and during the continuation thereof (whether or not Agent has accelerated payment of the Loan) and from and after the initial Maturity Date (or, if Borrower has elected and

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qualified for an extension of the initial Maturity Date in accordance with Section 2.3 above, from and after the Extended Maturity Date), the outstanding principal balance of all Obligations (including all unpaid installments of interest under the Note) shall bear interest, calculated daily (computed on the actual days elapsed over a year of 360 days), at the Default Rate.

4.1.4Late Charges.  In the event that any payment of principal and/or interest herein provided for shall become overdue for more than ten (10) days, a “late charge” of five percent (5%) of the required payment shall become immediately due and payable to the Agent, for the pro rata benefit of Lenders, as liquidated damages for failure to make prompt payment, and the same shall be secured by the Security Documents.

4.1.5Interest Installments.  All accrued, but unpaid, interest on the Notes shall be due and payable, in arrears, on the fifteenth (15th) day of each calendar month.  Notwithstanding anything to the contrary set forth in the Notes, Borrower shall pay all such interest to the Agent for the pro rata account of each Lender.

4.1.6Recapture of Interest.  Notwithstanding the foregoing, if at any time the amount of interest to be paid by Borrower would exceed the Maximum Legal Rate, then the interest payable under this Agreement shall be computed upon the basis of the Maximum Legal Rate, but any subsequent reduction in the Contract Rate or Default Rate, as applicable, shall not reduce such interest thereafter payable hereunder below the amount computed on the basis of the Maximum Legal Rate until the aggregate amount of such interest accrued and payable under this Agreement equals the total amount of interest which would have accrued if such interest had been at all times computed solely on the basis of the Contract Rate or Default Rate, as applicable.

4.1.7Maximum Legal Rate.  All agreements between Borrower, Agent and Lenders are hereby expressly limited so that in no contingency or event whatsoever, whether by reason of acceleration of maturity of the Obligations or otherwise, shall the amount paid or agreed to be paid to Agent or Lenders for the use or the forbearance of the Indebtedness evidenced by the Notes exceed the Maximum Legal Rate.  As used herein, the Maximum Legal Rate shall mean the Maximum Legal Rate in effect as of the date hereof; provided, however, in the event that there is a change in the Maximum Legal Rate which results in a higher permissible rate of interest, then the Maximum Legal Rate shall be governed by such new law as of its effective date.  In this regard, it is expressly agreed that it is the intent of Borrower, Agent and Lenders in the execution, delivery and acceptance of this Agreement and the Notes to contract in strict compliance with the laws of the State of Rhode Island from time to time in effect.  If, under or from any circumstances whatsoever, fulfillment of any provision hereof or of any of the other Loan Documents at the time of performance of such provision shall be due, shall involve transcending the limit of such validity prescribed by applicable law, then the obligation to be fulfilled shall automatically be reduced to the limits of such validity, and if under or from any circumstances

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whatsoever Agent or any Lender should ever receive as interest any amount which would exceed the Maximum Legal Rate, such amount which would be excessive interest shall be applied to the reduction of the principal balance of the Obligations and not to the payment of interest.  This provision shall control every other provision of all agreements between Borrower, Agent and Lenders.

4.1.8Amendments to Current Law.  If the applicable state or federal law is amended in the future to allow a greater rate of interest to be charged under this Agreement or the other Loan Documents than is presently allowed by applicable state or federal law, then the limitation of interest hereunder shall be increased to the maximum rate of interest allowed by applicable state or federal law as amended, which increase shall be effective hereunder on the effective date of such amendment.

4.2Principal Repayment.

4.2.1Principal Installments.

(a)As of each date specified below (each, a “Required Principal Payment Date”), the total Principal Reduction Payments that have been received by Lenders shall be sufficient to cause the outstanding principal balance of the Loan, as of each such date, to not exceed the applicable Maximum Outstanding Loan Amount that is set forth below:

Required Principal Payment Date	Maximum Outstanding Loan Amount
June 30, 2012	$	45,000,000
December 31, 2012	$	30,000,000
June 30, 2013	$	25,000,000
December 31, 2013	$	20,000,000
June 30, 2014	$	15,000,000
December 31, 2014	$	10,000,000

which amounts are hereinafter referred to as the “Maximum Outstanding Loan Amount”.  In this regard, on each Required Principal Payment Date, Borrower shall pay to Agent, for the account of the Lenders, for application to principal outstanding under the Loan, an amount equal to the difference (if any and only if such difference is a positive number) arrived at by subtracting (i) the then applicable Maximum Outstanding Loan Amount, from (ii) the then outstanding principal balance of the Loan.

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(b)Subject to the Borrower’s option to extend the same on the terms and conditions set forth in Section 2.2 and Section 2.3 above, all remaining unpaid principal, interest and other Obligations shall be paid in full on the Maturity Date.  If Borrower elects and qualifies for an extension of the Maturity Date pursuant to Section 2.2 and Section 2.3 above, all remaining unpaid principal, interest and other Obligations shall be paid in full on the Extended Maturity Date.

4.2.2Intentionally Omitted.

4.2.3  Mandatory Payments - Foreclosure Under Collateral Loans.

(a)Without Agent’s prior written consent, Borrower shall not consummate foreclosure proceedings against any real property securing any Collateral Loan having an Allocated Loan Amount in excess of $100,000 without having first delivered to Agent a new Environmental Site Assessment(s) (or a copy of the Environmental Site Assessment with respect to the real property in question which was delivered to Agent prior to and in connection with closing of the Loan (the “Original ESA”) and which is accompanied by such updates as Agent may reasonably require) with respect to the real property in question and either (i) received Agent’s written acknowledgement that the results thereof are acceptable to Agent or (ii) received Agent’s written approval of a plan of remediation and deposited with Agent an amount which is equal to 120% of the estimated costs of effectuating such remediation plan, as reasonably approved by Agent; and

(b)If at any time Borrower forecloses its liens upon any asset securing payment of a Collateral Loan, which asset has an Allocated Loan Amount or an estimated value at the time of the proposed foreclosure of $100,000 or more, and Agent reasonably believes that the foreclosure may result in a liability to Agent, any Lender or Borrower or the REO Affiliate in question under any Environmental Laws, Borrower, upon demand made by Agent, shall make a prepayment on the Loan in an amount equal to the Release Price of such Asset, and Agent shall release any Liens it holds upon such asset.

4.2.4Prepayment and Certain Payments.

(a)Borrower may prepay the outstanding principal balance of the Loan, in full at any time or in part from time to time, without fee, premium or penalty, provided that, other than payments of principal contemplated under Sections 5.1 and 5.2 of this Agreement, Agent shall have actually received from Borrower prior written notice of (A) Borrower’s intent to prepay, (B) the amount of principal which will be prepaid (the “Prepaid Principal”), and (C) the date on which the prepayment will be made; (iii) each prepayment shall be in the amount of $100,000 or a larger integral multiple of $10,000 (unless the prepayment retires the outstanding balance of the Loan in full); and (iv) each prepayment shall be in the amount of 100% of the Prepaid Principal, plus accrued unpaid interest thereon to the date of prepayment, plus any

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other sums which have become due to Agent and Lenders under the Loan Documents on or before the date of prepayment but have not been paid.

(b)Any partial prepayment of principal shall first be applied to any installment of principal then due and owing and no such partial prepayment shall relieve Borrower of the obligation to pay each subsequent installment of principal when due.

(c)Any principal that is repaid shall not be re-advanced.

4.2.5Net Payments.  All payments by Borrower of principal, interest, fees, indemnities and other amounts payable to Agent and/or Lenders hereunder shall be made without set-off or counterclaim.

4.2.6Application of Payments and Collections.  As long as no Event of Default has occurred and is continuing, all payments shall be applied first to the payment of all fees, expenses and other amounts due to the Agent and the Lenders (excluding principal and interest), and then to accrued interest, and the balance on account of outstanding principal.  After the occurrence of an Event of Default and during the continuance thereof, Borrower shall have no right, and it hereby irrevocably waives the right, to direct the application of any and all payments and collections at any time or times received by Agent and/or Lenders from or on behalf of Borrower, and Borrower does hereby irrevocably agree that Lenders shall, after the occurrence of an Event of Default and during the continuance thereof, have the continuing exclusive right to apply  any and all such payments and collections received at any time or times by Agent and/or Lenders against the Obligations, in such manner as Lenders may deem advisable, notwithstanding any entry by Lenders upon any of their books and records.

4.3Intentionally Omitted.

4.4Cost Protection.

4.4.1Taxes or Assessments.  If (i) after the date hereof, the FDIC, (ii) after the date hereof, Regulation D of the Board of Governors of the Federal Reserve System (“Regulation D”), (iii) the adoption after the date hereof of any law, (iv) any change after the date hereof in any law, (v) any published change after the date hereof in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or (vi) compliance by any Lender with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency:

(a)shall subject any Lender to any tax, duty or other charge with respect to any loans made by such Lender, or shall change the basis of taxation of payments to any Lender of the principal of or interest on the Loan or any other amounts due under this Agreement;

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(b)shall impose, modify or deem applicable any assessment or other charge (including any assessment for insurance of deposits) against assets of, deposits with or for the account of, or credit extended by any Lender;

(c)shall impose, modify or deem applicable any reserve (including any reserve imposed by the Board of Governors of the Federal Reserve System), special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by any Lender; or

(d)shall impose on any Lender any other condition affecting this Agreement, the Loan or the Notes;

and the result of any of the foregoing is to increase the cost to any Lender of making or maintaining the Loan hereunder, or to reduce the amount of any sum received or receivable by any Lender under this Agreement or under their Note which are not reflected in the Contract Rate, then, such Lender shall promptly notify the Agent thereof and of the reasons therefor, and the Agent shall promptly notify the Borrower thereof in writing stating the reasons provided to the Agent by such Lender therefor and the additional amounts required to fully compensate such Lender for such increased cost or reduced amount as reasonably determined by such Lender and, within ten (10) days after demand by Agent, Borrower shall pay directly to Agent, for the pro rata benefit of the affected Lenders, such additional amount or amounts as will compensate such Lenders for that portion of such cost, increased cost or such reduction which relates to the Obligations of Borrower.  Neither costs considered by any Lender in determining the Effective Prime or compensated for in any increase in the Libor Rate, nor any federal, state, local or foreign taxes based on gross or net income, or any franchise, net worth or capital tax payable by any Lender, shall be considered in making the determination of increased cost or reduction in amount receivable to Lenders under this Section 4.4.1.  Lenders shall not be entitled to make a demand for and Borrower shall not be liable for payment of any amount under the terms of this provision following payment in full of the Obligations.

4.4.2Capital Adequacy, Etc.  If, with respect to all or any portion of the Loan, any adoption of, ruling on, change in, or interpretation of any law or treaty now existing or hereafter promulgated by any tribunal or central bank regarding capital adequacy, or compliance by any Lender with any request, directive, or requirement hereafter imposed by any tribunal or central bank regarding capital adequacy (whether or not having the force of law) hereafter occurs, and, as a result of such adoption, ruling, change, interpretation or compliance, the rate of return on any Lender’s capital as a consequence of such Lender’s obligations under this Agreement decreases to a level below that which otherwise could have achieved (taking into consideration its policies with respect to capital adequacy) by an amount deemed by such Lender to be material (and such Lender may, in determining such amount, utilize

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such assumptions and allocations of costs and expenses as such Lender shall deem reasonable and may use any reasonable averaging or attribution method), and such reduction in the rate of return of the Lender’s capital is not compensated for by an increase in the Contract Rate, then such Lender shall notify Agent and Borrower and deliver to Agent and Borrower a certificate setting forth in detail the calculation on a reasonable basis of the amount necessary to compensate such Lender therefor, which certificate shall be conclusive and binding, and Borrower shall promptly pay such amount to such Lender. Notwithstanding the foregoing sentence, Borrower shall not be obligated to pay such amount unless notice thereof is given within ninety (90) Business Days after such Lender actually incurs such reduction in its rate of return.  Lenders shall not be entitled to make a demand for and Borrower shall not be liable for payment of any amount under the terms of this provision following payment in full of the Obligations.

4.5Term of Agreement.  The provisions of this Agreement shall be and remain in effect until full and final payment in immediately available funds of all of the Obligations.

4.6Special Libor Loan Provisions. All Libor Loans shall be subject to and governed by the following terms and conditions:

4.6.1Libor Loans Unavailable.

Agent may notify Borrower if the BBA LIBOR Daily Floating Rate is not available for any reason, or if Agent determines that no adequate basis exists for determining the BBA LIBOR Daily Floating Rate, or that the LIBOR Rate will not adequately and fairly reflect the cost to Lenders of funding the Loan, or that any applicable Legal Requirement or regulation or compliance therewith by Lenders prohibits or restricts or makes impossible the charging of interest based on the BBA LIBOR Daily Floating Rate.  If Agent so notifies Borrower, then interest shall accrue and be payable on the outstanding principal balance of the Loan at a fluctuating rate of interest equal to Effective Prime, from the date of such notification by Agent until Agent notifies Borrower that the circumstances giving rise to such suspension no longer exist, or until Maturity (whether by acceleration, declaration, extension or otherwise), whichever is earlier to occur.

4.7Loan Fees.

4.7.1Commitment Fee.  At the closing of the Loan, to the extent not previously paid, Borrower shall pay to Agent, for Agent’s own account, a commitment fee (“Commitment Fee”) in the amount of $375,000.

4.7.2Extension Fee.  The Extension Fee shall be payable to Agent, for the pro rata account of each Lender, as provided in Section 2.3 above.

4.8Notations.  At the time of (i) the making of each Loan evidenced by any Note, (ii)  and (ii) each payment or prepayment of any Note, each Lender may enter

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upon its records an appropriate notation evidencing (a) such Lender’s Pro Rata Share of the Loan and (b) the interest rate and Interest Adjustment Date applicable thereto or (c) such payment or prepayment of principal and (d) in the case of payments or prepayments of principal, the portion of the Loan  which was paid or prepaid.  No failure to make any such notation shall affect the Borrower’s unconditional obligations to repay the Loan and all interest, fees and other sums due in connection with this Agreement and/or any Note in full, nor shall any such failure, standing alone, constitute grounds for disproving a payment of principal by the Borrower.  However, in the absence of manifest error, such notations and each Lender’s records containing such notations shall constitute presumptive evidence of the facts stated therein, including, without limitation, the outstanding amount of such Lender’s Pro Rata Share of the Loan and all amounts due and owing to such Lender at any time.  Any such notations and such Lender’s records containing such notations may be introduced in evidence in any judicial or administrative proceeding relating to this Agreement, the Loan or any Note.

4.9Time of Payments and Prepayments in Immediately Available Funds.

4.9.1Notwithstanding any provision to the contrary contained in any of the Loan Documents, (a) the due dates of all payments under the Loan Documents shall be adjusted in accordance with the Following Business Day Convention, and (b) all payments and prepayments of principal, fees, interest and any other amounts owed from time to time under this Agreement and/or under any Note shall be made to the Agent for the pro rata account of each Lender at the Agent’s address referred to in Section 13.8 in Dollars and in immediately available funds prior to 12:00 o’clock P.M. on the Business Day that such payment is due, subject to, if applicable, the Following Business Day Convention.  Any such payment or prepayment which is received by the Agent in Dollars and in immediately available funds after 12:00 o’clock P.M. on a Business Day shall be deemed received for all purposes of this Agreement on the next succeeding Business Day except that solely for the purpose of determining whether a Default has occurred, any such payment or prepayment if received by the Agent prior to the close of the Agent’s business on a Business Day shall be deemed received on such Business Day.

4.9.2All payments of principal, interest, fees and any other amounts which are owing to any or all of the Lenders or the Agent hereunder and/or under any Note shall be paid directly to Agent (i.e., Borrower shall not pay and shall have no obligation to pay any such amount directly to any Lender other than Agent).  All such payments that are received by the Agent in immediately available Dollars prior to 12:00 o’clock P.M. on any Business Day shall, to the extent owing to Lenders other than the Agent, be sent by wire transfer by the Agent on the same Business Day.  Each such wire transfer by Agent shall be addressed to each Lender in accordance with the wire instructions set forth in Exhibit E hereto.  The amount of each payment wired by the Agent to each such Lender shall be such amount as shall be necessary to provide such Lender with its Pro Rata Share of such payment (without consideration or use of any contra accounts of any Lender), or with such other amount as may be owing to such Lender in accordance with this Agreement.  Each such wire transfer shall be sent by the

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Agent only after the Agent has received immediately available Dollars from or on behalf of the Borrower and each such wire transfer shall provide each Lender receiving same with immediately available Dollars on receipt by such Lender.  Any such payments of immediately available Dollars received by the Agent after 12:00 o’clock P.M. on any Business Day shall be forwarded in the same manner by the Agent to such Lender(s) as soon as practicable and, in any event, no later than the immediately succeeding Business Day.

SECTION 5.  CASH FLOW DISTRIBUTIONS AND OPERATIONAL ISSUES.

5.1  Net Cash Flow.

5.1.1  Funding of Lock-Box and Owner Collection Account and Distribution Dates.  As set forth in Section 8.1.19 hereof, (i) all Account Debtors (including all REO Affiliates ) and all “lead” lenders under Participation Agreements will be advised and instructed to deliver all payments under Collateral Loans (including Tax Escrow Payments) directly to the Lock-Box, (ii) Borrower, each REO Affiliate and Servicer will promptly remit (or cause to be remitted) to the Owner Collection Account all Net Cash Flow and Tax Escrow Payments received by any of them or any of their respective agents.  Net Cash Flow and Tax Escrow Payments received each month will be distributed by Bank of America, from the Owner Collection Account on the fifteenth (15th) day of the following month, or in the event that such day is not a Business Day then on the next Business Day, and on such other days as may be agreed upon from time to time by Borrower and Agent.  Each date upon which a distribution is to be made from the Owner Collection Account is hereinafter referred to as a “Distribution Date”.  Notwithstanding the foregoing, no payments due California Bank and Trust as a result of its 48.325% interest in FH Arizona Properties, LLC shall be applied to payment of any indebtedness or expenses under this Agreement.

5.1.2  Application of Net Cash Flow and Tax Escrow Payments.  Subject to Section 5.3 below, on each Distribution Date all Net Cash Flow and Tax Escrow Payments then in the Owner Collection Account will be paid and applied by Bank of America, in its capacity as Agent, as follows:

(a)  First, to the payment to Servicer for deposit in the Tax Escrow Account, an amount specified by Servicer in the “Request for Disbursements from Owner Collection Accounts” certificate, a form of which is attached hereto as Exhibit D; which sum shall represent the total amount of Tax Escrow Payments paid into the Owner Collection Account prior to the Distribution Date in question to the extent not previously deposited in the Tax Escrow Account;

(b)  Second, to the payment to the Custodian of any fees and expenses which are then due and payable to the Custodian under the Custodial Agreement or which will become so due and payable on or before the last day of the calendar month in which the Distribution Date in question occurs;

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(c)  Third, to the payment to Bank of America, in its capacities as Lock-Box Bank and Depository Bank, of all fees and expenses which are then due and payable to the Lock-Box Bank under the Lock-Box Agreement or to Depository Bank under the AAC Agreement or which will become so due and payable on or before the last day of the calendar month in which the Distribution Date in question occurs;

(d)  Fourth, to the payment to Agent, for the account of the Lenders, of all interest on the Loan which is then due and payable;

(e)  Fifth, to the payment to Agent of any Loan fees, late charges and other fees and expenses which are then due and payable to Agent and/or Lenders under this Agreement or any of the other Loan Documents or which will become so due and payable on or before the last day of the calendar month in which the Distribution Date in question occurs;

(f)  Sixth, to the payment to Agent, for the account of the Lenders, as a Principal Payment, an amount equal to the amount (if any) of any required Principal Reduction Payments which are then due and payable or which will be due and payable on or before the last day of the calendar month in which the Distribution Date in question occurs;

(g)  Seventh, (unless payment of such fees is prohibited by the terms of this Agreement), to the payment to the Servicer (subject to Section 5.3 below) of any “Servicing Fees” (as such term is defined in the Services Agreement) other than “Incentive Servicing Fees” (as such term is defined in the Services Agreement) then owed to the Servicer pursuant to the Services Agreement; which Servicing Fees shall not exceed, on a cumulative basis, fees payable under the Services Agreement;

(h)  Eighth, to the payment to Agent, for the account of the Lenders, of any Release Price which is then due and payable to Lenders pursuant to Section 6.5 of this Agreement;

(i)  Ninth, to the payment to Agent, for deposit in the Cash Reserve Account or application as a principal payment, the amount (if any) required to be so deposited or paid pursuant to Section 10.1 below;

(j)  Tenth, (unless such payment is prohibited by the terms of this Agreement) to the payment to Borrower (subject to Section 5.3 below) of any Net Collection Proceeds and any Net Sales Proceeds that were deposited in the Owner Collection Account since the immediately preceding Disbursement Date to the extent that such Net Collection Proceeds and Net Sales Proceeds exceed the sum of all Release Prices that are payable to Lenders; and

(k)  Eleventh, (unless such payment is prohibited by the terms of this Agreement) to the payment to Borrower (subject to Section 5.3 below), for deposit in the Operating Reserve, of such amount as may be requested by Borrower and

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approved by Agent in accordance with the provisions of Section 5.4.4 below.

Notwithstanding anything to the contrary set forth in this Section 5.1.2, no disbursements shall be made pursuant to subsections (j) and (k) above or Section 5.2 below, until such time as all of the Additional Conditions Subsequent set forth in Exhibit I hereto have been satisfied.  Any such funds not disbursed shall remain in the Owner Collection Account.

5.1.3  Borrower’s Obligation to Pay Agent and Lenders. Notwithstanding anything to the contrary contained in this Agreement or any of the other Loan Documents, in the event that at any time insufficient Net Cash Flow is available to make any payment then due and payable by Borrower to Agent or Lenders, Borrower shall be required to make each such payment directly to Agent promptly when due.

5.2  Excess Net Cash Flow.

5.2.1  Excess Net Cash Flow.  “Excess Net Cash Flow” is defined as all Net Cash Flow remaining in the Owner Collection Account on any Distribution Date after the payment in full of each of the ten (10) payment categories listed in Subsection 5.1.2(b) through (k) above.

5.2.2  Application of Excess Net Cash Flow.  If, as of any Distribution Date, (a) Lenders have not received Principal Reduction Payments which total at least twenty percent (20%) of the original principal amount of the Loan or (b) the then most-recently calculated Debt Service Coverage Ratio is less than 1.4:1, on each such Distribution Date one hundred percent (100%) of all then existing Excess Net Cash Flow (if any) shall be paid to Agent, for the account of Lenders as a Principal Reduction Payment.  If, as of any Distribution Date, (a) Lenders have received Principal Reduction Payments which total at least twenty percent (20%) of the original principal amount of the Loan, and the then most-recently calculated Debt Service Coverage Ratio is 1.4:1 or greater, subject to Section 5.3 below, on each such Distribution Date, all then existing Excess Net Cash Flow (if any) will be paid and applied as follows:

(a)First, to the payment to Agent, for the account of Lenders (as a Principal Reduction Payment) of an amount equal to fifty percent (50%) of the Excess Net Cash Flow existing on such Distribution Date (if any); and

(b)Second, to the payment to Borrower (subject to Section 5.3 below) of an amount equal to fifty percent (50%) of the Excess Net Cash Flow existing on such Distribution Date (if any).

5.3  If Any Default Exists.  Notwithstanding any of the foregoing provisions of this Section 5, at any time when there shall exist any Default or any Event of Default, all Net Cash Flow and all Excess Net Cash Flow shall be distributed from the Owner Collection Account and paid to Agent, for the account of Lenders, for application against the Obligations and, under no circumstances, shall any Net Cash Flow or Excess Net Cash

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Flow be paid to Borrower.

5.4  Operational Issues and Operating Reserve.

5.4.1  Servicer and Services Agreement.  Borrower shall at all times retain the services of a servicer reasonably satisfactory to Majority Lenders to service the Collateral Loan Pool and the REO Properties.  Such servicer shall render its services pursuant to a Services Agreement in all respects reasonably satisfactory to Majority Lenders.  In this regard, Lenders have approved FirstCity Servicing Corporation as the Servicer and have approved that certain Services Agreement of even date herewith by and between Borrower and FirstCity Servicing Corporation.  Any replacement servicer and any replacement services agreement must be approved in writing by Majority Lenders, which approval shall not be unreasonably withheld.  For all purposes, the Servicer shall be deemed to be the agent of Borrower and any and all funds of Borrower in the possession of Servicer or any of its agents shall be deemed to be in the possession of the Borrower. .  Notwithstanding the foregoing, Majority Lenders will not unreasonably withhold their approval of a proposed new servicer if such new servicer is “rated” by Standard & Poor’s as a servicer with an above average rating or above or by Moody’s or Fitch as a servicer with an equivalent or above rating.

5.4.2  Property Management Agreements.  As to each REO Property with respect to which the REO Affiliate in question enters into a Property Management Agreement, such Property Management Agreement shall conform to and contain the provisions of the definition of Property Management Agreement contained herein.

5.4.3  Tenant Security Deposits.  All Tenant Security Deposits will be maintained by Servicer or the applicable Property Manager in accordance with applicable law.  Upon Agent’s demand, Servicer and each Property Manager will pay to Agent all Tenant Security Deposits held by them, which Tenant Security Deposits will then be held by Agent in accordance with applicable law.

5.4.4Operating Account and Operating Reserve .

(a)  Operating Reserve.  Borrower shall have the right, at its option, to establish and maintain, from time to time, from funds on deposit in Borrower’s Operating Account, an operating reserve (the “Operating Reserve”) provided that any such Operating Reserve shall (a) be in all respects subject to the terms and conditions of this Agreement and (b) be funded and utilized solely in accordance with the terms and conditions set forth in this Agreement.  The Operating Reserve shall be subject to the following limit (the “Operating Reserve Limit”): the maximum amount permitted to be in the Operating Reserve at any time shall be $1,000,000.00.

If at any time Borrower elects to establish and maintain an Operating Reserve, Borrower shall submit to Agent, for its approval, a budget of all expenditures to be made from such Operating Reserve.  Such Operating Reserve budget shall be updated by Borrower from time to time and each update also shall be subject to Agent’s approval.

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Any such Operating Reserve budget, or updated budget, approved by Agent is referred to herein as an “Approved Operating Reserve Budget”.  Borrower shall be permitted to utilize funds in the Operating Reserve for Permitted Lease-Up Expenses and other expenses which would qualify as a Protective Advance in accordance with the then effective Approved Operating Reserve Budget.  From time to time, as contemplated in Section 5.1.2(j) above, Borrower shall be entitled to request that Net Cash Flow be deposited into the Operating Reserve.  At no time shall Agent be required to deposit Net Cash Flow into the Operating Reserve in excess of the lesser of (a) the amount set forth in the then effective Approved Operating Reserve Budget, or (b) the then applicable Operating Reserve Limit.  In connection with each such request, Borrower shall submit to Agent, for Agent’s approval, (a) a report (an “Operating Reserve Report”) detailing on an Asset-by-Asset basis all expenditures made by Borrower from the Operating Reserve since the last Operating Reserve Report submitted to Agent and setting forth a calculation, on a cumulative basis, of all expenditures made from the Operating Reserve from the Closing Date through the date of the Operating Reserve Report in question; which Operating Reserve Report will be in all respects reasonably satisfactory to Agent, and (b) invoices and such other back-up information as Agent may require evidencing all such expenditures from the Operating Reserve.

(b)  Operating Account.  Borrower shall at all times maintain the Operating Account with Bank of America.

SECTION  6.  COLLATERAL:  GENERAL TERMS

6.1  Security Interest in Personal Property.  To secure the prompt payment and performance to Agent and Lenders of the Obligations, Borrower, pursuant to the Security Agreement and the other Security Documents, shall grant to Agent, for the benefit of Lenders, a first and prior continuing security interest in and Liens upon all of the Collateral, except for the portion of the Collateral which is REO Property, and expressly including, without limitation, all of the Borrower’s rights in the Cash Reserve Account, the Owner Collection Account, the Operating Account and the Services Agreement.  At the time the Borrower forecloses upon any personal property securing payment of a Collateral Loan, upon Agent’s request, Borrower shall also execute a “Supplement to Security Agreement”, which “Supplement to Security Agreement” shall detail the specific assets being foreclosed upon.  Borrower agrees to execute the UCC-1 Financing Statements provided for by the Code or otherwise together with any and all other instruments, assignments or documents and shall take such other action (including the filing of such UCC-1 Financing Statements and other documents with appropriate filing offices at the expense of Borrower) as may be required by Agent to perfect or to continue the perfection of Agent’s security interest in the Collateral.  Unless prohibited by applicable law, Borrower hereby authorizes Agent to file any such Financing Statement on Borrower’s behalf without the signature of Borrower.  The parties agree that, if permitted by applicable law, a photographic or other reproduction of this Agreement shall be sufficient as a financing statement and may be filed in any appropriate office in lieu thereof.

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6.2  Lien on REO Properties.

(a)  All REO Properties will be owned by an REO Affiliate approved by Agent; it being understood that Borrower will not be taking title to any REO Properties.  Except in instances where Lenders demand a prepayment in accordance with Section 4.2.3 hereof, promptly upon the acquisition of title to a REO Property, Borrower agrees (i) to cause the REO Affiliate in question to execute and deliver to Borrower an REO Note, which shall be promptly delivered to Custodian, and REO Security Documents granting to Borrower a first and prior Lien upon each such REO Property, or in cases where such asset was subject to a prior Lien at the time Borrower purchased the Collateral Loan secured by such asset and such prior Lien was disclosed to Lenders in writing prior to the Closing Date, a Lien subject only to Permitted Prior Liens, and (ii) to promptly execute and deliver to Agent an allonge with respect to such REO Note and an Assignment with respect to such REO Security Documents.  Such REO Security Documents (and, to the extent required by Agent, such Assignment) shall all be recorded, at the expense of Borrower, with such filing offices as may be required by Agent to evidence Agent’s Lien on such REO Property.  Prior to the taking of title to any REO Property by an REO Affiliate, Borrower shall provide Agent with an Environmental Site Assessment with respect to each such parcel of REO Property or an update of any Environmental Site Assessment which was previously delivered to Agent in connection with such REO Property (if any), and Borrower shall have received Agent’s written acknowledgement that the results thereof are acceptable to Agent.  In addition, in the event that such REO Property has an Allocated Loan Amount of $100,000 or more, and upon Agent’s request, Borrower shall be obligated, at Borrower’s expense, to provide for Agent’s benefit such additional documentation as Agent would ordinarily require in connection with real estate collateral, including without limitation, the following: an appraisal performed in accordance with applicable law, a Title Certificate or, if requested by Agent, a Title Insurance Policy, in accordance with Section 8.1.20 below, a survey, and policies of liability, hazard and casualty insurance naming Agent as additional insured, mortgagee and loss payee.  The foregoing provisions shall not apply to the REO Property owned by FH Arizona Properties, LLC, but all other provisions and requirements with respect to an REO Property in this Agreement shall be applicable to such REO Property, provided that under no circumstances shall FH Arizona Properties, LLC be required to deliver any payments due to California Bank and Trust as a result of its 48.325% interest in FH Arizona Properties, LLC to the Agent, Lenders or the Owner Collection Account, nor shall any such payments be applied to payment of any indebtedness or expenses under this Agreement.

(b)  At this time, Lenders have agreed (a) to refrain from requiring the recording of any of the Assignments and any of the REO Security Documents relating to REO Properties that are located in the States of Florida, New York or Maryland unless and until there shall have occurred an Event of Default, and (b) such REO Security Documents relating to REO Properties located in the States of Florida, New York or Maryland shall not be deemed to be effective unless and until there shall have occurred an Event of Default; provided, however, Agent shall have the right at any time after the occurrence of any Event of Default to record any and all of such REO Security

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Documents and such Assignments, at the expense of Borrower, with such filing offices as may be required by Agent to evidence Agent’s Lien on such REO Properties.

6.3  Insurance of Collateral.

6.3.1  Borrower shall promptly notify Agent of the failure of any Account Debtor under a Collateral Loan to maintain the insurance coverage required under such Collateral Loan and, as to Collateral Loans having an Allocated Loan Amount of greater than $100,000, except as otherwise agreed to by Agent in writing, the Borrower shall procure the required coverage.  Borrower agrees to maintain and pay for (or cause the respective REO Affiliate to maintain and pay for) insurance upon all REO Properties having an Allocated Loan Amount of in excess of $100,000 covering casualty, hazard, public liability and such other risks and in such amounts and with such insurance companies as shall be reasonably satisfactory to Agent; provided, however, as long as Borrower maintains casualty and hazard coverage in amounts sufficient to avoid the application of any applicable co-insurance provision, Borrower shall not be required to maintain such coverage in excess of the lesser of the replacement cost or the Release Price of an Asset owned by Borrower.  In addition, upon Agent’s request, (i) Borrower will maintain and pay for such insurance upon REO Properties having an Allocated Loan Amount of less than $100,000 upon Agent’s request on a case by case basis, and (ii) Borrower will maintain and pay for insurance covering Borrower for casualty loss with respect to any Collateral where the Account Debtor under a Collateral Loan has failed to maintain such insurance coverage.  Borrower shall deliver certified copies of such policies to Agent with satisfactory endorsements naming Agent as additional insured, as loss payee and as mortgagee pursuant to a standard mortgagee clause.  Each policy of insurance or endorsement shall contain a clause requiring the insurer to give not less than thirty (30) days prior written notice to Agent in the event of cancellation of the policy for any reason whatsoever and a clause that the interest of Agent shall not be impaired or invalidated by any act or neglect of Borrower or any owner of the insured property nor by the occupation of the premises for purposes more hazardous than are permitted by said policy.  If Borrower fails to provide and pay for such insurance, Agent or Lenders may, at Borrower’s expense, procure the same, but Agent and Lenders shall not be required to do so.  Upon Agent’s request, Borrower shall deliver to Agent, promptly as rendered, true copies of all reports made in any reporting forms to insurance companies.

6.3.2  It is agreed that Borrower may elect to provide the insurance required by Section 6.3.1 above by one or more multi- property policies in lieu of individual insurance policies for each property.  Any such multi-property policy will be (i) in the amounts required under Section 6.3.1 above as to each covered property, (ii) shall be in a total amount in all respects satisfactory to Agent and (iii) shall provide coverage for public liability in an amount not less than $5,000,000.00; provided however, Agent reserves the right to require a separate insurance policy on any REO Property which is owned by an REO Affiliate for more than six (6) months.

6.4  Audits.  Lenders may from time to time, upon notification to Borrower, conduct

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an audit of any and all Collateral and all books and records of Borrower and each REO Affiliate, and all costs of one audit per calendar year shall be reimbursed by Borrower within thirty (30) days after the notification by Lenders to Borrower of the completion of such audit.  The costs and expenses of such audits shall not exceed $5,000.00 per audit.

6.5Release of Assets.

6.5.1In connection with any sale of an REO Property to an Unrelated Third Party, in connection with any sale (whether in the normal course of business or pursuant to a foreclosure) of each other item of Collateral to an Unrelated Third Party and in connection with the Settlement of each Collateral Loan (each such item of Collateral and Collateral Loan being hereinafter referred to as a “Released Asset”), Borrower may request the release of such Released Asset from the lien of the Security Documents.  In connection with any such requested release of a Released Asset, Lenders agree that Agent is authorized to and Agent shall release/discharge Agent’s Lien(s) on the respective REO Property, other item of Collateral or Collateral Loan upon receipt of a payment to the Owner Collection Account of an amount (the “Required Owner Collection Account Amount”) that is equal to the 100% of the hereinafter defined Release Price with respect to such Released Asset.  Lenders’ consent to any such release of a Released Asset shall not be required so long as 100% of the Required Owner Collection Account Amount that is applicable to such Released Asset is deposited in the Owner Collection Account.  The above provisions shall be applicable to all Assets, whether owned by Borrower or by any REO Affiliate and as to each REO Property owned by any REO Affiliate, the Required Owner Collection Account Amount and the Release Price shall be calculated as if Borrower were the owner of the REO Property in question and as if no REO Note existed.

6.5.2.The “Release Price” with respect to each Released Asset is defined as follows:

(a)In connection with any sale or Settlement, as the case may be, of the Released Asset in question (i) if the Debt Service Coverage Ratio (excluding all Performing Net Cash Flow that is attributable to such Released Asset, if any) as of the last Calculation Date was less than 1.4 to 1, then the Release Price with respect to such Released Asset shall be an amount equal to the greater of (i) 115% of the Allocated Loan Amount of such Released Asset (as reduced by prior collections directly relating to such Released Asset which have been received by Lenders and applied in reduction of the outstanding principal balance of the Loan) or (ii) 100% of the Net Sales Proceeds or the Net Collection Proceeds, as the case may be.

(b)In connection with any sale or Settlement, as the case may be, of the Released Asset in question if the Debt Service Coverage Ratio (excluding all Performing Net Cash Flow that is attributable to such Released Asset, if any) as of the last Calculation Date was greater than or equal to 1.4 to 1 and (ii) the LTV Ratio as of the last Calculation Date was greater than 55%, then the Release Price with respect to

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such Released Asset shall be an amount equal to the greater of (i) 115% of the Allocated Loan Amount of such Released Asset (as reduced by prior collections directly relating to such Released Asset which have been received by Lenders and applied in reduction of the outstanding principal balance of the Loan), or (ii) 80% of the Net Sales Proceeds or the Net Collection Proceeds, as the case may be.

(c)In connection with any sale or Settlement, as the case may be, of the Released Asset in question if the Debt Service Coverage Ratio (excluding all Performing Net Cash Flow that is attributable to such Released Asset, if any) as of the last Calculation Date was greater than or equal to 1.4 to 1 and (ii) the LTV Ratio as of the last Calculation Date was less than or equal to 55%, then the Release Price with respect to such Released Asset shall be an amount equal to the greater of (i) 115% of the Allocated Loan Amount of such Released Asset (as reduced by prior collections directly relating to such Released Asset which have been received by Lenders and applied in reduction of the outstanding principal balance of the Loan), or (ii) 70% of the Net Sales Proceeds or the Net Collection Proceeds, as the case may be.

(d)Notwithstanding the foregoing, Borrower shall have the right to request, from time to time, that the Release Price with respect to any particular Released Asset be less than the amount that is specified in subsection (a) above and if the Majority Lenders, in their sole discretion, approve such request, the Release Price with respect to such Released Asset shall be such lesser amount as may be approved by the Majority Lenders.

6.5.3In connection with the release of each Released Asset, Borrower will submit to Agent, for Agent’s determination as to compliance with this Agreement, a Release Request in the form of Exhibit H hereto (“Release Request”) signed by Borrower setting forth (a) the anticipated Net Sales Proceeds or Net Collection Proceeds, as the case may be, to be received by Borrower in connection with the sale or Settlement of such Released Asset, (b) Borrower’s calculation of the then applicable Debt Service Coverage Ratio (calculated using only the Assets that will remain subject to the Security Documents after the requested release) and (c) Borrower’s calculation of the Release Price and the Required Owner Collection Account Amount.  In connection with each proposed release of an Asset, Agent reserves the right to recalculate the Debt Service Coverage Ratio and, in this regard, as a precondition to Agent’s approval of any such Release Request, Borrower shall have submitted to Agent all required financial information with respect to the respective Calculation Period.  Within ten (10) days after Agent’s receipt of a Release Request and such other required financial information, Agent will notify Borrower of the Required Owner Collection Account Amount and the required Release Price.

6.6  Termination of Security Interests.  Upon payment in full of the Obligations, Agent shall release, terminate and satisfy all of its security interests in and Liens upon all remaining Collateral, and shall deliver to Borrower any and all written instruments requested by Borrower which are reasonably necessary to evidence such release, termination and satisfaction.  Neither Agent nor Lenders shall have any obligation to pay

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any costs or fees associated with the filing or recordation of any such release, termination or satisfaction and Borrower agrees to pay all reasonable costs and expenses (including reasonable attorneys’ fees) incurred by Agent or Lenders in connection with the preparation of any of such instruments.

SECTION 7.  REPRESENTATIONS AND WARRANTIES

7.1General Representations and Warranties.  To induce Agent and Lenders to enter into this Agreement and to make the Loan hereunder, Borrower warrants, represents and covenants to Agent and Lenders, as of the date of this Agreement, as follows:

7.1.1  Organization, Ownership; Etc.

(a)The Borrower is a Texas limited liability company.  The Borrower was formerly known as “FH Partners Investments LLC” and is the surviving entity of a merger among Borrower, FH Asset Corp., a Texas corporation, and FH Partners, L.P., a Texas limited partnership.

(b)Each of the two current REO Affiliates is a limited liability company, and each of such entities is duly organized, validly existing and in good standing under the laws of the jurisdiction governing the entity’s internal affairs; and each of such entities is duly qualified and authorized to do business and in good standing in all states and jurisdictions where the character of its assets or the nature of its activities make such qualification necessary and in which the failure to so qualify could have a material adverse effect on the Borrower; and Borrower has not been known as or used any corporate, fictitious or trade names in the past.  The Member is the sole member of Borrower.  All of the membership interests in the Borrower and the ownership interests in each REO Affiliate are owned as set forth in Exhibit C attached hereto and incorporated herein by reference.  All of the legal and beneficial ownership interests in each respective member (other than California Bank and Trust), as applicable, are also as set forth on such Exhibit C.  The taxpayer identification numbers of Borrower, Member and each REO Affiliate are accurately set forth on such Exhibit C.

7.1.2  Power and Authority.  Borrower has the right and power and is duly authorized to enter into, deliver and perform this Agreement and each of the other Loan Documents to which it is a party, and this Agreement is, and each of the other Loan Documents when delivered pursuant to this Agreement will be, legal, valid and binding obligations of Borrower enforceable against it in accordance with their respective terms.  Member has the right and power and is duly authorized to cause and direct Borrower to enter into, deliver and perform this Agreement and each of the other Loan Documents to which Borrower is a party.

7.1.3  Use of Loan Proceeds.  The Loan Proceeds will be used solely (a) to refinance the Assets, (b) to pay costs incurred by Borrower and (c) to fund reserves established by Borrower in connection with the closing of the Loan.  Borrower is not

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engaged principally, or as one of its important activities, in the business of purchasing or carrying “margin stock” (within the meaning of Regulation G or U of the Board of Governors of the Federal Reserve System), and no part of the proceeds of the Loan will be used to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying any margin stock, or be used for any purpose which violates or is inconsistent with the provisions of Regulations G, T, U or X of said Board of Governors.

7.1.4  Consents, Etc.

(a)Borrower, the Member and each REO Affiliate and each REO Affiliate Owner has, and each is in good standing with respect to, all governmental consents, approvals, authorizations, permits, certificates, inspections, and franchises necessary to conduct its business as heretofore or proposed to be conducted by it and to own or lease and operate its assets as now owned or leased by it; and in which the failure to so qualify could have a material adverse effect on such Person; and

(b)The execution, delivery and performance by (i) the Borrower of the Loan Documents, (ii) each REO Affiliate and each REO Affiliate Owner of the REO Notes and REO Security Documents, do not and will not (1) require any consent or approval of any REO Affiliate  Owners (or if any such consent is required, it will be obtained prior to the respective execution, delivery and performance of each respective document); (2) contravene the Borrower’s Limited Liability Company Agreement or any REO Affiliate’s respective limited liability operating company agreement or other governing documents, as applicable or; (3) violate any provision of any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award presently in effect having applicability to the Borrower, the Member, any REO Affiliate or any REO Affiliate Owner; (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 the Borrower, the Member or any REO Affiliate or any REO Affiliate Owner is a party or by which the Borrower, the Member, or any REO Affiliate or any REO Affiliate Owner or their properties may be bound or affected; (5) except as may be provided by the Security Documents or the REO Security Documents (with respect to any REO Affiliate), result in the creation or imposition of any Lien upon or with respect to any of the properties now owned or hereafter acquired by the Borrower, the Member, any REO Affiliate or any REO Affiliate Owner; or (6) cause the Borrower, the Member, any REO Affiliate or any REO Affiliate Owner 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.

7.1.5  Pending Proceedings.  There are no actions, suits, proceedings or investigations pending, or to the knowledge of Borrower, threatened, against or affecting Borrower, Member, Servicer, any REO Affiliate or any REO Affiliate Owner, or any of

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their assets in any court or before any governmental authority or arbitration board or tribunal which, if adversely determined, could materially and adversely affect the assets, business, prospects, profits or condition (financial or otherwise) of Borrower or any such Person.

7.1.6  Title to Assets.  Borrower has good title to all of its property and Assets, in each case, free and clear of all Liens except Permitted Liens.  Each REO Affiliate has good indefeasible title to and fee simple ownership of, or valid and subsisting leasehold interests in, all of its real property and good title to its interests in any other REO Affiliate other than Permitted Liens.

7.1.7  Financial Condition.  There are no liabilities of the Borrower, any REO Affiliate or any REO Affiliate Owner, fixed or contingent, which are material and which have not been disclosed to Agent in writing.  The fiscal years of Borrower, Member, each REO Affiliate and each REO Affiliate Owner, as applicable, end on December 31 of each year.

7.1.8  Material Facts.  There is no fact which Borrower or the Servicer has failed to disclose to Agent in writing which materially affects adversely or, so far as Borrower can now foresee, will materially affect adversely the assets, business, prospects, profits, or condition (financial or otherwise) of Borrower or the Servicer or the ability of Borrower to perform this Agreement.  No information, exhibit or report furnished by the Borrower to the Agent or Lenders in connection with the negotiation of this Agreement contained any material misstatement of fact or omitted a material fact or any fact necessary to make the statement contained therein not materially misleading.

7.1.9  ERISA Compliance.  The Borrower is in compliance in all material respects with all applicable requirements of ERISA and the regulations promulgated thereunder.  No fact or situation that could result in a material adverse change in the financial condition of Borrower (including, but not limited to, any Reportable Event or Prohibited Transaction) exists in connection with any Plan.  Borrower does not have any withdrawal liability in connection with a Multi-Employer Plan.  None of the equity funds provided or being provided by Borrower or its Member are being invested on behalf of a pension plan or other entity which is subject to ERISA.

7.1.10  Taxes and Assessments.  Borrower, each REO Affiliate and the Servicer have filed all federal, state and local tax returns and other reports they are required by law to file and have paid, or made provision for the payment of, all taxes, assessments, fees and other governmental charges that are due and payable; excluding, however, taxes or assessments that are a Lien on any REO Property or on any real property security a Collateral Loan with respect to which (i) Borrower has made a good faith commercially reasonable business determination to defer the payment of such taxes or assessments, (ii) the REO Property or real property in question is not sold at any tax sale or in any other action to foreclose a tax lien or other similar proceeding, and (iii) Agent has specifically consented to Borrower’s decision to defer the payment of such taxes or assessments, which consent shall not be unreasonably withheld.

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Provided that all relevant information concerning the deferral of the payment of any such taxes or assessments is included in the tax status reports that are delivered by Borrower to Agent pursuant to this Agreement, Agent shall be deemed to have consented to any deferral that is identified in such reports unless Agent objects thereto in writing within thirty (30) days after its receipt of the applicable report.

7.1.11  Compliance with Laws.  Borrower, each REO Affiliate and Servicer have duly complied with, and their assets, business operations and leaseholds are in compliance in all material respects with, the provisions of all federal, state and local laws, rules and regulations (including, without limitation, Environmental Laws) applicable to Borrower, each REO Affiliate, Servicer and their assets or the conduct of their businesses.  Neither Borrower nor any REO Affiliate, nor, to the best of Borrower’s knowledge, any of their respective assets is in material violation of any Environmental Laws or subject to any existing, pending or overtly threatened investigation by any governmental authority under any Environmental Law.  To the best of Borrower’s knowledge, no Hazardous Substance has been disposed of or released on any of Borrower’s assets or any of the applicable REO Affiliate’s assets.

7.1.12  Existence of Defaults.  No Default or Event of Default will exist or result from the execution and delivery of this Agreement or Borrower’s performance hereunder.

7.1.13  Commissions, Etc..  There are no claims for brokerage commissions, finder’s fees or investment banking fees in connection with the transactions contemplated by this Agreement.

7.1.14  Solvency.  Borrower is, and after giving effect to the transactions contemplated under the Loan Documents will be, solvent.  After giving effect to the transactions contemplated under the Loan Documents, the Borrower:  (a) will be able to pay its debts as they become due, and (b) will have funds and capital sufficient to carry on its business and all businesses in which it is about to engage.

7.1.15  Other Agreements.  Except for the Existing BOS Loans which are to be restructured into the New BOS Loan and except for the New FHP — BOS Subordinated Guaranty, neither the Borrower, the Member nor any REO Affiliate nor the Servicer is a party to any indenture, loan, or credit agreement, or to any lease or other agreement or instrument, or subject to any charter or corporate restriction which could have a material adverse effect on the businesses, properties, assets, operations or conditions, financial or otherwise of the Borrower, any REO Affiliate, or the Servicer, or the ability of the Borrower, any REO Affiliate, or the Servicer to carry out its respective obligations under the Loan Documents to which it is a party.  Neither the Borrower nor any REO Affiliate nor the Servicer is in default in any material 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.

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7.1.16  Principal Place of Business; Books and Records.  The Borrower’s chief executive office and principal place of business is located at the Borrower’s address set forth in Section 13.8 of this Agreement.  All of the Borrower’s books and records are kept at its principal place of business.

7.1.17  Subsidiaries, etc.  Other than any currently existing or hereafter organized REO Affiliates, the Borrower has no subsidiaries.

7.1.18  Preliminary Statement.  All information and statements set forth in the Preliminary Statement of this Agreement are true and accurate as of the date hereof.

7.1.19Authorized Representatives.  Agent and Lenders are authorized to rely upon the continuing authority of the persons, officers, signatories or agents hereafter designated (“Authorized Representatives”) to bind Borrower with respect to all matters pertaining to the Loan and the Loan Documents including, but not limited to, the execution of Notices of Borrowing.  Such authorization may be changed only upon written notice to Agent accompanied by evidence, reasonably satisfactory to Agent, of the authority of the person giving such notice and such notice shall be effective not sooner than five (5) Business Days following receipt thereof by Agent.  The present Authorized Representatives are listed on Exhibit A.

7.2Reaffirmation and Survival of Representations.  The submission of a Notice of Borrowing by Borrower pursuant to this Agreement shall constitute (a) an automatic representation and warranty by Borrower to Agent and Lenders that there does not then exist any Default or Event of Default, and (b) in the event the date of such Notice of Borrowing is different than the date of this Agreement, a reaffirmation as of the date of such Notice of Borrowing that all of the representations and warranties of Borrower contained in this Agreement and the other Loan Documents are true in all material respects as if made on such date rather than the date of this Agreement. Borrower covenants, warrants and represents to Agent and Lenders that all representations and warranties of Borrower contained in this Agreement or any of the other Loan Documents shall be true at the time of Borrower’s execution of this Agreement and the other Loan Documents, and shall survive the execution, delivery and acceptance thereof by the parties thereto and the closing of the transactions described therein or related thereto.

SECTION 8.  COVENANTS AND CONTINUING AGREEMENTS

8.1Affirmative Covenants.  During the term of this Agreement, and thereafter for so long as there are any Obligations to Agent and/or Lenders outstanding, Borrower covenants that, unless otherwise consented to by Majority Lenders in writing, Borrower shall, and Borrower shall cause each REO Affiliate to:

8.1.1  Payment of Taxes; Liens.  Pay and discharge all taxes, assessments and governmental charges upon it, its income and assets as and when such taxes, assessments and charges are due and payable, except and to the extent only that (a)

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such taxes, assessments and charges are being actively contested in good faith and by appropriate proceedings, Borrower maintains adequate reserves on its books therefor and the nonpayment of such taxes does not result in a Lien upon any assets of Borrower or each REO Affiliate other than a Permitted Lien, or (b) in the case of any particular REO Property or other real property securing a Collateral Loan, Borrower has made a good faith commercially reasonable business decision to defer the payment of such taxes, assessments or governmental charges and Agent has specifically consented thereto in accordance with Section 7.1.10 above.  Borrower shall also pay and discharge any lawful, valid claims which, if unpaid, might become a Lien against any of Borrower’s or any REO Affiliate’s assets except for Permitted Liens.

8.1.2  Filings.  File all federal, state and local tax returns and other reports Borrower or any REO Affiliate is required by law to file and maintain adequate reserves for the payment of all taxes, assessments, governmental charges, and levies imposed upon it, its income, or its profits, or upon any assets belonging to it.

8.1.3  Certain Expenses.  Pay to Agent and Lenders, upon demand therefor, any and all reasonable fees, costs or expenses which Agent or any Lender pays to a bank or other similar institution arising out of or in connection with (i) the forwarding to Borrower or any other Person on behalf of Borrower proceeds of the Loan and (ii) the depositing for collection of any check or item of payment received by or delivered to Agent or any Lender on account of the Obligations.

8.1.4  Maintenance of Rights.  Preserve and maintain its separate existence and all rights, privileges, and franchises in connection therewith, and maintain its qualification and good standing in all states in which such qualification is necessary.

8.1.5  Maintenance of Assets.  Maintain its physical assets in as good of a condition as they existed on the date acquired by Borrower or such REO Affiliate, ordinary wear and tear excepted.

8.1.6  Compliance with Laws.  Comply with all laws, ordinances, governmental rules and regulations to which it is subject, and obtain and keep in force any and all licenses, permits, franchises, or other governmental authorizations necessary to the ownership of its assets or to the conduct of its business, which violation or failure to obtain might materially and adversely affect the assets or condition (financial or otherwise) of Borrower or any REO Affiliate.  Borrower and each REO Affiliate shall at all times keep and maintain their assets in material compliance with, and shall not cause or permit any of the same to be in material violation of, any applicable Environmental Law.

8.1.7  Compliance with ERISA.  (i) At all times make prompt payment of contributions required to meet the minimum funding standards set forth in ERISA with respect to each Plan; (ii) promptly after the filing thereof, furnish to Agent copies of any annual report required to be filed pursuant to ERISA in connection with each Plan and any other employee benefit plan of it and its Affiliates subject to said Section; (iii) notify

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Agent as soon as practicable of any Reportable Event and of any additional act or condition arising in connection with any Plan which Borrower believes might constitute grounds for the termination thereof by the Pension Benefit Guaranty Corporation or for the appointment by the appropriate United States district court of a trustee to administer the Plan; and (iv) furnish to Agent, promptly upon Agent’s request therefor, such additional information concerning any Plan or any other such employee benefit plan as may be reasonably requested.

8.1.8  Records and Books.  Keep adequate records and books of account with respect to its business activities and the business activities of each REO Affiliate in which proper entries are made in accordance with GAAP reflecting all its financial transactions.

8.1.9  Inspections.  Upon reasonable notice, permit representatives of Lenders, from time to time, as often as may be reasonably requested, but only during normal business hours, to visit and inspect the assets of Borrower and each REO Affiliate, inspect and make extracts from its books and records, and discuss with its Member, its employees, its independent accountants and its Property Managers, Borrower’s and such REO Affiliate’s business, assets, liabilities, financial condition, business prospects and results of operations.

8.1.10  Financial Reports.  Cause to be prepared and furnished to Agent the following (all to be kept and prepared in accordance with GAAP applied on a consistent basis):

(a)as soon as possible, but not later than one hundred twenty (120) days after the close of each fiscal year of Borrower, either (i)  unqualified audited financial statements of Borrower as of the end of such year, certified by a firm of independent certified public accountants of recognized standing selected by Borrower but acceptable to Agent or (ii) financial statements of Borrower as of the end of such year prepared by KPMG LLP in accordance with the “agreed upon procedures” contained in the December 14, 2011 letter agreement between KPMG LLC and Borrower; and

(b)not later than thirty (30) days after the end of each calendar quarter, (i) a listing of all Assets remaining subject to the Security Documents as of the last day of the calendar quarter in question together with Borrower’s calculations of then Net Present Value of all such Assets, (ii) Borrower’s calculation of the Debt Service Coverage Ratio as of the last day of the calendar quarter in question, and (iii) Borrower’s calculation of the LTV Ratio as of the last day of the calendar quarter in question; all of which calculations shall be subject to Agent’s review and approval or recalculation (as reasonably determined by Agent) on the next Calculation Date; and

(c)as soon as possible, but not later than the earlier to occur of a date that is (i) ten (10) days after Servicer receives an opinion letter issued by the certified public accountants engaged by Servicer to audit its fiscal year end financial

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statements or (ii) one hundred twenty (120) days after the close of each fiscal year of Servicer, unqualified audited consolidated financial statements of Servicer as of the end of such year, certified by a firm of independent certified public accountants of recognized standing selected by Servicer but acceptable to Agent; and

(d)as to each REO Property, from time to time upon request by Agent, not later than ten (10) days after any such request, a “rent roll”, so-called, dated as of the end of the then most recent calendar quarter and stating with respect to each rental unit in the REO Property in question, the name of the tenant thereof, the rent paid by such tenant, the date to which such rent is paid, the date on which such tenant’s leasehold interest terminates and the amount held by the REO Affiliate in question by way of security deposit from each such tenant; which rent roll is to be certified to as being accurate by a Responsible Officer of the applicable REO Affiliate in question and by a Responsible Officer of the Servicer; and

(e)as soon as possible, but not later than twenty-five (25) days after the end of each calendar month, unaudited operating statements of Borrower as of the end of such month and as of the portion of Borrower’s fiscal year then elapsed, certified by a Responsible Officer of the Borrower and by a Responsible Officer of the Servicer as being prepared in accordance with GAAP and fairly presenting the financial position and results of operations of Borrower and each REO Affiliate (on an REO Property by REO Property basis) for such calendar month and period, subject only to changes from audit and year-end adjustments and except that such statements need not contain accountant’s notes thereto; which operating statements shall be in form reasonably acceptable to Agent and shall include and be supplemented by such detail, supporting data and schedules and other information as Agent may reasonably require.

Concurrently with the delivery of the financial statements described in clause (a) of this Section 8.1.10, Borrower shall forward to Agent a copy of the independent auditor’s report to Borrower’s management that is prepared in connection with such financial statements.  Concurrently with the delivery of the operating statements to be delivered with respect to the last month of each calendar quarter pursuant to clause (e) of this Section 8.1.10 and the calculations to be delivered as of the last day of each calendar quarter pursuant to clause (b) of this Section 8.1.10, Borrower shall cause to be prepared and furnished to Agent a certificate in the form attached hereto as Exhibit G (a “Compliance Certificate”) from a Responsible Officer of the Borrower, from a Responsible Officer of each REO Affiliate, and from a Responsible Officer of the Servicer certifying to Agent and Lenders that, to the best of such Responsible Officer’s knowledge (a) no Default or Event of Default has occurred, or, if such Default or Event of Default has occurred, specifying the nature thereof, (b) compliance with the Debt Service Coverage Ratio covenant referenced therein and (c) the accuracy of the financial information furnished pursuant to this Section 8.1.10.

8.1.11  Tax Escrow Reports & Tenant Security Deposit Reports.  From time to time upon request by Agent, not later than ten (10) days after any such request,  furnish to Agent:

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(a) a “Tax Escrow Report” detailing on an Asset by Asset basis (i) the annual real estate taxes (and to the extent applicable, insurance premiums) payable with respect to each Asset, (ii) a detail by category (i.e. real estate taxes, insurance, Net Insurance and Condemnation Proceeds, etc.) of the total amount of Tax Escrow Payments deposited in the Tax Escrow Account during the calendar month in question, (iii) a detail by category of the total amount of withdrawals from the Tax Escrow Account during such calendar month, and (iv) the remaining balance of real estate taxes (and where applicable, insurance premiums) due with respect to the Asset in question, which report shall be certified to by a Responsible Officer of the Servicer and a Responsible Officer of the Borrower; and

(b) a “Tenant Security Deposit Report” detailing, on an REO Property by REO Property basis and a tenant by tenant basis, the total amount of Tenant Security Deposits held by Servicer or the applicable Property Manager as of the end of the calendar month in question which report shall be certified to by a Responsible Officer of the Servicer and a Responsible Officer of the Borrower.

8.1.12  Collateral Loans Reports.  As soon as possible but no later than thirty (30) days after the end of each calendar month, furnish to Agent an analysis of all Collateral Loans reflecting monthly collections, outstanding balances, anticipated future collections, Settlement information, default status and such information as Agent may otherwise request (the “Collateral Loans Reports”).  In addition, at Majority Lenders’ option, Majority Lenders shall have the right to require such Collateral Loans Reports and such other information as Majority Lenders may otherwise reasonably request, on a weekly or bi-weekly basis.

8.1.13  Further Assurances.  At Agent’s request, promptly execute and deliver or cause to be executed and delivered to Agent any and all documents, instruments and agreements deemed necessary by Agent to perfect or to continue the perfection of Agent’s Liens, to facilitate collection of the Collateral or otherwise to give effect to or carry out the terms or intent of this Agreement or any of the other Loan Documents.

8.1.14  Ancillary Agreements.  Enter into the AAC Agreement, the Custodial Agreement and the Services Agreement and fully comply with all terms thereof; and pay, perform and observe each of its obligations under any other agreement to which it is a party in accordance with the terms thereof.

8.1.15  General Indemnity.  Indemnify, protect, and hold Agent and Lenders and their respective parents, subsidiaries, directors, officers, employees, representatives, agents, successors, assigns, and attorneys (collectively, the “Indemnified Parties”) harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses (including, without limitation, reasonable attorneys’ fees and legal expenses whether or not suit is brought and settlement costs), and disbursements of any kind or nature

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whatsoever which may be imposed on, incurred by, or asserted against the Indemnified Parties, in any way relating to or arising out of the Loan, the Collateral, the Other Agreements, the Loan Documents or any of the transactions contemplated therein (EXPRESSLY INCLUDING THE ORDINARY NEGLIGENCE OF LENDERS AND AGENT, BUT EXCLUDING THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF LENDERS AND AGENT) (collectively, the “Indemnified Liabilities”), to the extent that any of the Indemnified Liabilities results, directly or indirectly, from any claim made or action, suit, or proceedings commenced by or on behalf of any Person other than the Indemnified Parties or Borrower; PROVIDED, HOWEVER, THAT ALTHOUGH EACH INDEMNIFIED PARTY SHALL HAVE THE RIGHT TO BE INDEMNIFIED FROM ITS OWN ORDINARY NEGLIGENCE, NO INDEMNIFIED PARTY SHALL HAVE THE RIGHT TO BE INDEMNIFIED HEREUNDER FOR ITS OWN FRAUD, GROSS NEGLIGENCE, OR WILLFUL MISCONDUCT; provided further, however, that Agent and Lenders shall not be indemnified against claims resulting from Agent’s or Lenders’ own actions taken with respect to any Asset after Agent forecloses its Lien upon such Asset.  The provisions of and undertakings and indemnification set forth in this paragraph shall survive the satisfaction and payment of the Obligations and termination of this Agreement.

8.1.16   Environmental Site Assessments.  With respect to any REO Property, Agent shall have the right at any time to require that Borrower obtain and deliver to Agent an Environmental Site Assessment which Environmental Site Assessment shall be addressed to Borrower and Agent.  Borrower acknowledges that Agent shall have the right to retain the services of one or more environmental consultants, satisfactory to Agent, to review any such Environmental Site Assessments and to review all other environmental site assessments at any time submitted to Agent with respect to the Assets and that the fees and expenses of such environmental consultants shall be paid by Borrower.

8.1.17  Environmental Indemnity.  Indemnify, protect, and hold each of the Indemnified Parties harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, proceedings, costs, expenses (including, without limitation, all reasonable attorneys’ fees and legal expenses whether or not suit is brought and settlement costs), and disbursements of any kind or nature whatsoever which may at any time be imposed on, incurred by, or asserted against such Indemnified Parties, (EXPRESSLY INCLUDING THE ORDINARY NEGLIGENCE OF LENDERS AND AGENT, BUT EXCLUDING THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF LENDERS AND AGENT) with respect to or as a direct or indirect result of the violation of any Environmental Law by Borrower, by any Account Debtor under any Collateral Loan or by the condition of any of the Collateral or any real or personal property which secures any Collateral Loan; or with respect to or as a direct or indirect result of Borrower’s or any REO Affiliate’s or any such Account Debtor’s generation, manufacture, production, storage, release, threatened release, discharge, disposal or presence in connection with its properties of a Hazardous Substance including, without limitation, (a) all damages of any such use, generation, manufacture, production, storage, release, threatened release, discharge, disposal, or presence, or

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(b) the costs of any required or necessary environmental investigation, monitoring, repair, cleanup, or detoxification and the preparation and implementation of any closure, remedial, or other plans.  The provisions of and undertakings and indemnification set forth in this paragraph shall survive the satisfaction and payment of the Obligations and termination of this Agreement.  In addition to the foregoing, in the event that Borrower learns that any REO Property which has an Allocated Loan Amount of $100,000 or more has a condition that may require reporting or remediation, or both, pursuant to any Environmental Law applicable to such REO Property, Borrower or the applicable REO Affiliate shall obtain an Environmental Site Assessment of such REO Property, and if the report of such Environmental Site Assessment states that there is a condition on or in such REO Property that requires reporting or remediation as aforesaid, then Borrower or the applicable REO Affiliate shall, at Majority Lenders’ election, promptly either:  (a) take any and all actions necessary to comply with the applicable Environmental Laws with respect to such condition(s) or (b) obtain the release/discharge of Agent’s Lien on such REO Property by paying to Agent the Release Price (as a prepayment on the Loan) and otherwise complying with the provisions of Section 6.5 above (except that it shall not be necessary for the REO Affiliate in question to sell such REO Property to anyone), and Agent agrees to consent to such release/discharge.

8.1.18  Sale of Collateral and Collection of Collateral Loans.  If at any time Borrower or an REO Affiliate sells any items of Collateral, real or personal, then, promptly upon its receipt of the proceeds of such sale, Borrower or such REO Affiliate shall make a payment into the Owner Collection Account in an amount equal to the Required Owner Collection Account Amount with respect to such item of Collateral.  If at any time Borrower (a) makes a collection in full of a Collateral Loan, (b) agrees to settle any Collateral Loan or (c) makes a collection against a Collateral Loan in connection with a sale to an Unrelated Third Party of any item of personal property or real property securing a Collateral Loan pursuant to a foreclosure or other legal proceedings, then, promptly upon its receipt of same, Borrower shall make a payment into the Owner Collection Account in an amount equal to the Required Owner Collection Account Amount with respect to such Collateral Loan.  To the extent that any funds are not deposited in the Owner Collection Account in accordance with the above by reason of the inability to properly identify same, Borrower or Servicer shall not be in default of this Section if such funds are deposited in the Owner Collection Account within two (2) Business Days after the proper identification of same.

8.1.19  Deposit all Funds in Owner Collection Account.  Advise and instruct all Account Debtors (including all REO Affiliates ) and all “lead” lenders under Participation Agreements to deliver all payments under Collateral Loans (including all Tax Escrow Payments) directly to the Lock-Box and deposit, or cause to be deposited, in the Owner Collection Account, all Net Cash Flow and all Tax Escrow Payments within two (2) Business Days after the receipt thereof.  To the extent that any funds are not deposited in the Owner Collection Account in accordance with the above by reason of the inability to properly identify same, Borrower or Servicer shall not be in default of this Section if such funds are deposited in the Owner Collection Account within two (2) Business Days after the proper identification of same.

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8.1.20  Title Insurance Policies.

(a)   As to each parcel of real property securing a Collateral Loan, prior to the Closing Date, Borrower shall have recorded with the appropriate records of land evidence the appropriate assignment to Borrower of the mortgage or deed of trust which secures such Collateral Loan.

(b)   At this time, Lenders have agreed to refrain from requiring the recording of any of the Assignments to Agent; provided however, Agent shall have the right to record in the appropriate records of land evidence all of the Assignments, or any of them, at any time after the occurrence of an Event of Default hereunder.  As to any Asset, within ten (10) Business Days after receipt of written notice from Agent that Agent has recorded an Assignment, Borrower shall deliver to Agent a Title Certificate or a Title Insurance Policy with respect to such parcel of real property.

(c)   As to any REO Property acquired by Borrower or an REO Affiliate, within ten (10) Business Days after the date of Borrower’s or such REO Affiliate’s acquisition of such REO Property, (i) the appropriate REO Affiliate shall execute and deliver to Borrower the appropriate REO Note and the appropriate REO Security Documents with respect to such REO Property, (ii) subject to Section 6.2(b), all such REO Security Documents shall be recorded by the Borrower in the appropriate land records and shall be delivered by Borrower to the Custodian after such recording and (iii) Borrower shall execute and deliver to Agent an original Assignment   of such REO Note and such REO Security Documents.  As to all REO Properties, or any of them, Agent shall have the right to record all or any of such REO Security Documents and Assignments at any time after the occurrence of an Event of Default hereunder.  As to any REO Property, within ten (10) Business Days after receipt of written notice from Agent that Agent has recorded the applicable REO Security Documents, Borrower shall have delivered to Agent a Title Insurance Policy or a Title Certificate (as required by Agent) with respect to such REO Property.

8.1.21  Tax and Other Escrows.  Properly maintain and monitor all  escrow account (if any) for taxes and other expenses with respect to any Collateral Loan and, unless prohibited by applicable law, deposit and maintain all such escrow funds in the Tax Escrow Account.

8.1.22  Intentionally Omitted.

8.1.23  Intentionally Omitted.

8.1.24  Additional Information.  Furnish to the Agent:

(a)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

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Borrower, any REO Affiliate or the Servicer which, if determined adversely to the Borrower, any REO Affiliate or the Servicer, could have a material adverse affect on the financial condition, properties or operations of the Borrower, any REO Affiliate or the Servicer;

(b)Promptly after the filing or receiving thereof, copies of all reports, including annual reports, and notices which the Borrower files with or receives from the Pension Benefit Guaranty Corporation or the United States Department of Labor under ERISA;

(c)As soon as possible and in any event within five (5) Business 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;

(d)Within thirty (30) Business Days after the filing thereof, copies of all federal and state tax returns, together with all schedules thereto, filed by or on behalf of the Borrower, any REO Affiliate and the Servicer; and

(e)Promptly upon request by any Lender, such other information respecting the condition or operations, financial or otherwise, of the Borrower, any REO Affiliate and the Servicer as any Lender may reasonably from time to time request including, without limitation, all such information that any Lender may reasonably request (i) as to the Borrower with respect to asset compromise/sale experience, asset business plans, specific cash flow information, information concerning capital expenditures, etc. and (ii) as to the Servicer, on a “pool” by “pool” basis, with respect to asset compromise/sale experience, specific cash flow information, information concerning capital expenditures, etc.

8.1.25  Improvements to REO Properties.  In connection with the making of any improvements to any REO Properties:

(a)Comply with all applicable building, fire, health, sanitation, environmental protection, land use, subdivision and zoning laws, ordinances, rules and regulations promulgated by any governmental authority having jurisdiction over the REO Property in question, comply with all restrictions or other encumbrances affecting title to the REO Property in question, fulfill in every way the applicable requirements of any such governmental authority and furnish to Agent such evidence thereof as Agent may from to time reasonably require;

(b)File all plans for any such improvements with, and obtain all necessary approvals from, all governmental authorities having jurisdiction over the REO Property in question and submit copies of such approvals to Agent;

(c)Perform all of Borrower’s obligations under any construction contract and pay when due all sums for labor, materials, and equipment, including,

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without limitation, all fixtures and personalty incorporated in the REO Property in question;

(d)Give forthwith to Agent notice of any claim by any party of any material breach under any material construction contract in connection with any such improvements;

(e)Use only materials and equipment, including without limitation, fixtures and personalty incorporated in the REO Property in question, to which Borrower has absolute title, except as otherwise specifically approved in writing by Agent;

(f)Furnish to Agent from time to time, as requested by Agent, such budgets and revisions of budgets as the Agent may require in order to show the estimated cost of the improvements and the amount of funds required, at any given time, to complete and pay for the construction of such improvements; and

(g)Take all reasonable steps to prevent the recording of any notice of architect’s, artisan’s, materialmen’s or mechanic’s lien relating to the REO Property in question or the construction of the improvements and not permit or suffer to exist any Liens (other than the Permitted Prior Liens and the Permitted Liens) on the REO Property in question, any material stored thereon or therein or any insurance proceeds relating thereto or any sums due or to become due to Borrower under this Agreement, and, in the event of the recording of any such notice or lien, take all steps (including, without limitation, bonding) to remove the same from the record within fifteen (15) days after Borrower’s receipt of such notice.

8.1.26   Tax Escrow Payments.

(a)Deposit, or cause to be deposited, in the Tax Escrow Account all Tax Escrow Payments.

(b)Use funds deposited in the Tax Escrow Account only to pay the specific tax or other item for which such funds were deposited.

(c)Upon payment and other satisfaction in full of the Obligations, any funds remaining in the Tax Escrow Account shall be refunded to the Borrower.  Upon the occurrence of any Event of Default, Agent may apply against the Obligations, to the extent permitted by applicable law, in such manner as the Majority Lenders may determine, any or all of such deposited funds then held by Agent.

8.1.27Due Diligence.  Agent and Lenders shall be entitled to review, receive summaries of and otherwise inspect all due diligence of the Collateral Loan Pool performed by Borrower after the Closing Date.

8.1.28Conduct of Business.  Engage solely in the ownership and operation of the Assets and related activities and not enter into any new ventures or

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undertake any Investment, except as permitted in Section 8.2.2 below, or any new business dealings, without the Majority Lenders’ express prior written consent in each instance.  As an express inducement to Lenders to make and maintain the Loan, the Borrower agrees that at all times prior to payment and satisfaction of all Obligations, the Borrower and each REO Affiliate shall each be and remain a Bankruptcy Remote Entity.

8.1.29Delivery of Excluded Pledged Notes.  Upon Agent’s demand, which demand may be delivered to Borrower at any time, cause the Servicer to deliver all of the Excluded Pledged Notes (and any other Collateral Loan Documents that are associated with the Collateral Loans that are evidenced by such Excluded Pledged Notes), to Agent or, at Agent’s option, to the Custodian.

8.1.30Substitute Notes.  In connection with the closing of the Loan, Borrower is executing and delivering to Agent one Note in the principal amount of $50,000,000.  Thereafter, Borrower shall execute such replacement and substitute Notes (the “Substitute Note(s)”) as may be requested by Agent or Agent and any Lender from time to time to facilitate the issuance of individual Notes to each of the Lenders or the assignment by a Lender of all or part of its rights and obligations under this Agreement, provided, however, such Substitute Note(s) shall in the aggregate total the amount of the Note being replaced, and upon delivery of a Substitute Note, the Agent or Lender in question shall conspicuously mark the face of the Note being substituted with the following legend: “THIS NOTE HAS BEEN RENEWED AND SUBSTITUTED” and promptly return same to Borrower.

8.2Negative Covenants.  During the term of this Agreement, and thereafter for so long as there are any Obligations to Agent and/or Lenders outstanding, Borrower covenants that, unless Majority Lenders have first consented thereto in writing, Borrower will not, and Borrower will cause each REO Affiliate to not:

8.2.1  Dissolution, Merger, Etc.  Dissolve or otherwise terminate its existence or merge or consolidate with any Person; or acquire all or any substantial part of the assets of any Person except in cases where assets are acquired pursuant to a foreclosure of Borrower’s Liens upon the assets securing payment of a Collateral Loan.

8.2.2  Loans, Advances, and Investments.  Make any loan, advance, extension of credit, or capital contribution to, make any investment in, or purchase or commit to purchase any stock or other securities or evidences of Indebtedness of, or interests in, any other Person, other than:

(a) advances to employees of Borrower in the ordinary course of business not to exceed $1,500.00 in the aggregate outstanding at any time;

(b) investments in obligations of the United State of America and agencies thereof and obligations guaranteed by the United States of America maturing within one year from the date of acquisition;

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(c) certificates of deposit which are fully insured by the Federal Deposit Insurance Corporation or are issued by commercial banks organized under the Laws of the United States of America or any state thereof and having combined capital, surplus, and undivided profits of not less than $100,000,000.00 (as shown on such Person’s most recently published statement of condition), and which certificates of deposit have one of the three (3) highest ratings from Moody’s Investors Service, Inc., or Standard & Poor’s , a division of McGraw-Hill Companies, Inc.;

(d) commercial paper which has one of the two highest ratings from Moody’s Investors Service, Inc., or Standard & Poor’s, a division of McGraw-Hill Companies, Inc.;

(e)  investments with financial institutions having combined capital, surplus, and undivided profits of not less than U.S. $100,000,000.00 (as shown on such Person’s most recently published statement of condition), and whose certificates of deposit have one of the two highest ratings from Moody’s Investors Service, Inc., or Standard & Poor’s a division of McGraw-Hill Companies, Inc., respectively, or, if such institution does not have a commercial paper rating, a comparable bond rating;

(f) loans to or investments in the REO Affiliates in connection with the acquisition by such REO Affiliates of REO Properties; and

(g) loans to the purchaser of an REO Property for a portion of the purchase price of such REO Property, (i.e., seller financing); provided that in the case of any such loan the Majority Lenders specific prior written consent has been obtained, which consent may be withheld, granted or granted conditionally subject to such protective and other conditions as the Majority Lenders may require in their sole discretion.

Nothing contained in this Section 8.2.2 shall be deemed to in any way alter or diminish Borrower’s obligations to fully comply with the provisions of Section 8.1.18 and 8.1.19 above.

8.2.3  Other Indebtedness.  Create, incur, assume, or suffer to exist, any Indebtedness, or guarantee, assume, endorse or otherwise, in any way, become directly or contingently liable with respect to the Indebtedness of any Person except:

(a) the Obligations;

(b) obligations under the Services Agreement;

(c) contingent liabilities arising out of endorsements of checks and other negotiable instruments for deposit or collection in the ordinary course of business;

(d) contingent liabilities which may arise solely as a result of Borrower acquiring an asset subject to, but not assuming, a Permitted Prior Lien;

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(e) obligations incurred in connection with the ordinary course of Borrower’s business or the business of any REO Affiliate; and

(f) the New BOS Loan, including the New FHP — BOS Subordinated Guaranty.

8.2.4  Transactions with Affiliates.  Enter into any transaction with the Member, any Affiliate of Borrower or the Servicer, except for capital contributions or advances by the Member to Borrower, loans to or investments in REO Affiliates or those transactions evidenced by the Services Agreement.

8.2.5  Other Liens.  Create or suffer to exist any Lien upon any of its property, income or profits, whether now owned or hereafter acquired, except for Permitted Liens or Permitted Prior Liens.

8.2.6  Distributions.  Declare or make any distributions of any of its assets, income or profits to its Member or make any payments or distributions of any kind to any other Person if it constitutes an Improper Distribution.

8.2.7  New Places of Business.  Transfer its principal place of business or chief executive office, except upon at least sixty (60) days prior written notice to Agent and after the delivery to Agent of financing statements, if required by Agent, in form satisfactory to Agent to perfect or continue the perfection of Agent’s Liens and security interests hereunder.

8.2.8  New Businesses.  Enter into any new business or make any material change in any of Borrower’s business objectives, purposes and operations.

8.2.9  Disposition of Assets.  Sell, lease or otherwise dispose of any of its assets, except sales of assets in the ordinary course of Borrower’s business; provided, that Borrower or the appropriate REO Affiliate shall immediately pay all Net Sales Proceeds to Agent for deposit in the Owner Collection Account.

8.2.10  New Name or State of Organization; Fictitious Names.  Change its name or jurisdiction of organization or use any fictitious name or “d/b/a”.

8.2.11  Margin Stock.  Own, purchase or acquire (or enter into any contract to purchase or acquire) any “margin security”, as defined by any regulation of the Federal Reserve Board as now in effect or as the same may hereafter be in effect.

8.2.12  Fiscal Year.  Change its fiscal year.

8.2.13  Compliance with Environmental Laws.  Except in material compliance with all applicable laws (including all applicable Environmental Laws), use, generate, manufacture, produce, store, release, discharge, or dispose of on, under, or

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about any of its real property or transport to or from any of its real property any Hazardous Substance, or allow any other Person or entity to do so.

8.2.14  Discounts of Collateral Loans.  Discount or otherwise settle the amount owed on any Collateral Loan for an amount which is less than the Release Price of such Collateral Loan.

8.2.15  Modification of Ancillary Agreements.  Amend, modify or terminate the Services Agreement, the Lock-Box Agreement, the AAC Agreement or the Custodial Agreement without first obtaining Agent’s written consent.

8.2.16  Certain Prohibited Payments.  Make any payment under the Services Agreement at any time when any Default or Event of Default exists hereunder or if such payment would cause a Default or Event of Default hereunder; or make any payment under the Services Agreement (i) in a manner that is inconsistent with the terms of the Services Agreement or (ii) which is not specifically authorized under the terms of this Agreement.

SECTION 9.  EVENTS OF DEFAULT: RIGHTS AND REMEDIES ON DEFAULT

9.1Events of Default.  The occurrence of any one or more of the following events shall constitute an “Event of Default”:

9.1.1  Nonpayment of any installment of principal and/or interest due under the Notes when it shall become due and payable (no prior demand therefor being necessary) and such nonpayment shall have continued for more than ten (10) days after notice thereof from Agent to Borrower.

9.1.2  Nonpayment of any other sum payable under this Agreement, the Note, any of the Security Documents or any of the Other Agreements and, unless a different grace or notice period is elsewhere specified, such nonpayment shall have continued for more than ten (10) days after notice thereof from Agent to Borrower.

9.1.3  Nonpayment, nonperformance or nonobservance of any of the other covenants, agreements, or conditions of this Agreement (except for the covenants contained in Sections 3.3, 4.2.3, 8.1.18, 8.1.19 or 8.2 of this Agreement), or any of the Security Documents or any of the Other Agreements, and, unless a different grace or notice period is elsewhere specified, such nonperformance or nonobservance shall have continued for more than thirty (30) days after notice thereof from Agent to Borrower.  The foregoing shall not be deemed to provide a grace or notice period for nonperformance or nonobservance of any covenant, agreement or condition which is specifically listed as an Event of Default in any other Section of this Section 9.1.

9.1.4  Nonpayment, non-performance or non-observance of any of the covenants, agreements or conditions contained in Sections 3.3, 4.2.3, 8.1.18, 8.1.19, or 8.2 of this Agreement (no prior demand being necessary except with respect to Section

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8.2.13, where Agent agrees to give Borrower ten (10) days notice).

9.1.5  The occurrence of any “Event of Default” under the Notes, any of the Security Documents or any of the Other Agreements, or the occurrence of any event or condition which  entitles Agent or Lenders to exercise any of their remedies under any of the Security Documents or any of the Other Agreements.

9.1.6  Title to the Collateral is not satisfactory to the Agent by reason of any lien, charge, encumbrance, title condition or exception (other than Permitted Liens and Permitted Prior Liens) and such condition continues for more than thirty (30) days after notice thereof from Agent to Borrower.

9.1.7  As to any parcel of real property securing a Collateral Loan which Agent reasonably deems to be material, the Title Company shall fail to issue a Title Certificate, Title Insurance Policy or any endorsement referred to in Section 8.1.20 or shall otherwise refuse to insure the Loan as being secured by a valid lien on the real property portion of the Collateral subject only to Permitted Liens and Permitted Prior Liens.

9.1.8  The cancellation, lapse or termination of any insurance coverage required to be maintained by Borrower under this Agreement or under any of the Security Documents.

9.1.9  Borrower assigns this Agreement or any interest herein.

9.1.10  The Collateral or any portion thereof or any interest therein is conveyed, voluntarily encumbered or otherwise transferred in any way, except as may be specifically permitted by this Agreement, in each case, without the prior written consent of the Majority Lenders.

9.1.11  If any notice of responsibility, notice of violation, notice letter or similar notice or claim is issued or filed by any governmental authority against Borrower or any REO Affiliate or against any items of Collateral under any Environmental Laws and within sixty (60) days after the issuance or filing thereof either (a) the condition referenced therein is not cured or (b) a consent agreement reasonably satisfactory to the Majority Lenders has not been entered into such governmental authority.

9.1.12  Borrower or any REO Affiliate fails to deposit (or cause to be deposited) in the Owner Collection Account any funds required to be deposited therein in accordance with the provisions of Sections 8.1.18 and 8.1.19 hereof when due or Borrower fails to make any Mandatory Payment required under Section 4.2.3 when due (in either event, no prior demand being necessary).

9.1.13  If any REO Affiliate fails to promptly pay to Borrower (or if Borrower fails to deposit in the Owner Collection Account (when required hereunder) 100% of each month’s Net Operating Income from the REO Property in question.

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9.1.14  If Borrower requests a termination of the Loan or confesses inability to continue performance in accordance with this Agreement.

9.1.15  Breach or the proving false or misleading, in any material respect, of any representation or warranty now or hereafter made to Agent or Lenders by, on behalf of, or for the benefit of Borrower, any Member, any REO Affiliate or the Servicer contained in:

(a)this Agreement;

(b)any of the Security Documents or Other Agreements;

(c)the Notes; or

(d)any loan application, statement, financial statement, certificate or other document, agreement or instrument furnished, executed or delivered in connection herewith by, on behalf of, or for the benefit of Borrower, any Member, or the Servicer.

9.1.16  The occurrence of any “event of default” under any document, agreement or instrument now or hereafter (a) evidencing or securing any other obligation or indebtedness of Borrower or any REO Affiliate to Agent or any Lender now existing or hereafter arising or (b) evidencing any obligation or other indebtedness secured in whole or in part by any or all of the property covered by any of the Security Documents, or the nonpayment, nonperformance or nonobservance of any of the covenants, agreements or conditions of any such documents, agreements or instruments, which nonpayment, nonperformance or nonobservance shall have continued beyond the expiration of any applicable grace or notice period, or the occurrence of any event or condition which entitles the obligee of or under any such documents, agreements or instruments to exercise any of its remedies thereunder.

9.1.17  If BOS takes any action to enforce its rights or remedies against Borrower under the New FHP — BOS Subordinated Guaranty, the New BOS Security Documents or any of the other New BOS Loan Documents.

9.1.18  Nonpayment of any Indebtedness of the Borrower (other than the Notes or other Indebtedness referred to in the preceding subsection) if the effect of such nonpayment is to accelerate the maturity of such Indebtedness or to permit the holder thereof to cause such Indebtedness to become due prior to the stated maturity thereof, or if any other Indebtedness, the validity of which is not being contested in good faith by appropriate proceedings, is not paid when due and payable in accordance with the terms of such Indebtedness or customary trade practice.

9.1.19  (a) (i) The insolvency or inability of the Borrower or any REO Affiliate or any REO Affiliate Owner, or the Servicer to pay its debts as they mature; (ii) the appointment of a receiver, trustee, custodian or other fiduciary, for, or for any of the property of, the Borrower or any REO Affiliate or any REO Affiliate Owner or the Servicer or; (iii) the making of an assignment for the benefit of creditors, or the making

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of or entering into a trust mortgage or deed or other instrument of similar import for the benefit of creditors, by the Borrower or any REO Affiliate or any REO Affiliate Owner or the Servicer; or (iv) the convening of a meeting of the creditors, or the selection of a committee representing the creditors of the Borrower or the Member or any REO Affiliate or any REO Affiliate Owner, or the Servicer; or

(b)The filing of a petition, complaint, motion or other pleading seeking any relief under any receivership, insolvency, or debtor relief law, or seeking any readjustment of indebtedness, reorganization, composition, extension or any similar type of relief, or the filing of a petition, complaint, or motion under any chapter of the Bankruptcy Code by the Borrower or any REO Affiliate or any REO Affiliate Owner or the Servicer; or

(c)The filing of a petition, complaint, motion or other pleading seeking any relief under any receivership, insolvency, or debtor relief law, or under any chapter of the Bankruptcy Code, or seeking any readjustment of indebtedness, reorganization, composition, extension or any similar type of relief, or the entry of any order for relief under any chapter of the Bankruptcy Code, against the Borrower  or any REO Affiliate or any REO Affiliate Owner, or the Servicer; provided, however, that if Borrower shall immediately notify Agent in writing of the filing of any such petition, complaint, motion or other pleading against the Borrower or any REO Affiliate or any REO Affiliate Owner or the Servicer, and shall provide evidence satisfactory to Agent that the Borrower or any REO Affiliate or any REO Affiliate Owner, or the Servicer, as the case may be, has in good faith and within ten (10) days after the filing of any such petition, complaint, motion or other pleading filed an answer thereto contesting same, then there shall be no Event of Default under this subparagraph (c) until the earliest of (i) the entry of an order for relief or a judgment under any proceedings referred to in this subparagraph (c), (ii) the appointment of a receiver, trustee, custodian or other fiduciary in any such proceeding or (iii) the expiration of a period of thirty (30) days, at the end of which such petition, complaint, motion or other pleading remains undismissed; or

(d)The entry of any judgment against, or the attachment or garnishment of any of the property, goods or credits of, the Borrower or the Owner or any REO Affiliate or any REO Affiliate Owner or the Servicer with respect to any claim or claims in excess of One Hundred Thousand Dollars ($100,000) which remains unpaid, unstayed, undismissed or unbonded for a period of thirty (30) days; or if any foreclosure is instituted (by judicial proceedings, by publication of notice pursuant to a power of sale or otherwise) against the Borrower or any REO Affiliate or any REO Affiliate Owner or the Servicer under any mortgage, deed of trust or security agreement granted by the Borrower or any REO Affiliate or any REO Affiliate Owner or the Servicer and is not dismissed or terminated for a period of fifteen (15) days.

9.1.20  The dissolution, liquidation or termination of existence of the Borrower or the Member or any REO Affiliate or any REO Affiliate Owner or the Servicer or a sale of assets of Borrower or the Member or any REO Affiliate or any REO Affiliate Owner, or the Servicer out of the ordinary course of business.

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9.1.21  Any material adverse change in the financial condition of, or any act or omission of Borrower or any REO Affiliate or any REO Affiliate Owner, or the Servicer, or any act or omission of any officer, director, partner or trustee of Borrower or any REO Affiliate or any REO Affiliate Owner, or the Servicer which leads the Majority Lenders reasonably to believe that performance of any of the covenants, agreements, or conditions of any of the Loan Documents, is or may be substantially impaired.

9.1.22  Without the prior written consent of the Majority Lenders, (i) the transfer of any interest in Borrower by Member or dilution of the percentage interests in Borrower held by the Member (except transfers to one or more Affiliates of the Member) or (ii) the transfer of any interest in any REO Affiliate by any REO Affiliate Owner thereof or dilution of the percentage interests in any REO Affiliate held by any REO Affiliate Owner thereof.

9.1.23  Any change in the ownership or control of Servicer which would reduce the total percentage stock ownership in Servicer that is owned by FC Investment Holdings Corporation to be less than 100%, in every case without the Majority Lenders’ prior written consent or any change in the ownership or control of FC Investment Holdings Corporation which would reduce the total percentage stock ownership in FC Investment Holdings Corporation that is owned by FirstCity Financial Corporation to be less than 100%, in each without the Majority Lenders’ prior written consent.

9.1.24  The merger or consolidation with any corporation by the Member, the Servicer or any REO Affiliate Owner, or the transfer of any of the membership interests in the Borrower or any REO Affiliate by any of the present member, owner or partner, as applicable, thereof, or dilution of the percentage of the membership interests of, or voting rights in the Member any REO Affiliate Owner, held by any of the present partners, members or stockholders or other owners, as applicable, thereof, or the acquisition of any voting rights or membership or partnership interests, as applicable of either of the Member or any REO Affiliate, by any person, corporation or entity not presently a member, partner or stockholder, as applicable, thereof, without the prior written consent of the Majority Lenders.

9.1.25  If the Member or any REO Affiliate’s Owner, as applicable, claims that Borrower or any REO Affiliate is in default under Borrower’s company agreement or any such REO Affiliate’s governing agreements, or claims that such member, owner or partner or stockholder, as applicable, is not obligated to contribute all or any portion of such  member’s, owner’s or partner’s or stockholder’s, as applicable, contribution to such company’s capital or any such member, owner or partner or stockholder, as applicable, fails to make any such contribution in accordance with such governing agreement and such claim, action or inaction leads the Majority Lenders reasonably to believe that the performance of any of the covenants, agreements or conditions of any of the Loan Documents is or may be substantially impaired.

9.1.26  If Borrower fails to promptly notify Agent, in writing, and in any event

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within ten (10) days, of the occurrence of any event or condition of which Borrower is aware which constitutes a Default or an Event of Default, and together with such notice, furnish a written statement to Agent which shall set forth the details of any action Borrower proposes to take with respect thereto.

9.1.27  The failure of Servicer to maintain, at all times, a minimum net worth of at least $1,000,000.

Notwithstanding the terms of Sections 9.1.19, 9.1.21, 9.1.23 or 9.1.27 above, the occurrence of any event that is specified in any such Section which relates solely to the Servicer shall not be deemed an Event of Default hereunder if, within thirty (30) days after the occurrence of such event, the Servicer is replaced by a new servicer which is in all respects satisfactory to Majority Lenders in their sole discretion pursuant to a new services agreement which is in all respects satisfactory to Majority Lenders in their sole discretion and all books, records, data and other information that were in the possession, custody or control of the Servicer and which relate to any of the Assets shall have been transferred to such new servicer.

9.2Remedies.  After the occurrence of an Event of Default (unless such Event of Default has been waived in writing by the Majority Lenders), Agent and/or Lenders shall have and may exercise from time to time the following rights and remedies:

9.2.1  Acceleration of the Obligations.  The right to declare, at the Majority Lenders’ sole option, immediately due and payable all or any portion of the Obligations due or to become due from Borrower to Agent and/or Lenders (whether under the Loan or otherwise) without presentment, demand, protest, notice of dishonor, notice of default, notice of intent to accelerate, notice of acceleration, or any other notice whatsoever, and Borrower shall forthwith pay to Agent, for the account of Lenders, in addition to any and all sums and charges due, the entire principal of and interest accrued on the Obligations; provided, however, that in the case of an Event of Default under Section 9.1.19, the Obligations automatically shall become at once due and payable without presentment, demand, protest, notice of dishonor, notice of default, notice of intent to accelerate, notice of acceleration, or any other notice or action whatsoever by Agent or Lenders.

9.2.2  Cessation of Fundings.  The right to cease any and all fundings hereunder.

9.2.3  UCC Remedies.  All of the rights and remedies of a secured party under the Security Documents or under the Code or under other applicable law, and all other legal and equitable rights to which Agent or Lenders may be entitled, all of which rights and remedies shall be cumulative, and none of which shall be exclusive, and shall be in addition to any other rights or remedies contained in this Agreement or any of the other Loan Documents.

9.2.4  Possession of Collateral.  The right of Agent to take immediate

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possession of the Collateral (specifically including, without limitation, all records and all original documents), and (i) to require Borrower to assemble the Collateral, at Borrower’s expense, and make it available to Agent at a place designated by Agent which is reasonably convenient to both parties, and (ii) to enter any of the premises of Borrower or wherever any of the Collateral shall be located, and to keep and store the same on said premises until sold (and if said premises be the property of Borrower, Borrower agrees not to charge Agent for storage thereof).

9.2.5  Disposition of Collateral.  The right to sell or otherwise dispose of all or any of the Collateral at public or private sale or sales, with such notice as may be required by law, in lots or in bulk, for cash or on credit, all as Agent, in its discretion, may deem advisable.  Borrower agrees that thirty (30) days’ written notice to Borrower or the applicable REO Affiliate of any public or private sale or other disposition of any Collateral shall be reasonable notice thereof, and such sale shall be at such locations as Agent may designate in said notice.  Agent shall have the right to conduct such sales on Borrower’s or REO Affiliates’ premises, without charge therefor, and such sales may be adjourned from time to time in accordance with applicable law.  Agent shall have the right to sell, lease or otherwise dispose of any Collateral, or any part thereof, for cash, credit or any combination thereof, and Agent and/or Lenders may purchase all or any part of the Collateral at public or, if permitted by law, private sale and, in lieu of actual payment of such purchase price, may set-off the amount of such price against the Obligations.  Agent is hereby granted a license or other right to use, without charge, Borrower’s labels, patents, copyrights, rights of use of any name, trade secrets, tradenames, trademarks and advertising matter, or any property of a similar nature, as it pertains to the Collateral, in advertising for sale and selling any Collateral and Borrower’s rights under all licenses and all franchise agreements shall inure to Agent’s and Lenders’ benefit.  The proceeds realized from the sale of any Collateral may be applied, after allowing two (2) Business Days for collection, first to the costs, expenses and reasonable attorneys’ fees incurred by Agent and Lenders in collecting the Obligations, in enforcing Agent’s and Lenders’ rights under the Loan Documents and in collecting, retaking, completing, protecting, removing, storing, advertising for sale, selling and delivering any of the Collateral; secondly, to interest due upon any of the Obligations; and thirdly, to the principal of the Obligations. If any deficiency shall arise, Borrower shall remain liable to Agent and Lenders therefor.

9.2.6  Completion of Construction, etc.  The right (i) to enter upon any REO Property and construct, equip and/or complete any improvements, and to appoint watchmen to protect such REO Property, all at the risk, cost, and expense of Borrower; (ii) to discontinue, at any time, any work with respect to any improvements commenced by Agent or Lenders or change any course of action undertaken by Agent or Lenders in connection therewith; and/or (iii) to assume any construction contract or related agreement made by Borrower or any REO Affiliate in any way pertaining to any improvements and to take over and use all or any part or parts of the labor, materials, supplies, and equipment contracted for by Borrower or any REO Affiliate, all in the sole discretion of Agent.  In connection with any construction, equipping, and/or completion of any improvements undertaken by Agent or Lenders pursuant to the provisions of this

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Section 9.2.6 (but without intending to limit the powers and discretions conferred by said Section), Agent and Lenders may engage builders, contractors, architects, engineers, and others for the purpose of furnishing labor, materials, and equipment; pay, settle, or compromise all bills or claims which may become Liens or which have been or shall be incurred in any manner in connection with such construction, equipping, and/or completion of improvements; and take such action or refrain from acting hereunder as Agent or Lenders may, in their sole discretion, from time to time determine in order to carry out the intent of this Section 9.  Borrower shall be liable to Agent and Lenders for all costs paid or incurred for the construction, completion, and/or equipping of any improvements, whether the same shall be paid or incurred pursuant to the provisions of this Section 9.2.6, or otherwise, and all payments made or liabilities incurred by Agent or Lenders under this Agreement of any kind whatsoever shall be paid by Borrower to Agent on demand, with interest to the date of payment at the Default Rate and shall be secured by the Security Documents.

9.2.7  Rights Under Loan Documents.  The rights granted under any of the other Loan Documents and any of the Other Agreements.

9.3Security Interest and Set-Off.

9.3.1Security Interest and Set-Off. Borrower hereby grants to Agent and each Lender, a continuing lien, security interest and right of setoff as security for all of Borrower’s Obligations, whether now existing or hereafter arising, upon and against all Cash Collateral and all other deposits, credits, collateral and property, now or hereafter in the possession, custody, safekeeping or control of Agent or any Lender or any Affiliate of Agent or of any Lender (including without limitation any Affiliate of Bank of America Corporation and its successors and assigns) or in transit to any of them.  At any time after the occurrence of an Event of Default, without demand or notice (any such notice being expressly waived by Borrower), Agent and, subject to Section 9.3.3 below, each Lender and each such Affiliate may setoff the same or any part thereof and apply the same to any Obligation of Borrower even though unmatured and regardless of the adequacy of any other collateral securing the Obligations.  ANY AND ALL RIGHTS TO REQUIRE AGENT OR ANY LENDER OR ANY AFFILIATE THEREOF TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF BORROWER, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.

9.3.2Right to Freeze.  Agent and each Lender (and each Affiliate thereof) shall also have the right, at their option, upon the occurrence of any event which would entitle Agent or Lenders to set-off or debit any accounts, deposits, balances or other property of Borrower as set forth in Section 9.3.1, to freeze, block or segregate any of such accounts, deposits, balances or other property so that Borrower may not access, control or draw upon the same.

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9.3.3Additional Rights.  The rights of Agent and Lenders and each Affiliate of Agent and Lenders under this Section 9.3 are in addition to, and not in limitation of, other rights and remedies, including other rights of set-off, which Agent or Lenders may have; provided, however, no Lender and no such Affiliate shall independently exercise any rights under this Section 9.3, or any such other rights, without Agent’s prior written consent.

9.4Remedies Cumulative; No Waiver.  All covenants, conditions, provisions, warranties, guaranties, indemnities, and other undertakings of Borrower contained in this Agreement and the other Loan Documents, or in any document referred to herein or contained in any agreement supplementary hereto or in any schedule given to Agent or Lenders or contained in any other agreement between Borrower, Agent and/or Lenders heretofore, concurrently, or hereafter entered into, shall be deemed cumulative to and not in derogation or substitution of any of the terms, covenants, conditions, or agreements of Borrower herein contained.  The failure or delay of Agent or any Lender to exercise or enforce any rights, Liens, powers or remedies hereunder or under any of the aforesaid agreements or other documents or security or Collateral shall not operate as a waiver of such Liens, rights, powers and remedies, but all such Liens, rights, powers, and remedies shall continue in full force and effect until the Loan and all other Obligations shall have been fully satisfied.  All Liens, rights, powers, and remedies herein provided for are cumulative and none are exclusive.

SECTION 10.  DEBT SERVICE COVERAGE RATIO AND CASH RESERVE ACCOUNT

10.1Debt Service Coverage Ratio and Cash Reserve Account.

10.1.1

(a)  If, on any Calculation Date during the Term, commencing with the calendar quarter ending March 31, 2012, the Debt Service Coverage Ratio (calculated as of the last day of the immediately preceding calendar quarter) is calculated to be less than 1.4 to 1 but greater than or equal to 1.3 to 1, then within ten (10) days after notice from Agent, Borrower shall deposit in the Cash Reserve Account an amount (the “Six Month Cash Reserve Amount”) which is projected by Agent to equal (i) six (6) months interest on the Loan calculated on the then outstanding principal balance of the Loan and an interest rate equal to the then applicable Libor Rate minus (ii) the then balance in the Cash Reserve Account, if any.  The required Six Month Cash Reserve Amount shall be recalculated by Agent and adjusted on each respective Calculation Date and in connection with each requested release of an Asset and such amount shall remain on deposit in the Cash Reserve Account until such time as Borrower achieves a Debt Service Coverage Ratio of 1.4 to 1 or greater.  Upon achievement of such a Debt Service Coverage Ratio of 1.4 to 1 or greater, provided there does not then exist any Default, Agent shall release to Borrower all funds then remaining in the Cash Reserve Account, if any.  As an alternative to depositing the required Six Month Cash Reserve Amount in the Cash Reserve Account in accordance

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with the above, within the 10 day period referenced above, Borrower may prepay a sufficient amount of principal outstanding on the Loan such that if such outstanding principal balance had been reduced by such prepayment amount on the Calculation Date in question, the Debt Service Coverage Ratio would have been 1.4 to 1.

(b)  If on any Calculation Date during the Term, commencing with the calendar quarter ending March 31, 2012, the Debt Service Coverage Ratio (calculated as of the last day of the immediately preceding calendar quarter) is calculated to be less than 1.3 to 1 but greater than or equal to 1.25 to 1, then within ten (10) days after notice from Agent, Borrower shall deposit in the Cash Reserve Account an amount (“Twelve Month Cash Reserve Amount”) which is projected by Agent to equal (i) twelve (12) months interest on the Loan calculated on the then outstanding principal balance of the Loan and an interest rate equal to the then applicable Libor Rate minus (ii) the then balance in the Cash Reserve Account, if any.  The required Twelve Month Cash Reserve Amount shall be recalculated by Agent and adjusted on each respective Calculation Date and in connection with each requested release of an Asset and such amount shall remain on deposit in the Cash Reserve Account until such time as Borrower achieves a Debt Service Coverage Ratio of greater than or equal to 1.4 to 1.  Upon achievement of such a Debt Service Coverage Ratio of greater than or equal to 1.4 to 1, provided there does not then exist any Default, Agent shall release to Borrower all funds then remaining in the Cash Reserve Account in excess of the amount (if any) required to be maintained in the Cash Reserve Account pursuant to Section 10.1.1(b) above.  As an alternative to depositing the required Twelve Month Cash Reserve Amount in the Cash Reserve Account in accordance with the above, within the 10 day period referenced above, Borrower may (i) prepay a sufficient amount of principal outstanding on the Loan such that if such outstanding principal balance had been reduced by such prepayment amount on the Calculation Date in question, the Debt Service Coverage Ratio would have been 1.3 to 1, and (ii) deposit in the Cash Reserve Account the amount required under Section 10.1.1(a) above.

(c)  If, on any Calculation Date during the Term, commencing with the calendar quarter ending March 31, 2012, the Debt Service Coverage Ratio (calculated as of the last day of the immediately preceding calendar quarter) is calculated to be less than 1.25 to 1, then within ten (10) days after notice from Agent, Borrower shall (i) prepay a sufficient amount of principal outstanding on the Loan such that if such outstanding principal balance had been reduced by such prepayment amount on the Calculation Date in question, the Debt Service Coverage Ratio would have been 1.25 to 1 and (ii) deposit in the Cash Reserve Account the amount required under Section 10.1.1(b) above.

(d)  If, on any Calculation Date during the Extended Term, the Debt Service Coverage Ratio is calculated to be less than 1.4 to 1, then within ten (10) days after notice from Agent, Borrower shall prepay a sufficient amount of principal outstanding on the Loan such that if such outstanding principal balance had been reduced by such prepayment amount on the Calculation Date in question, the Debt Service Coverage Ratio would have been 1.4 to 1.

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10.1.2  To the extent required under Section 10.1.1 above, the Borrower shall establish with Agent, in the name of “Bank of America, N.A., as Agent”, a Cash Reserve Account and Borrower will at all times thereafter maintain and fund such Cash Reserve Account in the amounts required pursuant to Section 10.1.1 above.

10.1.3  The Cash Reserve Account shall be pledged and assigned to the Agent, for its benefit and for the benefit of the Lenders, as additional collateral for the payment and performance of the Obligations.  Agent shall have no obligation to apply any funds in the Cash Reserve Account against principal or interest payments due in connection with the Loan and any such application shall be made by Agent in the Majority Lender’s sole discretion.

SECTION 11.  THE AGENT AND THE LENDERS

11.1Rights, Duties and Immunities of the Agent.

11.1.1Appointment of Agent.  Each Lender hereby irrevocably designates and appoints Bank of America, N.A. as Agent for such Lender to act as specified herein and in the other Loan Documents, and each such Lender hereby irrevocably authorizes the Agent to take such actions, exercise such powers and perform such duties as are expressly delegated to or conferred upon the Agent by the terms of this Loan Agreement and the other Loan Documents, together with such other powers as are reasonably incidental thereto.  The Agent agrees to act as such upon the express conditions contained in this Article 11.  The Agent shall not have any duties or responsibilities except those expressly set forth herein or in the other Loan Documents, nor shall it have any fiduciary relationship with any Lender, and no implied covenants, responsibilities, duties, obligations or liabilities shall be read into this Loan Agreement or otherwise exist against the Agent.  The provisions of this Article 11 and of Article 11 are solely for the benefit of the Agent and the Lenders, and the Borrower shall not have any rights as a third party beneficiary of any of the provisions hereof.

11.1.2Administration of Loan by Agent.  The Agent shall be responsible for administering the Loan on a day-to day basis.  In the exercise of such administrative duties, the Agent shall use the same diligence and standard of care that is customarily used by the Agent with respect to similar loans held by Agent solely for its own account.

Each Lender delegates to the Agent the full right and authority on its behalf to take the following specific actions in connection with its administration of the Loan:

(a)to make Loan Advances in accordance with the provisions of the Loan Documents, but only (except as otherwise provided in Section 11.3.2 or 11.3.7 below) to the extent immediately available funds are provided to the Agent by the respective Lenders for such purpose;

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(b)to receive all payments of principal, interest, fees and other charges paid by, or on behalf of, the Borrower and, except for fees to which the Agent is entitled pursuant to the Loan Documents or otherwise, to distribute all such funds to the respective Lenders as provided for hereunder;

(c)to keep and maintain complete and accurate files and records of all material matters pertaining to the Loan, and make such files and records available for inspection and copying by each Lender and its respective employees and agents during normal business hours upon reasonable prior notice to the Agent; and

(d)to do or omit doing all such other actions as may be reasonably necessary or incident to the implementation, administration and servicing of the Loan and the rights and duties delegated hereinabove.

11.1.3Delegation of Duties.  The Agent may execute any of its duties under this Loan Agreement or any other Loan Document by or through its agents or attorneys-in-fact, and shall be entitled to the advice of counsel concerning all matters pertaining to its rights and duties hereunder or under the Loan Documents.  The Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care.

11.1.4Exculpatory Provisions.  Neither the Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or affiliates shall be liable for any action lawfully taken or omitted to be taken by it or them under or in connection with this Loan Agreement or the other Loan Documents, except for its or their gross negligence or willful misconduct.  Neither the Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or affiliates shall be responsible for or have any duty to ascertain, inquire into, or verify (a) any recital, statement, representation or warranty made by the Borrower or any of its officers or agents contained in this Loan Agreement or the other Loan Documents or in any certificate or other document delivered in connection therewith; (b) the performance or observance of any of the covenants or agreements contained in, or the conditions of, this Loan Agreement or the other Loan Documents; (c) the state or condition of any properties of the Borrower or any other obligor hereunder constituting Collateral for the Obligations of Borrower hereunder, or any information contained in the books or records of the Borrower; (d) the validity, enforceability, collectability, effectiveness or genuineness of this Loan Agreement or any other Loan Document or any other certificate, document or instrument furnished in connection therewith; or (e) the validity, priority or perfection of any lien securing or purporting to secure the Obligations or the value or sufficiency of any Collateral.

11.1.5Reliance by Agent.  The Agent shall be entitled to rely, and shall be fully protected in relying, upon any notice, consent, certificate, affidavit, or other document or writing believed by it to be genuine and correct and to have been signed, sent or made by the proper person or persons, and upon the advice and

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statements of legal counsel (including, without, limitation, counsel to the Borrower), independent accountants and other experts selected by the Agent.  The Agent shall be fully justified in failing or refusing to take any action under this Loan Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Majority Lenders as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of the taking or failing to take any such action.  The Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Loan Agreement and the other Loan Documents in accordance with any written request of the Majority Lenders, and each such request of the Majority Lenders, and any action taken or failure to act by Agent pursuant thereto, shall be binding upon all of the Lenders; provided, however, that the Agent shall not be required in any event to act, or to refrain from acting, in any manner which is contrary to the Loan Documents or to applicable law.

11.1.6Notice of Default.

(a)  The Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default unless the Agent has actual knowledge of the same or has received notice from a Lender or the Borrower referring to this Loan Agreement, describing such Default or Event of Default and stating that such notice is a “notice of default”.  In the event that the Agent obtains such actual knowledge or receives such a notice, the Agent shall give prompt notice thereof to each of the Lenders.  The Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Majority Lenders.  Unless and until the Agent shall have received such direction, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to any such Default or Event of Default as it shall deem advisable in the best interest of the Lenders, provided, however, that the Agent shall not accelerate the indebtedness under this Loan Agreement without the prior written consent of the Majority Lenders.

(b)  Notwithstanding the above, in the event that the Majority Lenders cannot come to agreement regarding acceleration of the Loan and the exercise of remedies under the Loan Documents within sixty (60) days after the time when the Lenders shall have had actual notice of any Event of Default, thereby resulting in a deadlock, then Agent shall, at the end of such sixty (60) day period, give notice to Borrower that the Loan is accelerated and Agent shall thereafter take such action (pursuant to the Loan  Documents under which it is acting as agent) as the Agent deems advisable to enforce the Lenders’ rights under this Loan Agreement and the other Loan Documents; provided, further, however, that in the event the Agent (whether in its capacity as a Lender or Agent, or both) shall not be in agreement with such acceleration of the Loan and exercise of remedies in connection therewith at the end of any such deadlock period, then the Agent shall have the option to withdraw as Agent prior to any such action being taken in connection with the Loan and the other Lenders shall appoint a successor Agent in accordance with Section 11.10 hereof.

11.1.7Lenders’ Credit Decisions.  Each Lender acknowledges

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that it has, independently and without reliance upon the Agent or any other Lender, and based on the financial statements prepared by the Borrower and such other documents and information as it has deemed appropriate, made its own credit analysis and investigation into the business, assets, operations, property, and financial and other condition of the Borrower and has made its own decision to enter into this Loan Agreement and the other Loan Documents.  Each Lender also acknowledges that it will, independently and without reliance upon the Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in determining whether or not conditions precedent to closing the Loan hereunder have been satisfied and in taking or not taking any action under this Loan Agreement and the other Loan Documents.

11.1.8Agent’s Reimbursement and Indemnification. The Lenders agree to reimburse and indemnify the Agent, ratably in proportion to their respective Commitments, for (a) any amounts not reimbursed by the Borrower for which the Agent is entitled to reimbursement by the Borrower under this Loan Agreement or the other Loan Documents, (b) any other expenses incurred by the Agent on behalf of the Lenders in connection with the preparation, execution, delivery, administration, amendment, waiver and/or enforcement of this Loan Agreement and the other Loan Documents, and (c) any liabilities, obligations, losses, damages, penalties, actions judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever which may be imposed on, incurred by or asserted against the Agent in any way relating to or arising out of this Loan Agreement or the other Loan Documents or any other document delivered in connection therewith or any transaction contemplated thereby, or the enforcement of any of the terms hereof or thereof, provided that no Lender shall be liable for any of the foregoing to the extent that they arise from the gross negligence or willful misconduct of the Agent.  IT BEING UNDERSTOOD THAT AGENT SHALL BE INDEMNIFIED FOR ITS ORDINARY NEGLIGENCE.  If any indemnity furnished to the Agent for any purpose shall, in the opinion of the Agent, be insufficient or become impaired, the Agent may call for additional indemnity and cease, or not commence, to do the action indemnified against until such additional indemnity is furnished.

11.1.9Agent in its Individual Capacity.  With respect to its Commitment as a Lender, and the Loan Advances made by it and the Note issued to it, the Agent shall have the same rights and powers hereunder and under any other Loan Document as any Lender and may exercise the same as though it were not the Agent, and the term “Lender” or “Lenders” shall, unless the context otherwise indicates, include the Agent in its individual capacity.  The Agent may accept deposits from, lend money to, and generally engage in any kind of banking or trust business with the Borrower or any Affiliate of the Borrower as if it were not the Agent hereunder.

11.1.10Successor Agent.  The Agent may resign at any time by giving thirty (30) days’ prior written notice to the Lenders and Borrower.  The Majority Lenders, for good cause, may remove Agent at any time by giving thirty (30) days’ prior written notice to the Agent, the Borrower and the other Lenders.  “Good cause” shall mean that the Majority Lenders shall have reasonably determined that the Agent is no

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longer capable of adequately performing its duties hereunder or Agent has failed to adequately perform its duties hereunder.  Upon any such resignation or removal, the Majority Lenders shall have the right to appoint a successor Agent.  If no successor Agent shall have been so appointed by the Majority Lenders and accepted such appointment within thirty (30) days after the retiring Agent’s giving notice of resignation or the Majority Lenders’ giving notice of removal, as the case may be, then the retiring Agent may appoint, on behalf of the Borrower and the Lenders, a successor Agent.  Each such successor Agent shall be a financial institution which meets the requirement of an Eligible Assignee.  As long as there does not exist any Event of Default, the identity of each successor Agent shall be subject to Borrower’s prior written approval, which approval shall not be unreasonably withheld, delayed or conditioned; provided, however, Borrower’s approval shall not be required if the successor agent is Bank of America Corporation or any Affiliate thereof.  Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents.  After any retiring Agent’s resignation hereunder, the provisions of this Section 11 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as the Agent hereunder.

11.1.11Duties in the Case of Enforcement.  In case one or more Events of Default have occurred and shall be continuing, and whether or not acceleration of the Obligations shall have occurred, the Agent shall, at the request, or may, upon the consent, of the Majority Lenders, and provided that the Lenders have given to the Agent such additional indemnities and assurances against expenses and liabilities as the Agent may reasonably request, proceed to enforce the provisions of this Loan Agreement and the other Loan Documents respecting the foreclosure of any Lien, the sale or other disposition of all or any part of the Collateral and the exercise any other legal or equitable rights or remedies that it may have hereunder or under any other Loan Documents or otherwise by virtue of applicable law, or to refrain from so acting if similarly requested by the Majority Lenders.  The Agent shall be fully protected in so acting or refraining from acting upon the instruction of the Majority Lenders, and such instruction shall be binding upon all the Lenders.  The Majority Lenders may direct the Agent in writing as to the method and the extent of any such foreclosure, sale or other disposition or the exercise of any other right or remedy, the Lenders hereby agreeing to indemnify and hold the Agent harmless from all costs and liabilities incurred in respect of all actions taken or omitted in accordance with such direction, provided that the Agent need not comply with any such direction to the extent that the Agent reasonably believes the Agent’s compliance with such direction to be unlawful or commercially unreasonable in any applicable jurisdiction.  The Agent may, in its discretion, but without obligation, in the absence of direction from the Majority Lenders, take such interim actions as it believes necessary to preserve the rights of the Lenders hereunder and in and to any Collateral, including but not limited to petitioning a court for injunctive relief, appointment of a receiver or preservation of the proceeds of any Collateral. Each of the Lenders acknowledges and agrees that no individual Lender may

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separately enforce or exercise any of the provisions of any of the Loan Documents, including without limitation the Notes, other than through the Agent.

11.2Lenders’ Pro Rata Shares.  Each Lender’s Pro Rata Share shall be as set forth on Exhibit E hereto, as the same may be amended from time to time, (“Pro Rata Share”) and accordingly each Lender shall be deemed to own an undivided interest equal to its Pro Rata Share in (i) the Loan; (ii) all Loan Documents; and (iii) all principal and interest payments due under or in connection with the Loan and, except as otherwise agreed by Lenders with respect to Loan fees, all other sums due under the Loan Documents.  Each Lender shall be entitled to its Pro Rata Share of all payments of principal, interest, and, except as otherwise agreed by Lenders with respect to Loan fees, other sums due under or in connection with the Loan.  Except as otherwise agreed by Lenders with respect to Loan fees, no Lender shall have any priority of ownership or interest in the Loan, the Loan Documents or any payment thereunder over the other Lenders.

11.3Respecting Loans and Payments.

11.3.1Procedures for Loan Advances.  Agent shall give written notice to each Lender of each request for a Loan Advance (including each request for a new Libor Loan), or conversion of an existing Loan from a Prime Rate Loan to a Libor Loan, by facsimile transmission, hand delivery or overnight courier, not later than 11:00 A.M. (i) three (3) Business Days prior to any Libor Loan or conversion to a Libor Loan, or (ii) two (2) Business Days prior to any Prime Rate Loan.  Each such notice shall be accompanied by a written summary of the request for a Loan Advance and shall specify (a) the date of the requested Loan Advance, (b) the aggregate amount of the requested Loan Advance, and (c) each Lender’s Pro Rata Share of the requested Loan Advance.   Each Lender shall, before 11:00 A.M. on the date set forth in any such request for a Loan Advance, make available to Agent, at an account to be designated by Agent, in same day funds, each Lender’s Pro Rata Share of the requested Loan Advance.  After Agent’s receipt of such funds and upon Agent’s determination that the applicable conditions to making the requested Loan Advance have been fulfilled, Agent shall make such funds available to Borrower as provided for in this Loan Agreement.  Within a reasonable period of time following the making of each Loan Advance, but in no event later than ten (10) Business Days following such Loan Advance, Agent shall deliver to each Lender a copy of Borrower’s requisition with respect to such Loan Advance.  Promptly after receipt by Agent of written request from any Lender, Agent shall deliver to the requesting Lender the accompanying certifications and such other instruments, documents, certifications and approvals delivered by or on behalf of Borrower to Agent in support of the requested Loan Advance.

11.3.2Nature of Obligations of Lenders and Failure of a Lender to Fund.

11.3.2.1  Several Obligations.  The obligations of the Lenders hereunder are several and not joint.  Failure of any Lender to fulfill its

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obligations hereunder shall not result in any other Lender becoming obligated to advance more than its Pro Rata Share of the Commitment, nor shall such failure release or diminish the obligations of any other Lender to fund its Pro Rata Share of the Commitment provided herein.

11.3.2.2  Failure of a Lender to Fund.  Should any Lender fail to make its Pro Rata Share of the requested Loan Advance available at the office of the Agent prior to 10:00 A.M. on the date of borrowing specified in the notice to such Lender, Agent shall notify Borrower of such default and, if Borrower so requests, Agent may, but shall not be obligated to, advance to the Borrower, on such Lender’s behalf, out of funds otherwise available to Agent, such Lender’s Pro Rata Share of such Loan Advance, or a portion thereof; provided, however, Agent shall not be authorized to make any such advance on behalf of any such Lender if prior to 10:00 A.M. on such date of borrowing, Agent shall have received a written instrument signed by a duly authorized officer of such Lender revoking the Agent’s authority hereunder or stating that such Lender’s Pro Rata Share is not required to be advanced pursuant to Section 10.3.1.  If Agent advances such Lender’s Pro Rata Share of such Loan Advance or a portion thereof as permitted hereby, Agent shall notify Borrower of such funding by Agent on the date of funding and such Lender shall reimburse (or if such Lender fails to pay such amount as hereinafter provided, Borrower shall repay) the Agent in full therefor within four (4) Business Days after the date of such Loan Advance (or, in the case of the Borrower’s repayment, within one Business Day after demand by Agent for payment), together with interest on the principal amount so advanced by Agent at a rate per annum equal to the interest rate payable by Borrower from time to time on such Loan Advance or portion thereof while it is outstanding.

11.3.3Payments to Agent.  All payments of principal of and interest on the Loan shall be made to the Agent by the Borrower or any other obligor or guarantor for the account of the Lenders in Dollars in immediately available funds as provided in the Notes and this Loan Agreement.  The Agent agrees promptly to distribute to each Lender, on the same Business Day upon which each such payment is made, such Lender’s Pro Rata Share of each such payment in immediately available funds, except as otherwise expressly provided herein.  The Agent shall upon each distribution promptly notify Borrower of such distribution and each Lender of the amounts distributed to it applicable to principal of, and interest on, the Pro Rata Share held by the applicable Lender.  Each payment to the Agent under the first sentence of this Section 11.3.3 shall constitute a payment by the Borrower to each Lender in the amount of such Lender’s Pro Rata Share of such payment, and any such payment to the Agent shall not be considered outstanding for any purpose after the date of such payment by the Borrower to the Agent without regard to whether or when the Agent makes distribution thereof as provided above.  If any payment received by the Agent from the Borrower is insufficient to pay both all accrued interest and all principal then due and owing, the Agent shall first apply such payment to all outstanding interest until paid in full and shall then apply the remainder of such payment to all principal then due and owing, and shall distribute the payment to each Lender accordingly.

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11.3.4Adjustments.  If, after Agent has paid each Lender’s Pro Rata Share of any payment received or applied by Agent in respect of the Loan, that payment is rescinded or must otherwise be returned or paid over by Agent, whether pursuant to any bankruptcy or insolvency law, sharing of payments clause of any loan agreement or otherwise, such Lender shall, at Agent’s request, promptly return its Pro Rata Share of such payment or application to Agent, together with such Lender’s Pro Rata Share of any interest or other amount required to be paid by Agent with respect to such payment or application.

11.3.5Setoff.  If any Lender (including the Agent), acting in its individual capacity, shall exercise any right of setoff against a deposit balance or other account of the Borrower held by such Lender on account of the obligations of the Borrower under this Loan Agreement, such Lender shall remit to the Agent all such sums received pursuant to the exercise of such right of setoff, and the Agent shall apply all such sums for the benefit of all of the Lenders hereunder in accordance with the terms of this Loan Agreement.  Notwithstanding the foregoing, no Lender shall exercise any such right of setoff without the prior written consent of Agent.

11.3.6Distribution by Agent.  If in the opinion of the Agent distribution of any amount received by it in such capacity hereunder or under the Notes or under any of the other Loan Documents might involve any liability, it may refrain from making distribution until its right to make distribution shall have been adjudicated by a court of competent jurisdiction or has been resolved by the mutual consent of all Lenders.  In addition, the Agent may request full and complete indemnity, in form and substance satisfactory to it, prior to making any such distribution.  If a court of competent jurisdiction shall adjudge that any amount received and distributed by the Agent is to be repaid, each person to whom any such distribution shall have been made shall either repay to the Agent its Pro Rata Share of the amount so adjudged to be repaid or shall pay over to the same in such manner and to such persons as shall be determined by such court.

11.3.7Delinquent Lender.  If for any reason any Lender shall fail or refuse to abide by its obligations under this Loan Agreement, including without limitation its obligation to make available to Agent its Pro Rata Share of any Loan Advances, expenses or setoff (a “Delinquent Lender”) and such failure is not cured within three (3) days of receipt from the Agent of written notice thereof, then, in addition to the rights and remedies that may be available to Agent, other Lenders, the Borrower or any other party at law or in equity, and not in limitation thereof, (a) such Delinquent Lender’s right to participate in the administration of, or decision-making rights related to, the Loan, this Loan Agreement or the other Loan Documents shall be suspended during the pendency of such failure or refusal, and (b) a Delinquent Lender shall be deemed to have assigned any and all payments due to it from the Borrower, whether on account of the outstanding Loan, interest, fees or otherwise, to the remaining non-delinquent Lenders for application to, and reduction of, their Pro Rata Shares of the outstanding Loan until, as a result of application of such assigned payments the Lenders’ respective Pro Rata Shares of all outstanding Loans shall have returned to those in effect

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immediately prior to such delinquency and without giving effect to the nonpayment causing such delinquency.  The Delinquent Lender’s decision-making and participation rights and rights to payments as set forth in clauses (a) and (b) hereinabove shall be restored only upon the payment by the Delinquent Lender of its Pro Rata Share of the Loan or expenses as to which it is delinquent, together with interest thereon at the Default Rate from the date when originally due until the date upon which any such delinquent amounts are actually paid.

The non-delinquent Lenders shall also have the right, but not the obligation, in their respective, sole and absolute discretion, to acquire for no cash consideration, (pro rata, based on the respective Pro Rata Shares of the Commitments of those Lenders electing to exercise such right) the Delinquent Lender’s Commitment to fund future Loan Advances (the “Future Commitment”). Upon any such purchase of the pro rata share of any Delinquent Lender’s Future Commitment, the Delinquent Lender’s share in future Loan Advances and its rights under the Loan Documents with respect thereto shall terminate on the date of purchase, and the Delinquent Lender shall promptly execute all documents reasonably requested to surrender and transfer such interest, including, if so requested, a Substitution Agreement.  Each Delinquent Lender shall indemnify Agent and each non-delinquent  Lender from and against any and all loss, damage or expenses, including but not limited to reasonable attorneys’ fees and funds advanced by Agent or by any non-delinquent Lender, on account of a Delinquent Lender’s failure to timely fund its Pro Rata Share of a Loan Advance or to otherwise perform its obligations under the Loan Documents.

11.3.8Holders.  The Agent may deem and treat the payee of any Note as the owner thereof for all purposes hereof unless and until a written notice of the assignment, transfer or endorsement thereof, as the case may be, shall have filed with the Agent.  Any request, authority or consent of any person or entity who, at the time of making such request or giving such authority or consent, is the holder of any Note shall be conclusive and binding on any subsequent holder, transferee or endorsee, as the case may be, of such Note or of any Note or Notes issued in exchange therefor.

SECTION 12.  ASSIGNMENT AND PARTICIPATION PROVISIONS AND CERTAIN

ADMINISTRATIVE MATTERS

12.1Assignment and Participation Provisions.

12.1.1Conditions to Assignment by Lenders.  Except as provided herein, each Lender may assign to one or more Eligible Assignees all or a portion of its interests, rights and obligations under this Loan Agreement (including all or a portion of its Commitment and the same portion of the Loan at the time owing to it and the Notes held by it), upon satisfaction of the following conditions: (a) each of the Agent and the Borrower shall have given its prior written consent to such assignment (provided that, in the case of the Borrower, such consent will not be unreasonably withheld and shall not be required if a Default or an Event of Default shall have occurred and be continuing); (b) each such assignment shall be of a constant, and not a varying,

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percentage of all the assigning Lender’s rights and obligations under this Loan Agreement, (c) each assignment shall be in an amount that is at least $3,000,000 and is a whole multiple of $1,000,000, (d) as long as no Default or Event of Default exists and is continuing, the Agent (or any successor agent hereunder), in its individual capacity as a Lender, shall retain, free of any such assignment, an amount of its Commitment of not less than the amount of the Commitment of the Lender who holds the next largest Commitment (provided, however, the foregoing restriction shall not be deemed to have been violated if, as a result of a merger or acquisition, the Commitments of two or more Lenders are combined and such combined Commitment exceeds the Commitment of the Agent (or any such successor agent) in its capacity as a Lender), and (e) the parties to such assignment shall execute and deliver to the Agent, for recording in the Register, a Substitution Agreement, substantially in the form of Exhibit F hereto (a “Substitution Agreement”), together with any Notes subject to such assignment.  Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Substitution Agreement, which effective date shall be at least five (5) Business Days after the execution thereof, (x) the assignee thereunder shall be a party hereto and, to the extent provided in such Substitution Agreement, have the rights and obligations of a Lender hereunder and under the other Loan Documents, and (y) the assigning Lender shall, to the extent provided in such assignment and upon payment to the Agent of the registration fee referred to in Section 12.1.3, be released from its obligations under this Loan Agreement.

12.1.2Certain Representations and Warranties; Limitations, Covenants.  By executing and delivering a Substitution Agreement, the parties to the assignment thereunder confirm to and agree with each other and the other parties hereto as follows:

(a)other than the representation and warranty that it is the legal and beneficial owner of the interest being assigned thereby free and clear of any adverse claim, the assigning Lender makes no representation or warranty, express or implied, and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Loan Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Loan Agreement, the other Loan Documents or any other instrument or document furnished pursuant hereto or the attachment, perfection or priority of any security interest or mortgage (if any);

(b)the assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or any other Person primarily or secondarily liable in respect of any of the Obligations, or the performance or observance by the Borrower or any other Person primarily or secondarily liable in respect of any of the Obligations of any of their obligations under this Loan Agreement or any of the other Loan Documents or any

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other instrument or document furnished pursuant hereto or thereto;

(c)such assignee confirms that it has received a copy of this Loan Agreement, together with copies of the most recent financial statements provided by the Borrower as required by the terms of this Loan Agreement, together with such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Substitution Agreement;

(d)such assignee will, independently and without reliance upon the assigning Lender, the Agent or any other Lender and based upon such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Loan Agreement;

(e)such assignee represents and warrants that it is an Eligible Assignee;

(f)such assignee appoints and authorizes the Agent to take such actions as agent on its behalf and to exercise such powers under this Loan Agreement and the other Loan Documents as are delegated to the Agent by the terms hereof or thereof, together with such powers as are reasonably incidental thereto;

(g)such assignee agrees that it will perform in accordance with their terms all of the obligations that by the terms of this Loan Agreement are required to be performed by it as a Lender;

(h)such assignee represents and warrants that it is legally authorized to enter into such Substitution Agreement; and

(i)such assignee represents and warrants that such assignment will not cause a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Internal Revenue Code.

12.1.3Register.  The Agent shall maintain a copy of each Substitution Agreement delivered to it and a register or similar list (the “Register”) for the recordation of the names and addresses of the Lenders and the Pro Rata Shares of the Commitment of, and principal amount of the Loan owing to, the Lenders from time to time.  The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrower, the Agent and the Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Loan Agreement. The Register shall be available for inspection by the Borrower and the Lenders at any reasonable time and from time to time upon reasonable prior notice.  Upon each such recordation, the assigning Lender agrees to pay to the Agent a registration fee in the sum of $3,000.

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12.1.4New Notes.  Upon its receipt of a Substitution Agreement executed by the parties to such assignment, together with each Note subject to such assignment, the Agent shall (a) record the information contained therein in the Register, and (b) give prompt notice thereof to the Borrower and the Lenders (other than the assigning Lender).  Within five (5) Business Days after receipt of a request from Agent to do so, the Borrower, at its own expense, shall execute and deliver to the Agent, in exchange for each surrendered Note, a new Note to the order of such assignee in an amount equal to the amount assumed by such assignee pursuant to such Substitution Agreement and, if the assigning Lender has retained some portion of its obligations hereunder, a new Note to the order of the assigning Lender in amount equal to the amount retained by it hereunder.  Such new Notes shall provide that they are replacements for the surrendered Notes, shall be in an aggregate principal amount equal to the aggregate principal amount of the surrendered Notes, shall be dated the effective date of such Substitution Agreement and shall otherwise be substantially the form of the assigned Notes. The surrendered Notes shall be canceled and returned to the Borrower.

12.1.5Participations.  Each Lender may sell participations to one or more banks or other financial institutions in all or a portion of such Lender’s rights and obligations under this Loan Agreement and the other Loan Documents; provided that (a) each such participation shall be in a minimum amount of $3,000,000, (b) each participant shall meet the requirements of an Eligible Assignee, (c) any such sale or participation shall not affect the rights and duties of the selling Lender hereunder to the Borrower, and (d) the only rights granted to the participant pursuant to such participation arrangements with respect to waivers, amendments or modifications of the Loan Documents shall be the rights to approve waivers, amendments or modifications that would reduce the principal of or the interest rate on the Loan, extend the term or increase the amount of the Pro Rata Share of the Commitment of such Lender as it relates to such participant, reduce the amount of any commitment fees to which such participant is entitled or extend any regularly scheduled payment date for principal or interest.

12.1.6Disclosure.  The Borrower agrees that in addition to disclosures made in accordance with standard and customary banking practices, any Lender may disclose information obtained by such Lender pursuant to this Loan Agreement to assignees or participants and potential assignees or participants hereunder; provided that such assignees or participants or potential assignees or participants shall agree (a) to treat in confidence such information unless such information otherwise was known or becomes known to such assignee or participant from a third party which is not, to the knowledge of such assignee or participant, bound by any confidentiality provisions with respect thereto, or otherwise becomes public knowledge, (b) not to disclose such information to a third party, except auditors, accountants, attorneys and other agents of such participant or assignee, bank regulators or other governmental authorities or as required by law or legal process and (c) not to make use of such information for purposes of transactions unrelated to such

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contemplated assignment or participation.

12.1.7Miscellaneous Assignment Provisions.

(a)  Any assigning Lender shall retain its rights to be indemnified pursuant to this Agreement with respect to any claims or actions arising prior to the date of such assignment.

(b)If any assignee Lender is not incorporated under the laws of the United States of America or any state thereof, it shall, prior to the date on which any interest or fees are payable hereunder or under any of the other Loan Documents for its account, deliver to the Borrower and the Agent certification as to its exemption from deduction or withholding of any United States federal income taxes.

(c)  Anything contained in this Section 12.1.7 to the contrary notwithstanding, any Lender may at any time pledge or assign all or any portion of its interest and rights under the Loan Documents (including all or any portion of its Notes) to any of the Federal Reserve Banks organized under §4 of the Federal Reserve Act, 12 U.S.C. §341.  No such pledge or assignment or the enforcement thereof shall release any such Lender from its obligations hereunder or under any of the other Loan Documents.

12.1.8Limitations on Lenders’ Right to Assign the Loan.  Notwithstanding the rights granted to Lenders pursuant to Section 12.1.1 and 12.1.5 above:

(a)Lenders shall not have the right to sell or assign all or any portion of their interest in the Loan to an Eligible Assignee at any time when there does not exist any Event of Default, without the prior written consent of the Borrower, which consent shall not be unreasonably withheld, delayed or conditioned.

(b)Notwithstanding the provisions of Section 12.1.8(a), above, in the event that any Lender is the subject of a merger with another financial institution, the survivor of such merger shall assume the rights and obligations of such Lender under the terms of this Agreement and the other Loan Documents and any such merger shall not be considered a substitution hereunder and will therefore not be deemed to increase the number of Lenders hereunder.

12.1.9Non-U.S. Lenders.  Each Lender (or Substituted Lender) that is organized under the laws of a jurisdiction other than the United States, any State thereof or the District of Columbia (a “Non-U.S. Lender”) shall deliver to the Borrower and Agent two copies of either United States Internal Revenue Form 1001 or Form 4224, or, in the case of a Non-U.S. Lender claiming exemption from U.S. Federal withholding tax under Section 871(h) or 881(c) of the Internal Revenue Code with respect to payments of “portfolio interest,” a Form W-8, or any subsequent versions thereof or successors thereto, properly completed and duly executed by such Non-U.S.

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Lender claiming complete exemption from, or reduced rate of, U.S. Federal withholding tax on payments by the Borrower under this Agreement and the other Loan Documents. Such forms shall be delivered by each Non-U.S. Lender on or before the date it becomes a party to this Agreement and on or before the date, if any, such Non-U.S. Lender changes its applicable lending office by designating a different lending office.

12.2Certain Administrative Matters.

12.2.1Amendment, Waiver, Consent, Etc.

(a)Except as otherwise expressly provided herein or as to any term or provision hereof which provides for the consent or approval of the Agent only, no term or provision of this Loan Agreement or any other Loan Document may be changed, waived, discharged or terminated, nor may any consent required or permitted by this Loan Agreement or any other Loan Document be given, unless such change, waiver, discharge, termination or consent receives the written approval of the Majority Lenders or unless such approval of the Majority Lenders is deemed given pursuant to Section 12.2.2 below.

Notwithstanding the foregoing, the unanimous written approval of all the Lenders (other than a Defaulting Lender) shall be required with respect to any proposed amendment, waiver, discharge, termination, or consent which:

(i)is described in Section 13.2 below; or

(ii)amends, modifies or waives any provisions of this Section 12.2.1;

and provided, further, that without the consent of the Agent, no such action shall amend, modify or waive any provision of Article 11 or Article 12 or any other provision of any Loan Documents which relates to the rights or obligations of the Agent.

(b)With respect to any requested amendment, waiver, consent or other action which under the terms of this Agreement requires the approval of the Majority Lenders or of all of the Lenders, as the case may be, Borrower shall be entitled to rely upon the written representation of the Agent that such approval has been obtained and Borrower shall have no obligation to independently verify that such is the case.

12.2.2Deemed Consent or Approval.  With respect to any requested amendment, waiver, consent or other action which requires the approval of the Majority Lenders in accordance with the terms of this Loan Agreement, or if the Agent is required hereunder to seek, or desires to seek, the approval of the Majority Lenders prior to undertaking a particular action or course of conduct, the Agent in each case shall provide each Lender with written notice of any such request for amendment, waiver or consent or any other requested or proposed action or course of conduct, accompanied by such background information and explanations as may be reasonably

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necessary to determine whether to approve or disapprove such amendment, waiver, consent or other action or course of conduct. The Agent may (but shall not be required to) include in any such notice, printed in capital letters or boldface type, a legend substantially to the following effect:

“THIS COMMUNICATION REQUIRES IMMEDIATE RESPONSE.  FAILURE TO RESPOND WITHIN TEN (10) BUSINESS DAYS FROM THE RECEIPT OF THIS COMMUNICATION SHALL CONSTITUTE A DEEMED APPROVAL BY THE ADDRESSEE OF THE ACTION REQUESTED BY THE BORROWER OR THE COURSE OF CONDUCT PROPOSED BY THE AGENT AND RECITED ABOVE.”

And if the foregoing legend is included by the Agent in its communication and if such communication is delivered to a Lender by registered or certified mail or by any recognized courier service or overnight delivery service such as Federal Express, such Lender shall be deemed to have approved or consented to such proposed action or course of conduct for all purposes hereunder if such Lender fails to object to such action or course of conduct by written notice to the Agent within ten (10) Business Days of such Lender’s receipt of such notice.  The procedure for deemed consent or approval that is set forth in this Section 12.2.2 shall not apply to any requested amendment, waiver, consent or other action which requires the approval of all of the Lenders pursuant to Section 13.2(a) below.

12.3Certain Lender Representations.  Each Lender severally represents and warrants, with respect to such Lender only, that such Lender is an Eligible Assignee.

SECTION 13.  MISCELLANEOUS

13.1   Power of Attorney.  Contemporaneously herewith, Borrower has executed a power of attorney in favor of Agent (the “Power of Attorney”) subject to the condition that such Power of Attorney may be used by Agent or Agent’s agent only in accordance with the following provisions:

13.1.1  At such time or times hereafter as Agent or said agent may determine, Agent may use the Power of Attorney (i) to endorse Borrower’s name on any checks, notes, acceptances, drafts, money orders or any other evidence of payment or proceeds of the Collateral which are payable to Borrower and which come into the possession of Agent or either Lender or under Agent’s or either Lenders’ control and (ii) to affix a stamped endorsement with facsimile signature by Borrower to Agent on any Pledged Note, any Assignment or any other Collateral Loan Document.

13.1.2  At such time or times after an Event of Default shall have occurred and be continuing, as Agent or its agent may determine, Agent may use the Power of Attorney to: (a) endorse the name of Borrower upon any of the items of payment or proceeds relating to any Collateral and deposit the same to the account of Lenders on

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account of the Obligations; (b) endorse the name of Borrower upon any chattel paper, document, instrument, invoice, freight bill, bill of lading or similar document or agreement relating to the Collateral; (c) make and adjust claims under policies of insurance; and (d) do all other acts and things contemplated in the Power of Attorney or necessary, in Agent’s determination, to fulfill Borrower’s obligations under this Agreement, which must be performed in the name of Borrower and for which Borrower has failed or refused to give Agent the necessary assignments.

13.2Amendments.

(a)  Notwithstanding anything to the contrary contained in this Agreement or any of the other Loan Documents, no amendment, modification, termination, or waiver of any provision of any of the Loan Documents nor consent to any departure by Borrower therefrom shall in any event be effective unless the same shall be in a written notice given to Borrower by Agent and consented to in writing by the Majority Lenders (or by the Agent acting alone if any specific provision of this Agreement provides that the Agent, acting alone, may grant such amendment, modification, termination, waiver or departure) and Agent shall give any such notice if the Majority Lenders so consent or direct Agent to do so; provided, however, that any such amendment, modification, termination, waiver or consent shall require a written notice given to Borrower by the Agent and consented to in writing by all of the Lenders if the effect thereof is to (i) change any of the provisions affecting the interest rates on the Loan, (ii) discharge or release the Borrower from its obligation to repay all principal due under the Loans, (iii) release any guarantor or any material portion of the Collateral other than in accordance with the terms of the Loan Documents, (iv) change any Lender’s Pro Rata Share of the Loan, (v) modify this Section 13.2, (vi) change the definition of Majority Lenders, (vii) extend any scheduled due date for payment of principal, interest or fees or (viii) permit Borrower to assign any of its rights under or interest in this Agreement, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.  Any amendment or modification of this Agreement must be signed by Borrower, Agent and at least all of the Lenders consenting thereto who shall then hold the Pro Rata Shares of the Loans required for such amendment or modification under this Section  13.2 and Agent shall sign any such amendment if such Lenders so consent or direct Agent to do so provided that any Lender dissenting therefrom shall be given an opportunity to sign any such amendment or modification.  Any amendment of any of the Security Documents must be signed by each of the parties thereto.

13.3Costs and Expenses.  Borrower shall pay all reasonable costs and expenses incurred by Agent (whether prior or subsequent to the date hereof and regardless of whether an Event of Default exists) in connection with (a) the negotiation, preparation, execution, delivery, administration, modification, amendment or waiver of, or consent under, any provision of this Agreement, any of the other Loan Documents or any of the other documents to be delivered hereunder or thereunder, (b) the closing or administration of the Loan (including the release of any Collateral), (c) any Default or alleged Default hereunder;  including in each case, without limitation, all

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reasonable fees and expenses associated with travel and all reasonable fees and expenses of legal counsel (including outside legal counsel and the allocated costs of in-house legal counsel), accountants, appraisers, engineers, surveyors and consultants retained by Agent with respect thereto and with respect to advising Agent as to its rights and obligations under this Agreement and the other Loan Documents.  Additionally, if an Event of Default occurs, Borrower shall pay all costs and expenses incurred by Agent and any of the Lenders (including, without limitation, the reasonable fees and expenses of legal counsel, including outside legal counsel and the allocated costs of in-house legal counsel) in connection with the restructuring or enforcement (whether through negotiation, collection, bankruptcy, insolvency or other enforcement proceedings or otherwise) of this Agreement and the other Loan Documents and the collection of the Loan, including, without limitation, any costs incurred in connection with any attempt to inspect, verify, protect, preserve, restore, collect, sell, liquidate or otherwise dispose of or realize upon any of the Collateral. Additionally, Borrower shall pay all costs and expenses incurred by Agent and any of the Lenders (including, without limitation, the reasonable fees and expenses of legal counsel, including outside legal counsel and the allocated costs of in-house legal counsel) in connection with any litigation, contest, dispute, suit, proceeding or action brought against Agent or any Lender by any third party relating in any way to any of the Assets or any of the other Collateral, this Agreement or any of the other Loan Documents or Borrower’s affairs.  Additionally, if any taxes (excluding taxes imposed upon or measured by the net income of Agent or Lenders but including, without limitation, any note or mortgage taxes and all revenue stamps) shall be payable on account of the execution or delivery of this Agreement, or the execution, delivery, issuance or recording of any of the other Loan Documents, or the creation of any of the Obligations hereunder, by reason of any existing or hereafter enacted federal or state statute, Borrower will pay all such taxes, including, but not limited to, any interest and penalties thereon, and will indemnify and hold Agent and Lenders harmless from and against liability in connection therewith.  Additionally, Borrower shall pay all recording, filing, title insurance and related costs reasonably incurred by Agent in connection with the Loan.  All amounts payable by Borrower pursuant to this Section 13.3 shall be due and payable ten (10) days after written demand to Borrower (which demand shall include invoices for such amounts). All such amounts shall be additional Obligations under this Agreement and shall be secured by the Security Documents and the Collateral.  All such amounts shall bear interest at the Contract Rate (or, if applicable, the Default Rate).

13.4Indulgences Not Waivers.  Agent’s or Lenders’ failure, at any time or times hereafter, to require strict performance by Borrower of any provision of the Loan Documents shall not waive, affect or diminish any right of Agent or Lenders thereafter to demand strict compliance and performance therewith.  Any suspension or waiver by Agent or Lenders of an Event of Default by Borrower under any Loan Document shall not suspend, waive or affect any other Event of Default by Borrower under any Loan Document, whether the same is prior or subsequent thereto and whether of the same or of a different type.  None of the undertakings, agreements, warranties, covenants and representations of Borrower contained in any Loan Document and no Event of Default by Borrower under any Loan Documents shall be deemed to have been suspended or

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waived by Agent or Lenders, unless such suspension or waiver is by an instrument in writing specifying such suspension or waiver and is signed by a duly authorized representative of Lenders and directed to Borrower.

13.5Severability.  Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.

13.6Cumulative Effect; Conflict of Terms.  The provisions of the Other Agreements and the Security Documents are hereby made cumulative with the provisions of this Agreement.  Except as otherwise provided in any of the Other Agreements or the Security Documents by specific reference to the applicable provision of this Agreement, if any provision contained in this Agreement is in direct conflict with, or inconsistent with, any provision in any of the Other Agreements or the Security Documents, the provision contained in this Agreement shall govern and control.

13.7Execution in Counterparts.  This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which counterparts taken together shall constitute but one and the same instrument.

13.8Notices.  Any notice or other communication in connection with this Loan Agreement, the Notes, or any of the other Loan Documents, shall be in writing, and (i) deposited in the United States Mail, postage prepaid, by registered or certified mail, or (ii) hand delivered by any commercially recognized courier service or overnight delivery service such as Federal Express, or (iii) sent by facsimile transmission, if a FAX Number is designated below, provided a copy is also sent by first-class mail addressed:

If to Borrower:

FH Partners LLC

6400 Imperial Drive, Waco, TX 76712 (deliveries only)

P.O. Box 8216, Waco, Texas 76714-8216 (mail)

Fax Number:  254-761-2953

Attention: Legal Department

with copies by regular mail or such hand delivery or facsimile transmission to:

Haley & Olson, P.C.

Triangle Tower, Suite 600

510 N. Valley Mills Dr.

Waco, Texas 76710

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Fax Number:  254-776-6823

Attention: Richard Vander Woude Esq.

If to Bank of America as Agent and/or Lender:

Bank of America, N.A.

Suite 1200

111 Westminster Street

Mail Stop: RI1-102-12-06

Providence, Rhode Island 02903

Fax Number: (401) 278-3674

Attention:  Deborah T. Jennings, Senior Vice President

with copies by regular mail or such hand delivery or facsimile transmission to:

Hinckley, Allen & Snyder, LLP

50 Kennedy Plaza

Suite 1500

Providence, Rhode Island 02903

Fax Number: (401) 277-9600

Attention:  Matthew T. Marcello, III, Esq.

If to any other Lender to the address set forth on Exhibit E.

Any such addressee may change its address and/or fax number for such notices to such other address or fax number in the United States as such addressee shall have specified by written notice given as set forth above.  All periods of notice shall be measured from the deemed date of delivery.

A notice shall be deemed to have been given, delivered and received for the purposes of all Loan Documents upon the earliest of:  (i) if sent by such certified or registered mail, on the earlier of the third Business Day following the date of postmark or on the date of actual receipt as evidenced by the return receipt, or (ii) if hand delivered at the specified address by such courier or overnight delivery service, when so delivered or tendered for delivery during customary business hours on a Business Day, or (iii) if facsimile transmission is a permitted means of giving notice, upon receipt during customary business hours on a Business Day as evidenced by confirmation; provided, however, that any notice, request or demand to or upon Agent or Lenders pursuant to Section 2, Section 4 or Section 5 of this Agreement shall be effective until received by Agent or Lenders as the case may be.  Any notice delivered outside of the customary business hours on a Business Day shall be deemed received on the next Business Day.

13.9Agent’s or Lenders’ Consent.  Whenever Agent’s or Lenders’ consent is required to be obtained under any Loan Documents as a condition to any action,

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inaction, condition or event, Agent or Lenders, as the case may be, shall be authorized to give or withhold such consent in their sole and absolute discretion without regard to reasonableness (unless otherwise expressly provided herein) and to condition their consent upon the giving of additional collateral security for the Obligations, the payment of money or any other matter.

13.10Time of Essence.  Time is of the essence with respect to each of the Loan Documents and payment and performance of the obligations thereunder.

13.11Entire Agreement. The Loan Documents embody the entire understanding and agreement between the parties hereto and thereto with respect to the subject matter hereof and thereof and supersede all prior agreements, understandings and inducements, whether express or implied, oral or written.

13.12Interpretation; Integration.

(a)  No provision in any of the Loan Documents shall be construed against or interpreted to the disadvantage of any party hereto by any court or other governmental or judicial authority by reason of such party having or being deemed to have structured, drafted or dictated such provision.

(b)  This Loan Agreement and the other Loan Documents are intended by the parties as the final, complete and exclusive statement of the transactions evidenced by this Loan Agreement and the other Loan Documents.  All prior or contemporaneous promises, agreements and understandings, whether oral or written, are deemed to be superseded by this Loan Agreement and the other Loan Documents, and no party is relying on any promise, agreement or understanding not set forth in this Loan Agreement or the other Loan Documents.

13.13No Preservation or Marshaling.  Borrower agrees that neither Agent nor either Lender shall have any obligation to preserve rights to the Collateral against prior parties or to marshal any Collateral for the benefit of any Person.

13.14Governing Law; Consent to Forum.

(a)GOVERNING LAW.  THE LOAN DOCUMENTS SHALL BE DEEMED TO HAVE BEEN MADE IN PROVIDENCE, RHODE ISLAND, AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF RHODE ISLAND WITHOUT RESORT TO THAT STATE’S CONFLICT OF LAWS RULES; PROVIDED, HOWEVER, THAT IF ANY OF THE COLLATERAL SHALL BE LOCATED IN ANY JURISDICTION OTHER THAN RHODE ISLAND, THE LAWS OF SUCH JURISDICTION SHALL GOVERN THE METHOD, MANNER AND PROCEDURE FOR FORECLOSURE OF AGENT’S OR LENDERS’ LIEN UPON SUCH COLLATERAL AND THE ENFORCEMENT OF AGENT’S OR LENDERS’ OTHER REMEDIES IN RESPECT OF SUCH COLLATERAL TO THE EXTENT THAT THE LAWS OF SUCH JURISDICTION ARE DIFFERENT FROM OR INCONSISTENT WITH

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THE LAWS OF RHODE ISLAND.

(b)CONSENT TO FORUM AND SERVICE OF PROCESS.  AS PART OF THE CONSIDERATION FOR NEW VALUE RECEIVED, AND REGARDLESS OF ANY PRESENT OR FUTURE DOMICILE OR PRINCIPAL PLACE OF BUSINESS OF BORROWER, AGENT OR ANY LENDER, BORROWER HEREBY CONSENTS AND AGREES THAT (EXCEPT AS OTHERWISE MANDATORILY REQUIRED BY APPLICABLE LAW IN ORDER TO ENFORCE AGENT’S OR LENDERS’ RIGHTS UNDER THIS AGREEMENT OR UNDER ANY OF THE OTHER LOAN DOCUMENTS) THE SUPERIOR COURT OF PROVIDENCE COUNTY, RHODE ISLAND OR, AT AGENT’S OR BORROWER’S OPTION, THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF RHODE ISLAND, SHALL HAVE NON-EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN BORROWER AND AGENT OR ANY LENDER PERTAINING TO THE LOAN DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED THERETO.  BORROWER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND BORROWER HEREBY WAIVES ANY OBJECTION WHICH BORROWER MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT.  NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO AFFECT THE RIGHT OF AGENT OR LENDERS TO SERVE LEGAL PROCESS IN ANY MANNER PERMITTED BY LAW, OR TO PRECLUDE THE ENFORCEMENT BY AGENT OR LENDERS OF ANY JUDGMENT OR ORDER OBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION TO ENFORCE SAME IN ANY OTHER APPROPRIATE FORUM OR JURISDICTION.

13.15Waivers by Borrower.  EXCEPT AS IS OTHERWISE EXPRESSLY PROVIDED FOR HEREIN, BORROWER WAIVES (A) PRESENTMENT, DEMAND AND PROTEST AND NOTICE OF PRESENTMENT, PROTEST, DEFAULT, NON-PAYMENT, INTENT TO ACCELERATE, ACCELERATION, MATURITY, RELEASE, COMPROMISE, SETTLEMENT, EXTENSION OR RENEWAL OF ANY OR ALL COMMERCIAL PAPER, ACCOUNTS, CONTRACT RIGHTS, DOCUMENTS, INSTRUMENTS, CHATTEL PAPER AND GUARANTIES AT ANY TIME HELD BY AGENT OR LENDERS ON WHICH BORROWER MAY IN ANY WAY BE LIABLE AND HEREBY RATIFIES AND CONFIRMS WHATEVER AGENT OR LENDERS MAY DO IN THIS REGARD; (B) NOTICE PRIOR TO TAKING POSSESSION OR CONTROL OF THE COLLATERAL OR OBTAINING ANY BOND OR SECURITY WHICH MIGHT BE REQUIRED BY ANY COURT PRIOR TO ALLOWING AGENT OR LENDERS TO EXERCISE ANY OF THEIR REMEDIES; (C) THE BENEFIT OF ALL VALUATION, APPRAISEMENT AND EXEMPTION LAWS; (D) ANY RIGHT BORROWER MAY HAVE UPON PAYMENT IN FULL OF THE OBLIGATIONS TO REQUIRE AGENT OR LENDERS TO TERMINATE THEIR SECURITY INTEREST IN THE COLLATERAL OR IN ANY OTHER PROPERTY OF BORROWER UNTIL TERMINATION OF THIS AGREEMENT IN ACCORDANCE WITH ITS TERMS, EXCLUDING, HOWEVER THE

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TERMS OF THIS AGREEMENT THAT PERTAIN TO CLAIMS OF INDEMNITY THAT ARE UNMATURED AS OF THE DATE OF TERMINATION OF THIS AGREEMENT; AND (E) NOTICE OF ACCEPTANCE HEREOF.  BORROWER ACKNOWLEDGES THAT THE FOREGOING WAIVERS ARE A MATERIAL INDUCEMENT TO AGENT’S AND LENDERS’ ENTERING INTO THIS AGREEMENT AND THAT AGENT AND LENDERS ARE RELYING UPON THE FOREGOING WAIVERS IN FUTURE DEALINGS WITH BORROWER.  BORROWER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THE FOREGOING WAIVERS WITH ITS LEGAL COUNSEL AND HAS KNOWINGLY AND VOLUNTARILY WAIVED SUCH RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.

13.16JURY TRIAL WAIVER.  BORROWER, AGENT AND LENDERS MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON THIS LOAN AGREEMENT, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS LOAN AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR ANY OTHER LOAN DOCUMENTS CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF ANY PARTY, INCLUDING, WITHOUT LIMITATION, ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS OR ACTIONS OF AGENT OR ANY LENDER RELATING TO THE ADMINISTRATION OF THE LOAN OR ENFORCEMENT OF THE LOAN DOCUMENTS, AND AGREE THAT NO PARTY WILL SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED.  BORROWER CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF AGENT OR ANY LENDER HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT AGENT OR ANY LENDER WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER.  THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR BORROWER, AGENT AND LENDERS TO ENTER INTO THE TRANSACTIONS CONTEMPLATED HEREBY.

13.17DTPA WAIVER.  IF IT EVER SHOULD BE DETERMINED BY A COURT OF COMPETENT JURISDICTION THAT THE DECEPTIVE TRADE PRACTICES - CONSUMER PROTECTION ACT (TEXAS BUS. & COM. CODE ANN. SECTION 17.01 ET SEQ. (VERNON SUPP. 1987)), IS APPLICABLE TO THIS TRANSACTION, BORROWER HEREBY WAIVES ALL PROVISIONS OF SUCH ACT OTHER THAN SECTION 17.555 THEREOF PERTAINING TO CONTRIBUTION AND INDEMNITY, AND BORROWER EXPRESSLY WARRANTS AND REPRESENTS THAT BORROWER (A) HAS ASSETS OF $5,000,000 OR MORE, (B) HAS KNOWLEDGE AND EXPERIENCE IN FINANCIAL AND BUSINESS MATTERS THAT ENABLE BORROWER TO EVALUATE THE MERITS AND RISKS OF THIS TRANSACTION, (C) IS NOT IN A SIGNIFICANTLY DISPARATE BARGAINING POSITION RELATIVE TO LENDERS AND (D) HAS BEEN REPRESENTED BY LEGAL COUNSEL IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.

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13.18Oral Agreements Ineffective.  IN NO EVENT SHALL ANY ORAL AGREEMENTS, PROMISES, ACTIONS, INACTIONS, KNOWLEDGE, COURSE OF CONDUCT, COURSE OF DEALINGS OR THE LIKE BE EFFECTIVE TO AMEND, TERMINATE, EXTEND OR OTHERWISE MODIFY THIS LOAN AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS. THE LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES, AND THE SAME MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

13.19Limitations on Claims Against Agent or Lenders.

13.19.1Borrower Must Notify.  Neither Agent nor any Lender shall be in default under this Agreement, or under any other Loan Document, unless a written notice specifically setting forth the claim of Borrower shall have been given to Agent or such Lender within sixty (60) days after Borrower first had actual knowledge or actual notice of the occurrence of the event which Borrower alleges gave rise to such claim and Agent or such Lender does not remedy or cure the default, if any there be, with reasonable promptness thereafter.  Such actual knowledge or actual notice shall refer to what was actually known by, or expressed in a written notification furnished to, any of the authorized representatives identified on Exhibit C hereto.

13.19.2Remedies.  If it is determined by the final order of a court of competent jurisdiction, which is not subject to further appeal, that Agent or any Lender breached any of their obligations under the Loan Documents and have not remedied or cured the same with reasonable promptness following notice thereof, Agent or such Lenders’ responsibilities shall be limited to the payment of any actual, direct, compensatory damages sustained by Borrower as a result thereof plus Borrower’s reasonable costs and expenses, including, without limitation, reasonable attorneys’ fees and disbursements in connection with such court proceedings.

13.19.3Limitations.  Except as prohibited by law, Borrower hereby waives any right it may have to claim or recover against Agent or any Lender in any litigation any special, exemplary, punitive or consequential damages or any damages other than, or in addition to, actual damages.  Borrower certifies that no representative, agent or attorney of Agent or any Lender has represented, expressly or otherwise, that Agent or any Lender would not, in the event of litigation, seek to enforce the foregoing waiver.  In no event shall Agent or any such Lender be liable to Borrower or anyone else unless a written notice specifically setting forth the claim of Borrower shall have been given to Agent or any such Lender within the time period specified above.

13.20Obligations Absolute.  Except to the extent prohibited by applicable law which cannot be waived, the Obligations of Borrower under the Loan Documents shall be absolute, unconditional and irrevocable and shall be paid strictly in accordance

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with the terms of the Loan Documents under all circumstances whatsoever, including, without limitation, the existence of any claim, set off, defense or other right which Borrower may have at any time against the Agent or any Lender whether in connection with the Loan or any unrelated transaction.

13.21Successors and Assigns.  This Agreement and the other Loan Documents shall be binding upon and shall inure to the benefit of Borrower, Agent, Lenders and their respective successors and assigns; provided, however, the Borrower may not sell, assign or transfer any of its rights or obligations under any of the Loan Documents or any monies due thereunder, or any interest therein without the prior written consent of each of the Lenders.

13.22Limitations on Recourse.  Notwithstanding anything to the contrary contained in this Loan Agreement, the Notes or any of the other Loan Documents, except for the obligations of the Servicer or any other parties expressly set forth in the Servicer Indemnity Agreement and any of the other Loan Documents which have been executed by the Servicer or any such other parties, the recourse of Agent and Lenders under and with respect to the Loan Documents shall be limited solely to the Borrower, the Collateral and all other assets now or hereafter owned by Borrower or in which Borrower has an interest, and neither the Servicer nor any Member of Borrower shall have any other liability to Agent or Lenders under or with respect to the Loan or the Loan Documents, whether directly or indirectly, whether by contract or by operation of law and whether in their respective capacities as a Member of Borrower or otherwise; it being understood that the foregoing shall in no way relieve Servicer or any other parties to the Servicer Indemnity Agreement from being fully liable to Agent and Lenders for the payment and performance of all of their respective liabilities and obligations under the Servicer Indemnity Agreement and shall in no way relieve Servicer or any such other parties from being fully liable to Agent and Lenders for the payment, performance and observance of all of their respective obligations under each of the Loan Documents which have been executed by Servicer or any such other party, but only as and to the extent expressly provided therein.

13.23Non-Covered Entities.  Agent and Lenders have agreed that Borrower may transfer its ownership interest in FH Golf Properties I, Inc. to an Affiliate of Borrower or may dissolve FH Golf Properties I, Inc. and that no provision of this Agreement shall be applicable to FH Golf Properties I, Inc., whether the ownership of such Person is transferred or such entity is dissolved prior to or after the Closing.  It is further agreed that FH Golf Properties I, Inc. is not an REO Affiliate for purposes of this Agreement and is an Excluded Asset.

13.24USA Patriot Act Notice.  Each Lender and Agent (for itself and not on behalf of any Lender) hereby notifies Borrower that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (as amended, the “Patriot Act”), it is required to obtain, verify and record information that identifies Borrower, which information includes the name and address of Borrower and other information that will allow such Lender or Agent, as applicable, to identify

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Borrower in accordance with the Patriot Act.

[Rest of page intentionally left blank; signature(s) on following page.]

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IN WITNESS WHEREOF, this Agreement has been duly executed as of the day and year first above written.

WITNESS:	BORROWER:
	FH Partners LLC,
	a limited liability company
	By:
Print Name:		James C. Holmes
		Executive Vice President
	AGENT AND LENDER:
	BANK OF AMERICA, N.A.,
	as Agent and as a Lender
	By:
Print Name:		Deborah T. Jennings
		Senior Vice President

STATE OF TEXAS

COUNTY OF MCLENNAN

In Waco in said County and State on the      day of December, 2011, before me personally appeared James C. Holmes, an Executive Vice President of FH Partners LLC, to me known and known by me to be the party executing the foregoing instrument and he acknowledge said instrument by him executed to be his free act and deed, his free act and deed in his capacity as aforesaid, the free act and deed of FH Partners LLC.

Notary Public

Print Name:

My commission expires: