LOAN AGREEMENT

 

                                                                    EXHIBIT 10.3

                                 LOAN AGREEMENT

                                     AMONG

                               FCLT LOANS, L.P.,
                                  AS BORROWER,

                                      AND

                              FLEET NATIONAL BANK,
                             AS AGENT AND AS LENDER

                                      AND

                          NATIONSBANK OF TEXAS, N.A.,
                                   AS LENDER

                                 JULY 11, 1995

                               TABLE OF CONTENTS

                                             
              Table of Contents

              Preliminary Statement

                                                        Section 1
                                                   General Definitions

1.1.          Defined Terms
1.2.          Accounting and Other Terms
1.3.          Certain Matters of Construction

                                                        Section 2
                                                    Financing Facility

2.1.          The Loan & Letters of Credit
2.2.          Manner of Borrowing

                                                        Section 3
                                      Conditions Precedent and Condition Subsequent

3.1.          Conditions Precedent
3.2.          Conditions Subsequent

                                                        Section 4
                                      Interest, Repayment, Fees and Extension Option

4.1.          Interest
4.2.          Principal Repayment
4.3.          Cost Protection
4.4.          Term of Agreement
4.5.          Loan Fees
4.6.          Option to Extend Maturity Date
4.7           Special Eurodollar Loan Provisions

                                                        Section 5
                                       Cash Flow Distributions & Operational Issues

5.1           Net Cash Flow
5.2           Excess Net Cash Flow
5.3           If any Default Exists
5.4           Operational Issues

                                                        Section 6
                                                Collateral:  General Terms

6.1.          Security Interest in Personal Property
6.2.          Lien on REO Properties

-i- 6.3. Insurance of Collateral 6.4. Audits 6.5. Cash Reserve Account 6.6. Release Price & Minimum Release Price 6.7 Termination of Security Interests 6.8 REO Lease-Up Reserve Section 7 Representations and Warranties 7.1. General Representations and Warranties 7.2. Reaffirmation and Survival of Representations Section 8 Covenants and Continuing Agreements 8.1. Affirmative Covenants 8.2. Negative Covenants Section 9 Events of Default: Rights and Remedies on Default 9.1. Events of Default 9.2. Remedies 9.3. Setoff, etc. 9.4. Remedies Cumulative; No Waiver Section 10 Agency Provisions Section 11 Miscellaneous 11.1. Power of Attorney 11.2. Modification of Agreement 11.3. Reimbursement of Expenses 11.4. Indulgences Not Waivers 11.5. Severability 11.6. Successors and Assigns; Participations by Lenders 11.7. Cumulative Effect: Conflict of Terms 11.8. Execution in Counterparts 11.9. Notice 11.10. Agent's or Lender's Consent 11.11. Time of Essence 11.12. Entire Agreement 11.13. Interpretation 11.14. No Preservation or Marshaling 11.15. Governing Law; Consent to Forum 11.16. Waivers by Borrower 11.17. DTPA Waiver 11.18. Oral Agreements Ineffective
-ii- 11.19. Limitations on Lenders Recourse SIGNATURES
EXHIBITS: EXHIBIT A-1 Notice of Borrowing EXHIBIT A-2 Advance Certificate EXHIBIT B Schedule of Collateral Loans and Allocated Values (Definitions) EXHIBIT C Schedule of Ownership Interests (Section 7.1.1) EXHIBIT D Borrowing Base Schedule EXHIBIT E Interest Election EXHIBIT F Tier 1 Assets and Tier 2 Assets Not Having Business Plans Approved By The Portfolio Committee EXHIBIT G Additional Conditions Subsequent EXHIBIT H Collateral Loans Not Being Paid Directly to the Lock-Box Account EXHIBIT I Additional Subsidiaries -iii- LOAN AGREEMENT THIS LOAN AGREEMENT ("Agreement") is made as of the 11th day of July, 1995, by and among (i) FCLT LOANS, L.P, a Texas limited partnership ("Borrower"), having FCLT Loans Asset Corp., a Texas corporation, as its general partner ("FCLT Loans Corp."), (ii) FLEET NATIONAL BANK, a national banking association ("Fleet") and NATIONSBANK OF TEXAS, N.A., a national banking association ("NationsBank"); Fleet and NationsBank being hereinafter referred to individually as a "Lender" or jointly as the "Lenders"; and (iii) and FLEET NATIONAL BANK, a national banking association, as Agent for the Lenders (in such capacity hereinafter referred to as the "Agent"). PRELIMINARY STATEMENT (i) All capitalized terms used but not specifically defined in this Preliminary Statement, shall have the definitions assigned to them in Section 1 below. (ii) Pursuant to the Sale Agreements and the Joint Plan: (a) Borrower, as the designee of FC Liquidating Trust, will be acquiring the Portfolio Assets and the Additional Assets; and (b) FC Liquidating Trust will be acquiring the Trust Assets. (iii) The Portfolio Assets have been segregated into the five (5) separate Pools and have been assigned to three (3) Tranches, designated as "Tranche 1", "Tranche 2", and "Tranche 3", respectively. In addition, for administrative purposes, the Portfolio Assets have been divided into three (3) Tiers designated as "Tier 1", "Tier 2" and "Tier 3", respectively. (iv) Borrower warrants and represents to Lenders that the Portfolio Assets consist of the Collateral Loans, all of which are being acquired and assigned to Borrower, and REO Properties, each of which are being conveyed to one of two REO Affiliates, and that all of the Tier 1 Assets and Tier 2 Assets are listed in Exhibit B attached hereto and incorporated herein. (v) Debt Structure. Pursuant to the Joint Plan: (a) New FirstCity has issued the Senior Subordinated Notes to the present Class A preferred shareholders of FCBOT; (b) FC Liquidating Trust has issued to New FirstCity a Class A Certificate (the "Class A Certificate") which requires payments to New FirstCity in order to provide New FirstCity with the funds required to pay (1) the Senior Subordinated Notes (i.e., the Senior Subordinated Certificate Payments), (2) Special Preferred Stock Payments and (3) certain other payments after the payment in full to Lenders of the herein contemplated Financing Facility; and (c) Contemporaneously herewith, Borrower is issuing to FC Liquidating Trust the Subordinate Note which requires payments to FC Liquidating Trust in order to enable FC Liquidating Trust to make the Senior Subordinated Certificate Payments, all of which shall be in all respects subordinate to the herein contemplated Financing Facility and is subject to the terms of this Loan Agreement and the rights of Lenders hereunder. (vi) Financing Facility. In connection with the above, Borrower has requested Lenders to provide Borrower with a senior debt financing facility in an amount of up to One Hundred Million Dollars ($100,000,000) (the "Financing Facility") consisting of a Revolving Line of Credit (i.e., the Loans) and the Letters of Credit. Each Lender, subject to the terms and conditions set forth below, has agreed to provide fifty percent (50%) of such Financing Facility in accordance with this Agreement. SECTION 1 GENERAL DEFINITIONS 1.1. Defined Terms. When used herein, the following terms shall have the following meanings (terms defined in the singular to have the same meaning when used in the plural and vice versa): Account Debtor - the "borrower" (or other "obligor") under each of the Collateral Loans, including each REO Affiliate. Acquisition Price - the total prices actually paid by the Borrower to the Sellers, pursuant to the Sale Agreements, for the acquisition of the Assets. Additional Assets - The following assets which have been or are being transferred to Borrower contemporaneously herewith: (i) all remaining assets held in the "First City Receiverships" (as defined in the Joint Plan) other than the FC Intangible Assets, plus (ii) all cash payments previously paid or to be hereafter paid by the FDIC to Borrower or FC Liquidating Trust in excess of the $20,000,000 being paid to New FirstCity and the sums being paid with respect to administrative claims and "Class 4" and "Class 8" creditor claims under the Joint Plan on the "Effective Date" of the -2- Joint Plan, plus (iii) all Borrower Business Assets plus (iv) all FC Intangible Assets. Adjusted Eurodollar Rate - with respect to any Interest Period for a Eurodollar Loan, the quotient of (i) the rate per annum (rounded upwards, if necessary, to the nearest 1/100th of 1%) quoted at 11:00 A.M. by NationsBank two Business Days prior to the first day of such Interest Period for the offering to leading banks in the interbank Eurodollar market of Dollar deposits for a maturity substantially comparable to such Interest Period and in an amount substantially comparable to the principal amount of such Loan, divided by (ii) a number equal to the number one minus the Eurodollar Rate Reserve Percentage. The "Eurodollar Rate Reserve Percentage" applicable to any Interest Period means the maximum effective rate (expressed as a decimal) of the statutory reserve requirements (without duplication, but including, without limitation, basic, supplemental, marginal and emergency reserves) applicable to either Lender during such Interest Period under regulations of the Board of Governors of the Federal Reserve System (or any successor), including without limitation Regulation D or any other regulation dealing with maximum reserve requirements which are applicable to Lenders with respect to its "Eurocurrency Liabilities", as that term may be defined from time to time by the Board of Governors of the Federal Reserve System (or any successor) or which in any other respect relate to the funding of Eurodollar Loans. The Adjusted Eurodollar Rate shall be adjusted automatically on and as of the effective date of any change in the Eurodollar Rate Reserve Percentage. A.M. - a time from and including 12 o'clock midnight to and excluding 12 o'clock noon on any day using Dallas, Texas time. Advance Certificate - A certificate (i) which is in the form attached hereto as Exhibit A-2, (ii) which shall be submitted to Lenders in connection with each Notice of Borrowing pursuant to Section 2 below, (iii) which is addressed to both Lenders and signed by Borrower and Servicer and (iv) which: (a) contains a calculation and certification of the applicable Maximum Revolver Availability, (b) commencing six months after the Closing Date and continuing for the remainder of the Term, contains a calculation and certification of the applicable Maximum DSC Loan Amount, (c) contains a certification as to the outstanding principal balances under each of the Revolving Notes as of the date thereof, and (d) contains a certification (by Borrower only) that no Event of Default exists under this Loan Agreement as of the date thereof and certain other therein set forth loan estoppels/ratifications. Advance Date - as defined in Section 2.1.3 of this Agreement. -3- Advance Documents - as defined in Section 2.2.2 of this Agreement. Affidavit of Lost Note - as to any Pledged Note which has been lost by any of the Sellers, an affidavit executed by the Seller in question certifying that such Pledged Note has been lost and that such Pledged Note remains in full force and effect and an outstanding obligation of the "borrower" or "maker" thereunder and attaching thereto a copy of such lost Pledged Note. Affiliate - of any Person shall mean any other Person which, directly or indirectly, controls or is controlled by or is under common control with such first-mentioned Person, or any individual, in the case of a Person who is an individual, who has a relationship by blood, marriage or adoption to such first-mentioned Person not more remote than first cousin, and, without limiting the generality of the foregoing, shall include (a) any Person beneficially owning or holding 35% or more of any class of voting stock or partnership interests of such first-mentioned Person or (b) any Person of which such first-mentioned Person owns or holds 35% or more of any class of voting stock or partnership interests. For the purposes of this definition, "control" (including, with correlative meanings, the terms "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting stock or partnership interests or by contract or otherwise. Allocated Value - with respect to each Portfolio Asset which constitutes a Tier 1 Asset or a Tier 2 Asset, the "Allocated Value" assigned to such Portfolio Asset and shown on the then effective Borrowing Base Schedule. Unless and until a Tier 3 Asset is reclassified as a Tier 2 Asset as provided under the definition of Borrowing Base Schedule, for purposes of this Agreement the "Allocated Value" for each Tier 3 Asset shall be zero dollars ($0.00). Approved Budgets - Cash flow budgets with respect to Borrower and FC Liquidating Trust which (i) set forth on an annual and quarterly basis for three years, statements of cash flow detailing, for each such period, beginning cash, all expected cash inflows, all expected cash outflows and ending cash, and (ii) have been approved in writing by Borrower, Servicer, the Portfolio Committee and Lenders. Such Approved Budgets may only be amended with the written consent of both Lenders. Approved Expenditures - (i) Senior Subordinated Certificate Payments and (ii) costs and obligations which have been incurred by Borrower and are to be paid by Borrower in accordance with the -4- Approved Budgets (subject, as to such other costs and obligations, to a 10% variance in the aggregate in any calendar quarter); each of which have been approved by Lenders. Assets - Collectively, each and every Portfolio Asset and all Additional Assets. Assignments - Assignments of Liens of even date herewith from the Borrower to Agent in such form and content as Lenders may reasonably require in their sole discretion, whereby Borrower assigns all Liens securing payment of all Collateral Loans to Agent for the benefit of both Lenders. Bankruptcy Case - That certain Chapter 11 bankruptcy proceeding entitled "In Re: First City Bancorporation of Texas, Inc., Debtor", pending in the Bankruptcy Court (Case No. 392-39474-HCA-11). Bankruptcy Code - The United States Bankruptcy Code, 11 U.S.C. Section 101, et seq., as the same now exists or may hereafter be amended. Bankruptcy Court - The United States Bankruptcy Court for the Northern District of Texas, Dallas Division. Borrower's Acquisition Costs - all due diligence, closing, legal and other expenses which are incurred by Borrower and/or FC Liquidating Trust and paid by Borrower in connection with the Loan and Borrower's acquisition of the Assets and which are approved in writing by Lenders. Borrower Business Assets - all Business Assets conveyed to Borrower under one of the Sale Agreements or otherwise and all Business Assets hereafter acquired by Borrower as a result of Borrower's exercise of its rights under documents securing a Business Loan. Borrowing Base Schedule - the schedule which (i) lists each Tier 1 Asset and each Tier 2 Asset, (ii) lists the Tier and the Tranche to which each of such Portfolio Assets have been assigned, (iii) lists the Allocated Value and ERC for each of such Portfolio Assets and (iv) has been approved by Lenders in writing, as the same may be amended from time to time with the written approval of Lenders. As of the date hereof, Exhibit D attached hereto and incorporated herein is the effective Borrower Base Schedule. From time to time subsequent to the date hereof, but not less often than quarterly, Borrower will update the Borrowing Base Schedule; which updated schedule will be submitted to Lenders for their review and approval. In no event shall the Allocated Value or ERC for any Portfolio Asset be increased without the prior written consent of Lenders. Unless and until an updated Borrowing Base Schedule has -5- been approved by Lenders, the most recent Borrowing Base Schedule which has been approved in writing by Lenders shall be deemed to be the effective Borrowing Base Schedule. Subsequent to the date hereof, from time to time, Borrower may submit to Lenders for their consideration Tier 3 Assets which Borrower would like to reclassify as Tier 2 Assets and to which Borrower would like to assign a ERC, an Allocated Value and a Tranche; which submissions shall be accompanied by such information as Lenders may require. Lenders, in their sole discretion, may refuse to approve any such requested reclassification. If Lenders, in their sole discretion do approve the reclassification of a Tier 3 Asset to a Tier 2 Asset, such reclassification shall be effective at such time as (i) the Collateral Loan Documents with respect to such Portfolio Asset then held by the Tier 3 Custodian have been transferred to the Custodian under the Custodial Agreement and (ii) Borrower has submitted to Lenders and Lenders have approved an updated Borrowing Base Schedule adding the respective reclassified Tier 3 Assets thereto. Upon the approval by Lenders of such revised Borrowing Base Schedule, such Tier 3 Assets shall each be deemed to be a Tier 2 Asset. Business Assets - accounts receivable, inventory, equipment, furniture and other personal property which were pledged/given as security for a Business Loan (i.e., all assets securing a Collateral Loan other than real estate). Business Day - every day other than Saturday, Sunday and any day which is a legal holiday under the laws of the States of Rhode Island or Texas or is a day on which banking institutions in Rhode Island or Texas are closed. Business Loan - each loan acquired by Borrower pursuant to one of the Sale Agreements which is secured by Business Assets and each and every other loan (or interest therein) which is secured by Liens on Business Assets and which is now or at any time hereafter owned by Borrower. Capitalized Lease Obligations - All lease obligations which have been or should be, in accordance with GAAP, capitalized on the books of the lessee. Cash Reserve Account - as defined in Section 6.5 of this Agreement. Cash Reserve Base Amount - as defined in Section 6.5 of this Agreement. CERCLA - the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (42 U.S.C. Section 9601, et seq.), as amended from time to time, which for purposes of this definition -6- shall include, without limitation, the Superfund Amendments and Reauthorization Act. Class A Certificate - as defined in subsection (v)(b) of the Preliminary Statement appearing at the beginning of this Agreement. Closing Date - the date of this Agreement, as shown on page 1 hereof. Closing Expenditures - the following expenditures which are being paid by Borrower in connection with the closing of the Financing Facility: (i) the purchase prices actually paid by Borrower for the Assets, (ii) Borrower's Acquisition Costs, (iii) Lenders' Transaction Costs (iv) Lenders' Loan Fees and (v) other costs incurred by Borrower in accordance with the Approved Budgets. Code - the Uniform Commercial Code as adopted and in force in the State of Texas, as from time to time in effect. Collateral - All presently owned or hereafter acquired or existing property of the Borrower as follows: (i) All Goods, Equipment, Inventory, Accounts, Instruments, Documents, Chattel Paper, General Intangibles, Fixtures and other personal property; (ii) All "Pledged Loan Documents" consisting of: (a) All promissory notes (together with all Affidavits of Lost Note), bonds, other Instruments, Chattel Paper and Participation Interests owned or acquired by Borrower (whether or not acquired from Sellers), including, without limitation, the promissory notes evidencing the Collateral Loans (including all REO Notes), and any renewals, modifications and extensions thereof and all promissory notes, Instruments, Chattel Paper and other property delivered in substitution therefor (collectively, the "Pledged Notes"); and (b) All security agreements, mortgages, deeds of trust, assignments of rents or leases, UCC-1 Financing Statements and REO Security Documents which secure the payment of the Pledged Notes, whether or not such documents have been recorded or filed with the appropriate records of land evidence or other filing offices applicable to the real or personal property (as the case may be) covered thereby (collectively, the "Pledged Security Documents"); and -7- (c) All guaranties, bonds, title or hazard insurance policies (together with the proceeds thereof) commitments, leases and other agreements now existing or hereafter arising that provide collateral security or financial or other support for the payment of the Pledged Notes (collectively, the "Other Pledged Documents"); All of which Pledged Notes, Pledged Security Documents and Other Pledged Documents are hereinafter collectively called the "Pledged Loan Documents"; (iii) All money, bank accounts and deposits in the name of or for the benefit of the Borrower, whether or not evidenced by any certificates of deposit, passbooks or other documents; all money, deposits, funds and balances from time to time in any bank accounts or deposits maintained by Borrower with either of the Lenders, whether the Lender in question maintains such bank accounts or deposits as agent, escrow holder, custodian or otherwise or for its own account pursuant to the Custodial Agreement, the Lock-Box Agreement or the Escrow Agreement, and any amendments thereto, including, without limitation, the Cash Reserve Account, the Tax Escrow Account, the Disbursement Account, the Operating Reserve Account and the Lock-Box Account; all Instruments or Items now or hereafter submitted as deposits or additions to any bank accounts and deposits described herein; and all revenues, income, interest, dividends, issues and profits added to, earned or accrued on any bank accounts and deposits described herein; (iv) All contract and other rights of the Borrower pursuant to the Pledged Notes or the other Pledged Loan Documents, the Lock-Box Agreement, the Escrow Agreement, the Custodial Agreement, the Tier 3 Custodial Agreement, and the Services Agreement, including, without limitation, all claims and causes of action arising from or pertaining to such contract rights; (v) All Judgments; (vi) All land, improvements, fixtures and other interests in real estate and leases thereof, including without limitation, all REO Properties; (vii) All Additional Assets; -8- (viii) All books and records describing, used in connection with or pertaining to any of the property described in paragraphs (i) through (vii) hereof including, without limitation, all credit files, correspondence, computer programs, printouts, tapes and other records (collectively referred to as the "Books and Records"); and (ix) All accessions to, substitutions for, replacements of, products of and Proceeds of any of the Collateral described in paragraphs (i) through (viii) hereof including, without limitation, all Non-Cash Proceeds (whether in the form of personal property, real property or interests therein), Cash Proceeds, investments of Collateral or Proceeds thereof, and the revenues, income, interest, dividends, issues and profits thereof. As used herein, the term Goods, Equipment, Inventory, Accounts, Chattel Paper, Instruments, Documents, General Intangibles, Fixtures, Proceeds, Cash Proceeds and Non-Cash Proceeds shall have the respective meanings assigned to them in Chapter 9 of the Code and the term Items has the meaning assigned to it in Chapter 4 of the Code. Collateral Loan - each now existing or hereafter arising Business Loan and Real Estate Loan and each and every other loan (or interest therein) now or at any time hereafter owned by Borrower. Collateral Loan Documents - all promissory notes evidencing Collateral Loans (including all REO Notes), all mortgages, deeds of trust, security agreements, guarantees and other documents securing Collateral Loans (including all REO Security Documents) and all loan agreements and other documents executed by Account Debtors in connection with Collateral Loans. Collateral Loan Pool - the entire pool of (i.e., all) Collateral Loans (which may from time to time include real and personal property that has been foreclosed upon). Collateral Loans Report - as defined in Section 8.1.13 of this Agreement. Commitment - the obligation of each Lender to lend to Borrower under this Agreement, on a several and not on a joint basis, an aggregate principal amount not to exceed Fifty Million and 00/100 Dollars ($50,000,000.00) for a combined total commitment of One Hundred Million and 00/100 Dollars ($100,000,000.00). -9- Compliance Certificate - as defined in Section 8.1.11 of this Agreement. Contract Rate - The interest rate(s) applicable to the Loan as determined in accordance with Section 4 below, which interest rate(s) shall be (i) the Eurodollar Rate, and/or (ii) Effective Prime. Custodial Agreement - that certain Custodial Agreement by and among Custodian, Borrower, Agent, Subordinated Lender and Servicer whereby Custodian agrees to act as bailee for the documents evidencing certain of the Collateral Loans, as such Custodial Agreement may hereafter be amended or supplemented from time to time, together with any replacement or substitution therefor. Custodian - Fleet, in its capacity as custodian under the Custodial Agreement. DIDMCA - the Depositary Institutions Deregulation and Monetary Control Act of 1980, Public Law 96-221, as amended, codified at 12 U.S.C. Section 1735f-7. Default - an event or condition the occurrence of which would, with the lapse of time or the giving of notice, or both, become an Event of Default. Default Rate - a fluctuating rate of interest per annum which from day to day is equal to the lesser of: (i) the Prime Rate plus four percent (4%) or (ii) the Maximum Legal Rate. Disbursement Account - an account to be maintained at NationsBank's main office, 901 Main Street, Dallas, Texas, as more particularly defined in the Escrow Agreement. Disbursing Agent - NationsBank in its capacity as the Lender with primary responsibility for (i) the receipt and review of Notices of Borrowing and Advance Certificates, (ii) the administration of advances of Loan Proceeds under the Notes and (iii) the making of disbursements/distributions of Net Cash Flow and Excess DA Funds from the Disbursement Account. Distribution Date - as defined in Section 5.1.1 of this Agreement. Dollars and $ - currency of the United States of America. DSC Calculation Period - In connection with the submission to Lenders of each Advance Certificate and the calculation of the applicable Maximum DSC Loan Amount, the two full calendar month period which commenced on the first day of the calendar month which -10- is three months prior to the date of the Advance Certificate in question and which ends on the last day of the second calendar month after such commencement (e.g. if an Advance Certificate is dated May 10, 1996, the applicable DSC Calculation Period shall be February 1, 1996 through March 31, 1996). DSC Coverage Rate - As calculated in each Advance Certificate, an amount equal to the DSC Interest Rate multiplied by 1.15. DSC Interest Rate - As calculated in each Advance Certificate, an interest rate equal to the Eurodollar Rate in effect on the date of the Advance Certificate in question. DSC Net Cash Flow - As calculated in each Advance Certificate, an amount equal to the sum of (i) the total amount of regularly scheduled principal payments (i.e., not prepayments or "balloon" or maturity payments) and regularly scheduled interest payments collected by Borrower under Pledged Notes which constitute Tier 1 Assets and Tier 2 Assets during the DSC Calculation Period in question, plus (ii) the total amount of Net Operating Income received by Borrower with respect to REO Properties which constitute Tier 1 Assets and Tier 2 Assets during the DSC Calculation Period in question plus (iii) an amount equal to one sixth of the total amount then in the Cash Reserve Account; which sum shall be annualized (i.e., multiplied by six and adjusted to reflect any extraordinary sums received during such DSC Calculation Period) to determine the applicable DSC Net Cash Flow. Effective Prime - the lesser of (i) 1% in excess of the Prime Rate or (ii) the Maximum Legal Rate. Environmental Laws - all federal, state or local laws, statutes, ordinances, or regulations pertaining to health, industrial hygiene, environmental conditions or the existence, release, generation, storage or disposal of any Hazardous Substance, including but not limited to, CERCLA and RCRA. Environmental Site Assessment - an environmental site assessment report conforming to the standards for Phase I Environmental Site Assessments in ASTM Standard Procedures for Environmental Site Assessments, E 1527-93 or other standards reasonably satisfactory to Lenders (either of which is herein called the "Acceptable Standards"), which is in all respects satisfactory to Lenders and which has been prepared by a qualified environmental firm reasonably satisfactory to Lenders (a) indicating that, on the basis of an investigation conducted in accordance with the Acceptable Standards, (i) it found no Hazardous Substances present on or in the property that is the subject of its report at levels that require reporting or remediation, or both, pursuant to any Environmental Laws that are applicable to such -11- property ("Prohibited Hazardous Substances"), (ii) it did not learn of any conditions on or in the land adjacent to the property that is the subject of its report that would cause it to believe that there might be Prohibited Hazardous Substances present on or in the property that is the subject of its report, and (iii) no notice of violation of any of the Environmental Laws, or other claim or order issued pursuant to any of the Environmental Laws, has been duly filed against such property by any governmental authority; or (b) if any Prohibited Hazardous Substance is present on such property or if any such notice of violation, claim or order has been filed, providing evidence satisfactory to Lenders as to the extent and nature of the environmental problem caused thereby and the likely costs and duration of any recommended remediation. ERC - with respect to each Portfolio Asset which constitutes a Tier 1 Asset or a Tier 2 Asset, the "ERC" (which means the estimated remaining collections which Borrower has determined will be collected with respect to each of such Portfolio Assets) assigned to such Portfolio Asset and shown on the then effective Borrowing Base Schedule. Unless and until a Tier 3 Asset is reclassified as a Tier 2 Asset as provided under the definition of Borrowing Base Schedule, for purposes of this Agreement the "ERC" for each Tier 3 Asset shall be zero dollars ($0.00). ERISA - the Employee Retirement Income Security Act of 1974, and all rules and regulations from time to time promulgated thereunder. Escrow Agent - Nationsbank in its capacity as "Escrow Agent" under the Escrow Agreement. Escrow Agreement - that certain Escrow Agreement of even date herewith executed by and among Escrow Agent, Borrower, Agent and the Servicer, as such Escrow Agreement may hereafter be amended or supplemented from time to time, together with any replacement or substitute therefor. Eurodollar Loan - any Loan Proceeds bearing interest at the Eurodollar Rate. Eurodollar Rate - for each Interest Period during the entire Term, the lesser of (i) the Adjusted Eurodollar Rate for such Interest Period plus three and one quarter percent (3.25%) or (ii) the Maximum Legal Rate, in each case fixed for the Interest Period in question. Event of Default - as defined in Section 9.1 of this Agreement. Excess DA Funds - as determined on any Advance Date, the total amount of funds then in the Disbursement Account minus a reserve in -12- an amount equal to the sum of all interest payments, Loan Fees and other fees and expenses which Disbursing Agent determines will be due and payable to Lenders during the calendar month in question. Excess Net Cash Flow - as defined in Section 5.2.1 of this Agreement. Excluded FC Reserve Funds - the reserve of funds (not to exceed $10,000,000) established by FC Liquidating Trust on or prior to the Closing Date for the payment of class 4 administrative claims under the Joint Plan and preclosing expenses (as defined in the FC Trust Agreement); which reserved funds shall only be deemed to be Excluded FC Reserve Funds to the extent needed for the payment of the above claims and expenses. FCBOT - First City Bancorporation of Texas, Inc., a bank holding company incorporated in the State of Delaware. FC Intangible Assets - all "Fidelity Bond" policies and claims and "D & O" policies and claims of FCBOT and all capital stock in First City Life Insurance Company, a life insurance company owned by FCBOT, and all capital stock in Central Texas Insurance Company, Inc.; all of which FC Intangible Assets are being held in the name of New FirstCity for the benefit of Borrower and/or FC Liquidating Trust, as provided in the FCLT Asset Agency Agreement. FC Liquidating Trust - FirstCity Liquidating Trust, a Texas business trust. FCLT Asset Agency Agreement - collectively, (i) that certain Assignment of Proceeds of Causes of Action dated June 21, 1995, pursuant to which FCBOT assigned to Borrower all of its right, title and interest in and to any and all proceeds recovered by FCBOT as the result of the assertion by it of any claims related to that portion of the FC Intangible Assets consisting of "Fidelity Bond" policies and claims, and agreed that Borrower would have the right to direct the prosecution by FCBOT of any such claims, subject to certain terms and conditions as set forth therein, (ii) that certain Assignment of Proceeds of Causes of Action dated July 3, 1995, pursuant to which FCBOT assigned to Borrower all of its right, title and interest in and to any and all proceeds recovered by FCBOT as the result of the assertion by it of any claims related to that portion of the FC Intangible Assets consisting of "D & O" policies and claims, and agreed that Borrower would have the right to direct the prosecution by FCBOT of any such claims, subject to certain terms and conditions as set forth therein, and (iii) that certain Undertaking for Future Assignment dated July 3, 1995, pursuant to which New FirstCity agreed to hold, for the benefit of FC Liquidating Trust, that portion of the FC Intangible Assets consisting of capital stock in First City Life -13- Insurance Company and Central Texas Insurance Company, Inc., and agreed to transfer to FC Liquidating Trust all proceeds in respect of such capital stock for the account of Borrower, and to transfer, upon receipt of certain regulatory approvals and other conditions, such capital stock to Borrower or other designee of FC Liquidating Trust, subject to certain terms and conditions as set forth therein. FC Trust Agreement - that certain Liquidating Trust Agreement dated as of July 3, 1995 under which Shawmut Bank Connecticut, National Association, appears as Trustee (the "Trustee") and pursuant to which FC Liquidating Trust was created, and any amendments thereto. FDIC - the Federal Deposit Insurance Corporation in its corporate capacity and in its capacity as receiver of the "First City Banks" (as defined in the FDIC Loss Sharing Agreement). FDIC Cushion Funds - all funds retained by the FDIC in the "Litigation and Expense Cushion" which was established by the FDIC in the initial amount of $60,000,000 pursuant to Section 3.2 of the FDIC Loss Sharing Agreement; which funds are to be released to Borrower, as the assignee of FCBOT, pursuant to Section 3.4 of the FDIC Loss Sharing Agreement. FDIC Loss Sharing Agreement - that certain "Loss-Sharing Settlement Agreement" dated March 3, 1995 among the FDIC, FCBOT and the FCBOT REO Affiliated Entities, a copy of which is attached to the Motion to Approve Loss Sharing Agreements as Exhibit A. Financing Facility - as defined in subsection (vi) of the Preliminary Statement appearing at the beginning of this Agreement. Fleet - Fleet National Bank, a national banking association formed under the laws of the United States of America. Frost - the Frost National Bank, a national banking association. Frost Letters of Credit - jointly (i) that certain Letter of Credit No. RS1036995 in the amount of One Million Dollars ($1,000,000) dated July 11, 1995 and issued to Frost by Fleet (the "Fleet - Frost LC") pursuant to the Fleet - Frost LC Application; and (ii) that certain Letter of Credit No. 151614 in the amount of One Million Dollars ($1,000,000) dated July 11, 1995 issued to Frost by NationsBank (the "NationsBank - Frost LC") pursuant to the NationsBank - Frost LC Application; and any future amendments, extensions, replacements or substitutions therefor or for either of them, whether of the same amount(s) or otherwise. -14- Frost LC Applications - jointly and severally (i) that certain Application and Agreement for Standby Letter of Credit dated July 6, 1995 executed and delivered by Borrower to Fleet requesting the issuance by Fleet of a Letter of Credit in the amount of One Million Dollars ($1,000,000) in favor of Frost (the "Fleet - Frost LC Application"); and (ii) that certain Application and Agreement for Standby Letter of Credit dated July 6, 1995 executed and delivered by Borrower to NationsBank requesting the issuance by NationsBank of a Letter of Credit in the amount of One Million Dollars ($1,000,000) in favor of Frost (the "NationsBank - Frost LC Application"); and any future amendments thereof. Frost LC Documents - collectively, the Frost LC Applications and the Frost Letters of Credit. Frost Purchase Agreement - that certain Purchase Agreement between Frost and FCBOT, a copy of which is attached to the Motion to Approve Loss Sharing Agreements as Exhibit C. GAAP - generally accepted accounting principles in the United States of America in effect from time to time. General Partner - FCLT Loans Asset Corp., a Texas corporation. Hazardous Substance - one or more of the following substances: (a) those substances included within the definitions of "hazardous substances," "hazardous materials" or "toxic substances," in CERCLA, RCRA, Toxic Substances Control Act, Federal Insecticide, Fungicide and Rodenticide Act and the Hazardous Materials Transportation Act (49 U.S.C. Section 1801, et seq.); (b) such other substances, materials and wastes which at the time in question are regulated as hazardous or toxic under applicable local, state or federal law, or which are classified as hazardous or toxic under federal, state, or local laws or regulations; and (c) any material, waste or substance which is (i) asbestos, (ii) polychlorinated biphenyls, (iii) designated as a "hazardous substance" pursuant to Section 311 of the Clean Water Act, 33 U.S.C. Sections 1251 et seq. (33 U.S.C. 1321) or listed pursuant to Section 307 of the Clean Water Act (33 U.S.C. 1317), (iv) explosives, (v) radioactive materials, or (vi) petroleum, petroleum products or any fraction thereof. -15- Indebtedness - as applied to a Person means, without duplication (a) all items which in accordance with GAAP would be included in determining total liabilities as shown on the liability side of a balance sheet of such Person on the date as of which Indebtedness is to be determined, including, without limitation, Capitalized Lease Obligations, (b) all obligations of other Persons which such Person has guaranteed and (c) in the case of Borrower (without duplication), the Obligations. Indemnified Liabilities - as defined in Section 8.1.17 of this Agreement. Indemnified Parties - as defined in Section 8.1.17 of this Agreement. Indemnity Agreement - that certain Servicer Indemnity Agreement from New FirstCity to Agent and Lenders of even date herewith. Initial Advance - as defined in Section 2.1 of this Agreement. Interest Adjustment Date - the first Business Day after the fifth calendar day of each calendar month; which shall be the first day of each Interest Period pertaining to each Eurodollar Loan. Interest Election - Borrower's irrevocable written notice of election of Contract Rate(s) which shall be in the form of Exhibit E attached hereto and which shall, subject to this Agreement, effect a change in the Contract Rate(s) to be applicable to the portion of the outstanding Loan Proceeds specified therein, such change to occur on the Interest Adjustment Date next succeeding three (3) Business Days after receipt of such Interest Election by Disbursing Agent. Any Interest Election received by Disbursing Agent after 12 o'clock P.M. on a Business Day shall be deemed, for purposes of this Agreement, to have been received prior to 12 o'clock P.M. on the next succeeding Business Day. Interest Period - with respect to each Eurodollar Loan, each succeeding approximately one month period commencing on each Interest Adjustment Date and ending on the day immediately prior to the next succeeding Interest Adjustment Date; provided however, any Interest Period that would otherwise extend beyond the Maturity Date shall end on the Maturity Date. Interim FDIC Settlement Agreement - that certain Settlement Agreement dated June 22, 1994 between the FDIC, the FDIC Receivers, FCBOT and the "FCBOT Affiliate Entities", as amended; which Settlement Agreement is more particularly described in the Services Agreement. -16- Joint Plan - That certain Joint Plan of reorganization dated December 23, 1994, as amended, filed with the Bankruptcy Court in the Bankruptcy Case by FCBOT, the Official Committee of Equity Security Holders and J-Hawk Corporation with the participation of Cargill Financial Services Corporation. Judgment - a verdict or order obtained in a legal proceeding to enforce any Instrument, note or mortgage, including without limitation any and all verdicts or orders obtained by any of the Sellers or their predecessors, Borrower or any REO Affiliate with respect to any of the Pledged Notes or any of the other Pledged Loan Documents. LC Documents - collectively, the Frost LC Documents and the TCB LC Documents. Lease-Up Expenses - as to any REO Property, (i) all reasonable and customary leasing commissions, (ii) all reasonable tenant improvement costs actually paid by Borrower or the REO Affiliate in question with respect to the leasing of space in such REO Property pursuant to a written lease and (iii) all capital expenditures actually paid by Borrower or the REO Affiliate in question with respect to other improvements to such REO Property, provided that such capital expenditures are expended in accordance with a budget for such REO Property which has been approved in writing by Lenders; all as evidenced by invoices and such other back-up information as Lenders may require. Lender or Lenders - individually or jointly, Fleet and NationsBank. Lender Pro Rata Share - the percentage interest in the Loan owned by each Lender, as more particularly defined in Section 10.10 of this Agreement. Lenders' Transaction Costs - (i) all of both Lenders' reasonable due diligence and travel expenses, (ii) all of both Lenders' reasonable attorneys' fees , (iii) all disbursements of Lenders' attorneys, and (iv) all reasonable title costs, recording costs, appraisal fees, environmental fees and other related costs incurred by Lenders. Letter of Credit Agreements - collectively, the Fleet - Frost LC Application, the NationsBank - Frost LC Application, the Fleet - TCB LC Application and the NationsBank - TCB LC Application. Letters of Credit - collectively, the Fleet - Frost LC, the NationsBank - - Frost LC, the Fleet - TCB LC and the NationsBank -TCB LC. -17- Lien - any interest in property securing an obligation owed to, or a claim by, a Person other than the owner of the property, whether such interest is based on the common law, statute or contract, and including, but not limited to, the security interest, security title or lien arising from a security agreement, mortgage, deed of trust, deed to secure debt, encumbrance, pledge, conditional sale or trust receipt or a lease, consignment or bailment for security purposes. Loan or Loans - the revolving line of credit loans made by Lenders to Borrower pursuant to this Agreement and evidenced by the Notes. Loan Documents - this Agreement, the Notes, the Advance Documents, the LC Documents, the Other Agreements, and the Security Documents. Loan Fees - The fees payable by Borrower to Lenders in connection with the Financing Facility, as more particularly described in Section 4.5 of this Agreement. Loan Proceeds - All proceeds of the Notes advanced by Lenders. Lock-Box - one or more post office boxes opened by NationsBank, in its capacity as Lock-Box Agent, with the United States Postal Service pursuant to the Lock-Box Agreement for the receipt of payments under Collateral Loans and all other payments with respect to all other Assets of the Borrower and all assets of FC Liquidating Trust. Lock-Box Account - an account to be maintained at NationsBank's main office, 901 Main Street, Dallas, Texas, as more particularly defined in the Lock-Box Agreement. Lock-Box Agreement - that certain Lock-Box Agreement of even date herewith by and among NationsBank in its capacity as Lock-Box Agent, Borrower, Agent, Subordinated Lender, and Servicer, as such Agreement may hereafter be amended or supplemented from time to time together with any replacement or substitution therefor. LT Guaranty - that certain Guaranty from FC Liquidating Trust, as Guarantor, to Agent pursuant to the terms of which FC Liquidating Trust has guaranteed the payment and performance in full by Borrower of all of its Obligations to Agent and Lenders. LT Security Instruments - the following documents of even date herewith executed and delivered by FC Liquidating Trust to Agent for the benefit of both Lenders as security for the payment and performance by FC Liquidating Trust of its obligations under the LT Guaranty and the payment and performance by Borrower of its -18- Obligations: (i) that certain Security Agreement and Assignment of Right whereby FC Liquidating Trust grants to Agent a security interest in all of the Trust Assets, (ii) those three (3) separate Stock Pledge Agreements whereby FC Liquidating Trust pledges to Agent and grants to Agent a security interest in all of the issued and outstanding capital stock of FCLT One Corp., FCLT Two Corp. and FCLT Loans Corp., respectively, (iii) that certain Pledge and Security Agreement whereby FC Liquidating Trust pledges to Agent and grants to Agent a security interest in all of its limited partnership interest in Borrower, (iv) that certain Pledge and Security Agreement whereby FCLT One Corp. pledges to Agent and grants to Agent a security interest in all of its general partnership interest in FCLT One, L.P. and (v) that certain Pledge and Security Agreement whereby FCLT Two Corp. pledges to Agent and grants to Agent a security interest in all of its limited partnership interest in FCLT Two, L.P.; together with any modifications of any of the foregoing instruments, additions thereto and substitutions therefor. LT Loan Documents - the LT Guaranty and the LT Security Instruments. Maturity Date - subject to the Borrower's right to extend the same on the terms and conditions set forth in Section 4.6 below, the 30th day of June, 1997, being the date on which the Note is due and payable in full. Maximum DSC Loan Amount - As calculated in each Advance Certificate, an amount equal to the applicable DSC Net Cash Flow divided by the applicable DSC Coverage Rate; which calculations shall be set forth in an attachment to the respective Advance Certificate and shall be subject to the review and approval of Lenders. Maximum Facility Availability - As calculated in each Advance Certificate, an amount equal to the lesser of: (a) 70% of the total Allocated Values of the Portfolio Assets then remaining in Tranche 1, plus 55% of the total Allocated Values of the Portfolio Assets then remaining in Tranche 2, plus 70% of the total Allocated Values of the Portfolio Assets then remaining in Tranche 3; or (b) 60% of the total ERC of all Portfolio Assets then remaining in Tranche 1, Tranche 2 and Tranche 3; or -19- (c) An amount equal to $91,100,000 plus 70% of the total Allocated Values of the Portfolio Assets then remaining in Tranche 3; or (d) commencing six (6) months after the Closing Date and continuing for the remainder of the Term, the "Maximum DSC Loan Amount". Maximum Legal Rate - on any day, the highest non-usurious rate of interest permitted by applicable law on such day, computed on the basis of the actual number of days elapsed over a year of 365 or 366 days, as applicable. Maximum Revolver Availability - As calculated in each Advance Certificate, an amount equal to the then Maximum Facility Availability minus the total combined amounts of all then outstanding Letters of Credit. Minimum Release Price - as defined in Section 6.6 of this Agreement. Motion to Approve Loss Sharing Agreement - Debtor's Motion to Approve Loss Sharing Agreements . . . dated March 3, 1995 filed with the Bankruptcy Court in connection with the confirmation of the Joint Plan. Multi-Employer Plans - has the meaning set forth in Section 4001(a)(3) of ERISA. NationsBank - NationsBank of Texas, N.A., a national banking association formed under the laws of the United States of America. Net Cash Flow - all funds of every type and nature received by Borrower, each REO Affiliate, the FC Liquidating Trust, the Servicer or any of their respective agents with respect to the Collateral or the Trust Assets, including, without limiting the generality of the foregoing: (a) all interest, principal, Tax Escrow Payments and other payments and collections received on or with respect to the Collateral Loans, (b) all Net Operating Income from REO Properties, (c) all Net Sales Proceeds from the sales of REO Properties, Collateral Loans and any other items of Collateral and any Trust Assets, (d) all Net Insurance and Condemnation Proceeds (e) all payments received by Borrower or FC Liquidating Trust from any of the Sellers pursuant to any of the Sale Agreements, including all proceeds of all "put backs" to any of the Sellers of any items of Collateral, (f) all Net Collection Proceeds, and (g) all interest, dividends and other earnings directly or indirectly paid to Borrower or FC Liquidating Trust on funds, accounts and investments of Borrower or FC Liquidating Trust. Notwithstanding anything to the contrary contained in this -20- Agreement, all Net Operating Income from any REO Property with respect to any calendar month shall not be deemed to be Net Cash Flow which has been "received by Borrower" until the first to occur of (i) the payment of such Net Operating Income by the respective Property Manager to Borrower, the REO Affiliate in question or the Servicer, or (ii) the 15th day of the next following calendar month. Net Collection Proceeds - with respect to the (i) payment in full of any Collateral Loan, (ii) the settlement or compromise of any Collateral Loan or (iii) any other collection on a Collateral Loan (including pursuant to a foreclosure or other legal proceedings against the Account Debtor in question or any guarantor), all proceeds received in connection with such payment/collection (whether from the Account Debtor, a guarantor, pursuant to a foreclosure, or otherwise) less reasonable and customary costs of collection actually paid by the Borrower to Unrelated Third Parties. Net Insurance and Condemnation Proceeds - All Insurance and Condemnation Proceeds paid to Borrower, Servicer or REO Affiliates with respect to the Collateral (including any of the REO Properties) less reasonable and customary costs of collection actually paid by Borrower or the REO Affiliate in question to Unrelated Third Parties. Net Operating Income - with respect to each REO Property, for any period, such property's "Gross Income" for such period, minus all "Operating Expenses" paid during such period and minus all Permitted Lease-Up Expenses paid during such period. "Gross Income" is defined as all cash receipts (exclusive of Tenant Security Deposits) generated by the REO Property in question of whatever kind, including all rents, reimbursements from tenants for Operating Expenses and other revenues. "Operating Expenses" is defined as all reasonable and customary expenses actually paid during such period which, in accordance with GAAP, would be classified as operating expenses for a similar type of property, including utilities, taxes, insurance, repairs and maintenance, janitorial and reasonable property management fees actually paid by Borrower or the REO Affiliate in question to Unrelated Third Parties. Net Sales Proceeds - with respect to the sale or conveyance of any REO Property, Collateral Loan, or other Collateral, the gross proceeds of such sale minus reasonable and customary broker's commissions and other closing costs of the sale actually paid by the Borrower or the REO Affiliate in question to Unrelated Third Parties. -21- New FirstCity - FirstCity Financial Corporation, a Delaware corporation, resulting from the merger of FCBOT and J-Hawk Corporation pursuant to the Joint Plan, having its main office at 6400 Imperial Drive, Waco Texas 76714-8216 . Notes or Note - jointly, the $50,000,000.00 Revolving Credit Note of even date herewith, executed by Borrower and delivered to Fleet pursuant to the terms of this Agreement and the $50,000,000.00 Revolving Credit Note of even date herewith executed by Borrower and delivered to NationsBank pursuant to the terms of this Agreement; together with any renewals, extensions or modifications thereof and substitutions therefor. Notice of Borrowing - as defined in Section 2.2.1 of this Agreement. Obligations - All liabilities and obligations of Borrower to Lenders and/or Agent and/or Disbursing Agent under and with respect to the Loan, the Notes, this Agreement, the LC Documents and the other Loan Documents, and all renewals, increases, extensions, modifications, rearrangements or restatements thereof, and all other advances, debts, liabilities, obligations, covenants and duties owing, arising, due or payable from Borrower to Lenders or Agent of any kind or nature, present or future, whether or not evidenced by any note, guaranty or other instrument, arising under or with respect to this Agreement or any of the other Loan Documents, whether direct or indirect, absolute or contingent, primary or secondary, due or to become due, now existing or hereafter arising. The term includes, without limitation, all interest, charges, expenses, fees, attorney's fees and any other sums chargeable to Borrower under any of the Loan Documents. Operating Reserve Account - an interest bearing checking account established by Borrower with Fleet; which account shall be (i) funded and disbursed in accordance with Sections 2.2 and 5.1.2(f) of this Agreement and (ii) pledged and assigned to Agent and Lenders as additional security for the payment, performance and observance of the Obligations. Other Agreements - any and all agreements, instruments and documents (other than this Agreement, the Note, the Advance Documents, and the Security Documents), heretofore, now or hereafter executed by Borrower and/or delivered to Lenders with respect to the transactions contemplated by this Agreement (including, without limitation, the Services Agreement and the Subordination Agreement), together with related documentation, all as amended, renewed, modified, extended or restated from time to time. -22- Participation Agreement - a Participation Agreement pursuant to which Borrower owns a Participation Interest in a loan. Participation Interest - the interest of Borrower in a loan evidenced by a Participation Agreement where Borrower is not the "lead" lender with respect to such loan. Permitted Lease-Up Expenses - all Lease-Up Expenses with respect to any REO Property which do not exceed, in the aggregate and on a cumulative basis, the lesser of (i) $100,000 or (ii) ten percent (10%) of the Allocated Value of the REO Property in question, or such other limit as may be agreed to in writing by Lenders. Permitted Liens - (i) Liens at any time granted in favor of Lenders; (ii) Liens on REO Properties at any time granted in favor of Borrower (with the consent of Lenders) with respect to which Assignments have been delivered to Lenders; (iii) Liens for taxes (excluding any Lien imposed pursuant to any of the provisions of ERISA); provided, however, that all taxes or assessments that are a Lien on any REO Property or any real property securing a Collateral Loan, shall be paid by Borrower before any scheduled tax sale or any action to foreclose such Lien; (iv) Liens securing the claims or demands of materialmen, mechanics, carriers, warehousemen, landlords and other like Persons for labor, materials, supplies or rentals incurred in the ordinary course of Borrower's business, but only if such Liens are in all respects junior and subordinate to the Liens in favor of Lenders and to all advances at any time to be made by Lenders; (v) Liens resulting from deposits made in the ordinary course of business in connection with workmen's compensation, unemployment insurance, social security and other like laws; (vi) attachment, judgment and other similar non-tax Liens arising in connection with court proceedings, but only if and for so long as (a) such Liens are in all respects junior and subordinate to the Liens in favor of Lenders and to all advances at any time to be made by Lenders or (b) the execution or other enforcement of such Liens is and continues to be effectively stayed and bonded on appeal in a manner satisfactory to Lenders for the full amount thereof, and in either case (i.e., either (a) or (b)) the validity and amount of the claims secured thereby are being actively contested in good faith and by appropriate lawful proceedings, and such Liens do not, in the aggregate, materially detract from the value of the Collateral or materially impair the use thereof in the operation of Borrower's business; (vii) liens to Subordinated Lender created pursuant to the Subordinated Security Agreement; (viii) such other Liens as Lenders may hereafter approve in writing and (ix) all Permitted Prior Liens. Permitted Prior Liens - Liens and encumbrances upon any asset securing payment of a Collateral Loan which have priority (are -23- senior and superior) to the Lien of the mortgage or deed of trust or security interest securing such Collateral Loan and which are existing on the date the Collateral Loan is purchased by Borrower or granted to Borrower by an REO Affiliate, as the case may be, provided such prior Liens are disclosed to Lenders by Borrower in writing prior to the Closing Date. Person - an individual, partnership, corporation, joint stock company, trust or unincorporated organization, or a governmental agency or political subdivision thereof. Plan - an employee benefit plan now or hereafter maintained for employees of Borrower that is covered by Title IV of ERISA. Pledge Agreements - collectively, those two (2) certain Pledge and Security Agreements of even date herewith from Borrower to Agent for the benefit of both Lenders whereby Borrower pledges to Agent and grants to Agent a security interest in (i) all of Borrower's limited partnership interest in FCLT One, L.P. and (ii) all of Borrower's limited partnership interest in FCLT Two, L.P. and that certain Pledge and Security Agreement of even date herewith from FCLT Loans Corp. to Agent for the benefit of both Lenders whereby FCLT Loans Corp. pledges to Agent and grants to Agent a security interest in all of its general partnership interest in Borrower. Pledged Loan Documents - as defined in the definition of Collateral under this Agreement. Pledged Notes - as defined in the definition of Collateral under this Agreement. Pledged Security Documents - as defined in the definition of Collateral under this Agreement. P.M. - a time from and including twelve o'clock noon to and excluding twelve o'clock midnight on any day using Dallas, Texas time. Pools - the five (5) separate pools (designated as: (i) "TCB - Houston", (ii) "TCB - Dallas", (iii) "Frost", (iv) "FCB-FDIC" and (v) "FCB Estate") into which the Portfolio Assets have been segregated. The respective Pools into which the Tier 1 Assets and the Tier 2 Assets have been segregated have been shown on the Borrowing Base Schedule attached hereto as Exhibit D. Portfolio Assets - collectively, all Collateral Loans and all REO Properties. -24- Portfolio Committee - the "Portfolio Committee" under that certain Liquidating Trust Agreement dated as of July 3, 1995 pursuant to which FC Liquidating Trust was created. Power of Attorney - an irrevocable Power of Attorney to be delivered by Borrower to Agent on the Closing Date, as more specifically defined in Section 11.1 of this Agreement. Prime Rate - the floating rate of interest per annum announced by NationsBank from time to time as being its "prime rate" of interest, such interest rate to be adjusted on the effective date of any change thereof by NationsBank. Prime Rate Loan - any Loan Proceeds bearing interest at Effective Prime. Principal Payments - all payments of principal under the Notes. Prohibited Transaction - any transaction set forth in Section 406 of ERISA or Section 4975 of the Internal Revenue Code of 1986. Property Manager - an independent management firm which has been retained by Servicer or by an REO Affiliate to manage an REO Property. Property Management Agreement - as to each REO Property, an agreement between Servicer or the respective REO Affiliate and the respective Property Manager which contains provisions whereby such Property Manager agrees (i) to collect all Gross Income with respect to such REO Property, (ii) to pay when due all Operating Expenses (exclusive of taxes) with respect to such REO Property, (iii) by not later than fifteen (15) days after the end of each calendar month, to pay to Servicer or such REO Affiliate all Net Operating Income from such REO Property with respect to the calendar month in question, (iv) to render such other services as may be agreed upon by Servicer or such REO Affiliate and such Property Manager and (v) that such Property Management Agreement may be terminated by Lenders upon the occurrence of an Event of Default hereunder and, upon such termination and upon Lenders's written request, to deliver to Lenders all funds, books, records, leases and other documents in such Property Manager's possession with respect to the REO Property in question. Real Estate Loan - Each loan acquired by Borrower pursuant to one of the Sale Agreements which is secured by Liens (e.g. a deed of trust, mortgage, etc.) on real estate. RCRA - the Resource Conservation and Recovery Act of 1976 (42 U.S.C. Sections 6901, et seq.), as amended from time to time. -25- Regulation D - as defined in Section 4.3 of this Agreement. Released Asset - as defined in Section 6.6 of this Agreement. Release Price - as defined in Section 6.6 of this Agreement. REO Affiliates - (i) FCLT REO One, L.P., a Texas limited partnership ("FCLT One L.P."), having FCLT REO One Asset Corp., a Texas corporation ("FCLT One Corp.") as its general partner, (ii) FCLT REO Two, L.P, a Texas limited partnership ("FCLT Two L.P."), having FCLT REO Two Asset Corp., a Texas corporation ("FCLT Two Corp."), as its general partner and (iii) any other legal entity (such as a limited partnership or a corporation) which is 100% owned, directly or indirectly, by Borrower and/or the limited partners of Borrower and/or the General Partner or any combination thereof, the ownership interests in which have been pledged to Agent and which has been approved by Lenders. REO Note - as to each REO Property, a demand promissory note which (i) is in form and substance satisfactory to Lenders (ii) is executed and delivered to Borrower by the REO Affiliate which owns the REO Property in question, (iii) is in an amount equal to not less than 130% of the Allocated Value of the REO Property in question, (iv) bears interest at Effective Prime with a provision whereby such interest rate shall increase to the Default Rate upon the occurrence of a default thereunder, (v) requires the payment of interest monthly in arrears on the last day of each month, (vi) requires a monthly principal payment in an amount equal to all Net Operating Income received by such REO Affiliate with respect to each calendar month minus any interest paid by such REO Affiliate to Borrower with respect to the month in question and (vii) contains provisions whereby the occurrence of an Event of Default hereunder shall constitute an event of default under such REO Note. REO Property - any real property, or any interest therein, now or hereafter legally or beneficially owned by Borrower or an REO Affiliate including, without limitation, any real property which has been foreclosed upon by a Seller or Borrower or an REO Affiliate or which was conveyed to Borrower or an REO Affiliate by a deed in lieu of foreclosure; which REO Property shall in all respects be deemed to be proceeds of the Collateral. REO Security Documents - those certain mortgages or deeds of trust, assignments of leases and rents, security agreements and appropriate UCC financing statements, all in form and substance satisfactory to Lenders, as required by Lenders in their sole discretion for each REO Property, to be executed by REO Affiliate(s) in favor of Borrower and pursuant to the terms of which, as security for the applicable REO Note (and, at Lenders' option, the Notes), there shall be (a) granted and conveyed to -26- Borrower Liens upon each REO Property (including, all personal property associated therewith) owned by REO Affiliate(s) from time to time as is described therein and (b) assigned to Borrower all leases and rents with respect thereto; as the same may be amended, renewed, modified, extended or restated from time to time with the consent of Lenders. REO Tax Escrow Payments - All payments made by REO Affiliates to Borrower for a specified purpose (such as real estate tax payments, insurance premiums, etc.) other than payments of principal, interest, fees and other amounts owed to Borrower with respect to the Loan evidenced the respective REO Note. Reportable Event - any of the events set forth in Section 4043(b) of ERISA. Responsible Officer - for each entity which is required to provide reports hereunder, the chief executive officer, chief financial officer or other vice president designated in writing to Lenders as a "Responsible Officer". Revolving Advances - as defined in Section 2.1.3 of this Agreement. Sale Agreements - Collectively, (i) the FDIC Loss Sharing Agreement, (ii) the Frost Purchase Agreement, (iii) the TCB Purchase Agreement, and (iv) the Interim FDIC Settlement Agreement. Security Agreement - that certain Security Agreement and Assignment of Rights of even date herewith from Borrower to Agent for the benefit of both Lenders whereby Borrower grants Agent a security interest in the Collateral; together with any modifications thereof, additions thereto and substitutions therefor. Security Documents - The following documents: the (i) Security Agreement, (ii) Assignments, (iii) Custodial Agreement, (iv) Lock-Box Agreement, (v) Escrow Agreement, (vi) Indemnity Agreement, (vii) UCC-1 Financing Statements; (viii) Pledge Agreements, (ix) LT Loan Documents and (x) all other agreements and documents executed by Borrower or Servicer now or at any time hereafter securing the whole or any part of the Obligations, as amended, renewed, modified, extended or restated from time to time. Seller or Sellers - individually or collectively, the FDIC, TCB and Frost. Servicer - New FirstCity (which may also be doing business under the name "J-Hawk Corporation") or any replacement servicer designated by Borrower and approved in writing by Lenders. All -27- references to Servicer shall be deemed to refer to each of such parties, all of such parties and any of such parties. Servicer Advances - all advances made to Borrower by Servicer in order to provide Borrower with funds to pay Approved Expenditures. Services Agreement - that certain Investment Management Agreement of even date herewith by and among New FirstCity, Borrower, FC Liquidating Trust, FCLT One Corp. and FCLT Two Corp., or any replacement to such agreement which is entered into by Borrower with a replacement servicer and which is approved in writing by Lenders. Senior Subordinated Certificate Payments - payments required to be paid to New FirstCity under the Class A Certificate in order to provide New FirstCity with funds sufficient to make the scheduled payments required to be paid under the Senior Subordinated Notes. Senior Subordinated Notes - those certain "Senior Subordinated Notes" dated July 3, 1995 issued by New FirstCity to the present Class A preferred shareholders of FCBOT pursuant to the Joint Plan; which Senior Subordinated Notes (i) are in the combined principal amount of $106,690,029, (ii) bear interest at the rate of nine percent (9%) per annum payable quarterly and (iii) require one (1) principal payment in the amount of $53,345,014.50 on September 30, 1996 and an additional principal payment in the amount of $53,345,014.50 on September 30, 1997. Settlement - with respect to any Collateral Loan, the satisfaction of Borrower's claims against the respective Account Debtor in connection with such Collateral Loan, whether pursuant to a full or discounted repayment. Special Preferred Stock Payments - all dividends, redemption amounts and other amounts at anytime payable to holders of the "New Special Preferred Stock" issued by New FirstCity; which Special Preferred Stock Payments are in all respects subordinate to the Financing Facility. Subordinate Note - the $150,000,000 Subordinate Promissory Note of even date herewith executed by Borrower and delivered to Subordinated Lender; together with any renewals, extensions or modifications thereof or substitutions therefor. Subordinate Security Agreement - that certain Subordinate Security Agreement and Assignment of Rights of even date herewith from Borrower to Subordinated Lender whereby Borrower grants Subordinated Lender a security interest in the Collateral which is in all respects subordinate and inferior the Liens on the -28- Collateral held by Agent and/or Lenders; together with any modifications thereof, additions thereto and substitutions therefor. Subordination Agreement - that certain Subordination Agreement by and among Borrower, Agent and Subordinated Lender of even date herewith whereby Subordinated Lender agrees, among other things, that the Subordinated Indebtedness and all of its rights under the Subordinated Indebtedness Documents are in all respects subordinate and inferior to the rights of Agent and Lenders under the Loan Documents. Subordinated Indebtedness - all Indebtedness of Borrower to Subordinated Lender of every type and nature, whether now existing or hereafter arising. Subordinated Indebtedness Documents - the Subordinate Note, the Subordinate Security Agreement and all other documents and instruments evidencing, securing or executed in connection with the Subordinated Indebtedness, whether now existing or hereafter arising. Subordinated Lender - FC Liquidating Trust. Tax Escrow Account - an account to be opened in the name of Borrower and maintained at Fleet's main office, 111 Westminster Street, Providence, Rhode Island 02903 into which Tax Escrow Payments are to be deposited, as more particularly defined in the Escrow Agreement. Tax Escrow Payments - all payments made by Account Debtors (including REO Affiliates) for a specified purpose (such as real estate tax payments, insurance payments, etc.) other than payments of principal, interest, fees and other amounts owed to Borrower with respect to the Collateral Loans and all Net Insurance and Condemnation Proceeds received by Borrower which are not available to be applied to the outstanding balance under the Collateral Loan in question but, rather, are required by the Collateral Loan Documents in question to be used for purposes of repairing or rebuilding of the real property in question. TCB - Texas Commerce Bank National Association, a national banking association. TCB Letters of Credit - jointly (i) that certain Letter of Credit No. RS1036996 in the amount of Twelve Million Five Hundred Thousand Dollars ($12,500,000) dated July 11, 1995 and issued to TCB by Fleet (the "Fleet - TCB LC") pursuant to the Fleet - TCB LC Application; and (ii) that certain Letter of Credit No. 151615 in the amount of Twelve Million Five Hundred Thousand Dollars -29- ($12,500,000) dated July 11, 1995 issued to TCB by NationsBank (the "NationsBank - TCB LC") pursuant to the NationsBank - TCB LC Application; and any future amendments, extensions, replacements or substitutions therefor or for either of them, whether of the same amount(s) or otherwise. TCB LC Applications - jointly and severally (i) that certain Application and Agreement for Standby Letter of Credit dated July 6, 1995 executed and delivered by Borrower to Fleet requesting the issuance by Fleet of a Letter of Credit in the amount of Twelve Million Five Hundred Thousand Dollars ($12,500,000) in favor of TCB (the "Fleet - TCB LC Application"); and (ii) that certain Application and Agreement for Standby Letter of Credit dated July 6, 1995 executed and delivered by Borrower to NationsBank requesting the issuance by NationsBank of a Letter of Credit in the amount of Twelve Million Five Hundred Thousand Dollars ($12,500,000) in favor of TCB (the "NationsBank - TCB LC Application"); and any future amendments thereof. TCB LC Documents - collectively, the TCB LC Applications and the TCB Letters of Credit. TCB Purchase Agreement - That certain Purchase Agreement between TCB and FCBOT, a copy of which is attached to the Motion to approve Loss Sharing Agreements as Exhibit B. Tenant Security Deposits - all security deposits paid to Servicer or Property Managers by tenants of space in one of the REO Properties. Term - the period commencing on the Closing Date and ending on the Maturity Date, as the same may be extended pursuant to the terms hereof. Tiers - the three (3) separate tiers (designated as (i) "Tier 1", (ii) "Tier 2", and (iii) "Tier 3") to which the Portfolio Assets have been divided for administrative purposes. Tier 1 Assets - the Portfolio Assets designated in the effective Borrowing Base Schedule as being in Tier 1. As set forth in the Borrowing Base Schedule attached hereto as Exhibit D, 59 Portfolio Assets have been designated as Tier 1 Assets. Tier 2 Assets - the Portfolio Assets designated in the effective Borrowing Base Schedule as being in Tier 2. As set forth in the Borrowing Base Schedule attached hereto as Exhibit D, 236 Portfolio Assets have been designated as Tier 2 Assets. Tier 3 Assets - Portfolio Assets which are not (at the time in question) Tier 1 Assets or Tier 2 Assets. -30- Tier 3 Custodian - New FirstCity, in its capacity as custodian under the Tier 3 Custodial Agreement. Tier 3 Custodial Agreement - that certain Tier 3 Custodial Agreement by and among the Tier 3 Custodian, Borrower, Agent and Subordinated Lender whereby the Tier 3 Custodian agrees to act as bailee for the documents evidencing the Collateral Loans which constitute Tier 3 Assets, as such Tier 3 Custodial Agreement hereafter be amended or supplemented from time to time together with any replacement or substitution therefor. Title Certificate - (i) as to any parcel of REO Property, a Certificate issued by the Title Company to Lenders, showing title to the REO Property in question to be vested in an REO Affiliate, reflecting the recording of the respective REO Security Documents thereon, reflecting the recording of the Assignment of such REO Security Documents to Lenders, showing no Liens or encumbrances except the Permitted Prior Liens and being in all respects otherwise reasonably satisfactory to Lenders; and (ii) as to any parcel of real property securing a Collateral Loan, a Certificate issued by the Title Company to Lenders, reflecting the recording of the respective mortgage or deed of trust which secures such Collateral Loan, the assignment of such mortgage or deed of trust to Borrower and the Assignment thereof to Lenders, showing no Liens or encumbrances except the Permitted Liens and being in all respects otherwise reasonably satisfactory to Lenders. Title Company - such title insurance company(s) as are reasonably satisfactory to Lenders. Title Insurance Policy - (i) as to any parcel of REO Property, an ALTA or ALTEX Standard-Form Mortgagee Title Insurance Policy issued by the Title Company naming Borrower and Lenders as the "Insured", showing title to the REO Property in question to be vested in an REO Affiliate, reflecting the recording of the respective REO Security Documents thereon, reflecting the recording of the Assignment of such REO Security Documents to Lenders, showing no Liens or encumbrances except Permitted Prior Liens and being in all respects otherwise reasonably satisfactory to Lenders; and (ii) as to each parcel of real property securing a Collateral Loan, an ALTA or ALTEX Standard Form Mortgagee Title Insurance Policy issued by the Title Company naming Borrower and Lenders as the "Insured", reflecting the recording of the respective mortgage or deed of trust which secures such Collateral Loan, the assignment of such mortgage or deed of trust to Borrower and the Assignment thereof to Lenders, showing no Liens or encumbrances except the Permitted Liens and being in all respects otherwise reasonably satisfactory to Lenders. -31- Tranches - the three (3) separate Tranches (designated as "Tranche 1", "Tranche 2" and "Tranche 3") into which the Tier 1 and Tier 2 Assets have been divided for administrative purposes and for purposes of determining the Maximum Facility Availability. Tranche 1 Assets - all Tier 1 Assets and Tier 2 Assets which have been designated as being in Tranche 1 in the effective Borrowing Base Schedule. As of the date hereof, 206 Portfolio Assets have been designated as being Tranche 1 Assets in the Borrowing Base Schedule attached hereto as Exhibit D. Tranche 2 Assets - all Tier 1 Assets and Tier 2 Assets which have been designated as being in Tranche 2 in the effective Borrowing Base Schedule. As of the date hereof, 86 Portfolio Assets have been designated as being Tranche 2 Assets in the Borrowing Base Schedule attached hereto as Exhibit D. Tranche 3 Assets - the 3 Portfolio Assets designated in the Borrowing Base Schedule attached hereto as Exhibit D as being Tranche 3 Assets. Trust Assets - all assets owned by FC Liquidating Trust. UCC-1 Financing Statements - UCC-1 Financing Statements showing Borrower as "Debtor" and Agent as "Secured Party", and listing all of the Collateral; each of which UCC-1 Financing Statements shall be in form and substance satisfactory to Lenders. UCC Filing Offices - Each of the following filing offices with which UCC-1 Financing Statements are to be filed: (i) Texas Secretary of State; and (ii) All filing offices required in connection with any REO Security Documents. Unrelated Third Party. Any Person who or which is not an Affiliate of Borrower, any REO Affiliate, any of Borrower's or any REO Affiliate's partners, the Servicer or the Subordinated Lender. 1.2. Accounting and Other Terms. All accounting terms not specifically defined herein shall be construed in accordance with GAAP consistent with that applied in preparation of the financial statements referred to in Section 8.1.11, and all financial data pursuant to the Agreement shall be prepared in accordance with such principles. All other terms contained in this Agreement shall have, when the context so indicates, the meanings provided for by the Code to the extent the same are used or defined therein. -32- 1.3. Certain Matters of Construction. The terms "herein", "hereof" and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular section, paragraph or subdivision. Any pronoun used shall be deemed to cover all genders. The section titles, table of contents and list of exhibits appear as a matter of convenience only and shall not affect the interpretation of this Agreement. All references to statutes and related regulations shall include any amendments of same and any successor statutes and regulations. All references to any instruments or agreements, including, without limitation, references to any of the Loan Documents, shall include any and all modifications or amendments thereto and any and all extensions or renewals thereof. SECTION 2 FINANCING FACILITY 2.1. The Loan and Letters of Credit. 2.1.1 Commitment of Lenders. Notwithstanding the fact that the combined principal amounts of the Notes equal $100,000,000.00 and that the combined amounts of the Letters of Credit equal $27,000,000, at no time shall the commitment of Lenders exceed the Maximum Facility Availability. 2.1.2 Letters of Credit. Contemporaneously herewith Lenders are issuing the Letters of Credit to Frost and TCB. Notwithstanding anything to the contrary contained in any of the Letter of Credit Agreements, it is agreed that in the event of any conflict between the provisions of this Agreement and the provisions of any of the Letter of Credit Agreements, the provisions of this Agreement will govern and control. To the extent that funds are ever drawn under any of the Letters of Credit, (i) each such draw will be paid by the issuing Lender in question, (ii) Disbursing Agent will promptly pay any then existing Excess DA Funds to each of the Lenders in reimbursement of such draw(s) and (iii) each of the Lenders will make an equal advance under their respective Notes in an amount sufficient to reimburse both Lenders for the balance of such draw(s). 2.1.3 Revolving Loans. Subject to the terms and conditions of this Agreement and the other Loan Documents, Lenders each agree, on a several and not on a joint basis, to make advances of 50% of the proceeds of the Loan to Borrower on a revolving basis up to the Maximum Revolver Availability; which Maximum Revolver Availability, as calculated at any time shall be the maximum combined amount of the proceeds of the Loan which Lenders shall ever be obligated to advance. Subject to the above, advances of Loan Proceeds shall be made by Lenders in accordance with the following: -33- (a) Initial Advance. In connection with the closing of the Financing Facility, Lender will make an initial advance of the Loan Proceeds (the "Initial Advance") in an amount equal to such Closing Expenditures as Borrower may request and Lenders may approve; and (b) Revolving Advances. After the Closing Date, on up to two (2) Business Days selected by Borrower in each calendar month and on such additional Business Days as are required in connection with advances required to be made by Borrower to Account Debtors under Collateral Loans (each an "Advance Date") through the Maturity Date, Lenders shall make advances ("Revolving Advances") under the Notes for Approved Expenditures and for the repayment of Servicer Advances, as detailed in a Notice of Borrowing which has been received by Disbursing Agent and Lenders not later than five (5) Business Days prior to the respective Advance Date requested by Borrower. To the extent that, on any Advance Date upon which Lenders have agreed to make any advance of Loan Proceeds, there exist Excess DA Funds, as determined by Disbursing Agent, then on such Advance Date, (i) Disbursing Agent shall advance to Borrower all then existing Excess DA Funds and (ii) Lenders shall advance to Borrower under the Notes the balance of the amount requested in the respective Notice of Borrowing and so approved by Lenders. 2.1.4 The Loan to Constitute One Obligation. The Financing Facility shall constitute one general obligation of Borrower to Lenders, and shall be secured by Lenders' security interests in and Liens upon all of the Collateral, and by all other security interests and Liens heretofore, now or at any time or times hereafter granted by Borrower to Lenders. Lenders shall enter the Loan and all advances made by Lenders thereunder as debits to loan accounts established on the books of Lenders and shall also record in such loan accounts all payments made by Borrower on any Obligations and all proceeds of Collateral which are finally paid to Lenders, and may record therein, in accordance with customary accounting practice, all charges and expenses properly chargeable to Borrower and any other Obligation. Absent manifest error, each Lender's books and records with respect to the loan account shall be conclusive and binding evidence of the outstanding amount of the Obligations and such books and records may be admitted in evidence in any proceeding to enforce the Lenders' rights with respect to the Obligations. 2.2. Manner of Borrowing. 2.2.1 Request for Loan. In connection with the Initial Advance and each Revolving Advance requested by Borrower, Borrower shall give Disbursing Agent (with a copy to Fleet) a written notice (a "Notice of Borrowing") specifying (i) the amount of Loan Proceeds which Borrower is requesting be advanced, (ii) the -34- Advance Date upon which Borrower requests Lenders to make such advance of Loan Proceeds and (iii) where Borrower requests Lenders to wire such Loan Proceeds to a third party, the relevant wiring instructions. Each Notice of Borrowing shall have attached to it (a) a fully executed Advance Certificate, (b) such additional Schedules with respect to the Assets as Disbursing Agent may request and (c) a Schedule which contains a detailed listing of all Approved Expenditures and Servicer Advances for which Borrower is requesting the advance of Loan Proceeds in question and which contains a listing of all such Approved Expenditures and all other Approved Expenditures with respect to which Revolving Advances have been made during the calendar quarter in question and a comparison of same to the then effective Approved Budgets on a quarter-to-date basis; which Schedule shall be accompanied by such invoices and other backup information as Disbursing Agent may require. Each Notice of Borrowing shall be irrevocable and binding on Borrower. Lenders will have no obligation to make any advances in excess of the amount of Loan Proceeds specified in the Notice of Borrowing delivered to Disbursing Agent in connection with the Initial Advance or the respective Revolving Advance. In addition: (a) The submission of each Notice of Borrowing to Disbursing Agent shall constitute a reaffirmation by Borrower of each and every representation and warranty contained in this Agreement as of the date of such Notice of Borrowing and a further representation, warranty and covenant that no Default or Event of Default then exists and that Borrower knows of no fact or circumstance which will or could prejudice the repayment of the Financing Facility; (b) To the extent that Lenders make a Revolving Advance on a day other than an Interest Adjustment Date, the Contract Rate applicable to such Revolving Advance shall be Effective Prime until the next Interest Adjustment Date; (c) Each Lender will advance 50% of each Revolving Advance by (i) in the case of Fleet, depositing same in the Operating Reserve Account at Fleet and (ii) in the case of NationsBank, wire transferring same into the Operating Reserve Account at Fleet; and (d) Each Advance Date requested by Borrower shall be not less than five (5) Business Days (or such shorter period as may be agreed to by Disbursing Agent) after Lenders receive the respective Notice of Borrowing together with all required attachments. 2.2.2 Delivery of Advance Documents. On or before the Closing Date, Borrower shall execute and deliver or cause to be executed and delivered, or cause to be delivered all of the "Documentation" described in Section 3 of this Agreement and Borrower shall also execute and deliver or cause to be executed and -35- delivered or cause to be delivered to Lenders such other documents and statements as Lenders deem advisable (collectively, the "Advance Documents"). 2.2.3 Funding. If, and only if, Borrower satisfies all the conditions set forth in Section 3 of this Agreement, Lenders shall make available the requested Loan Proceeds to or on behalf of Borrower. SECTION 3 CONDITIONS PRECEDENT AND CONDITIONS SUBSEQUENT 3.1 Conditions Precedent. Notwithstanding any other provision of this Agreement or any of the other Loan Documents, and without affecting in any manner the rights of Lenders under the other sections of this Agreement, it is understood and agreed that Lenders shall be under no obligation to make the Initial Advance or any Revolving Advances or to issue the Letters of Credit, as contemplated under this Agreement, unless and until Lenders shall have received each of the following documents and each of the following conditions has been and continues to be satisfied, all in form and substance satisfactory to Lenders and their counsel: 3.1.1. Loan Documents. This Agreement and the other Loan Documents (including all of the Other Agreements), duly executed and delivered by the parties thereto; 3.1.2 Subordinated Indebtedness Documents. Certified copies of all of the Subordinated Indebtedness Documents together with a certification from Borrower and Subordinated Lender that such documents so delivered constitute all of the Subordinated Indebtedness Documents. 3.1.3 Equity Investment. Evidence satisfactory to Lenders (such as the closing statements from the respective Sellers) that, in connection with Borrower's acquisition of the Assets and the Financing Facility, Borrower has expended cash equity funds in an amount contemplated by the Approved Budgets. 3.1.4 Approved Budgets and Business Plans. The Approved Budgets and Business Plans for the liquidation of all of the Tier 1 Assets and Tier 2 Assets except those listed in Exhibit F attached hereto; each of which Business Plans shall have been approved by Servicer, Lenders and (except as to those Assets listed in Exhibit F) the Portfolio Committee. 3.1.5 Cash Reserve Account. Evidence satisfactory to Agent that Borrower has funded the Cash Reserve Account as required by Section 6.5 of this Agreement. -36- 3.1.6 Perfection of Personal Property Liens. With regard to all Collateral comprised of personal property, current lien searches from each of the UCC Filing Offices in each case evidencing that the respective UCC-1 Financing Statement has been filed and constitutes valid and perfected, first priority, security interests in the Collateral, subject only to Permitted Prior Liens with respect to security interests in assets securing payment of a Collateral Loan. 3.1.7 Delivery of Pledged Notes: Receipt by Custodian of one hundred percent (100%), measured both in number and in dollar amount, of the original Pledged Notes constituting Tier 1 Assets and Tier 2 Assets (or, as to each such Pledged Note which has been lost, an original Affidavit of Lost Note attached to which is a copy of such lost Pledged Note), each of which notes shall have been duly endorsed thereon or on an allonge attached thereto (by a complete chain of endorsements from the original holder thereof) to Agent, or, at Agent's option, endorsed in blank. 3.1.8 Organizational Documents. (a) A copy of the Partnership Certificates of Borrower and all REO Affiliates and the Articles/Certificate of Incorporation of the General Partner, Servicer and the corporate general partners of all REO Affiliates, and any amendments thereto, and a copy of the Partnership Agreements of Borrower and all REO Affiliate's and the By-laws of the General Partner, Servicer and the corporate general partners of all REO Affiliates, and any amendments thereto, all certified to as of the Closing Date by the General Partner with respect to Borrower and the General Partner and by the corporate general partner of each REO Affiliate with respect to the REO Affiliate in question; (b) A copy of the FC Trust Agreement and any amendments thereto; all certified to as of the Closing Date by the Portfolio Committee or the Trustee thereunder; (c) Appropriate partnership and corporate resolutions on behalf of the partners of Borrower and each REO Affiliate and the boards of directors of the General Partner, the corporate general partners of each REO Affiliate and the Servicer; and (d) Certificates of existence/subsistence and/or good standing from the Secretary of State of Texas relating to the continuing existence of Borrower, the General Partner, Servicer, each REO Affiliate and the corporate general partner of each REO Affiliate. -37- 3.1.9 Legal Opinions. The written opinions of (i) Vander Woude, Malone & Istre P.C., Akin, Gump, Strauss, Hauer & Feld, L.L.P. and/or other counsel satisfactory to Lenders, regarding the Borrower, the General Partner, each REO Affiliate, FC Liquidating Trust and the Servicer, the due execution and enforceability of the Loan Documents and the transactions contemplated by the Loan Documents and such other matters as Lenders shall reasonably request and (ii) Akin, Gump, Strauss, Hauer & Feld, L.L.P., counsel to the Subordinated Lender, (or other counsel satisfactory to Lenders) regarding the due execution and enforceability of the Subordination Agreement and such other matters as Lenders shall reasonably request; which opinions shall be in all respects satisfactory to Lenders. 3.1.10 Formation Balance Sheets. "Formation Balance Sheets" from FC Liquidating Trust, Borrower and the General Partner, each of which are in all respects reasonably satisfactory to Lenders. 3.1.11 Other Documents. Such other documents, instruments and agreements as Agent or Lenders shall reasonably request in connection with the transaction contemplated hereby, including, without limitation, a Power of Attorney and such other documents, instruments and agreements as Agent or Lenders reasonably determine are necessary at any time to perfect any of their security interests in the Collateral. 3.1.12 Information Concerning the Collateral Loan Pool. Any and all information and documentation Agent or Lenders deem necessary to conduct Lenders' analysis of the Collateral Loan Pool. 3.1.13 Other Conditions. The following other conditions have been and shall continue to be satisfied: (a) Defaults. No Default or Event of Default shall exist hereunder or under the Subordinated Credit Agreement, the Subordination Agreement or the Services Agreement; (b) Material Adverse Changes. Since formation of Borrower, there shall not have occurred any material adverse change in the business, financial condition or results of operations of Borrower, or the existence or value of any Collateral, or any event, condition or state of facts which would reasonably be expected materially and adversely to affect the business, financial condition or results of operations of Borrower; (c) Proceedings, Etc. No action, proceeding, investigation, regulation or legislation shall have been instituted, threatened or proposed before any court, governmental agency or legislative body to enjoin, restrain or prohibit, or to -38- obtain damages in respect of, or which is related to or arises out of this Agreement or the consummation of the transactions contemplated hereby or which, in either Lender's judgment, would make it inadvisable to consummate the transactions contemplated by this Agreement or any of the other Loan Documents; (d) Payment of Origination Fee and Lender's Transaction Costs. Borrower shall have paid (i) the Origination Fee described in Section 4.5 below, and (ii) all of Lenders' Transaction Costs; (e) Representations and Warranties. All representations and warranties made to Agent or Lenders by Borrower or any of Borrower's partners in connection with the application for, processing of and closing of the Loan shall be true and correct as if made on the Closing Date. 3.2 Conditions Subsequent. In addition to the Conditions Precedent to funding set forth in Section 3.1 above, Lenders shall have received the following within the time periods listed below: 3.2.1 Purchase Documentation. Within thirty (30) days after the Closing Date, certified (by Borrower) copies of all final executed documentation related to Borrower's acquisition of the Assets; provided, however, upon either Lender's request (at any time prior to the expiration of such thirty (30) days) Borrower shall promptly deliver to Lenders photocopies of such specific purchase documents as either Lender may reasonably request. 3.2.2 Perfection of Real Property Liens. With regard to Collateral comprised of real property (including Collateral Loans secured by real property) Title Certificates or Title Insurance Policies in accordance with Section 8.1.24 hereof; 3.2.3 Collateral Loan Documents. (a) Within twenty (20) days after the Closing Date, evidence satisfactory to Lenders that the Custodian has received one hundred percent (100%) of (i) any and all "Possessory Collateral" (as defined in the Custodial Agreement) with respect to all Tier 1 Assets and all Tier 2 Assets other than the Pledged Notes delivered pursuant to Section 3.1.8 above, and (ii) one set of originals of all Assignments with respect to all Tier 1 Assets and all Tier 2 Assets; and (b) Within fifteen (15) days after Borrower's receipt of same, the originals of all Assignments and all REO Security Documents which have been recorded with the appropriate records of land evidence pursuant to Section 8.1.24 below; and -39- (c) As to all Collateral Loans which constitute Tier 1 Assets or Tier 2 Assets, within twenty one (21) days after the Closing Date, (i) a "master" listing of all Collateral Loan Documents received by Borrower or Servicer in connection with Borrower's purchase of such Tier 1 and Tier 2 Collateral Loans and noting whether each Collateral Loan Document is an original or a photocopy (the "Master List"); which Master List shall have been certified to as being accurate and complete by the Servicer, and (ii) evidence satisfactory to Lenders that the Custodian has received 100% of all "legal binders" containing originals (or photocopies in instances where originals were not received by Borrower) of all mortgages, deeds of trust and other Collateral Loan Documents (as set forth on the "Master List") with respect to all such Tier 1 and Tier 2 Collateral Loans; and (d) As to all Collateral Loans constituting Tier 3 Assets, within thirty (30) days after the Closing Date, (i) evidence satisfactory to Lenders that the Tier 3 Custodian has received 100% of any and all "Possessory Collateral" (as defined in the Tier 3 Custodial Agreement) with respect to all Tier 3 Assets and (ii) a "master" listing of all Collateral Loan Documents received by the Tier 3 Custodian in connection with Borrower's purchase of such Tier 3 Collateral Loans and noting whether each Collateral Loan Document is an original or a photocopy; which "master" listing shall have been certified to as being accurate and complete by the Tier 3 Custodian. (e) Within fifteen (15) days after either Lender's request, originals of such Collateral Loan Documents as either Lender, in its discretion, may from time to time request. 3.2.4 Additional Conditions Subsequent. Attached hereto as Exhibit G is a listing of additional items to be delivered to Lenders and additional conditions to be satisfied by Borrower subsequent to the Closing Date (the "Additional Conditions Subsequent"). Within the respective time periods set forth on such Exhibit G, Lenders shall have received all items set forth thereon and Borrower shall have satisfied all conditions set forth thereon. 3.2.5 Other. At Lenders' option, the satisfaction of each of the above Conditions Subsequent shall be Conditions Precedent to the funding of any Revolving Advances. SECTION 4 INTEREST, REPAYMENT, FEES AND EXTENSION OPTION. 4.1. Interest 4.1.1 Contract Rate. -40- (a) The unpaid principal balance of the Loan from time to time outstanding shall bear interest at the Contract Rate calculated on a daily basis (computed on the actual number of days elapsed over a year of 360 days) from the date of advance to maturity, at the Contract Rate. Provided however, in the event that the Contract Rate is the Maximum Legal Rate, such Contract Rate shall be computed on the actual number of days elapsed over a year of 365 days or 366 days as applicable. (b) As to all Loan Proceeds outstanding under the Notes on the Closing Date and on each Interest Adjustment Date thereafter, to the extent that the Eurodollar Rate is available pursuant to the terms of this Agreement, the Contract Rate applicable thereto for the entire respective Interest Period shall be the Eurodollar Rate for an Interest Period of one month or Effective Prime, as elected by Borrower. Borrower may elect to allocate up to two separate portions of the outstanding Loan Proceeds to different Contract Rates as specified in an Interest Election; provided however, the minimum amount of each such portion of the outstanding Loan Proceeds shall be $5,000,000. For example, if the $50,000,000 of Loan Proceeds are outstanding on an Interest Adjustment Date, Borrower may elect to have $10,000,000 of such outstanding Loan Proceeds subject to Effective Prime and $40,000,000 of such outstanding Loan Proceeds subject to the Eurodollar Rate for a one month Interest Period. Each separate Contract Rate shall only apply to that portion of the Loan Proceeds as is specified in the Interest Election. In no event shall Lender be obligated to permit Borrower to have more than two (2) separate Contract Rates in effect at any one time. (c) As to all Loan Proceeds advanced on any day other than an Interest Adjustment Date, the Contract Rate applicable thereto until the next Interest Adjustment Date shall be Effective Prime. During any period that the Eurodollar Rate is unavailable pursuant to the terms of this Agreement, the Contract Rate shall be Effective Prime. (b) With respect to any Loan Proceeds as to which the Contract Rate is the Eurodollar Rate, the Contract Rate shall be adjusted as of each Interest Adjustment Date with respect to such Eurodollar Loan. As to any Loan Proceeds with respect to which the Contract Rate is Effective Prime, Effective Prime shall be increased or decreased, as the case may be, by an amount equal to any increase or decrease in the Prime Rate, with such adjustments to be effective as of the opening of business on the Business Day that any such change in the Prime Rate becomes effective. 4.1.2 Interest Period in Absence of Interest Election. If, by not later than three (3) Business Days prior to the next -41- Interest Adjustment Date, Disbursing Agent has not received an Interest Election by Borrower which is effective in accordance with the terms and conditions of this Agreement and which elects to have a portion of the then outstanding Loan Proceeds subject to Effective Prime, then on such Interest Adjustment Date, the Contract Rate on all then outstanding Loan Proceeds shall thereupon become the Eurodollar Rate. 4.1.3 Default Rate. Upon and after the occurrence of an Event of Default and during the continuation thereof and from and after the Maturity Date, the principal amount of all Obligations shall bear interest, calculated daily (computed on the actual days elapsed over a year of 360 days), at the Default Rate. Provided however, in the event that the Contract Rate is the Maximum Legal Rate, such Contract Rate shall be computed on the actual number of days elapsed over a year of 365 days or 366 days as applicable. 4.1.4 Late Charges. In the event that any payment of principal or interest herein provided for shall become overdue for more than ten (10) days after notice given under Section 9.1.1 hereof, a "late charge" of five percent (5%) of the overdue payment shall become immediately due and payable to the Lenders as liquidated damages for failure to make prompt payment, and the same shall be secured by the Security Documents. 4.1.5 Interest Installments. All accrued, but unpaid, interest on the Notes shall be due and payable, in arrears, on the last day of each calendar month commencing July 31, 1995. 4.1.6 Recapture of Interest. Notwithstanding the foregoing, if at any time the amount of interest computed on the basis of the Contract Rate or the Default Rate would exceed the Maximum Legal Rate, then the interest payable under this Agreement shall be computed upon the basis of the Maximum Legal Rate, but any subsequent reduction in the Contract Rate or Default Rate, as applicable, shall not reduce such interest thereafter payable hereunder below the amount computed on the basis of the Maximum Legal Rate until the aggregate amount of such interest accrued and payable under this Agreement equals the total amount of interest which would have accrued if such interest had been at all times computed solely on the basis of the Contract Rate or Default Rate, as applicable. 4.1.7 Maximum Interest Rate. Regardless of any provision contained in any of the Loan Documents, Lenders shall never be entitled to contract for, charge, take, reserve, receive, or apply, as interest on the Obligations, or any part thereof, any amount in excess of the Maximum Legal Rate, and, in the event either Lender ever contracts for, charges, takes reserves, -42- receives, or applies as interest any such excess, it shall be deemed a partial prepayment of principal and treated hereunder as such and any remaining excess shall be refunded to Borrower. In determining whether or not the interest paid or payable, under any specific contingency, exceeds the Maximum Legal Rate, Borrower and Lenders shall, to the maximum extent permitted under applicable law, (a) treat the Loan as but a single extension of credit (and Lenders and Borrower agree that such is the case), (b) characterize any non-principal payment as an expense, fee, or premium rather than as interest, (c) exclude voluntary prepayments and prepayments resulting from the exercise by Lenders of its remedies upon the occurrence of an Event of Default and, in each case, the effects thereof, and (d) "spread" the total amount of interest throughout the entire contemplated term of the Obligations; provided that, if the Obligations are paid and performed in full prior to the end of the full contemplated term thereof, and if the interest received for the actual period of existence thereof exceeds the Maximum Legal Rate, Lenders shall refund such excess, and, in such event, Lenders shall not be subject to any penalties provided by any laws for contracting for, charging, taking, reserving, or receiving interest in excess of the Maximum Legal Rate. The provisions of this Section 4.1.6 shall be deemed to be incorporated into every document or communication relating to the Obligations which sets forth or prescribes any account, right or claim or alleged account, right or claim of Lenders with respect to Borrower (or any other obligor in respect of Obligations), whether or not any provision of this Section 4.1.6 is referred to therein. All such documents and communications and all figures set forth therein shall, for the sole purpose of computing the extent of the Obligations and obligations of the Borrower (or other obligor) asserted by Lenders thereunder, be automatically recomputed by any Borrower or obligor, and by any court considering the same, to give effect to the adjustments or credits required by this Section 4.1.6. 4.1.8 Amendments to Current Law. If the applicable state or federal law is amended in the future to allow a greater rate of interest to be charged under this Agreement or the other Loan Documents than is presently allowed by applicable state or federal law, then the limitation of interest hereunder shall be increased to the maximum rate of interest allowed by applicable state or federal law as amended, which increase shall be effective hereunder on the effective date of such amendment, and all interest charges owing to Lenders by reason thereof shall be due and payable upon the earlier of six (6) months from the effective date of such amendment or the termination of this Agreement. 4.2. Principal Repayment. 4.2.1 Maturity Date. Subject to the Borrower's option to extend the same on the terms and conditions set forth in Section -43- 4.6 below, all unpaid principal, interest and other Obligations shall be paid in full on the Maturity Date. 4.2.2 Mandatory Payments - Foreclosure Under Collateral Loans. (a) Without Lenders' prior written consent, Borrower shall not consummate foreclosure proceedings against any real property securing any Collateral Loan having an Allocated Value in excess of $100,000 without having first delivered to Lenders a new Environmental Site Assessment(s) (or a copy of the Environmental Site Assessment with respect to the real property in question which was delivered to Lenders in connection with closing of the Loan (the "Original ESA") and which is accompanied by such updates as Lenders may reasonably require) with respect to the real property in question and either (i) received Lenders' written acknowledgement that the results thereof are acceptable to Lenders or (ii) received Lenders' written approval of a plan of remediation and deposited with Agent an amount which is equal to 120% of the estimated costs of effectuating such remediation plan, as reasonably approved by Lenders; and (b) If at any time Borrower forecloses its liens upon any asset securing payment of a Collateral Loan, which asset has an Allocated Value or an estimated value at the time of the proposed foreclosure of $100,000 or more, and Lenders reasonably believe that the foreclosure may result in a liability to Lenders or Borrower or the REO Affiliate in question under any Environmental Laws, Borrower, upon demand made by Lenders, shall make a prepayment on the Loan (a "Mandatory Payment") in an amount equal to the Minimum Release Price of such Asset, and Lenders shall release any Liens it holds upon such asset. 4.2.3 Prepayment and Certain Payments. (a) All or any portion of the unpaid principal balance of any Prime Rate Loan may be prepaid at any time by a payment to Agent of immediately available Dollars by the Borrower, and all or any portion of the unpaid principal balance of any Eurodollar Loan may be prepaid or paid to Disbursing Agent by a payment of immediately available Dollars on the Interest Adjustment Date for such Loan, upon three (3) Business Days' prior written notice from the Borrower to Agent, in each case without premium or penalty, except as provided in Section 4.7; provided that all such payments and prepayments of Eurodollar Loans shall be accompanied by the interest accrued on the principal amount being paid or prepaid through the date of payment or prepayment. All Principal Payments received by Disbursing Agent shall first be applied to any outstanding Prime Rate Loan. If there is no Prime Rate Loan outstanding, any Principal Payments received by Disbursing Agent on -44- a day that is not a Interest Adjustment Date, shall be deposited in the Disbursement Account and shall be then applied against the outstanding Eurodollar Loan on the next succeeding Interest Adjustment Date with respect thereto. (b) In the event that there occurs any payment or prepayment of all or any portion of the Loan, Agent shall allocate any such payment or prepayment to any outstanding Prime Rate Loan, if any, until paid or prepaid in full and thereafter to the Eurodollar Loan. In the event that any mandatory payment is required upon acceleration or for any other reason (including without limitation any Mandatory Payment under Section 4.2.2), and on the date any such payment is due, the amount of Prime Rate Loans, if any, plus the amount of Eurodollar Loans as to which such date is an Interest Adjustment Date for such Eurodollar Loans is less than the amount of such required payment or prepayment, such payment or prepayment shall nevertheless be paid in full by the Borrower when due and the proceeds thereof will be applied first to any outstanding Prime Rate Loan until paid in full, second to the Eurodollar Loans as to which such date is an Interest Adjustment Date for such Eurodollar Loans until paid in full, and thereafter to the Disbursement Account for disbursement in accordance with Section 5 below. 4.2.4 Net Payments. All payments by Borrower of principal, interest, fees, indemnities and other amounts payable to Lenders hereunder shall be made without set-off or counterclaim. 4.2.5 Application of Payments and Collections. After the occurrence of an Event of Default and during the continuance thereof, Borrower shall have no right, and it hereby irrevocably waives the right, to direct the application of any and all payments and collections at any time or times received by Agent or Lenders from or on behalf of Borrower, and Borrower does hereby irrevocably agree that Lenders shall, after the occurrence of an Event of Default and during the continuance thereof, have the continuing exclusive right to apply and reapply any and all such payments and collections received at any time or times by Agent or Lenders against the Obligations, in such manner as Lenders may deem advisable, notwithstanding any entry by Lenders upon any of their books and records. 4.3. Cost Protection. 4.3.1 Taxes or Assessments. If (i) after the date hereof, the FDIC, (ii) after the date hereof, Regulation D of the Board of Governors of the Federal Reserve System ("Regulation D"), (iii) the adoption after the date hereof of any law, (iv) any change after the date hereof in any law, (v) any published change after the date hereof in the interpretation or administration -45- thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or (vi) compliance by either Lender with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency: (a) shall subject either Lender to any tax, duty or other charge with respect to any loans made by either Lender, or shall change the basis of taxation of payments to either Lender of the principal of or interest on the Loan or any other amounts due under this Agreement; (b) shall impose, modify or deem applicable any assessment or other charge (including any assessment for insurance of deposits) against assets of, deposits with or for the account of, or credit extended by either Lender; (c) shall impose, modify or deem applicable any reserve (including any reserve imposed by the Board of Governors of the Federal Reserve System), special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by either Lender; or (d) shall impose on either Lender any other condition affecting this Agreement, the Loan or the Notes; and the result of any of the foregoing is to increase the cost to either Lender of making or maintaining the Loan and the Commitment hereunder, or to reduce the amount of any sum received or receivable by either Lender under this Agreement or under the Notes then, within ten (10) days after demand by either Lender (which demand shall be made promptly after such Lender becomes aware of such conditions and shall be accompanied by a statement setting forth the basis of such demand), Borrower shall pay directly to such Lender such additional amount or amounts as will compensate such Lender for that portion of such cost, increased cost or such reduction which relates to Indebtedness of Borrower. Neither costs considered by Agent in determining the Prime Rate nor any federal, state, local or foreign taxes based on gross or net income, or any franchise, net worth or capital tax payable by either Lender, shall be considered in making the determination of increased cost or reduction in amount receivable to Lenders under this Section 4.3.1. Neither Lender shall be entitled to make a demand for and Borrower shall not be liable for payment of any amount under the terms of this provision following payment in full of the Notes. 4.3.2 Capital Adequacy, Etc. If, with respect to all or any portion of the Loan, any adoption of, ruling on, change in, or interpretation of any law or treaty now existing or hereafter promulgated by any tribunal or central bank regarding capital -46- adequacy, or compliance by either Lender with any request, directive, or requirement hereafter imposed by any tribunal or central bank regarding capital adequacy (whether or not having the force of law) hereafter occurs, and, as a result of such adoption, ruling, change, interpretation or compliance, the rate of return on either Lender's capital as a consequence of either Lender's obligations under this Agreement decreases to a level below that which otherwise could have been achieved (taking into consideration its policies with respect to capital adequacy) by an amount deemed by either Lender to be material (and each Lender may, in determining such amount, utilize such assumptions and allocations of costs and expenses as such Lender shall deem reasonable and may use any reasonable averaging or attribution method), and such reduction in the rate of return on such Lender's capital is not compensated for by an increase in the Prime Rate (to the extent the Prime Rate is the rate of interest applicable under the Loan at the time in question), then such Lender shall notify Borrower and deliver to Borrower a certificate setting forth in detail the calculation on a reasonable basis of the amount necessary to compensate such Lender therefor, which certificate shall be conclusive and binding, and Borrower shall promptly pay such amount to such Lender. Notwithstanding the foregoing sentence, Borrower shall not be obligated to pay such amount unless notice thereof is given within ninety (90) Business Days after a Lender actually incurs such reduction in its rate of return. Neither Lender shall be entitled to make a demand for and Borrower shall not be liable for payment of any amount under the terms of this provision following payment in full of the Notes. 4.4. Term of Agreement. The provisions of this Agreement shall be and remain in effect until full and final payment in immediately available funds of all of the Obligations. 4.5. Loan Fees. In connection with the Financing Facility, Borrower shall pay to Lenders the following fees (the "Loan Fees"); which Loan Fees shall be shared by Lenders equally (i.e. 50% each): (i) Origination Fee. (a) Borrower has agreed to pay to Lenders, an origination fee (the "Origination Fee") in the amount of $1,095,000.00. Lenders hereby acknowledge receipt of $300,000.00 of such Origination Fee and Borrower agrees to pay to Lenders on the Closing Date the $795,000.00 balance of the Origination Fee. (b) Tranche 3 Rebate. To the extent that, within sixty (60) days after the Closing Date, Borrower -47- sells or collects amounts due with respect to Tranche 3 Assets and pays to Lenders the appropriate Release Price(s), Lenders will promptly rebate to Borrower a portion of the Origination Fee in an amount equal to the lesser of (a) a combined cumulative amount (i.e., as to all such Tranche 3 Release Prices) of $111,250, or (b) 1.25% of seventy percent (70%) of the Allocated Value of each of such Released Assets. The above rebate provision shall terminate sixty (60) days after the Closing Date. (ii) Administrative Fee. A quarterly Administrative Fee in an amount equal to .0625% of the average Maximum Facility Availability during each calendar quarter; which Fee shall be paid to Lenders within fifteen (15) days after the last day of each calendar quarter; and (iii) Letter of Credit Fees. Quarterly Letter of Credit Fees in an amount equal to .5% of the average outstanding amounts of all of the Letters of Credit during each calendar quarter; which Fees shall be paid to Lenders within fifteen (15) days after the last day of each calendar quarter. 4.6. Option to Extend Maturity Date. All outstanding principal, interest, fees, expenses and other Obligations are due and payable in full on the Maturity Date. Provided, however, upon and subject to the terms and conditions hereinafter set forth, at Borrower's request, Lenders will consider extending the Maturity Date for a period of one (1) year (such extension period to terminate on the 30th day of June, 1998) subject to the prior satisfaction of all of the following conditions precedent: (a) receipt by Agent, at least thirty (30) days prior to the commencement of the extension period, of each of the following: (i) a written request for the extension signed by a Responsible Officer of the General Partner on behalf of the Borrower; and (ii) payment of an extension fee in an amount equal to one percent (1%) of the then Maximum Facility Availability; (b) On June 1, 1997, the then Maximum Facility Availability having been reduced to an amount in all respects satisfactory to Lenders; -48- (c) there shall exist no Default or Event of Default at the time of the submission of such extension request or at any time thereafter; (d) the Borrower, the Subordinated Lender, the Servicer and other parties required by Lenders shall execute and deliver such documents and agreements as Lenders may reasonably require in form satisfactory to Lenders; and (e) the satisfaction of such other conditions as Lenders may reasonably require. Notwithstanding anything to the contrary contained herein, Lenders shall have absolutely no obligations whatsoever to agree to an extension of the Maturity Date; it being understood that Lenders, in their sole and absolute discretion, shall have the right to refuse to grant such extension. 4.7 Special Eurodollar Loan Provisions. All Eurodollar Loans shall be subject to and governed by the following terms and conditions: 4.7.1 Eurodollar Loans Unavailable. Notwithstanding any other provision of this Agreement, if, prior to or on the date on which all or any portion of the Loan is to be made as or converted into a Eurodollar Loan, Disbursing Agent shall determine, for any reason whatsoever (which determination shall be conclusive and binding on Borrower), that: (i) Dollar deposits in the relevant amounts and for the relevant Interest Period are not offered to Disbursing Agent in the interbank eurodollar market referred to below, (ii) by reason of circumstances affecting the interbank eurodollar market referred to below, adequate and reasonable means do not exist for ascertaining the interest rate applicable hereunder to such Eurodollar Loan, or (iii) the Adjusted Eurodollar Rate shall no longer represent the effective cost to Lenders for Dollar deposits in the interbank eurodollar market in which Lenders regularly participate, Lenders shall promptly give notice of such determination and the reason therefor to Borrower, and all or such portion of the Loans, as the case may be, which are subject to any of Section 4.7.1(i) through (iii) as a result of Lenders' determination shall be made as or converted into, as the case may be, Prime Rate Loans and -49- Lenders shall have no further obligation to make Eurodollar Loans, until further written notice to the contrary is given by Lenders to the Borrower. If such circumstances subsequently change so that Lenders shall no longer be so affected, Lenders' obligation to make or maintain all or any portion of the Loans as Eurodollar Loans shall be reinstated when Lenders obtain actual knowledge of such change of circumstances and promptly after obtaining such actual knowledge Lenders shall forward written notice thereof to the Borrower. Upon the first day of the next Interest Period after receipt by the Borrower of such written notice, the Eurodollar Rate shall again be the applicable interest rate in accordance with this Agreement. During any period throughout which Lenders have no obligation to make or maintain the Loan as a Eurodollar Loan, Effective Prime (or the Default Rate, as the case may be) shall be the rate of interest that is payable with respect to all Loans. 4.7.2 Eurodollar Lending Unlawful. In the event that any change in applicable laws or regulations (including the introduction of any new applicable law or regulation) or in the interpretation thereof (whether or not having the force of law) by any governmental or other regulatory authority charged with the administration thereof, shall make it unlawful for Lenders to make or continue to maintain all or any portion of the Loans as Eurodollar Loans, the obligation of Lenders to make or maintain the Loans or such portion thereof as Eurodollar Loans shall, upon the happening of such event, terminate and Lenders shall, by telephonic notice to Borrower, declare that such obligation has so terminated, and the Loans or any portion thereof, to the extent then maintained as Eurodollar Loans, shall, on the last day on which Lenders can lawfully continue to maintain the Loans or any portion thereof as Eurodollar Loans, automatically convert into Prime Rate Loans. If circumstances subsequently change so that Lenders shall no longer be so affected, Lenders' obligation to make or maintain all or any portion of the Loans as Eurodollar Loans shall be reinstated when Lenders obtains actual knowledge of such change of circumstances, and promptly after obtaining such actual knowledge Lenders shall forward written notice thereof to Borrower. Upon the first day of the next Interest Period after receipt by the Borrower of such written notice, the Eurodollar Rate shall again be the applicable interest rate in accordance with this Agreement. During any period throughout which Lenders have no obligation to make or maintain the Loan as a Eurodollar Loan, Effective Prime shall be the rate of interest that is payable with respect to all Loans. 4.7.3 Additional Costs on Eurodollar Loans. Borrower further agrees to pay to Lenders, such amounts as will compensate Lenders for any increase in the cost to Lenders of making or maintaining (or of its obligation to make or maintain) all or any portion of the Loans as Eurodollar Loans and for any reduction in the amount of any sum receivable by Lenders under this Agreement in -50- respect of making or maintaining all or any portion of the Loans as Eurodollar Loans, in either case, from time to time by reason of: (a) any reserve (other than any reserve already reflected in the Adjusted Eurodollar Rate), special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, Lenders, under or pursuant to any law, treaty, rule, regulation (including, without limitation, any Regulations of the Board of Governors of the Federal Reserve System) or requirement in effect on or after the date hereof, any interpretation thereof by any governmental authority charged with administration thereof or by any central bank or other fiscal or monetary authority or other authority, or any requirement imposed by any central bank or such other authority whether or not having the force of law; or (b) any change in (including the introduction of any new) applicable law, treaty, rule, regulation or requirement or in the interpretation thereof by any official authority, or the imposition of any requirement of any central bank, whether or not having the force of law, which shall subject Lenders or Borrower to any tax (other than taxes on net income imposed on Lenders by the United States of America or the state in which the head office of Lenders is located), levy, impost, charge, fee, duty, deduction or withholding of any kind whatsoever or change the taxation of Lenders with respect to making or maintaining all or any portion of the Loans as Eurodollar Loans and the interest thereon (other than any change which affects, and to the extent that it affects, the taxation of net income of Lenders by the United States of America or the state in which the head office of Lenders is located); provided, that with respect to any withholding the foregoing shall not apply to any withholding tax described in sections 1441, 1442 or 3406 of the Internal Revenue Code, or any succeeding provision of any legislation that amends, supplements or replaces any such section, or to any tax, levy, impost, duty, charge, fee, deduction or withholding that results from any noncompliance by Lenders with any federal, state or foreign law or from any failure by Lenders to file or furnish any report, return, statement or form the filing or furnishing of which would not have an adverse effect on Lenders and would eliminate such tax, impost, duty, deduction or withholding. In any such event, Lenders shall promptly notify Borrower thereof in writing stating the reasons therefor and the additional amounts required to fully compensate Lenders for such increased or new cost or reduced amount as determined by Lenders. Such additional amounts shall be payable on each date on which interest is to be paid hereunder. Lenders' certificate as to any such increased or new cost or reduced amount (including calculations, in reasonable detail, showing how Lenders computed such cost or reduction) shall -51- be submitted by Lenders to Borrower and shall, in the absence of manifest error, be conclusive and binding. In determining any such amount, the Lenders may use any reasonable averaging and attribution methods. Neither Lender shall be entitled to make a demand for and Borrower shall not be liable for payment of any amount under the terms of this provision following payment in full of the Notes. 4.7.4 Eurodollar Funding Losses. In the event the Lenders shall incur any loss or expense (including, without limitation, any loss or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by Lenders to fund or maintain all or any portion of the Loans as Eurodollar Loans) as a result of: (a) payment or prepayment by the Borrower of all or any portion of any Eurodollar Loan on a date other than the scheduled last day of the Interest Period applicable thereto, for any reason; or (b) conversion of all or any portion of any Eurodollar Loan on a day other than the last day of an Interest Period applicable to such Loan to a Prime Rate Loan for any reason including, without limitation, acceleration of the Loan upon or after an Event of Default, or any other cause whether voluntary or involuntary and whether or not referred to or described in this Agreement; then upon the request of Lenders, Borrower shall pay directly to Lenders such amount as will (in the reasonable determination of Lenders, which shall be conclusive absent manifest error) reimburse Lenders for such loss or expense with respect to the applicable Interest Period. Lenders shall furnish to the Borrower, upon written request, a written statement setting forth the computation of any such amounts payable to Lenders under this Section 4.7.4. 4.7.5 Banking Practices. Lenders agree that upon the occurrence of any of the events described in Section 4.7.1(i), (ii) or (iii), 4.7.3 or 4.7.4, Lenders will exercise reasonable efforts to take such reasonable actions at no expense to Lenders (other than expenses which are covered by Borrower's advance deposit of funds with Lenders for such purpose, or if Lenders agree, which the Borrower has agreed to pay or reimburse to Lenders in full upon demand), in accordance with Lenders' usual banking practices in such situations and subject to any statutory or regulatory requirements applicable to Lenders, as Lenders may take without the consent or participation of any other person to, in the case of an event described in Sections 4.7.3 or 4.7.4, mitigate the cost of such events to the Borrower and, in the case of an event described in Section 4.7.1(i), (ii) or (iii), to seek Dollar -52- deposits in any other interbank Eurodollar market in which Disbursing Agent regularly participates and in which the applicable determination(s) described in Section 4.7.1(i), (ii) or (iii), as the case may be, does not apply. SECTION 5 CASH FLOW DISTRIBUTIONS & OPERATIONAL ISSUES. 5.1. Net Cash Flow & Excess DA Funds. 5.1.1 Funding of Disbursement Account and Distribution Dates. As set forth in the Lock-Box Agreement and Section 8.1.21 hereof, (i) except as set forth on Exhibit H attached hereto, all Account Debtors (including all REO Affiliates) and all "lead" lenders under Participation Agreements will be advised and instructed to deliver all payments under Collateral Loans directly to the Lock-Box, (ii) Borrower, each REO Affiliate, FC Liquidating Trust and Servicer will promptly remit (or cause to be remitted) to the Lock-Box Account all Net Cash Flow received by any of them or any of their respective agents; and (iii) NationsBank, in its capacity as Lock-Box Agent, will periodically transfer funds in the Lock-Box Account to the Disbursement Account. As set forth below and in the Escrow Agreement, (a) Net Cash Flow will be distributed by Escrow Agent from the Disbursement Account on each Interest Adjustment Date and (b) Excess DA Funds will be distributed by Escrow Agent from the Disbursement Account (as contemplated in Sections 5.1.4 below) on up to three (3) additional Business Days selected by Borrower in each calendar month (each an "Interim Distribution Date"). Each date upon which a distribution is to be made from the Disbursement Account is hereinafter referred to as a "Distribution Date". 5.1.2 Application of Net Cash Flow. Subject to the Escrow Agreement and to Section 5.3 below, on each Distribution Date which is an Interest Adjustment Date, all Net Cash Flow then in the Disbursement Account will be paid and applied by Escrow Agent as follows: (a) First for transfer to Fleet for deposit in the Tax Escrow Account, an amount specified by Servicer in the "Request for Disbursements from Escrow Accounts" certificate (as defined in the Escrow Agreement); which sum shall represent the total amount of Tax Escrow Payments paid into the Lock-Box Account prior to the Distribution Date in question to the extent not previously deposited in the Tax Escrow Account; (b) Second to the payment to Lenders of all interest on the Loan which is then due and payable or will be due and payable on the last day of the calendar month in question; -53- (c) Third to the payment to Lenders of any Loan Fees, late charges, fees and expenses which are then due and payable to Lenders or either of them under this Agreement, the Custodial Agreement, the Escrow Agreement or the Lock-Box Agreement or which will become so due and payable on the last day of the calendar month in question; (d) Fourth to the payment to Lenders, as a Principal Payment, of an amount equal to the amount (if any) by which the then outstanding principal balance under the Loan exceeds the then Maximum Revolver Availability, as calculated on the Distribution Date in question; (e) Fifth (unless payment of such fees is prohibited by the terms of this Agreement), to the payment to the Servicer of any "Servicing Fees" (as such term is defined in the Services Agreement) then owed to the Servicer pursuant to the Services Agreement; which Servicing Fees shall not exceed three percent (3%) of the Net Cash Flow paid into the Lock-Box Account during the calendar month in question; (f) Sixth to the payment to Fleet for deposit in the Operating Reserve Account of such amount as may be requested by Borrower and approved by Disbursing Agent for the payment of Approved Expenditures and for the repayment of Servicer Advances owed to the Servicer; and (g) Seventh to the payment to Lenders, as Principal Payments, of an amount equal to the then outstanding principal balances under the Notes (i.e., under the Loan) such payment to be divided equally between Lenders. 5.1.3 Borrower's Obligation to Pay Lenders. Notwithstanding anything to the contrary contained in this Agreement or any of the other Loan Documents, in the event that at any time insufficient Net Cash Flow is available to make any payment then due and payable by Borrower to Agent or Lenders, Borrower shall be required to make each such payment directly to Agent promptly when due. 5.1.4 Application of Excess DA Funds. Subject to the Escrow Agreement and to Section 5.3 below, on each Interim Distribution Date, Excess DA Funds in an amount equal to any then outstanding Prime Rate Loan will be paid to Lenders for application to such Prime Rate Loan; such payment to be divided equally between Lenders. -54- 5.2 Excess Net Cash Flow. 5.2.1 Excess Net Cash Flow. "Excess Net Cash Flow" is defined as all Net Cash Flow remaining in the Disbursement Account on any Distribution Date which is an Interest Adjustment Date after the payment in full of each of the seven (7) payment categories listed in Subsection 5.1.2(a) through (g) above. 5.2.2 Application of Excess Net Cash Flow. All Excess Net Cash Flow will be retained in the Disbursement Account as security for the Obligations subject to (i) Borrower's right to have such funds advanced pursuant to Section 2 above or distributed pursuant to Section 5.1 above. Provided, however, at such time as (a) all Obligations owed to Lenders under and with respect to the Financial Facility have been paid in full, (b) all Letters of Credit have been cancelled and (c) all obligations of Lenders under and with respect to the Financing Facility have been terminated, any then existing excess Net Cash Flow will be paid to Borrower. 5.3 If Any Default Exists. Notwithstanding any of the foregoing provisions of this Section 5, at any time when there shall exist any Default or any Event of Default, all Net Cash Flow (including all Excess DA Funds) and all Excess Net Cash Flow shall be distributed from the Disbursement Account and paid to Lenders for application against the Obligations. 5.4 Operational Issues. 5.4.1 Servicer and Services Agreement. Borrower shall at all times retain the services of a servicer reasonably satisfactory to Lenders to service the Collateral Loan Pool and the REO Properties. Such Servicer shall render its services pursuant to a Services Agreement in all respects reasonably satisfactory to Lenders. In this regard, Lenders have approved New FirstCity as the Servicer and have approved that certain Services Agreement (i.e., the Investment Management Agreement) of even date herewith. Any replacement servicer and any replacement services agreement must be approved in writing by Lenders in their sole discretion. For all purposes, the Servicer shall be deemed to be the agent of Borrower and any and all funds of Borrower in the possession of Servicer or any of its agents shall be deemed to be in the possession of the Borrower. 5.4.2 Property Management Agreements. As to each REO Property with respect to which the REO Affiliate in question enters into a Property Management Agreement, such Property Management Agreement shall conform to and contain the provisions of the definition of Property Management Agreement contained herein. -55- 5.4.3. Tenant Security Deposits. All Tenant Security Deposits will be maintained by Servicer or the applicable Property Manager in accordance with applicable law. Upon Agent's demand, Servicer and each Property Manager will pay to Agent all Tenant Security Deposits held by them, which Tenant Security Deposits will then be held by Agent in accordance with applicable law. SECTION 6 COLLATERAL: GENERAL TERMS 6.1 Security Interest in Personal Property. To secure the prompt payment and performance to Lenders of the Obligations, Borrower, pursuant to the Security Agreement and the other Security Documents, shall grant to Lenders a first and prior continuing security interest in and Liens upon all of the Collateral, except for the portion of the Collateral which is REO Property, and expressly including, without limitation, all of the Borrower's rights in the Cash Reserve Account, the Lock-Box Account, the Disbursement Account, the Tax Escrow Account (subject to the rights of Account Debtors), the Services Agreement and the Sale Agreements. At the time the Borrower forecloses upon any personal property securing payment of a Collateral Loan, upon Agent's request, Borrower shall also execute a "Supplement to Security Agreement", which "Supplement to Security Agreement" shall detail the specific assets being foreclosed upon. Borrower agrees to execute the UCC-1 Financing Statements provided for by the Code or otherwise together with any and all other instruments, assignments or documents and shall take such other action (including the filing of such UCC-1 Financing Statements and other documents with appropriate filing offices at the expense of Borrower) as may be required by Agent or Lenders to perfect or to continue the perfection of Agent's security interest in the Collateral. Unless prohibited by applicable law, Borrower hereby authorizes Agent to execute and file any such Financing Statement on Borrower's behalf. The parties agree that, if permitted by applicable law, a photographic or other reproduction of this Agreement shall be sufficient as a financing statement and may be filed in any appropriate office in lieu thereof. 6.2 Lien on REO Properties. All REO Properties will be owned by an REO Affiliate approved by Lenders; it being understood that Borrower will not be taking title to any REO Properties. Except in instances where Lenders demand a prepayment in accordance with Section 4.2.2 hereof, promptly upon the acquisition of title to a REO Property, Borrower agrees (i) to cause the REO Affiliate in question to execute and deliver to Borrower a REO Note, which shall be promptly endorsed by Borrower to Agent and delivered to Custodian, and REO Security Documents granting to Borrower a first and prior Lien upon each such REO Property, or in cases where such asset was subject to a prior Lien at the time Borrower purchased the Collateral Loan secured by such asset and such prior Lien was -56- disclosed to Lenders in writing prior to the Closing Date, a Lien subject only to Permitted Prior Liens, and (ii) to promptly execute and deliver to Lenders an Assignment with respect to such REO Security Documents. Such REO Security Documents and such Assignment shall all be recorded, at the expense of Borrower, with such filing offices as may be required by Lenders to evidence Agent's Lien on such REO Property. Prior to the taking of title to any REO Property by an REO Affiliate, Borrower shall provide Lenders with an Environmental Site Assessment with respect to each such parcel of REO Property or an update of the Environmental Site Assessment which was delivered to Lenders in connection with the closing of the Loan, and Borrower shall have received Lenders' written acknowledgement that the results thereof are acceptable to Lenders. In addition, in the event that such REO Property has an Allocated Loan Amount of $250,000 or more, and upon Lenders' request, Borrower shall be obligated, at Borrower's expense, to provide for Lenders' benefit such additional documentation as Lenders would ordinarily require in connection with real estate collateral, including without limitation, the following: an appraisal performed in accordance with applicable law, a Title Certificate or, if requested by Lenders, a Title Insurance Policy, in accordance with Section 8.1.24 below, a survey, and policies of liability, hazard and casualty insurance naming Lenders as additional insured, mortgagee and loss payee. 6.3 Insurance of Collateral. 6.3.1 Borrower shall promptly notify Lenders of the failure of any Account Debtor under a Collateral Loan to maintain the insurance coverage required under such Collateral Loan and, as to Collateral Loans having an Allocated Value of greater than $100,000, except as otherwise agreed to by Lenders in writing, the Borrower shall procure the required coverage. Borrower agrees to maintain and pay for (or cause the respective REO Affiliate to maintain and pay for) insurance upon all REO Properties having an Allocated Value of in excess of $100,000 covering casualty, hazard, public liability and such other risks and in such amounts and with such insurance companies as shall be reasonably satisfactory to Lenders; provided, however, as long as Borrower maintains casualty and hazard coverage in amounts sufficient to avoid the application of any applicable co-insurance provision, Borrower shall not be required to maintain such coverage in excess of the lesser of the replacement cost or the Minimum Release Price of an asset owned by Borrower. In addition, upon Agent's or Lenders' request, (i) Borrower will maintain and pay for such insurance upon REO Properties having an Allocated Value of less than $100,000 upon Agent's or Lenders' request on a case by case basis, and (ii) Borrower will maintain and pay for insurance covering Borrower for casualty loss with respect to any Collateral where the Account Debtor under a Collateral Loan has failed to maintain such -57- insurance coverage. Borrower shall deliver certified copies of such policies to Agent with satisfactory endorsements naming Lenders as additional insured, as loss payee and as mortgagee pursuant to a standard mortgagee clause. Each policy of insurance or endorsement shall contain a clause requiring the insurer to give not less than thirty (30) days prior written notice to Lenders in the event of cancellation of the policy for any reason whatsoever and a clause that the interest of Lenders shall not be impaired or invalidated by any act or neglect of Borrower or any owner of the insured property nor by the occupation of the premises for purposes more hazardous than are permitted by said policy. If Borrower fails to provide and pay for such insurance, Lenders may, at Borrower's expense, procure the same, but Lenders shall not be required to do so. Borrower agrees to deliver to Lenders, promptly as rendered, true copies of all reports made in any reporting forms to insurance companies. 6.3.2 It is agreed that Borrower may elect to provide the insurance required by Section 6.3.1 above by one or more multi-property policies in lieu of individual insurance policies for each property. Any such multi-property policy will be (i) in the amounts required under Section 6.3.1 above as to each covered property, (ii) shall be in a total amount in all respects satisfactory to Lenders and (iii) shall provide coverage for public liability in an amount not less than $5,000,000.00; provided however, Lenders reserve the right to require a separate insurance policy on any REO Property which is owned by an REO Affiliate for more than six (6) months. 6.4 Audits. Lenders may from time to time, upon notification to Borrower, conduct an audit of any and all Collateral and all books and records of Borrower and each REO Affiliate, and all costs of one audit per calendar year shall be reimbursed by Borrower within thirty (30) days after the notification by Lenders to Borrower of the completion of such audit. The costs and expenses of such audits shall not exceed $5,000.00 per audit. 6.5 Cash Reserve Account. 6.5.1 As additional security for Borrower's payment and performance of the Obligations, the Borrower shall deposit with Agent, on the Closing Date, in an interest-bearing account, in the name of "Fleet National Bank", and will at all times thereafter maintain, subject to Section 6.5.3 below, a cash reserve account (the "Cash Reserve Account") in an amount equal to three (3) months' interest on the Maximum Facility Availability, calculated at an interest rate of ten percent (10%) per annum, (the "Cash Reserve Base Amount"). The Cash Reserve Base Amount as of the Closing Date is $2,500,000. -58- 6.5.2 The Cash Reserve Account shall be pledged and assigned to the Agent as additional collateral for the payment and performance of the Obligations. Agent shall have no obligation to apply any funds in the Cash Reserve Account against interest payments due in connection with the Loan and any such application shall be made by Lenders in their sole discretion. 6.5.3 Upon Borrower's request at the end of each quarter, provided that there does not then exist any Default or any Event of Default, the Cash Reserve Base Amount will be reduced to an amount equal to three (3) months' interest on the then outstanding principal amount of the Loan, calculated at the Eurodollar Rate in effect at the end of such quarter, and any funds (if any) in excess of the Cash Reserve Base Amount will be wire transferred into the Disbursement Account. 6.6. Release Price & Minimum Release Price. In connection with any sale of an REO Property to an Unrelated Third Party, in connection with any sale (whether in the normal course of business or pursuant to a foreclosure) of each other item of Collateral to an Unrelated Third Party and in connection with the settlement of each Collateral Loan (each such item of Collateral and Collateral Loan being hereinafter referred to as a "Released Asset"), Agent shall release/discharge its Lien(s) on the respective REO Property, other item of Collateral or Collateral Loan upon receipt of a payment to the Lock-Box Account of a sum (the "Release Price") equal to the greater of (a) all Net Sales Proceeds or Net Collection Proceeds with respect to the Released Asset in question or (b) the "Minimum Release Price" with respect to such Released Asset. As to each Released Asset having an Allocated Value of $50,000 or less, the "Minimum Release Price" shall be $1,000.00. As to each Released Asset having an Allocated Value of greater than $50,000, the "Minimum Release Price" is defined to be an amount equal to one hundred percent (100%) of the then outstanding Allocated Value (i.e., the Allocated Value minus all principal payments theretofore received by Lenders with respect to such Collateral Loan) with respect to the Released Asset in question . Provided, however, such Minimum Release Price shall not exceed the total of all sums due to Lenders hereunder, under the Notes or under any of the other Loan Documents at the time in question. The above provisions shall be applicable to all Assets, whether owned by Borrower or by an REO Affiliate and as to each REO Property owned by an REO Affiliate, the Release Price shall be calculated as if Borrower were the owner of the REO Property in question and as if no REO Note existed. 6.7. Termination of Security Interests. Upon payment in full of the Obligations, Agent shall release, terminate and satisfy all of its security interests in and Liens upon all remaining Collateral, and shall deliver to Borrower any and all written -59- instruments requested by Borrower which are reasonably necessary to evidence such release, termination and satisfaction. Neither Agent nor Lenders shall have any obligation to pay any costs or fees associated with the filing or recordation of any such release, termination or satisfaction and Borrower agrees to pay all reasonable costs and expenses (including reasonable attorneys' fees) incurred by Agent or Lenders in connection with the preparation of any of such instruments. SECTION 7 REPRESENTATIONS AND WARRANTIES 7.1. General Representations and Warranties. To induce Agent and Lenders to enter into this Agreement and to make the Loan hereunder, Borrower warrants, represents and covenants to Agent and Lenders, as of the date of this Agreement, as follows: 7.1.1 Organization, Ownership; Etc. Borrower, FCLT One, L.P. and FCLT Two, L.P. are limited partnerships; the General Partner, FCLT One Corp. and FCLT Two Corp. are corporations; and each of such entities are duly organized, validly existing and in good standing under the laws of the State of Texas; each will be, within ninety (90) days after the Closing Date, duly qualified and authorized to do business and in good standing in all states and jurisdictions where the character of its assets or the nature of its activities make such qualification necessary; and Borrower has not been known as or used any corporate, fictitious or trade names in the past. The General Partner is the sole general partner of the Borrower and the General Partner holds a 2% partnership interest in the Borrower. All of the general and limited partnership interests in each of the above-referenced limited partnerships are owned as set forth in Exhibit C attached hereto and incorporated herein by reference. All of the legal and beneficial ownership interests in each general partner and each limited partner, are also as set forth on such Exhibit C. 7.1.2 Power and Authority. Borrower and the General Partner each has the right and power and is duly authorized to enter into, deliver and perform this Agreement and each of the other Loan Documents to which it is a party, and this Agreement is, and each of the other Loan Documents when delivered pursuant to this Agreement will be, legal, valid and binding obligations of Borrower enforceable against it in accordance with their respective terms. 7.1.3 Use of Loan Proceeds. The Loan Proceeds will be used solely to fund Closing Expenditures, Approved Expenditures and Servicer Advances. Borrower is not engaged principally, or as one of its important activities, in the business of purchasing or carrying "margin stock" (within the meaning of Regulation G or U of the Board of Governors of the Federal Reserve System), and no part -60- of the proceeds of the Loan will be used to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying any margin stock, or be used for any purpose which violates or is inconsistent with the provisions of Regulations G, T, U or X of said Board of Governors. 7.1.4 Consents, Etc. (a) Borrower, the General Partner, FCLT One L.P., FCLT One Corp., FCLT Two L.P., FCLT Two Corp. each has, and each is in good standing with respect to, all governmental consents, approvals, authorizations, permits, certificates, inspections, and franchises necessary to conduct its business as heretofore or proposed to be conducted by it and to own or lease and operate its assets as now owned or leased by it; and (b) The execution, delivery and performance by (i) the Borrower and the General Partner of the Loan Documents, (ii) FCLT One L.P. and FCLT One Corp. and FCLT Two L.P. and FCLT Two Corp. of the REO Notes and REO Security Documents do not and will not (1) require any consent or approval of the stockholders of the General Partner, FCLT One Corp. or FCLT Two Corp.; (2) contravene the Borrower's or FCLT One L.P.'s or FCLT Two L.P.'s Limited Partnership Agreements or Certificate or the General Partner's or FCLT One Corp.'s and FCLT Two Corp.'s Articles of Incorporation or Bylaws; (3) violate any provision of any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award presently in effect having applicability to the Borrower, General Partner, FCLT One L.P., FCLT Two L.P., FCLT One Corp. or FCLT Two Corp.; (4) result in a breach of or constitute a default under any indenture or loan or credit agreement or any other agreement, lease or instrument to which the Borrower, General Partner, FCLT One L.P., FCLT Two L.P., FCLT One Corp. or FCLT Two Corp. are a party or by which the Borrower, General Partner, FCLT One L.P., FCLT Two L.P., FCLT One Corp. or FCLT Two Corp. or their properties may be bound or affected; (5) except as may be provided by the Security Documents or the REO Security Documents (with respect to FCLT One L.P., FCLT Two L.P., FCLT One Corp. or FCLT Two Corp.), result in the creation or imposition of any Lien upon or with respect to any of the properties now owned or hereafter acquired by the Borrower, General Partner, FCLT One L.P., FCLT Two L.P., FCLT One Corp. or FCLT Two Corp.; and (6) cause the Borrower, General Partner, FCLT One L.P., FCLT Two L.P., FCLT One Corp. or FCLT Two Corp. to be in default under any such law, rule, regulation, order, writ, judgment, injunction, decree, determination, or award or any such indenture, agreement, lease or instrument. 7.1.5 Pending Proceedings. There are no actions, suits, proceedings or investigations pending, or to the knowledge of Borrower, threatened, against or affecting Borrower or the General -61- Partner or any of their assets in any court or before any governmental authority or arbitration board or tribunal. 7.1.6 Title to Assets. Borrower has good and indefeasible title to and fee simple ownership of, or valid and subsisting leasehold interests in, all of its real property, and good title to all of its other property and Assets (specifically including all of the Portfolio Assets), in each case, free and clear of all Liens except Permitted Liens. 7.1.7 Financial Condition. There are no liabilities of the Borrower, the General Partner, FCLT One L.P., FCLT Two L.P., FCLT One Corp. or FCLT Two Corp. fixed or contingent, which are material and which have not been disclosed to Lenders in writing. The fiscal years of Borrower, General Partner, FCLT One L.P., FCLT Two L.P., FCLT One Corp. or FCLT Two Corp. end on December 31 of each year. 7.1.8 Material Facts. There is no fact which Borrower or the Servicer has failed to disclose to Lenders in writing which materially affects adversely or, so far as Borrower can now foresee, will materially affect adversely the assets, business, prospects, profits, or condition (financial or otherwise) of Borrower or the Servicer or the ability of Borrower to perform this Agreement. No information, exhibit or report furnished by the Borrower to the Lenders in connection with the negotiation of this Agreement contained any material misstatement of fact or omitted a material fact or any fact necessary to make the statement contained therein not materially misleading. 7.1.9 ERISA Compliance. The Borrower is in compliance in all material respects with all applicable requirements of ERISA and the regulations promulgated thereunder. No fact or situation that could result in a material adverse change in the financial condition of Borrower (including, but not limited to, any Reportable Event or Prohibited Transaction) exists in connection with any Plan. Borrower does not have any withdrawal liability in connection with a Multi-Employer Plan. None of the equity funds being provided by Borrower or by any of its partners are being invested on behalf of a pension plan or other entity which is subject to ERISA. 7.1.10 Taxes and Assessments. Borrower and the Servicer have filed all federal, state and local tax returns and other reports they are required by law to file and have paid, or made provision for the payment of, all taxes, assessments, fees and other governmental charges that are due and payable. 7.1.11 Compliance with Laws. Borrower and Servicer have duly complied with, and their assets, business operations and -62- leaseholds are in compliance in all material respects with, the provisions of all federal, state and local laws, rules and regulations (including, without limitation, Environmental Laws) applicable to Borrower, Servicer and their assets or the conduct of their businesses. Neither Borrower nor any REO Affiliate, nor, to the best of Borrower's knowledge, any of their respective assets is in material violation of any Environmental Laws or subject to any existing, pending or overtly threatened investigation by any governmental authority under any Environmental Law. To the best of Borrower's knowledge, no Hazardous Substance has been disposed of or released on any of Borrower's assets. 7.1.12 Existence of Defaults. No Default or Event of Default will exist or result from the execution and delivery of this Agreement or Borrower's performance hereunder. 7.1.13 Commissions, Etc.. There are no claims for brokerage commissions, finder's fees or investment banking fees in connection with the transactions contemplated by this Agreement. 7.1.14 Solvency. Borrower is, and after giving effect to the transactions contemplated under the Loan Documents will be, solvent. After giving effect to the transactions contemplated under the Loan Documents, the Borrower: (a) will be able to pay its debts as they become due, and (b) will have funds and capital sufficient to carry on its business and all businesses in which it is about to engage. 7.1.15 Other Agreements. Neither the Borrower nor the General Partner nor the Servicer is a party to any indenture, loan, or credit agreement, or to any lease or other agreement or instrument, or subject to any charter or corporate restriction which could have a material adverse effect on the businesses, properties, assets, operations or conditions, financial or otherwise of the Borrower, the General Partner or the Servicer, or the ability of the Borrower or the General Partner or the Servicer to carry out its respective obligations under the Loan Documents to which it is a party. Neither the Borrower nor the General Partner nor the Servicer is in default in any material respect in the performance, observance or fulfillment of any of the obligations, covenants, or conditions contained in any agreement or instrument material to its business to which it is a party. 7.1.16 Principal Place of Business; Books and Records. The Borrower's principal place of business is located at the Borrower's address set forth in Section 11.9 of this Agreement. All of the Borrower's books and records are kept at its principal place of business. -63- 7.1.17 Subsidiaries, etc. The Borrower has no subsidiaries other than any currently existing or hereafter organized REO Affiliates and the additional subsidiaries listed on Exhibit I attached hereto (the "Additional Borrower Subsidiaries"); which Additional Borrower Subsidiaries have no assets other than the cash amounts set forth in Exhibit I. 7.1.18 Preliminary Statement. All information and statements set forth in the Preliminary Statement of this Agreement are true and accurate as of the date hereof. 7.2. Reaffirmation and Survival of Representations. The submission of a Notice of Borrowing by Borrower pursuant to this Agreement shall constitute (a) an automatic representation and warranty by Borrower to Agent and Lenders that there does not then exist any Default or Event of Default, and (b) in the event the date of such Notice of Borrowing is different than the date of this Agreement, a reaffirmation as of the date of said Notice of Borrowing that all of the representations and warranties of Borrower contained in this Agreement and the other Loan Documents are true in all material respects as if made on such date rather than the date of this Agreement. Borrower covenants, warrants and represents to Agent and Lenders that all representations and warranties of Borrower contained in this Agreement or any of the other Loan Documents shall be true at the time of Borrower's execution of this Agreement and the other Loan Documents, and shall survive the execution, delivery and acceptance thereof by the parties thereto and the closing of the transactions described therein or related thereto. SECTION 8 COVENANTS AND CONTINUING AGREEMENTS 8.1. Affirmative Covenants. During the term of this Agreement, and thereafter for so long as there are any Obligations to Lenders, Borrower covenants that, unless otherwise consented to by Lenders in writing, it shall and each REO Affiliate shall: 8.1.1 Use Proceeds. Use the proceeds of the Loan only to pay for Closing Expenditures, Approved Expenditures and Servicer Advances. Without the prior written consent of Lenders, no Loan Proceeds or other funds of Borrower shall be utilized to make any Special Preferred Stock Payments. 8.1.2 Payment of Taxes; Liens. Pay and discharge all taxes, assessments and governmental charges upon it, its income and assets as and when such taxes, assessments and charges are due and payable, except and to the extent only that such taxes, assessments and charges are being actively contested in good faith and by appropriate proceedings, Borrower maintains adequate reserves on its books therefor and the nonpayment of such taxes does not result -64- in a Lien upon any assets of Borrower other than a Permitted Lien. Borrower shall also pay and discharge any lawful, valid claims which, if unpaid, might become a Lien against any of Borrower's or any REO Affiliate's assets except for Permitted Liens. 8.1.3 Filings. File all federal, state and local tax returns and other reports Borrower is required by law to file and maintain adequate reserves for the payment of all taxes, assessments, governmental charges, and levies imposed upon it, its income, or its profits, or upon any assets belonging to it. 8.1.4 Certain Expenses. Pay to Agent and Lenders, upon demand therefor, any and all reasonable fees, costs or expenses which either Lender pays to a bank or other similar institution arising out of or in connection with (i) the forwarding to Borrower or any other Person on behalf of Borrower proceeds of the Loan and (ii) the depositing for collection of any check or item of payment received by or delivered to Agent or Lenders on account of the Obligations. 8.1.5 Maintenance of Rights. Preserve and maintain its separate existence and all rights, privileges, and franchises in connection therewith, and maintain its qualification and good standing in all states in which such qualification is necessary. 8.1.6 Maintenance of Assets. Maintain its physical assets in as good of a condition as they existed on the date acquired by Borrower or an REO Affiliate, ordinary wear and tear excepted. 8.1.7 Compliance with Laws. Comply with all laws, ordinances, governmental rules and regulations to which it is subject, and obtain and keep in force any and all licenses, permits, franchises, or other governmental authorizations necessary to the ownership of its assets or to the conduct of its business, which violation or failure to obtain might materially and adversely affect the assets or condition (financial or otherwise) of Borrower. Borrower and each REO Affiliate shall at all times keep and maintain its assets in material compliance with, and shall not cause or permit any of the same to be in material violation of, any applicable Environmental Law. 8.1.8 Compliance with ERISA. (i) At all times make prompt payment of contributions required to meet the minimum funding standards set forth in ERISA with respect to each Plan; (ii) promptly after the filing thereof, furnish to Lenders copies of any annual report required to be filed pursuant to ERISA in connection with each Plan and any other employee benefit plan of it and its affiliates subject to said Section; (iii) notify Lenders as soon as practicable of any Reportable Event and of any additional -65- act or condition arising in connection with any Plan which Borrower believes might constitute grounds for the termination thereof by the Pension Benefit Guaranty Corporation or for the appointment by the appropriate United States district court of a trustee to administer the Plan; and (iv) furnish to Lenders, promptly upon either Lenders' request therefor, such additional information concerning any Plan or any other such employee benefit plan as may be reasonably requested. 8.1.9 Records and Books. Keep adequate records and books of account with respect to its business activities and the business activities of each REO Affiliate in which proper entries are made in accordance with GAAP reflecting all its financial transactions. 8.1.10 Inspections. Upon reasonable notice, permit representatives of Lenders, from time to time, as often as may be reasonably requested, but only during normal business hours, to visit and inspect the assets of Borrower and each REO Affiliate, inspect and make extracts from its books and records, and discuss with its partners, its employees, its independent accountants and its Property Managers, Borrower's and such REO Affiliate's business, assets, liabilities, financial condition, business prospects and results of operations. 8.1.11 Financial Reports. Cause to be prepared and furnished to Agent and Lenders the following (all to be kept and prepared in accordance with GAAP applied on a consistent basis): (a) as soon as possible, but not later than the earlier to occur of a date that is (i) ninety (90) days after FC Liquidating Trust receives an opinion letter issued by the certified public accountants engaged by FC Liquidating Trust to audit its fiscal year-end financial statements or (ii) one hundred fifty (150) days after the close of each fiscal year of FC Liquidating Trust, unqualified audited consolidated and consolidating financial statements of FC Liquidating Trust (which shall include Borrower and each REO Affiliate) as of the end of such year, certified by a firm of independent certified public accountants of recognized standing selected by FC Liquidating Trust and acceptable to Lenders; and (b) as soon as possible, but not later than thirty (30) days after the end of each calendar month, unaudited interim financial statements of Borrower, FC Liquidating Trust and each REO Affiliate as of the end of such month and as of the portion of Borrower's, FC Liquidating Trust's and each REO Affiliate's fiscal year then elapsed, certified by a Responsible Officer of the General Partner and by a Responsible Officer of the Servicer as being prepared in accordance with GAAP and fairly presenting the financial position and results of operations of Borrower, FC -66- Liquidating Trust and each REO Affiliate (on a REO Property by REO Property basis) for such calendar month and period, subject only to changes from audit and year-end adjustments and except that such statements need not contain accountant's notes thereto; and (c) as soon as possible, but not later than the earlier to occur of a date that is (i) ninety (90) days after Servicer receives an opinion letter issued by the certified public accountants engaged by Servicer to audit its fiscal year-end financial statements or (ii) one hundred fifty (150) days after the close of each fiscal year of Servicer, unqualified audited consolidated financial statements of Servicer as of the end of such year, certified by a firm of independent certified public accountants of recognized standing selected by Servicer and acceptable to Lenders; and (d) as to each REO Property in Tier 1 and Tier 2 with an Allocated Value above $50,000, as soon as possible, but not later than thirty (30) days after the end of each calendar quarter, a "rent roll", so-called, dated as of the end of such calendar quarter and stating with respect to each rental unit in the REO Property in question, the name of the Tenant thereof, the rent paid by such Tenant, the date to which such rent is paid, the date on which such Tenant's leasehold interest terminates and the amount held by the REO Affiliate in question by way of security deposit from each such Tenant; which rent roll is to be certified to as being accurate by a Responsible Officer of the general partner of the REO Affiliate in question and by a Responsible Officer of the Servicer. Concurrently with the delivery of the financial statements described in clause (a) of this Section 8.1.11, Borrower shall forward to Lenders a copy of the independent auditor's report to Borrower's management that is prepared in connection with such financial statements. Concurrently with the delivery of all financial statements described in this Section 8.1.11, Borrower shall cause to be prepared and furnished to Lenders a certificate from a Responsible Officer of the General Partner, from a Responsible Officer of each REO Affiliate, and from a Responsible Officer of the Servicer certifying to Lenders that, to the best of such Responsible Officer's knowledge, no Default or Event of Default has occurred, or, if such Default or Event of Default has occurred, specifying the nature thereof (a "Compliance Certificate"). 8.1.12 Tax Escrow Reports & Tenant Security Deposit Reports. Within ten (10) Business Days after the end of each calendar month, furnish to Lenders: -67- (a) a "Tax Escrow Report" detailing on an Asset by Asset basis (i) the annual real estate taxes (and to the extent applicable, insurance premiums) payable with respect to each Asset, (ii) a detail by category (i.e. real estate taxes, insurance, Net Insurance and Condemnation Proceeds, etc.) of the total amount of Tax Escrow Payments deposited in the Tax Escrow Account during the calendar month in question, (iii) a detail by category of the total amount of withdrawals from the Tax Escrow Account during such calendar month, and (iv) the remaining balance of real estate taxes (and where applicable, insurance premiums) due with respect to the Asset in question, which report shall be certified to by a Responsible Officer of the Servicer and the General Partner; and (b) As to all Tier 1 Assets and Tier 2 Assets having an Allocated Value of $50,000 or more, a "Tenant Security Deposit Report" detailing, on an Asset by Asset basis and a tenant by tenant basis, the total amount of Tenant Security Deposits held by Servicer or the applicable Property Manager as of the end of the calendar month in question which report shall be certified to by a Responsible Officer of the Servicer and the General Partner. 8.1.13 Collateral Loans Reports. As soon as possible but no later than thirty (30) days after the end of each calendar month, furnish to Lenders an analysis of all Collateral Loans reflecting monthly collections, outstanding balances, anticipated future collections, settlement information, default status and such information as Lenders may otherwise request (the "Collateral Loans Reports"). In addition, at Lenders' option, Lenders shall have the right to require such Collateral Loans Reports and such other information as Lenders may otherwise reasonably request, on a weekly or bi-weekly basis. 8.1.14 Further Assurances. At Lenders' request, promptly execute and deliver or cause to be executed and delivered to Agent any and all documents, instruments and agreements deemed necessary by Lenders to perfect or to continue the perfection of Agent's Liens, to facilitate collection of the Collateral or otherwise to give effect to or carry out the terms or intent of this Agreement or any of the other Loan Documents. 8.1.15 Ancillary Agreements. Enter into the Lock-Box Agreement, the Custodial Agreement, the Escrow Agreement, and the Services Agreement and the Subordination Agreement and fully comply with all terms thereof; and pay, perform and observe each of its obligations under any other agreement to which it is a party in accordance with the terms thereof. 8.1.16 Substitute Notes. Execute such replacement and substitute notes as may be requested by either Lender from time to time to facilitate the assignment by either Lender of all or part -68- of its rights and obligations under this Agreement, provided, however, such replacement and substitute notes shall in the aggregate total the amount of the note being replaced, and upon delivery of a substitute note, Agent shall conspicuously mark the face of the note being substituted with the following legend: "THIS NOTE HAS BEEN RENEWED AND SUBSTITUTED". 8.1.17 General Indemnity. Indemnify, protect, and hold Agent and Lenders and their respective parents, subsidiaries, directors, officers, employees, representatives, agents, successors, assigns, and attorneys (collectively, the "Indemnified Parties") harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses (including, without limitation, reasonable attorneys' fees and legal expenses whether or not suit is brought and settlement costs), and disbursements of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against the Indemnified Parties, in any way relating to or arising out of the Loan, the Collateral, the Sale Agreements, the Other Agreements, the Loan Documents or any of the transactions contemplated therein (EXPRESSLY INCLUDING THE ORDINARY NEGLIGENCE OF LENDERS AND AGENT, BUT EXCLUDING THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF LENDERS AND AGENT) (collectively, the "Indemnified Liabilities"), to the extent that any of the Indemnified Liabilities results, directly or indirectly, from any claim made or action, suit, or proceedings commenced by or on behalf of any Person other than the Indemnified Parties or Borrower; PROVIDED, HOWEVER, THAT ALTHOUGH EACH INDEMNIFIED PARTY SHALL HAVE THE RIGHT TO BE INDEMNIFIED FROM ITS OWN ORDINARY NEGLIGENCE, NO INDEMNIFIED PARTY SHALL HAVE THE RIGHT TO BE INDEMNIFIED HEREUNDER FOR ITS OWN FRAUD, GROSS NEGLIGENCE, OR WILLFUL MISCONDUCT; provided further, however, that Agent and Lenders shall not be indemnified against claims resulting from Agent or Lenders' own actions taken with respect to any asset after Agent forecloses its Lien upon such asset. The provisions of and undertakings and indemnification set forth in this paragraph shall survive the satisfaction and payment of the Obligations and termination of this Agreement. 8.1.18 Environmental Site Assessments. With respect to all real property (whether REO Property or real property securing any Collateral Loan), which constitutes a Tier 1 Asset, by July 31, 1995, Borrower shall have delivered to Lenders all environmental site assessments in Borrower's possession which are less than one (1) year old (the "Existing Assessments") and as to all such real property with respect to which Borrower does not possess an environmental site assessment, by September 15, 1995 (or within five (5) days after Borrower's receipt of same), Borrower shall have ordered, obtained and delivered to Lenders, at Borrower's expense, a "Phase I" Environmental Site Assessment and, where appropriate, a "Phase II" Environmental Site Assessment; each of -69- which ordered Environmental Site Assessments shall be addressed to Borrower and Lenders. Within sixty (60) days after its receipt of each of such Existing Assessments and each of such ordered Environmental Site Assessments Lenders shall provide written notice to Borrower specifying each such assessment which does not qualify as an Environmental Site Assessment and specifying the reasons for such non-qualification. Lenders agree that no Existing Assessment shall disqualify by reason of being out of date provided that such assessment is dated after June 1, 1994. To the extent that any such Environmental Site Assessment is not approved by Lenders in accordance with the above or that as to any such real property, Lenders have not received an Environmental Site Assessment by September 15, 1995, then thereafter as to each such Tier 1 Asset, unless and until Lenders shall have approved an Environmental Site Assessment, such Tier 1 Asset will be excluded from all calculations with respect to the Maximum Facility Availability and the Maximum Revolver Availability. 8.1.19 Environmental Indemnity. Indemnify, protect, and hold each of the Indemnified Parties harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, proceedings, costs, expenses (including, without limitation, all reasonable attorneys' fees and legal expenses whether or not suit is brought and settlement costs), and disbursements of any kind or nature whatsoever which may at any time be imposed on, incurred by, or asserted against such Indemnified Parties, (EXPRESSLY INCLUDING THE ORDINARY NEGLIGENCE OF LENDERS AND AGENT, BUT EXCLUDING THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF LENDERS AND AGENT) with respect to or as a direct or indirect result of the violation of any Environmental Law by Borrower, by any Account Debtor under any Collateral Loan or by the condition of any of the Collateral or any real or personal property which secures any Collateral Loan; or with respect to or as a direct or indirect result of Borrower's or any REO Affiliate's or any such Account Debtor's generation, manufacture, production, storage, release, threatened release, discharge, disposal or presence in connection with its properties of a Hazardous Substance including, without limitation, (a) all damages of any such use, generation, manufacture, production, storage, release, threatened release, discharge, disposal, or presence, or (b) the costs of any required or necessary environmental investigation, monitoring, repair, cleanup, or detoxification and the preparation and implementation of any closure, remedial, or other plans. The provisions of and undertakings and indemnification set forth in this paragraph shall survive the satisfaction and payment of the Obligations and termination of this Agreement. In addition to the foregoing, in the event that Borrower learns that any REO Property which has an Allocated Loan Value of $100,000 or more has a condition that may require reporting or remediation, or both, pursuant to any Environmental Law applicable to such REO Property, -70- Borrower or the applicable REO Affiliate shall obtain an Environmental Site Assessment of such REO Property, and if the report of such Assessment states that there is a condition on or in such REO Property that requires reporting or remediation as aforesaid, then Borrower or the applicable REO Affiliate shall, at Lenders' election, promptly either: (a) take any and all actions necessary to comply with the applicable Environmental Laws with respect to such condition(s) or (b) obtain the release/discharge of Agent's Lien on such REO Property by paying to Agent the Minimum Release Price (as a prepayment on the Loan) and otherwise complying with the provisions of Section 6.6 above (except that it shall not be necessary for the REO Affiliate to sell such REO Property to anyone), and Agent agrees to consent to such release/discharge. 8.1.20 Sale of Collateral and Collection of Collateral Loans. If at any time Borrower or an REO Affiliate sells any items of Collateral, real or personal, then, promptly upon its receipt of the proceeds of such sale, Borrower or such REO Affiliate shall make a payment into the Lock-Box Account in an amount equal to the Release Price with respect to such item of Collateral. If at any time Borrower (a) makes a collection in full of a Collateral Loan, (b) agrees to settle any Collateral Loan or (c) makes a collection against a Collateral Loan in connection with a sale to an Unrelated Third Party of any item of personal property or real property securing a Collateral Loan pursuant to a foreclosure or other legal proceedings, then, promptly upon its receipt of same, Borrower shall make a payment into the Lock-Box Account in an amount equal to the Release Price with respect to such Collateral Loan. To the extent that any funds are not deposited in the Lock-Box Account in accordance with the above by reason of the inability to properly identify same, Borrower or Servicer shall not be in default of this Section if such funds are deposited in the Lock-Box Account within two (2) Business Days after the proper identification of same. 8.1.21 Deposit all Funds in Lock-Box Account. Deposit, or cause to be deposited, in the Lock-Box Account, all Net Cash Flow (specifically including without limiting the generality of the foregoing, all FDIC Cushion Funds received by Borrower and all Excluded FC Reserve Funds to the extent not expended by FC Liquidating Trust) within two (2) Business Days after the receipt thereof. To the extent that any funds are not deposited in the Lock-Box Account in accordance with the above by reason of the inability to properly identify same, Borrower or Servicer shall not be in default of this Section if such funds are deposited in the Lock-Box Account within two (2) Business Days after the proper identification of same. 8.1.22 Compliance with Sale Agreements. Faithfully pay, perform and observe in a timely manner all of the Borrower's obligations under any agreements executed by the Borrower in -71- connection with the acquisition of the Collateral Loan Pool including, without limitation, the Sale Agreements and take no action(s) which could result in the early termination of any "Due Diligence Period" under any Sale Agreement. In addition Borrower shall exercise all of Borrower's rights under such documents in a timely manner including, without limiting the generality of the foregoing, exercise all rights to "put" Assets back to the respective Seller; provided however, Borrower shall not be required to "put" an Asset back to the Seller if Borrower shall have obtained Lenders' written consent thereto prior to the expiration of the applicable "put back" time period under the respective Sale Agreements. In the event that Lenders do not consent to Borrower's not "putting back" an Asset, Borrower shall have the right to pay to Lenders the Minimum Release Price with respect to such Asset in lieu of putting such Asset back to the Seller in question. 8.1.23 Seller Notices. Promptly deliver to Lenders, within three (3) Business Days after the Borrower's delivery or receipt of same, copies of any notice to or from any Seller with respect to any matter having a monetary effect or a potential monetary effect of in excess of $50,000.00. 8.1.24 Title Insurance Policies. (a) As to each parcel of REO Property constituting a Tier 1 Asset or a Tier 2 Asset purchased on the Closing Date, (i) on the Closing Date, the appropriate REO Affiliate shall have executed and delivered to Borrower the appropriate REO Note and the appropriate REO Security Documents with respect to such parcel of REO Property and Borrower shall have executed and delivered to Agent an Assignment thereof to Agent and, as to each parcel REO Property constituting a Tier 1 Asset, within fifteen (15) days after the Closing Date duplicate originals of such REO Security Documents and such Assignment shall have been properly recorded with the appropriate records of land evidence, (ii) as to each parcel of REO Property constituting a Tier 1 Asset or a Tier 2 Asset, by not later than August 31, 1995, Borrower shall have delivered to Agent a Title Certificate with respect to each parcel of REO Property constituting a Tier 2 Asset and a Title Insurance Policy with respect to each parcel of REO Property constituting a Tier 1 Asset. As to any parcel of REO Property with respect to which Lenders have not required the recording of the respective REO Security Documents and/or the Assignment thereof to Agent, (i) within ten (10) business days after receipt of written notice from Agent, Borrower shall record such REO Security Documents and/or Assignment in the appropriate records of land evidence and within forty-five (45) days after receipt of such notice, Borrower shall have delivered to Agent a Title Certificate with respect to such parcel of real property; it being understood that Agent shall have -72- the absolute right to require such recordings at any time Agent, in its sole discretion, deems advisable. (b) As to each parcel of real property securing a Collateral Loan, (i) within ten (10) Business Days after the Closing Date, Borrower shall have recorded with the appropriate records of land evidence the appropriate assignment from Seller to Borrower of the mortgage or deed of trust which secures such Collateral Loan together with, as to each such Collateral Loan constituting a Tier 1 Asset (subject to subsection (c) below), the Assignment to Agent of each such mortgage or deed of trust, and (ii) as to each Collateral Loan constituting a Tier 1 Asset or a Tier 2 Asset, by not later than August 31, 1995, Borrower shall have delivered to Agent a Title Certificate with respect to each Collateral Loan constituting a Tier Two Asset and a Title Insurance Policy with respect to each Collateral Loan constituting a Tier 1 Asset. (c) As to any parcel of real property securing a Collateral Loan which Lenders agree to refrain from requiring the recording of the Assignment to Agent of the respective mortgage or deed of trust securing the respective Collateral Loan, (i) within ten (10) Business Days after receipt of written notice from Lenders, Borrower shall record such Assignment in the appropriate records of land evidence, (ii) within forty-five (45) days after receipt of such notice, Borrower shall deliver to Agent a Title Certificate (or, to the extent requested by Lenders, a Title Insurance Policy) with respect to such parcel of real property and (iii) Agent shall have the absolute right to so record each or any Assignment at any time Lenders deems advisable and in its sole discretion. (d) As to any parcel of REO Property acquired by Borrower or an REO Affiliate after the Closing Date, (i) within ten (10) Business Days after the date of Borrower's or such REO Affiliate's acquisition of such parcel of REO Property, the appropriate REO Affiliate shall have executed and delivered to Borrower the appropriate REO Note and the appropriate REO Security Documents with respect to such parcel of REO Property and Borrower shall have executed and delivered to Agent an Assignment thereof to Agent and as to any parcel of REO Property constituting a Tier 1 Asset, Borrower shall have had duplicate originals of such REO Security Documents and such Assignment properly recorded with the appropriate records of land evidence and (ii) within forty-five (45) days after such acquisition date, Borrower shall have delivered to Agent a Title Insurance Policy or a Title Certificate (as required by Lenders) with respect to such parcel of REO Property. -73- 8.1.25 Tax and Other Escrows. Properly maintain and monitor all escrow accounts for taxes and other expenses with respect to all Collateral Loans and, unless prohibited by applicable law, deposit and maintain all such escrow funds in the Tax Escrow Account. 8.1.26 Notice to Obligors. Within five (5) Business Days after the Closing Date, give written notice to each Account Debtor on each Collateral Loan constituting a Tier 1 Asset or a Tier Two Asset, at its last known address, advising such Account Debtor of the assignment of such Collateral Loan to Borrower and directing that all future payments be made to the Lock-Box. 8.1.27 Adjustment of Collateral Loan Pool Purchase Price. Give the Lenders prior written notice of all proposed post Closing Date adjustments to the "Purchase Price" (as such term is defined in the Sale Agreements) and the basis thereof at least ten (10) Business Days before the date of settlement of any such adjustments. 8.1.28 Additional Information. Furnish to the Lenders: (a) Promptly after the commencement thereof, notice of all actions, suits and proceedings before any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, affecting the Borrower, any REO Affiliate, FC Liquidating Trust or the Servicer which, if determined adversely to the Borrower, any REO Affiliate, FC Liquidating Trust or the Servicer, could have a material adverse affect on the financial condition, properties or operations of the Borrower, any REO Affiliate, FC Liquidating Trust or the Servicer; (b) Promptly after the filing or receiving thereof, copies of all reports, including annual reports, and notices which the Borrower files with or receives from the Pension Benefit Guaranty Corporation or the United States Department of Labor under ERISA; (c) As soon as possible and in any event within five (5) Business Days after the occurrence of each Default or Event of Default, a written notice setting forth the details of such Default or Event of Default and the action which is proposed to be taken by the Borrower with respect thereto; (d) Within thirty (30) Business Days after the filing thereof, copies of all federal and state tax returns, together with all schedules thereto, filed by or on behalf of the Borrower, any REO Affiliate, FC Liquidating Trust and the Servicer; and -74- (e) Promptly upon request by either Lender, such other information respecting the condition or operations, financial or otherwise, of the Borrower, any REO Affiliate, FC Liquidating Trust and the Servicer as the Lenders may reasonably from time to time request including, without limitation, all such information that the Lenders may reasonably request (i) as to the Borrower with respect to asset compromise/sale experience, asset business plans, specific cash flow information, information concerning capital expenditures, etc. and (ii) as to the Servicer, on a "pool" by "pool" basis, with respect to asset compromise/sale experience, specific cash flow information, information concerning capital expenditures, etc. 8.1.29 Improvements to REO Properties. In connection with the making of any improvements to any REO Properties: (a) Comply with all applicable building, fire, health, sanitation, environmental protection, land use, subdivision and zoning laws, ordinances, rules and regulations promulgated by any governmental authority having jurisdiction over the REO Property in question, comply with all restrictions or other encumbrances affecting title to the REO Property in question, fulfill in every way the applicable requirements of any such governmental authority and furnish to Agent such evidence thereof as Agent may from to time reasonably require; (b) File all plans for any such improvements with, and obtain all necessary approvals from, all governmental authorities having jurisdiction over the REO Property in question and submit copies of such approvals to Agent; (c) Perform all of Borrower's obligations under any construction contract and pay when due all sums for labor, materials, and equipment, including, without limitation, all fixtures and personalty incorporated in the REO Property in question; (d) Give forthwith to Agent notice of any claim by any party of any material breach under any material construction contract in connection with any such improvements; (e) Use only materials and equipment, including without limitation, fixtures and personalty incorporated in the REO Property in question, to which Borrower has absolute title, except as otherwise specifically approved in writing by Agent; (f) Furnish to Agent from time to time, as requested by Lenders, such budgets and revisions of budgets as the Lenders may require in order to show the estimated cost of the improvements -75- and the amount of funds required, at any given time, to complete and pay for the construction of such improvements; and (g) Take all reasonable steps to prevent the recording of any notice of architect's, artisan's, materialmen's or mechanic's lien relating to the REO Property in question or the construction of the improvements and not permit or suffer to exist any Liens (other than the Permitted Prior Liens and the Permitted Liens) on the REO Property in question, any material stored thereon or therein or any insurance proceeds relating thereto or any sums due or to become due to Borrower under this Agreement, and, in the event of the recording of any such notice or lien, take all steps (including, without limitation, bonding) to remove the same from the record within fifteen (15) days after Borrower's receipt of such notice. 8.1.30 Tax Escrow Payments. (a) Deposit, or cause to be deposited, in the Tax Escrow Account all Tax Escrow Payments. (b) Use funds deposited in the Tax Escrow Account only to pay the specific tax or other item for which such funds were deposited. (c) Upon payment and other satisfaction in full of the Obligations, any funds remaining in the Tax Escrow Account shall be refunded to the Borrower. 8.1.31 Due Diligence. Lenders shall be entitled to review, receive summaries of and otherwise inspect all due diligence of the Collateral Loan Pool performed by Borrower after the Closing Date. 8.2. Negative Covenants. During the term of this Agreement, and thereafter for so long as there are any Obligations outstanding, Borrower covenants that, unless Lenders have first consented thereto in writing, it will not and each REO Affiliate will not: 8.2.1 Dissolution, Merger, Etc. Dissolve or otherwise terminate its existence or merge or consolidate with any Person; or acquire all or any substantial part of the assets of any Person except in cases where assets are acquired pursuant to a foreclosure of Borrower's Liens upon the assets securing payment of a Collateral Loan. 8.2.2 Loans, Advances, and Investments. Make any loan, advance, extension of credit, or capital contribution to, make any investment in, or purchase or commit to purchase any stock -76- or other securities or evidences of Indebtedness of, or interests in, any other Person, other than: (a) advances to employees of Borrower in the ordinary course of business not to exceed $1,500.00 in the aggregate outstanding at any time; (b) investments in obligations of the United State of America and agencies thereof and obligations guaranteed by the United States of America maturing within one year from the date of acquisition; (c) certificates of deposit which are fully insured by the Federal Deposit Insurance Corporation or are issued by commercial banks organized under the Laws of the United States of America or any state thereof and having combined capital, surplus, and undivided profits of not less than $100,000,000.00 (as shown on such Person's most recently published statement of condition), and which certificates of deposit have one of the three (3) highest ratings from Moody's Investors Service, Inc., or Standard & Poor Corporation; (d) commercial paper which has one of the two highest ratings from Moody's Investors Service, Inc., or Standard & Poors Corporation; (e) eurodollar investments with financial institutions having combined capital, surplus, and undivided profits of not less than U.S. $100,000,000.00 (as shown on such Person's most recently published statement of condition), and whose certificates of deposit have one of the two highest ratings from Moody's Investors Service, Inc., or Standard & Poor Corporation, respectively, or, if such institution does not have a commercial paper rating, a comparable bond rating; and (f) loans to or investments in REO Affiliates in connection with the acquisition by such REO Affiliates of REO Properties. Nothing contained in this Section 8.2.2 shall be deemed to in any way alter or diminish Borrower's obligations to fully comply with the provisions of Section 8.1.20 and 8.1.21 above. 8.2.3 Other Indebtedness. Create, incur, assume, or suffer to exist, any Indebtedness, or guarantee, assume, endorse or otherwise, in any way, become directly or contingently liable with respect to the Indebtedness of any Person except: (a) the Obligations; -77- (b) the Subordinated Indebtedness; (c) obligations under the Services Agreement; (d) contingent liabilities arising out of endorsements of checks and other negotiable instruments for deposit or collection in the ordinary course of business; (e) contingent liabilities which may arise solely as a result of Borrower acquiring an asset subject to, but not assuming, a Permitted Prior Lien; (f) obligations incurred in connection with the ordinary course of Borrower's business or the business of any REO Affiliate; and (g) loans from Servicer for Servicer Advances. 8.2.4 Transactions with Affiliates. Enter into any transaction with any Affiliate or partner of Borrower, the General Partner, FC Liquidating Trust or the Servicer, except for capital contributions or advances by Borrower's partners to Borrower, loans to or investments in REO Affiliates or those transactions evidenced by the Subordinated Indebtedness and the Services Agreement. 8.2.5 Other Liens. Create or suffer to exist any Lien upon any of its property, income or profits, whether now owned or hereafter acquired, except for Permitted Liens or Permitted Prior Liens. 8.2.6 Distributions. Declare or make any distributions of any of its assets, income or profits to any of its partners. 8.2.7 New Places of Business. Transfer its principal place of business or chief executive office, except upon at least sixty (60) days prior written notice to Lenders and after the delivery to Lenders of financing statements, if required by Lenders, in form satisfactory to Lenders to perfect or continue the perfection of Lenders's Liens and security interests hereunder. 8.2.8 New Businesses. Enter into any new business or make any material change in any of Borrower's business objectives, purposes and operations. 8.2.9 Disposition of Assets. Sell, lease or otherwise dispose of any of its assets, except sales of assets in the ordinary course of Borrower's business; provided, that Borrower or the appropriate REO Affiliate shall immediately pay all Net Sales Proceeds to Lenders for deposit in the Lock-Box Account. -78- 8.2.10 Fictitious Names. Use any fictitious name or "d/b/a". 8.2.11 Margin Stock. Own, purchase or acquire (or enter into any contract to purchase or acquire) any "margin security", as defined by any regulation of the Federal Reserve Board as now in effect or as the same may hereafter be in effect. 8.2.12 Fiscal Year. Change its fiscal year. 8.2.13 Compliance with Environmental Laws. Except in material compliance with all applicable laws (including all applicable Environmental Laws), use, generate, manufacture, produce, store, release, discharge, or dispose of on, under, or about any of its real property or transport to or from any of its real property any Hazardous Substance, or allow any other Person or entity to do so. 8.2.14 Discounts of Collateral Loans. Discount or otherwise settle the amount owed on any Collateral Loan for an amount which is less than the Minimum Release Price of such Collateral Loan. 8.2.15 Modification of Ancillary Agreements. Amend, modify or terminate either of the Sale Agreements, the Services Agreement, the Lock-Box Agreement, the Escrow Agreement or the Custodial Agreement. 8.2.16 Modification of Subordinated Indebtedness. Amend, modify or terminate any document governing, evidencing or otherwise related to the Subordinated Indebtedness in any way that creates any change that conflicts with the Subordination Agreement or this Agreement, or that otherwise materially impairs the rights of Lenders; this prohibition including by way of illustration but not by way of limitation, any increase in the amortization schedule of the Subordinated Indebtedness, and any increase in the rate of interest that accrues on the Subordinated Indebtedness. 8.2.17 Certain Prohibited Payments. Make any payment under the Subordinated Indebtedness at any time when any Default or Event of Default exists hereunder or if such payment would cause a Default or Event of Default hereunder; or make any payment under the Subordinated Indebtedness or the Services Agreement (i) in a manner that is inconsistent with the terms of the Subordination Agreement or (ii) which is not specifically authorized under the terms of this Agreement. -79- SECTION 9 EVENTS OF DEFAULT: RIGHTS AND REMEDIES ON DEFAULT 9.1. Events of Default. The occurrence of any one or more of the following events shall constitute an "Event of Default": 9.1.1 Nonpayment of any installment of principal and/or interest due under the Notes when it shall become due and payable (no prior demand therefor being necessary) and such nonpayment shall have continued for more than ten (10) days after notice thereof from Disbursing Agent to Borrower. 9.1.2 Nonpayment of any other sum payable under this Agreement, the Note, any of the Security Documents or any of the Other Agreements and, unless a different grace or notice period is elsewhere specified, such nonpayment shall have continued for more than ten (10) days after notice thereof from Agent to Borrower. 9.1.3 Nonpayment, nonperformance or nonobservance of any of the other covenants, agreements, or conditions of this Agreement (except for the covenants contained in Sections 4.2.3, 8.1.20, 8.1.21 and 8.2 of this Agreement), or any of the Security Documents or any of the Other Agreements, and, unless a different grace or notice period is elsewhere specified, such nonperformance or nonobservance shall have continued for more than thirty (30) days after notice thereof from Lenders to Borrower. The foregoing shall not be deemed to provide a grace or notice period for nonperformance or nonobservance of any covenant, agreement or condition which is specifically listed as an Event of Default in any other Section of this Section 9.1. 9.1.4 Nonpayment, non-performance or non-observance of any of the covenants, agreements or conditions contained in Sections 4.2.3, 8.1.20, 8.1.21, and 8.2 of this Agreement (no prior demand being necessary except with respect to Section 8.2.13, where Agent agrees to give Borrower ten (10) days notice). 9.1.5 The occurrence of any "Event of Default" under the Notes, any of the Security Documents or any of the Other Agreements, or the occurrence of any event or condition which entitles Agent or Lenders to exercise any of their remedies under any of the Security Documents or any of the Other Agreements. 9.1.6 Title to the Collateral is not satisfactory to the Lenders by reason of any lien, charge, encumbrance, title condition or exception (other than Permitted Liens and Permitted Prior Liens) and such condition continues for more than thirty (30) days after notice thereof from Agent to Borrower. 9.1.7 The Title Company shall fail to issue a Title Certificate, Title Insurance Policy or any endorsement referred to -80- in Section 8.1.24 or shall otherwise refuse to insure the Loan as being secured by a valid lien on the real property portion of the Collateral subject only to Permitted Liens and Permitted Prior Liens. 9.1.8 The cancellation, lapse or termination of any insurance coverage required to be maintained by Borrower under this Agreement or under any of the Security Documents. 9.1.9 Borrower assigns this Agreement or any interest herein. 9.1.10 The Collateral or any portion thereof or any interest therein is conveyed, voluntarily encumbered or otherwise transferred in any way, except as may be specifically permitted by this Agreement, in each case, without the prior written consent of Lenders. 9.1.11 If any notice of responsibility, notice of violation, notice letter or similar notice or claim is issued or filed by any governmental authority against Borrower or any REO Affiliate or against any items of Collateral under any Environmental Laws and within sixty (60) days after the issuance or filing thereof either (a) the condition referenced therein is not cured or (b) a consent agreement reasonably satisfactory to Lenders has not been entered into such governmental authority. 9.1.12 Borrower or any REO Affiliate or FC Liquidating Trust fails to deposit (or cause to be deposited) in the Lock-Box Account any funds required to be deposited therein in accordance with the provisions of Sections 8.1.20 and 8.1.21 hereof when due or Borrower fails to make any Mandatory Payment required under Section 4.2.3 when due (in either event, no prior demand being necessary). 9.1.13 If any REO Affiliate fails to promptly pay to Lenders 100% of each month's Net Operating Income from the REO Property in question. 9.1.14 If Borrower requests a termination of the Loan or confesses inability to continue performance in accordance with this Agreement. 9.1.15 Breach or the proving false or misleading, in any material respect, of any representation or warranty now or hereafter made to Agent or Lenders by, on behalf of, or for the benefit of Borrower, the General Partner, the Servicer or the Subordinated Lender contained in: (a) this Agreement; -81- (b) any of the Security Documents or Other Agreements; (c) the Notes; or (d) any loan application, statement, financial statement, certificate or other document, agreement or instrument furnished, executed or delivered in connection herewith by, on behalf of, or for the benefit of Borrower, the General Partner, Servicer or the Subordinated Lender. 9.1.16 The occurrence of any "event of default" under any document, agreement or instrument now or hereafter (a) evidencing or securing any other obligation or indebtedness of Borrower or any REO Affiliate to Lenders now existing or hereafter arising or (b) evidencing any obligation or other indebtedness secured in whole or in part by any or all of the property covered by any of the Security Documents, or the nonpayment, nonperformance or nonobservance of any of the covenants, agreements or conditions of any such documents, agreements or instruments, which nonpayment, nonperformance or nonobservance shall have continued beyond the expiration of any applicable grace or notice period, or the occurrence of any event or condition which entitles the obligee of or under any such documents, agreements or instruments to exercise any of its remedies thereunder. 9.1.17 The occurrence of any "event of default" under any of the Subordinated Indebtedness Documents or the occurrence of any event or condition as the result of which Subordinated Lender has exercised any of its rights or remedies thereunder. 9.1.18 The occurrence of any "event of default" by Borrower under any document, agreement or instrument now or hereafter executed in connection with the Borrower's purchase of the Collateral Loan Pool from Sellers, including, without limitation the Sale Agreements; or the non-payment, non-performance or non-observance of any of the covenants, agreements or conditions or such documents, agreements or instruments, which non-payment, non-performance or non-observance shall have continued beyond the expiration of any applicable grace or notice period, if any, or the occurrence of any event or condition which entitles the obligee of or under any such documents, agreements or instruments to exercise any of its remedies thereunder. 9.1.19 Nonpayment of any Indebtedness of the Borrower (other than the Notes or other Indebtedness referred to in the preceding subsection) if the effect of such nonpayment is to accelerate the maturity of such Indebtedness or to permit the holder thereof to cause such Indebtedness to become due prior to the stated maturity thereof, or if any other Indebtedness, the validity of which is not being contested in good faith by appropriate proceedings, is not paid when due and payable in -82- accordance with the terms of such Indebtedness or customary trade practice. 9.1.20 (a) (i) The insolvency or inability of the Borrower or any REO Affiliate or the General Partner or Servicer or FC Liquidating Trust to pay its debts as they mature; (ii) the appointment of a receiver, trustee, custodian or other fiduciary, for, or for any of the property of, the Borrower or any REO Affiliate or the General Partner or Servicer or FC Liquidating Trust; (iii) the making of an assignment for the benefit of creditors, or the making of or entering into a trust mortgage or deed or other instrument of similar import for the benefit of creditors, by the Borrower or any REO Affiliate or the General Partner or Servicer or FC Liquidating Trust; or (iv) the convening of a meeting of the creditors, or the selection of a committee representing the creditors of the Borrower or any REO Affiliate or the General Partner or Servicer or FC Liquidating Trust; or (b) The filing of a petition, complaint, motion or other pleading seeking any relief under any receivership, insolvency, or debtor relief law, or seeking any readjustment of indebtedness, reorganization, composition, extension or any similar type of relief, or the filing of a petition, complaint, or motion under any chapter of the Bankruptcy Code by the Borrower or any REO Affiliate or the General Partner or Servicer or FC Liquidating Trust; or (c) The filing of a petition, complaint, motion or other pleading seeking any relief under any receivership, insolvency, or debtor relief law, or under any chapter of the Bankruptcy Code, or seeking any readjustment of indebtedness, reorganization, composition, extension or any similar type of relief, or the entry of any order for relief under any chapter of the Bankruptcy Code, against the Borrower or any REO Affiliate or the General Partner or Servicer or FC Liquidating Trust; provided, however, that if Borrower shall immediately notify Lenders in writing of the filing of any such petition, complaint, motion or other pleading against the Borrower or any REO Affiliate or the General Partner or Servicer or FC Liquidating Trust, and shall provide evidence satisfactory to Lenders that the Borrower or any REO Affiliate or the General Partner or Service or FC Liquidating Trust, as the case may be, has in good faith and within ten (10) days after the filing of any such petition, complaint, motion or other pleading filed an answer thereto contesting same, then there shall be no Event of Default under this subparagraph (c) until the earliest of (i) the entry of an order for relief or a judgment under any proceedings referred to in this subparagraph (c), (ii) the appointment of a receiver, trustee, custodian or other fiduciary in any such proceeding or (iii) the expiration of a -83- period of thirty (30) days, at the end of which such petition, complaint, motion or other pleading remains undismissed; or (d) The entry of any judgment against, or the attachment or garnishment of any of the property, goods or credits of, the Borrower or any REO Affiliate or the General Partner or Servicer or FC Liquidating Trust with respect to any claim or claims in excess of One Hundred Thousand Dollars ($100,000) which remains unpaid, unstayed, undismissed or unbonded for a period of thirty (30) days; or if any foreclosure is instituted (by judicial proceedings, by publication of notice pursuant to a power of sale or otherwise) against the Borrower or any REO Affiliate or the General Partner or Servicer or FC Liquidating Trust under any mortgage, deed of trust or security agreement granted by the Borrower or any REO Affiliate or the General Partner or Servicer or FC Liquidating Trust and is not dismissed or terminated for a period of fifteen (15) days. 9.1.21 The dissolution, liquidation or termination of existence of the Borrower or any REO Affiliate or Servicer or FC Liquidating Trust or a sale of assets of Borrower or any REO Affiliate or Servicer or FC Liquidating Trust out of the ordinary course of business. 9.1.22 Any material adverse change in the financial condition of, or any act or omission of Borrower or Servicer or FC Liquidating Trust, or any act or omission of any officer, director, partner or trustee of Borrower which leads Lenders reasonably to believe that performance of any of the covenants, agreements, or conditions of any of the Loan Documents, is or may be substantially impaired. 9.1.23 The transfer of any interest in Borrower or any REO Affiliate by any of the present partners thereof or dilution of the percentage interests in Borrower or any REO Affiliate held by any of the present partners thereof without the prior written consent of Lenders. 9.1.24 Any change in the ownership or control of Servicer which would reduce the total percentage stock ownership in Servicer owned by (a) shareholders of J-Hawk Corporation as of the Closing Date to less than 30% or (b) James T. Sartain or Rick R. Hagelstein to less than 3.5% each, in every case without Lenders' prior written consent. 9.1.25 The merger or consolidation with any corporation by the General Partner, Servicer or any corporate general partner of any REO Affiliate, or the transfer of any of the capital stock of the General Partner or any corporate general partner of any REO Affiliate by any of the present stockholders thereof, or dilution -84- of the percentage of the capital stock of, or voting rights in the General Partner or any corporate general partner of any REO Affiliate held by any of the present stockholders thereof, or the acquisition of any of the capital stock of the General Partner or any corporate general partner of any REO Affiliate by any person, corporation or entity not presently a stockholder thereof, without the prior written consent of Lenders. 9.1.26 If any of Borrower's partners claims that Borrower or any REO Affiliate or any of Borrower's other partners are in default under Borrower's partnership agreement or claims that such partner is not obligated to contribute all or any portion of such partner's contribution to the Borrower's capital or any such partner fails to make any such contribution in accordance with said partnership agreement and such claim, action or inaction leads Lenders reasonably to believe that the performance of any of the covenants, agreements or conditions of any of the Loan Documents is or may be substantially impaired. 9.1.27 If Borrower fails to promptly notify Lenders, in writing, and in any event within ten (10) days, of the occurrence of any event or condition of which Borrower is aware which constitutes a Default or an Event of Default, and together with such notice, furnish a written statement to Lenders which shall set forth the details of any action Borrower proposes to take with respect thereto. 9.1.28 The failure of Servicer to maintain, at all times, a minimum net worth of at least $30,000,000. 9.1.29 The occurrence of any "Guaranty Event of Default" under the Guaranty. 9.2. Remedies. After the occurrence of an Event of Default (unless such Event of Default has been waived in writing by Lenders), Agent and/or Lenders shall have and may exercise from time to time the following rights and remedies: 9.2.1 Acceleration of the Obligations. The right to declare, at Lenders' sole option, immediately due and payable all or any portion of the Obligations due or to become due from Borrower to Lenders (whether under the Loan or otherwise) without presentment, demand, protest, notice of dishonor, notice of default, notice of intent to accelerate, notice of acceleration, or any other notice whatsoever, and Borrower shall forthwith pay to Disbursing Agent for the account of Lenders, in addition to any and all sums and charges due, the entire principal of and interest accrued on the Obligations; provided, however, that in the case of an Event of Default under Section 9.1.20, the Obligations automatically shall become at once due and payable without -85- presentment, demand, protest, notice of dishonor, notice of default, notice of intent to accelerate, notice of acceleration, or any other notice or action whatsoever by Lenders. 9.2.2 Cessation of Fundings. The right to cease any and all fundings hereunder. 9.2.3 UCC Remedies. All of the rights and remedies of a secured party under the Security Documents or under the Code or under other applicable law, and all other legal and equitable rights to which Agent or Lenders may be entitled, all of which rights and remedies shall be cumulative, and none of which shall be exclusive, and shall be in addition to any other rights or remedies contained in this Agreement or any of the other Loan Documents. 9.2.4 Possession of Collateral. The right to take immediate possession of the Collateral (specifically including, without limitation, all records and all original documents), and (i) to require Borrower to assemble the Collateral, at Borrower's expense, and make it available to Agent at a place designated by Agent which is reasonably convenient to both parties, and (ii) to enter any of the premises of Borrower or wherever any of the Collateral shall be located, and to keep and store the same on said premises until sold (and if said premises be the property of Borrower, Borrower agrees not to charge Agent for storage thereof). 9.2.5 Disposition of Collateral. The right to sell or otherwise dispose of all or any of the Collateral at public or private sale or sales, with such notice as may be required by law, in lots or in bulk, for cash or on credit, all as Agent, in its discretion, may deem advisable. Borrower agrees that thirty (30) days' written notice to Borrower or the applicable REO Affiliate of any public or private sale or other disposition of any Collateral shall be reasonable notice thereof, and such sale shall be at such locations as Agent may designate in said notice. Agent shall have the right to conduct such sales on Borrower's or REO Affiliates' premises, without charge therefor, and such sales may be adjourned from time to time in accordance with applicable law. Agent shall have the right to sell, lease or otherwise dispose of any Collateral, or any part thereof, for cash, credit or any combination thereof, and Lenders may purchase all or any part of the Collateral at public or, if permitted by law, private sale and, in lieu of actual payment of such purchase price, may set-off the amount of such price against the Obligations. Agent is hereby granted a license or other right to use, without charge, Borrower's labels, patents, copyrights, rights of use of any name, trade secrets, tradenames, trademarks and advertising matter, or any property of a similar nature, as it pertains to the Collateral, in advertising for sale and selling any Collateral and Borrower's rights under all licenses and all franchise agreements shall inure -86- to Agent's and Lenders' benefit. The proceeds realized from the sale of any Collateral may be applied, after allowing two (2) Business Days for collection, first to the costs, expenses and reasonable attorneys' fees incurred by Agent or Lenders in collecting the Obligations, in enforcing Agent's and Lenders' rights under the Loan Documents and in collecting, retaking, completing, protecting, removing, storing, advertising for sale, selling and delivering any of the Collateral; secondly, to interest due upon any of the Obligations; and thirdly, to the principal of the Obligations. If any deficiency shall arise, Borrower shall remain liable to Agent and Lenders therefor. 9.2.6 Completion of Construction, etc. The right (i) to enter upon any REO Property and construct, equip and/or complete any improvements, and to appoint watchmen to protect any REO Property, all at the risk, cost, and expense of Borrower; (ii) to discontinue, at any time, any work with respect to any improvements commenced by Agent or change any course of action undertaken by Lenders in connection therewith; and/or (iii) to assume any construction contract or related agreement made by Borrower in any way pertaining to any improvements and to take over and use all or any part or parts of the labor, materials, supplies, and equipment contracted for by Borrower, all in the sole discretion of Agent. In connection with any construction, equipping, and/or completion of any improvements undertaken by Agent pursuant to the provisions of this Section 9.2.6 (but without intending to limit the powers and discretions conferred by said Section), Agent may engage builders, contractors, architects, engineers, and others for the purpose of furnishing labor, materials, and equipment; pay, settle, or compromise all bills or claims which may become Liens or which have been or shall be incurred in any manner in connection with such construction, equipping, and/or completion of improvements; and take such action or refrain from acting hereunder as Agent may, in its sole discretion, from time to time determine in order to carry out the intent of this Section 9. Borrower shall be liable to Agent and Lenders for all costs paid or incurred for the construction, completion, and/or equipping of any improvements, whether the same shall be paid or incurred pursuant to the provisions of this Section 9.2.6, or otherwise, and all payments made or liabilities incurred by Agent or Lenders under this Agreement of any kind whatsoever shall be paid by Borrower to Agent on demand, with interest to the date of payment at the Default Rate and shall be secured by the Security Documents. 9.2.7 Rights Under Loan Documents. The rights granted under any of the other Loan Documents and any of the Other Agreements. -87- 9.3. Setoff, Etc. 9.3.1 Upon the occurrence of any Event of Default, Agent and Lenders are hereby authorized at any time and from time to time, without notice to the Borrower (any such notice being expressly waived by the Borrower), and regardless of the adequacy of any Collateral, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by either Lender (or by any of either Lender's Affiliates) to or for the credit or the account of the Borrower (including without limitation all funds held in the Lock-Box Account, the Cash Reserve Account, Disbursement Account, the Operating Reserve Account, and the Tax Escrow Account but excluding, however, any funds deposited in the Tax Escrow Account which, to Lenders' knowledge, are the property of any Account Debtor) against any and all of the Obligations of the Borrower now or hereafter existing under the Loan Documents irrespective of whether or not Lenders shall have made any demand under the Loan Documents and although such Obligations may be unmatured. Lenders agree to promptly notify the Borrower after any such setoff and application; provided that the failure to give such notice shall not affect the validity of such setoff and application. 9.3.2 Any such right of setoff may be exercised by the Lenders against the Borrower or against any bankruptcy trustee, debtor-in-possession, assignee for the benefit of creditors, receiver, or execution, judgment or attachment creditor or any of them, or against anyone else claiming through or against them. 9.3.3 As security for the due payment and performance of all Obligations to the Lenders now in existence or hereafter arising, including without limitation, all Obligations hereunder and under the other Loan Documents, Borrower hereby grants to the Agent and Lenders a lien on any and all deposits or other sums at any time credited by or due from the Lenders and any Affiliate of either Lender to Borrower, whether in regular or special depository accounts or otherwise (including without limitation all funds held in the Lock-Box Account, the Cash Reserve Account, Disbursement Account, the Operating Reserve Account, and the Tax Escrow Account but excluding, however, any funds deposited in the Tax Escrow Account which, to Lenders' knowledge, are the property of any Account Debtor), and any and all moneys, securities and other property of Borrower and the proceeds thereof, now or hereinafter held or received by or in transit to either Lender, or any Affiliate of either Lender, whether for safekeeping, custody, pledge, transmission, collection or otherwise, and any such deposits, sums, moneys, securities and other property, may at any time after the occurrence of any Event of Default be set off, appropriated and applied by the Lenders against any of such -88- Obligations, whether or not any of the Obligations are then due or are secured by any other Collateral, or, if they are so secured, whether or not the other Collateral held by the Lenders is considered to be adequate. 9.3.4 The rights of Lenders under this Section 9.3 are in addition to all other rights and remedies (including, without limitation, other rights of setoff) which Lenders may have. 9.4. Remedies Cumulative; No Waiver. All covenants, conditions, provisions, warranties, guaranties, indemnities, and other undertakings of Borrower contained in this Agreement and the other Loan Documents, or in any document referred to herein or contained in any agreement supplementary hereto or in any schedule given to Lenders or contained in any other agreement between Borrower, Agent and/or and Lenders heretofore, concurrently, or hereafter entered into, shall be deemed cumulative to and not in derogation or substitution of any of the terms, covenants, conditions, or agreements of Borrower herein contained. The failure or delay of Agent or either Lender to exercise or enforce any rights, Liens, powers or remedies hereunder or under any of the aforesaid agreements or other documents or security or Collateral shall not operate as a waiver of such Liens, rights, powers and remedies, but all such Liens, rights, powers, and remedies shall continue in full force and effect until the Loan and all other Obligations shall have been fully satisfied. All Liens, rights, powers, and remedies herein provided for are cumulative and none are exclusive. SECTION 10 AGENCY PROVISIONS 10.1. Appointment. 10.1.1 The Lenders have designated and appointed Fleet or NationsBank as agent for the Lenders to act as specified herein and the other Loan Documents (as used in this Section 10, the term "Agent" means each of Fleet and NationsBank in its capacity as "Agent" under the respective Loan Document), and each such Lender hereby irrevocably authorizes the Agent, as the agent for such Lender, to take such action on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers and perform such duties as are expressly delegated to the Agent by the terms hereof and of the other Loan Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere herein and in the other Loan Documents, the Agent shall not have any duties or responsibilities, except those expressly set forth herein and therein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations -89- or liabilities shall be read into this Agreement or any of the other Loan Documents, or shall otherwise exist against the Agent. 10.1.2 The provisions of this Section: (i) are solely for the benefit of the Agent and the Lenders, (ii) are not for the benefit of Borrower and Borrower shall have no right as a third party beneficiary of the provisions hereof, (iii) are not to be relied upon by Borrower or any third party, and (iv) shall not affect the rights or obligations of Borrower or create any obligations of Borrower. In performing its functions and duties under this Agreement and the other Loan Documents, the Agent shall act solely as agent of the Lenders and does not assume and shall not be deemed to have assumed any obligation or relationship of agency or trust with or for the Borrower. 10.1.3 Notwithstanding the authority delegated to Agent pursuant to Section 10.1.1 or otherwise in the Loan Documents, Agent shall not enter into any amendment or modification of any of the Loan Documents or take other action specifically requiring the consent, direction or approval of Lenders without the consent, direction or approval of both Lenders. Lenders may direct Agent to take certain actions in respect of Borrower, any REO Affiliate or otherwise related to the authority granted to such Agent under the Loan Documents, including the granting or denial of waivers, the giving of consents or approvals, the exercise of remedies or the initiation of suit or other legal proceedings, and if so directed, Agent shall take such actions. Agent may take any actions so approved or directed by Lenders in its name without the joinder of Lenders, and Borrower, any REO Affiliate and all third parties shall be entitled to rely on the actions taken by Agent with respect to the execution by Agent of any and all agreements, financing statements, affidavits, notices or any other type of document or instrument pertaining thereto, including, without limitation, in connection with the exercise of any rights or remedies of Lenders under the Loan Documents, and the same shall be binding upon all Lenders as to any third party relying on such actions by Agent. Either Agent may also be named secured party or beneficiary under the Security Documents and in such capacity shall take and maintain possession of the respective Security Documents, as agent for and on behalf of Lenders, and the grant to either Agent of any Lenders' liens or security interests under any Security Document shall be for the ratable benefit of Lenders. 10.2 Delegation of Duties. The Agent may execute any of its duties hereunder or under the other Loan Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. -90- 10.3 Exculpatory Provisions. Neither the Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection herewith or in connection with any of the other Loan Documents (IT BEING EXPRESSLY UNDERSTOOD THAT SUCH INDEMNIFIED PARTY SHALL BE INDEMNIFIED FOR ITS OR HIS ORDINARY NEGLIGENCE BUT NOT FOR SUCH PERSON'S OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT), or (ii) responsible in any manner to either of the Lenders for any recitals, statements, representations or warranties made by the Borrower or any partner thereof contained herein or in any of the other Loan Documents or in any certificate, report, statement or other document referred to or provided for in, or received by the Agent under or in connection herewith or in connection with the other Loan Documents, or enforceability or sufficiency hereof or of any of the other Loan Documents, or for any failure of the Borrower to perform its obligations hereunder or thereunder. The Agent shall not be responsible to either Lender for the collectibility of the Loan or the effectiveness, genuineness, validity, or enforceability of this Loan Agreement or any of the other Loan Documents or for any representations, warranties, recitals or statements made herein or therein or made in any written or oral statement or in any financial or other statements, instruments, reports, certificates or any other documents in connection herewith or therewith furnished or made by the Agent to the Lenders or by or on behalf of the Borrower to the Agent or either Lender. The Agent shall not be required to ascertain or inquire as to the performance or observance of any of the terms, conditions, provisions, covenants or agreements contained herein or in any of the other Loan Documents (except as expressly required by any provision hereof or of any other Loan Document) or as to the use of the proceeds of the Loan or of the existence or possible existence of any Default or Event of Default or to inspect the properties, books or records or the Borrower. 10.4 Reliance on Communications. The Agent shall be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper person or persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Borrower), independent accountants and other experts selected by the agent with reasonable care. The Agent may deem and treat the Lenders as the owner of their respective interests hereunder for all purposes. The Agent shall be fully justified in failing or refusing to take any action under this Loan Agreement or under any of the other Loan Documents unless it shall first receive such advice or concurrence of both Lenders as it deems appropriate or it -91- shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Agent shall in all cases be fully protected in acting or in refraining from acting, hereunder or under any of the other Loan Documents in accordance with a request of both Lenders and such request and any action taken or failure to act pursuant thereto shall be binding upon both Lenders (including their successors and assigns). 10.5. Notice of Default. 10.5.1 The Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless the Agent has received notice from a Lender or the Borrower referring to the Loan Document, describing such Default or Event of Default and stating that such notice is a "notice of default." In the event that the Agent receives such a notice, the Agent shall give prompt notice thereof to the Lenders. Thereafter, during the continuance of such Event of Default, the Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by both Lenders; provided that, the Agent may (but shall not be obligated to) take such other action, or refrain from taking such other action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders to protect Lenders' rights and interests under the Loan Documents and in the Collateral. 10.5.2 Notwithstanding the above, in the event that the Lenders cannot come to agreement regarding acceleration of the Loan and the exercise of remedies under the Loan Documents within ninety (90) days after the time when the Lenders shall have had actual notice of the Event of Default in question, thereby resulting in a deadlock, then Fleet shall, at the end of such ninety (90) day period, give notice to the Borrower that the Loan is accelerated and each Agent shall thereafter take such action (pursuant to the Loan Documents under which it is acting as agent) as the Agent deems advisable to enforce the Lenders' rights under the respective Loan Agreement and the other Loan Documents; provided, further, however, that in the event the Agent (whether in its capacity as a Lender or Agent, or both) shall not be in agreement with such acceleration of the Loan and exercise of remedies in connection therewith at the end of any such deadlock period, then the Agent shall have the option to withdraw as Agent prior to any such action being taken in connection with the Loan and the other Lender shall automatically be appointed successor Agent under the applicable Loan Document. 10.6. Non-Reliance on Agent and other Lender. Each Lender expressly acknowledges that neither the Agent nor any of its -92- officers, directors, employees, agents, attorneys-in-fact or affiliates has made any representations or warranties to it and that no act by the Agent or any affiliate thereof hereinafter taken, including any review of the affairs of the Borrower, shall be deemed to constitute any representation or warranty by the Agent to either Lender. Each Lender represents to the Agent that it has, independently and without reliance upon the Agent or the other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, assets, operations, property, financial and other conditions, prospects and creditworthiness of the Borrower and made its own decision to make available to the Borrower its portion of the Loan hereunder and enter into this Agreement. Each Lender also represents that it will, independently and without reliance upon the Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement, and to make such investigation as it deems necessary to inform itself as to the business, assets, operations, property, financial and other conditions, prospects and creditworthiness of the Borrower. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Agent hereunder and under the other Loan Documents, the Agent shall not have any duty or responsibility to provide either Lender with any credit or other information concerning the business, prospects or creditworthiness of the Borrower which may come into the possession of the Agent or any of its officers, directors, employees, agents, attorneys-in-fact or affiliates. 10.7. Indemnification. The Lenders agree to indemnify the Agent in its capacity as such (to the extent not promptly reimbursed by the Borrower and without limiting the obligation of the Borrower to do so), ratably according to their respective Lender Pro Rata Shares, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgements, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including without limitation at any time following the payment of the Notes) be imposed on, incurred by or asserted against the Agent in its capacity as such in any way relating to or arising out of this Agreement or the other Loan Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by the Agent under or in connection with any of the foregoing; provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgements, suits, costs, expenses or disbursements resulting from the Agent's gross negligence or willful misconduct [IT BEING EXPRESSLY UNDERSTOOD AND AGREED THAT THE INDEMNIFIED PARTY SHALL BE INDEMNIFIED FOR ITS -93- ORDINARY NEGLIGENCE]. If any indemnity furnished to the Agent for any purpose shall, in the opinion of the Agent, be insufficient or become impaired, the Agent may call for additional indemnity and cease, or not commence, to do the acts indemnified against until such additional indemnity is furnished. The agreements in this Section shall survive the payment of the Notes and all other amounts payable hereunder and under the other Loan Documents. 10.8. Agent in its Individual Capacity. The Agent and its affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Borrower as though the Agent were not the Agent hereunder. With respect to the Loan, the Agent, in its individual capacity as a Lender, shall have the same rights and powers under this Agreement as either Lender and may exercise the same as though it were not the Agent, and the terms "Lender" and "Lenders" shall include the Agent in its individual capacity. 10.9. Successor Agent. The Agent may, at any time, resign as Agent under the applicable Loan Document upon twenty (20) days' written notice to the Lenders and the Borrower, and be removed as Agent under the applicable Loan Document with or without cause by the Lenders upon thirty (30) days written notice to the Agent. Upon any such resignation or removal, the other Lender shall have the option of becoming the Agent hereunder and, if the other Lender does not agree to act as Agent within ten (10) days of such resignation or removal, the Lenders shall have the right to appoint a successor Agent. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations as Agent under the applicable Loan Document and the provisions of this Section 10 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under the applicable Loan Document. Any successor Agent shall have the right to cause itself or an affiliate entity to serve as the Escrow Agent, Custodian, Lock-Box Agent (as defined in the Lock-Box Agreement) or other similar function under the Loan Documents by so notifying the retiring Agent. The retiring Agent shall cooperate with the successor Agent to cause such functions to be so transferred as soon as reasonably and practically possible. Notwithstanding the foregoing provisions of this Section 10.9, the Lenders, each acknowledge and agree that only NationsBank or Fleet shall serve as Agent under the Loan Documents unless otherwise agreed to by the Borrower. 10.10. Lender Pro Rata Shares. Fleet's Lender Pro Rata Share shall be 50% and NationsBank's Lender Pro Rata Share shall be 50% and accordingly each Lender shall be deemed to own an undivided 50% interest in (i) the Loan; (ii) all Loan Documents; and (iii) -94- all principal and interest payments due under or in connection with the Loan and all Loan Fees and all other fees and other sums due under the Loan Documents. Each Lender shall be entitled to its Lender Pro Rata Share of all payments of principal, interest fees and other sums due under or in connection with the Loan. Neither Lender shall have any priority of ownership or interest in Loan, the Loan Documents or any payment thereunder over the other Lender. 10.11. Pro Rata Treatment. Each payment received by Agent for the account of Lenders shall be distributed to each Lender in accordance with the Lender Pro Rata Share of each Lender by not later than the end of the next Business Day after Disbursing Agent's receipt of "good" funds (as determined in accordance with Agent's customary practices). If either Lender shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of set-off or otherwise) in excess of the Lender Pro Rata Share of such Lender, such Lender shall forthwith pay to the other Lender such amount as shall be necessary to cause both Lenders to share such excess payment ratably. In addition, in the event that any amount received by either Lender with respect to the Loan is subsequently invalidated, declared to fraudulent or preferential, set aside or judicially required to be repaid to a trustee, receiver or any other person under any applicable creditors' remedy preceding, including without limitation, any bankruptcy proceeding, the other Lender shall pay to the Lender from which said amount is recovered, such amount as will result in both Lenders retaining their respective Lender Pro Rata Shares after such recovery. In addition, Agent shall promptly forward to both Lenders, copies of all documents, instruments, requests, lists and other written information delivered to Agent under the Loan Documents, which are intended for the files of or to be reviewed by Lenders. 10.12. Assignments/Participations. Neither Lender shall have the right to assign any of its interests, rights and obligations under this Agreement. Notwithstanding the above prohibition on assignments, without the consent of Agent, Borrower or the other Lender, each Lender shall have the right to sell participation interests in its respective Lender Pro Rata Share to such other lenders (collectively, "Participants") as the Lender in question may deem appropriate. No Participant shall have any rights in the Loan or hereunder or under any of the other Loan Documents; it being understood that each Lender shall be responsible for interacting with its respective Participant(s). Notwithstanding the fact that a Lender may sell participation interests in its Lender Pro Rata Share, such Lender shall remain fully liable and responsible for the administration of the full Lender Pro Rata Share of such Lender and the performance of all of such Lender's obligations hereunder as if such Lender had never sold any such participation interest. In the event that either Lender does sell a participation interest in its Lender Pro Rata -95- Share, neither the Agent nor the other Lender nor Borrower shall have duty to in any way whatsoever give notices to or otherwise communicate with, make payments to, or interact with such Participant. SECTION 11 MISCELLANEOUS 11.1. Power of Attorney. Contemporaneously herewith, Borrower has executed a power of attorney in favor of Agent (the "Power of Attorney") subject to the condition that such Power of Attorney may be used by Agent or Agent's agent only in accordance with the following provisions: 11.1.1 At such time or times hereafter as Agent or said agent may determine, Agent may use the Power of Attorney (i) to endorse Borrower's name on any checks, notes, acceptances, drafts, money orders or any other evidence of payment or proceeds of the Collateral which are payable to Borrower and which come into the possession of Agent or either Lender or under Agent's or either Lenders' control and (ii) to affix a stamped endorsement with facsimile signature by Borrower to Agent on any Pledged Note, any Assignment or any other Collateral Loan Document. 11.1.2 At such time or times upon or after the occurrence of an Event of Default, as Agent or its agent may determine, Agent may use the Power of Attorney to: (a) endorse the name of Borrower upon any of the items of payment or proceeds relating to any Collateral and deposit the same to the account of Lenders on account of the Obligations; (b) endorse the name of Borrower upon any chattel paper, document, instrument, invoice, freight bill, bill of lading or similar document or agreement relating to the Collateral; (c) make and adjust claims under policies of insurance; and (d) do all other acts and things contemplated in the Power of Attorney or necessary, in Agent's determination, to fulfill Borrower's obligations under this Agreement, which must be performed in the name of Borrower and for which Borrower has failed or refused to give Agent the necessary assignments. 11.2. Modification of Agreement. All modifications, consents, amendments or waivers of any provision of any Loan Document, or consent to any departure by Borrower therefrom, shall be effective only if the same shall be in writing and concurred with by Agent and Lenders and then shall be effective only in the specific instance and for the purpose for which given. 11.3. Reimbursement of Expenses. If, at any time or times prior or subsequent to the date hereof, regardless of whether or not an Event of Default then exists or any of the transactions contemplated hereunder are concluded, either Lender reasonably -96- employs counsel for advice or other representation, or incurs legal expenses or other costs or out-of-pocket expenses in connection with: (a) the negotiation and preparation of this Agreement or any of the other Loan Documents ); (b) any amendment of or modification of this Agreement or any of the other Loan Documents or any release of any Collateral; (c) the determination of whether a Default or Event of Default exists under this Agreement and Lenders' rights with respect to such potential Default or Event of Default; (d) any litigation, contest, dispute, suit, proceeding or action (whether instituted by Lenders, Borrower or any other Person) in any way relating to the Collateral, this Agreement or any of the other Loan Documents or Borrower's affairs; (e) any attempt to enforce any rights of Agent and/or Lenders against Borrower or any other Person which may be obligated to Agent and/or Lenders by virtue of this Agreement or any of the other Loan Documents, including, without limitation, the obligors under any Collateral Loan; or (f) after the occurrence of an Event of Default hereunder, any attempt to inspect, verify, protect, preserve, restore, collect, sell, liquidate or otherwise dispose of or realize upon the Collateral; then, in any such event, the reasonable attorneys' fees arising from such services and all expenses, costs and charges of such counsel or of Agent or Lenders or relating to any of the events or actions described in this Section 11.3 shall be due and payable, by Borrower to Agent, five (5) days after notice to Borrower (which notice shall include invoices for such costs, fees or expenses) and demand for payment thereof, and all such amounts shall be additional Obligations hereunder secured by the Collateral. Additionally, if any taxes (excluding taxes imposed upon or measured by the net income of Lenders but including, without limitation, any note or mortgage taxes and all revenue stamps) shall be payable on account of the execution or delivery of this Agreement, or the execution, delivery, issuance or recording of any of the other Loan Documents, or the creation of any of the Obligations hereunder, by reason of any existing or hereafter enacted federal or state statute, Borrower will pay all such taxes, including, but not limited to, any interest and penalties thereon, and will indemnify and hold Agent and Lenders harmless from and against liability in connection therewith. Additionally, Borrower shall pay all recording, filing, title insurance and related costs incurred by Agent or Lenders in connection with the Loan, together with the fees and expenses of all appraisers, engineers, surveyors and environmental consultants engaged by Agent or Lenders in connection with the Loan. 11.4. Indulgences Not Waivers. Agent's or Lenders' failure, at any time or times hereafter, to require strict performance by Borrower of any provision of the Loan Documents shall not waive, affect or diminish any right of Agent or Lenders thereafter to demand strict compliance and performance therewith. Any suspension or waiver by Agent or Lenders of an Event of Default by Borrower -97- under any Loan Document shall not suspend, waive or affect any other Event of Default by Borrower under any Loan Document, whether the same is prior or subsequent thereto and whether of the same or of a different type. None of the undertakings, agreements, warranties, covenants and representations of Borrower contained in any Loan Document and no Event of Default by Borrower under any Loan Documents shall be deemed to have been suspended or waived by Agent or Lenders, unless such suspension or waiver is by an instrument in writing specifying such suspension or waiver and is signed by a duly authorized representative of Lenders and directed to Borrower. 11.5. Severability. Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. 11.6. Successors and Assigns; Participations by Lenders. This Agreement and the other Loan Documents shall be binding upon and inure to the benefit of the successors and assigns of Borrower, Agent and Lenders; provided, however, that Borrower may not sell, assign or transfer any interest in the Loan Documents, or any portion thereof, including, without limitation, Borrower's rights, title, interests, remedies, powers and duties hereunder or thereunder. In the case of any participations sold by either Lender, each participating lender shall be entitled to receive all information received by Lenders regarding the creditworthiness of Borrower, including, without limitation, information required to be disclosed to a participant pursuant to Banking Circular 181 (Rev., August 2, 1984), issued by the Comptroller of the Currency (whether such participating lender is subject to the Circular or not). 11.7. Cumulative Effect; Conflict of Terms. The provisions of the Other Agreements and the Security Documents are hereby made cumulative with the provisions of this Agreement. Except as otherwise provided in any of the Other Agreements or the Security Documents by specific reference to the applicable provision of this Agreement, if any provision contained in this Agreement is in direct conflict with, or inconsistent with, any provision in any of the Other Agreements or the Security Documents, the provision contained in this Agreement shall govern and control. 11.8. Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which -98- counterparts taken together shall constitute but one and the same instrument. 11.9. Notice. Except as otherwise expressly provided herein, all notices, requests and demands to or upon a party hereto shall be in writing, and shall be deemed to have been validly served, given or delivered (a) if sent by certified or registered mail against receipt, three (3) Business Days after deposit in the mail, postage prepaid, or, if earlier, when delivered against receipt, (b) if sent by telegraphic notice, when delivered to the telegraph company, or (c) if sent by any other method (including by overnight courier), upon actual delivery, in each case addressed as follows: If to Lenders or Agent: To: Fleet National Bank c/o Fleet Real Estate, Inc. Suite 800 111 Westminster Street Providence, Rhode Island 02903 ATTN: Deborah T. Fox Vice President and NationsBank of Texas, N.A. c/o Real Estate Group 901 Main Street 51st Floor NationsBank Plaza Dallas, Texas 75202 ATTN: Christopher J. Martineau Assistant Vice President with a copy to: Hinckley, Allen & Snyder 1500 Fleet Center Providence, Rhode Island 02903 ATTN: Matthew T. Marcello III, Esq. If to Borrower: FCLT Loans, L.P. 1021 Main Street, Suite 2600 Houston, Texas 77002 Attention: Robert W. Brown -99- with a courtesy copy to: FirstCity Financial Corporation 6400 Imperial Drive P.O. Box 8216 Waco, Texas 76712-8216 Attention: James T. Sartain or to such other address as each party may designate for itself by like notice given in accordance with this Section 11.9; provided, however, that any notice, request or demand to or upon Lenders pursuant to Section 2, Section 4 and Section 5 shall not be effective until received by Lenders. 11.10. Agent's or Lender's Consent. Whenever Agent's or Disbursing Agent's or Lenders' consent is required to be obtained under any Loan Documents as a condition to any action, inaction, condition or event, Agent or Disbursing Agent or Lenders, as the case may be, shall be authorized to give or withhold such consent in their sole and absolute discretion without regard to reasonableness (unless otherwise expressly provided herein) and to condition their consent upon the giving of additional collateral security for the Obligations, the payment of money or any other matter. 11.11. Time of Essence. Time is of the essence with respect to each of the Loan Documents and payment and performance of the obligations thereunder. 11.12. Entire Agreement. The Loan Documents embody the entire understanding and agreement between the parties hereto and thereto with respect to the subject matter hereof and thereof and supersede all prior agreements, understandings and inducements, whether express or implied, oral or written. 11.13. Interpretation. No provision in any of the Loan Documents shall be construed against or interpreted to the disadvantage of any party hereto by any court or other governmental or judicial authority by reason of such party having or being deemed to have structured, drafted or dictated such provision. 11.14. No Preservation or Marshaling. Borrower agrees that neither Agent nor either Lender shall have any obligation to preserve rights to the Collateral against prior parties or to marshal any Collateral for the benefit of any Person. 11.15. Governing Law; Consent to Forum. THE LOAN DOCUMENTS HAVE BEEN NEGOTIATED, EXECUTED AND DELIVERED AT AND SHALL BE DEEMED TO HAVE BEEN MADE IN HOUSTON, TEXAS, AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT -100- RESORT TO THAT STATE'S CONFLICT OF LAWS RULES; PROVIDED, HOWEVER, THAT IF ANY OF THE COLLATERAL SHALL BE LOCATED IN ANY JURISDICTION OTHER THAN TEXAS, THE LAWS OF SUCH JURISDICTION SHALL GOVERN THE METHOD, MANNER AND PROCEDURE FOR FORECLOSURE OF AGENT'S OR LENDERS' LIEN UPON SUCH COLLATERAL AND THE ENFORCEMENT OF AGENT'S OR LENDERS' OTHER REMEDIES IN RESPECT OF SUCH COLLATERAL TO THE EXTENT THAT THE LAWS OF SUCH JURISDICTION ARE DIFFERENT FROM OR INCONSISTENT WITH THE LAWS OF TEXAS. AS PART OF THE CONSIDERATION FOR NEW VALUE RECEIVED, AND REGARDLESS OF ANY PRESENT OR FUTURE DOMICILE OR PRINCIPAL PLACE OF BUSINESS OF BORROWER, ANY REO AFFILIATE, AGENT OR EITHER LENDER, BORROWER HEREBY CONSENTS AND AGREES THAT THE DISTRICT COURT OF DALLAS COUNTY, TEXAS, OR, AT AGENT'S OPTION, THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS (DALLAS DIVISION), SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN BORROWER AND AGENT OR EITHER LENDER PERTAINING TO THE LOAN DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED THERETO. BORROWER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND BORROWER HEREBY WAIVES ANY OBJECTION WHICH BORROWER OR ANY REO AFFILIATE MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENCE AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO AFFECT THE RIGHT OF AGENT OR EITHER LENDER TO SERVE LEGAL PROCESS IN ANY MANNER PERMITTED BY LAW, OR TO PRECLUDE THE ENFORCEMENT BY AGENT OR EITHER LENDER OF ANY JUDGMENT OR ORDER OBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION TO ENFORCE SAME IN ANY OTHER APPROPRIATE FORUM OR JURISDICTION. 11.16. Waivers by Borrower. EXCEPT AS IS OTHERWISE EXPRESSLY PROVIDED FOR HEREIN, BORROWER WAIVES (A) THE RIGHT TO TRIAL BY JURY (WHICH AGENT AND LENDERS HEREBY ALSO WAIVE) IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO ANY OF THE LOAN DOCUMENTS, THE OBLIGATIONS OR THE COLLATERAL; (B) PRESENTMENT, DEMAND AND PROTEST AND NOTICE OF PRESENTMENT, PROTEST, DEFAULT, NON-PAYMENT, INTENT TO ACCELERATE, ACCELERATION, MATURITY, RELEASE, COMPROMISE, SETTLEMENT, EXTENSION OR RENEWAL OF ANY OR ALL COMMERCIAL PAPER, ACCOUNTS, CONTRACT RIGHTS, DOCUMENTS, INSTRUMENTS, CHATTEL PAPER AND GUARANTIES AT ANY TIME HELD BY AGENT OR EITHER LENDER ON WHICH BORROWER MAY IN ANY WAY BE LIABLE AND HEREBY RATIFIES AND CONFIRMS WHATEVER AGENT OR EITHER LENDER MAY DO IN THIS REGARD; (C) NOTICE PRIOR TO TAKING POSSESSION OR CONTROL OF THE COLLATERAL OR OBTAINING ANY BOND OR SECURITY WHICH MIGHT BE REQUIRED BY ANY COURT PRIOR TO ALLOWING AGENT OR LENDER TO EXERCISE ANY OF AGENT'S OR LENDERS' REMEDIES; (D) THE BENEFIT OF ALL VALUATION, APPRAISEMENT AND EXEMPTION LAWS; (E) ANY RIGHT BORROWER MAY HAVE UPON PAYMENT IN FULL OF THE OBLIGATIONS TO REQUIRE AGENT TO TERMINATE ITS SECURITY INTEREST IN THE COLLATERAL OR IN ANY OTHER PROPERTY OF BORROWER UNTIL TERMINATION OF THIS AGREEMENT IN -101- ACCORDANCE WITH ITS TERMS, EXCLUDING, HOWEVER THE TERMS OF THIS AGREEMENT THAT PERTAIN TO CLAIMS OF INDEMNITY THAT ARE UNMATURED AS OF THE DATE OF TERMINATION OF THIS AGREEMENT; AND (F) NOTICE OF ACCEPTANCE HEREOF. BORROWER ACKNOWLEDGES THAT THE FOREGOING WAIVERS ARE A MATERIAL INDUCEMENT TO AGENT'S AND LENDERS' ENTERING INTO THIS AGREEMENT AND THAT AGENT AND LENDERS ARE RELYING UPON THE FOREGOING WAIVERS IN FUTURE DEALINGS WITH BORROWER. BORROWER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THE FOREGOING WAIVERS WITH ITS LEGAL COUNSEL AND HAS KNOWINGLY AND VOLUNTARILY WAIVED ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT. 11.17. DTPA Waiver. IF IT EVER SHOULD BE DETERMINED BY A COURT OF COMPETENT JURISDICTION THAT THE DECEPTIVE TRADE PRACTICES -CONSUMER PROTECTION ACT (TEXAS BUS. & COM. CODE ANN. SECTION 17.01 ET SEQ. (VERNON SUPP. 1987)), IS APPLICABLE TO THIS TRANSACTION, BORROWER HEREBY WAIVES ALL PROVISIONS OF SUCH ACT OTHER THAN SECTION 17.555 THEREOF PERTAINING TO CONTRIBUTION AND INDEMNITY, AND BORROWER EXPRESSLY WARRANTS AND REPRESENTS THAT BORROWER (A) HAS ASSETS OF $5,000,000 OR MORE, (B) HAS KNOWLEDGE AND EXPERIENCE IN FINANCIAL AND BUSINESS MATTERS THAT ENABLE BORROWER TO EVALUATE THE MERITS AND RISKS OF THIS TRANSACTION, (C) IS NOT IN A SIGNIFICANTLY DISPARATE BARGAINING POSITION RELATIVE TO LENDERS AND (D) HAS BEEN REPRESENTED BY LEGAL COUNSEL IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. 11.18. Limitation on Interest. (a) Notwithstanding anything herein or in the Loan Documents, expressed or implied, to the contrary, in no event shall any interest rate charged hereunder or under the Notes or any of the Loan Documents, or any interest contracted for, collected or received by the Lenders or either of them exceed the Maximum Legal Rate or the maximum amount of interest permitted under applicable law. With respect to the Notes, if at any time the rate of interest calculated with reference to the applicable Contract Rate is limited to the Maximum Legal Rate, any subsequent reductions in the applicable Contract Rate shall not reduce the rate of interest on the Notes below the Maximum Legal Rate until the total amount of interest accrued equals the amount of interest which would have accrued if the contract rate had at all times been in effect. In the event that at maturity (stated or by acceleration), or at final payment of the Notes, the total amount of interest paid or accrued on the Notes is less than the amount of interest which would have accrued if the applicable Contract Rate had at all times been in effect, then at such time, to the extent permitted by law, Borrower shall pay to Lenders an amount equal to the difference between (i) the lesser of the amount of interest which would have accrued if the applicable Contract Rate had at all times been in effect and -102- the amount of interest which would have accrued if the Maximum Legal Rate had at all times been in effect, and (ii) the amount of interest actually paid on the Notes. (b) Borrower and Lenders acknowledge and agree that they intend for the Loans to be, and to the fullest extent possible the Loans shall be, subject to DIDMCA, and the interest on the Loans shall be calculated in accordance with Section 501 of DIDMCA, such that there will be no legal limitation on the amount or rate of interest that Lenders may charge on amounts outstanding under the Loans. Borrower and Lenders further agree that if DIDMCA does not apply to the Loans or any funds advanced hereunder, then (i) the interest rate shall be limited to the Maximum Legal Rate as herein provided and (ii) Borrower's sole remedies for any violation of any usury limitation shall be those set forth in the usury savings clauses herein and in the Notes. (c) It is expressly stipulated and agreed to be the intent of Borrower and Lender at all times to comply with the applicable law governing the maximum rate or amount of interest payable on or in connection with the Notes and the Loans. If the applicable law is ever judicially interpreted so as to render usurious any amount called for under the Notes or under any of the other Loan Documents, or contracted for, charged, taken, reserved or received with respect to the Notes, or if acceleration of the maturity of the Notes, any prepayment by Borrower, or any other circumstance whatsoever, results in Lender having been paid any interest in excess of that permitted by applicable law, then it is the express intent of Borrower and Lender that all excess amounts theretofore collected by Lender be credited on the principal balance of the Notes (or, if the Notes have been or would thereby be paid in full, refunded to Borrower), and the provisions of the Notes and the other applicable Loan Documents immediately be deemed reformed and the amounts thereafter collectible hereunder and thereunder reduced, without the necessity of the execution of any new document, so as to comply with the applicable law, but so as to permit the recovery of the fullest amount otherwise called for hereunder and thereunder. The right to accelerate the maturity of the Notes does not include the right to accelerate any interest which has not otherwise accrued on the date of such acceleration, and Lender does not intend to collect any unearned interest in the event of acceleration. All sums paid or agreed to be paid to Lender for the use, forbearance or detention of the indebtedness evidenced hereby or by any other Loan Documents shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the full term of such indebtedness until payment in full so that the rate or amount of interest on account of such indebtedness does not exceed the Maximum Legal Rate. The term "applicable law" as used herein shall mean the laws of the State of Texas, or DIDMCA or any other applicable United -103- States federal law to the extent that it permits Lender to contract for, charge, take, reserve or receive a greater amount of interest than under Texas law. The provisions of this paragraph shall control all agreements between Borrower and Lenders. 11.19. Oral Agreements Ineffective. THE LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES, AND THE SAME MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. IN WITNESS WHEREOF, this Agreement has been duly executed as of the day and year first above written. BORROWER: WITNESS AS TO ALL: FCLT LOANS, L.P. By: FCLT LOANS ASSET CORP., its General Partner /s/ Lori-Ann Zannini - ------------------------ By: /s/ Robert W. Brown ---------------------------- Robert W. Brown President LENDERS AND AGENT: FLEET NATIONAL BANK, as Lender and Agent By: /s/ Deborah T. Fox -------------------------------- Deborah T. Fox Vice President By: /s/ Sarah A. Cousineau -------------------------------- Sarah A. Cousineau Loan Officer -104- NATIONSBANK OF TEXAS, N.A., as Lender By: /s/ Deborah L. Newman -------------------------------- Deborah L. Newman Senior Vice President By: /s/ Huvishka Ali -------------------------------- Huvishka Ali Real Estate Banking Officer -105-

Basic Info X:

Name: LOAN AGREEMENT
Type: Loan Agreement
Date: May 2, 1996
Company: FIRST CITY LIQUIDATING TRUST
State:

Other info:

Date:

  • 11th day of July , 1995
  • Saturday
  • Sunday
  • last day of the second
  • May 10 , 1996
  • February 1 , 1996
  • March 31 , 1996
  • June 21 , 1995
  • June 22 , 1994
  • December 23 , 1994
  • 30th day of June , 1997
  • March 3 , 1995
  • July 3 , 1995
  • September 30 , 1996
  • September 30 , 1997
  • July 11 , 1995
  • July 6 , 1995
  • Tier 1
  • fifteen 15 days after the last day
  • 30th day of June , 1998
  • June 1 , 1997
  • each quarter
  • December 31
  • July 31 , 1995
  • June 1 , 1994
  • September 15 , 1995
  • August 31 , 1995
  • August 2 , 1984

Organization:

  • Loan & Letters of Credit 2.2
  • Extend Maturity Date 4.7 Special Eurodollar Loan Provisions Section 5 Cash Flow Distributions & Operational Issues
  • Release Price & Minimum Release Price 6.7 Termination of Security Interests 6.8 REO
  • Time of Essence 11.12
  • Notice of Borrowing EXHIBIT A-2 Advance Certificate EXHIBIT B Schedule of Collateral Loans and Allocated Values
  • The Portfolio Committee EXHIBIT G Additional Conditions Subsequent
  • FC Liquidating Trust the Subordinate Note
  • vi Financing Facility
  • Eurodollar Rate Reserve Percentage
  • Portfolio Committee and Lenders
  • The United States Bankruptcy Court
  • Northern District of Texas
  • Borrower Base Schedule
  • Comprehensive Environmental Response
  • Chattel Paper and Participation Interests
  • Pledged Security Documents
  • Real Estate Loan
  • Notices of Borrowing and Advance Certificates
  • DSC Interest Rate multiplied
  • DSC Calculation Period
  • ASTM Standard Procedures for Environmental Site Assessments
  • First City Bancorporation of Texas , Inc.
  • State of Delaware
  • First City Life Insurance Company
  • FCLT Asset Agency Agreement
  • FirstCity Liquidating Trust
  • Assignment of Proceeds of Causes of Action
  • FC Intangible Assets
  • Central Texas Insurance Company , Inc.
  • Shawmut Bank Connecticut , National Association
  • Frost National Bank
  • Frost Letters of Credit
  • Official Committee of Equity Security Holders
  • Cargill Financial Services Corporation
  • Pledged Loan Documents
  • Frost LC Documents
  • TCB LC Documents
  • United States Postal Service
  • LT Security Instruments
  • Allocated Values of the Portfolio Assets
  • Debtor 's Motion to Approve Loss Sharing Agreements
  • Borrower to Unrelated Third Parties
  • All Insurance and Condemnation Proceeds
  • Revolving Credit Note
  • FCLT Loans Corp.
  • definition of Collateral
  • Frost Purchase Agreement
  • LT Loan Documents
  • Texas Commerce Bank National Association
  • Borrower to Fleet
  • Fleet of a Letter of Credit
  • Standby Letter of Credit
  • Twelve Million Five Hundred Thousand Dollars
  • TCB Letters of Credit
  • Title Company to Lenders
  • ALTEX Standard-Form Mortgagee Title Insurance Policy
  • ALTEX Standard Form Mortgagee Title Insurance Policy
  • Borrowing Base Schedule
  • UCC-1 Financing Statements
  • Certain Matters of Construction
  • Commitment of Lenders
  • Letters of Credit to Frost
  • Letter of Credit Agreements
  • Borrower to Account Debtors
  • Borrower to Lenders
  • Operating Reserve Account at Fleet
  • Delivery of Advance Documents
  • Subordinated Indebtedness Documents
  • Servicer , Lenders
  • Partnership Agreements of Borrower
  • Secretary of State
  • Vander Woude , Malone & Istre P.C.
  • Hauer & Feld , L.L.P.
  • Formation Balance Sheets
  • Information Concerning the Collateral Loan Pool
  • 3.2.3 Collateral Loan Documents
  • Interest Period in Absence of Interest Election
  • Foreclosure Under Collateral Loans
  • Tranche 3 Rebate
  • Eurodollar Loans Unavailable
  • Eurodollar Lending Unlawful
  • Eurodollar Funding Losses
  • Cash Flow & Excess DA Funds
  • Application of Excess DA Funds
  • Interest Adjustment Date
  • Servicer and Services Agreement
  • Property Management Agreements
  • Tenant Security Deposits
  • Insurance of Collateral
  • Cash Reserve Base Amount
  • Board of Governors of the Federal Reserve System
  • General Partner of the Loan Documents
  • FCLT Two L.P.
  • FCLT One L.P.
  • FCLT One Corp.
  • FCLT Two Corp.
  • Principal Place of Business ; Books and Records
  • Survival of Representations
  • Special Preferred Stock Payments
  • Tax Escrow Reports & Tenant Security Deposit Reports
  • Net Insurance and Condemnation Proceeds
  • Environmental Site Assessments Lenders
  • Maximum Facility Availability
  • Agent the Minimum Release Price
  • Sale of Collateral and Collection of Collateral Loans
  • Unrelated Third Party
  • FC Reserve Funds
  • Lenders the Minimum Release Price
  • Title Insurance Policies
  • REO Security Documents
  • Adjustment of Collateral Loan Pool Purchase Price
  • Pension Benefit Guaranty Corporation
  • United States Department of Labor
  • Tax Escrow Payments
  • United State of America
  • Federal Deposit Insurance Corporation
  • Standard & Poors Corporation
  • Moody 's Investors Service , Inc.
  • Standard & Poor Corporation
  • REO Affiliates of REO Properties
  • Federal Reserve Board
  • Minimum Release Price of such Collateral Loan
  • Modification of Ancillary Agreements
  • General Partner or Service
  • Possession of Collateral
  • Disposition of Collateral
  • Completion of Construction
  • Rights Under Loan Documents
  • Cash Reserve Account
  • Delegation of Duties
  • Reliance on Communications
  • Power of Attorney
  • Event of Default
  • Conflict of Terms
  • Fleet National Bank co Fleet Real Estate , Inc.
  • Real Estate Group
  • Allen & Snyder 1500 Fleet Center Providence
  • FirstCity Financial Corporation 6400 Imperial Drive P.O
  • FCLT LOANS ASSET CORP.
  • Huvishka Ali Real Estate Banking Officer

Location:

  • Borrower
  • Delaware
  • Waco Texas
  • United States of America
  • U.S.
  • Etc
  • Pro Rata Share
  • Providence
  • Rhode Island
  • Esq
  • HOUSTON
  • DALLAS
  • State of Texas
  • L.P.
  • N.A.

Money:

  • $ 20,000,000
  • $ 0.00
  • $ 60,000,000
  • $ 1,000,000
  • $ 91,100,000
  • $ 50,000,000.00
  • $ 106,690,029
  • $ 53,345,014.50
  • $ 150,000,000
  • $ 12,500,000
  • $ 27,000,000
  • $ 10,000,000
  • $ 40,000,000
  • $ 1,095,000.00
  • $ 300,000.00
  • $ 795,000.00
  • $ 111,250
  • $ 250,000
  • $ 5,000,000.00
  • $ 5,000.00
  • $ 2,500,000
  • $ 1,000.00
  • $ 50,000.00
  • $ 1,500.00
  • $ 100,000,000.00
  • $ 30,000,000

Person:

  • Strauss
  • Lien
  • Rick R. Hagelstein
  • Christopher J. Martineau
  • Hinckley
  • Matthew T. Marcello III
  • James T. Sartain
  • Lori-Ann Zannini
  • Robert W. Brown
  • Deborah T. Fox
  • Sarah A. Cousineau
  • Deborah L. Newman
  • Huvishka Ali

Time:

  • midnight

Percent:

  • fifty percent
  • 35 %
  • four percent
  • 4 %
  • one quarter percent
  • 3.25 %
  • 55 %
  • 60 %
  • 130 %
  • nine percent
  • 9 %
  • five percent 5 %
  • 120 %
  • 1.25 %
  • seventy percent
  • 70 %
  • .0625 %
  • one percent 1 %
  • three percent
  • 3 %
  • ten percent
  • 10 %
  • one hundred percent 100 %
  • 2 %
  • 3.5 %
  • 50 %