SC 13E3

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

SCHEDULE 13E-3

RULE 13E-3 TRANSACTION STATEMENT

UNDER SECTION 13(E) OF

THE SECURITIES EXCHANGE ACT OF 1934

FirstCity Financial Corporation

(Name of the Issuer)

FirstCity Financial Corporation

Hotspurs Holdings LLC

Hotspurs Acquisition Corporation

The Värde Fund X (Master), L.P.

The Värde Fund X (GP), L.P.

The Värde Fund X GP, LLC

The Värde Fund VI-A, L.P.

Värde Investment Partners, L.P.

Värde Investment Partners (Offshore) Master, L.P.

Värde Investment Partners G.P., LLC

Värde Partners, L.P.

Värde Partners, Inc.

George G. Hicks

Marcia L. Page

Gregory S. McMillan

(Names of Person(s) Filing Statement)

Common Stock, par value $0.01 per share

(Title of Class of Securities)

33761X107

(CUSIP Number of Class of Securities)

James T. Sartain President and Chief Executive Officer FirstCity Financial Corporation 6400 Imperial Drive Waco, Texas 76712 (254) 761-2800 David A. Marple Värde Partners, Inc. Hotspurs Holdings LLC Hotspurs Acquisition Corporation 8500 Normandale Lake Blvd., Suite 1500 Minneapolis, Minnesota 55437 (952) 893-1554

(Name, Address, and Telephone Numbers of Person Authorized to

Receive Notices and Communications on Behalf of the Persons Filing Statement)

with copies to:

Brian D. Barnard Haynes and Boone, LLP 201 Main Street, Suite 2200 Fort Worth, Texas 76102 Andrew J. Noreuil Mayer Brown LLP 71 South Wacker Drive Chicago, Illinois 60606

This statement is filed in connection with (check the appropriate box):

a.xThe filing of solicitation materials or an information statement subject to Regulation 14A, Regulation 14C or Rule 13e-3(c) under the Securities Exchange Act of 1934.

b.¨The filing of a registration statement under the Securities Act of 1933.

c.¨A tender offer.

d.¨None of the above.

Check the following box if the soliciting materials or information statement referred to in checking box (a) are preliminary copies:  x

Check the following box if the filing is a final amendment reporting the results of the transaction:   ¨

Calculation of Filing Fee
Transaction valuation*	$107,092,608	Amount of filing fee**	$14,608

*The transaction valuation was calculated based upon the sum of (A) 10,556,197 shares of common stock (including restricted shares), which represents the total number of shares of FirstCity Financial Corporation common stock outstanding as of January 28, 2013, multiplied by the merger consideration of $10.00 per share, plus (B) (1) 624,750 shares of common stock underlying outstanding options with an exercise price of $10.00 per share or less, as of January 28, 2013, multiplied by (2) the excess of the per share merger consideration over the weighted average exercise price of $7.55.

**The amount of the filing fee, calculated in accordance with Rule 0-11(c) and the Fee Rate Advisory #1 for Fiscal Year 2013, equals the product of 0.00013640 multiplied by the proposed maximum aggregate value of the transaction.

xCheck the box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule, and the date of its filing.

Amount Previously Paid: $14,608	Filing Party: FirstCity Financial Corporation:
Form or Registration No.: Schedule 14A — Preliminary Proxy Statement	Date Filed: February 1, 2013

Table of Contents

Item 1. Summary Term Sheet	4
Item 2. Subject Company Information	4
Item 3. Identity and Background of Filing Person	5
Item 4. Terms of the Transaction	5
Item 5. Past Contacts, Transactions, Negotiations and Agreements	6
Item 6. Purposes of the Transaction and Plans or Proposals	8
Item 7. Purposes, Alternatives, Reasons and Effects	8
Item 8. Fairness of the Transaction	10
Item 9. Reports, Opinions, Appraisals and Negotiations	12
Item 10. Source and Amounts of Funds or Other Consideration	12
Item 11. Interest in Securities of the Subject Company	13
Item 12. The Solicitation or Recommendation	14
Item 13. Financial Statements	14
Item 14. Persons/Assets, Retained, Employed, Compensated or Used	15
Item 15. Additional Information	15
Item 16. Exhibits	15

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Introduction

This Rule 13E-3 Transaction Statement on Schedule 13E-3 (this “Schedule 13E-3”) is being filed with the Securities and Exchange Commission (the “SEC”) pursuant to Section 13(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), by (i) FirstCity Financial Corporation, a Delaware corporation (the “Company”), (ii) Hotspurs Holdings LLC, a Delaware limited liability company (“Parent”), (iii) Hotspurs Acquisition Corporation, a Delaware corporation (“Merger Subsidiary”), (iv) The Värde Fund X (Master), L.P., a Delaware limited partnership, (v) The Värde Fund X (GP), L.P., a Delaware limited partnership, (vi) The Värde Fund X GP, LLC, a Delaware limited liability company, (vii) The Värde Fund VI-A, L.P., a Delaware limited partnership, (viii) Värde Investment Partners, L.P., a Delaware limited partnership, (ix) Värde Investment Partners (Offshore) Master, L.P., a Cayman Islands exempted limited partnership, (x) Värde Investment Partners G.P., LLC, a Delaware limited liability company, (xi) Värde Partners, L.P., a Delaware limited partnership, (xii) Värde Partners, Inc., a Delaware corporation, (xiii) George G. Hicks, (xiv) Marcia L. Page, and (xv) Gregory S. McMillan (collectively, the “Filing Persons”).  This Schedule 13E-3 relates to the Agreement and Plan of Merger, dated as of December 20, 2012 (as it may be amended from time to time, the “Merger Agreement”), by and among the Company, Parent and Merger Subsidiary.

Pursuant to the Merger Agreement, Merger Subsidiary will merge with and into the Company, with the Company continuing as the surviving corporation (the “Merger”).  If the Merger is completed, each share of the Company’s common stock and each share of the Company’s restricted stock, including those previously unvested shares that will become fully vested immediately prior to the effective time of the Merger (other than shares held by the Company, Parent or any of their wholly-owned subsidiaries and shares held by stockholders who have perfected their appraisal rights under Delaware law), will be converted into the right to receive $10.00 in cash, without interest on the terms and subject to the conditions set forth in the Merger Agreement (the “Merger Consideration”).  In addition, each outstanding option to purchase shares of the Company’s common stock granted under the Company’s equity incentive plans or any other agreement, whether or not then vested or exercisable, will become fully vested and exercisable immediately prior to the effective time of the Merger and cancelled as of the effective time of the Merger.  The holders of such stock options will be entitled to receive an amount in cash, without interest, equal to (i) the excess, if any, of the Merger Consideration over the per share exercise price of such stock option multiplied by (ii) the aggregate number of shares into which such stock option was exercisable immediately prior to the effective time of the Merger.  As a result of the Merger, the Company will become a private company that is wholly-owned by Parent.

Concurrently with the filing of this Schedule 13E-3, the Company is filing with the SEC a preliminary proxy statement (the “Proxy Statement”) under Regulation 14A of the Exchange Act, pursuant to which the Company’s board of directors is soliciting proxies from stockholders of the Company in connection with the Merger.  The adoption of the Merger Agreement requires the affirmative vote of the holders of a majority of the issued and outstanding shares of the Company’s common stock.  The Proxy Statement is attached hereto as Exhibit (a)(2). A copy of the Merger Agreement is attached to the Proxy Statement as Annex A and is incorporated herein by reference. As of the date hereof, the Proxy Statement is in preliminary form, and is subject to completion or amendment.

Pursuant to General Instruction F to Schedule 13E-3, the information in the Proxy Statement, including all annexes, exhibits and appendices thereto, is expressly incorporated by reference herein in its entirety, and responses to each item herein are qualified in their entirety by the information contained in the Proxy Statement.  The cross references below are being supplied pursuant to General Instruction G to Schedule 13E-3 and show the location in the Proxy Statement of the information required to be included in response to the items of Schedule 13E-3.  All information contained in this Schedule 13E-3 concerning any of the Filing Persons has been provided by such Filing Person and none of the Filing Persons,

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including the Company, takes responsibility for the accuracy of any information not supplied by such Filing Person.

The filing of this Schedule 13E-3 shall not be construed as an admission by any Filing Person, or by any affiliate of a Filing Person, that the Company is “controlled” by any Filing Person, or that any Filing Person is an “affiliate” of the Company within the meaning of Rule 13e-3 promulgated under Section 13(e) of the Exchange Act.

Item 1. Summary Term Sheet

The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:

“Summary Term Sheet”

“Questions and Answers About the Merger and the Special Meeting”

Item 2. Subject Company Information

(a) Name and address. The Company’s name and the address and telephone number of its principal executive offices are as follows:

FirstCity Financial Corporation

6400 Imperial Drive

Waco, Texas 76712

(254) 761-2800

(b) Securities. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:

“Questions and Answers About the Merger and the Special Meeting”

“The Special Meeting—Record Date and Quorum”

(c) Trading market and price. The information set forth in the Proxy Statement under the following caption is incorporated herein by reference:

“Common Stock Market Price and Dividend Information”

(d) Dividends. The information set forth in the Proxy Statement under the following caption is incorporated herein by reference:

“Common Stock Market Price and Dividend Information—Dividend Policy”

(e) Prior public offerings. The information set forth in the Proxy Statement under the following caption is incorporated herein by reference:

“Common Stock Market Price and Dividend Information—Prior Public Offerings”

(f) Prior stock purchases. The information set forth in the Proxy Statement under the following caption is incorporated herein by reference:

“Certain Purchases and Sales of FirstCity Common Stock”

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Item 3. Identity and Background of Filing Person

(a) Name and address. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:

“Summary Term Sheet”

“The Parties to the Merger”

“Important Information Concerning FirstCity”

“Directors and Executive Officers of FirstCity”

“Important Information Concerning Parent, Merger Subsidiary and the Värde Filing Persons”

(b) Business and background of entities. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:

“Summary Term Sheet”

“Important Information Concerning FirstCity”

“Directors and Executive Officers of FirstCity”

“Important Information Concerning Parent, Merger Subsidiary and the Värde Filing Persons”

(c) Business and background of natural persons. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:

“Directors and Executive Officers of FirstCity”

“Important Information Concerning Parent, Merger Subsidiary and the Värde Filing Persons”

Item 4. Terms of the Transaction

(a) Material terms. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:

“Summary Term Sheet”

“Questions and Answers About the Merger and the Special Meeting”

“Special Factors — Background of the Merger”

“Special Factors — Recommendation of the SRC and Board of Directors; Reasons for Recommending Approval of the Merger”

“Special Factors — Reasons of Parent, Merger Subsidiary and the Värde Filing Persons for the Merger”

“Special Factors — Effects of the Merger”

“Special Factors — Interests of Certain Persons in the Merger”

“Special Factors — Accounting Treatment of the Merger”

“Special Factors — Material United States Federal Income Tax Considerations”

“The Special Meeting — Required Vote”

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“The Merger Agreement — The Merger”

“The Merger Agreement —Merger Consideration”

“The Merger Agreement — Treatment of Stock Options and Restricted Common Stock”

“Advisory Vote on ‘Golden Parachute Compensation’”

“Annex A — Agreement and Plan of Merger”

(c) Different terms. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:

“Summary Term Sheet”

“Questions and Answers About the Merger and the Special Meeting”

“Special Factors — Effects of the Merger”

“Special Factors — Interests of Certain Persons in the Merger”

“Special Factors — Support Agreement”

“Special Factors — Securities Purchase Agreement”

“The Merger Agreement — Treatment of Stock Options and Restricted Common Stock”

“Advisory Vote on ‘Golden Parachute Compensation’”

“Annex A — Agreement and Plan of Merger”

(d) Appraisal rights. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:

“Summary Term Sheet”

“Questions and Answers About the Merger and the Special Meeting”

“Rights of Appraisal”

“Annex C — Section 262 of the General Corporation Law of the State of Delaware”

(e) Provisions for unaffiliated security holders. The information set forth in the Proxy Statement under the following caption is incorporated herein by reference:

“Special Factors — Provisions for Unaffiliated Stockholders”

(f) Eligibility for listing or trading.  Not applicable.

Item 5. Past Contacts, Transactions, Negotiations and Agreements

(a) Transactions. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:

“Summary Term Sheet”

“Special Factors — Background of the Merger”

“Special Factors — Interests of Certain Persons in the Merger”

“Advisory Vote on ‘Golden Parachute Compensation’”

(b) Significant corporate events. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:

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“Summary Term Sheet”

“Questions and Answers About the Merger and the Special Meeting”

“Special Factors — Background of the Merger”

“Special Factors — Recommendation of the SRC and Board of Directors; Reasons for Recommending Approval of the Merger”

“Special Factors — Position of Parent, Merger Subsidiary and the Värde Filing Persons as to the Fairness of the Merger”

“Special Factors — Interests of Certain Persons in the Merger”

“Special Factors — Support Agreement”

“Special Factors — Equity Commitment Letter”

“Special Factors — Limited Guarantee”

“The Special Meeting — Stock Ownership and Interests of Certain Persons”

“The Merger Agreement”

“Annex A — Agreement and Plan of Merger”

(c) Negotiations or contacts. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:

“Special Factors — Background of the Merger”

“Special Factors — Recommendation of the SRC and Board of Directors; Reasons for Recommending Approval of the Merger”

“Special Factors — Position of Parent, Merger Subsidiary and the Värde Filing Persons as to the Fairness of the Merger”

“Special Factors — Interests of Certain Persons in the Merger”

(e) Agreements involving the subject company’s securities. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:

“Summary Term Sheet”

“Questions and Answers About the Merger and the Special Meeting”

“Special Factors — Background of the Merger”

“Special Factors — Recommendation of the SRC and Board of Directors; Reasons for Recommending Approval of the Merger”

“Special Factors — Position of Parent, Merger Subsidiary and the Värde Filing Persons as to the Fairness of the Merger”

“Special Factors — Reasons of Parent, Merger Subsidiary and the Värde Filing Persons for the Merger”

“Special Factors — Interests of Certain Persons in the Merger”

“Special Factors — Support Agreement”

“Special Factors — Securities Purchase Agreement”

“The Special Meeting — Stock Ownership and Interests of Certain Persons”

“The Merger Agreement”

“Advisory Vote on ‘Golden Parachute Compensation’”

“Security Ownership of Certain Beneficial Owners and Management”

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“Certain Purchases and Sales of FirstCity Common Stock”

“Annex A — Agreement and Plan of Merger”

Item 6. Purposes of the Transaction and Plans or Proposals

(b) Use of securities acquired. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:

“Summary Term Sheet”

“Questions and Answers About the Merger and the Special Meeting”

“Special Factors — Effects of the Merger”

“Special Factors — Interests of Certain Persons in the Merger”

“The Merger Agreement”

“Advisory Vote on ‘Golden Parachute Compensation’”

“Annex A — Agreement and Plan of Merger”

(c)(1)-(8) Plans. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:

“Summary Term Sheet”

“Questions and Answers About the Merger and the Special Meeting”

“Special Factors — Background of the Merger”

“Special Factors — Recommendation of the SRC and Board of Directors; Reasons for Recommending Approval of the Merger”

“Special Factors — Position of Parent, Merger Subsidiary and the Värde Filing Persons as to the Fairness of the Merger”

“Special Factors — Reasons of Parent, Merger Subsidiary and the Värde Filing Persons for the Merger”

“Special Factors — Effects of the Merger”

“Special Factors — Effects of the Merger on FirstCity’s Net Book Value and Net Income”

“Special Factors — Interests of Certain Persons in the Merger”

“Special Factors — Support Agreement”

“Special Factors — Securities Purchase Agreement”

“The Merger Agreement”

“Advisory Vote on ‘Golden Parachute Compensation’”

“Annex A — Agreement and Plan of Merger”

Item 7. Purposes, Alternatives, Reasons and Effects

(a) Purposes. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:

“Summary Term Sheet”

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“Questions and Answers About the Merger and the Special Meeting”

“Special Factors — Background of the Merger”

“Special Factors — Recommendation of the SRC and Board of Directors; Reasons for Recommending Approval of the Merger”

“Special Factors — Position of Parent, Merger Subsidiary and the Värde Filing Persons as to the Fairness of the Merger”

“Special Factors — Reasons of Parent, Merger Subsidiary and the Värde Filing Persons for the Merger”

“Special Factors — Effects of the Merger”

“Special Factors — Interests of Certain Persons in the Merger”

(b) Alternatives. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:

“Special Factors — Background of the Merger”

“Special Factors — Recommendation of the SRC and Board of Directors; Reasons for Recommending Approval of the Merger”

“Special Factors — Position of Parent, Merger Subsidiary and the Värde Filing Persons as to the Fairness of the Merger”

“Special Factors — Reasons of Parent, Merger Subsidiary and the Värde Filing Persons for the Merger”

(c) Reasons. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:

“Summary Term Sheet”

“Special Factors — Background of the Merger”

“Special Factors — Recommendation of the SRC and Board of Directors; Reasons for Recommending Approval of the Merger”

“Special Factors — Position of Parent, Merger Subsidiary and the Värde Filing Persons as to the Fairness of the Merger”

“Special Factors — Reasons of Parent, Merger Subsidiary and the Värde Filing Persons for the Merger”

“Special Factors — Effects of the Merger”

“Special Factors — Projected Financial Information”

“Special Factors — Interests of Certain Persons in the Merger”

(d) Effects. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:

“Summary Term Sheet”

“Questions and Answers About the Merger and the Special Meeting”

“Special Factors — Background of the Merger”

“Special Factors — Recommendation of the SRC and Board of Directors; Reasons for Recommending Approval of the Merger”

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“Special Factors — Reasons of Parent, Merger Subsidiary and the Värde Filing Persons for the Merger”

“Special Factors — Effects of the Merger”

“Special Factors — Effects of the Merger on FirstCity’s Net Book Value and Net Income”

“Special Factors — Interests of Certain Persons in the Merger”

“Special Factors — Material United States Federal Income Tax Considerations”

“Special Factors — Estimated Fees and Expenses”

“The Merger Agreement”

“Advisory Vote on ‘Golden Parachute Compensation’”

“Annex A — Agreement and Plan of Merger”

Item 8. Fairness of the Transaction

(a) Fairness. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:

“Summary Term Sheet”

“Questions and Answers About the Merger and the Special Meeting”

“Special Factors — Background of the Merger”

“Special Factors — Recommendation of the SRC and Board of Directors; Reasons for Recommending Approval of the Merger”

“Special Factors — Position of Parent, Merger Subsidiary and the Värde Filing Persons as to the Fairness of the Merger”

“Special Factors — Reasons of Parent, Merger Subsidiary and the Värde Filing Persons for the Merger”

(b) Factors considered in determining fairness. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:

“Summary Term Sheet”

“Questions and Answers About the Merger and the Special Meeting”

“Special Factors — Background of the Merger”

“Special Factors — Recommendation of the SRC and Board of Directors; Reasons for Recommending Approval of the Merger”

“Special Factors — Opinion of the Company’s Financial Advisor”

“Special Factors — Position of Parent, Merger Subsidiary and the Värde Filing Persons as to the Fairness of the Merger”

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“Special Factors — Reasons of Parent, Merger Subsidiary and the Värde Filing Persons for the Merger”

“Special Factors — Projected Financial Information”

“Special Factors — Effects of the Merger”

“Special Factors — Effects of the Merger on FirstCity’s Net Book Value and Net Income”

“Special Factors — Interests of Certain Persons in the Merger”

“Annex B — Opinion of Lazard Middle Market LLC”

See also the materials attached hereto as exhibits (c)(2), (c)(3) and (c)(4) and incorporated by reference herein, which were prepared by Lazard Middle Market LLC for the Strategic Review Committee and the Board of Directors of the Company.

(c) Approval of security holders. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:

“Summary Term Sheet”

“Questions and Answers About the Merger and the Special Meeting”

“Special Factors — Background of the Merger”

“Special Factors — Recommendation of the SRC and Board of Directors; Reasons for Recommending Approval of the Merger”

“The Special Meeting — Record Date and Quorum”

“The Special Meeting — Required Vote”

“The Merger Agreement — Conditions to the Completion of the Merger”

“Annex A — Agreement and Plan of Merger”

(d) Unaffiliated representative. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:

“Summary Term Sheet”

“Special Factors — Background of the Merger”

“Special Factors — Recommendation of the SRC and Board of Directors; Reasons for Recommending Approval of the Merger”

“Special Factors — Position of Parent, Merger Subsidiary and the Värde Filing Persons as to the Fairness of the Merger”

(e) Approval of directors. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:

“Summary Term Sheet”

“Questions and Answers About the Merger and the Special Meeting”

“Special Factors — Background of the Merger”

“Special Factors — Recommendation of the SRC and Board of Directors; Reasons for Recommending Approval of the Merger”

“Special Factors — Position of Parent, Merger Subsidiary and the Värde Filing Persons as to the Fairness of the Merger”

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(f) Other offers.  None.

Item 9. Reports, Opinions, Appraisals and Negotiations

(a)-(b) Report, opinion or appraisal; Preparer and summary of the report, opinion or appraisal . The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:

“Summary Term Sheet”

“Special Factors — Background of the Merger”

“Special Factors — Recommendation of the SRC and Board of Directors; Reasons for Recommending Approval of the Merger”

“Special Factors — Opinion of the Company’s Financial Advisor”

“Special Factors — Position of Parent, Merger Subsidiary and the Värde Filing Persons as to the Fairness of the Merger”

“Special Factors — Estimated Fees and Expenses”

“The Merger Agreement — Representations and Warranties”

“Annex A — Agreement and Plan of Merger”

“Annex B — Opinion of Lazard Middle Market LLC”

See also the materials attached hereto as exhibits (c)(2), (c)(3) and (c)(4) and incorporated by reference herein, which were prepared by Lazard Middle Market LLC for the Strategic Review Committee and the Board of Directors of the Company.

(c) Availability of documents. The information set forth in the Proxy Statement under the following caption is incorporated herein by reference:

“Additional Information”

The reports, opinions or appraisals referenced in this Item 9 will be made available for inspection and copying at the principal executive offices of the Company during its regular business hours.

Item 10. Source and Amounts of Funds or Other Consideration

(a) Source of funds. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:

“Summary Term Sheet”

“Questions and Answers About the Merger and the Special Meeting”

“Special Factors — Background of the Merger”

“Special Factors — Recommendation of the SRC and Board of Directors; Reasons for Recommending Approval of the Merger”

“Special Factors — Position of Parent, Merger Subsidiary and the Värde Filing Persons as to the Fairness of the Merger”

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“Special Factors — Equity Commitment Letter”

“Special Factors — Limited Guarantee”

“The Merger Agreement”

“Annex A — Agreement and Plan of Merger”

(b) Conditions. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:

“Summary Term Sheet”

“Questions and Answers About the Merger and the Special Meeting”

“Special Factors — Background of the Merger”

“Special Factors — Recommendation of the SRC and Board of Directors; Reasons for Recommending Approval of the Merger”

“Special Factors — Position of Parent, Merger Subsidiary and the Värde Filing Persons as to the Fairness of the Merger”

“Special Factors — Equity Commitment Letter”

“Special Factors — Limited Guarantee”

“The Merger Agreement”

“Annex A — Agreement and Plan of Merger”

(c) Expenses. The information set forth in the Proxy Statement under the following caption is incorporated herein by reference:

“Special Factors — Estimated Fees and Expenses”

“The Merger Agreement — Termination Fees and Expense Reimbursement; Remedies”

“Annex A — Agreement and Plan of Merger”

(d) Borrowed funds.  Not applicable.

Item 11.  Interest in Securities of the Subject Company

(a) Securities ownership. The information set forth in the Proxy Statement under the following caption is incorporated herein by reference:

“Special Factors — Securities Purchase Agreement”

“Security Ownership of Certain Beneficial Owners and Management”

(b) Securities transactions. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:

“Summary Term Sheet”

“Special Factors — Background of the Merger”

“Special Factors — Support Agreement”

“Certain Purchases and Sales of FirstCity Common Stock”

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Item 12. The Solicitation or Recommendation

(d) Intent to tender or vote in a going-private transaction. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:

“Summary Term Sheet”

“Questions and Answers About the Merger and the Special Meeting”

“Special Factors — Background of the Merger”

“Special Factors — Recommendation of the SRC and Board of Directors; Reasons for Recommending Approval of the Merger”

“Special Factors — Support Agreement”

“The Special Meeting — Stock Ownership and Interests of Certain Persons”

“The Merger Agreement — No Solicitation”

“Security Ownership of Certain Beneficial Owners and Management”

“Annex A — Agreement and Plan of Merger”

(e) Recommendations of others. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:

“Summary Term Sheet”

“Questions and Answers About the Merger and the Special Meeting”

“Special Factors — Recommendation of the SRC and Board of Directors; Reasons for Recommending Approval of the Merger”

“Special Factors — Position of Parent, Merger Subsidiary and the Värde Filing Persons as to the Fairness of the Merger”

“Special Factors — Reasons of Parent, Merger Subsidiary and the Värde Filing Persons for the Merger”

“Special Factors — Support Agreement”

“The Special Meeting — Stock Ownership and Interests of Certain Persons”

“The Merger Agreement — Representations and Warranties”

“The Merger Agreement — No Solicitation”

“Security Ownership of Certain Beneficial Owners and Management”

“Annex A — Agreement and Plan of Merger”

Item 13. Financial Statements

(a) Financial statements. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:

“Special Factors — Effects of the Merger on FirstCity’s Net Book Value and Net Income”

“Selected Historical Consolidated Financial Data”

“Additional Information”

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(b) Pro forma information.  Not applicable.

Item 14. Persons/Assets, Retained, Employed, Compensated or Used

(a) Solicitations or recommendations. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:

“Questions and Answers About the Merger and the Special Meeting”

“Special Factors — Estimated Fees and Expenses”

“The Special Meeting — Solicitation of Proxies”

(b) Employees and corporate assets. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:

“Questions and Answers About the Merger and the Special Meeting”

“Special Factors — Estimated Fees and Expenses”

“Special Factors — Background of the Merger”

“Special Factors — Interests of Certain Persons in the Merger”

“The Special Meeting — Solicitation of Proxies”

“Advisory Vote on ‘Golden Parachute Compensation’”

Item 15. Additional Information

(b) Golden Parachute Payment. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:

“Summary Term Sheet”

“Special Factors — Background of the Merger”

“Special Factors — Interests of Certain Persons in the Merger”

“The Merger Agreement — Treatment of Stock Options and Restricted Common Stock”

“Advisory Vote on ‘Golden Parachute Compensation’”

“Annex A — Agreement and Plan of Merger”

(c) Other material information.  The entirety of the Proxy Statement, including all annexes thereto, is incorporated herein by reference.

Item 16.  Exhibits

(a)(2)(i)	Preliminary Proxy Statement of FirstCity Financial Corporation, incorporated by reference to the Schedule 14A filed with the Securities and Exchange Commission on February 1, 2013.
(a)(2)(ii)	Form of Proxy Card, incorporated herein by reference to the Proxy Statement.
(a)(2)(iii)	Letter to Stockholders of FirstCity Financial Corporation, incorporated herein by reference to

15

	the Proxy Statement.
(a)(2)(iv)	Notice of Special Meeting of Stockholders, incorporated herein by reference to the Proxy Statement.
(a)(2)(v)	Press Release dated December 21, 2012, filed as Exhibit 99.1 to the Company’s Current Report on Form 8-K, filed December 21, 2012 and incorporated herein by reference.
(c)(1)	Opinion of Lazard Middle Market LLC, incorporated herein by reference to Annex B of the Proxy Statement.
(c)(2) †	Discussion Materials, dated March 23, 2012, of Lazard Middle Market LLC for the Strategic Review Committee and the Board of Directors of the Company.
(c)(3) †	Supplemental Discussion Materials, dated March 28, 2012, of Lazard Middle Market LLC for the Strategic Review Committee and the Board of Directors of the Company.
(c)(4)	Presentation, dated December 20, 2012, of Lazard Middle Market LLC for the Board of Directors of the Company.
(d)(1)	Agreement and Plan of Merger, dated as of December 20, 2012, by and among FirstCity Financial Corporation, Hotspurs Holdings LLC and Hotspurs Acquisition Corporation, incorporated herein by reference to Annex A of the Proxy Statement.
(d)(2)	Equity Commitment Letter, dated as of December 20, 2012, by and among The Värde Fund X (Master) L.P., Värde Investment Partners, L.P., Värde Investment Partners (Offshore) Master, L.P., The Värde Fund VI-A, L.P. and Hotspurs Holdings LLC, filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed December 26, 2012 and incorporated herein by reference.
(d)(3)	Limited Guarantee, dated as of December 20, 2012, by and among The Värde Fund X (Master) L.P., Värde Investment Partners, L.P., Värde Investment Partners (Offshore) Master, L.P., The Värde Fund VI-A, L.P. and FirstCity Financial Corporation, filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed December 26, 2012 and incorporated herein by reference.
(d)(4)	Management Agreement, dated as of December 20, 2012, by and between Hotspurs Holdings LLC and Terry R. DeWitt.
(d)(5)	Management Agreement, dated as of December 20, 2012, by and between Hotspurs Holdings LLC and James C. Holmes.
(d)(6)	Management Agreement, dated as of December 20, 2012, by and between Hotspurs Holdings LLC and Mark B. Horrell.
(d)(7)	Retirement and Consulting Agreement, dated as of December 20, 2012, by and between James T. Sartain and Värde Partners, Inc., filed as Exhibit 10.7 to the Company’s Current Report on Form 8-K, filed December 26, 2012 and incorporated herein by reference.
(d)(8)	Separation Agreement, dated as of December 20, 2012, by and between J. Bryan Baker and FirstCity Financial Corporation, filed as Exhibit 10.5 to the Company’s Current Report on Form 8-K, filed December 26, 2012 and incorporated herein by reference.
(d)(9)	Separation Agreement, dated as of December 20, 2012, by and between Joe S. Greak and FirstCity Financial Corporation, filed as Exhibit 10.6 to the Company’s Current Report on Form 8-K, filed December 26, 2012 and incorporated herein by reference.
(d)(10)	Separation Agreement, dated as of December 20, 2012, by and between Jim W. Moore and FirstCity Financial Corporation, filed as Exhibit 10.4 to the Company’s Current Report on Form 8-K, filed December 26, 2012 and incorporated herein by reference.
(d)(11)	Support Agreement, dated as of December 20, 2012, by and among Hotspurs Holdings LLC and certain stockholders of FirstCity Financial Corporation, filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed December 26, 2012 and incorporated herein by reference.
(d)(12)	Securities Purchase Agreement, dated June 29, 2010, by and among FirstCity Financial Corporation and Värde Investment Partners, L.P., filed as Exhibit 10.60 to the Company’s Form 10-Q dated August 16, 2010 and incorporated herein by reference.

16

(f)  Section 262 of the Delaware General Corporation Law, incorporated herein by reference to Annex C of the Proxy Statement.

† Confidential treatment has been requested with respect to certain portions of these exhibits.

17

SIGNATURES

After due inquiry and to the best of my knowledge and belief, the undersigned certify that the information set forth in this statement is true, complete and correct.

Dated: February 1, 2013
	FIRSTCITY FINANCIAL CORPORATION
	By:	/s/ James T. Sartain
	Name:	James T. Sartain
	Title:	Chief Executive Officer
	HOTSPURS HOLDINGS LLC
	By:	/s/ David A. Marple
	Name:	David A. Marple
	Title:	Assistant Secretary
	HOTSPURS ACQUISITION CORPORATION
	By:	/s/ David A. Marple
	Name:	David A. Marple
	Title:	Assistant Secretary
	THE VÄRDE FUND X (MASTER), L.P.
	By:	The Värde Fund X (GP), L.P., Its General Partner
	By:	The Värde Fund X GP, LLC, Its General Partner
	By:	Värde Partners, L.P., Its Managing Member
	By:	Värde Partners, Inc., Its General Partner
	By:	/s/ David A. Marple
	Name:	David A. Marple
	Title:	General Counsel
	THE VÄRDE FUND X (GP), L.P.
	By:	The Värde Fund X GP, LLC, Its General Partner
	By:	Värde Partners, L.P., Its Managing Member
	By:	Värde Partners, Inc., Its General Partner
	By:	/s/ David A. Marple
	Name:	David A. Marple
	Title:	General Counsel

18

THE VÄRDE FUND X GP, LLC
By:	Värde Partners, L.P., Its Managing Member
By:	Värde Partners, Inc., Its General Partner
By:	/s/ David A. Marple
Name:	David A. Marple
Title:	General Counsel
THE VÄRDE FUND VI-A, L.P.
By:	Värde Investment Partners G.P., LLC, Its General Partner
By:	Värde Partners, L.P., Its Managing Member
By:	Värde Partners, Inc., Its General Partner
By:	/s/ David A. Marple
Name:	David A. Marple
Title:	General Counsel
VÄRDE INVESTMENT PARTNERS, L.P.
By:	Värde Investment Partners G.P., LLC, Its General Partner
By:	Värde Partners, L.P., Its Managing Member
By:	Värde Partners, Inc., Its General Partner
By:	/s/ David A. Marple
Name:	David A. Marple
Title:	General Counsel
VÄRDE INVESTMENT PARTNERS (OFFSHORE) MASTER, L.P.
By:	Värde Investment Partners G.P., LLC, Its General Partner
By:	Värde Partners, L.P., Its Managing Member
By:	Värde Partners, Inc., Its General Partner
By:	/s/ David A. Marple
Name:	David A. Marple
Title:	General Counsel
VÄRDE INVESTMENT PARTNERS G.P., LLC
By:	Värde Partners, L.P., Its Managing Member
By:	Värde Partners, Inc., Its General Partner
By:	/s/ David A. Marple
Name:	David A. Marple
Title:	General Counsel

19

VÄRDE PARTNERS, L.P.
By:	Värde Partners, Inc., Its General Partner
By:	/s/ David A. Marple
Name:	David A. Marple
Title:	General Counsel
VÄRDE PARTNERS, INC.
By:	/s/ David A. Marple
Name:	David A. Marple
Title:	General Counsel
GEORGE G. HICKS
/s/ George G. Hicks
MARCIA L. PAGE
/s/ Marcia L. Page
GREGORY S. MCMILLAN
/s/ Gregory S. McMillan

20

EX-99.(C)(2)

Exhibit (c)(2)

. DISCUSSION MATERIALS PREPARED EXCLUSIVELY FOR : 2 3 M A R CH 2 0 1 2 PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THE OMISSIONS HAVE BEEN INDICATED BY ASTERISKS ("*****"), AND THE OMITTED TEXT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

DRAFT Disclaimer . The information herein has been prepared by Lazard based upon information supplied by the Company or publicly available information, and portions of the information herein may be based upon certain statements, estimates and forecasts provided by the Company with respect to the anticipated future performance of the Company. We have relied upon the accuracy and completeness of the foregoing information, and have not assumed any responsibility for any independent verification of such information or any independent valuation or appraisal of any of the assets or liabilities of the Company, or any other entity, or concerning solvency or fair value of the Company or any other entity. With respect to financial forecasts, we have assumed that they have been reasonably prepared in good faith on bases reflecting the best currently available estimates and judgments of management of the Company as to the future financial performance of the Company. We assume no responsibility for and express no view as to such forecasts or the assumptions on which they are based. The information set forth herein is based upon economic, monetary, market and other conditions as in effect on, and the information made available to us as of, the date hereof, unless indicated otherwise. These materials and the information contained herein are confidential and may not be disclosed publicly or made available to third parties without the prior written consent of Lazard; provided, however, that you may disclose to any and all persons the U.S. federal income tax treatment and tax structure of the transaction described herein and the portions of these materials that relate to such tax treatment or structure. These materials are preliminary and summary in nature and do not include all of the information that the Company should evaluate in considering a possible transaction. Nothing herein shall constitute a commitment or undertaking on the part of Lazard or any related party to provide any service. These materials do not constitute tax, accounting, actuarial, legal or other specialist advice, and Lazard shall have no duties or obligations to you in respect of these materials or other advice provided to you, except to the extent specifically set forth in an engagement or other written agreement, if any, that is entered into by Lazard and you.

DRAFT Table of Contents I EXECUTIVE SUMMARY 1 II STRATEGIC LANDSCAPE 6 III PERFORMANCE 9 IV PRELIMINARY DUE DILIGENCE OBSERVATIONS 22 V MANAGEMENT PROJECTIONS 24 VI PRELIMINARY VALUATION CONSIDERATIONS 29 VII PRELIMINARY CONSIDERATIONS - STRATEGIC ALTERNATIVES 39 VIII APPENDIX 50

DRAFT I Executive Summary .

DRAFT Executive Summary We view FirstCity Financial as one of the oldest and most experienced asset managers specializing in the acquisition, servicing, management and disposition of non-performing assets. Ahead of its time, the Company was founded in 1986 and has deployed more than $4 billion to acquire more than $12 billion (face value) of portfolio assets, focusing principally on commercial real estate loans and commercial & industrial loan portfolios FirstCity’s deep domain expertise and systematic approach to origination, servicing and asset value realization has contributed significantly to the attractiveness of the leadership team and platform to third party creditors, investors and strategic partners; carefully planned and opportunistic partnerships have served the Company well from time to time in providing expansion avenues into adjacent asset classes and geographic regions. Senior management’s long-term dedication to and specialization within the sector, and time-tested ability to retain a cohesive leadership team has manifestly generated significant credibility, good will and an extensive network of business relationships in the marketplace; management’s tenure and stability have also contributed to the generation of attractive returns on purchased assets with an average unlevered cash-on-cash IRR1 of 20%+ over the course of the last decade. While a recent financial restructuring substantially removed near-term ongoing concern risk, the positioning as a highly experienced and well-placed ‘go-to- Company’s specialist in a large and opportunity-rich industry has and is presently undermined by funding and liquidity constraints, a complex capital structure, and a thinly-traded micro-cap public stock. Due to these and other factors, the Company’s ability to execute on its business plan and achieve its financial forecast as an independent company is brought into question (considered doubtful) in the absence of additional capital becoming available on reasonable terms. 1 I E X E C U T I V E S UMMAR Y . 1 Internal calculation of IRR equivalent to unlevered cash on cash collections excluding all servicing and other expenses.

DRAFT Today’s Discussion Review and report on the due diligence analysis conducted Preliminary observations Initial views on potential strategic alternatives 2 . I E X E C U T I V E S UMMAR Y

DRAFT Potential Next Steps 1. Continue due diligence and refine financial and valuation analysis 2. Identify and preview potential strategic partners (tiered) and a potential process plan 3. Continue to facilitatedue diligence and report back 4. Mobilize necessary resources to expedite the preparation of the Company for a potential market check and sale process 5. Revisit within 2 weeks: Updated diligence Revised / refined valuation analysis status Process outline Strategic partner discussion 3 . I E X E C U T I V E S UMMAR Y ****Confidential information on this page has been omitted and filed separately with the Securities Exchange Commission pursuant to a Confidential Treatment Request. ***** *****

DRAFT Recent Dates 17th February LMM / FirstCity engagement letter executed 20th February Onsite organizational meeting; management presentations and preliminary due diligence 24th February Inbound calls from group 24th February LMM granted access to electronic data room 29th February LMM receives information request list and cover letter from group 3rd March LMM authorized to provide information to group; 3/23 BoD meeting set 6th8th March Onsite due diligence meetings; LMM receives inbound call from & Varde Partners (8th) 27th February LMM attended lunch meeting with group 16th March group begin to receive access to confirmatory due diligence items 24th February LMM authorized to meet group 20th March FirstCity Q4 and YE 2011 earnings conference call 4 . I E X E C U T I V E S UMMAR Y 23rd March Update FirstCity BOD ****Confidential information on this page has been omitted and filed separately with the Securities Exchange Commission pursuant to a Confidential Treatment Request.  ***** ***** ***** ***** ***** ***** *****

DRAFT CORPORATE Corporate orientation and overview; multiple senior management presentations Business due diligence including interviews with senior management and key business line leaders Business segment review including all international businesses and assets Business plan and 5-year financial forecast FINANCIAL Current funding structure; capitalization; 2H 2011 restructuring; liquidity position and outlook Financial statements and audits Off-balance sheet relationships; non-core assets and investments (including special situations) Management’s ‘base case’ financial forecast and capital / financing assumptions Tax ORIGINATION AND UNDERWRITING Target market Industry developments and marketplace opportunity (market sizing) Origination strategy; pipeline; due diligence and pricing processes; proprietary internal systems and procedures Historical and projected deployment / acquisition (origination) activity Historical pricing trends; collection trends; actual v/s budget comparative analysis SERVICING Review of global servicing platform and operations Evaluated characteristics of the servicing platform to identify sources of potential franchise value TECHNOLGY & SYSTEMS Primary internal (mission-critical) technology platform (ASR) including management demonstrations LEGAL Key contracts Current and pending litigation Change of control implications on loan and facility covenants Other primary agreements Due Diligence Recap 5 . I E X E C U T I V E S UMMAR Y

DRAFT II Strategic Landscape .

DRAFT Positioning INTELLECTUAL PROPERTY Significant intellectual property developed and resident from 25+ years of specialized experience in origination, investing, servicing and disposition transactions and de minimus attrition / turnover of key employees ASSET VALUATION, SERVICING & AND RESOLUTION EXPERTISE 25-year history & industry pioneer Deep domain expertise and vast relationship network Strategic and financial relationships in U.S. and abroad I I S T R A T EG I C L ANDS C A PE TRACK RECORD 25-years: $ 4B deployed to acquire $12B (face value) of assets 10-years: unlevered cash-on-cash (pre-servicing) IRR of 20+ % Since 2001: gross cash collections of 130%+ (avg.) of purchase price LEADERSHIP Cohesive senior management with 25 years of team experience 30 + years (avg.) of direct industry experience Vast relationship network and considerable professional good will; synonymous team and brand DIFFERENTIATED Long-term specialization and integrated model (originate, service, manage, divest) differentiated from new market entrants; generalists, and part-time participants HIGH VALUE-ADD APPROACH Integrated model and robust internal systems platform offers differentiated and difficult-toreplicate high value-added model Extensive special servicing and workout expertise across a wide range of assets and regions through multiple cycles $3B+ servicing portfolio across 14 different investment partners 6 . 1 2 3 4 5 6

DRAFT ALTERNATIVE ASSET MANAGERS Multi-fund and multi-strategy systematic or opportunistic managers of third-party limited partner funds; typically heavily focused on credit and/or real-estate Global focus and origination network; work independently or as part of consortia; generally do not offer servicing capabilities Focus on the highly competitive larger loan pools; strong ties to major Wall Street firms Origination Underwriting Servicing INDEPENDENT SPECIALTY FINANCIAL & SECTOR SPECIALISTS Independent specialty / regional investors Consistency of participation highly dependent on institutional-quality funding base and multiple traditional, bank, Wall Street and/or non-traditional funding sources, including both on-and-off balance sheet Many lack scale, enterprise-wide systems, purchasing power and consistent sources of origination Many remain niche buyers of smaller, offthe- run loan pools or partner with third party investors Origination Underwriting Servicing Landscape MULTI-NATIONAL / INTEGRATED Integrated firms typically with global footprint and major bracket Wall Street capabilities Global origination, expansive structured finance capabilities including syndication and securitization experience; substantial 3rd party investor distribution capabilities Target market segment: highly competitive larger loan pools on a global basis; trophy property assets and asset portfolios Origination Underwriting Servicing Description General Capabilities Sample Participants = yes, = no = yes, = no = yes, = no NLA 7 I I S T R A T EG I C L ANDS C A PE . Waterfall Asset Management

DRAFT Industry Developments OBSERVATIONS & CONSIDERATIONS GROWTH OF FINANCIAL SECTOR IMPAIRED ASSETS Analyst estimates1: $500 Bn of impaired assets within the U.S banking sector alone (v/s $135B in 2006) $180 Bn of FDIC loss-share assets available to be marketed by acquiring banks in the coming 2-5 years $800 - $1,000 Bn of CRE loans expected to mature in the next 5-years; up to 1/3 of all borrowers expected to be unable to pay off or refinance DEAL ACTIVITY DRIVEN BY ONGOING DELEVERAGING Management views transaction activity accelerating as regulated institutions continue to pursue deleveraging strategies Bank managements increasingly focused on achieving new regulatory capital ratios and compliance An estimated 68 distressed funds seeking to raise funds totaling $47Bn for deployment in the CRE loan sector $100 Bn (est.) of assets (face value) marketed in 2011; the 2012 estimate is $120 Bn M&A DRIVEN MARK-TO-MARKET AS TRANSACTION CATALYST A wave of community and regional bank M&A activity is expected, driven by a strategic refocus by larger banks on growth via consolidations and virtual capitulation by smaller banks facing soft earnings outlook and razor-thin NIM in a historically-low rate environment Mark-to-market triggered by change of control and recap transaction accounting is expected to fuel additional supply in the secondary market, creating further opportunities for the secondary market participants EUROPE Management views the European opportunity to be larger and longer-tailed than the U.S. opportunity Total assets of European banks approximate €41 trillion; analysts estimate asset sales of €2.0 Trillion over 10-years NPLs forecast to be sold in the next 12-24 months estimated at €50-100bn European banks face refinancing of approximately €1.3 trillion over the next 3-years PRICING Increased competition from both traditional and non-traditional investors, along with favorable financing terms has buoyed pricing from cyclical lows, however most industry analysts agree significant upside remains FRAGMENTED MIDDLE MARKET COMPETITION Episodic involvement from boutique participants, subscale relationship networks and internal systems generally preclude consistent competition from boutique and regional players in lower-mid market loan pools ($20-50MM) Larger competitors complete less frequently in the low-mid market due to inability to capture scale economies for their larger LPs and investment partners I I S T R A T EG I C L ANDS C A PE 1 FDIC and E&Y Source: Company Management, SNL, Preqin 8 .

DRAFT III Performance .

DRAFT Source: Company Management and public filings Face value of originations is the face value of loans purchased by FirstCity (Portfolio Assets). The discount to face value is the face value less the combined contribution from FirstCity & Varde. I I I P E R FORMANC E Origination (Deployment) Trends A consistent and specialized market participant with a strong reputation and extensive multi-jurisdictional origination network, FirstCity’s deployment activity nonetheless reflects increasingly evident direct funding constraints, resulting in a higher percentage of purchased assets being channeled into its off balance-sheet partnerships; this operating model has and will continue to impact the growth profile of on-balance-sheet earning assets and the overall earnings outlook. $24 $17 $23 $60 $71 $144 $127 $72 $148 $68 $58 $201 $155 $106 $114 $76 $153 $87 $17 $53 $158 $229 $542 $530 $258 $669 $183 $559 $300 $709 $209 $194 $271 $0 $250 $500 $750 $1,000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 FirstCity share of originations Varde share of originations Aggregate implied discount to face value ($ in Millions) $767 $702 $387 $843 $330 $856 $516 $798 $410 $420 $558 Face Value of Origination 9 .

DRAFT Source: Company Management and pubic filings % Face value paid represents the historical yearly weighted average of the purchase price for FirstCity’s loan portfolio acquisitions (Portfolio Assets). I I I P E R FORMANC E Pricing Trends A historically low rate environment pressuring investment returns in traditional asset classes and an increased supply of dedicated funds targeting distressed real estate portfolios and troubled assets has pushed industry pricing to above precrisis levels, suggesting that scale economies and operating efficiency will factor heavily in near-term earnings prospects. 29% 25% 33% 21% 44% 35% 42% 11% 49% 54% 52% 0% 25% 50% 75% 100% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 31.5% Weighted Average Purchase Price % of Face Value Paid 10 .

DRAFT $0 $50 $100 $150 $200 $250 $300 $350 $400 $450 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 $Millions Portfolio Assets Equity Investments Railroad/manufacturing Investment Securities Source: Company Management. For purposes of this analysis, LMM defines earning assets as Portfolio Assets, Loans Receivable, Total Equity Investments, Investment Securities, Operating Entity Assets, and Assets Held for Sale I I I P E R FORMANC E Growth (Earning Assets) The declining growth rate in consolidated earning assets leading up to 2010 and an increased dependence on equity investments for earnings growth highlight capacity constraints at a point in the cycle characterized by management as the most attractive purchasing environment in the history; such constraints were punctuated in 2011 when total earning assets declined by 23% and portfolio assets declined by 35%, a year when FirstCity was limited to acquiring (for its own balance sheet) only $58 MM, a relatively small share of $287 MM of total deployments. 11 . FirstCity’s Company’s

DRAFT I I I P E R FORMANC E Performance (Cash Recoveries) Gross collections (cash on cash, before servicing expenses) as a percentage of purchase price (aggregate deployments) has averaged 133%, with relatively low budget : actual variance highlighting FirstCity’s high quality origination network, and disciplined due diligence and pricing regimen; still, FirstCity is receiving proportionately less direct economic benefit of this solid and consistent performance as a result of the on-balance-sheet v/s off-balance-sheet mix shift. Source: Company Management. For purposes of this analysis, LMM defines the Current Collection Ratio as the gross cash on cash collections, before servicing as of 12/31/11 for the U.S. platform; Budgeted refers to the forecasted cash on cash collections, before servicing at the time of origination. 132% 181% 133% 128% 129% 115% 107% 145% 144% 131% 134% 144% 130% 125% 130% 134% 130% 138% 148% 140% 142% 133% 100% 125% 150% 175% 200% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Current Budgeted Weighted Average 133% Average Current Collection Ratio % of Initial Investment 12 .

DRAFT I I I P E R FORMANC E Performance (Portfolio IRR) Long-term specialization, disciplined pricing and robust servicing capabilities have assisted in the achievement of 20+% IRR’s through multiple cycles with relatively low actual : forecast difference Source: Company Management. 1 Internal IRR formula based on unlevered cash on cash collections before servicing and other expenses 21% 46% 21% 20% 12% 10% 4% 31% 29% 21% 25% 20% 35% 14% 19% 15% 17% 15% 24% 31% 26% 25% 0% 10% 20% 30% 40% 50% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Actual Forecasted Weighted Avg. IRR Average IRR1 : 21.7% Internal Rate of Return % 13 .

DRAFT Financial Results (Annual Cash Collection Trends) I I I P E R FORMANC E Over an 11 year period, FirstCity has recovered more than $3.0B of cumulative cash collections with approximately 20% of collections as consolidated assets and almost 80% of collections derived from (off-balance sheet) unconsolidated partnerships. Source: Company Management. For purposes of this analysis, LMM defines Annual Cash Collections as Total Unconsolidated Partnership Collections and Total Consolidated Partnership Collections consistent with the Company’s filings 274 273 290 284 223 240 214 161 87 109 184 19 10 8 8 29 48 86 63 178 126 128 $0 $100 $200 $300 $400 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Gross collections: Unconsolidated partnerships Gross collections: Consolidated partnerships $293 $252 $292 $298 $283 $224 $300 $288 $312 $234 $265 Gross annual collections 14 .

DRAFT Financial Results (Cash Collections by Vintage) I I I P E R FORMANC E Approximately 80% of forecast collections from vintage 2007 deployments have been collected; 2011, 2010 and to a lesser extent 2009 deployments represent the preponderance of the near-term collection pipeline, which underscores the importance of the consolidated / unconsolidated mix shift in near-term earnings forecasts. Source: Company Management. For purposes of this analysis, LMM defines Gross Cash Collections as the Gross Cash Collections for the U.S. Platform. Cash Collections by vintage refers to Gross Cash Collections from pools of assets originated in a given year. $182 $112 $123 $112 $105 $153 $86 $125 $218 $182 $41 $183 $113 $125 $116 $121 $179 $108 $147 $312 $326 $383 $0 $100 $200 $300 $400 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Actual Gross Cash Collections (As of 12/31/11) Estimated Gross Cash Collections ($ in Millions) 99.6% 99.4% 98.5% 87.1% 96.5% 85.3% 79.2% 70.0% 85.4% 55.8% 10.7% % Completion 15 .

DRAFT Financial Results (Core Revenue) I I I P E R FORMANC E Pro-forma revenue are presented to exclude items considered one-time and non-core by LMM; pro-forma revenue trends underscore the trends in core revenue growth (negative) and the trends in portfolio income (shrinking). $0 $20 $40 $60 $80 $100 $120 2007 2008 2009 2010 2011 Servicing fees Portfolio income ABL investment income Interest income - other loans Equity in earnings of subsidiaries Gain on investment/subsidiary sales Income from consol Crestone subs Other income $55 $45 $79 $100 $78 Total Core Revenue ($ in Millions) Source: Company Management. Core Revenue excludes certain one-time items considered by LMM to be non-core including the following items: 2008:$20.2mm DTA writedown 2009: $2.3mm business combination gain and $6.1mm from a legal settlement 2010: $4.6mm business combination gain 2011: $26.5mm debt extinguishment gain and $0.4mm business combination gain 16 .

DRAFT Financial Results (Core Net Income) I I I P E R FORMANC E Pro forma net income represents LMM adjustments for one-time and non-recurring revenues and punctuates FirstCity’s core operating earnings trends. $2.2 ($26.5) $10.4 $7.9 ($2.8) ($30) ($25) ($20) ($15) ($10) ($5) $0 $5 $10 $15 2007 2008 2009 2010 2011 Core Net Income ($ in Millions) Source: Company Management. Core Net income excludes certain one-time items considered by LMM to be non-core including the following items: 2008: $20.2mm DTA writedown 2009: $2.3mm business combination gain and $6.1mm from a legal settlement 2010: $4.6mm business combination gain 2011: $26.5mm debt extinguishment gain and $0.4mm business combination gain 17 .

DRAFT $0.00 $5.00 $10.00 $15.00 $20.00 $25.00 $30.00 $35.00 Jan-96 Aug-96 Mar-97 Oct-97 May-98 Dec-98 Jul-99 Feb-00 Sep-00 Apr-01 Nov-01 Jun-02 Jan-03 Aug-03 Mar-04 Oct-04 May-05 Dec-05 Jul-06 Feb-07 Sep-07 Apr-08 Nov-08 Jun-09 Jan-10 Aug-10 Mar-11 Oct-11 Stock Price Performance (Absolute, Since IPO) FirstCity’s stock has generally not recovered from the Harbor Financial write-down; current share price approximates the value at which the shares traded 8-years ago. Source: FactSet and SNL Financial; as of 3/21/12. 12/20/11 Recognized $26mm one time gain in Q4 relating to the restructuring Bank of Scotland credit facility 9/30/09 FCFC enters into agreement to settle Prudential lawsuit resulting in a $6.2mm gain 6/30/10 Refinanced $287M senior credit facility with Bank of Scotland; enter into an investment agreement with Värde Investment Partners LP I I I P E R FORMANC E Current Price: $8.95 9/2004 Sold interest in Drive Financial ($87M) 1/2001 Hawkins named Chairman, Sartain named CEO 8/2000 Sold interest in auto finance company to Bank of Scotland 3/1997 Merger with Harbor Financial ($46M) 5/1996 Acquired National Auto Funding 9/1999 Incurred a write-down of $63.1mm related to Harbor Financial transaction 9/1998 MSR provision of $28.5mm; incurred a quarterly loss of $40mm Median = $7.58 $ Price per Share 18 . 3/20/12 Recognized a one time impairment of $9.2mm in Q4 related to FCFC’s Mexican business

DRAFT Mar-07 Dec-07 Aug-08 May-09 Jan-10 Oct-10 Jul-11 Mar-12 20 40 60 80 100 120 -65.82% -44.72% -14.76% -5 -2.24% Jan-96 Apr-98 Aug-00 Dec-02 Apr-05 Jul-07 Nov-09 Mar-12 0 50 100 150 200 250 300 350 -53.79 -63.40% -51.52% 79.84% 124.62% 1 YEAR 180 Days Source: FactSet, as of 3/21/12; values indexed at 100 as of beginning of analysis period; Receivables Management Peer Group includes AACC, ASFI, ECPG, FCFC and PRAA; Commercial Finance Peer Group includes CSE, DFR, CIT, GMT, KFN, MRLN, MFI, MIND, NEWS, PLUS. Commercial Finance Peer Group Receivables Management Peer Group S&P 500 FirstCity I I I P E R FORMANC E FirstCity’s stock price has halved since the IPO; the recent rally represents a response to the successful debt restructuring. Stock Price Performance (Relative % Change Since IPO) NASDAQ Bank Index SINCE IPO 5 YEAR 19 . Mar-11 May-11 Jul-11 Aug-11 Oct-11 Dec-11 Jan-12 Mar-12 70 80 90 100 110 120 130 140 -13.46 1.58% 3.43% 8.05% 25.35% Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 80 90 100 110 120 130 140 150 160 -2.5 15.10% 18.26% 19.92% 39.63%

DRAFT Source: SNL Financial; as of 3/21/12. AVERAGE DAILY TRADING VOLUME (in thousands) DAILY VOLUME AS % OF FLOAT Period Median Volume Median Notional Value 5-Year ~6,400 $41.3k 3-Year ~5,800 $37.7k 1-Year ~3,900 $27.6k 180 Day ~3,500 $25.7k Period FirstCity Median Receivables Management Peers Median Commercial Financing PeersMedian 5-Year 0.07% 0.63% 0.45% 3-Year 0.07% 0.54% 0.40% 1-Year 0.04% 0.54% 0.43% 180 Day 0.04% 0.57% 0.43% I I I P E R FORMANC E Liquidity and Float A non-traditional IPO (reverse merger), thin float and micro-cap profile is generally not conducive to institutional coverage nor substantive institutional sponsorship; paired with a difficult-to-understand business, these characteristics impair the - Company’s ability to raise capital through traditional equity, equity linked and debt capital markets transactions. 0% 1% 2% 3% 4% 5% Receivables Management Peers Commercial Financing Peers FirstCity 0 70 140 210 280 350 20 .

DRAFT Coverage & Wall Street Sponsorship Note: Prices as of 3/21/12 I I I P E R FORMANC E Price Current Market Number of Mean Implied Mean Price / Target / Stock Cap Covering Mean Price Price 2012 EPS 2012 EPS Tangible Company Ticker Price ($M) Analysts Rating Target Appreciation Estimate Estimate Book First City Financial Corporation FCFC $8.95 $93 None None None Commercial Finance CapitalSource Inc. CSE $7.18 $1,761 13 Buy $7.79 8.5% $0.52 13.81x 1.27x CIT Group Inc. CIT $42.24 $8,482 17 Buy $44.00 4.2% $1.38 30.61x 0.99x GATX Corporation GMT $42.61 $1,990 8 Buy $51.67 21.3% $2.61 16.33x 2.14x Marlin Business Services Corp. MRLN $14.85 $189 3 Strong Buy $17.00 14.5% $0.77 19.29x 1.32x Mitcham Industries, Inc. MIND $21.76 $270 5 Buy $29.67 36.4% $1.99 10.93x 2.58x Median $1,761 8 14.5% 16.33x 1.32x Receivables Management Asset Acceptance Capital Corp. AACC $4.73 $145 4 Buy $7.33 55.0% $0.44 10.75x 1.63x Encore Capital Group, Inc. ECPG $21.86 $536 6 Strong Buy $35.20 61.0% $2.92 7.49x 2.32x Portfolio Recovery Associates, Inc. PRAA $70.07 $1,201 6 Strong Buy $94.80 35.3% $6.95 10.08x 2.73x Median $536 6 55.0% 10.08x 2.32x 21 .

DRAFT IV Preliminary Due Diligence Observations .

DRAFT Situation Summary I V P R E L I M I N AR Y DUE D I L I G ENCE OB S E R V A T ION S . RESULTS and CONDITIONS CONSIDERATION Deployments / origination activity: $287MM of total deployments (originations) in 2011 represented a near record year for purchasing YTD Q1 2012 is on track to be a record quarter with $90MM of total deployments expected Cash collection activity: Total collections increased 33% in 2011, from $234.3MM to $311.7MM representing a record year of collections Growth: Servicing revenue increased 28% in 2011 from $8.7MM in 2010 Consolidated revenues increased 0.5% in 2011 to $105.3MM Revenue has grown at a 17.7% CAGR over a 5-year period Net income increased 93.7% in 2011 from $12.5MM in 2010 Net income has grown at a 82.5% CAGR over a 5-year period ? FirstCity’s investment in 2011 originations declined to the lowest level in 5- years to 20% (58.1MM / 287.3MM) ? Despite record deployments, the balance sheet continues to shrink, with consolidated earning assets down 23% for the year ending 12/31/11 and consolidated portfolio assets down 35% for the same period ? Unconsolidated partnerships represented close to 60% of total collections, and increased nearly 70% in 2011 from $108.7MM in 2010 to $183.7MM ? Collections from consolidated partnerships increased 2% from $125.7MM in 2010 to $128.0MM in 2011; collections generated from consolidated partnerships contributed 41% to total collections ? Servicing revenue remains a small overall component of revenues ? 2011 revenues included a $26.5MM one-time accounting gain relating to the restructuring of the BOS facility; pro forma for the exclusion of the one-time gain, total consolidated revenue was $78.8MM, 25% lower than stated revenues; 21% lower than 2010 revenues excluding the one-time gain of $4.6MM relating to a business combination and 44% more than total revenues generated in 2007 ? FirstCity’s two primary sources of core revenue (income from portfolio assets and income from Crestone subsidiaries) contributed $47.6MM in 2011, a decline of 22% from $61.1MM in 2010. ? Excluding the one-time gain from the BOS facility restructuring, 2011 net income was $(2.3)MM, a 135% decline from 2010 net earnings excluding a $4.6MM one-time gain from a business combination. ? A depleting NOL will result in an additional earnings constraint. 22

DRAFT Situation Summary I V P R E L I M I N AR Y DUE D I L I G ENCE OB S E R V A T ION S . CONSIDERATION and ABILITY TO CAPITALIZE Funding and Liquidity Generation: FirstCity was successful in restructuring a senior BOS facility in Q4, 2011, booking a large one-time accounting gain Near/intermediate going-concern risk was mitigated, and the gain contributed to strong 2011 revenues and earnings results Stock Price Performance: o The market responded favorably to the debt restructuring; FirstCity’s stock price rallied 23% between the announced restructuring and January 5, 2012 Pipeline: o Management recently described its pipeline as the most robust in history, FirstCity is currently involved in active due diligence on approx. $600MM of potential originations (face value) The Opportunity: Market and Industry Developments o Management was recently quoted as describing the market opportunity both in the US and abroad to be the best and most lucrative in firm history; compelling market opportunity for non-performing asset purchase and servicing opportunities RESULTS and CONDITIONS ? The debt restructuring did not improve FirstCity’s cash position ? The Company remains funding-constrained, with limited capacity and a significant percentage of assets encumbered by current lenders. ? The current stock price and its illiquidity, along with current capital structure, leverage ratios and existing covenants severely limit access to traditional capital markets; liquidity otherwise available via select asset divestitures subject to an available market and covenant waivers. ? FirstCity’s stock continues to trade at a discount to book value (NAV), the micro-cap and thinly traded profile all but precludes the Company from accessing the traditional equity and equity-linked institutional marketplace. ? The Company remains uncovered by Wall Street; a relatively complex business and thin float limit institutional investor interest ? With significant funding constraints, and assuming no additional funding, options include declining participation (which may impact reputation as an incumbent) or directing an increasing proportion of new originations to its off-balance sheet partnerships, in which case economic participation will be marginalized and the balance sheet will continue to shrink. ? Specialty finance companies that are not growing (originations, collections, earning assets, earnings etc) are generally perceived by investors to be in run-off (liquidation) and are valued accordingly. ? In its present condition, FirstCity is not positioned to effectively leverage its established brand, strong domain reputation, vast origination network and sophisticated, high-efficacy internal servicing and collections systems to capitalize on a multi-generational market opportunity; participation (even if nominal) will result in an increasing proportion of originations being channeled into unconsolidated (off-balance-sheet) partnerships and a decreasing amount of on-balance-sheet participation; capital partners will accrue primary economic benefit while FirstCity is likely to accrue nominal economic benefit. . 23

DRAFT V Management Projections .

DRAFT Assumptions GENERAL ASSUMPTIONS All forecast deployments funded with new capital (zero current debt capacity for new purchases) Debt funding: all new deployments dependent on management securing additional debt capacity Equity funding required to support new deployments assumed to be sourced from (i) unencumbered liquidity (cash); (ii) unencumbered excess cash collections; (iii) prospective capital offerings, including select asset sales Collection performance: Collection-to-cost ratio of 135%; implies a 26% gross profit on every collection dollar Collection expenses (e.g. maintenance, insurance, etc.) assumed to be 6.0% of aggregate collections Incremental overhead estimated to support new deployments is assumed to be 0.5% of gross new collections Additional expenses include interest on existing and new debt facilities, salaries and benefits, executive bonuses, costs from the Crestone subsidiaries and other expenses Assumes net operating losses are exhausted by June 2013; thereafter, earnings are subject to 39% effective tax rate TERMS ON NEW FINANCING Weighted average interest rate: 6.00% Other financing costs: 0.50% Advance rate on senior acquisition debt: 60% Excess cash flow to service debt: Year 1: 70% Year 2: 70% Year 3: 60% Year 4: 50% Year 5: 50% V MANA GEMENT P ROJ E C T I O N S . 24

DRAFT $366 $400 $309 $264 $280 $278 $313 $351 $0 $100 $200 $300 $400 $500 2009 2010 2011 2012 2013 2014 2015 2016 $148 $68 $58 $90 $140 $120 $180 $200 $0 $50 $100 $150 $200 $250 2009 2010 2011 2012 2013 2014 2015 2016 Assumptions (Key Drivers) Source: Company management (a) Represents participation in originations Projected Actual Actual Projected Earnings Assets Originations (a) GROSS COLLECTIONS CURVE Projected $ in Millions $ in Millions % Collected Each Year 25

DRAFT Financial Forecast ($ in millions) Source: Company Management (a) 2011 2016E originations represent FirstCity’s share of total originations. Historical Projected CAGR 2009 2010 2011 2012 2013 2014 2015 2016 '11A - '16E Summary Income Statement: Servicing Fees $9 $9 $11 $9 $6 $2 $0 $0 (50.7%) Management/Incentive Fees 0 0 0 2 7 3 1 2 NA Portfolio Income 54 46 41 30 40 45 47 60 8.0% ABL Investment Income 3 2 4 4 1 1 0 0 (47.3%) Equity in Earnings of Subsidiaries 0 15 2 14 15 12 8 7 27.3% Income from Consol. Crestone Subs 5 19 7 4 4 4 4 4 (9.0%) Other Income 17 18 40 6 8 8 8 9 (26.6%) Total Revenues $88 $109 $105 $70 $81 $74 $68 $82 (4.9%) Total Expenses (56) (72) (64) (44) (43) (46) (49) (55) (3.0%) Operating Profit $32 $37 $41 $26 $38 $28 $19 $27 (8.2%) Minority Interest (6) (13) (9) (4) (2) (3) (1) (1) (38.9%) Impairment (5) (9) (4) (5) (4) (4) (4) (4) 0.0% Pre-Tax Income $21 $15 $28 $17 $32 $21 $14 $22 (4.7%) Income Taxes (2) (2) (4) (0) (6) (8) (6) (9) 16.5% Net Income $19 $13 $24 $16 $25 $13 $9 $13 (10.9%) Summary Balance Sheet: Total Assets 465 460 356 305 313 310 351 396 2.1% Equity 78 88 112 130 156 169 177 191 11.2% Deployments (a) 148 68 58 90 140 120 180 200 Operating Metrics: Debt/Equity 4.35x 3.82x 1.96x 1.23x 0.94x 0.76x 0.91x 1.02x ROE 26.1% 17.5% 28.7% 15.9% 17.8% 7.8% 5.0% 7.3% Effective Tax Rate 9.5% 13.3% 14.3% 2.9% 20.3% 39.0% 39.0% 39.0% Per Share Statistics: Earnings per Share $1.86 $1.27 $2.33 $1.58 $2.45 $1.23 $0.84 $1.29 (11.1%) Book Value per Share $7.62 $8.63 $10.87 $12.57 $15.02 $16.25 $17.09 $18.38 11.1% 26

DRAFT Capitalization (Current Balance Sheet (12/31/11) ($ in thousands) (a) FLGB is a structured finance entity created to restructure and repay the Company's debt owed to Bank of Scotland and Bank of America. Approximately 75% of total assets are currently securing the BOS Reducing Note Facility within FLBG x x FC Investment FLBG(a) Holding Bank of Scotland Consolidated Assets: Cash and Cash Equivalents $14,606 $21,425 $36,031 Portfolio Assets 21,539 102,373 123,912 Loans Receivable -- 45,696 45,696 Interest Receivable -- 285 285 Investment Securities Available for Sale, net 1,000 2,798 3,798 Equity Investments 51,365 58,028 109,393 Assets Held for Sale -- 9,900 9,900 Service Fees Receivable 1,088 ($174) 913 Loan Servicing Assets - SBA -- 1,090 1,090 Other Assets 1,893 23,435 25,327 Total Assets $91,491 $264,855 $356,346 Liabilities: Notes Payable - BoS $0 $86,579 $86,579 Notes Payable - Other 11,757 91,600 103,357 Notes Payable - Affiliates -- -- -- Other Liabilities 7,804 21,203 29,007 Total Liabilities $19,562 $199,381 $218,943 Equity: FirstCity Investor Equity $70,419 $41,557 $111,976 Noncontrolling Interest 1,510 23,916 25,427 Total Equity $71,929 $65,474 $137,403 Total Liabilities & Equity $91,491 $264,855 $356,346 x x 27

DRAFT Credit Facilities (Current Structure) Source: Company Management as of 12/31/2011. (a) Excludes $25mm FLBG2 Holdings note, which has been written down to $0 on the balance sheet. V MANA GEMENT P ROJ E C T I ONS . Description Issue Date Type Original Face Value Balance Sheet Carrying Value Rate Maturity LTV % Amortization Requirements Other Key Terms Bank of Scotland 6/25/10 Reducing Note Facility $268,479 $86,579 0.25% fixed 12/21/14 62.1% 90% of cash flow paydown outstanding balance Secured by substantially all assets and equity investments of FirstCity Commercial Corp.; Minimum tangible net worth of $90MM for FirstCity Financial; 10% of cash flow leak through provision; Consent required upon change of control Bank of America $50mm term note 12/21/11 Term 51,000 49,228 LIBOR + 2.75% 12/1/14 63.4% $20mm in 2012; $5mm every 6 months thereafter Secured by all assets of FH Partners; 5% servicing fee; excess cash flows then go to paydown bank of scotland Wells Fargo 2/15/12 Revolving Note 25,000 21,405 Alternate interest rates based on Wells Fargo base rate + margin, LIBOR + 2/15/15 60.0% Revolving line of credit solely for SBA orginations Secured by assets of ABL and guaranteed by FirstCity up to $5.0mm; Key man provisions regarding director composition Merrill Lynch Mortgage Trust 3/30/06 Term 7,800 7,361 6.07% fixed 4/5/16 -- $47,117 per month; Bullet at maturity Secured by assets of Oregon Short Line Building Bank of America - WAMCO 30 10/30/07 Term 37,500 6,355 LIBOR + 2.75% 12/1/12 56.5% Bullet at maturity Secured by all assets of Wamco 30 Fifth Third Bank 3/14/11 Term 3,750 3,531 Prime Rate + margin (0.50- 1.50%) or LIBOR + 3/1/16 -- Montly Amortization of $31,250 with balance at Secured by assets of FirstCity's consolidated railroad subsidiaries Fifth Third Bank 3/14/11 Line of Credit 0 1,625 Prime Rate + margin (0.50- 1.50%) or LIBOR + margin (2.25-3.25%) 3/1/13 -- Bullet at maturity $5 million Acquisition Line of Credit available until March 2013 at which time any outstanding amounts convert to Term Debt maturing in March 2016. Secured by assets of FirstCity's GATX Rail (East Penn RR) 4/15/11 Capital Lease 750 735 Capital lease 10/1/22 -- Monthly P&I payments of $7,289 $7,289 monthly payment through Oct. 2022 Republic Corporation loan participation 11/1/11 Participation 333 333 -- 2/28/15 -- Bullet at maturity Participation in underlying loan originated to Republic Corp. (borrower) by FC Crestone entity (lender); terms same as the lead BEI Electronics loan participation 6/30/10 Participation 156 163 -- 3/31/13 -- Bullet at maturity Participation in underlying loan originated to BEI (borrower) by FC Crestone entity (lender); terms same as the lead term-note Subtotal $394,768 $178,188 Central National Bank 9/1/11 Term 5,665 $4,869 5.0% fixed 8/15/14 51.8% Cash Flow Note; bullet at maturity Secured by assets of FirstStorm Partners 2, 30% leak through of cash flow once 50% LTV reached First National Bank of Central Texas 10/30/10 Term 5,250 4,457 5.0% fixed through Oct. 2013, then greater of 4.50% or Prime + 0.25%, or 10/30/15 46.2% $250K every six months; bullet at maturity Secured by assets of MPortfolio 2 LLC, 20% leak through of cash flow once 50% LTV reached First National Bank of Central Texas 2/11/11 Term 3,400 2,432 5.0% fixed 2/11/16 48.3% Cash Flow Note; bullet at maturity Secured by assets of FirstStorm Partners 1, 20% leak through of cash flow once 50% LTV reached Subtotal $14,315 $11,758 Consolidated Total $409,083 $189,946 FLBG(a) FC INVEST. HLDGS 28

DRAFT VI Preliminary Valuation Considerations .

DRAFT Benchmarking Source: SNL and FactSet (3/21/12), based on a closing price of $8.95 Note: Receivables Management Peer Group includes AACC, ASFI, ECPG, FCFC and PRAA; Commercial Finance Peer Group includes CSE, DFR, CIT, GMT, KFN, MRLN, MFI, MIND, NEWS, PLUS. 29 Average Current 3 Month 12 Month FirstCity Financial Corp. 0.82x 0.89x 0.77x Commerical Finance trading comps 1.16 1.10 1.01 Receivables Management trading comps 1.25 1.27 1.40 FirstCity Financial Corp. 0.82x 0.89x 0.77x Commerical Finance trading comps 1.22 1.15 1.05 Receivables Management trading comps 1.34 1.37 1.51 FirstCity Financial Corp. 3.8x 7.6x 6.2x Commerical Finance trading comps 12.2 12.5 15.2 Receivables Management trading comps 11.5 11.0 13.8 P/BV P/TBV LTM P/E

DRAFT MARKET CAPITALIZATION HYPOTHETICAL LIQUIDATION TRADING COMPARABLES PRECEDENT TRANSACTIONS DCF (DIVIDEND DISCOUNT) PREMIUMS PAID BALANCE SHEET FAIR MARKET VALUE The 52-week range of the share price Current share price as of 3/21/12 is $8.95 Based on case projections and a stress case whereby net cash flows are reduced ~$15mm Assumes a discount rate of 20% Assumes a P/TBV range of 0.90x 23 1.30x based on select comparable commercial finance and receivables management companies Assumes a P/BV range of 0.95 23 1.05x based on select precedent specialty finance transactions Intrinsic value of the Company as an ongoing concern Based on projections Discount rate range of 17.5% - 22.5% and a 1.0x P/TBV exit multiple Assumes a 20 30% premium to the current share price Based on the premium paid in select specialty finance and small cap FIG transactions Base on a moderate stress case and a contingent case whereby balance assets are reduced, on average, by 7% and 17%, respectively IMPLIED P/TBV SHARE PRICE LOW HIGH MARKET PRICE (52-WEEK RANGE) 0.53x 0.93x HYPOTHETICAL LIQUIDATION 0.76x 0.87x TRADING COMPARABLES 0.90x 1.30x PRECEDENT TRANSACTIONS 0.95x 1.05x DCF (DIVIDEND DISCOUNT) 0.62x 0.76x PREMIUMS PAID 0.99x 1.07x HYPOTHETICAL BALANCE SHEET FAIR MARKET VALUE 0.54x 0.79x $5.79 $8.21 $9.78 $10.33 $6.71 $10.74 $5.82 $10.09 $9.43 $14.13 $11.41 $8.27 $11.64 $8.59 Valuation Summary . Note: Implied P/TBV multiples based on 12/31/11 tangible book value per share of $10.87. 30

DRAFT Comparable Trading Comps Source: FactSet and SNL Financial; as of 3/21/12. V I P R E L IMI N A R Y V A L U A T I O N C ONS I DE R A T I O N S . 31 Stock Mkt % of Price / Price / GAAP PE Div. Reported (1) Debt / Price($) Cap 52 Week 52 Wk BV TBV CY 2012 CY 2013 Yield LTM LTM Equity Ticker 3/21/12 ($MM) High Low High (X) (X) (X) (X) (%) ROAA (%) ROAE (%) (X) FirstCity Financial Corporation FCFC $8.95 $93 $10.09 $5.79 88.7% 0.82x NM NA NA 0.0% 5.3% 17.9% 1.8x COMMERCIAL FINANCE CapitalSource Inc. CSE $7.18 $1,761 $7.31 $5.08 98.2% 1.17x 1.31x 13.7x 12.5x 0.6% (0.6%) (2.6%) 0.8x CIT Group Inc. CIT $42.24 $8,482 $44.88 $27.68 94.1% 0.95x 1.00x NM 15.6x 0.0% 0.1% 0.4% 3.0x GATX Corporation GMT $42.61 $1,990 $45.50 $28.90 93.6% 1.77x 1.92x 16.3x 14.1x 2.7% 2.0% 9.6% 3.2x Marlin Business Services Corp. MRLN $14.85 $189 $16.58 $9.37 89.6% 1.15x 1.15x 19.3x 12.5x 1.9% 1.3% 3.8% 0.6x MicroFinancial Incorporated MFI $6.80 $97 $7.11 $4.29 95.6% 1.28x 1.28x 10.5x 9.1x 4.1% 6.1% 12.4% 0.8x Mitcham Industries, Inc. MIND $21.76 $270 $26.76 $9.52 81.3% 1.89x 2.02x 9.0x 9.0x 0.0% 10.2% 14.0% 0.0x NewStar Financial, Inc. NEWS $10.60 $524 $12.43 $7.17 85.3% 0.93x 0.93x NA NA 0.0% 0.8% 2.5% 2.4x High - - 98.2% 1.89 2.02x 19.3x 15.6% 4.1% 10.2% 14.0% 3.2% Average - - 91.1% 1.31 1.37 13.7 12.1 1.3 2.8 5.7 1.5 Median - - 93.6% 1.17 1.28 13.7 12.5 0.6 1.3 3.8 0.8 Low - - 81.3% 0.93 0.93 9.0 9.0 0.0 NM NM 0.0 RECEIVABLES MANAGEMENT Asset Acceptance Capital Corp. AACC $4.73 $145 $5.97 $2.80 79.2% 1.05x 1.17x 10.9x 8.8x 0.0% 3.2% 9.2% 1.3x Asta Funding, Inc. ASFI $8.05 $118 $8.75 $6.40 92.0% 0.67x 0.67x NA NA 1.0% 4.3% 6.3% 0.4x Encore Capital Group, Inc. ECPG $21.86 $536 $33.16 $18.96 65.9% 1.44x 1.51x 7.5x 6.7x 0.0% 8.0% 18.1% 1.1x Portfolio Recovery Associates, Inc. PRAA $70.07 $1,201 $90.95 $56.76 77.0% 2.02x 2.31x 10.5x 8.5x 0.0% 9.8% 18.7% 0.4x High - - 92.0% 2.02x 2.31x 10.9x 8.8x 1.0% 9.8% 18.7% 1.3x Average - - 78.5% 1.29 1.42 9.6 8.0 0.3 6.3 13.1 0.8 Median - - 78.1% 1.25 1.34 10.5 8.5 0.0 6.2 13.7 0.7 Low - - 65.9% 0.67 0.67 7.5 6.7 0.0 3.2 6.3 0.4

DRAFT Historical Perspective (Price / TBV) Source: SNL, FactSet (3/21/12) Note: a) FirstCity had a tangible book value per share of ($0.21) in 3Q2002 b) Pre-crisis defined as the period from 3/18/02 to 12/31/07 c) Financial crisis defined as the period from 1/1/08 to 3/31/09 d) Post-crisis defined as the period from 4/1/09 to current e) 3/21/12 Note: Receivables Management Peer Group includes AACC, ASFI, ECPG, FCFC and PRAA; Commercial Finance Peer Group includes CSE, DFR, CIT, GMT, KFN, MRLN, MFI, MIND, NEWS, PLUS 0.82x 1.22x 1.34x 0.00 1.00 2.00 3.00 4.00 5.00 6.00x Mar 2002 Mar 2004 Mar 2006 Mar 2008 Mar 2010 Mar 2012 FirstCity Commercial Finance Peer Group Receivables Management Peer Group (a) 32 V I P R E L IMI N A R Y V A L U A T I O N C ONS I DE R A T I O N S . P/TBV trading ranges of small-cap specialty finance companies have tended to converge since the 2008-09 financial crisis Average P/TBV Financial Post- Pre-Crisis (b) Crisis (c) Crisis (d) Current (e) FirstCity Financial Corp. 1.50x 0.47x 0.90x 0.82x Comm. Finance 1.31 0.70 0.89 1.22 Receivables Mgmt. 3.00 1.68 1.62 1.34

DRAFT Comparable Transactions(1) . Source: SNL. (1) Select specialty finance transactions announced since 1/1/2000; TEV at the time of announcement <$250mm 33 V I P R E L I M I N AR Y V A L U A T I O N CONS I DE R A T I O N S Announce Target Transaction Implied Multiple Date Acquiror Target Ticker Value BV TBV LTM EPS 2/3/11 Cerberus Silverleaf Resorts SVLF $95.3 0.46x 0.46x 11.4x 12/27/10 Investor group United PanAm Financial UPFC 110.4 0.83 0.85 NM 8/3/09 Prospect Capital Patriot Capital Funding PCAP 86.3 0.49 0.51 NM 9/16/08 EZCORP Value Financial Services VFSI 76.7 4.13 NA NA 1/28/08 Hypo Real Estate Hldg. Quadra Realty Trust QRR 179.2 0.75 0.77 40.5 2/28/07 CRX Acquisition Cronos Group CRNS 134.8 1.42 1.81 14.0 2/15/07 Investor group Fieldstone Invst. Corp. FICC 188.1 0.44 0.44 NM 9/13/05 Wachovia AmNet Mortgage AMNT 80.8 1.12 1.06 NM 9/6/05 WDM Fund United Financial Mortgage UFMC 35.8 1.11 1.20 25.6 5/27/05 New Century Financial RBC Mortgage Company PRFN 80.6 NA NA NA 1/20/05 iStar Financial Falcon Financial Invst. Trust FLCN 119.7 1.02 1.02 NM 9/22/04 Capital One Financial Onyx Acceptance Corp. ONYX 190.8 1.70 2.23 17.1 6/30/04 Allied Capital Financial Pacific FNPC 92.9 NA NA NA 11/12/03 General Electric HPSC HDR 75.0 1.69 2.02 23.4 7/12/03 American Home Mortgage Apex Mortgage Capital AXM 181.2 0.95 0.93 3.6 3/31/03 Consumer Portfolio Services TFC Enterprises TFCE 21.8 0.46 0.47 NM High 4.13x 2.23x 40.5x Mean 1.18 1.06 19.4 Median 0.99 0.93 17.1 Low 0.44 0.44 3.6

DRAFT SELECTED FINANCIAL TRANSACTIONS (ALL SECTORS) Premiums Paid (1) (2) Source: SNL. (1) Announced transactions involving publicly traded target companies in the specialty finance sector; transactions since March 2002; transaction value less than $250mm at the time of announcement (2) Announced transactions involving publicly traded target companies in the financials industry excluding banks; transactions since March 2002; transaction value less than $250mm at the time of announcement IMPLIED PREMIUMS SELECTED SPECIALTY FINANCIAL TRANSACTIONS 41.1 61.5 54.9 79.4 0.0% 25.0 50.0 75.0 100.0 Premium % 10-Year Avg. 36.6% 34.7% 38.3% 31.8% 60.0% 56.9% 53.6% 44.3% 52.8% 54.4% 49.3% 39.1% 57.4% 44.7% 28.3% 28.8% 0.0 25.0 50.0 75.0 100.0 1- Year Avg. 3-Year Avg. 5-Year Avg. 10-Year Avg. 1 Day Before 1 Month Prior 3 Months Prior 1 Year Prior V I P R E L IMI N A R Y V A L U A T I O N C ONS I DE R A T I O N S . 75 total transactions: 17 Financial Technology 7 Broker/Dealer 30 Insurance 6 Investment Company 15 Specialty Finance 34

DRAFT DCF (Dividend Discount) ($ in millions) . 1 Based on 10,381,000 fully-diluted shares outstanding shares as of December 31, 2011. 35 V I P R E L I M I N AR Y V A L U A T I O N CONS I DE R A T I O N S FIRSTCITY - MANAGEMENT FORECAST 2011A 2012E 2013E 2014E 2015E 2016E TV Net Income $24.0 $16.5 $25.5 $12.7 $8.7 $13.4 Dividends 0.0 0.0 0.0 0.0 0.0 0.0 Period Ending Shareholder's Equit 112.0 130.5 155.9 168.7 177.4 190.8 Terminal Multiple (P/TBV) 1.00x Terminal Value $190.8 NPV (@ 20%) $76.7 Per Share Price1 $7.44 P/TBV EXIT MULTIPLE 0.80x 1.00x 1.20x 0.8x 1.0x 1.2x 12.5% $8.22 $10.28 $12.33 15.0% 7.37 9.21 11.05 17.5% 6.61 8.27 9.92 20.0% 5.95 7.44 8.93 22.5% 5.37 6.71 8.06 25.0% 4.85 6.07 7.28 Implied LTM P/E 11.4x 14.2x 17.0x DISCOUNT RATE

DRAFT Liquidation Scenario (Overview and Assumptions) . PRIMARY ASSUMPTIONS Premium/(discount) to current share price based on a price of $8.95 as of 3/21/12 Discount rate range: 12.5% 25.0% Total tax shield of $246.0mm, comprised of: Tax basis: $219.6; NOLs: $26.4 It is assumed that the first $246.0mm of net pre-tax cash flows (including cash used to service debt) are tax-exempt Effective tax rate: 39.0% (35.0% federal, 4.0% state); taxes applied to cash flows above aggregate tax shield Fully-diluted shares outstanding: 10,381,000 (12/31/11) Cash and equivalents (unencumbered): $11.3mm (12/31/11) Estimated administrative and overhead expenses through the wind-down period: $48.4mm (includes approx. $5.7mm of employee retention + compensation expense, and; $2.2mm for employee severance expense Based on historical expenses as a percent of gross cash collections (~6.0%); in line with prior years BASE CASE Base Case: Implied WAL: 29.3 months DOWNSIDE CASE Downside Case: 2012, 2013 and 2014 collections are adjusted down 5.0%, 2.5% and 2.5%, respectively 2016 collections are adjusted up 2.5% and 2.5%, respectively Result: Approx. $7.5mm loss of base case net cash flows Implied WAL: 31.1 months EXTENDED WAL CASE Extended WAL Case: 2012, 2013 and 2014 collections are lowered 10.0%, 10.0% and 5.0%, respectively 2015, 2016 and 2016+ collections are increased 5.0%, 10.0% and 15.0%, respectively No change to base case net cash flows Implied WAL: 35.1 months REDUCED NET CASH FLOW CASE Reduced Net Cash Flow Case: 2012, 2013 and 2014 collections are lowered 5.0%, 5.0% and 5.0%, respectively Result : $14.5mm loss of base case net cash flows Implied WAL: 30.6 months 36 V I P R E L I M I N AR Y V A L U A T I O N CONS I DE R A T I O N S Collections and timing of collections; assumes management’s base case scenatrio Adjusts net cash flows under management’s bse case (timing and gross collections change based on the following adjustments to management’s base case assumptions: based on the following adjustments to management’s base case assumptions:

DRAFT ($ in thousands, except per share amounts) . (a) Net collections net of (following) repayment to all existing credit facilities including Bank of Scotland and Bank of America under the terms of the current facilities Management Base Case Cash Flows @ 20.0% Discount Rate Net FC Invest. Net Cash FLBG Holdings Collections(a) Overhead Taxes Flows 2012 $9,859 $49,616 $59,475 ($17,512) -- $41,963 2013 4,543 40,876 45,418 (15,811) -- 29,607 2014 15,575 12,299 27,875 (8,250) ($3,834) 15,791 2015 29,797 7,393 37,190 (3,400) (13,178) 20,612 2016 30,934 2,841 33,775 (3,380) (11,854) 18,541 2016+ 9,187 34 9,221 (4) (3,595) 5,623 Total $99,895 $113,059 $212,954 ($48,357) ($32,461) $132,136 Share Price Sensitivities Premium/(Discount) to Current Share Price ($8.95) Case Case Mgmt. Mgmt. Extended Reduced Mgmt. Mgmt. Extended Reduced Base Downside WAL Cash Base Downside WAL Cash 12.5% $10.73 $9.93 $9.94 $9.44 19.9% 10.9% 11.1% 5.5% 15.0% 10.27 9.45 9.38 9.00 14.7% 5.6% 4.8% 0.5% 17.5% 9.83 9.02 8.86 8.59 9.9% 0.7% (1.0%) (4.1%) 20.0% 9.43 8.61 8.38 8.21 5.4% (3.8%) (6.3%) (8.3%) 22.5% 9.06 8.24 7.95 7.85 1.2% (8.0%) (11.2%) (12.2%) 25.0% 8.71 7.89 7.55 7.53 (2.7%) (11.8%) (15.6%) (15.9%) Net Cash Flows Lost - $ -- ($7.5) ($0.1) ($14.5) WAL 29.3 31.1 35.1 30.6 Implied Price/Tangible Book Value of $10.87 (12/31/11) Case Mgmt. Mgmt. Extended Reduced Base Downside WAL Cash 12.5% 0.99x 0.91x 0.91x 0.87x 15.0% 0.94 0.87 0.86 0.83 17.5% 0.90 0.83 0.81 0.79 20.0% 0.87 0.79 0.77 0.75 22.5% 0.83 0.76 0.73 0.72 25.0% 0.80 0.73 0.69 0.69 Discount Rate Discount Rate 37 V I P R E L I M I N AR Y V A L U A T I O N CONS I DE R A T I O N S

DRAFT Balance Sheet - Stress Test Analysis . a) Consolidated unaudited balance sheet as of 12/31/11 b) Based on 10,381,000 fully-diluted shares outstanding of as of 12/31/11 c) Assumes the following declines in value: 5% Portfolio Assets; 3% for SBA loans; 10% for other Loans Receivable 10% for Equity Investments; 15% for Equity Investments in Servicing Entities; 20% for Investment Securities AFS; 10% of Operating Assets; 10% for Assets Held for Sale; case-by-case percentage declines assumed for Other Assets. Non-controlling interest is adjusted by corresponding amounts for those assets that the Company consolidates but does not own 100%. d) Assumes the following declines in value: 15% Portfolio Assets; 10% for SBA Loans; 25 for other Loans Receivable; 20% for Equity Investments; 30% for Equity Investments in Servicing Entities; 50% for Investment Securities AFS; 20% for Operating Assets; 20% for Assets Held for Sale; case-by-case percentage declines assumed for Other Assets. Non-controlling interest is adjusted by corresponding amounts for those assets that the Company consolidates but does not own 100%. 38 V I P R E L I M I N AR Y V A L U A T I O N CONS I DE R A T I O N S ($000) Est. Est. Loss Loss Consolidated Rate Moderate Rate Contingent (12/31/11)a % Casec % Cased Assets Cash and cash equivalents $35,996 0% $35,996 0% $35,996 Restricted Cash 35 0% 35 0% 35 Portfolio Assets 123,946 (5%) 117,749 (15%) 105,354 Loans Receivable 45,947 (6%) 43,234 (16%) 38,493 Equity Investments 109,393 (12%) 96,607 (23%) 83,821 Investment Securities - AFS 3,798 (20%) 3,039 (13%) 3,298 Operating Entity Assets 15,703 (10%) 14,133 (20%) 12,562 Assets Held for Sale 9,900 (10%) 8,910 (20%) 7,920 Total Earning Assets 308,687 (8%) 283,671 (19%) 251,448 Other Assets 11,628 (13%) 10,102 (21%) 9,181 Total Assets 356,346 (7%) 329,804 (17%) 296,660 Liabilities Total Liabilities 218,943 0% 218,943.2 0% 218,943.2 Non-controlling Interest 25,427 (15%) 21,638.2 (32%) 17,281.5 Sub total 244,370 (2%) 240,581 (3%) 236,225 Shareholders' Equity 111,976 (20%) 89,223 (46%) 60,435 Book Value per Share $10.79 (20%) $8.59 (46%) $5.82 Premium / (Discount) to Current Book Value per Share ($2.19) ($4.96) Implied Price to Book Value per Shareb 0.80x 0.54x Total Liabilities and Shareholders' Equity 356,346 329,804 296,660

DRAFT VII Preliminary Considerations - Strategic Alternatives .

DRAFT Preliminary Considerations V I I P R E L I M I N AR Y C ONS I DE R A T I O N S - S T R A T E G I C A L T E RNA T I V ES In considering potential strategic alternatives based on the non-exhaustive due diligence and analyses conducted thus far, LMM has considered among other factors (i) historical operating performance; (ii) historical and current funding structure; (iii) current position in the marketplace and market opportunities and industry developments; (iv) small- -year forecast and outlook for the business, and; (vi) capital alternatives reasonably available to the Company. In summary, we considered the following alternatives Status Quo Attempt to renegotiate / modify the Varde agreement -balance sheet leverage within acquisition partnerships Capital Markets Offering Enhance funding and deployment capacity by evaluating and pursuing appropriate equity, equity-linked and debt offerings in the public, hybrid and/or private markets Select Asset Sales As an alternative to or in addition to raising capital, consider divesting of certain unencumbered assets to enhance funding capacity; seek and obtain covenant waivers from existing creditors if and as needed Fund Placement Enhance funding capacity by capitalizing an off-balance sheet special purpose vehicle (SPV) with strategic capital partners in which FirstCity retains significant equity interest and for which FirstCity serves as external manager Full Sale of the Company Full or majority sale of the Company to either a strategic or a financial acquirer Liquidation Initiate and manage an orderly winding down of the business including among other components managing the portfolios in runoff and reductions in force . 39 FirstCity’s profile and lace of research coverage;(v) management’s 5 Continue to operate the business according to management’s base case finanaical forecast Seek limited leverage on equity investments’ “on balance sheet” + seek off-

DRAFT Preliminary Considerations V I I P R E L I M I N AR Y C ONS I DE R A T I O N S - S T R A T E G I C A L T E RNA T I V ES Strategic considerations: In order to grow, specialty finance companies must continue to raise and deploy capital Receivables Earning assets Cash collections (recoveries) Revenues Earnings ROA; ROE Without captive sources of funding via customer deposits (banks), specialty finance companies are dependent on funding from third party creditors, from equity investors, and from the redeployment of unencumbered earnings to support all-important purchasing (origination) capacity. In the absence of growth, sophisticated investors will generally view a specialty finance company to be in run-off (orderly liquidation), and will consider such observations when valuing the enterprise Strategic questions: Is FirstCity growing? In the absence of a material shift in positioning or strategy, is FirstCity able to grow organically? Does FirstCity have sufficient funding (origination capacity) and access to appropriate deployment opportunities in order to acquire enough earning assets to more than offset liquidating assets ? Is the market valuing FirstCity as a growth company, or as a company that is in run-off? . 40

DRAFT Status Quo (Preliminary Considerations) Considerations EARNINGS, SHARE PRICE AND SHAREHOLDER REALIZATION IMPLICATIONS Completely dependent on management base case financial forecast, itself dependent on securing significant additional funding Estimated PV1: $5.95 - $8.93 per share; implies a range that is lower than the estimated liquidation value and a (approximate) 20% discount to the current share price Doubtful that the attractive market opportunity will be realized Constrained liquidity limits the deployment, collections, revenue and earnings outlook, with earning assets forecast continuing to shrink Utilization of NOL by 2013, and resulting tax expense weighs on future net income Stock is already thinly traded, limiting traditional capital markets alternatives; doubtful that institutional investor sponsorship will increase in the near-term, although investors will tend to value the Company as a liquidation/run-off opportunity if growth is not apparent In the absence of an amended Varde agreement, the economic benefit from both portfolio purchases and servicing will continue to accrue disproportionately to Varde Status quo assumes continued burden of public company expenses EXECUTION CONSIDERATIONS Limited growth may impact employee morale + threaten long-standing cohesion TIMING As the assets and firm profits decline, the ability to obtain a for the company will likely erode V I I P R E L I M I N AR Y C ONS I DE R A T I O N S - S T R A T E G I C A L T E RNA T I V ES . 41 1 DCF(Dividend Discount) value Company’s “premimum”

DRAFT Liquidation (Preliminary Considerations) Considerations EARNINGS, SHARE PRICE AND SHAREHOLDER REALIZATION IMPLICATIONS Estimated value per share range of $8.21- $9.43 (approximately a 10% discount and a 5% premium to today’s share price), assuming a base case discount factor of 20% Opportunity cost of a franchise (going-concern or growth) premium Opportunity cost of forgone (highly attractive) market opportunity No elimination of public company expenses; retain net operating loss tax benefits EXECUTION Inherently unstable process Threatens long-term cohesion among employees and senior management Loss of key employees places further pressure on collections Incremental expenses are material (retention and severance expense) TIMING Significant percentage of aggregate cash collections will be received in the early years, although a full liquidation may take as many as 5+ years V I I P R E L I M I N AR Y C ONS I DE R A T I O N S - S T R A T E G I C A L T E RNA T I V ES . 42

DRAFT SPV Fund Raising (Considerations) Considerations EARNINGS, SHARE PRICE AND SHAREHOLDER REALIZATION IMPLICATIONS Current income would be highly dependent on the size of the fund or funds raised; however, the majority of profits would be earned over multiple years and likely to be subordinated to return of investor capital plus a preferred return Substantial portion of the value almost always accrues to the capital partner/s Utilization of the NOL by 2013, and the resulting tax expense, significantly weighs on future earnings Unlikely to attract additional investor interest in the shares No elimination of public company expenses EXECUTION High-degree of execution risk as inaugural fund Previous attempts have been unsuccessful (2008 and 2011) Significant key employee risk TIMING Fund raising process is time intensive and can span up to 1-2 years for first-time managers Highly competitive fund raising environment could extend timing further as LP investors in the marketplace are concentrating their investment with fewer institutions V I I P R E L I M I N AR Y C ONS I DE R A T I O N S - S T R A T E G I C A L T E RNA T I V ES . 43 FirstCity’s

DRAFT Select Asset Sales (Considerations) Considerations EARNINGS, SHARE PRICE AND SHAREHOLDER REALIZATION IMPLICATIONS Most important consideration relates to reconciling liquidity shortfall with realistically estimated capacity that may be available if and to the extent assets can in fact be divested and proceeds remain unencumbered Current estimates: FMV of all assets outside the BOS facility relatively modest (approx. $52MM of equity investments) Proceeds may be difficult to leverage pending current credit capacity Given the recent restructuring of the Bank of Scotland facility, it may be difficult to obtain waivers to obtain liquidity from assets securing its agreement; LMM has not yet surveyed market appetite Motivated liquidation of assets may compromise the market position vis a via maximizing value Restrictive market terms on new bank facilities will continue to pressure originations and the future financial results Utilization of NOL by 2013, and the resulting tax expense, will also significantly weigh on future earnings No elimination of public company expenses EXECUTION Varde appears well positioned in a sale for the majority of the unencumbered assets as its partnerships represent approximately $50MM of the equity investments We understand Varde to have a right of first refusal TIMING Unencumbered assets already have a relatively short duration vast majority are expected to pay down within 18-24 months Likely to take substantially more time to consummate a transaction if the counterparty is not Varde OTHER $90MM minimum TNW covenant related to FirstCity Financial guarantee for the Bank of Scotland facility V I I P R E L I M I N AR Y C ONS I DE R A T I O N S - S T R A T E G I C A L T E RNA T I V ES . 44 Company’s Company’s  –

DRAFT Capital Markets Transaction (Considerations) Considerations EARNINGS, SHARE PRICE AND SHAREHOLDER REALIZATION IMPLICATIONS All forms of traditional capital (equity, hybrid, debt) are anticipated to be very expensive We cannot be assured of investor demand for such product Based on a number of factors including stock price, relative illiquidity and small-cap profile, we would anticipate a significant discount due to high cost capital (assuming capital is in fact available) Risk NOL preservation if a change of control is triggered by equity or equity-linked issuance No elimination of public company expenses No guarantees of institutional coverage EXECUTION Given the illiquidity in the stock, the earnings profile, and access to acceptable liquidity/credit facilities, an investment in the Company will not likely appeal to public investors As such, domain of equity investors will likely overlap with universe of buyers seeking control High degree of execution risk equity raise would be contingent on debt and vice versa Complex existing funding structure, encumbered assets, and FirstCity Financial guarantee to Bank of Scotland will constrain investor willingness to invest Depending of availability of credit and related terms, the Company will likely require additional equity to fund origination growth on a go-forward basis Careful review and consideration of change of control issues New equity investor may require significant governance rights TIMING Contingent, parallel debt and equity process complicates execution and would extend timing . 45 V I I P R E L I M I N AR Y C ONS I DE R A T I O N S - S T R A T E G I C A L T E RNA T I V ES –

DRAFT Equity Capital Markets (Recent Issuance Trends) Source: ECM Analytics and PlacementTracker as of 12/31/11. Note: Excludes SPACs, REITs, closed-end funds and offerings less than $10mm. OVERALL QUARTERLY NEW ISSUANCE 2005-2011 YTD 2005 2006 2007 2008 2009 2010 2011 # of FIG Offerings 25 28 36 31 96 90 24 32 32 22 31 23 25 62 26 22 6 61 64 59 54 51 40 53 48 39 14 20 % of All Offerings 7.9% 10.1% 9.3% 7.6% 32.7% 25.8% 11.9% 7.7% 9.9% 6.7% 12.6% 6.4% 14.0% 22.3% 15.3% 21.6% 5.5% 18.4% 19.5% 17.0% 18.5% 19.5% 19.1% 14.8% 16.2% 14.2% 11.8% 12.1% . 46 V I I P R E L I M I N AR Y C ONS I DE R A T I O N S - S T R A T E G I C A L T E RNA T I V ES —

DRAFT Equity Capital Markets (PIPE Transactions) (1) V I I P R E L I M I N AR Y C ONS I DE R A T I O N S - S T R A T E G I C A L T E RNA T I V ES . PIPE PRICING - PREMIUM / (DISCOUNT) AT CLOSING NUMBER OF PIPE TRANSACTIONS AGGREGATE PROCEED RAISED Source: Dealogic All 2012 data through March 19th, 2012 (1) Excludes banks $ in Billions 47

DRAFT Source: Dealogic All 2012 data through March 19th, 2012 V I I P R E L I M I N AR Y C ONS I DE R A T I O N S - S T R A T E G I C A L T E RNA T I V ES AMOUNT SECURITIZED . CORPORATE DEBT ISSUED Debt Capital Markets (Recent Developments) NUMBER OF CORPORATE DEBT TRANSACTIONS NUMBER OF SECURITIZATION TRANSACTIONS $ in Billions $ in Billions 48

DRAFT Control Sale (Considerations) Considerations EARNINGS, SHARE PRICE AND SHAREHOLDER REALIZATION Likely greatest relative value versus other alternatives Possibility of capturing a share of synergies, such as funding, cross-selling, incremental originations, etc. Provides shareholders with a liquidity event Eliminates public company costs However, lack of stand-alone funding options for the Company may pressure ultimate value Net operating loss tax benefits will likely be negatively impacted by a change of control EXECUTION Complex story in highly risky market segment with a non-homogenous portfolio will increase execution risk and could significantly extend the time to execute a transaction Limited buyer universe–target interested parties with a strong funding position and experience in investing in non-performing loan pools One party has completed substantive due diligence and has had a previous relationship with the company A few parties have made inbound calls expressing interest Careful review and consideration of change of control issues TIMING Ability to launch a sale process would need to be carefully orchestrated and timed Identify and agree on possible target buyers Draft appropriate process and legal documentation Management preparation for a sale process (e.g. develop management presentations, rehearsal, etc.) V I I P R E L I M I N AR Y C ONS I DE R A T I O N S - S T R A T E G I C A L T E RNA T I V ES . 49

DRAFT VIII Appendix .

DRAFT Preparedness STATUS COMENTARY MARKETING RESOURCES Marketing resources, including teaser, management presentation and financial model will need to be refined / developed prior to being shared with potential buyers Public company status and associated information in the public domain will help facilitate buyer due diligence ELECTRONIC DATA ROOM Over 700 documents populate the existing electronic dataroom; however, further legal and HR related information will be required additions Organization of the dataroom is required prior to presenting to potential buyers Consider migrating to a dataroom platform that is better suited for a formal sell-side process and is able to provide additional functionality and security features MANAGEMENT PRESENTATIONS Develop materials with Management to create a concise, well-orchestrated investor presentation Requires rehearsal of senior management team as well as business line leaders LEGAL DOCUMENTS Company counsel to begin drafting definitive agreements V I I I A P P ENDI X . 50

DRAFT Due Diligence Update Tax Many of the requested items have been provided Accounting and other miscellaneous items The company continues to assemble and share information Legal Limited information has been provided as many items are not in electronic form; in process . 51 V I I I A P P ENDI X D ****Confidential information on this page has been omitted and filed separately with the Securities Exchange Commission pursuant to a Confidential Treatment Request.

EX-99.(C)(3)

Exhibit (c)(3)

SUPPLEMENTAL DISCUSSION MATERIALS PREPARED EXCLUSIVELY FOR : 28 MARCH 2012 CONFIDENTIAL PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THE OMISSIONS HAVE BEEN INDICATED BY ASTERISKS ("*****"), AND THE OMITTED TEXT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

1 Recent Performance Source: FactSet and SNL Financial; as of 3/27/12. P R O J E C T H O T S P U R S Volume (in thousands) $ Share price 27.53 41.32 30.92 1.85 8.23 1.93 1.35 $9.95 $8.93 $8.95 $8.94 $9.08 $9.04 $8.94 0 5 10 15 20 25 30 35 40 45 $8.75 $9.00 $9.25 $9.50 $9.75 $10.00 3/19/12 3/20/12 3/21/12 3/22/12 3/23/12 3/26/12 3/27/12 Volume ('000) Price ($)

Benchmarking 1) Pro forma calculations remove the effect of $26.5MM non cash gain related to the Bank of Scotland debt refinancing 2) LTM reflects the last twelve months of net income Source: SNL and FactSet (3/27/12), based on a closing price of $8.94 Note: Receivables Management Peer Group includes AACC, ASFI, ECPG, FCFC and PRAA; Commercial Finance Peer Group includes CSE, DFR, CIT, GMT, KFN, MRLN, MFI, MIND, NEWS, PLUS. P R O J E C T H O T S P U R S  Current Pro-forma1 3 Month 12 Month FirstCity Financial Corp. 0.82x 1.08x 0.89x 0.77x Commerical Finance trading comps 1.16 1.11 1.01 Receivables Management trading comps 1.28 1.28 1.39 FirstCity Financial Corp. 0.82x 1.08x 0.89x 0.77x Commerical Finance trading comps 1.23 1.16 1.05 Receivables Management trading comps 1.38 1.37 1.50 FirstCity Financial Corp. 3.84x NM 7.41x 6.17x Commerical Finance trading comps 11.50 12.36 15.18 Receivables Management trading comps 11.87 11.02 13.69 LTM P/E 2 P/BV P/TBV Average 2

MARKET PRICE TRADING COMPARABLES PRECEDENT TRANSACTIONS PREMIUMS PAID DCF (DIVIDEND DISCOUNT) HYPOTHETICAL LIQUIDATION HYPOTHETICAL BALANCE SHEET FMV 52-week range of the share price Current price as of 3/27/12 is $8.94 P/TBV range of 0.90x – 1.30x Commercial finance and receivables management peer groups P/BV range of 0.95 – 1.05x based on select precedent specialty finance transactions 36-41% premium to current share price Premium paid in select specialty finance and small cap FIG transactions Intrinsic value of the Company as an ongoing concern Based on management’s projections Discount rate range of 17.5% - 22.5% and a 1.0x P/TBV exit multiple Based on management’s base case projections and a stress case whereby net cash flows are reduced ~$15mm Assumes a discount rate of 20% Based on a moderate stress case and a contingent case whereby balance assets are reduced, on average, by 7% and 17%, respectively IMPLIED P/TBV SHARE PRICE LOW HIGH MARKET BASED MARKET PRICE (52-WEEK RANGE) 0.53x 0.93x TRADING COMPARABLES 0.90x 1.30x PRECEDENT TRANSACTIONS 0.95x 1.05x PREMIUMS PAID 1.12x 1.16x FUNDAMENTAL DCF (DIVIDEND DISCOUNT) 0.62x 0.76x HYPOTHETICAL LIQUIDATION 0.76x 0.87x HYPOTHETICAL BALANCE SHEET FAIR MARKET VALUE 0.54x 0.79x $5.79 $9.78 $10.33 $12.16 $6.69 $8.21 $5.82 $10.09 $14.13 $11.41 $12.60 $8.24 $9.43 $8.59 Note: Implied P/TBV multiples based on actual, consolidated 12/31/11 tangible book value per share of $10.87 (unaudited) 3 P R O J E C T H O T S P U R S

Trading Comps Source: FactSet and SNL Financial; as of 3/27/12. 4 Stock Mkt % of Price / Price / GAAP PE Div. Debt / Price($) Cap 52 Week 52 Wk BV TBV CY 2012 CY 2013 Yield LTM LTM Equity Ticker 3/27/12 ($MM) High Low High (X) (X) (X) (X) (%) ROAA (%) ROAE (%) (X) FirstCity Financial Corporation FCFC $8.94 $93 $10.09 $5.79 88.6% 0.82x 0.82x NA NA 0.0% 5.3% 17.9% 1.8x COMMERCIAL FINANCE CapitalSource Inc. CSE $6.82 $1,692 $7.31 $5.08 93.3% 1.11x 1.25x 13.2x 12.0x 0.6% (0.6%) (2.6%) 0.8x CIT Group Inc. CIT $41.33 $8,299 $44.88 $27.68 92.1% 0.93x 0.98x NM 15.3x 0.0% 0.1% 0.4% 3.0x GATX Corporation GMT $41.75 $1,950 $45.50 $28.90 91.8% 1.73x 1.88x 16.0x 13.8x 2.7% 2.0% 9.6% 3.2x Marlin Business Services Corp. MRLN $15.49 $197 $16.58 $9.37 93.4% 1.20x 1.20x 20.1x 13.1x 1.9% 1.3% 3.8% 0.6x MicroFinancial Incorporated MFI $6.90 $98 $7.11 $4.31 97.0% 1.30x 1.30x 10.6x 9.2x 4.1% 6.1% 12.4% 0.8x Mitcham Industries, Inc. MIND $22.33 $277 $26.76 $9.52 83.5% 1.94x 2.08x 9.2x 9.2x 0.0% 10.2% 14.0% 0.0x NewStar Financial, Inc. NEWS $10.87 $537 $12.43 $7.17 87.4% 0.95x 0.95x NA NA 0.0% 0.8% 2.5% 2.4x High - - 97.0% 1.94 2.08x 20.1x 15.3% 4.1% 10.2% 14.0% 3.2% Average - - 91.2% 1.31 1.38 13.8 12.1 1.3 2.8 5.7 1.5 Median - - 92.1% 1.20 1.25 13.2 12.5 0.6 1.3 3.8 0.8 Low - - 83.5% 0.93 0.95 9.2 9.2 0.0 NM NM 0.0 RECEIVABLES MANAGEMENT Asset Acceptance Capital Corp. AACC $4.89 $150 $5.97 $2.80 81.9% 1.09x 1.21x 11.2x 9.1x 0.0% 3.2% 9.2% 1.3x Asta Funding, Inc. ASFI $8.20 $120 $8.75 $6.40 93.7% 0.68x 0.68x NA NA 1.0% 4.3% 6.3% 0.4x Encore Capital Group, Inc. ECPG $22.38 $549 $33.16 $18.96 67.5% 1.48x 1.55x 7.7x 6.9x 0.0% 8.0% 18.1% 1.1x Portfolio Recovery Associates, Inc. PRAA $73.11 $1,254 $90.95 $56.76 80.4% 2.10x 2.41x 11.0x 8.8x 0.0% 9.8% 18.7% 0.4x High - - 93.7% 2.10x 2.41x 11.2x 9.1x 1.0% 9.8% 18.7% 1.3x Average - - 80.9% 1.34 1.46 10.0 8.2 0.3 6.3 13.1 0.8 Median - - 81.1% 1.28 1.38 11.0 8.8 0.0 6.2 13.7 0.7 Low - - 67.5% 0.68 0.68 7.7 6.9 0.0 3.2 6.3 0.4 Reported (1) P R O J E C T H O T S P U R S

Comparable Transactions(1) Source: SNL. (1) Select specialty finance transactions announced since 1/1/2000; TEV at the time of announcement <$250mm 5 Announce Target Transaction Implied Multiple Date Acquiror Target Ticker Value BV TBV LTM EPS 2/3/11 Cerberus Silverleaf Resorts SVLF $95.3 0.46x 0.46x 11.4x 12/27/10 Investor group United PanAm Financial UPFC 110.4 0.83 0.85 NM 8/3/09 Prospect Capital Patriot Capital Funding PCAP 86.3 0.49 0.51 NM 9/16/08 EZCORP Value Financial Services VFSI 76.7 4.13 NA NA 1/28/08 Hypo Real Estate Hldg. Quadra Realty Trust QRR 179.2 0.75 0.77 40.5 2/28/07 CRX Acquisition Cronos Group CRNS 134.8 1.42 1.81 14.0 2/15/07 Investor group Fieldstone Invst. Corp. FICC 188.1 0.44 0.44 NM 9/13/05 Wachovia AmNet Mortgage AMNT 80.8 1.12 1.06 NM 9/6/05 WDM Fund United Financial Mortgage UFMC 35.8 1.11 1.20 25.6 5/27/05 New Century Financial RBC Mortgage Company PRFN 80.6 NA NA NA 1/20/05 iStar Financial Falcon Financial Invst. Trust FLCN 119.7 1.02 1.02 NM 9/22/04 Capital One Financial Onyx Acceptance Corp. ONYX 190.8 1.70 2.23 17.1 6/30/04 Allied Capital Financial Pacific FNPC 92.9 NA NA NA 11/12/03 General Electric HPSC HDR 75.0 1.69 2.02 23.4 7/12/03 American Home Mortgage Apex Mortgage Capital AXM 181.2 0.95 0.93 3.6 3/31/03 Consumer Portfolio Services TFC Enterprises TFCE 21.8 0.46 0.47 NM High 4.13x 2.23x 40.5x Mean 1.18 1.06 19.4 Median 0.99 0.93 17.1 Low 0.44 0.44 3.6 P R O J E C T H O T S P U R S

SELECTED FINANCIAL TRANSACTIONS (ALL SECTORS) Premiums Paid (1) (2) Source: SNL. (1) Announced transactions involving publicly traded target companies in the specialty finance sector; transactions since March 2002; transaction value less than $250mm at the time of announcement (2) Announced transactions involving publicly traded target companies in the financials industry excluding banks; transactions since March 2002; transaction value less than $250mm at the time of announcement IMPLIED PREMIUMS SELECTED SPECIALTY FINANCIAL TRANSACTIONS 41.06 61.53 54.89 79.42 0.0% 25.0 50.0 75.0 100.0 Premium % 10-Year Avg. 36.6% 34.7% 38.3% 31.8% 60.0% 56.9% 53.6% 44.3% 52.8% 54.4% 49.3% 39.1% 57.4% 44.7% 28.3% 28.8% 0.0 25.0 50.0 75.0 100.0 1- Year Avg. 3-Year Avg. 5-Year Avg. 10-Year Avg. 1 Day Before 1 Month Prior 3 Months Prior 1 Year Prior 75 total transactions: 17 Financial Technology 7 Broker/Dealer 30 Insurance 6 Investment Company 15 Specialty Finance 6 P R O J E C T H O T S P U R S % % % %

 ($ in millions) Source: Company Management (a) 2011 2016E originations represent FirstCity's share of total originations. 7 P R O J E C T H O T S P U R S Historical Projected CAGR 2009 2010 2011 2012 2013 2014 2015 2016 '11A - '16E Summary Income Statement: Servicing Fees $9 $9 $11 $9 $6 $2 $0 $0 (50.7%) Management/Incentive Fees $0 0 0 2 7 3 1 2 NA Portfolio Income $54 46 41 29 37 40 41 53 5.4% ABL Investment Income $3 2 4 4 1 1 0 0 (47.3%) Equity in Earnings of Subsidiaries $4 15 2 14 15 12 8 7 27.3% Income from Consol. Crestone Subs 5 19 7 4 4 4 4 4 (9.0%) Other Income 13 18 40 6 8 8 8 9 (26.4%) Total Revenues $88 $109 $105 $69 $78 $69 $62 $75 (6.5%) Total Expenses (56) (72) (64) (42) (39) (42) (45) (50) (4.7%) Operating Profit $32 $37 $41 $27 $39 $27 $17 $25 (9.6%) Minority Interest (6) (13) (9) (4) (2) (3) (1) (1) (38.9%) Impairment (5) (9) (4) (5) (4) (4) (4) (4) 0.0% Pre-Tax Income $21 $15 $28 $18 $32 $20 $13 $20 (6.5%) Income Taxes (2) (2) (4) (1) (6) (8) (5) (8) 14.3% Net Income $19 $13 $24 $18 $26 $12 $8 $12 (12.7%) Summary Balance Sheet: Total Assets 465 460 356 298 303 297 336 379 1.3% Equity 78 88 112 132 158 170 178 190 11.2% Deployments (a) 148 68 58 75 120 100 160 180 25.4% Operating Metrics: Debt/Equity 4.35x 3.82x 1.96x 1.16x 0.84x 0.67x 0.82x 0.94x ROE 185.6% 127.5% 232.9% 172.4% 251.4% 117.5% 73.9% 117.5% Effective Tax Rate 9.5% 13.3% 14.3% 2.9% 19.4% 39.0% 39.0% 39.0% Per Share Statistics: Earnings per Share $1.86 $1.27 $2.33 $1.72 $2.51 $1.18 $0.74 $1.17 (12.8%) Book Value per Share $7.62 $8.63 $10.87 $12.71 $15.22 $16.40 $17.14 $18.31 11.0% Management’s Financial Forecast

DCF (Dividend Discount) ($ in millions) 1 Based on 10,381,000 fully-diluted shares outstanding shares as of December 31, 2011. 8 P R O J E C T H O T S P U R S FIRSTCITY - MANAGEMENT FORECAST 2011A 2012E 2013E 2014E 2015E 2016E TV Net Income $24.0 $17.9 $26.1 $12.2 $7.7 $12.2 Dividends 0.0 0.0 0.0 0.0 0.0 0.0 Period Ending Shareholder's Equity 112.0 131.9 158.0 170.2 177.9 190.1 Terminal Multiple (P/TBV) 1.00x Terminal Value $190.1 NPV (@ 20%) $76.4 Per Share Price1 $7.41 P/TBV EXIT MULTIPLE $7.41 0.80x 1.00x 1.20x 12.5% $8.19 $10.24 $12.28 15.0% 7.34 9.17 11.01 17.5% 6.59 8.24 9.88 20.0% 5.93 7.41 8.90 22.5% 5.35 6.69 8.02 25.0% 4.84 6.04 7.25 Implied LTM P/E at Exit 12.5x 15.6x 18.7x DISCOUNT RATE

($ in thousands, except per share amounts) (a) Net collections net of (following) repayment to all existing credit facilities including Bank of Scotland and Bank of America under the terms of the current facilities 9 P R O J E C T H O T S P U R S Hypothetical Liquidation Management Base Case Cash Flows @ 20.0% Discount Rate Net FC Invest. Net Cash FLBG Holdings Collections(a) Overhead Taxes Flows 2012 $9,859 $49,616 $59,475 ($17,512) -- $41,963 2013 4,543 40,876 45,418 (15,811) -- 29,607 2014 15,575 12,299 27,875 (8,250) ($3,834) 15,791 2015 29,797 7,393 37,190 (3,400) (13,178) 20,612 2016 30,934 2,841 33,775 (3,380) (11,854) 18,541 2016+ 9,187 34 9,221 (4) (3,595) 5,623 Total $99,895 $113,059 $212,954 ($48,357) ($32,461) $132,136 Share Price Sensitivities Premium/(Discount) to Current Share Price ($8.94) Case Case Mgmt. Mgmt. Extended Reduced Mgmt. Mgmt. Extended Reduced Base Downside WAL Cash Base Downside WAL Cash 12.5% $10.73 $9.93 $9.94 $9.44 20.1% 11.1% 11.2% 5.6% 15.0% 10.27 9.45 9.38 9.00 14.8% 5.8% 4.9% 0.6% 17.5% 9.83 9.02 8.86 8.59 10.0% 0.9% (0.9%) (4.0%) 20.0% 9.43 8.61 8.38 8.21 5.5% (3.7%) (6.2%) (8.2%) 22.5% 9.06 8.24 7.95 7.85 1.3% (7.8%) (11.1%) (12.1%) 25.0% 8.71 7.89 7.55 7.53 (2.6%) (11.7%) (15.6%) (15.8%) Net Cash Flows Lost - $ -- ($7.5) ($0.1) ($14.5) WAL 29.3 31.1 35.1 30.6 Implied Price/Tangible Book Value of $10.87 (12/31/11) Case Mgmt. Mgmt. Extended Reduced Base Downside WAL Cash 12.5% 0.99x 0.91x 0.91x 0.87x 15.0% 0.94 0.87 0.86 0.83 17.5% 0.90 0.83 0.81 0.79 20.0% 0.87 0.79 0.77 0.75 22.5% 0.83 0.76 0.73 0.72 25.0% 0.80 0.73 0.69 0.69 Discount Rate Discount Rate

Hypothetical Balance Sheet Fair Market Value a) Consolidated unaudited balance sheet as of 12/31/11 b) Based on 10,381,000 fully-diluted shares outstanding of as of 12/31/11 c) Assumes the following declines in value: 5% Portfolio Assets; 3% for SBA loans; 10% for other Loans Receivable 10% for Equity Investments; 15% for Equity Investments in Servicing Entities; 20% for Investment Securities AFS; 10% of Operating Assets; 10% for Assets Held for Sale; case-by-case percentage declines assumed for Other Assets. Non-controlling interest is adjusted by corresponding amounts for those assets that the Company consolidates but does not own 100%. d) Assumes the following declines in value: 15% Portfolio Assets; 10% for SBA Loans; 25 for other Loans Receivable; 20% for Equity Investments; 30% for Equity Investments in Servicing Entities; 50% for Investment Securities AFS; 20% for Operating Assets; 20% for Assets Held for Sale; case-by-case percentage declines assumed for Other Assets. Non-controlling interest is adjusted by corresponding amounts for those assets that the Company consolidates but does not own 100%. 10 ($000) Est. Est. Loss Loss Consolidated Rate Moderate Rate Contingent (12/31/11)a % Casec % Cased Assets Cash and cash equivalents $35,996 0% $35,996 0% $35,996 Restricted Cash 35 0% 35 0% 35 Portfolio Assets 123,946 (5%) 117,749 (15%) 105,354 Loans Receivable 45,947 (6%) 43,234 (16%) 38,493 Equity Investments 109,393 (12%) 96,607 (23%) 83,821 Investment Securities - AFS 3,798 (20%) 3,039 (13%) 3,298 Operating Entity Assets 15,703 (10%) 14,133 (20%) 12,562 Assets Held for Sale 9,900 (10%) 8,910 (20%) 7,920 Total Earning Assets 308,687 (8%) 283,671 (19%) 251,448 Other Assets 11,628 (13%) 10,102 (21%) 9,181 Total Assets 356,346 (7%) 329,804 (17%) 296,660 Liabilities Total Liabilities 218,943 0% 218,943.2 0% 218,943.2 Non-controlling Interest 25,427 (15%) 21,638.2 (32%) 17,281.5 Sub total 244,370 (2%) 240,581 (3%) 236,225 Shareholders' Equity 111,976 (20%) 89,223 (46%) 60,435 Book Value per Share $10.79 (20%) $8.59 (46%) $5.82 Premium / (Discount) to Current Book Value per Share ($2.19) ($4.96) Implied Price to Book Value per Share b 0.80x 0.54x Total Liabilities and Shareholders' Equity 356,346 329,804 296,660 P R O J E C T H O T S P U R S

Marketing Considerations and Selection Parameters Strategic motivation (platform vs. portfolio) Originate, service, manage, and resolve non-performing loans Asset class expertise Strategically linked or motivated to enter the asset class and sector or build upon an existing direct or indirect presence Long-term availability of capital Current situation - ability to pay Current liquidity / capital position No financing contingencies Demand for yield enhancement in low rate environment Revenue diversification 11 1 2 3 4 5 6 P R O J E C T H O T S P U R S

Alternative Asset Managers Origination, underwriting and special servicing capabilities Robert Bass (Keystone Group Inc.) P R O J E C T H O T S P U R S 12

Foreign Financial Institutions Asset valuation and servicing expertise Global expansion Deploy excess liquidity into higher yielding asset classes P R O J E C T H O T S P U R S 13

Non-bank Financial Institutions Unique product capabilities Internalize special servicing expertise P R O J E C T H O T S P U R S 14 Banks Non-traditional bank seeking higher yielding assets in a low rate environment Leucadia

15 P R O J E C T H O T S P U R S Legend Week 1 Week 2 Week 3 Week 4 Week 5 Week 6 Week 7 Week 8 Week 9 Week 10 Week 11 Week 12 Week 13 Action Mar-12 Apr-12 May-12 Jun-12 Holiday M T W T F M T W T F M T W T F M T W T F M T W T F M T W T F M T W T F M T W T F M T W T F M T W T F M T W T F M T W T F M T W T F Key Events 26 27 28 29 30 2 3 4 5 6 9 10 11 12 13 16 17 18 19 20 23 24 25 26 27 30 1 2 3 4 7 8 9 10 11 14 15 16 17 18 21 22 23 24 25 28 29 30 31 1 4 5 6 7 8 11 12 13 14 15 18 19 20 21 22 1 Stage One - Pre-Marketing 1 Authorization of target list 2 NDA 3 Process letter - first round - Draft 4 Stock purchase agreement - Draft 5 Data room - prep 6 Management presentations - refine 7 Management presentations - rehersal Stage Two - Launch through first round bid date 1 Marketing calls - initiate 2 NDAs - execute 3 Process letter - distribute 4 "Controlled" data room - open 5 Management presentations - onsite 6 Process letter - final round - draft 7 Bid date - first round 8 Review first round bids / notification to final round participants Stage Three - Final round participations through close 1 Final round process letter and SPA - distribution 2 "Full" data room - open 3 Follow up due diligence & onsite meetings 4 Bid date - final 5 Selection 6 Final due diligence and negotiations 7 Pre-signing announcement logistics 8 Sign and announce ****Confidential information on this page has been omitted and filed separately with the Securities Exchange Commission pursuant to a Confidential Treatment Request.

16 Considerations Clarify and confirm communication protocol Fulfillment of outstanding information requests <2 days (management estimate) Outstanding information requests: Legal - 3 Business / Tax - 8 have requested conference calls for week of April 2 Finalize and confirm: Timeline Resources Target list Initiate / launch P R O J E C T H O T S P U R S h ****Confidential information on this page has been omitted and filed separately with the Securities Exchange Commission pursuant to a Confidential Treatment Request.

EX-99.(C)(4)

Exhibit (c)(4)

2 0 D E C E M B E R 2 0 1 2 C O N F I D E N T I A L PRESENTATION T O THE BOARD OF DIRECTORS Project HOTSPURS

C O N F I D E N T I A L P R O J E C T H O T S P U R S Disclaimer The information herein has been prepared by Lazard Middle Market LLC (“LMM”) based upon information supplied by the management HOTSPURS (“HOTSPURS” or the Company”) or publicly available information, and portions of the information herein may be based upon certain statements, estimates and forecasts provided by the Company with respect to the anticipated future performance of the Company. We have assumed and relied upon the accuracy and completeness of the foregoing information without independent verification of such information. We have not conducted any independent valuation or appraisal of any of the assets or liabilities (contingent or otherwise) of the Company, or concerning the solvency or fair value of the Company, and we have not been furnished with any such valuation or appraisal. With respect to financial forecasts, we have assumed that they have been reasonably prepared in good faith on bases reflecting the best currently available estimates and judgments as to the future financial performance of the Company. We assume no responsibility for and express no view as to any such forecasts or the assumptions on which they are based. The information set forth herein is based upon economic, monetary, market and other conditions as in effect on, and the information made available to us as of, the date hereof, unless indicated otherwise. These materials and the information were prepared for the benefit and use of the Board of Directors of HOTSPURS (in its capacity as such). These materials and the information contained herein may not be disclosed publicly except to the extent required by applicable law or made available to third parties without the prior written consent of LMM; provided, however, that the Company may disclose to any and all persons the U.S. federal income tax treatment and tax structure of the transaction described herein and the portions of these materials that relate to such tax treatment or structure. LMM is acting as financial advisor to the Company, and will not be responsible for and will not provide any tax, accounting, actuarial, legal or other specialist advice.

P R O J E C T H O T S P U R S C O N F I D E N T I A L Table of Contents I TRANSACTION SUMMARY 1 II MARKET AND TRADING PERFORMANCE 3 III FINANCIAL ANALYSIS 7 APPENDIX

P R O J E C T H O T S P U R S I Transaction Summary

I T R A N S A C T I O N SUMM A R Y P R O J E C T H O T S P U R S Summary of Selected Transaction Terms Acquirer Värde Partners, Inc. (“Värde Partners”) through newly-formed subsidiaries, Hotspurs Holdings LLC and Hotspurs Acquisition Corporation Structure Merger of Hotspurs Acquisition Corporation with and into HOTSPURS (the “Merger”) Consideration $10.00 per outstanding share of Company common stock $107.1 million aggregate consideration 100% cash Financing Available cash / no financing contingency Continuation of HOTSPURS’ financing facilities through waiver of change of control provisions by current lenders, including Bank of Scotland and Bank of America Company non-solicitation provision, subject to exercise of Board’s fiduciary duties with respect to a superior proposal or intervening event Certain Closing Conditions HOTSPURS’ stockholder approval Expiration or termination of HSR waiting periods Termination Fee $2.0 million fee and up to $1.0 million expense reimbursement payable by HOTSPURS upon termination in connection with execution of an agreement relating to an acquisition proposal, receipt of a superior proposal or change in HOTSPURS Board recommendation Reverse Termination Fee $5.0 million fee and up to 1.0 million expense reimbursement payable by Värde Partners upon termination by HOTSPURS for material breach of representations or covenants resulting in the failure of closing conditions to be satisfied or failure to consummate the Merger Management Three members of the Company’s management owning collectively approximately 3.3% of outstanding Company common stock will enter into new employment contracts Transition and severance arrangements will be entered into with certain members of the Company’s management who will not remain with the Company after the Merger Support Agreement Executive officers and directors owning collectively approximately 16.6% of outstanding Company common stock will enter into a support agreement 1 Source: Draft dated December 19, 2012 of Agreement and Plan of Merger

I T R A N S A C T I O N SUMM A R Y P R O J E C T H O T S P U R S Implied Transaction Multiples and Premia ($ In Millions, Except Per Share Data) IMPLIED PREMIA TO CLOSING STOCK PRICES D E Implied IMPLIED MULTIPLES A B C 12/19/2012 p Closing Transaction Stock Price Premium 12/19/2012 $8.27 20.9% 30-Day Average (c) 8.13 23.0% / / HOTSPURS Closing Stock Per Share Metrics Price Consideration Closing Stock Price $8.27 $10.00 Fully Diluted Shares Outstanding (millions) 10.627 10.709 Implied Fully-Diluted Equity Value $87.9 $107.1 60-Day Average (c) 8.14 22.9% 90-Day Average (c) 8.17 22.4% 52-Week High 10.00 0.0% 52-Week Low 6.88 45.3% Fully Value Implied Price/Book Value Multiples: September 30, 2012A Shareholders' Equity $129.1 0.68x 0.83x September 30, 2012A Tangible Shareholders' Equity 129.1 0.68x 0.83x Implied Price/Earnings Multiples: Reported LTM Earnings 30.0 2.9x 3.6x LTM Operating Earnings (a) 3.5 25.1x 30.6x 2012E Earnings 19.6 4.5x 5.5x 2012E Adjusted Earnings (b) 12.8 6.8x 8.3x 2 Source: SNL Financial; Company public filings and Board-authorized Company financial information and forecasts (a) Operating earnings do not include non-recurring extraordinary gain on debt extinguishment in December 2011 (net impact of reversal is approximately $26.5m). If LTM operating earnings were adjusted to exclude recent and near-term divestitures, LTM operating earnings for this period would be negative $4.7m (b) Excludes full-year earnings for recent and near-term divestitures (c) As of 12/19/2012; trading days only used in market premium calculations

P R O J E C T H O T S P U R S II Market and Trading Performance

I I M A R K E T A N D T R A D I N G P E R F O R M A N C E P R O J E C T H O T S P U R S 250 $12.00 Historic Stock Price Performance 12/21/2009 12/19/2012 Volume (in thousands) Price per share ($) 200 $8.00 $10.00 Closing stock price: $6.75 Closing stock price: $8.27 1 – Year Average: $8.44 3 Y A 743 2 – Year Average: $7.66 100 150 $4 00 $6.00 – Year Average: $7.43 50 $2.00 4.00 0 $0.00 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 CLOSING STOCK PRICE IMPLIED ( ) DAILY VOLUME TRENDS (b) % OF SHARES LOW HIGH AVG MEDIAN PREMIUM a) 10-Days $7.81 $8.27 $8.02 $8.04 24% 30-Days $7.81 $8.40 $8.13 $8.13 23% 6-Month $7.76 $9.00 $8.32 $8.27 21% 1- Year $6.88 $10.00 $8.44 $8.35 20% 2 Year $6 00 $10 00 $7 66 $7 91 26% AVG OUTSTANDING 10-Days 15.06 0.14% 30-Days 8.39 0.08% 6-Month 6.04 0.06% 1- Year 7.85 0.07% 2 Year 3 Source: FactSet (a) Premium based on $10.00 per share consideration over average closing stock price for specified period (b) Volume of shares traded in thousands, assumes constant basic shares outstanding of 10,556,197 2- 6.00 10.00 7.66 7.91 3- Year $5.40 $10.00 $7.43 $7.35 36% 2- 7.00 0.07% 3- Year 8.06 0.08%

I I M A R K E T A N D T R A D I N G P E R F O R M A N C E P R O J E C T H O T S P U R S Trading Volume at Various Historical Stock Prices Last 30 Trading Days Total Volume ('000): 251.7 VWAP: $8.10 140 160 180 200 0s) L 60T di D Average Daily Volume: 8.39 % Traded 0.0% 0.0% 0.0% 27.8% 72.2% 0.0% 0.0% 0.0% 0.0% 0 20 40 60 80 100 120 <$6.50 $6.51 - $7.00 $7.01 - $7.50 $7.51 - $8.00 $8.01 - $8.50 $8.51 - $9.00 $9.01 - $9.50 $9.51 - $10.00 >$10.00 Volume (00 Last 60 Trading Days % Cumulative 0.0% 0.0% 0.0% 27.8% 100.0% 100.0% 100.0% 100.0% 100.0% Total Volume ('000): 343.2 VWAP: $8.09 Average Daily Volume: 5.72 0 40 80 120 160 200 240 280 Volume (000s) Last 90 Trading Days % Traded 0.0% 0.0% 0.0% 28.4% 71.6% 0.0% 0.0% 0.0% 0.0% % Cumulative 0.0% 0.0% 0.0% 28.4% 100.0% 100.0% 100.0% 100.0% 100.0% <$6.50 $6.51 - $7.00 $7.01 - $7.50 $7.51 - $8.00 $8.01 - $8.50 $8.51 - $9.00 $9.01 - $9.50 $9.51 - $10.00 >$10.00 Total Volume ('000): 505.6 VWAP: $8.08 Average Daily Volume: 5.62 200 250 300 350 ( 000s) Last 12 Months % Traded 0.0% 0.0% 0.0% 32.2% 65.0% 2.8% 0.0% 0.0% 0.0% % Cumulative 0.0% 0.0% 0.0% 32.2% 97.2% 100.0% 100.0% 100.0% 100.0% 0 50 100 150 <$6.50 $6.51 - $7.00 $7.01 - $7.50 $7.51 - $8.00 $8.01 - $8.50 $8.51 - $9.00 $9.01 - $9.50 $9.51 - $10.00 >$10.00 Volume Total Volume ('000): 1,978.1 VWAP: $8.49 Average Daily Volume: 7.85 0 150 300 450 600 750 900 Volume (000s) 4 Source: Capital IQ. As of 12/18/2012 Based on average of daily high and low stock price % Traded 0.0% 1.5% 0.0% 14.1% 40.5% 29.7% 5.7% 8.5% 0.0% % Cumulative 0.0% 1.5% 1.5% 15.6% 56.1% 85.8% 91.5% 100.0% 100.0% <$6.50 $6.51 - $7.00 $7.01 - $7.50 $7.51 - $8.00 $8.01 - $8.50 $8.51 - $9.00 $9.01 - $9.50 $9.51 - $10.00 >$10.00

I I M A R K E T A N D T R A D I N G P E R F O R M A N C E P R O J E C T H O T S P U R S Relative Indexed Stock Price Performance Over the past three years, HOTSPURS’ stock price generally has underperformed relative to selected companies across various sectors of the specialty finance industry 300% 167 5% 209.9% 200% 250% 167.5% 150% 26.4% 38.2% 38.0% 50% 100% Dec-09 May-10 Oct-10 Apr-11 Sep-11 Feb-12 Jul-12 Dec-12 0% Commercial Finance Receivables Management HOTSPURS Specialty CRE Services BDCs 5 Source: FactSet. Values indexed at 100 as of 12/18/2009 Note: Selected companies are referenced in Appendix

I I M A R K E T A N D T R A D I N G P E R F O R M A N C E P R O J E C T H O T S P U R S Relative Implied Trading Multiples Over the past three years, HOTSPURS generally has traded at a discount to selected companies across various sectors of the specialty 1.45x 1 43x 1.52x 1.6x 30.0x finance industry PRICE / BOOK VALUE PRICE / REPORTED LTM EARNINGS (a) 0 82 0.99x 0.91x 0.87x 1.15x 1.14x 0.95x 1.32x 1.21x 1.06x 1.43x 1.0x 1.2x 1.4x 17.5x 19.5x 25.1x 20.0x 25.0x 0.68x 0.77x 0.82x 0.4x 0.6x 0.8x 13.7x 13.0x 15.1x 9.6x 13.8x 10.8x 11.9x 11.6x 10.5x 10.0x 15.0x 0.0x 0.2x Current 1-Year Average 3-Year Average 2.9x 4.2x 4.5x 0.0x 5.0x Current 1-Year Average 3-Year Average 12/18/12 12/18/12 HOTSPURS Commercial Finance Receivables Management Specialty CRE Services BDCs 6 Source: FactSet and SNL Financial. As of 12/18/2012. Note: Selected companies are referenced in Appendix (a) Based on Price/LTM operating earnings, HOTSPURS currently trades at 25.1x, 1-year average of 38.2x and 3-year average of 15.5x

P R O J E C T H O T S P U R S III Financial Analysis

I I I F I N A N C I A L A N A L Y S I S P R O J E C T H O T S P U R S Summary of Financial Forecasts Board-authorized financial forecasts provided to LMM on 11/20/12 (and affirmed on 12/11/2012) include: Consolidated financial performance for the period inclusive of 10/01/2012 to 12/31/2012 Assumptions relating to contemplated asset divestitures during the above-referenced period Forecast consolidated financial condition as of 12/31/2012 Forecasts of financial performance and financial condition for the fiscal years ending 12/31/2013 through 12/31/2016 Ongoing capital constraints with an assumption of limited liquidity due principally to high proportion of the Company’s consolidated earnings assets remaining encumbered by existing financing facilities and continued uncertainty in accessing additional capital Other assumptions per Company management include: Current portfolio investments: managed and recovered (collected) according to the Company’s collection assumptions and based solely on the Company’s proprietary internal collections models Special situations investments: managed and realized over time in accordance with the Company’s internal estimates of timing and realized (terminal) value Servicing contracts: no new servicing contracts; servicing fees diminish as assets are resolved or moved Interim (near-term) asset divestitures: sale of the Company’s minority interest in: UBN/MCS in December 2012; Teton Buildings in March 2013; and American Business Lending in March 2013 Fixed operating overhead: material reductions in operating expenses beginning in 2013 and ongoing expense rationalization in accordance with reduced origination activities Financing/capitalization: current debt obligations and financing facilities are amortized in accordance with contractual terms, and as cash flows from assets pledged to such facilities are realized Accounting: NOLs are substantially used and exhausted prior to 12/31/2012; the Company begins paying corporate income taxes in 2013; no material changes in accounting methods and practices 7 Source: Company management as authorized by Board of Directors

I I I F I N A N C I A L A N A L Y S I S P R O J E C T H O T S P U R S Financial Forecast ($ in millions) ADJUSTED NET REVENUE (a,b,c,d) $104 8 $120 $54.8 $45 4 $81.8 104.8 $78.8 $71.0 $53.8 $60 $80 $100 $42.6 45.4 $45.0 $18.4 $6.9 $0 $20 $40 ADJUSTED NET INCOME (c,d) $19.6 $20 $30 2006 2007 2008 2009 2010 2011 2012E 2013E 2014E 2015E 2016E $9.8 $2.2 $12.6 $12.5 -$2.3 $11.4 $7.8 $1.4 -$3.8 $10 $0 $10 -$26.5 $ -$30 -$20 -$2006 2007 2008 2009 2010 2011 2012E 2013E 2014E 2015E 2016E 8 Source: Company public filings and Board-authorized Company financial information and forecasts (a) Presented in accordance with Company’s internal reporting format (b) “Adjusted Net Revenue” is equivalent to Revenue as presented in public filings plus: “Equity income from unconsolidated subsidiaries”; “Gain on business combinations”; “Gain on sale of subsidiaries” (c) Adjusted to exclude non-operating items (d) Company’s fiscal year ends annually on the Saturday closest to December 31 and consists of either 52 weeks or 53 weeks

I I I F I N A N C I A L A N A L Y S I S P R O J E C T H O T S P U R S $450 Financial Forecast (cont’d) ($ in millions) NON-CASH ASSETS (a,c) $279.2 $275.1 $308.9 $384.7 $413.8 $321.5 $250 $300 $350 $400 $179.4 $71.5 $46.4 $14.3 $0 0 $50 $100 $150 $200 0.0 $0 2006 2007 2008 2009 2010 2011 2012E 2013E 2014E 2015E 2016E DEBT OUTSTANDING (b,c) $313.7 $304.8 $300 $350 $187.8 $177.3 $251.5 $189.9 $150 $200 $250 $70.8 $8.7 $8.7 $0.1 $0.0 -$50 $0 $50 $100 9 Source: Company public filings and Board-authorized Company financial information and forecasts (a) Includes GAAP balance sheet assets other than “Cash and Equivalents” (b) Consists of “Notes payable to banks and other” and “Notes payable to affiliates” (c) Company’s fiscal year ends annually on the Saturday closest to December 31 and consists of either 52 weeks or 53 weeks 2006 2007 2008 2009 2010 2011 2012E 2013E 2014E 2015E 2016E

I I I F I N A N C I A L A N A L Y S I S P R O J E C T H O T S P U R S Financial Analysis Summary IMPLIED HOTSPURS EQUITY VALUE METHODOLOGY COMMENTS 12/19/12 CLOSING STOCK PRICE: $8.27 PER SHARE CONSIDERATION: $10.00 DISCOUNTED CASH FLOW ANALYSIS $7.42 $10.66 Discount Rate: 15.0% - 18.0% Price / Tangible Book Value 09/30/2012 Tangible Shareholders' Equity Price / Earnings 12/31/2012 Adjusted Earnings (a) ELECTED PUBLIC COMPANIES ANALYSIS $8.83 $12.75 0.73x – 1.07x 9/30/12 Tangible Book Value of $129.1 million / / Ad d f Adjusted Earnings SELECTED PRECEDENT TRANSACTIONS ANALYSIS Price / Tangible Book Value 09/30/2012 Tangible Shareholders' $6.35 $8.45 $12.75 $13.27 7.0x -11.2x 12/31/2012E Adjusted Earnings of $12.8 million 0.52x – 1.07x 09/30/12 Tangible Book Value of Implied Premiums Paid (b,c) Equity $9.92 $11.58 20% – 40% premium to $8.27 closing stock price as of December 19, 2012 g $129.1 million 52-Week Low to High Closing Stock Price (b) INFORMATIONAL REFERENCE RANGES $6.88 $10.00 $0 00 $9 00 $18 00 52 – week closing stock price range as of December 19, 2012 0.00 9.00 18.00 10 Source: Company public filings, Board-authorized Company financial information and forecasts, Capital IQ, SNL Financial, Thomson SDC (a) Adjusted to exclude full-year earnings impact from recent and near-term planned divestitures, per Company management (b) For informational purposes (c) Based on premiums paid in all-cash transactions involving financial services targets with equity values of between $75m-$500m

I I I F I N A N C I A L A N A L Y S I S P R O J E C T H O T S P U R S Discounted Cash Flow Analysis (Dividend Discount Model) ($ in millions, except per share data) HOTSPURS historically has maintained a zero dividend policy Net present value (NPV) of distributable cash in terminal year utilizing discount rate range of 15% to 18% Company Forecast (Summary) NO INTERIM DIVIDENDS 2013E 2014E 2015E 2016E Dividends $0.0 $0.0 $0.0 $152.5 Total Cash 106.1 136.8 149.6 0.0 Board approved management projections do not contemplate dividends being paid prior to 2016 Total Non-Cash Assets 71.5 46.4 14.3 0.0 Tangible Common Equity 147.0 154.7 156.1 0.0 NPV ($ IN MILLIONS) NPV ($ PER SHARE) NPV ($ IN M No No Dividends Dividends 15.0% $87.2 15.0% $8.20 16.5% 82.8 16.5% $7.80 Discount Rate Discount Rate 18.0% 78.6 18.0% $7.42 P/ BV(a) P/ 2012E ADJ. EARNINGS IMPLIED MULTIPLE IMPLIED MULTIPLE No No Dividends Dividends 15.0% 0.68x 15.0% 6.8x 16.5% 0.64x 16.5% 6.5x Discount Rate Discount Rate 11 Source: Board-authorized Company financial information and forecasts Note: Assumes diluted share count in accordance with treasury stock methodology (TSM) (a) Book value as of 9/30/2012 18.0% 0.61x 18.0% 6.1x D D

I I I F I N A N C I A L A N A L Y S I S P R O J E C T H O T S P U R S Discounted Cash Flow Analysis (Dividend Discount Model): Sensitivities ($ in millions, except per share data) For illustrative and comparative purposes, sensitivity assuming adoption of capital management and dividend policy NPV utilizing discount rate range of 15% to 18% Operating Cash Flow Forecast (0%) 2013E 2014E 2015E 2016E Dividends $66.1 $40.1 $21.8 $21.7 Total Cash 40.0 30.0 20.0 0.0 Total Non-Cash Assets NPV of annual dividends in excess of working capital levels prescribed by the Company 2013E: $40.0 million 2014E: $30.0 million 2015E:$20.0 million 71.5 46.4 14.3 0.0 Tangible Common Equity 80.9 48.0 26.6 0.0 Operating Cash Flow Forecast (5%) 2013E 2014E 2015E 2016E Dividends $60.4 $38.6 $20.8 $21.6 To ta lCas h 40 0 30 0 20 0 0 0 Reduction of the Company’s annual operating cash flow forecasts 0% per year 5% per year Total Cash 40.0 30.0 20.0 0.0 Total Non-Cash Assets 71.5 46.4 14.3 0.0 Tangible Common Equity 80.9 48.0 26.6 0.0 Operating Cash Flow Forecast (10%) 2013E 2014E 2015E 2016E 10% per year 15% per year Dividends $54.7 $37.1 $19.8 $21.5 Total Cash 40.0 30.0 20.0 0.0 Total Non-Cash Assets 71.5 46.4 14.3 0.0 Tangible Common Equity 80.9 48.0 26.6 0.0 Operating Cash Flow Forecast (15%) 2013E 2014E 2015E 2016E Dividends $49.0 $35.6 $18.8 $21.4 Total Cash 40.0 30.0 20.0 0.0 Total Non-Cash Assets 71.5 46.4 14.3 0.0 Tangible Common Equity 80.9 48.0 26.6 0.0 12 Source: Board-authorized sensitivities per Company management

I I I F I N A N C I A L A N A L Y S I S P R O J E C T H O T S P U R S Discounted Cash Flow Analysis (Dividend Discount Model) ($ in millions, except per share data) Realization of projected operating cash flows subject to several factors, including: Recovery (collection) of unpaid principal balance on earning assets owned in accordance with the Company’s forecast Achievement of asset disposition schedule as set forth by the Company Reduction in overheard/operating expense at rate projected by the Company Reduction to projected Reduction to projected annual operating cash flow annual operating cash flow 0% 5% 10% 15% 0% 5% 10% 15% NPV ($ IN MILLIONS) NPV ($ PER SHARE) 15.0% $114.5 $107.7 $101.0 $94.2 15.0% $10.66 $10.05 $9.44 $8.83 16.5% $111.9 $105.2 $98.5 $91.9 16.5% $10.42 $9.82 $9.22 $8.62 18.0% $109.3 $102.7 $96.2 $89.6 18.0% $10.19 $9.60 $9.01 $8.42 Discount Rate Discount Rate P / BV(a) P / 2012E ADJ. EARNINGS IMPLIED MULTIPLE IMPLIED MULTIPLE Reduction to projected Reduction to projected annual operating cash annual operating cash flow flow 0% 5% 10% 15% 0% 5% 10% 15% 15.0% 0.89x 0.83x 0.78x 0.73x 15.0% 8.9x 8.4x 7.9x 7.4x 16.5% 0.87x 0.81x 0.76x 0.71x 16.5% 8.7x 8.2x 7.7x 7.2x 18.0% 0 85x 0 80x 0 74x 0 69x 18.0% 8 5x 8 0x 7 5x 7 0x Discount Rate Discount Rate 13 Note: Dividend cash flows discounted to present value as of December 31, 2012. Assumes diluted share count in accordance with TSM (a) Book value as of 9/30/2012 0.85x 0.80x 0.74x 0.69x 8.5x 8.0x 7.5x 7.0x

I I I F I N A N C I A L A N A L Y S I S P R O J E C T H O T S P U R S Selected Public Companies Analysis ($ in millions, except per share data) LMM reviewed selected U.S. public companies operating in commercial finance, receivables management, specialty CRE and BDC sectors, with market capitalizations of under $750 million as of December 19, 2012 Closing Equity P /E 2012E 2013E Equity 2012E-Stock % of 52 Week Market Total Price / 2012E Earnings Company Price High Low Cap Assets TBV (x) (X) Growth (%) HOTSPURS (current stock price) - Reported $8.27 83% 127% $88 $282.5 0.68x 4.5x (42%) HOTSPURS (current stock price) - Adjusted (a) $8.27 83% 127% $88 $282.5 0.68x 6.8x (75%) HOTSPURS (@ transaction) - Reported $10.00 100% 154% $107 $282.5 0.83x 5.5x (42%) HOTSPURS (@ transaction) - Adjusted (a) $10.00 100% 154% $107 $282.5 0.83x 8.3x (75%) COMMERCIAL FINANCE - DIVERSIFIED Marlin Business Services Corp. $18.15 80% 145% $231 $579 1.35x 19.1x 53% MicroFinancial Incorporated $7.72 80% 140% $109 $167 1.37x 12.1x 11% Mitcham Industries, Inc. $13.59 52% 113% $173 $193 1.07x 13.1x 69% NewStar Financial, Inc. $13.59 101% 154% $686 $2,108 1.14x 29.9x 20% RECEIVABLES MANAGEMENT Asset Acceptance Capital Corp. $ 4.58 57% 128% $ 141 $ 396 1.04x 12.0x 44% p p p Asta Funding, Inc. $9.50 92% 130% $123 $238 0.73x NA NA Encore Capital Group, Inc. $28.87 95% 148% $721 $1,109 1.92x 9.3x 14% SPECIALTY CRE Federal Agricultural Mortgage Corporation $31.79 92% 183% $336 $12,502 1.11x 7.0x 1% Resource America, Inc. $6.97 98% 150% $141 $196 0.96x NA NA Walker & Dunlop, Inc. $16.30 93% 150% $565 $1,879 1.99x 8.6x 17% BDCs Fidus Investment Corporation $16.35 96% 133% $195 $328 1.07x 10.7x 12% Gladstone Capital Corporation $8.39 91% 114% $176 $293 0.93x 9.2x (7%) Gladstone Investment Corporation $7.21 85% 107% $190 $374 0.95x 11.8x 1% Horizon Technology Finance Corporation $15.13 88% 112% $142 $235 0.90x 10.7x 8% Kohlberg Capital Corporation $9.43 98% 169% $250 $303 1.21x 10.8x 16% Medley Capital Corporation $14.31 98% 147% $402 $416 1 11% 1 1.14x 10.9x NGP Capital Resources Company $7.13 88% 120% $152 $295 0.73x 11.6x 26% PennantPark Floating Rate Capital Ltd. $12.85 97% 126% $88 $178 0.92x 13.4x 17% Solar Senior Capital Ltd. $18.84 102% 122% $178 $245 1.01x 14.5x 9% THL Credit, Inc. $14.60 100% 127% $386 $404 1.10x 10.8x 6% High 1.99x 29.9x 69% Average 1.13 12.5 18% 14 Source: Public filings, FactSet and SNL Financial; Board-authorized Company financial information and forecasts Note: “NA” denotes data not publicly available. Closing stock prices as of 12/19/2012 (a) HOTSPURS 2012E adjusted for recent and near-term planned divestitures Median 1.07 11.2 13% Low 0.73x 7.0x (7%)

I I I F I N A N C I A L A N A L Y S I S P R O J E C T H O T S P U R S Selected Precedent Transactions Analysis ($ in millions) LMM reviewed selected all-cash U.S. transactions announced between 01/01/2003 and 12/19/2012 involving specialty finance target companies with operating businesses in the following sectors (as defined by SNL Financial): (i) mortgage banking; (ii) commercial diversified commercial lending; (iii) diversified mortgage lending; (iv) diversified specialty lending; (v) niche commercial lending; and (vi) business development corporations Announced Implied Date of Transaction Price / Announcement Acquiror Target Value TBV Varde Partners HOTSPURS $107 0.83x 6/7/12 Walker & Dunlop Inc. CWCapital $220 1.46x 10/22/09 $292 0 52x EverBank Financial Tygris Commercial Finance 0.52x 6/8/05 MuniMae Glaser Financial Group Inc. $50 2.23x 1/29/04 Sumitomo Corporation Oxford Finance Corporation $51 1.11x 9/15/03 Rabobank Nederland Lend Lease Agri-Business $45 1.00x (a) 8/14/03 Wachovia Corp. Lend Lease Mortgage Capital $43 1.04x (a) 7/25/03 Hudson United Bancorp Flatiron Credit Company, Inc. $40 1.25x 5/7/03 General Motors Acceptance Corp. Lend Lease's U.S. Debt Advisory Group/CapMark $106 0.82x (a) High 2.23x Average 1.18x Median 1.07x Low 0.52x 15 Source: Public filings and SNL Financial (a) Reflects P/BV. Intangible assets data publicly unavailable

P R O J E C T H O T S P U R S Appendix

A P P E N D I X P R O J E C T H O T S P U R S Implied Premiums Paid Period Prior to Announcement 1 - Day (a) 21% 1 - Week (a) 25% 4 - Weeks (a) 21% VARDE PARTNERS / HOTSPURS FINANCIAL SERVICES 1 - Day 120% 1 - Week 108% 4 - Weeks 107% 1 -33% HIGH Day 1 - Week 30% 4 - Weeks 29% 1 - Day 35% 1 - Week 35% 4 Weeks 35% MEDIAN AVERAGE - Weeks 1 - Day (31%) 1 - Week (36%) 4 - Weeks (41%) N b f i 36 LOW Number of transactions 16 Source: Thomson SDC. As of 12/18/2012 (a) HOTSPURS 1-day, 1–week and 4–week implied premium based on 12/19/12 reference date

A P P E N D I X P R O J E C T H O T S P U R S Cost of Equity Calculation ($ in millions) A B C D E F G H Company Levered Beta Net Debt Market Cap. Net Capital Net Debt/Equity Net Debt/Capital Unlevered Beta RECEIVABLES MANAGEMENT Asset Acceptance Capital Corp 1.13 $183.2 $140.9 $324.1 130.0% 56.5% 0.63 Asta Funding, Inc 0.56 40.3 123.4 163.7 32.6% 24.6% 0.47 Encore Capital Group, Inc. 1.20 595.9 721.1 1,316.9 82.6% 45.2% 0.80 COMMERCIAL FINANCE Marlin Business Services Corp. 1.14 $32.2 $230.8 $263.0 13.9% 12.2% 1.05 MicroFinancial Incorporated 0.66 67.4 109.4 176.8 61.6% 38.1% 0.48  1.77 (9.8) 173.1 163.2 (5.7%) (6.0%) 1.83 Mitcham Industries, Inc. 1.77 (9.8) 173.1 163.2 (5.7%) (6.0%) 1.83 NewStar Financial, Inc. 1.28 1,261.5 685.9 1,947.4 183.9% 64.8% 0.60 CRE LENDER, INVESTOR & SERVICERS Resource America, Inc. 0.89 $4.4 $141.2 $145.6 3.1% 3.0% 0.87 Walker & Dunlop, Inc. 0.84 1,272.3 565.0 1,837.3 225.2% 69.2% 0.35 BDCs Fidus Investment Corporation 0.94 $73.9 $195.1 $268.9 37.9% 27.5% 0.76 Gladstone Capital Corporation 0.90 52.0 175.6 227.5 29.6% 22.8% 0.77 Gladstone Investment Corporation 0.77 39.8 189.9 229.6 20.9% 17.3% 0.68 Horizon Technology Finance Corporation 0.66 73.0 141.8 214.7 51.5% 34.0% 0.50 Kohlberg Capital Corporation 1.12 79.5 249.6 329.1 31.9% 24.2% 0.94 Medley Capital Corporation 1.03 106.2 402.3 508.4 26.4% 20.9% 0.88 NGP Capital Resources Company 0.96 50.6 152.4 203.1 33.2% 24.9% 0.80 PennantPark Floating Rate Capital Ltd. 0.53 71.4 88.0 159.5 81.2% 44.8% 0.35 Solar Ltd. 0.74 52.3 177.7 229.9 29.4% 22.7% 0.62 Senior Capital Ltd. 0.74 52.3 177.7 229.9 29.4% 22.7% 0.62 THL Credit, Inc. 0.78 24.2 385.5 409.7 6.3% 5.9% 0.76 High 1.77 High 225.2% 69.2% 1.83 Median 0.90 Median 32.6% 24.6% 0.76 Mean 0.94 Mean 56.6% 29.1% 0.75 Low 0.53 Low (5.7%) (6.0%) 0.35 Cost of Equity Notes Calculation: Risk-free rate of return 1.78% 10-year constant maturity treasury bond rate as of December 17, 2012 (Federal Reserve Statistical Release) Equity risk premium 6.62% 2012 Ibbotson SBBI Valuation Yearbook Small-company premium 8.93% Capital Structure Assumptions: Assumed Marginal Tax Rate 39.00% Target D/E Ratio 32.65% Based on median net debt/equity ratio of selected companies shown above Decile 10(b)(y) from Ibbotson Associates' "2012 Risk Premia Over Time Report," which includes market capitalization of between $86.9mm - $128.67mm 17 Source: Bloomberg, SNL Financial, public filings, Ibbotson Associates’ Cost of Capital Yearbook (2012), Federal Reserve Statistical Release H.15, MSCI Barra Note: Excludes Federal Agricultural Mortgage Corporation due to the existence of government guarantee on its debt Unlevered Beta 0.76 Median of selected companies shown above Levered Beta 0.91 Levered beta equals unlevered beta multiplied by one plus target debt/equity ratio multiplied by one-tax rate Estimated Cost Of Equity 16.7% Capital Asset Pricing Model; risk-free rate of return plus equity risk premium multiplied by levered beta plus small stock premium

A P P E N D I X P R O J E C T H O T S P U R S Selected Publicly Traded Companies Commercial Finance Receivables Management Specialty Commercial Real Estate ( CRE) Services Business Development Companies (BDCs) Marlin Business Services Corp. Asset Acceptance Capital Corp. Federal Agricultural Mortgage Corp. Fidus Investment Corporation MicroFinancial Incorporated Asta Funding, Inc Resource America, Inc. Gladstone Capital Corporation Mitcham Industries, Inc. Encore Capital Group, Inc. Walker & Dunlop, Inc. Gladstone Investment Corporation NewStar Financial, Inc. Horizon Technology Finance Corporation Kohlberg Capital Corporation Medley Capital Corporation NGP Capital Resources Company PennantPark Floating Rate Capital Ltd. Solar Senior Capital Ltd. THL Credit, Inc. 18

EX-99.(D)(4)

Exhibit (d)(4)

EXECUTION VERSION

MANAGEMENT AGREEMENT

This Management Agreement (the “Agreement”), dated as of December 20, 2012, is entered into by and among Hotspurs Holdings LLC (the “Company”), and Terry R. Dewitt (“Executive”).

WHEREAS, the Company has entered into an Agreement and Plan of Merger dated December 20, 2012 (the “Merger Agreement”) pursuant to which the Merger Subsidiary, as such term is defined in the Merger Agreement, shall be merged with and into the Company;

WHEREAS, Executive is currently employed by the Company as Senior Vice President & Head of Global Acquisitions;

WHEREAS, the Company desires to continue to employ the Executive after the consummation of the transaction (the “Transaction”) contemplated by the Merger Agreement (the “Closing”) and Executive desires to continue in the employ of the Company after the Closing, in accordance with the terms and conditions set forth herein;

WHEREAS, the rights and obligations of the Company and Employee set forth in this Agreement are effective as of and conditioned upon, the Closing; and

NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Executive hereby agree as follows:

1.  Agreement to Employ.  Upon the terms and subject to the conditions of this Agreement, the Company hereby continues to employ Executive and Executive hereby accepts continued employment by the Company.

2. Term; Position and Responsibilities.

(a) Term of Employment.  The stated term of this Agreement shall begin on the date on which the Closing occurs (the “Effective Date”) and shall remain in effect until the date which is the third anniversary of the Effective Date unless sooner terminated in accordance with Section 5 hereof (the “Employment Term”).  The period during which Executive is employed pursuant to this Agreement will be referred to as the “Employment Period.”  In the event of Executive’s continued employment by the Company following the expiration of the Employment Term, Executive shall then be employed as an at will employee.  During the Employment Term, Executive shall serve as a member of the Company’s Board of Directors, with voting rights that are proportional to Executive’s ownership percentage of the total outstanding Membership Interests.

(b) Position and Responsibilities.  During the Employment Period, Executive will serve as a Senior Executive of the Company with such duties and responsibilities as are customarily assigned to individuals serving in such position and such other duties and responsibilities consistent with his position and his duties and responsibilities as a Senior Executive, as may be specified by the Company’s Board of Directors from time to time.  During the Employment Period, Executive will devote his undivided loyalty

to the Company and devote all of his skill, knowledge and working time (except for (i) reasonable vacation time and absence for sickness or similar disability, and (ii) to the extent that it does not interfere with the performance of Executive’s duties hereunder, (A) such reasonable time as may be devoted to service on boards of directors and the fulfillment of civic responsibilities, and (B) such reasonable time as may be necessary from time to time for personal financial matters), to the conscientious performance of his duties and responsibilities hereunder.  Executive represents that he is entering into this Agreement voluntarily and that, to the best of his knowledge, his employment hereunder and compliance by him with the terms and conditions hereof will not conflict with or result in the breach of any agreement to which he is a party or by which he may be bound.

3.  Compensation.  As compensation for the services to be performed by Executive hereunder, during the Employment Period, the Company will pay Executive, and Executive shall accept as full compensation hereunder, the following:

(a) Base Salary. Executive shall be paid a base salary at an annualized rate of $300,000 per year, which base salary shall hereinafter be referred to as the “Base Salary.”  Executive’s salary shall be payable in accordance with the normal payroll procedures of the Company.

(b) Discretionary Bonus. Executive shall be eligible to receive an annual cash bonus.  The amount and terms of any such annual bonus shall be based on such criteria and subject to such terms and conditions as the Company shall determine from time to time in its sole discretion.

(c)  Equity Incentive Compensation.  Executive shall be eligible for the grants of equity incentive compensation reserved for Senior Managers as described in the Equity Incentive Compensation Term Sheet attached hereto as Attachment A, subject however, in all cases to the terms and conditions thereof, and subject also to the terms and conditions of the applicable limited liability company agreement, including conditions of forfeiture.

(d)  Annual Review of Base Salary. Beginning in 2013, the Company will review Executive’s Base Salary annually, commencing with the first such annual review no later than thirty (30) days prior to the end of each year and, in the sole discretion of the Company, may increase or decrease the Base Salary.

4. Benefits and Perquisites: Expenses.

(a) Benefits and Perquisites.  Executive shall be entitled to participate in the benefit plans provided by the Company for all employees generally, and for executive employees of the Company, as such benefit plans may exist from time to time.  The Company shall be entitled to amend, modify, or terminate such plans in its sole discretion at any time.

(b)  Business Expenses.  The Company will reimburse Executive for reasonable travel, lodging and meal expenses incurred by him in connection with his performance of services hereunder upon submission of information required to be provided under the Company’s policy for reimbursement of business expenses.

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(c)  Key Man Life Insurance. The Company reserves the right to purchase key man life insurance on the life of Executive at the Company’s expense, and in such amounts and on such terms as the Company, in its sole discretion, may determine.

5.  Termination of Employment. The employment relationship between Executive and the Company created hereunder shall terminate before the expiration of the stated term of this Agreement upon the occurrence of any one of the following events:

(a)  Death or Permanent Disability. The employment relationship shall be terminated effective upon the death or permanent disability of Executive. However, Executive shall be entitled to leaves of absence from the Company in accordance with the policy of the Company generally applicable to executives for illness or temporary disabilities (which the Company may amend or modify at any time), and his status as an Executive shall continue during such periods.  If Executive is incapacitated due to physical or mental illness and such incapacity prevents Executive from satisfactorily performing his duties for the Company on a full time basis for six (6) months or more, Executive shall be deemed to have experienced a permanent disability and the Company may terminate this Agreement upon thirty (30) days written notice.  Upon Executive’s death or termination of employment by reason of permanent disability, Executive’s outstanding Membership Interests shall become 100% vested and subject to repurchase by the Issuer from Executive, or from Executive’s estate, as applicable, at the then-current fair market value of such Membership Interests, as more particularly described in the applicable limited liability company agreement.

(b)  Termination for Cause. The Company shall have the option to terminate the Executive’s employment during the Employment Period, effective upon written notice of such termination to the Executive, for Cause as determined by the Company’s controlling shareholder or the Company’s Board of Directors. For purposes of this Agreement, termination for “Cause” shall mean termination of Executive’s employment by the Board of Directors upon the occurrence of any of the following events:

i.  Any act of fraud, dishonesty, misappropriation or embezzlement by Executive with respect to any aspect of the Company’s business;

ii.  The breach by Executive of any provision of Sections 2 or 7 of this Agreement (including but not limited to a refusal to follow lawful directives of the person to whom Executive reports or the superiors of the person to whom Executive reports which are not inconsistent with the duties of Executive’s position and the provisions of this Agreement); provided that Executive fails to cure the breach in all material respects within thirty (30) days after written notice thereof from the Board or its designee;

iii.  The conviction of Executive by a court of competent jurisdiction of a felony or a crime involving moral turpitude;

iv.  The intentional failure by Executive to perform in all material respects his duties and responsibilities (other than as a result of death or disability) and the failure of Executive to cure

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the same in all material respects within thirty (30) days after written notice thereof from the Board or its designee;

v.  The illegal use of drugs by Executive during the term of this Agreement that, in the determination of the Company, substantially interferes with Executive’s performance of his duties hereunder;

vi.  Acceptance of employment with any employer other than the Company, except (A) upon written permission of the Board, or (B) after termination of the Employment Period;

vii.  Executive’s gross negligence or gross misconduct in the performance of Executive’s duties;

viii. Willful conduct by Executive that is materially detrimental, monetarily or otherwise, to the Company or its affiliates;

ix.  Executive’s chronic absenteeism that is not permitted or excused; or

x. A material breach by Executive of his fiduciary duties to the Company in circumstances where Executive knew or reasonably should have known, that his actions or omissions would constitute  or result in a material breach of his fiduciary duties to the Company.

The Company shall provide Executive with a written notice of termination for Cause, which can be provided on the date of termination. In the event Executive’s employment is terminated for Cause hereunder, Executive shall be entitled to the compensation provided in Section 6(a) below but shall not be entitled to the compensation provided in Section 6(b) below.

(c)  Termination by the Company with Notice.  The Company may terminate this Agreement and Executive’s employment (i) without Cause at any time upon sixty (60) days written notice to Executive, and (ii) upon expiration of the Employment Term; provided, however, that upon such termination or expiration of the Employment Term accompanied by the Company’s termination of Executive’s employment, Executive shall be entitled to compensation as provided in Sections 6(a) and (b) below.

(d)  Termination by Executive for Good Reason.  Executive shall be entitled to terminate this Agreement at any time for Good Reason. For purposes of this Agreement, “Good Reason” shall mean the occurrence of any of the following events:

i.  Without his express written consent, the assignment of Executive to a  position functionally and materially inferior to his position with the Company on the date of this Agreement;

ii.  The change of the location where Executive is based to a location which is more than fifty (50) miles from his present location without Executive’s written consent;

iii.  A reduction by the Company in Executive’s Base Salary as in effect on the date hereof, unless such reduction is (i) a proportionate reduction of the compensation of Executive and all other senior officers of the Company as a part of a company-wide effort to enhance the financial condition of the Company, and (ii) consented to by Executive in writing; or

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iv.  Any other material breach by the Company of its obligations under this Agreement.

Executive shall give the Company thirty (30) days notice of an intent to terminate this Agreement for “Good Reason” as defined in this Section 5(d), and provide the Company with thirty (30) days after receipt of such notice from Executive to remedy the alleged violation of this Subsection  5(d).  In the event the Company fails, within the thirty (30) day period provided to the Company, to remedy the circumstances alleged to constitute “Good Reason,” as defined in this Section 5(d), Executive must exercise his right to terminate this Agreement for “Good Reason” within ninety (90) days of the alleged violation; if Executive fails to do so, he will be deemed to have waived his right to resign for Good Reason with respect to such alleged violation.  In the event Executive terminates his employment for Good Reason hereunder, Executive shall be entitled to the compensation provided in Sections 6(a) and (b) below.

(e)  Termination by Executive with Notice.  Executive may terminate this Agreement without Good Reason at any time upon sixty (60) days written notice to the Company, during which period Executive shall be required to perform all of the services for the Company required by this Agreement, and Executive may elect not to renew the Employment Term, in accordance with a Non-Renewal Notice given under Section 2(a); provided, however, that upon such termination or non-renewal, Executive shall be entitled to compensation as provided in Section 6(a) below, but Executive shall not be entitled to the compensation provided in Section 6(b) below.

Upon Executive’s termination of employment by the Company for whatever reason, he shall be deemed to have resigned from all offices Executive then holds with the Company or any of its affiliates and Executive agrees that he shall provide such letters of resignation from such offices as the Company may request.  Executive agrees that both prior to and after the date on which Executive’s employment with the Company terminates, Executive shall cooperate with the Company in transferring all information on business matters that Executive handled during his Employment and further cooperate with the Company to insure an orderly transition of his duties and responsibilities at the Company.

6.  Compensation upon Termination.  Upon the termination of Executive’s employment under this Agreement before the expiration of the Employment Term (the “stated term”), Executive shall be entitled to the following:

(a)  Compensation upon Termination for Any Reason.  Upon termination of Executive’s employment during the Employment Period before the expiration of the stated term hereof for any reason (including death or permanent disability), Executive shall be entitled to:

i. Salary. The Base Salary earned by him before the effective date of termination as provided in Section 3(a) hereof (including salary payable during any applicable notice period), prorated on the basis of the number of full days of service rendered by Executive during the salary payment period to the effective date of termination;

ii. Vacation Benefits. Any accrued, but unpaid, vacation benefits; and

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iii. Unreimbursed Business Expenses. Any previously authorized but unreimbursed business expenses.

Notwithstanding the foregoing, with respect to any outstanding Membership Interests or outstanding awards under other plans or programs in which Executive is participating at the time of termination of his employment, Executive’s rights and benefits to any such outstanding interests or awards shall be determined in accordance with the terms, conditions, and limitations of the applicable plan or arrangement.

(b)  Additional Compensation and Benefits upon Termination by the Company without Cause or With Notice or by Executive for Good Reason.  If Executive’s employment hereunder terminates without “Cause” (as defined in Section 5(b) above) pursuant to Section 5(c) above, or for “Good Reason” (as defined in Section 5(d) above), or upon expiration of this Agreement accompanied by the Company’s termination of Executive’s employment, the Company shall, upon Executive’s timely execution of a general release of claims in favor of the Company, its subsidiaries, affiliates, and officers, directors, employees, and shareholders (the “Release”), and upon such Release becoming effective and irrevocable, provide to Executive in addition to the amounts set forth in Subsection 6(a) above:

i. a cash payment equal to 100% of his Base Salary; and

ii. if at the time of his termination, Executive and/or his eligible dependents are covered under a group health plan of the Company, a single sum cash payment equal to 140% of the aggregate premiums (both the employer and employee portions) for six months coverage under the group health plan under which Executive and/or his eligible dependents are covered at the time of Executive’s termination, based upon the premium cost in effect at the time of Executive’s termination and taking into account any announced increases in premium costs.

The Release shall be in such form and contain such provisions as the Company shall reasonably determine and must become both effective and irrevocable by Executive within the sixty (60) day period immediately following Executive’s termination of employment.  Upon the Release becoming effective and irrevocable within such sixty (60) day period, subject to Section 24(b) of this Agreement, the Company shall commence to pay the severance amounts referenced in Section 6(b)(i) in equal semi-monthly installments for a period of twelve (12) months (“Severance Period”) in accordance with the Company’s regular payroll practices and shall pay the amount referenced in Section 6(b)(ii); provided however, that if the aforementioned sixty (60) day period spans two calendar years, the payment of the severance installments referenced in Section 6(b)(i) shall commence no earlier than January 1 of the second calendar year.

Executive shall have no obligation to mitigate any severance obligation of the Company under this Agreement by seeking new employment. The Company shall not be entitled to set off or reduce any severance payments owed to Executive under this Agreement by the amount of earnings or benefits received by Executive in future employment. The provisions of Sections 5, 6 and 7 hereof shall survive the termination of the employment relationship hereunder and this Agreement.  Notwithstanding the foregoing, with respect to any outstanding Membership Interests or outstanding awards under other

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plans or programs in which Executive is participating at the time of termination of his employment, Executive’s rights and benefits to any such outstanding interests or awards shall be determined in accordance with the terms, conditions, and limitations of the applicable plan or arrangement.

(c)  Penalty for Breach of Covenants. If, during the Severance Period, Executive is in material breach of his post-employment covenants contained in Section 7 of this Agreement, the Company shall not be obligated to pay any severance payments referenced herein, the Company’s severance obligations shall be forfeited, terminate, and expire, and the Company shall have no further obligations to Executive hereunder from and after the date of such breach and shall have all other rights and remedies available under this Agreement or any other agreement and at law or in equity; provided that Executive fails to cure the breach in all material respects within thirty (30) days after written notice thereof from the Board or its designee.

7.  Protective Covenants.  Executive recognizes that his employment by the Company is one of the highest trust and confidence because (i) Executive has become and in the future will become familiar with additional critical aspects of the Company’s business during the period of his employment with the Company, (ii) the Company has provided and will additionally provide to Executive information during his employment by the Company which is proprietary, confidential and/or trade secret information and is of special and peculiar value to the Company, and (iii) if any such proprietary, confidential and/or trade secret information, save and except such information in the public domain or information commonly known in the industry, were imparted to or became known by any person, including Executive, engaging in a business in competition with that of the Company, hardship, loss and irreparable injury and damage could result to the Company, the measurement of which would be difficult if not impossible to ascertain. Executive further acknowledges that the Company has developed and will continue to develop unique concepts, portfolio acquisition strategies, senior and junior financing arrangements and strategies, direct equity investment strategies, sales presentations, marketing programs, marketing strategies, business practices and strategies, investment practices and strategies, methods of operation, pricing information, cost information, trademarks, licenses, technical information, proprietary information, computer software programs, tapes and disks concerning its operations systems, client lists, client leads, documents identifying past, present and future clients, client profile and preference data, hiring and training methods, investment policies, financial and other confidential, proprietary and/or trade secret information concerning its operations and expansion plans (“Confidential Information,” which term shall not include information that becomes publicly available through no fault of Executive). Therefore, Executive agrees that it is necessary for the Company to protect its business and that of its affiliates from such damage, and Executive further agrees that the following covenants constitute a reasonable and appropriate means, consistent with the best interest of both Executive and the Company, to protect the Company or its affiliates against damage due to loss or disclosure of Confidential Information and shall apply to and be binding upon Executive as provided herein; provided, however, that the parties agree that neither information concerning the Executive’s professional contacts as of the date of this Agreement nor the Executive’s general knowledge of distressed loan and business investing shall be deemed to be Confidential Information:

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(a)  Confidential Information. The Company agrees to provide Executive with some or all of its Confidential Information (as defined above) during the term of this Agreement. Executive recognizes that his position with the Company is one of the highest trust and confidence by reason of Executive’s access to and contact with certain Confidential Information of the Company. Executive agrees and covenants that, except as may be required by the Company in connection with this Agreement, or with the prior written consent of the Company, Executive shall not, either during the term of this Agreement or at any time thereafter, directly or indirectly, use for Executive’s own benefit or for the benefit of another, or disclose, disseminate, or distribute to another, except as directed by the Company or as required for the performance of Executive’s duties on behalf of the Company, any Confidential Information (whether or not acquired, learned, obtained, or developed by Executive alone or in conjunction with others) of the Company or of others with whom the Company has a business relationship, provided, however that this restriction shall not apply to truthful testimony given under oath in a legal proceeding by Executive that is required to be disclosed by law, order or regulation of a court or tribunal or government authority if Executive provides timely notice of such legal requirement or subpoena to the Company. All Confidential Information, and all memoranda, notes, records, drawings, documents, or other writings whatsoever made, compiled, acquired, or received by Executive at any time during his employment with the Company, including during the term of this Agreement, arising out of, in connection with, or related to any activity or business of the Company, including, but not limited to, the clients, suppliers, or others with whom the Company has a business relationship, the arrangements of the Company with such parties, and the pricing and expansion policies and strategy of the Company, are, and shall continue to be, the sole and exclusive property of the Company.  Executive represents and warrants that, to the best of his knowledge, he is not bound by any agreement with any prior employer or other party that will be breached by execution and performance of this Agreement, or which would otherwise prevent him from performing his duties with the Company as set forth in this Agreement. Executive represents and warrants that he has not retained any copies of proprietary or confidential information of any prior employer or other party, and he will not use or rely on any confidential and proprietary information of any prior employer or other party in carrying out his duties for the Company.

(b)  Covenant Not to Compete. In consideration of the numerous mutual promises and agreements contained in this Agreement between the Company and Executive, including, without limitation, those involving Confidential Information, and in order to protect the Company’s Confidential Information and to reduce the likelihood of irreparable damage which would occur in the event such information is provided to or used by a competitor of the Company, and subject to the Company’s payment when due of the amounts specified in Sections 6(a) and 6(b), Executive agrees that he will not, during his employment and for an additional period of twelve (12) months immediately following the termination of his employment for any reason (the “Noncompetition Term”), directly or indirectly, either through any form of ownership or as an individual, director, officer, principal, agent, employee, adviser, consultant, shareholder, partner, member, or in any individual or representative capacity whatsoever, without the prior written consent of the Company (which consent the Company shall not unreasonably withhold), (i) compete for or solicit business for or on behalf of any person or business entity operating a specialty financial services company providing similar services and employing

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acquisition and loan servicing strategies similar to those provided by the Company with a place of business in any state in the United States; (ii) own, operate, participate in, undertake any employment with or have any interest in any entity with a place of business in any state in the United States related to the operation of a specialty financial services company providing similar services and employing acquisition and loan servicing strategies similar to those provided by the Company, except that Executive may own publicly traded stock for investment purposes only in any company in which Executive owns less than 5% of the voting equity, (iii) compete for or solicit business related to the operation of a specialty financial services company providing similar services to those provided by the Company from any client of the Company (or its successors by merger); or (iv) use in any competition, solicitation, or marketing effort any Confidential Information, any proprietary list, or any information concerning clients of the Company.

Executive hereby acknowledges that the geographic boundaries, scope of prohibited activities and the duration of the provisions of this Section 7 are reasonable and are no broader than are necessary to protect the legitimate business interests of the Company. This noncompetition provision shall survive the termination of Executive’s employment and can only be revoked or modified by a writing signed by the parties that specifically states an intent to revoke or modify this provision. Executive acknowledges that the Company would not employ him or provide him with access to its Confidential Information but for his covenants or promises contained in this Section.

The Company and Executive agree and stipulate that the agreements and covenants not to compete contained in this Section 7 are fair and reasonable in light of all of the facts and circumstances of the relationship between Executive and the Company; however, Executive and the Company are aware that in certain circumstances courts have refused to enforce certain terms of agreements not to compete. Therefore, in furtherance of, and not in derogation of the provisions of this Section 7, the Company and Executive agree that in the event a court should decline to enforce any term or terms of any of the provisions of this Section 7, this Section 7 shall be deemed to be modified or reformed to restrict Executive’s competition with the Company or its affiliates to the maximum extent, as to time, geography and business scope, which the court shall find enforceable; provided, however, that in no event shall the provisions of this Section 7 be deemed to be more restrictive to Executive than those contained herein.

Executive agrees that during the Noncompetition Term, he shall immediately notify the Company in writing of any employment, work or business he undertakes with or on behalf of any person (including himself) or entity.

(c)  Non-Solicitation.  Executive agrees that during his employment, and for a period of eighteen (18) months following the termination of his employment by the Company for whatever reason, that he shall not, whether directly or indirectly, and whether in his individual capacity or on behalf of any partnership, limited partnership, corporation or other entity or business with which he is in any way affiliated, including, without limitation, as a partner, limited partner, member, director, officer, shareholder, employee, or agent of any such entity or business, (i) request, induce or attempt to influence, directly or indirectly, any employee of the Company to terminate his or her employment with

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the Company or (ii) employ any person who as of the date of this Agreement was, or after such date is, an employee of the Company; provided that the foregoing restrictions shall not apply to general employment solicitations not directed at Company employees or the hiring of any former employee of the Company who was not solicited to leave or induced to leave the employment of the Company by Executive.  Executive further agrees that during the period beginning with the commencement of Executive’s employment with the Company and ending eighteen (18) months after the termination of Executive’s employment with the Company, for whatever reason, he shall not, directly or indirectly, as an individual, employee, agent, consultant, stockholder, director, partner or in any other individual or representative capacity of the Company or of any other person, entity or business, solicit or encourage any present supplier, contractor, partner or investor of the Company to terminate, limit or otherwise alter his, her or its relationship with the Company.

(d)  Work Product.  For purposes of this Section 7, “Work Product” shall mean all intellectual property rights, including all trade secrets, U.S. and international copyrights, patentable inventions, discoveries and other intellectual property rights in any programming, design, documentation, technology, or other work product that is created in connection with Executive’s work. In addition, all rights in any preexisting programming, design, documentation, technology, or other Work Product provided to the Company during Executive’s employment shall automatically become part of the Work Product hereunder, whether or not it arises specifically out of Executive’s “Work.” For purposes of this Agreement, “Work” shall mean (i) any direct assignments and required performance by or for the Company, and (ii) any other productive output that relates to the business of the Company and is produced during the course of Executive’s employment or engagement by the Company. For this purpose, Work may be considered present even after normal working hours, away from the Company’s premises, on an unsupervised basis, alone or with others. Unless otherwise approved in writing by the Board, this Agreement shall apply to all Work Product created in connection with all Work conducted before or after the date of this Agreement.

The Company shall own all rights in the Work Product. To this end, all Work Product shall be considered work made for hire for the Company. If any of the Work Product may not, by operation of law or agreement, be considered Work made by Executive for hire for the Company (or if ownership of all rights therein do not otherwise vest exclusively in the Company immediately), Executive agrees to assign, and upon creation thereof does hereby automatically assign, without further consideration, the ownership thereof to the Company. Executive hereby irrevocably relinquishes for the benefit of the Company and its assigns any moral rights in the Work Product recognized by applicable law. The Company shall have the right to obtain and hold, in whatever name or capacity it selects, copyrights, registrations, and any other protection available in the Work Product.

Executive agrees to perform upon the request of the Company, during or after Executive’s Work or employment, such further acts as may be necessary or desirable to transfer, perfect, and defend the Company’s ownership of the Work Product, including by (i) executing, acknowledging, and delivering any requested affidavits and documents of assignment and conveyance, (ii) obtaining and/or aiding in the enforcement of copyrights, trade secrets, and (if applicable) patents with respect to the Work Product in any countries, and (iii) providing testimony in connection with any proceeding affecting the

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rights of the Company in any Work Product. In the event that Executive is required to perform the services described in this paragraph after his employment with the Company has terminated, Executive will be reasonably compensated for actual time spent providing such services. Executive warrants that, to the best of his knowledge, his Work for the Company does not and will not in any way conflict with any obligations Executive may have with any prior the Company or contractor. Executive also agrees, to the best of his ability, to develop all Work Product in a manner that avoids even the appearance of infringement of any third party’s intellectual property rights.

(e)  Non-Solicitation of Clients.  During the period of Executive’s employment and, as a condition to receiving severance pay thereafter during the Non-Competition Term, Executive shall not, during the Non-Competition Term, directly or indirectly, solicit or otherwise attempt to establish for himself or any other person, firm or entity any business relationship with any person, firm or entity which, at any time during the twenty-four month period preceding the date of Executive’s termination of employment, was a client of the Company or any of its affiliates except during Executive’s employment with the Company.

(f)  Return of Property. In the event of the termination of Executive’s employment for any reason, Executive will deliver to the Company all nonpersonal documents and data of any nature and in whatever medium pertaining to Executive’s employment with the Company, or any of its subsidiaries or affiliates and he will not take with him any such property, documents or data of any description or any reproduction thereof, including summaries or notes regarding same, or any documents containing or pertaining to any Proprietary Information.  Executive will also deliver to the Company all other property of the Company in Executive’s possession, including but not limited to, computer equipment, cell phones, Company business cards, building passes, portable storage devices, and Company credit cards.

(g)  Survival of Covenants.  Each covenant of Executive set forth in this Section 7 shall survive the termination of this Agreement and Executive’s employment for any reason and shall be construed as an agreement independent of any other provision of this Agreement, and the existence of any claim or cause of action of Executive against the Company whether predicated on this Agreement or otherwise, excluding any claim of Executive against the Company for nonpayment of any amount payable to Executive, shall not constitute a defense to the enforcement by the Company of said covenant. No modification or waiver of any covenant contained in this Section 7 shall be valid unless such waiver or modification is approved in writing by the Board.

Executive hereby acknowledges that Executive’s agreement to be bound by the protective covenants set forth in this Section 7 was a material inducement for the Company entering into this Agreement, agreeing to pay Executive the compensation and benefits set forth herein, and providing Executive with the Company’s Confidential Information and other proprietary information.

8. Enforcement of Covenants.

(a)  Injunctive Relief.  Executive acknowledges and agrees that the covenants, obligations and agreements of Executive contained in Section 7 relate to special, unique and extraordinary matters and that a violation of any of the terms of such covenants, obligations or agreements will cause the Company irreparable injury for which adequate remedies are not available at law. Therefore, Executive

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agrees that the Company will be entitled to an injunction, restraining order or such other equitable relief (without the requirement to post bond) as a court of competent jurisdiction may deem necessary or appropriate to restrain Executive from committing any violation of the covenants, obligations or agreements referred to in this Section 8. These injunctive remedies are cumulative and in addition to any other rights and remedies the Company may have. The Company and Executive hereby irrevocably submit to the exclusive jurisdiction of the courts of the State of the city of the Company’s headquarters and the Federal courts of the United States of America, in each case located in (or located nearest to) the city of the Company’s headquarters, solely in respect of the injunctive remedies set forth in this Section and the interpretation and enforcement of Section 7 solely insofar as such interpretation and enforcement relate to an application for injunctive relief in accordance with the provisions of this Section, and the parties hereto hereby irrevocably agree that (i) the sole and exclusive appropriate venue for any suit or proceeding relating solely to such injunctive relief shall be in such a court, (ii) all claims with respect to any application solely for such injunctive relief shall be heard and determined exclusively in such a court, (iii) any such court shall have exclusive jurisdiction over the person of such parties, subject to proper service being made on such parties, and over the subject matter of any dispute relating to an application solely for such injunctive relief, and (iv) each party, subject to proper service being made on such party, hereby waives any and all objections and defenses based on forum, venue or personal or subject matter jurisdiction as they may relate to an application solely for such injunctive relief in a suit or proceeding brought before such a court in accordance with the provisions of this Section 8. For purposes of this Section 8, the headquarters of the Company shall be deemed to be located in Waco, McLennan County, Texas.

(b)  Forfeiture of Severance Payments.  Executive agrees that receipt of severance pay under Section 6 is conditioned upon Executive’s observance of the covenants contained in Section 7. Executive further agrees that in the event of his failure to observe the provisions of Section 7, (i) Executive shall forfeit the right to receive any portion of any bonus, and (ii) the Company shall be entitled to discontinue further severance payments under Section 7, provided that Executive fails to cure the breach in all material respects within thirty (30) days after written notice thereof from the Board or its designee.

9.  Entire Agreement.  Except as otherwise expressly provided herein, this Agreement constitutes the entire agreement among the parties hereto with respect to the subject matter hereof, and all promises, representations, understandings, arrangements and prior agreements relating to such subject matter (including those made to or with Executive by any other person or entity) are merged herein and superseded in their entirety hereby.

10. Indemnification.  The Company shall indemnify and advance expenses to the Executive (whether or not a governing person) to the extent permitted by Sections 8.101, 8.102, 8.103, 8.104 and 8.105 of the Texas Business Organization Code (the “TBOC”); provided, however, the foregoing indemnification does not include any claims made by previous employers.

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11.  Miscellaneous.

(a)  Binding Effect.  This Agreement shall be binding on and inure to the benefit of the Company and its successors and permitted assigns. This Agreement shall also be binding on and inure to the benefit of Executive and his heirs, executors, administrators and legal representatives.

(b)  Taxes.  The Company may withhold from any payments made under the Agreement, whether payable in cash or in property and from any other compensation payable to Executive by the Company, all federal, state, city or other applicable taxes as shall be required pursuant to any law, governmental regulation or ruling.

12.  Cooperation with Proceedings; Non-Disparagement.

(a)  Cooperation with Proceedings.  Executive agrees that both during his employment with the Company and after his employment with the Company terminates, Executive will assist and cooperate with the Company and its attorneys in connection with any proceeding brought against or by the Company or any of its affiliates, or in connection with any investigation of the Company or any of its affiliates, and such assistance and cooperation shall take place at reasonable times and on reasonable notice, at times and places mutually convenient to Executive and the Company.

(b)  Non-Disparagement.  Executive agrees not to make any statements that disparage the reputation of the Company, its products, services or employees.  Following Executive’s termination of employment, the Company agrees to instruct its directors, officers, and senior executives not to make any statements that disparage the reputation of Executive.  Each of the Company and Executive further acknowledges and agrees that any breach or violation of this non-disparagement provision shall entitle the Company and Executive to seek injunctive relief to prevent any future breaches of this provision and/or to sue the other party under the provisions of this Agreement for the immediate recovery of any damages caused by such breach.  Nothing in this Section 12(b) is intended to prevent either party from making good faith adverse comments, critiques, or criticisms of the other’s performance during the Employment Term, including, in the case of comments by the Company with respect to Executive, in oral and written performance evaluations.

13.  Assignment.  This Agreement is personal to Executive and may not be assigned in any way by Executive without the prior written consent of the Company.  This Agreement shall not be assignable or delegable by the Company, other than to an affiliate of the Company; provided, however, that in the event of the acquisition, merger or consolidation of the Company, the obligations of the Company hereunder shall be binding upon the surviving or resulting entity of such acquisition, merger or consolidation. The rights and obligations under this Agreement shall inure to the benefit of and shall be binding upon the heirs, legatees, administrators and personal representatives of Executive and upon the successors, representatives and assigns of the Company.

14.  Severability and Reformation.  The parties hereto intend all provisions of this Agreement to be enforced to the fullest extent permitted by law. If, however, any provision of this Agreement is held to be illegal, invalid, or unenforceable under present or future law, such provision shall be fully

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severable, and this Agreement shall be construed and enforced as if such illegal, invalid, or unenforceable provision were never a part hereof, and the remaining provisions shall remain in full force and effect and shall not be affected by the illegal, invalid, or unenforceable provision or by its severance. In lieu of such illegal, invalid or unenforceable provision, there shall be added automatically as a part of this Agreement a legal, valid and enforceable provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible, and the Company and Executive hereby request the court to whom disputes relating to this Agreement are submitted to reform the otherwise unenforceable covenant in accordance with this Section 14.

15.  Notices.  All notices and other communications required or permitted to be given hereunder shall be in writing and shall be deemed to have been duly given if delivered personally, mailed by certified mail (return receipt requested) or sent by overnight delivery service, cable, telegram, facsimile transmission or telex to the parties at the following addresses or at such other addresses as shall be specified by the parties by like notice:

If to the Company:

Hotspurs Holdings LLC
8500 Normandale Lake Blvd.
Suite 1500
Minneapolis, MN 55437
Attn:  Jeffrey Thuringer
Fax Number:  (952) 893-9613

If to Executive:

Mr. Terry DeWitt

6400 Imperial Drive

Waco, TX 76712

Notice so given shall, in the case of notice so given by mail, be deemed to be given and received on the fourth calendar day after posting, in the case of notice so given by overnight delivery service, on the date of actual delivery and, in the case of notice so given by cable, telegram, facsimile transmission, telex or personal delivery, on the date of actual transmission or, as the case may be, personal delivery.

16.  Further Acts. Whether or not specifically required under the terms of this Agreement, each party hereto shall execute and deliver such documents and take such further actions as shall be necessary in order for such party to perform all of his or its obligations specified herein or reasonably implied from the terms hereof.

17.  Publicity and Advertising. Executive agrees that the Company may use his name, picture, or likeness for any advertising, publicity or other business purpose at any time, during the term of this Agreement and may continue to use materials generated during the term of this Agreement for a period of six months thereafter. Such use of Executive’s name, picture, or likeness shall not be deemed to result

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in any invasion of Executive’s privacy or in violation of any property right Executive may have; and Executive shall receive no additional consideration if his name, picture or likeness is so used. The Executive further agrees that any negatives, prints or other material for printing or reproduction purposes prepared in connection with the use of his name, picture or likeness by the Company shall be and are the sole property of the Company.

18.  GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS (RULES) OR CHOICE OF LAWS (RULES) THEREOF.

19.  Venue. The exclusive venue for all suits or proceedings arising from or related to this Agreement shall be in a court of competent jurisdiction in McLennan County, Texas.

20.  Amendment. This Agreement may not be altered, amended, or rescinded, nor may any of its provisions be waived, except by an instrument in writing signed by both parties hereto or, in the case of an asserted waiver, by the party against whom the waiver is sought to be enforced. Any modification of this Agreement may only be signed on behalf of the Company by an authorized director of the Company and approved by the Board.

21.  Counterparts. This Agreement may be executed in counterparts, with the same effect as if both parties had signed the same document. All such counterparts shall be deemed an original, shall be construed together and shall constitute one and the same instrument.

22.  Headings. The section and other headings contained in this Agreement are for the convenience of the parties only and are not intended to be a part hereof or to affect the meaning or interpretation hereof.

23.  Attorney Fees. In the event that any legal proceeding is commenced in relation to this Agreement, the unsuccessful party in the action shall pay to the successful party the successful party’s reasonable attorney’s fees, in addition to all other sums that either party may be called on to pay.

24.  Section 409A — General.  This Agreement shall be interpreted and administered in a manner so that any amount or benefit payable hereunder shall be paid or provided in a manner that is either exempt from or compliant with the requirements Section 409A of the Code and applicable Internal Revenue Service guidance and Treasury Regulations issued thereunder.

(a)  Definitional Restrictions.  Notwithstanding anything in this Agreement to the contrary, no payment that is due upon Employee’s termination of employment shall be made unless and until Employee has incurred a “separation from service,” as defined under Treas. Reg. Section 1.409A-1(h).

(b)  Six-Month Delay in Certain Circumstances.  Notwithstanding any other provision of this Agreement, if Employee is a Specified Employee (as defined below) at the time of termination of employment, then, to the extent that payments and benefits under this Agreement constitute “deferred compensation” under Section 409A of the Code and are not eligible for any exemption thereunder

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(“Non-Exempt Deferred Compensation”), and payment of cash or provision of his benefits is pursuant to a termination of employment, then:

(i) the amount of such Non-Exempt Deferred Compensation that would otherwise be payable during the six-month period immediately following Employee’s separation from service will be accumulated through and paid or provided on the first day of the seventh month following Employee’s separation from service (or, if Employee dies during such period, within 30 days after Employee’s death) (in either case, the “Required Delay Period”); and

(ii) the normal payment or distribution schedule for any remaining payments or distributions will resume at the end of the Required Delay Period.

For purposes of this Agreement, the term “Specified Employee” has the meaning given such term in Treas. Reg. Section 1.409A-1(i).

(c)  Treatment of Installment Payments.  Each payment of termination benefits under Section 6(a) of this Agreement, including, without limitation, each installment payment, shall be considered a separate payment, as described in Treas. Reg. Section 1.409A-2(b)(2), for purposes of Section 409A of the Code.

(d)  Timing of Reimbursements and In-kind Benefits.  If Employee is entitled to be paid or reimbursed for any taxable expenses under Section 4, and such payments or reimbursements are includible in Employee’s federal gross taxable income, the amount of such expenses reimbursable in any one calendar year shall not affect the amount reimbursable in any other calendar year, the reimbursement of an eligible expense must be made no later than December 31 of the year after the year in which the expense was incurred, and no right of Employee to reimbursement of such expenses.

(e)  Permitted Acceleration.  The Company shall have the sole authority to make any accelerated distribution permissible under Treas. Reg. Section 1.409A-3(j)(4) to Employee of deferred amounts, provided that such distribution meets the requirements of Treas. Reg. Section 1.409A-3(j)(4).

[Remainder of page intentionally left blank]

[Signature page follows]

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first indicated above.

COMPANY:
HOTSPURS HOLDINGS LLC
By:	/s/ Jason R. Spaeth
Name:	Jason R. Spaeth
Title:	President and Chief Executive Officer
EXECUTIVE:
TERRY R. DEWITT
/s/ Terry R. Dewitt

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Exhibit A

Term Sheet
Equity Incentive Compensation

Issuer	Hotspurs Holdings LLC
Capital Structure	One series of Limited Liability Company Membership Interests
Anticipated Total Senior Manager Membership Interest Participation	(i).On the closing date of the Merger, the senior manager of Hotspurs (the “Senior Manager) will initially receive 1 2/3% of the total Limited Liability Company Membership Interests of the Issuer (the “Membership Interests”), such Membership Interests to be treated as a pari passu interest in the Company (ii).If Värde Partners, Inc. or its affiliated funds (collectively, “Värde”) achieve an XIRR, as used in Microsoft Excel, of 12% on Värde’s initial equity investment and any of its future cash infusions in Hotspurs, then the Membership Interests of the Senior Manager will increase to 3 1/3% of the total Membership Interests (iii).The XIRR, as used in Microsoft Excel, will be calculated on the dates on which cash inflows (Värde’s initial equity investment and any of its future cash infusions in Hotspurs) and cash outflows (dividends paid to Membership Interest holders) occur
Membership Interest Buyback/Forfeiture	(i).If Hotspurs terminates the Senior Manager for cause, at any time, then all of his Membership Interests will be automatically and immediately forfeited and returned to the Issuer (ii).If Hotspurs terminates the Senior Manager for any reason, other than cause, at any time, then all of his Membership Interests will be subject to repurchase by the Issuer at the then-current fair market value of such Membership Interests as determined using mutually agreed upon cash outflows and a discount rate of 15% (iii).If the Senior Manager terminates his employment with Hotspurs for (a) good reason before the third anniversary of the closing date of the Merger or (b) any reason after the third anniversary of the closing date of the Merger, then all of his Membership Interests will be subject to repurchase by the Issuer at the then-current fair market value of such Membership Interests as determined using mutually agreed upon cash outflows and a discount rate of 15%; if such Membership Interests are not repurchased, Senior Manager will continue to receive cash distributions subject to his undisturbed pari passu Membership Interests in the Company (iv).If the Senior Manager terminates his employment with Hotspurs other than for good reason before the third anniversary of the closing date of the Merger, then all of his Membership Interests will be automatically and immediately forfeited and returned to the Issuer (v).In the event of the Senior Manager’s death or termination of employment due to disability, then all of his outstanding Membership Interests will become fully vested and subject to repurchase by the Issuer at the then-current fair market value of such Membership Interests as determined using

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	mutually agreed upon cash outflows and a discount rate of 15%; if such Membership Interests are not repurchased, Senior Manager or Senior Manager’s estate, as applicable, will continue to receive cash distributions subject to his undisturbed pari passu Membership Interests in the Company
Board of Directors and Voting Rights	Each Senior Manager shall serve as a member of the Company’s Board of Directors during the Senior Manager’s employment term. The voting rights granted to each Director will be proportional to the Director’s ownership percentage of the total outstanding Membership Interests.
Sale of Issuer	Membership Interests will be subject to customary “drag-along”, “tag-along” rights and other similar obligations in connection with a sale of Issuer
Transferability of Membership Interests	Membership Interests are non-transferable except in limited circumstances relating to certain estate planning transfers
Limited Liability Company Agreement	Membership Interests will be subject in all respects to the terms of a Limited Liability Company Agreement, which the Senior Manager will be required to execute

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EX-99.(D)(5)

Exhibit (d)(5)

EXECUTION VERSION

MANAGEMENT AGREEMENT

This Management Agreement (the “Agreement”), dated as of December 20, 2012, is entered into by and among Hotspurs Holdings LLC (the “Company”), and James C. Holmes (“Executive”).

WHEREAS, the Company has entered into an Agreement and Plan of Merger dated December 20, 2012 (the “Merger Agreement”) pursuant to which the Merger Subsidiary, as such term is defined in the Merger Agreement, shall be merged with and into the Company;

WHEREAS, Executive is currently employed by the Company as Senior Vice President & Managing Director;

WHEREAS, the Company desires to continue to employ the Executive after the consummation of the transaction (the “Transaction”) contemplated by the Merger Agreement (the “Closing”) and Executive desires to continue in the employ of the Company after the Closing, in accordance with the terms and conditions set forth herein;

WHEREAS, the rights and obligations of the Company and Employee set forth in this Agreement are effective as of and conditioned upon, the Closing; and

NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Executive hereby agree as follows:

1.  Agreement to Employ.  Upon the terms and subject to the conditions of this Agreement, the Company hereby continues to employ Executive and Executive hereby accepts continued employment by the Company.

2. Term; Position and Responsibilities.

(a) Term of Employment.  The stated term of this Agreement shall begin on the date on which the Closing occurs (the “Effective Date”) and shall remain in effect until the date which is the third anniversary of the Effective Date unless sooner terminated in accordance with Section 5 hereof (the “Employment Term”).  The period during which Executive is employed pursuant to this Agreement will be referred to as the “Employment Period.”  In the event of Executive’s continued employment by the Company following the expiration of the Employment Term, Executive shall then be employed as an at will employee.  During the Employment Term, Executive shall serve as a member of the Company’s Board of Directors, with voting rights that are proportional to Executive’s ownership percentage of the total outstanding Membership Interests.

(b) Position and Responsibilities.  During the Employment Period, Executive will serve as a Senior Executive of the Company with such duties and responsibilities as are customarily assigned to individuals serving in such position and such other duties and responsibilities consistent with his position and his duties and responsibilities as a Senior Executive, as may be specified by the Company’s Board of Directors from time to time.  During the Employment Period, Executive will devote his undivided loyalty

to the Company and devote all of his skill, knowledge and working time (except for (i) reasonable vacation time and absence for sickness or similar disability, and (ii) to the extent that it does not interfere with the performance of Executive’s duties hereunder, (A) such reasonable time as may be devoted to service on boards of directors and the fulfillment of civic responsibilities, and (B) such reasonable time as may be necessary from time to time for personal financial matters), to the conscientious performance of his duties and responsibilities hereunder.  Executive represents that he is entering into this Agreement voluntarily and that, to the best of his knowledge, his employment hereunder and compliance by him with the terms and conditions hereof will not conflict with or result in the breach of any agreement to which he is a party or by which he may be bound.

3.  Compensation.  As compensation for the services to be performed by Executive hereunder, during the Employment Period, the Company will pay Executive, and Executive shall accept as full compensation hereunder, the following:

(a) Base Salary. Executive shall be paid a base salary at an annualized rate of $300,000 per year, which base salary shall hereinafter be referred to as the “Base Salary.”  Executive’s salary shall be payable in accordance with the normal payroll procedures of the Company.

(b) Discretionary Bonus. Executive shall be eligible to receive an annual cash bonus.  The amount and terms of any such annual bonus shall be based on such criteria and subject to such terms and conditions as the Company shall determine from time to time in its sole discretion.

(c)  Equity Incentive Compensation.  Executive shall be eligible for the grants of equity incentive compensation reserved for Senior Managers as described in the Equity Incentive Compensation Term Sheet attached hereto as Attachment A, subject however, in all cases to the terms and conditions thereof, and subject also to the terms and conditions of the applicable limited liability company agreement, including conditions of forfeiture.

(d)  Annual Review of Base Salary. Beginning in 2013, the Company will review Executive’s Base Salary annually, commencing with the first such annual review no later than thirty (30) days prior to the end of each year and, in the sole discretion of the Company, may increase or decrease the Base Salary.

4. Benefits and Perquisites: Expenses.

(a) Benefits and Perquisites.  Executive shall be entitled to participate in the benefit plans provided by the Company for all employees generally, and for executive employees of the Company, as such benefit plans may exist from time to time.  The Company shall be entitled to amend, modify, or terminate such plans in its sole discretion at any time.

(b)  Business Expenses.  The Company will reimburse Executive for reasonable travel, lodging and meal expenses incurred by him in connection with his performance of services hereunder upon submission of information required to be provided under the Company’s policy for reimbursement of business expenses.

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(c)  Key Man Life Insurance. The Company reserves the right to purchase key man life insurance on the life of Executive at the Company’s expense, and in such amounts and on such terms as the Company, in its sole discretion, may determine.

5.  Termination of Employment. The employment relationship between Executive and the Company created hereunder shall terminate before the expiration of the stated term of this Agreement upon the occurrence of any one of the following events:

(a)  Death or Permanent Disability. The employment relationship shall be terminated effective upon the death or permanent disability of Executive. However, Executive shall be entitled to leaves of absence from the Company in accordance with the policy of the Company generally applicable to executives for illness or temporary disabilities (which the Company may amend or modify at any time), and his status as an Executive shall continue during such periods.  If Executive is incapacitated due to physical or mental illness and such incapacity prevents Executive from satisfactorily performing his duties for the Company on a full time basis for six (6) months or more, Executive shall be deemed to have experienced a permanent disability and the Company may terminate this Agreement upon thirty (30) days written notice.  Upon Executive’s death or termination of employment by reason of permanent disability, Executive’s outstanding Membership Interests shall become 100% vested and subject to repurchase by the Issuer from Executive, or from Executive’s estate, as applicable, at the then-current fair market value of such Membership Interests, as more particularly described in the applicable limited liability company agreement.

(b)  Termination for Cause. The Company shall have the option to terminate the Executive’s employment during the Employment Period, effective upon written notice of such termination to the Executive, for Cause as determined by the Company’s controlling shareholder or the Company’s Board of Directors. For purposes of this Agreement, termination for “Cause” shall mean termination of Executive’s employment by the Board of Directors upon the occurrence of any of the following events:

i.  Any act of fraud, dishonesty, misappropriation or embezzlement by Executive with respect to any aspect of the Company’s business;

ii.  The breach by Executive of any provision of Sections 2 or 7 of this Agreement (including but not limited to a refusal to follow lawful directives of the person to whom Executive reports or the superiors of the person to whom Executive reports which are not inconsistent with the duties of Executive’s position and the provisions of this Agreement); provided that Executive fails to cure the breach in all material respects within thirty (30) days after written notice thereof from the Board or its designee;

iii.  The conviction of Executive by a court of competent jurisdiction of a felony or a crime involving moral turpitude;

iv.  The intentional failure by Executive to perform in all material respects his duties and responsibilities (other than as a result of death or disability) and the failure of Executive to cure

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the same in all material respects within thirty (30) days after written notice thereof from the Board or its designee;

v.  The illegal use of drugs by Executive during the term of this Agreement that, in the determination of the Company, substantially interferes with Executive’s performance of his duties hereunder;

vi.  Acceptance of employment with any employer other than the Company, except (A) upon written permission of the Board, or (B) after termination of the Employment Period;

vii.  Executive’s gross negligence or gross misconduct in the performance of Executive’s duties;

viii. Willful conduct by Executive that is materially detrimental, monetarily or otherwise, to the Company or its affiliates;

ix.  Executive’s chronic absenteeism that is not permitted or excused; or

x. A material breach by Executive of his fiduciary duties to the Company in circumstances where Executive knew or reasonably should have known, that his actions or omissions would constitute  or result in a material breach of his fiduciary duties to the Company.

The Company shall provide Executive with a written notice of termination for Cause, which can be provided on the date of termination. In the event Executive’s employment is terminated for Cause hereunder, Executive shall be entitled to the compensation provided in Section 6(a) below but shall not be entitled to the compensation provided in Section 6(b) below.

(c)  Termination by the Company with Notice.  The Company may terminate this Agreement and Executive’s employment (i) without Cause at any time upon sixty (60) days written notice to Executive, and (ii) upon expiration of the Employment Term; provided, however, that upon such termination or expiration of the Employment Term accompanied by the Company’s termination of Executive’s employment, Executive shall be entitled to compensation as provided in Sections 6(a) and (b) below.

(d)  Termination by Executive for Good Reason.  Executive shall be entitled to terminate this Agreement at any time for Good Reason. For purposes of this Agreement, “Good Reason” shall mean the occurrence of any of the following events:

i.  Without his express written consent, the assignment of Executive to a  position functionally and materially inferior to his position with the Company on the date of this Agreement;

ii.  The change of the location where Executive is based to a location which is more than fifty (50) miles from his present location without Executive’s written consent;

iii.  A reduction by the Company in Executive’s Base Salary as in effect on the date hereof, unless such reduction is (i) a proportionate reduction of the compensation of Executive and all other senior officers of the Company as a part of a company-wide effort to enhance the financial condition of the Company, and (ii) consented to by Executive in writing; or

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iv.  Any other material breach by the Company of its obligations under this Agreement.

Executive shall give the Company thirty (30) days notice of an intent to terminate this Agreement for “Good Reason” as defined in this Section 5(d), and provide the Company with thirty (30) days after receipt of such notice from Executive to remedy the alleged violation of this Subsection  5(d).  In the event the Company fails, within the thirty (30) day period provided to the Company, to remedy the circumstances alleged to constitute “Good Reason,” as defined in this Section 5(d), Executive must exercise his right to terminate this Agreement for “Good Reason” within ninety (90) days of the alleged violation; if Executive fails to do so, he will be deemed to have waived his right to resign for Good Reason with respect to such alleged violation.  In the event Executive terminates his employment for Good Reason hereunder, Executive shall be entitled to the compensation provided in Sections 6(a) and (b) below.

(e)  Termination by Executive with Notice.  Executive may terminate this Agreement without Good Reason at any time upon sixty (60) days written notice to the Company, during which period Executive shall be required to perform all of the services for the Company required by this Agreement, and Executive may elect not to renew the Employment Term, in accordance with a Non-Renewal Notice given under Section 2(a); provided, however, that upon such termination or non-renewal, Executive shall be entitled to compensation as provided in Section 6(a) below, but Executive shall not be entitled to the compensation provided in Section 6(b) below.

Upon Executive’s termination of employment by the Company for whatever reason, he shall be deemed to have resigned from all offices Executive then holds with the Company or any of its affiliates and Executive agrees that he shall provide such letters of resignation from such offices as the Company may request.  Executive agrees that both prior to and after the date on which Executive’s employment with the Company terminates, Executive shall cooperate with the Company in transferring all information on business matters that Executive handled during his Employment and further cooperate with the Company to insure an orderly transition of his duties and responsibilities at the Company.

6.  Compensation upon Termination.  Upon the termination of Executive’s employment under this Agreement before the expiration of the Employment Term (the “stated term”), Executive shall be entitled to the following:

(a)  Compensation upon Termination for Any Reason.  Upon termination of Executive’s employment during the Employment Period before the expiration of the stated term hereof for any reason (including death or permanent disability), Executive shall be entitled to:

i. Salary. The Base Salary earned by him before the effective date of termination as provided in Section 3(a) hereof (including salary payable during any applicable notice period), prorated on the basis of the number of full days of service rendered by Executive during the salary payment period to the effective date of termination;

ii. Vacation Benefits. Any accrued, but unpaid, vacation benefits; and

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iii. Unreimbursed Business Expenses. Any previously authorized but unreimbursed business expenses.

Notwithstanding the foregoing, with respect to any outstanding Membership Interests or outstanding awards under other plans or programs in which Executive is participating at the time of termination of his employment, Executive’s rights and benefits to any such outstanding interests or awards shall be determined in accordance with the terms, conditions, and limitations of the applicable plan or arrangement.

(b)  Additional Compensation and Benefits upon Termination by the Company without Cause or With Notice or by Executive for Good Reason.  If Executive’s employment hereunder terminates without “Cause” (as defined in Section 5(b) above) pursuant to Section 5(c) above, or for “Good Reason” (as defined in Section 5(d) above), or upon expiration of this Agreement accompanied by the Company’s termination of Executive’s employment, the Company shall, upon Executive’s timely execution of a general release of claims in favor of the Company, its subsidiaries, affiliates, and officers, directors, employees, and shareholders (the “Release”), and upon such Release becoming effective and irrevocable, provide to Executive in addition to the amounts set forth in Subsection 6(a) above:

i. a cash payment equal to 100% of his Base Salary; and

ii. if at the time of his termination, Executive and/or his eligible dependents are covered under a group health plan of the Company, a single sum cash payment equal to 140% of the aggregate premiums (both the employer and employee portions) for six months coverage under the group health plan under which Executive and/or his eligible dependents are covered at the time of Executive’s termination, based upon the premium cost in effect at the time of Executive’s termination and taking into account any announced increases in premium costs.

The Release shall be in such form and contain such provisions as the Company shall reasonably determine and must become both effective and irrevocable by Executive within the sixty (60) day period immediately following Executive’s termination of employment.  Upon the Release becoming effective and irrevocable within such sixty (60) day period, subject to Section 24(b) of this Agreement, the Company shall commence to pay the severance amounts referenced in Section 6(b)(i) in equal semi-monthly installments for a period of twelve (12) months (“Severance Period”) in accordance with the Company’s regular payroll practices and shall pay the amount referenced in Section 6(b)(ii); provided however, that if the aforementioned sixty (60) day period spans two calendar years, the payment of the severance installments referenced in Section 6(b)(i) shall commence no earlier than January 1 of the second calendar year.

Executive shall have no obligation to mitigate any severance obligation of the Company under this Agreement by seeking new employment. The Company shall not be entitled to set off or reduce any severance payments owed to Executive under this Agreement by the amount of earnings or benefits received by Executive in future employment. The provisions of Sections 5, 6 and 7 hereof shall survive the termination of the employment relationship hereunder and this Agreement.  Notwithstanding the foregoing, with respect to any outstanding Membership Interests or outstanding awards under other

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plans or programs in which Executive is participating at the time of termination of his employment, Executive’s rights and benefits to any such outstanding interests or awards shall be determined in accordance with the terms, conditions, and limitations of the applicable plan or arrangement.

(c)  Penalty for Breach of Covenants. If, during the Severance Period, Executive is in material breach of his post-employment covenants contained in Section 7 of this Agreement, the Company shall not be obligated to pay any severance payments referenced herein, the Company’s severance obligations shall be forfeited, terminate, and expire, and the Company shall have no further obligations to Executive hereunder from and after the date of such breach and shall have all other rights and remedies available under this Agreement or any other agreement and at law or in equity; provided that Executive fails to cure the breach in all material respects within thirty (30) days after written notice thereof from the Board or its designee.

7.  Protective Covenants.  Executive recognizes that his employment by the Company is one of the highest trust and confidence because (i) Executive has become and in the future will become familiar with additional critical aspects of the Company’s business during the period of his employment with the Company, (ii) the Company has provided and will additionally provide to Executive information during his employment by the Company which is proprietary, confidential and/or trade secret information and is of special and peculiar value to the Company, and (iii) if any such proprietary, confidential and/or trade secret information, save and except such information in the public domain or information commonly known in the industry, were imparted to or became known by any person, including Executive, engaging in a business in competition with that of the Company, hardship, loss and irreparable injury and damage could result to the Company, the measurement of which would be difficult if not impossible to ascertain. Executive further acknowledges that the Company has developed and will continue to develop unique concepts, portfolio acquisition strategies, senior and junior financing arrangements and strategies, direct equity investment strategies, sales presentations, marketing programs, marketing strategies, business practices and strategies, investment practices and strategies, methods of operation, pricing information, cost information, trademarks, licenses, technical information, proprietary information, computer software programs, tapes and disks concerning its operations systems, client lists, client leads, documents identifying past, present and future clients, client profile and preference data, hiring and training methods, investment policies, financial and other confidential, proprietary and/or trade secret information concerning its operations and expansion plans (“Confidential Information,” which term shall not include information that becomes publicly available through no fault of Executive). Therefore, Executive agrees that it is necessary for the Company to protect its business and that of its affiliates from such damage, and Executive further agrees that the following covenants constitute a reasonable and appropriate means, consistent with the best interest of both Executive and the Company, to protect the Company or its affiliates against damage due to loss or disclosure of Confidential Information and shall apply to and be binding upon Executive as provided herein; provided, however, that the parties agree that neither information concerning the Executive’s professional contacts as of the date of this Agreement nor the Executive’s general knowledge of distressed loan and business investing shall be deemed to be Confidential Information:

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(a)  Confidential Information. The Company agrees to provide Executive with some or all of its Confidential Information (as defined above) during the term of this Agreement. Executive recognizes that his position with the Company is one of the highest trust and confidence by reason of Executive’s access to and contact with certain Confidential Information of the Company. Executive agrees and covenants that, except as may be required by the Company in connection with this Agreement, or with the prior written consent of the Company, Executive shall not, either during the term of this Agreement or at any time thereafter, directly or indirectly, use for Executive’s own benefit or for the benefit of another, or disclose, disseminate, or distribute to another, except as directed by the Company or as required for the performance of Executive’s duties on behalf of the Company, any Confidential Information (whether or not acquired, learned, obtained, or developed by Executive alone or in conjunction with others) of the Company or of others with whom the Company has a business relationship, provided, however that this restriction shall not apply to truthful testimony given under oath in a legal proceeding by Executive that is required to be disclosed by law, order or regulation of a court or tribunal or government authority if Executive provides timely notice of such legal requirement or subpoena to the Company. All Confidential Information, and all memoranda, notes, records, drawings, documents, or other writings whatsoever made, compiled, acquired, or received by Executive at any time during his employment with the Company, including during the term of this Agreement, arising out of, in connection with, or related to any activity or business of the Company, including, but not limited to, the clients, suppliers, or others with whom the Company has a business relationship, the arrangements of the Company with such parties, and the pricing and expansion policies and strategy of the Company, are, and shall continue to be, the sole and exclusive property of the Company.  Executive represents and warrants that, to the best of his knowledge, he is not bound by any agreement with any prior employer or other party that will be breached by execution and performance of this Agreement, or which would otherwise prevent him from performing his duties with the Company as set forth in this Agreement. Executive represents and warrants that he has not retained any copies of proprietary or confidential information of any prior employer or other party, and he will not use or rely on any confidential and proprietary information of any prior employer or other party in carrying out his duties for the Company.

(b)  Covenant Not to Compete. In consideration of the numerous mutual promises and agreements contained in this Agreement between the Company and Executive, including, without limitation, those involving Confidential Information, and in order to protect the Company’s Confidential Information and to reduce the likelihood of irreparable damage which would occur in the event such information is provided to or used by a competitor of the Company, and subject to the Company’s payment when due of the amounts specified in Sections 6(a) and 6(b), Executive agrees that he will not, during his employment and for an additional period of twelve (12) months immediately following the termination of his employment for any reason (the “Noncompetition Term”), directly or indirectly, either through any form of ownership or as an individual, director, officer, principal, agent, employee, adviser, consultant, shareholder, partner, member, or in any individual or representative capacity whatsoever, without the prior written consent of the Company (which consent the Company shall not unreasonably withhold), (i) compete for or solicit business for or on behalf of any person or business entity operating a specialty financial services company providing similar services and employing

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acquisition and loan servicing strategies similar to those provided by the Company with a place of business in any state in the United States; (ii) own, operate, participate in, undertake any employment with or have any interest in any entity with a place of business in any state in the United States related to the operation of a specialty financial services company providing similar services and employing acquisition and loan servicing strategies similar to those provided by the Company, except that Executive may own publicly traded stock for investment purposes only in any company in which Executive owns less than 5% of the voting equity, (iii) compete for or solicit business related to the operation of a specialty financial services company providing similar services to those provided by the Company from any client of the Company (or its successors by merger); or (iv) use in any competition, solicitation, or marketing effort any Confidential Information, any proprietary list, or any information concerning clients of the Company.

Executive hereby acknowledges that the geographic boundaries, scope of prohibited activities and the duration of the provisions of this Section 7 are reasonable and are no broader than are necessary to protect the legitimate business interests of the Company. This noncompetition provision shall survive the termination of Executive’s employment and can only be revoked or modified by a writing signed by the parties that specifically states an intent to revoke or modify this provision. Executive acknowledges that the Company would not employ him or provide him with access to its Confidential Information but for his covenants or promises contained in this Section.

The Company and Executive agree and stipulate that the agreements and covenants not to compete contained in this Section 7 are fair and reasonable in light of all of the facts and circumstances of the relationship between Executive and the Company; however, Executive and the Company are aware that in certain circumstances courts have refused to enforce certain terms of agreements not to compete. Therefore, in furtherance of, and not in derogation of the provisions of this Section 7, the Company and Executive agree that in the event a court should decline to enforce any term or terms of any of the provisions of this Section 7, this Section 7 shall be deemed to be modified or reformed to restrict Executive’s competition with the Company or its affiliates to the maximum extent, as to time, geography and business scope, which the court shall find enforceable; provided, however, that in no event shall the provisions of this Section 7 be deemed to be more restrictive to Executive than those contained herein.

Executive agrees that during the Noncompetition Term, he shall immediately notify the Company in writing of any employment, work or business he undertakes with or on behalf of any person (including himself) or entity.

(c)  Non-Solicitation.  Executive agrees that during his employment, and for a period of eighteen (18) months following the termination of his employment by the Company for whatever reason, that he shall not, whether directly or indirectly, and whether in his individual capacity or on behalf of any partnership, limited partnership, corporation or other entity or business with which he is in any way affiliated, including, without limitation, as a partner, limited partner, member, director, officer, shareholder, employee, or agent of any such entity or business, (i) request, induce or attempt to influence, directly or indirectly, any employee of the Company to terminate his or her employment with

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the Company or (ii) employ any person who as of the date of this Agreement was, or after such date is, an employee of the Company; provided that the foregoing restrictions shall not apply to general employment solicitations not directed at Company employees or the hiring of any former employee of the Company who was not solicited to leave or induced to leave the employment of the Company by Executive.  Executive further agrees that during the period beginning with the commencement of Executive’s employment with the Company and ending eighteen (18) months after the termination of Executive’s employment with the Company, for whatever reason, he shall not, directly or indirectly, as an individual, employee, agent, consultant, stockholder, director, partner or in any other individual or representative capacity of the Company or of any other person, entity or business, solicit or encourage any present supplier, contractor, partner or investor of the Company to terminate, limit or otherwise alter his, her or its relationship with the Company.

(d)  Work Product.  For purposes of this Section 7, “Work Product” shall mean all intellectual property rights, including all trade secrets, U.S. and international copyrights, patentable inventions, discoveries and other intellectual property rights in any programming, design, documentation, technology, or other work product that is created in connection with Executive’s work. In addition, all rights in any preexisting programming, design, documentation, technology, or other Work Product provided to the Company during Executive’s employment shall automatically become part of the Work Product hereunder, whether or not it arises specifically out of Executive’s “Work.” For purposes of this Agreement, “Work” shall mean (i) any direct assignments and required performance by or for the Company, and (ii) any other productive output that relates to the business of the Company and is produced during the course of Executive’s employment or engagement by the Company. For this purpose, Work may be considered present even after normal working hours, away from the Company’s premises, on an unsupervised basis, alone or with others. Unless otherwise approved in writing by the Board, this Agreement shall apply to all Work Product created in connection with all Work conducted before or after the date of this Agreement.

The Company shall own all rights in the Work Product. To this end, all Work Product shall be considered work made for hire for the Company. If any of the Work Product may not, by operation of law or agreement, be considered Work made by Executive for hire for the Company (or if ownership of all rights therein do not otherwise vest exclusively in the Company immediately), Executive agrees to assign, and upon creation thereof does hereby automatically assign, without further consideration, the ownership thereof to the Company. Executive hereby irrevocably relinquishes for the benefit of the Company and its assigns any moral rights in the Work Product recognized by applicable law. The Company shall have the right to obtain and hold, in whatever name or capacity it selects, copyrights, registrations, and any other protection available in the Work Product.

Executive agrees to perform upon the request of the Company, during or after Executive’s Work or employment, such further acts as may be necessary or desirable to transfer, perfect, and defend the Company’s ownership of the Work Product, including by (i) executing, acknowledging, and delivering any requested affidavits and documents of assignment and conveyance, (ii) obtaining and/or aiding in the enforcement of copyrights, trade secrets, and (if applicable) patents with respect to the Work Product in any countries, and (iii) providing testimony in connection with any proceeding affecting the

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rights of the Company in any Work Product. In the event that Executive is required to perform the services described in this paragraph after his employment with the Company has terminated, Executive will be reasonably compensated for actual time spent providing such services. Executive warrants that, to the best of his knowledge, his Work for the Company does not and will not in any way conflict with any obligations Executive may have with any prior the Company or contractor. Executive also agrees, to the best of his ability, to develop all Work Product in a manner that avoids even the appearance of infringement of any third party’s intellectual property rights.

(e)  Non-Solicitation of Clients.  During the period of Executive’s employment and, as a condition to receiving severance pay thereafter during the Non-Competition Term, Executive shall not, during the Non-Competition Term, directly or indirectly, solicit or otherwise attempt to establish for himself or any other person, firm or entity any business relationship with any person, firm or entity which, at any time during the twenty-four month period preceding the date of Executive’s termination of employment, was a client of the Company or any of its affiliates except during Executive’s employment with the Company.

(f)  Return of Property. In the event of the termination of Executive’s employment for any reason, Executive will deliver to the Company all nonpersonal documents and data of any nature and in whatever medium pertaining to Executive’s employment with the Company, or any of its subsidiaries or affiliates and he will not take with him any such property, documents or data of any description or any reproduction thereof, including summaries or notes regarding same, or any documents containing or pertaining to any Proprietary Information.  Executive will also deliver to the Company all other property of the Company in Executive’s possession, including but not limited to, computer equipment, cell phones, Company business cards, building passes, portable storage devices, and Company credit cards.

(g)  Survival of Covenants.  Each covenant of Executive set forth in this Section 7 shall survive the termination of this Agreement and Executive’s employment for any reason and shall be construed as an agreement independent of any other provision of this Agreement, and the existence of any claim or cause of action of Executive against the Company whether predicated on this Agreement or otherwise, excluding any claim of Executive against the Company for nonpayment of any amount payable to Executive, shall not constitute a defense to the enforcement by the Company of said covenant. No modification or waiver of any covenant contained in this Section 7 shall be valid unless such waiver or modification is approved in writing by the Board.

Executive hereby acknowledges that Executive’s agreement to be bound by the protective covenants set forth in this Section 7 was a material inducement for the Company entering into this Agreement, agreeing to pay Executive the compensation and benefits set forth herein, and providing Executive with the Company’s Confidential Information and other proprietary information.

8. Enforcement of Covenants.

(a)  Injunctive Relief.  Executive acknowledges and agrees that the covenants, obligations and agreements of Executive contained in Section 7 relate to special, unique and extraordinary matters and that a violation of any of the terms of such covenants, obligations or agreements will cause the Company irreparable injury for which adequate remedies are not available at law. Therefore, Executive

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agrees that the Company will be entitled to an injunction, restraining order or such other equitable relief (without the requirement to post bond) as a court of competent jurisdiction may deem necessary or appropriate to restrain Executive from committing any violation of the covenants, obligations or agreements referred to in this Section 8. These injunctive remedies are cumulative and in addition to any other rights and remedies the Company may have. The Company and Executive hereby irrevocably submit to the exclusive jurisdiction of the courts of the State of the city of the Company’s headquarters and the Federal courts of the United States of America, in each case located in (or located nearest to) the city of the Company’s headquarters, solely in respect of the injunctive remedies set forth in this Section and the interpretation and enforcement of Section 7 solely insofar as such interpretation and enforcement relate to an application for injunctive relief in accordance with the provisions of this Section, and the parties hereto hereby irrevocably agree that (i) the sole and exclusive appropriate venue for any suit or proceeding relating solely to such injunctive relief shall be in such a court, (ii) all claims with respect to any application solely for such injunctive relief shall be heard and determined exclusively in such a court, (iii) any such court shall have exclusive jurisdiction over the person of such parties, subject to proper service being made on such parties, and over the subject matter of any dispute relating to an application solely for such injunctive relief, and (iv) each party, subject to proper service being made on such party, hereby waives any and all objections and defenses based on forum, venue or personal or subject matter jurisdiction as they may relate to an application solely for such injunctive relief in a suit or proceeding brought before such a court in accordance with the provisions of this Section 8. For purposes of this Section 8, the headquarters of the Company shall be deemed to be located in Waco, McLennan County, Texas.

(b)  Forfeiture of Severance Payments.  Executive agrees that receipt of severance pay under Section 6 is conditioned upon Executive’s observance of the covenants contained in Section 7. Executive further agrees that in the event of his failure to observe the provisions of Section 7, (i) Executive shall forfeit the right to receive any portion of any bonus, and (ii) the Company shall be entitled to discontinue further severance payments under Section 7, provided that Executive fails to cure the breach in all material respects within thirty (30) days after written notice thereof from the Board or its designee.

9.  Entire Agreement.  Except as otherwise expressly provided herein, this Agreement constitutes the entire agreement among the parties hereto with respect to the subject matter hereof, and all promises, representations, understandings, arrangements and prior agreements relating to such subject matter (including those made to or with Executive by any other person or entity) are merged herein and superseded in their entirety hereby.

10. Indemnification.  The Company shall indemnify and advance expenses to the Executive (whether or not a governing person) to the extent permitted by Sections 8.101, 8.102, 8.103, 8.104 and 8.105 of the Texas Business Organization Code (the “TBOC”); provided, however, the foregoing indemnification does not include any claims made by previous employers.

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11.  Miscellaneous.

(a)  Binding Effect.  This Agreement shall be binding on and inure to the benefit of the Company and its successors and permitted assigns. This Agreement shall also be binding on and inure to the benefit of Executive and his heirs, executors, administrators and legal representatives.

(b)  Taxes.  The Company may withhold from any payments made under the Agreement, whether payable in cash or in property and from any other compensation payable to Executive by the Company, all federal, state, city or other applicable taxes as shall be required pursuant to any law, governmental regulation or ruling.

12.  Cooperation with Proceedings; Non-Disparagement.

(a)  Cooperation with Proceedings.  Executive agrees that both during his employment with the Company and after his employment with the Company terminates, Executive will assist and cooperate with the Company and its attorneys in connection with any proceeding brought against or by the Company or any of its affiliates, or in connection with any investigation of the Company or any of its affiliates, and such assistance and cooperation shall take place at reasonable times and on reasonable notice, at times and places mutually convenient to Executive and the Company.

(b)  Non-Disparagement.  Executive agrees not to make any statements that disparage the reputation of the Company, its products, services or employees.  Following Executive’s termination of employment, the Company agrees to instruct its directors, officers, and senior executives not to make any statements that disparage the reputation of Executive.  Each of the Company and Executive further acknowledges and agrees that any breach or violation of this non-disparagement provision shall entitle the Company and Executive to seek injunctive relief to prevent any future breaches of this provision and/or to sue the other party under the provisions of this Agreement for the immediate recovery of any damages caused by such breach.  Nothing in this Section 12(b) is intended to prevent either party from making good faith adverse comments, critiques, or criticisms of the other’s performance during the Employment Term, including, in the case of comments by the Company with respect to Executive, in oral and written performance evaluations.

13.  Assignment.  This Agreement is personal to Executive and may not be assigned in any way by Executive without the prior written consent of the Company.  This Agreement shall not be assignable or delegable by the Company, other than to an affiliate of the Company; provided, however, that in the event of the acquisition, merger or consolidation of the Company, the obligations of the Company hereunder shall be binding upon the surviving or resulting entity of such acquisition, merger or consolidation. The rights and obligations under this Agreement shall inure to the benefit of and shall be binding upon the heirs, legatees, administrators and personal representatives of Executive and upon the successors, representatives and assigns of the Company.

14.  Severability and Reformation.  The parties hereto intend all provisions of this Agreement to be enforced to the fullest extent permitted by law. If, however, any provision of this Agreement is held to be illegal, invalid, or unenforceable under present or future law, such provision shall be fully

13

severable, and this Agreement shall be construed and enforced as if such illegal, invalid, or unenforceable provision were never a part hereof, and the remaining provisions shall remain in full force and effect and shall not be affected by the illegal, invalid, or unenforceable provision or by its severance. In lieu of such illegal, invalid or unenforceable provision, there shall be added automatically as a part of this Agreement a legal, valid and enforceable provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible, and the Company and Executive hereby request the court to whom disputes relating to this Agreement are submitted to reform the otherwise unenforceable covenant in accordance with this Section 14.

15.  Notices.  All notices and other communications required or permitted to be given hereunder shall be in writing and shall be deemed to have been duly given if delivered personally, mailed by certified mail (return receipt requested) or sent by overnight delivery service, cable, telegram, facsimile transmission or telex to the parties at the following addresses or at such other addresses as shall be specified by the parties by like notice:

If to the Company:

Hotspurs Holdings LLC
8500 Normandale Lake Blvd.
Suite 1500
Minneapolis, MN 55437
Attn:  Jeffrey Thuringer
Fax Number:  (952) 893-9613

If to Executive:

James C. Holmes

6400 Imperial Drive

Waco, TX 76712

Notice so given shall, in the case of notice so given by mail, be deemed to be given and received on the fourth calendar day after posting, in the case of notice so given by overnight delivery service, on the date of actual delivery and, in the case of notice so given by cable, telegram, facsimile transmission, telex or personal delivery, on the date of actual transmission or, as the case may be, personal delivery.

16.  Further Acts. Whether or not specifically required under the terms of this Agreement, each party hereto shall execute and deliver such documents and take such further actions as shall be necessary in order for such party to perform all of his or its obligations specified herein or reasonably implied from the terms hereof.

17.  Publicity and Advertising. Executive agrees that the Company may use his name, picture, or likeness for any advertising, publicity or other business purpose at any time, during the term of this Agreement and may continue to use materials generated during the term of this Agreement for a period of six months thereafter. Such use of Executive’s name, picture, or likeness shall not be deemed to result

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in any invasion of Executive’s privacy or in violation of any property right Executive may have; and Executive shall receive no additional consideration if his name, picture or likeness is so used. The Executive further agrees that any negatives, prints or other material for printing or reproduction purposes prepared in connection with the use of his name, picture or likeness by the Company shall be and are the sole property of the Company.

18.  GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS (RULES) OR CHOICE OF LAWS (RULES) THEREOF.

19.  Venue. The exclusive venue for all suits or proceedings arising from or related to this Agreement shall be in a court of competent jurisdiction in McLennan County, Texas.

20.  Amendment. This Agreement may not be altered, amended, or rescinded, nor may any of its provisions be waived, except by an instrument in writing signed by both parties hereto or, in the case of an asserted waiver, by the party against whom the waiver is sought to be enforced. Any modification of this Agreement may only be signed on behalf of the Company by an authorized director of the Company and approved by the Board.

21.  Counterparts. This Agreement may be executed in counterparts, with the same effect as if both parties had signed the same document. All such counterparts shall be deemed an original, shall be construed together and shall constitute one and the same instrument.

22.  Headings. The section and other headings contained in this Agreement are for the convenience of the parties only and are not intended to be a part hereof or to affect the meaning or interpretation hereof.

23.  Attorney Fees. In the event that any legal proceeding is commenced in relation to this Agreement, the unsuccessful party in the action shall pay to the successful party the successful party’s reasonable attorney’s fees, in addition to all other sums that either party may be called on to pay.

24.  Section 409A — General.  This Agreement shall be interpreted and administered in a manner so that any amount or benefit payable hereunder shall be paid or provided in a manner that is either exempt from or compliant with the requirements Section 409A of the Code and applicable Internal Revenue Service guidance and Treasury Regulations issued thereunder.

(a)  Definitional Restrictions.  Notwithstanding anything in this Agreement to the contrary, no payment that is due upon Employee’s termination of employment shall be made unless and until Employee has incurred a “separation from service,” as defined under Treas. Reg. Section 1.409A-1(h).

(b)  Six-Month Delay in Certain Circumstances.  Notwithstanding any other provision of this Agreement, if Employee is a Specified Employee (as defined below) at the time of termination of employment, then, to the extent that payments and benefits under this Agreement constitute “deferred compensation” under Section 409A of the Code and are not eligible for any exemption thereunder

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(“Non-Exempt Deferred Compensation”), and payment of cash or provision of his benefits is pursuant to a termination of employment, then:

(i) the amount of such Non-Exempt Deferred Compensation that would otherwise be payable during the six-month period immediately following Employee’s separation from service will be accumulated through and paid or provided on the first day of the seventh month following Employee’s separation from service (or, if Employee dies during such period, within 30 days after Employee’s death) (in either case, the “Required Delay Period”); and

(ii) the normal payment or distribution schedule for any remaining payments or distributions will resume at the end of the Required Delay Period.

For purposes of this Agreement, the term “Specified Employee” has the meaning given such term in Treas. Reg. Section 1.409A-1(i).

(c)  Treatment of Installment Payments.  Each payment of termination benefits under Section 6(a) of this Agreement, including, without limitation, each installment payment, shall be considered a separate payment, as described in Treas. Reg. Section 1.409A-2(b)(2), for purposes of Section 409A of the Code.

(d)  Timing of Reimbursements and In-kind Benefits.  If Employee is entitled to be paid or reimbursed for any taxable expenses under Section 4, and such payments or reimbursements are includible in Employee’s federal gross taxable income, the amount of such expenses reimbursable in any one calendar year shall not affect the amount reimbursable in any other calendar year, the reimbursement of an eligible expense must be made no later than December 31 of the year after the year in which the expense was incurred, and no right of Employee to reimbursement of such expenses.

(e)  Permitted Acceleration.  The Company shall have the sole authority to make any accelerated distribution permissible under Treas. Reg. Section 1.409A-3(j)(4) to Employee of deferred amounts, provided that such distribution meets the requirements of Treas. Reg. Section 1.409A-3(j)(4).

[Remainder of page intentionally left blank]

[Signature page follows]

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first indicated above.

COMPANY:
HOTSPURS HOLDINGS LLC
By:	/s/ Jason R. Spaeth
Name:	Jason R. Spaeth
Title:	President and Chief Executive Officer
EXECUTIVE:
JAMES C. HOLMES
/s/ James C. Holmes

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Exhibit A

Term Sheet
Equity Incentive Compensation

Issuer	Hotspurs Holdings LLC
Capital Structure	One series of Limited Liability Company Membership Interests
Anticipated Total Senior Manager Membership Interest Participation	(i).On the closing date of the Merger, the senior manager of Hotspurs (the “Senior Manager) will initially receive 1 2/3% of the total Limited Liability Company Membership Interests of the Issuer (the “Membership Interests”), such Membership Interests to be treated as a pari passu interest in the Company (ii).If Värde Partners, Inc. or its affiliated funds (collectively, “Värde”) achieve an XIRR, as used in Microsoft Excel, of 12% on Värde’s initial equity investment and any of its future cash infusions in Hotspurs, then the Membership Interests of the Senior Manager will increase to 3 1/3% of the total Membership Interests (iii).The XIRR, as used in Microsoft Excel, will be calculated on the dates on which cash inflows (Värde’s initial equity investment and any of its future cash infusions in Hotspurs) and cash outflows (dividends paid to Membership Interest holders) occur
Membership Interest Buyback/Forfeiture	(i).If Hotspurs terminates the Senior Manager for cause, at any time, then all of his Membership Interests will be automatically and immediately forfeited and returned to the Issuer (ii).If Hotspurs terminates the Senior Manager for any reason, other than cause, at any time, then all of his Membership Interests will be subject to repurchase by the Issuer at the then-current fair market value of such Membership Interests as determined using mutually agreed upon cash outflows and a discount rate of 15% (iii).If the Senior Manager terminates his employment with Hotspurs for (a) good reason before the third anniversary of the closing date of the Merger or (b) any reason after the third anniversary of the closing date of the Merger, then all of his Membership Interests will be subject to repurchase by the Issuer at the then-current fair market value of such Membership Interests as determined using mutually agreed upon cash outflows and a discount rate of 15%; if such Membership Interests are not repurchased, Senior Manager will continue to receive cash distributions subject to his undisturbed pari passu Membership Interests in the Company (iv).If the Senior Manager terminates his employment with Hotspurs other than for good reason before the third anniversary of the closing date of the Merger, then all of his Membership Interests will be automatically and immediately forfeited and returned to the Issuer (v).In the event of the Senior Manager’s death or termination of employment due to disability, then all of his outstanding Membership Interests will become fully vested and subject to repurchase by the Issuer at the then-current fair market value of such Membership Interests as determined using

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	mutually agreed upon cash outflows and a discount rate of 15%; if such Membership Interests are not repurchased, Senior Manager or Senior Manager’s estate, as applicable, will continue to receive cash distributions subject to his undisturbed pari passu Membership Interests in the Company
Board of Directors and Voting Rights	Each Senior Manager shall serve as a member of the Company’s Board of Directors during the Senior Manager’s employment term.  The voting rights granted to each Director will be proportional to the Director’s ownership percentage of the total outstanding Membership Interests.
Sale of Issuer	Membership Interests will be subject to customary “drag-along”, “tag-along” rights and other similar obligations in connection with a sale of Issuer
Transferability of Membership Interests	Membership Interests are non-transferable except in limited circumstances relating to certain estate planning transfers
Limited Liability Company Agreement	Membership Interests will be subject in all respects to the terms of a Limited Liability Company Agreement, which the Senior Manager will be required to execute

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EX-99.(D)(6)

Exhibit (d)(6)

EXECUTION VERSION

MANAGEMENT AGREEMENT

This Management Agreement (the “Agreement”), dated as of December 20, 2012, is entered into by and among Hotspurs Holdings LLC (the “Company”), and Mark B. Horrell (“Executive”).

WHEREAS, the Company has entered into an Agreement and Plan of Merger dated December 20, 2012 (the “Merger Agreement”) pursuant to which the Merger Subsidiary, as such term is defined in the Merger Agreement, shall be merged with and into the Company;

WHEREAS, Executive is currently employed by the Company as Senior Vice President & Head of U.S. Acquisitions;

WHEREAS, the Company desires to continue to employ the Executive after the consummation of the transaction (the “Transaction”) contemplated by the Merger Agreement (the “Closing”) and Executive desires to continue in the employ of the Company after the Closing, in accordance with the terms and conditions set forth herein;

WHEREAS, the rights and obligations of the Company and Employee set forth in this Agreement are effective as of and conditioned upon, the Closing; and

NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Executive hereby agree as follows:

1.  Agreement to Employ.  Upon the terms and subject to the conditions of this Agreement, the Company hereby continues to employ Executive and Executive hereby accepts continued employment by the Company.

2. Term; Position and Responsibilities.

(a) Term of Employment.  The stated term of this Agreement shall begin on the date on which the Closing occurs (the “Effective Date”) and shall remain in effect until the date which is the third anniversary of the Effective Date unless sooner terminated in accordance with Section 5 hereof (the “Employment Term”).  The period during which Executive is employed pursuant to this Agreement will be referred to as the “Employment Period.”  In the event of Executive’s continued employment by the Company following the expiration of the Employment Term, Executive shall then be employed as an at will employee.  During the Employment Term, Executive shall serve as a member of the Company’s Board of Directors, with voting rights that are proportional to Executive’s ownership percentage of the total outstanding Membership Interests.

(b) Position and Responsibilities.  During the Employment Period, Executive will serve as Chief Executive Officer of the Company with such duties and responsibilities as are customarily assigned to individuals serving in such position and such other duties and responsibilities consistent with his position and his duties and responsibilities as Chief Executive Officer, as may be specified by the Company’s Board of Directors from time to time.  During the Employment Period, Executive will devote his

undivided loyalty to the Company and devote all of his skill, knowledge and working time (except for (i) reasonable vacation time and absence for sickness or similar disability, and (ii) to the extent that it does not interfere with the performance of Executive’s duties hereunder, (A) such reasonable time as may be devoted to service on boards of directors and the fulfillment of civic responsibilities, and (B) such reasonable time as may be necessary from time to time for personal financial matters), to the conscientious performance of his duties and responsibilities hereunder.  Executive represents that he is entering into this Agreement voluntarily and that, to the best of his knowledge, his employment hereunder and compliance by him with the terms and conditions hereof will not conflict with or result in the breach of any agreement to which he is a party or by which he may be bound.

3.  Compensation.  As compensation for the services to be performed by Executive hereunder, during the Employment Period, the Company will pay Executive, and Executive shall accept as full compensation hereunder, the following:

(a) Base Salary. Executive shall be paid a base salary at an annualized rate of $300,000 per year, which base salary shall hereinafter be referred to as the “Base Salary.”  Executive’s salary shall be payable in accordance with the normal payroll procedures of the Company.

(b) Discretionary Bonus. Executive shall be eligible to receive an annual cash bonus.  The amount and terms of any such annual bonus shall be based on such criteria and subject to such terms and conditions as the Company shall determine from time to time in its sole discretion.

(c)  Equity Incentive Compensation.  Executive shall be eligible for the grants of equity incentive compensation reserved for Senior Managers as described in the Equity Incentive Compensation Term Sheet attached hereto as Attachment A, subject however, in all cases to the terms and conditions thereof, and subject also to the terms and conditions of the applicable limited liability company agreement, including conditions of forfeiture.

(d)  Annual Review of Base Salary. Beginning in 2013, the Company will review Executive’s Base Salary annually, commencing with the first such annual review no later than thirty (30) days prior to the end of each year and, in the sole discretion of the Company, may increase or decrease the Base Salary.

4. Benefits and Perquisites: Expenses.

(a) Benefits and Perquisites.  Executive shall be entitled to participate in the benefit plans provided by the Company for all employees generally, and for executive employees of the Company, as such benefit plans may exist from time to time.  The Company shall be entitled to amend, modify, or terminate such plans in its sole discretion at any time.

(b)  Business Expenses.  The Company will reimburse Executive for reasonable travel, lodging and meal expenses incurred by him in connection with his performance of services hereunder upon submission of information required to be provided under the Company’s policy for reimbursement of business expenses.

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(c)  Key Man Life Insurance. The Company reserves the right to purchase key man life insurance on the life of Executive at the Company’s expense, and in such amounts and on such terms as the Company, in its sole discretion, may determine.

5.  Termination of Employment. The employment relationship between Executive and the Company created hereunder shall terminate before the expiration of the stated term of this Agreement upon the occurrence of any one of the following events:

(a)  Death or Permanent Disability. The employment relationship shall be terminated effective upon the death or permanent disability of Executive. However, Executive shall be entitled to leaves of absence from the Company in accordance with the policy of the Company generally applicable to executives for illness or temporary disabilities (which the Company may amend or modify at any time), and his status as an Executive shall continue during such periods.  If Executive is incapacitated due to physical or mental illness and such incapacity prevents Executive from satisfactorily performing his duties for the Company on a full time basis for six (6) months or more, Executive shall be deemed to have experienced a permanent disability and the Company may terminate this Agreement upon thirty (30) days written notice.  Upon Executive’s death or termination of employment by reason of permanent disability, Executive’s outstanding Membership Interests shall become 100% vested and subject to repurchase by the Issuer from Executive, or from Executive’s estate, as applicable, at the then-current fair market value of such Membership Interests, as more particularly described in the applicable limited liability company agreement.

(b)  Termination for Cause. The Company shall have the option to terminate the Executive’s employment during the Employment Period, effective upon written notice of such termination to the Executive, for Cause as determined by the Company’s controlling shareholder or the Company’s Board of Directors. For purposes of this Agreement, termination for “Cause” shall mean termination of Executive’s employment by the Board of Directors upon the occurrence of any of the following events:

i.  Any act of fraud, dishonesty, misappropriation or embezzlement by Executive with respect to any aspect of the Company’s business;

ii.  The breach by Executive of any provision of Sections 2 or 7 of this Agreement (including but not limited to a refusal to follow lawful directives of the person to whom Executive reports or the superiors of the person to whom Executive reports which are not inconsistent with the duties of Executive’s position and the provisions of this Agreement); provided that Executive fails to cure the breach in all material respects within thirty (30) days after written notice thereof from the Board or its designee;

iii.  The conviction of Executive by a court of competent jurisdiction of a felony or a crime involving moral turpitude;

iv.  The intentional failure by Executive to perform in all material respects his duties and responsibilities (other than as a result of death or disability) and the failure of Executive to cure

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the same in all material respects within thirty (30) days after written notice thereof from the Board or its designee;

v.  The illegal use of drugs by Executive during the term of this Agreement that, in the determination of the Company, substantially interferes with Executive’s performance of his duties hereunder;

vi.  Acceptance of employment with any employer other than the Company, except (A) upon written permission of the Board, or (B) after termination of the Employment Period;

vii.  Executive’s gross negligence or gross misconduct in the performance of Executive’s duties;

viii. Willful conduct by Executive that is materially detrimental, monetarily or otherwise, to the Company or its affiliates;

ix.  Executive’s chronic absenteeism that is not permitted or excused; or

x. A material breach by Executive of his fiduciary duties to the Company in circumstances where Executive knew or reasonably should have known, that his actions or omissions would constitute  or result in a material breach of his fiduciary duties to the Company.

The Company shall provide Executive with a written notice of termination for Cause, which can be provided on the date of termination. In the event Executive’s employment is terminated for Cause hereunder, Executive shall be entitled to the compensation provided in Section 6(a) below but shall not be entitled to the compensation provided in Section 6(b) below.

(c)  Termination by the Company with Notice.  The Company may terminate this Agreement and Executive’s employment (i) without Cause at any time upon sixty (60) days written notice to Executive, and (ii) upon expiration of the Employment Term; provided, however, that upon such termination or expiration of the Employment Term accompanied by the Company’s termination of Executive’s employment, Executive shall be entitled to compensation as provided in Sections 6(a) and (b) below.

(d)  Termination by Executive for Good Reason.  Executive shall be entitled to terminate this Agreement at any time for Good Reason. For purposes of this Agreement, “Good Reason” shall mean the occurrence of any of the following events:

i.  Without his express written consent, the assignment of Executive to a  position functionally and materially inferior to his position with the Company on the date of this Agreement;

ii.  The change of the location where Executive is based to a location which is more than fifty (50) miles from his present location without Executive’s written consent;

iii.  A reduction by the Company in Executive’s Base Salary as in effect on the date hereof, unless such reduction is (i) a proportionate reduction of the compensation of Executive and all other senior officers of the Company as a part of a company-wide effort to enhance the financial condition of the Company, and (ii) consented to by Executive in writing; or

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iv.  Any other material breach by the Company of its obligations under this Agreement.

Executive shall give the Company thirty (30) days notice of an intent to terminate this Agreement for “Good Reason” as defined in this Section 5(d), and provide the Company with thirty (30) days after receipt of such notice from Executive to remedy the alleged violation of this Subsection  5(d).  In the event the Company fails, within the thirty (30) day period provided to the Company, to remedy the circumstances alleged to constitute “Good Reason,” as defined in this Section 5(d), Executive must exercise his right to terminate this Agreement for “Good Reason” within ninety (90) days of the alleged violation; if Executive fails to do so, he will be deemed to have waived his right to resign for Good Reason with respect to such alleged violation.  In the event Executive terminates his employment for Good Reason hereunder, Executive shall be entitled to the compensation provided in Sections 6(a) and (b) below.

(e)  Termination by Executive with Notice.  Executive may terminate this Agreement without Good Reason at any time upon sixty (60) days written notice to the Company, during which period Executive shall be required to perform all of the services for the Company required by this Agreement, and Executive may elect not to renew the Employment Term, in accordance with a Non-Renewal Notice given under Section 2(a); provided, however, that upon such termination or non-renewal, Executive shall be entitled to compensation as provided in Section 6(a) below, but Executive shall not be entitled to the compensation provided in Section 6(b) below.

Upon Executive’s termination of employment by the Company for whatever reason, he shall be deemed to have resigned from all offices Executive then holds with the Company or any of its affiliates and Executive agrees that he shall provide such letters of resignation from such offices as the Company may request.  Executive agrees that both prior to and after the date on which Executive’s employment with the Company terminates, Executive shall cooperate with the Company in transferring all information on business matters that Executive handled during his Employment and further cooperate with the Company to insure an orderly transition of his duties and responsibilities at the Company.

6.  Compensation upon Termination.  Upon the termination of Executive’s employment under this Agreement before the expiration of the Employment Term (the “stated term”), Executive shall be entitled to the following:

(a)  Compensation upon Termination for Any Reason.  Upon termination of Executive’s employment during the Employment Period before the expiration of the stated term hereof for any reason (including death or permanent disability), Executive shall be entitled to:

i. Salary. The Base Salary earned by him before the effective date of termination as provided in Section 3(a) hereof (including salary payable during any applicable notice period), prorated on the basis of the number of full days of service rendered by Executive during the salary payment period to the effective date of termination;

ii. Vacation Benefits. Any accrued, but unpaid, vacation benefits; and

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iii. Unreimbursed Business Expenses. Any previously authorized but unreimbursed business expenses.

Notwithstanding the foregoing, with respect to any outstanding Membership Interests or outstanding awards under other plans or programs in which Executive is participating at the time of termination of his employment, Executive’s rights and benefits to any such outstanding interests or awards shall be determined in accordance with the terms, conditions, and limitations of the applicable plan or arrangement.

(b)  Additional Compensation and Benefits upon Termination by the Company without Cause or With Notice or by Executive for Good Reason.  If Executive’s employment hereunder terminates without “Cause” (as defined in Section 5(b) above) pursuant to Section 5(c) above, or for “Good Reason” (as defined in Section 5(d) above), or upon expiration of this Agreement accompanied by the Company’s termination of Executive’s employment, the Company shall, upon Executive’s timely execution of a general release of claims in favor of the Company, its subsidiaries, affiliates, and officers, directors, employees, and shareholders (the “Release”), and upon such Release becoming effective and irrevocable, provide to Executive in addition to the amounts set forth in Subsection 6(a) above:

i. a cash payment equal to 100% of his Base Salary; and

ii. if at the time of his termination, Executive and/or his eligible dependents are covered under a group health plan of the Company, a single sum cash payment equal to 140% of the aggregate premiums (both the employer and employee portions) for six months coverage under the group health plan under which Executive and/or his eligible dependents are covered at the time of Executive’s termination, based upon the premium cost in effect at the time of Executive’s termination and taking into account any announced increases in premium costs.

The Release shall be in such form and contain such provisions as the Company shall reasonably determine and must become both effective and irrevocable by Executive within the sixty (60) day period immediately following Executive’s termination of employment.  Upon the Release becoming effective and irrevocable within such sixty (60) day period, subject to Section 24(b) of this Agreement, the Company shall commence to pay the severance amounts referenced in Section 6(b)(i) in equal semi-monthly installments for a period of twelve (12) months (“Severance Period”) in accordance with the Company’s regular payroll practices and shall pay the amount referenced in Section 6(b)(ii); provided however, that if the aforementioned sixty (60) day period spans two calendar years, the payment of the severance installments referenced in Section 6(b)(i) shall commence no earlier than January 1 of the second calendar year.

Executive shall have no obligation to mitigate any severance obligation of the Company under this Agreement by seeking new employment. The Company shall not be entitled to set off or reduce any severance payments owed to Executive under this Agreement by the amount of earnings or benefits received by Executive in future employment. The provisions of Sections 5, 6 and 7 hereof shall survive the termination of the employment relationship hereunder and this Agreement.  Notwithstanding the foregoing, with respect to any outstanding Membership Interests or outstanding awards under other

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plans or programs in which Executive is participating at the time of termination of his employment, Executive’s rights and benefits to any such outstanding interests or awards shall be determined in accordance with the terms, conditions, and limitations of the applicable plan or arrangement.

(c)  Penalty for Breach of Covenants. If, during the Severance Period, Executive is in material breach of his post-employment covenants contained in Section 7 of this Agreement, the Company shall not be obligated to pay any severance payments referenced herein, the Company’s severance obligations shall be forfeited, terminate, and expire, and the Company shall have no further obligations to Executive hereunder from and after the date of such breach and shall have all other rights and remedies available under this Agreement or any other agreement and at law or in equity; provided that Executive fails to cure the breach in all material respects within thirty (30) days after written notice thereof from the Board or its designee.

7.  Protective Covenants.  Executive recognizes that his employment by the Company is one of the highest trust and confidence because (i) Executive has become and in the future will become familiar with additional critical aspects of the Company’s business during the period of his employment with the Company, (ii) the Company has provided and will additionally provide to Executive information during his employment by the Company which is proprietary, confidential and/or trade secret information and is of special and peculiar value to the Company, and (iii) if any such proprietary, confidential and/or trade secret information, save and except such information in the public domain or information commonly known in the industry, were imparted to or became known by any person, including Executive, engaging in a business in competition with that of the Company, hardship, loss and irreparable injury and damage could result to the Company, the measurement of which would be difficult if not impossible to ascertain. Executive further acknowledges that the Company has developed and will continue to develop unique concepts, portfolio acquisition strategies, senior and junior financing arrangements and strategies, direct equity investment strategies, sales presentations, marketing programs, marketing strategies, business practices and strategies, investment practices and strategies, methods of operation, pricing information, cost information, trademarks, licenses, technical information, proprietary information, computer software programs, tapes and disks concerning its operations systems, client lists, client leads, documents identifying past, present and future clients, client profile and preference data, hiring and training methods, investment policies, financial and other confidential, proprietary and/or trade secret information concerning its operations and expansion plans (“Confidential Information,” which term shall not include information that becomes publicly available through no fault of Executive). Therefore, Executive agrees that it is necessary for the Company to protect its business and that of its affiliates from such damage, and Executive further agrees that the following covenants constitute a reasonable and appropriate means, consistent with the best interest of both Executive and the Company, to protect the Company or its affiliates against damage due to loss or disclosure of Confidential Information and shall apply to and be binding upon Executive as provided herein; provided, however, that the parties agree that neither information concerning the Executive’s professional contacts as of the date of this Agreement nor the Executive’s general knowledge of distressed loan and business investing shall be deemed to be Confidential Information:

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(a)  Confidential Information. The Company agrees to provide Executive with some or all of its Confidential Information (as defined above) during the term of this Agreement. Executive recognizes that his position with the Company is one of the highest trust and confidence by reason of Executive’s access to and contact with certain Confidential Information of the Company. Executive agrees and covenants that, except as may be required by the Company in connection with this Agreement, or with the prior written consent of the Company, Executive shall not, either during the term of this Agreement or at any time thereafter, directly or indirectly, use for Executive’s own benefit or for the benefit of another, or disclose, disseminate, or distribute to another, except as directed by the Company or as required for the performance of Executive’s duties on behalf of the Company, any Confidential Information (whether or not acquired, learned, obtained, or developed by Executive alone or in conjunction with others) of the Company or of others with whom the Company has a business relationship, provided, however that this restriction shall not apply to truthful testimony given under oath in a legal proceeding by Executive that is required to be disclosed by law, order or regulation of a court or tribunal or government authority if Executive provides timely notice of such legal requirement or subpoena to the Company. All Confidential Information, and all memoranda, notes, records, drawings, documents, or other writings whatsoever made, compiled, acquired, or received by Executive at any time during his employment with the Company, including during the term of this Agreement, arising out of, in connection with, or related to any activity or business of the Company, including, but not limited to, the clients, suppliers, or others with whom the Company has a business relationship, the arrangements of the Company with such parties, and the pricing and expansion policies and strategy of the Company, are, and shall continue to be, the sole and exclusive property of the Company.  Executive represents and warrants that, to the best of his knowledge, he is not bound by any agreement with any prior employer or other party that will be breached by execution and performance of this Agreement, or which would otherwise prevent him from performing his duties with the Company as set forth in this Agreement. Executive represents and warrants that he has not retained any copies of proprietary or confidential information of any prior employer or other party, and he will not use or rely on any confidential and proprietary information of any prior employer or other party in carrying out his duties for the Company.

(b)  Covenant Not to Compete. In consideration of the numerous mutual promises and agreements contained in this Agreement between the Company and Executive, including, without limitation, those involving Confidential Information, and in order to protect the Company’s Confidential Information and to reduce the likelihood of irreparable damage which would occur in the event such information is provided to or used by a competitor of the Company, and subject to the Company’s payment when due of the amounts specified in Sections 6(a) and 6(b), Executive agrees that he will not, during his employment and for an additional period of twelve (12) months immediately following the termination of his employment for any reason (the “Noncompetition Term”), directly or indirectly, either through any form of ownership or as an individual, director, officer, principal, agent, employee, adviser, consultant, shareholder, partner, member, or in any individual or representative capacity whatsoever, without the prior written consent of the Company (which consent the Company shall not unreasonably withhold), (i) compete for or solicit business for or on behalf of any person or business entity operating a specialty financial services company providing similar services and employing

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acquisition and loan servicing strategies similar to those provided by the Company with a place of business in any state in the United States; (ii) own, operate, participate in, undertake any employment with or have any interest in any entity with a place of business in any state in the United States related to the operation of a specialty financial services company providing similar services and employing acquisition and loan servicing strategies similar to those provided by the Company, except that Executive may own publicly traded stock for investment purposes only in any company in which Executive owns less than 5% of the voting equity, (iii) compete for or solicit business related to the operation of a specialty financial services company providing similar services to those provided by the Company from any client of the Company (or its successors by merger); or (iv) use in any competition, solicitation, or marketing effort any Confidential Information, any proprietary list, or any information concerning clients of the Company.

Executive hereby acknowledges that the geographic boundaries, scope of prohibited activities and the duration of the provisions of this Section 7 are reasonable and are no broader than are necessary to protect the legitimate business interests of the Company. This noncompetition provision shall survive the termination of Executive’s employment and can only be revoked or modified by a writing signed by the parties that specifically states an intent to revoke or modify this provision. Executive acknowledges that the Company would not employ him or provide him with access to its Confidential Information but for his covenants or promises contained in this Section.

The Company and Executive agree and stipulate that the agreements and covenants not to compete contained in this Section 7 are fair and reasonable in light of all of the facts and circumstances of the relationship between Executive and the Company; however, Executive and the Company are aware that in certain circumstances courts have refused to enforce certain terms of agreements not to compete. Therefore, in furtherance of, and not in derogation of the provisions of this Section 7, the Company and Executive agree that in the event a court should decline to enforce any term or terms of any of the provisions of this Section 7, this Section 7 shall be deemed to be modified or reformed to restrict Executive’s competition with the Company or its affiliates to the maximum extent, as to time, geography and business scope, which the court shall find enforceable; provided, however, that in no event shall the provisions of this Section 7 be deemed to be more restrictive to Executive than those contained herein.

Executive agrees that during the Noncompetition Term, he shall immediately notify the Company in writing of any employment, work or business he undertakes with or on behalf of any person (including himself) or entity.

(c)  Non-Solicitation.  Executive agrees that during his employment, and for a period of eighteen (18) months following the termination of his employment by the Company for whatever reason, that he shall not, whether directly or indirectly, and whether in his individual capacity or on behalf of any partnership, limited partnership, corporation or other entity or business with which he is in any way affiliated, including, without limitation, as a partner, limited partner, member, director, officer, shareholder, employee, or agent of any such entity or business, (i) request, induce or attempt to influence, directly or indirectly, any employee of the Company to terminate his or her employment with

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the Company or (ii) employ any person who as of the date of this Agreement was, or after such date is, an employee of the Company; provided that the foregoing restrictions shall not apply to general employment solicitations not directed at Company employees or the hiring of any former employee of the Company who was not solicited to leave or induced to leave the employment of the Company by Executive.  Executive further agrees that during the period beginning with the commencement of Executive’s employment with the Company and ending eighteen (18) months after the termination of Executive’s employment with the Company, for whatever reason, he shall not, directly or indirectly, as an individual, employee, agent, consultant, stockholder, director, partner or in any other individual or representative capacity of the Company or of any other person, entity or business, solicit or encourage any present supplier, contractor, partner or investor of the Company to terminate, limit or otherwise alter his, her or its relationship with the Company.

(d)  Work Product.  For purposes of this Section 7, “Work Product” shall mean all intellectual property rights, including all trade secrets, U.S. and international copyrights, patentable inventions, discoveries and other intellectual property rights in any programming, design, documentation, technology, or other work product that is created in connection with Executive’s work. In addition, all rights in any preexisting programming, design, documentation, technology, or other Work Product provided to the Company during Executive’s employment shall automatically become part of the Work Product hereunder, whether or not it arises specifically out of Executive’s “Work.” For purposes of this Agreement, “Work” shall mean (i) any direct assignments and required performance by or for the Company, and (ii) any other productive output that relates to the business of the Company and is produced during the course of Executive’s employment or engagement by the Company. For this purpose, Work may be considered present even after normal working hours, away from the Company’s premises, on an unsupervised basis, alone or with others. Unless otherwise approved in writing by the Board, this Agreement shall apply to all Work Product created in connection with all Work conducted before or after the date of this Agreement.

The Company shall own all rights in the Work Product. To this end, all Work Product shall be considered work made for hire for the Company. If any of the Work Product may not, by operation of law or agreement, be considered Work made by Executive for hire for the Company (or if ownership of all rights therein do not otherwise vest exclusively in the Company immediately), Executive agrees to assign, and upon creation thereof does hereby automatically assign, without further consideration, the ownership thereof to the Company. Executive hereby irrevocably relinquishes for the benefit of the Company and its assigns any moral rights in the Work Product recognized by applicable law. The Company shall have the right to obtain and hold, in whatever name or capacity it selects, copyrights, registrations, and any other protection available in the Work Product.

Executive agrees to perform upon the request of the Company, during or after Executive’s Work or employment, such further acts as may be necessary or desirable to transfer, perfect, and defend the Company’s ownership of the Work Product, including by (i) executing, acknowledging, and delivering any requested affidavits and documents of assignment and conveyance, (ii) obtaining and/or aiding in the enforcement of copyrights, trade secrets, and (if applicable) patents with respect to the Work Product in any countries, and (iii) providing testimony in connection with any proceeding affecting the

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rights of the Company in any Work Product. In the event that Executive is required to perform the services described in this paragraph after his employment with the Company has terminated, Executive will be reasonably compensated for actual time spent providing such services. Executive warrants that, to the best of his knowledge, his Work for the Company does not and will not in any way conflict with any obligations Executive may have with any prior the Company or contractor. Executive also agrees, to the best of his ability, to develop all Work Product in a manner that avoids even the appearance of infringement of any third party’s intellectual property rights.

(e)  Non-Solicitation of Clients.  During the period of Executive’s employment and, as a condition to receiving severance pay thereafter during the Non-Competition Term, Executive shall not, during the Non-Competition Term, directly or indirectly, solicit or otherwise attempt to establish for himself or any other person, firm or entity any business relationship with any person, firm or entity which, at any time during the twenty-four month period preceding the date of Executive’s termination of employment, was a client of the Company or any of its affiliates except during Executive’s employment with the Company.

(f)  Return of Property. In the event of the termination of Executive’s employment for any reason, Executive will deliver to the Company all nonpersonal documents and data of any nature and in whatever medium pertaining to Executive’s employment with the Company, or any of its subsidiaries or affiliates and he will not take with him any such property, documents or data of any description or any reproduction thereof, including summaries or notes regarding same, or any documents containing or pertaining to any Proprietary Information.  Executive will also deliver to the Company all other property of the Company in Executive’s possession, including but not limited to, computer equipment, cell phones, Company business cards, building passes, portable storage devices, and Company credit cards.

(g)  Survival of Covenants.  Each covenant of Executive set forth in this Section 7 shall survive the termination of this Agreement and Executive’s employment for any reason and shall be construed as an agreement independent of any other provision of this Agreement, and the existence of any claim or cause of action of Executive against the Company whether predicated on this Agreement or otherwise, excluding any claim of Executive against the Company for nonpayment of any amount payable to Executive, shall not constitute a defense to the enforcement by the Company of said covenant. No modification or waiver of any covenant contained in this Section 7 shall be valid unless such waiver or modification is approved in writing by the Board.

Executive hereby acknowledges that Executive’s agreement to be bound by the protective covenants set forth in this Section 7 was a material inducement for the Company entering into this Agreement, agreeing to pay Executive the compensation and benefits set forth herein, and providing Executive with the Company’s Confidential Information and other proprietary information.

8. Enforcement of Covenants.

(a)  Injunctive Relief.  Executive acknowledges and agrees that the covenants, obligations and agreements of Executive contained in Section 7 relate to special, unique and extraordinary matters and that a violation of any of the terms of such covenants, obligations or agreements will cause the Company irreparable injury for which adequate remedies are not available at law. Therefore, Executive

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agrees that the Company will be entitled to an injunction, restraining order or such other equitable relief (without the requirement to post bond) as a court of competent jurisdiction may deem necessary or appropriate to restrain Executive from committing any violation of the covenants, obligations or agreements referred to in this Section 8. These injunctive remedies are cumulative and in addition to any other rights and remedies the Company may have. The Company and Executive hereby irrevocably submit to the exclusive jurisdiction of the courts of the State of the city of the Company’s headquarters and the Federal courts of the United States of America, in each case located in (or located nearest to) the city of the Company’s headquarters, solely in respect of the injunctive remedies set forth in this Section and the interpretation and enforcement of Section 7 solely insofar as such interpretation and enforcement relate to an application for injunctive relief in accordance with the provisions of this Section, and the parties hereto hereby irrevocably agree that (i) the sole and exclusive appropriate venue for any suit or proceeding relating solely to such injunctive relief shall be in such a court, (ii) all claims with respect to any application solely for such injunctive relief shall be heard and determined exclusively in such a court, (iii) any such court shall have exclusive jurisdiction over the person of such parties, subject to proper service being made on such parties, and over the subject matter of any dispute relating to an application solely for such injunctive relief, and (iv) each party, subject to proper service being made on such party, hereby waives any and all objections and defenses based on forum, venue or personal or subject matter jurisdiction as they may relate to an application solely for such injunctive relief in a suit or proceeding brought before such a court in accordance with the provisions of this Section 8. For purposes of this Section 8, the headquarters of the Company shall be deemed to be located in Waco, McLennan County, Texas.

(b)  Forfeiture of Severance Payments.  Executive agrees that receipt of severance pay under Section 6 is conditioned upon Executive’s observance of the covenants contained in Section 7. Executive further agrees that in the event of his failure to observe the provisions of Section 7, (i) Executive shall forfeit the right to receive any portion of any bonus, and (ii) the Company shall be entitled to discontinue further severance payments under Section 7, provided that Executive fails to cure the breach in all material respects within thirty (30) days after written notice thereof from the Board or its designee.

9.  Entire Agreement.  Except as otherwise expressly provided herein, this Agreement constitutes the entire agreement among the parties hereto with respect to the subject matter hereof, and all promises, representations, understandings, arrangements and prior agreements relating to such subject matter (including those made to or with Executive by any other person or entity) are merged herein and superseded in their entirety hereby.

10. Indemnification.  The Company shall indemnify and advance expenses to the Executive (whether or not a governing person) to the extent permitted by Sections 8.101, 8.102, 8.103, 8.104 and 8.105 of the Texas Business Organization Code (the “TBOC”); provided, however, the foregoing indemnification does not include any claims made by previous employers.

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11.  Miscellaneous.

(a)  Binding Effect.  This Agreement shall be binding on and inure to the benefit of the Company and its successors and permitted assigns. This Agreement shall also be binding on and inure to the benefit of Executive and his heirs, executors, administrators and legal representatives.

(b)  Taxes.  The Company may withhold from any payments made under the Agreement, whether payable in cash or in property and from any other compensation payable to Executive by the Company, all federal, state, city or other applicable taxes as shall be required pursuant to any law, governmental regulation or ruling.

12.  Cooperation with Proceedings; Non-Disparagement.

(a)  Cooperation with Proceedings.  Executive agrees that both during his employment with the Company and after his employment with the Company terminates, Executive will assist and cooperate with the Company and its attorneys in connection with any proceeding brought against or by the Company or any of its affiliates, or in connection with any investigation of the Company or any of its affiliates, and such assistance and cooperation shall take place at reasonable times and on reasonable notice, at times and places mutually convenient to Executive and the Company.

(b)  Non-Disparagement.  Executive agrees not to make any statements that disparage the reputation of the Company, its products, services or employees.  Following Executive’s termination of employment, the Company agrees to instruct its directors, officers, and senior executives not to make any statements that disparage the reputation of Executive.  Each of the Company and Executive further acknowledges and agrees that any breach or violation of this non-disparagement provision shall entitle the Company and Executive to seek injunctive relief to prevent any future breaches of this provision and/or to sue the other party under the provisions of this Agreement for the immediate recovery of any damages caused by such breach.  Nothing in this Section 12(b) is intended to prevent either party from making good faith adverse comments, critiques, or criticisms of the other’s performance during the Employment Term, including, in the case of comments by the Company with respect to Executive, in oral and written performance evaluations.

13.  Assignment.  This Agreement is personal to Executive and may not be assigned in any way by Executive without the prior written consent of the Company.  This Agreement shall not be assignable or delegable by the Company, other than to an affiliate of the Company; provided, however, that in the event of the acquisition, merger or consolidation of the Company, the obligations of the Company hereunder shall be binding upon the surviving or resulting entity of such acquisition, merger or consolidation. The rights and obligations under this Agreement shall inure to the benefit of and shall be binding upon the heirs, legatees, administrators and personal representatives of Executive and upon the successors, representatives and assigns of the Company.

14.  Severability and Reformation.  The parties hereto intend all provisions of this Agreement to be enforced to the fullest extent permitted by law. If, however, any provision of this Agreement is held to be illegal, invalid, or unenforceable under present or future law, such provision shall be fully

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severable, and this Agreement shall be construed and enforced as if such illegal, invalid, or unenforceable provision were never a part hereof, and the remaining provisions shall remain in full force and effect and shall not be affected by the illegal, invalid, or unenforceable provision or by its severance. In lieu of such illegal, invalid or unenforceable provision, there shall be added automatically as a part of this Agreement a legal, valid and enforceable provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible, and the Company and Executive hereby request the court to whom disputes relating to this Agreement are submitted to reform the otherwise unenforceable covenant in accordance with this Section 14.

15.  Notices.  All notices and other communications required or permitted to be given hereunder shall be in writing and shall be deemed to have been duly given if delivered personally, mailed by certified mail (return receipt requested) or sent by overnight delivery service, cable, telegram, facsimile transmission or telex to the parties at the following addresses or at such other addresses as shall be specified by the parties by like notice:

If to the Company:

Hotspurs Holdings LLC
8500 Normandale Lake Blvd.
Suite 1500
Minneapolis, MN 55437
Attn:  Jeffrey Thuringer
Fax Number:  (952) 893-9613

If to Executive:

Mark B. Horrell

6400 Imperial Drive

Waco, TX 76712

Notice so given shall, in the case of notice so given by mail, be deemed to be given and received on the fourth calendar day after posting, in the case of notice so given by overnight delivery service, on the date of actual delivery and, in the case of notice so given by cable, telegram, facsimile transmission, telex or personal delivery, on the date of actual transmission or, as the case may be, personal delivery.

16.  Further Acts. Whether or not specifically required under the terms of this Agreement, each party hereto shall execute and deliver such documents and take such further actions as shall be necessary in order for such party to perform all of his or its obligations specified herein or reasonably implied from the terms hereof.

17.  Publicity and Advertising. Executive agrees that the Company may use his name, picture, or likeness for any advertising, publicity or other business purpose at any time, during the term of this Agreement and may continue to use materials generated during the term of this Agreement for a period of six months thereafter. Such use of Executive’s name, picture, or likeness shall not be deemed to result

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in any invasion of Executive’s privacy or in violation of any property right Executive may have; and Executive shall receive no additional consideration if his name, picture or likeness is so used. The Executive further agrees that any negatives, prints or other material for printing or reproduction purposes prepared in connection with the use of his name, picture or likeness by the Company shall be and are the sole property of the Company.

18.  GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS (RULES) OR CHOICE OF LAWS (RULES) THEREOF.

19.  Venue. The exclusive venue for all suits or proceedings arising from or related to this Agreement shall be in a court of competent jurisdiction in McLennan County, Texas.

20.  Amendment. This Agreement may not be altered, amended, or rescinded, nor may any of its provisions be waived, except by an instrument in writing signed by both parties hereto or, in the case of an asserted waiver, by the party against whom the waiver is sought to be enforced. Any modification of this Agreement may only be signed on behalf of the Company by an authorized director of the Company and approved by the Board.

21.  Counterparts. This Agreement may be executed in counterparts, with the same effect as if both parties had signed the same document. All such counterparts shall be deemed an original, shall be construed together and shall constitute one and the same instrument.

22.  Headings. The section and other headings contained in this Agreement are for the convenience of the parties only and are not intended to be a part hereof or to affect the meaning or interpretation hereof.

23.  Attorney Fees. In the event that any legal proceeding is commenced in relation to this Agreement, the unsuccessful party in the action shall pay to the successful party the successful party’s reasonable attorney’s fees, in addition to all other sums that either party may be called on to pay.

24.  Section 409A — General.  This Agreement shall be interpreted and administered in a manner so that any amount or benefit payable hereunder shall be paid or provided in a manner that is either exempt from or compliant with the requirements Section 409A of the Code and applicable Internal Revenue Service guidance and Treasury Regulations issued thereunder.

(a)  Definitional Restrictions.  Notwithstanding anything in this Agreement to the contrary, no payment that is due upon Employee’s termination of employment shall be made unless and until Employee has incurred a “separation from service,” as defined under Treas. Reg. Section 1.409A-1(h).

(b)  Six-Month Delay in Certain Circumstances.  Notwithstanding any other provision of this Agreement, if Employee is a Specified Employee (as defined below) at the time of termination of employment, then, to the extent that payments and benefits under this Agreement constitute “deferred compensation” under Section 409A of the Code and are not eligible for any exemption thereunder

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(“Non-Exempt Deferred Compensation”), and payment of cash or provision of his benefits is pursuant to a termination of employment, then:

(i) the amount of such Non-Exempt Deferred Compensation that would otherwise be payable during the six-month period immediately following Employee’s separation from service will be accumulated through and paid or provided on the first day of the seventh month following Employee’s separation from service (or, if Employee dies during such period, within 30 days after Employee’s death) (in either case, the “Required Delay Period”); and

(ii) the normal payment or distribution schedule for any remaining payments or distributions will resume at the end of the Required Delay Period.

For purposes of this Agreement, the term “Specified Employee” has the meaning given such term in Treas. Reg. Section 1.409A-1(i).

(c)  Treatment of Installment Payments.  Each payment of termination benefits under Section 6(a) of this Agreement, including, without limitation, each installment payment, shall be considered a separate payment, as described in Treas. Reg. Section 1.409A-2(b)(2), for purposes of Section 409A of the Code.

(d)  Timing of Reimbursements and In-kind Benefits.  If Employee is entitled to be paid or reimbursed for any taxable expenses under Section 4, and such payments or reimbursements are includible in Employee’s federal gross taxable income, the amount of such expenses reimbursable in any one calendar year shall not affect the amount reimbursable in any other calendar year, the reimbursement of an eligible expense must be made no later than December 31 of the year after the year in which the expense was incurred, and no right of Employee to reimbursement of such expenses.

(e)  Permitted Acceleration.  The Company shall have the sole authority to make any accelerated distribution permissible under Treas. Reg. Section 1.409A-3(j)(4) to Employee of deferred amounts, provided that such distribution meets the requirements of Treas. Reg. Section 1.409A-3(j)(4).

[Remainder of page intentionally left blank]

[Signature page follows]

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first indicated above.

COMPANY:
HOTSPURS HOLDINGS LLC
By:	/s/ Jason R. Spaeth
Name:	Jason R. Spaeth
Title:	President and Chief Executive Officer
EXECUTIVE:
MARK B. HORRELL
/s/ Mark B. Horrell

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Exhibit A

Term Sheet
Equity Incentive Compensation

Issuer	Hotspurs Holdings LLC
Capital Structure	One series of Limited Liability Company Membership Interests
Anticipated Total Senior Manager Membership Interest Participation	(i).On the closing date of the Merger, the senior manager of Hotspurs (the “Senior Manager) will initially receive 1 2/3% of the total Limited Liability Company Membership Interests of the Issuer (the “Membership Interests”), such Membership Interests to be treated as a pari passu interest in the Company (ii).If Värde Partners, Inc. or its affiliated funds (collectively, “Värde”) achieve an XIRR, as used in Microsoft Excel, of 12% on Värde’s initial equity investment and any of its future cash infusions in Hotspurs, then the Membership Interests of the Senior Manager will increase to 3 1/3% of the total Membership Interests (iii).The XIRR, as used in Microsoft Excel, will be calculated on the dates on which cash inflows (Värde’s initial equity investment and any of its future cash infusions in Hotspurs) and cash outflows (dividends paid to Membership Interest holders) occur
Membership Interest Buyback/Forfeiture	(i).If Hotspurs terminates the Senior Manager for cause, at any time, then all of his Membership Interests will be automatically and immediately forfeited and returned to the Issuer (ii).If Hotspurs terminates the Senior Manager for any reason, other than cause, at any time, then all of his Membership Interests will be subject to repurchase by the Issuer at the then-current fair market value of such Membership Interests as determined using mutually agreed upon cash outflows and a discount rate of 15% (iii).If the Senior Manager terminates his employment with Hotspurs for (a) good reason before the third anniversary of the closing date of the Merger or (b) any reason after the third anniversary of the closing date of the Merger, then all of his Membership Interests will be subject to repurchase by the Issuer at the then-current fair market value of such Membership Interests as determined using mutually agreed upon cash outflows and a discount rate of 15%; if such Membership Interests are not repurchased, Senior Manager will continue to receive cash distributions subject to his undisturbed pari passu Membership Interests in the Company (iv).If the Senior Manager terminates his employment with Hotspurs other than for good reason before the third anniversary of the closing date of the Merger, then all of his Membership Interests will be automatically and immediately forfeited and returned to the Issuer (v).In the event of the Senior Manager’s death or termination of employment due to disability, then all of his outstanding Membership Interests will become fully vested and subject to repurchase by the Issuer at the then-current fair market value of such Membership Interests as determined using

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	mutually agreed upon cash outflows and a discount rate of 15%; if such Membership Interests are not repurchased, Senior Manager or Senior Manager’s estate, as applicable, will continue to receive cash distributions subject to his undisturbed pari passu Membership Interests in the Company
Board of Directors and Voting Rights	Each Senior Manager shall serve as a member of the Company’s Board of Directors during the Senior Manager’s employment term. The voting rights granted to each Director will be proportional to the Director’s ownership percentage of the total outstanding Membership Interests.
Sale of Issuer	Membership Interests will be subject to customary “drag-along”, “tag-along” rights and other similar obligations in connection with a sale of Issuer
Transferability of Membership Interests	Membership Interests are non-transferable except in limited circumstances relating to certain estate planning transfers
Limited Liability Company Agreement	Membership Interests will be subject in all respects to the terms of a Limited Liability Company Agreement, which the Senior Manager will be required to execute

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