FIRST INTERNATIONAL BANCORP INC
10-K, 2000-03-30
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<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

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

                   For the fiscal year ended December 31, 1999
                           Commission file no. 0-22861

                                  ------------

                        FIRST INTERNATIONAL BANCORP, INC.
             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                                      <C>
           Delaware                                          06-1151731
(State or other jurisdiction of                            (I.R.S. Employer
incorporation or organization)                            Identification No.)

     280 Trumbull Street
     Hartford, CT                                              06103
(Address of principal executive offices)                     (Zip Code)
</TABLE>


       Registrant's telephone number, including area code: (860) 727-0700

                                  ------------

           Securities Registered Pursuant to Section 12(b) of the Act:
                                      None

           Securities Registered Pursuant to Section 12(g) of the Act:
                              (Title of each class)
                     Common Stock, par value $.10 per share

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes /X/   No__

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
or Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/

As of March 23, 2000, the aggregate market value of the voting stock held by
non-affiliates of the Registrant, based on the closing price of the common stock
as reported by the Nasdaq Stock Market of $7.0625 was approximately $24,197,100.

As of March 23, 2000, the Registrant had 8,264,318 shares of Common Stock
outstanding.

                      DOCUMENTS INCORPORATED BY REFERENCE:

Part II, items 5, 6, 7, 7A and 8 are incorporated by reference to First
International Bancorp's, Inc. 1999 Annual Report to Shareholders which is
included as an exhibit hereto.

Part III, items 10, 11, 12 and 13 are incorporated by reference to First
International Bancorp, Inc.'s definitive proxy statement to stockholders which
will be filed with the Securities and Exchange Commission no later than 120 days
after December 31, 1999.
<PAGE>   2
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
         PART 1                                                          Page No.
<S>                                                                     <C>
ITEM 1.  BUSINESS                                                              1

ITEM 2.  PROPERTIES                                                           25

ITEM 3.  LEGAL PROCEEDINGS                                                    25

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY
         HOLDERS                                                              25

                  PART II

ITEM 5.  MARKET FOR THE COMPANY'S COMMON STOCK AND
         RELATED STOCKHOLDER MATTERS                                          26

ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA                                 26

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
         FINANCIAL CONDITION AND RESULTS OF OPERATIONS                        26

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
         ABOUT MARKET RISK                                                    26

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                          26

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
         ON ACCOUNTING AND FINANCIAL DISCLOSURE                               26

         PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                   27

ITEM 11. EXECUTIVE COMPENSATION                                               27

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
         AND MANAGEMENT                                                       27

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                       27

         PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND
</TABLE>
<PAGE>   3
<TABLE>
<S>                                                                         <C>
                  REPORTS ON FORM 8-K                                         27
</TABLE>
<PAGE>   4
                                     PART 1

ITEM 1:  BUSINESS

GENERAL

Overview

First International Bancorp, Inc., a Delaware corporation, is a one bank holding
company incorporated in 1985 and regulated by the Board of Governors of the
Federal Reserve System. Its principal asset and subsidiary is First
International Bank (the "Bank"), a Connecticut state bank and trust company. The
Bank was established in 1955 as a national bank and converted to a state bank in
July 1999. The Bank is regulated by the State of Connecticut Department of
Banking ("CDB") and the Federal Deposit Insurance Corporation ("FDIC"). The Bank
changed its name from First National Bank of New England on February 1, 1999 to
more closely reflect the markets it serves. Since 1998, the Bank has established
six special purpose subsidiaries to facilitate loan securitizations and sales to
commercial paper conduits.

The Bank solicits commercial loans in New Jersey through its wholly-owned
subsidiary, First International Capital Corp. of New Jersey and operates in
various other states under the trade name First International Capital.

In September 1997, the Company completed an underwritten public offering whereby
1,955,000 shares of common stock were issued for net proceeds of $23.8 million.

On March 26, 1999, the Company sold its last retail branch and its checking,
savings and money market accounts. The Company retained its certificates of
deposit and continues to offer certificates of deposit to retail and brokered
depositors. (See "Changes in Funding Sources" for further discussion of the
funding sources used by the Company.)

The Company specializes in providing credit, trade and financial solutions to
small and medium size industrial companies located in the United States and in
international emerging markets. The Company serves its target market by offering
flexible and attractive terms to borrowers and manages its credit risk through
the combined utilization of commercial loan guarantee programs made available by
three U.S. federal agencies: the U.S. Small Business Administration (the "SBA"),
the U.S. Department of Agriculture (the "USDA"), and the Export-Import Bank of
the U.S. ("Ex-Im Bank"), as well as through the use of private credit insurance
policies.

For the federal fiscal year ending September 30, 1999, the Company was the
country's largest Ex-Im Bank lender measured by number of transactions; the
largest USDA Business and Industry lender measured by dollar volume; and the
tenth largest SBA 7(a) lender measured by dollar volume (and the largest in New
England). The Company maintains preferred status for government guaranteed
lending programs in several jurisdictions.




                                       1
<PAGE>   5
Changes in Funding Sources

During 1999 and 1998, the Company completed transactions that effected changes
in the manner in which the Company obtains funding for its lending business.
These transactions included:

* the sale of the Company's last branch in March 1999, including checking,
savings and money market accounts which requires the Company to provide funding
by alternative sources;

* establishment of two warehouse loan and sale facilities pursuant to which up
to an aggregate of $75 million is available to the Company (based upon the
contractual advance rates against the qualifying principal balance of the loans
pledged to secure the facilities; the pledged loans consist of equipment loans,
working capital term loans and loans secured by mortgages on commercial real
estate);

* establishment of a commercial paper conduit facility pursuant to which up to
$60 million is available to the Company (based upon the contractual advance
rates against the qualifying principal balance of the loans pledged to secure
the facility; the pledged loans consist of the unguaranteed portion of loans
guaranteed by the SBA);

* the increase from $65 million to $95 million of availability of a second
commercial paper conduit facility, pursuant to which the Company has the right
to sell up to $95 million in commercial revolving lines of credit and other
qualifying loans during the term of the facility;

* loan securitization and sales transactions pursuant to which the Company
securitized and sold in the aggregate approximately $140 million of asset backed
loans, including $49 million of the unguaranteed portions of loans originated by
the Company that were guaranteed in part by the SBA; and

* establishment of agreements with five national brokers which provide a source
for brokered certificates of deposits used for fundings of one year or less.

         The Company expects to continue to obtain funding for its operations
from retail and brokered certificates of deposit, warehouse lines of credit, the
sale of loans on a loan-by-loan basis, through private placement securitizations
and from the sale of loans to commercial paper conduits and sale facilities.

Loan Originations

Management believes that the specialized market knowledge and experience of the
Company's lending officers, combined with a broad range of commercial and
international financing products, enable the Company to satisfy the needs of its
small and medium size industrial clients. Brand recognition for the Company is
maintained by incorporating the servicemark Financing Manufacturers
Worldwide(R) in its logos. The Company's domestic and international lending
relationships generally range from $150,000 to $5.0 million.





                                       2
<PAGE>   6
The Company's Commercial business units underwrite lines of credit, term loans,
industrial mortgages and trade financing for businesses primarily located in the
Northeast, Mid-atlantic, and Midwest regions of the United States. Commercial
lenders operate from the Company's Hartford, Connecticut headquarters, as well
as from regional representative offices located in Boston and Springfield,
Massachusetts; Providence, Rhode Island; Morristown, New Jersey; Pittsburgh and
Philadelphia, Pennsylvania; Rochester, New York; Washington D.C.; Detroit,
Michigan; St. Louis, Missouri; and Cleveland, Ohio. The Company plans to
continue its U. S. expansion in 2000 by opening additional representative
offices in the Southern and Western regions of the U. S. The Company's domestic
loan officers are trained to understand the specific financial needs of small
and medium size industrial companies, and to use government guaranteed and other
commercial loan products to respond to those needs. Domestic loan officers
participate in industrial trade organizations representing the Company's target
market and conduct other marketing activities to reach potential borrowers.

The Company's International business units underwrite Ex-Im Bank guaranteed and
insured and private sector insured short and medium term loans to small and
medium size industrial companies located in various international emerging
markets. The International business units also underwrite Ex-Im Bank guaranteed
revolving lines of credit to U.S. manufacturers and, in 1998, began offering
privately insured loans to U.S. importers of foreign-made goods. See
"International Lending Services and Products." International lending activities
support trade flows between the United States and emerging markets. The
Company's International business units operate from its Hartford, Connecticut
headquarters and are assisted in their efforts by contractual international
marketing representatives, or "master agents", many of whom are actively
involved in providing financial, accounting, consulting and/or engineering
services to industrial companies in their home countries. Contractual marketing
arrangements have been established with professionals in Argentina, Brazil,
Central America, Egypt, India, Indonesia, Korea, Mexico, North Africa,
Philippines, Poland, South Africa, Turkey and West Africa. The Company has
formally established "representative offices" in certain countries in accordance
with local regulations. The Company began lending internationally in 1994 and
has increased these loan originations to $60.9 million in 1997, $110.4 million
in 1998 and $182.1 million in 1999.

Underwriting

The Company's underwriting activities are initiated from each of its lending
offices and supported and approved at the Hartford, Connecticut headquarters.
Commercial lending officers analyze the creditworthiness of proposed borrowers
and evaluate each borrower's financial statements, credit reports, business
plans and other data to determine if the credit and proposed collateral satisfy
the Company's specific lending standards and policies. All credit memoranda are
reviewed by an independent credit officer and may require additional approval
depending on the particular circumstances of the financing package. Domestic and
international loans undergo a substantially identical approval process.




                                       3
<PAGE>   7
Loan Sales and Securitizations

The Company seeks to achieve high returns while meeting the growing credit needs
of its target market by selling a portion of its commercial and international
loans on a non-recourse, servicing-retained basis. A separate Capital Markets
business unit directs its resources toward identifying secondary loan markets to
sell loans originated by the Company to generate non-interest income and as a
further means of mitigating credit risk, leveraging capital and replenishing
liquidity.

In 1998, the Company began securitizing and selling certain whole loans and the
unguaranteed portions of certain government guaranteed loans that it originates,
and selling commercial revolving lines of credit, other commercial loans and the
unguaranteed portions of SBA loans to commercial paper conduits. In these
securitization and commercial paper transactions, the Company sells a pool of
loans to a trust, which in turn issues certificates representing beneficial
ownership interests in the trust or which issues notes and sells these
securities through private placement transactions. In order to provide credit
enhancement for the certificates or notes, the Company generally retains
subordinated certificates or notes and establishes a cash reserve account. The
Company also records an interest-only strip in connection with the transactions.
For all securitizations and sales, the Company is the servicer of the underlying
loans.

BUSINESS STRATEGY

The Company's strategy is to serve small and medium size industrial companies
through the following key activities:

Domestic Loan Origination Activities. Commercial business units currently
operate from the Hartford, Connecticut headquarters, as well as from regional
loan production or "representative" offices located in Boston and Springfield,
Massachusetts; Providence, Rhode Island; Pittsburgh and Philadelphia,
Pennsylvania; Morristown, New Jersey; Rochester, New York; Washington D.C.;
Detroit, Michigan; St. Louis, Missouri; and Cleveland, Ohio. The Company intends
to continue to expand into new markets by opening additional representative
offices throughout the U.S. as marketing diligence is completed.

Financing Trade with International Emerging Markets. The International business
units operating from the Hartford, Connecticut headquarters are assisted in
their efforts abroad by contractual relationships with international master
agents in Argentina, Brazil, Central America, Egypt, India, Indonesia, Korea,
Mexico, North Africa, Philippines, Poland, South Africa, Turkey and West Africa.
The master agents are actively involved in providing professional financial
services to small and medium size industrial companies in their home countries.
The Company also provides working capital to U.S. manufacturers who export to,
and in 1998 the Company began financing U.S. imports from, international
emerging markets.




                                       4
<PAGE>   8
LENDING ACTIVITIES AND POLICIES

The Company's distribution of domestic and international commercial loan
originations are detailed below:

<TABLE>
<CAPTION>
                                                                         FOR THE YEARS ENDED
                                                  -------------------------------------------------------------------
                                                         DECEMBER 31, 1999                  DECEMBER 31, 1998
                                                  --------------------------------   --------------------------------
  Loan Originations                                Principal        Percentage        Principal        Percentage
                                                  --------------    --------------   --------------    --------------
<S>                                               <C>               <C>              <C>               <C>
  Domestic:
     SBA loans................................         $142,089               26%         $122,178               31%
     USDA loans...............................           53,723               10%           45,162               12%
     Other commercial loans...................          172,964               31%          113,888               29%
                                                  --------------    --------------   --------------    --------------
        Total domestic banking................          368,776               67%          281,228               72%



  International:
     Ex-Im working capital lines..............           64,035               12%           37,276               10%
     Ex-Im medium term loans..................           46,874                8%           48,248               12%
     Other international loans................           71,175               13%           24,925                6%
                                                  --------------    --------------   --------------    --------------

        Total international banking...........          182,084               33%          110,449               28%
                                                  --------------    --------------   --------------    --------------

        Total commercial loan originations....         $550,860              100%         $391,677              100%
                                                  ==============    ==============   ==============    ==============
</TABLE>


MARKETING

Domestic Lending

The Company originates domestic loans through its 56 commercial lenders in
twelve offices who seek to establish long-term relationships with their clients.
The Company believes it is uniquely positioned to serve its domestic market
through an ability to provide clients with a flexible combination of lines of
credit, term loans and mortgages for industrial property and trade financing.
The Company generally utilizes the SBA, USDA, Ex-Im Bank and/or privately
insured loan guarantee and insurance programs as a part of a financing package
in light of an applicant's particular situation. The Company's participation in
these programs enables it to provide clients with longer loan terms than are
typically available to small and medium size industrial companies.

Commercial loan officers are responsible for marketing, underwriting, servicing,
monitoring and collecting payments on their portfolio of loans. The Company
believes that this broad range of responsibilities enables the commercial loan
officers to establish strong working relationships with both existing and
prospective clients and promotes strong client service and prudent loan
portfolio management. Commercial loan officers are encouraged to keep apprised
of market conditions through frequent contact with clients and potential
borrowers, to develop specific knowledge of their clients' businesses, and to
offer flexible structuring of loan products. In consultation with the borrower,
a commercial loan officer will evaluate the financing needs of the business and
then recommend the best way to structure the lending transaction to fit the
client's unique needs.





                                       5
<PAGE>   9
The marketing efforts by commercial loan officers include participation in trade
associations serving the needs of small and medium size industrial companies;
contacting accountants, attorneys and other professionals known by the Company
to have contact with businesses in need of financing; personal visits; direct
mail solicitations; and referrals from existing clients. Since the target client
of both domestic and international loan officers is often the same, there is an
active cross-selling effort between these two areas.

Strategic Alliances

In addition to the marketing efforts of the Bank's domestic lending officers,
the Bank seeks to market its domestic loan products through marketing agreements
with various trade and cooperative associations. In 1998, the Bank entered into
such agreements ("Strategic Alliances") with the National Rural Utilities
Cooperative Finance Corporation, and with various regional chapters of the
National Tooling & Machining Association. The Marketing Agreements provide,
among other things, for the applicable trade or cooperative association to
develop and implement a marketing plan pursuant to which the Bank has
implemented an expedited and streamlined credit application and approval process
for association members who desire commercial term loans from the Bank. The Bank
retains the sole discretion as to the credit standards to be applied and as to
whether or not to make any particular loan. The Marketing Agreements further
provide for the Bank to pay quarterly and annual compensation to such trade and
cooperative associations based upon the amount of loans made by the Bank to the
members of the associations.

International Lending

The Company has six international lenders in the Trade Finance business unit who
target U.S. exporters eligible for trade financing programs, including those
supported by Ex-Im Bank. These loan officers market pre-export working capital
lines of credit. This International business unit also targets U. S. buyers of
goods from certain international emerging markets. As with the domestic lending
relationships, the Trade Finance business unit is responsible for marketing,
underwriting, servicing, monitoring and collecting payments on its portfolio of
loans.

The Company has sixteen international lenders in its Americas and
Asia/Africa/Europe business units who target foreign purchasers of U. S. goods
eligible for short and medium term financing supported by Ex-Im Bank guarantees
and insurance and by private sector insurance. These International business
units are also responsible for marketing, underwriting, servicing, monitoring
and collecting payments on their portfolios of loans.

Internationally, the Company has established contractual marketing relationships
with professional firms in twelve emerging markets who, in the course of
conducting their primary business, have frequent contact with local industrial
companies who require financing to purchase U.S. goods or are manufacturing or
distributing goods for export to the U. S. Prior to entering into relationships
with these "Master Agents," the Company conducts due diligence, including
visiting the prospective representative and conducting local diligence
concerning their business reputation and legal status. The Company also requires
that each Master Agent be






                                       6
<PAGE>   10
trained on the Company's products and services at the Hartford, Connecticut
headquarters. Each Master Agent markets, on behalf of the Company, Ex-Im Bank
guaranteed and insured short and medium terms loans and privately insured export
loans in its respective market. The Master Agent will develop a lead with a
potential borrower and may aid in the transaction by obtaining required
financial or operational data from borrowers and providing assistance in the
loan origination and closing process. The Master Agents work with the Company's
U.S.-based loan officer who completes the application underwriting and closing
process. The Master Agent receives a negotiated fee when a loan referral made to
the Company has been underwritten and closed. The Master Agent assists the loan
officer in obtaining certain information from the applicant and in responding to
inquiries of the applicant, but does not have any direct underwriting
responsibilities. All decisions with respect to referrals of Master Agents are
made by the Company, which retains full control over international loan
originations.

The Company's Import Finance Business Unit has two lenders who seek to finance
goods imported by U. S. industrial companies throughout the country under a
private sector insurance policy and to cross sell SBA guaranteed and other
commercial loans to the companies.

Marketing efforts of these International business units include visits to, and
direct mail solicitation of, U.S.-based exporters and importers of capital
goods, direct mail solicitation of foreign-based manufacturers and industrial
trade organizations, and in-country marketing by the Company's network of Master
Agents. The Company has also entered into contractual strategic alliances with
Panalpina, Inc., a leading international freight forwarding company, the
Association for Manufacturing Technology, and the Korean Federation of Small
Business to provide access to additional trade finance opportunities.

DOMESTIC LENDING SERVICES AND PRODUCTS

Loan Products and the Origination Process

The commercial loans originated by the Company include industrial mortgage loans
(i.e., loans to businesses collateralized by industrial real property),
equipment term loans and revolving lines of credit to manufacturers, wholesalers
and distributors, many of which are exporters. The typical commercial borrower
is a privately owned and operated company with annual sales of $1 million to $50
million, employing 10-500 workers, which has been in business for at least three
years. A number of the Company's borrowers have a proprietary product line,
export their products and/or have a geographically diverse client base. The
Company is typically the borrower's primary lender and provides loans which are
collateralized by assets of the borrower.

The Company originates loans to a variety of industries; however, in the future
based upon its loss experience and economic forecasts, the Company may decide to
de-emphasize certain industries from time to time.

The interest rates accruing on the Company's commercial loans are typically
Prime-based, changing monthly or quarterly when the Prime Rate changes. The
Company also makes fixed rate loans from time to time. The Company originates
certain loans for sale through loan






                                       7
<PAGE>   11
purchase programs pre-established with investors. The term of a loan depends
upon whether the loan is guaranteed or is underwritten for a loan purchase
program. Government guarantee programs give clients access to longer term
financing and slower amortization than otherwise available. A government
guaranteed mortgage loan has a maximum term and amortization of up to 30 years,
while the term and amortization of an unguaranteed mortgage loan typically does
not exceed 15 years. Equipment loans are underwritten to correspond to the
useful life of the equipment and generally range from 5-15 years. SBA guaranteed
working capital term loans range from 7-10 years, while unguaranteed working
capital revolving lines of credit have one-year terms. Medium term loans are
generally fully amortizing.

The primary collateral sought by the Company for commercial loans consists of
liens which are generally first liens, on owner-occupied industrial real estate,
equipment, inventory and/or accounts receivable, although additional collateral
may include junior liens on residential properties. The Company generally
requests the personal guarantee of the principals of a business because the
Company believes this induces the guarantor to facilitate repayment of the loan.

In striving to meet the credit needs of its clients, the Company utilizes
government guarantee loan programs which allow it to offer longer-term loans
while mitigating the credit risk to the Company through the government
guarantee. The two government guarantee loan programs utilized by the Company's
Commercial business units to provide financing to its niche market are discussed
below.

SBA Guaranteed Loan Originations

The Company utilizes the SBA's 7(a) loan program for eligible borrowers. The
Company has Preferred Lender status in twenty-one SBA "districts." Preferred
Lender status allows the Bank to approve loans on behalf of the SBA, with the
national SBA processing center's concurrence that the applicant meets the SBA
eligibility requirements. The SBA generally completes its eligibility review
within 24 hours of submission. The Company has Certified Lender status in
twenty-two districts. Certified Lender status entitles the Bank to 72-hour
turnaround from local SBA district offices for approval of loan applications. In
other districts where the Company does not have either Preferred or Certified
Lender Status, applications may be submitted with a 7-day turnaround from the
local SBA district office.

The SBA's 7(a) loan program provides for a guarantee equal to 75% of the
principal balance, up to a maximum guarantee of $750,000 per borrower.

The Company makes SBA loans to businesses which qualify under agency regulations
as a "small business." The primary operative SBA eligibility criterion for the
Bank's targeted market are privately-owned manufacturers employing fewer than
500 workers. Loans may generally be used for the acquisition or refinancing of
plant and equipment, working capital and debt consolidation.





                                       8
<PAGE>   12
In the event of default, the SBA and Company share in any collections or
collateral on a pari passu basis. For example, if a loan carries a 75%
guarantee, the SBA receives 75% of all collections while the Company receives
25% of such amounts, beginning with the initial recovery. The SBA also
reimburses the Company's collection costs on a similar basis.

If the SBA establishes that any resulting loss is attributable to a failure by
the Company to comply with SBA policies and procedures in connection with the
origination, documentation or funding of a loan, the SBA may decline to pay the
guaranteed amount, or if the guaranty has already been paid, may seek recovery
of funds from the Company. With respect to guaranteed SBA loan participations
which have been sold, the SBA will first honor its guarantee and then seek
compensation from the Company in the event that a loss is deemed to be
attributable to a failure to comply with SBA policies and procedures.

USDA Guaranteed Loan Originations

The Company utilizes the Business and Industry Program ("B&I Program") of the
USDA when applicable based on an applicant's geographical location and other
characteristics. The B&I Program generally provides for 80% guarantees on loans
with principal balances up to $5 million and 70% guarantees on loans with
principal balances up to $10 million and, therefore, enables the Company to
provide to eligible borrowers a greater amount of financing than the Company
would otherwise be able to provide under the SBA program and on an unguaranteed
basis due to legal lending limits. The stated purpose of this program is to
support industry, employment and general economic and environmental conditions
in rural communities, which are defined as towns with fewer than 50,000
inhabitants. These loans may be utilized for acquisition, improvement or
refinancing of plant, equipment, working capital and debt consolidation
purposes.

Loans to be guaranteed under the B&I Program are submitted to the USDA district
office and, depending on that office's loan authority, may be required to be
forwarded to the national USDA for approval. The USDA approved the Company as a
Certified Lender in 1997, making it one of the first USDA Certified Lenders
nationally. As a Certified Lender, the Company is recognized as a "Subject
Matter Expert" and is able to reserve funds, which facilitates the processing of
USDA loans.

The guarantee of the USDA also provides for pari passu recovery of collection
proceeds, and for recourse to the Company similar to that discussed above for
SBA loans in the event the Company is found to have been negligent in the
origination, documentation or funding of USDA loans.

DOMESTIC UNDERWRITING

For the Company's domestic underwriting process, the Company's staff seeks to:
(i) analyze borrowers' credit profiles; (ii) assess the collateral underlying a
loan; (iii) assure compliance with eligibility requirements for inclusion under
any applicable guarantee programs; and (iv) obtain or provide appropriate
documentation for the transaction.





                                       9
<PAGE>   13
Domestic lending officers receive and assemble initial applications, analyze the
creditworthiness of proposed borrowers, prepare credit memoranda and, aided by
staff, prepare any required government guarantee loan application forms and
conduct credit and trade reference checks. In the course of analyzing the
creditworthiness of prospective borrowers, commercial lending officers evaluate
each applicant's and any guarantors' financial statements, credit reports,
appraisals and other information regarding the value of collateral, the
experience, strength and continuity of the borrower's management business plans
and other data to determine if the credit and collateral satisfy the Company's
standards and compliance with any applicable government guaranteed loan program
requirements. These standards may include debt service coverage ratios, or other
financial ratios, reasonableness of the borrower's projections (when submitted),
the experience, strength and continuity of the borrower's management, the
financial condition of individual guarantors, the value of collateral, and
compliance with government guarantee loan program requirements. The originating
officer performs on-site inspections to determine the condition of a borrower's
facility, the manner in which business is being conducted, the condition and
maintenance of assets, the existence of environmental issues, and other market
conditions.

Originating lending officers have no authority to approve a loan on their own.
Subject to approval by the Credit Policy Officer, the business manager of each
commercial business unit and the Company's Division Executives have lending
authority in accordance with their experience. Loans above certain levels
require the additional approval of the Chief Credit Officer and any loan
requests above $6 million must be further approved by the Company's Chief
Executive Officer. All loans to a borrower and its affiliates are aggregated to
determine whether they are within an individual's lending authority.

Upon initial approval by a business manager, the credit memorandum must be
approved by the Credit Policy Officer, who reports to the Chief Credit Officer.
The Credit Policy Officer reviews the memorandum and supporting file for
compliance with internal Company policy as well as applicable government
guarantee requirements. If additional approvals are required, the credit
memorandum is forwarded to the appropriate parties as noted above. If the
financing package includes a government guaranteed loan, the application is
forwarded to the applicable government agency as required.

The Company performs a credit analysis on all applications, considering the type
and value of the assets collateralizing a loan, the characteristics of the
borrower, the borrower's industry, and the anticipated debt service ratio. The
Company generally requires that a borrower's most recently completed fiscal year
financial statements demonstrate historical debt service coverage ratio of at
least 1.25 to 1. If requested funding is for plant or line of business
expansions, consideration may also be given to projected results and, therefore,
certain loans may be granted when historical debt service coverage is less than
1.25 to 1.

Real property taken as primary collateral for a loan is valued by an independent
appraiser in accordance with federal banking regulations, and the appraisal is
then subject to an internal review in accordance with these regulations.
Equipment serving as primary collateral for a loan





                                       10
<PAGE>   14
is generally valued by an independent equipment appraiser. The Company will
generally obtain a Phase I environmental report completed in accordance with the
standards of the American Society for Testing and Materials on any commercial
real property to be mortgaged. Additional environmental reporting and
remediation are required prior to closing if environmental issues either exist
or are suspected.

The Company's standard underwriting criteria details the maximum advance rates
which are utilized for each type of collateral. Commercial property is generally
given a collateral value for underwriting purposes equal to 80% of the appraised
value; finished goods and raw material are generally valued at 50% of book
value; trade accounts receivable under 90 days are generally valued at 75% of
book value.

Although the maximum prescribed collateral values are generally utilized in the
Company's analyses, there may be instances where the maximum values are reduced
or, due to the borrower's situation, special consideration may be given to
applications exceeding the general standards. Proposed exceptions to the
Company's loan policy are reviewed by the approving officers. Decisions to
approve these loans are made on a case-by-case basis and depend upon the overall
creditworthiness of the applicant. The overall trends in underwriting exceptions
are monitored by the Chief Credit Officer and the Company's Loan Committee.

INTERNATIONAL LENDING SERVICES AND PRODUCTS

The Company's International business units underwrite revolving lines of credit
to U.S. manufacturers, short and medium term loans to foreign buyers of U.S.
goods, short term loans to U.S. buyers of foreign goods, and letters of credit
issued in connection with such facilities.

The International lending business units include the following:

<TABLE>
BUSINESS UNITS/TERRITORY                PRODUCTS USED                             DESCRIPTION
- ------------------------                -------------                             -----------
<S>                                     <C>                                       <C>
TRADE FINANCE  (principally the         Working capital line of credit; 90%       One year revolving line of credit
Northeast, Mid-atlantic and Midwest     Ex-Im guaranteed; indexed to U.S.         to U.S. manufacturers
U.S.)                                   Prime, variable daily; U.S. dollar        collateralized by export accounts
                                        denomination                              receivable and inventory

IMPORT FINANCE (entire U.S.)            90-360 day U.S. import term loan;         Financing of accounts receivable
                                        discount note; 95% privately insured      due from U.S. manufacturer
                                                                                  purchasing goods from international
                                                                                  emerging markets; unsecured
</TABLE>



                                       11
<PAGE>   15
<TABLE>
<S>                                     <C>                                       <C>
AMERICAS (principally                   Short and medium term loan;               1 to 5-year term loans to
Argentina, Brazil, Central              100% guaranteed by Ex-Im Bank             foreign purchasers of quali-
America, Mexico)                        or privately insured (generally           fied U.S. made inventory and
ASIA/AFRICA/EUROPE                      95%); indexed to 6-month                  equipment; unsecured or
(principally Egypt, India,              LIBOR, variable semi-annually;            secured by equipment
Indonesia, Korea, North                 U.S. dollar denominated
Africa, Philippines, Poland,
South Africa, Turkey and
West Africa)
</TABLE>


Ex-Im Bank is an independent agency of the U.S. whose mission is to facilitate
export financing of U.S. goods and services by neutralizing the effect of export
credit subsidies from other governments and absorbing credit risks that the
private sector will not accept. The Company utilizes the Ex-Im Bank's loan
guarantee and insurance programs designed to support small and medium size U.S.
exporters. In 1997 the Company received Ex-Im Bank's annual "Small Business Bank
of the Year" award.

International Lending - United States

Export Working Capital and U.S. Import Loan Products and the Origination Process

The typical U.S. client for the Company's international products is a U.S.-based
manufacturer with sales of $1 million to $50 million and export or import
financing needs. The Trade Finance business unit handles clients who are
exporting while the Import Finance Business Unit handles U.S. importers. The
target profile of these clients is generally the same as for the Company's other
domestic clients.

The one-year revolving Ex-Im Bank working capital lines of credit are indexed to
WSJ Prime and adjust daily. The primary collateral for these loans includes
export-related accounts receivable and inventory. The accounts receivable are
generally insured under an Ex-Im Bank insurance policy, a private export credit
insurance policy or an acceptable letter of credit. Open accounts receivable may
qualify as collateral if approved in advance by the Company and Ex-Im Bank.
Borrowers must submit borrowing base certificates to the Company to evidence the
availability of acceptable collateral when an advance is requested, and monthly
thereafter.

The Company is a "AA Level Delegated Authority" lender with respect to Ex-Im
Bank's working capital loan guarantee program and, therefore, has authority to
approve working capital lines up to $5 million per borrower, up to an aggregate
portfolio of $75 million, without Ex-Im Bank approval.

In the event of a loan default, the Company and Ex-Im Bank share in all loan
recovery proceeds on a pari passu basis in accordance with the 90%
guaranteed/10% unguaranteed ratio. The Company also has the responsibility to
ensure that loans are underwritten, documented and funded in accordance with
Ex-Im Bank polices and procedures in order to avoid loss of the guarantee.




                                       12
<PAGE>   16
The loans made by the Company to finance the purchase by U.S. manufacturers of
goods from international emerging markets are unsecured loans which are
discounted at origination to yield a market rate. The Company has obtained a
credit risk policy from a private sector insurance company to insure loans made
under this program. In the event of a loan default, the insurance company will
pay the Company, subject to certain deductibles, 95% of the principal balance,
plus accrued interest. The Company has the responsibility to ensure that loans
are underwritten, documented and funded in accordance with the insurance policy
in order to avoid loss of the insurance.

International Lending  - Emerging Markets
Short and Medium Term Loan Products and the Origination Process

Emerging market-based clients of the Company's Americas and Asia/Africa/Europe
business units are typically small and medium size industrial companies
requiring financing to purchase equipment, components and raw materials from the
U.S.

The Company primarily uses Ex-Im Bank guarantee and insurance programs to
mitigate its credit risk to the borrower. In 1998, as an alternative to the
Ex-Im Bank product, the Company obtained a credit risk insurance policy for
short and medium term loans to industrial companies in certain international
emerging markets from a private sector insurance company. The underwriting
criteria is substantially the same under both the Ex-Im Bank and privately
insured programs, although Ex-Im Bank imposes U.S. content measurements.

The Ex-Im Bank guarantee or insurance provides 100% coverage on the medium term
loans and generally 95% coverage on the short-term loans. The private sector
insurance policy generally insures 95% of the short and medium term loans. With
the private sector insurance policy, the Company has discretionary credit
approval authority for loans up to $750,000 which meet the underlying criteria
of the private sector insurance policy. The Company tends to utilize the private
sector insurance policy for smaller dollar requests to facilitate approval time.

Medium term loans are generally 3-5 years in term, and finance the acquisition
of qualified U.S.-made capital goods. The Ex-Im Bank program allows the
financing of up to the lower of 85% of purchase price or 100% of U.S. content.
Certain other U.S. content and product requirements must also be met. The loans
range in size from $150,000 to $10 million and are U.S. dollar-denominated.
Although the purchase of the equipment is being financed, the Ex-Im Bank loans
are unsecured; the Company relies on the borrower's cash flow and the 100% Ex-Im
Bank guarantee or Ex-Im Bank insurance. The Company does obtain a security
interest in the equipment being underwritten pursuant to the private sector
insurance policy.

International lending officers are responsible for marketing, underwriting,
servicing, monitoring and collecting their portfolios of loans. Because the
medium term loans are fully amortizing with semi-annual payments, there is less
post-closing analysis required for performing loans than for other types of
loans made by the Company.





                                       13
<PAGE>   17
In the event of default, the Company will work with Ex-Im Bank to handle the
workout and collection of Ex-Im Bank guaranteed medium and short term loans and,
in the event a claim is filed, Ex-Im Bank will pay the Company 100% of the
guaranteed or insured principal balance, plus accrued interest. See "Delinquency
and Collection Activities."

INTERNATIONAL UNDERWRITING

International lending officers receive and assemble initial applications,
analyze the creditworthiness of proposed borrowers, prepare memoranda and, aided
by staff, prepare the required Ex-Im Bank and private sector insurance loan
application forms and conduct credit and trade reference checks. For short and
medium term loans, in-country Master Agents, where applicable, aid in the
transaction by obtaining required financial or operational data from borrowers
and by providing general assistance in the loan origination and closing process.

The Company's international lending officers will often visit the prospective
U.S. borrower's place of business and perform on-site inspections. The Company
will generally instruct its in-country Master Agents to make these inspections
of foreign prospective borrowers. Although certain of the international loans
are unsecured, site inspections are conducted in most cases because this
information is helpful in assessing a borrower's operations.

The approval process is substantially similar to that followed by the commercial
lending officers. The Credit Policy Officer reviews the memorandum and
supporting file for compliance with internal Company policies as well as
applicable Ex-Im Bank or private insurer program parameters. As with the
domestic lending, exceptions to the Company's and Ex-Im Bank's loan policies are
entertained on a case-by-case basis by the approving loan officers, and
acceptance of exceptions depends upon the overall creditworthiness of the
applicant.

Working capital lines of credit are collateralized by export-related inventory
and accounts receivable less than 90 days old; this collateral has maximum
prescribed collateral values of 75% and 90%, respectively. As is the case with
respect to domestic loans, the collateral value required to support a loan is
based on the borrower's individual circumstances, and applications exceeding the
Company's general standards may receive special consideration.

For short and medium term loans, debt service coverage and operating history are
reviewed in the underwriting process. The lending officer also considers the
availability to the borrower of U.S. dollars and other "hard" currency revenue
sources from sales to the U.S. and other stable currency markets.

While most working capital lines of credit are within the Company's "AA
Delegated Authority", applications which do not comply with and/or are above the
Company's authority, and all Ex-Im Bank short and medium term loans, require
Ex-Im Bank approval. U.S. import loans in excess of $500,000, and short and
medium term loans in excess of $750,000, require approval from the private
sector insurance company if they are to carry that insurance.





                                       14
<PAGE>   18
CAPITAL MARKETS AND LOAN SERVICING

Capital Markets Activities

The Capital Markets business unit was established in July 1996 to assume
responsibility for the non-recourse, servicing-retained sale of SBA, USDA and
Ex-Im Bank government guaranteed loans and to identify markets for the sale of
non-guaranteed mortgage, term and revolving loans on a non-recourse,
servicing-retained basis. Since 1998, the Capital Markets business unit has
completed four securitizations of the unguaranteed portions of SBA loans and
certain whole commercial loans, and has sold revolving lines of credit to
commercial paper conduits. These capital markets activities allow the Company to
leverage capital, replenish liquidity and mitigate the risk of balance sheet
exposure to any single borrower.

The guaranteed portions of SBA and USDA loans are generally sold during the
quarter of origination on a single loan basis to established brokers. Brokers
generally pool the SBA guaranteed portions. USDA loans are individually sold.
The guaranteed portions of Ex-Im Bank loans and lines of credit are sold to
various parties, including the Private Funding Export Funding Corporation
("PEFCO"). PEFCO is a private corporation established with the support of the
United States Treasury and Ex-Im Bank to assist in financing exports of U.S.
goods and services by making direct loans to foreign importers of U.S. made
goods, and to provide liquidity support for private sector lending utilizing
Ex-Im Bank programs. The Company is a 1% shareholder and one of among
approximately 50 PEFCO shareholders, with a common stock investment of $987,000
at December 31, 1999.

SBA and USDA regulations permit the Company to sell or participate,
respectively, a portion of the unguaranteed amount of loans originated under
their respective programs. In accordance with SBA and USDA regulations, the
Company is required to retain a 5% interest in the unguaranteed portion of the
loan. Current SBA regulations require that the Company hold retained interests
in the unguaranteed portion of securitized loans equal to a minimum of 2% of the
transaction. Upon the sale of any guaranteed portions, the Company, if holding
an unguaranteed portion, shares in the payment stream and collateral on a pari
passu basis with all (guaranteed and unguaranteed) investors, beginning with the
initial recovery. If the Company is holding an investment in a subordinated
interest following a securitization, the application of the cash flows is
determined in accordance with the applicable pooling and servicing agreement.

The Capital Markets business unit has developed a list of potential buyers of
non-guaranteed mortgage loans, term loans and revolving lines of credit and
devotes substantial resources to the identification of these and other buyers. A
primary objective in the negotiation and sale of these loans is the Company's
retention of sole responsibility for borrower contact. Investors meet with
borrowers only in rare circumstances, and generally rely on the Company to
prudently service and monitor lending relationships. The Company believes that
this is important to maintain client relationships and also reflects investor
confidence in its servicing ability and reputation.





                                       15
<PAGE>   19
Loan Servicing Activities

At December 31, 1999, the total loan portfolio managed by the Company was $1.1
billion as compared to $779.1 million at December 31, 1998.

The Company services substantially all of the loans it originates, whether
securitized, sold individually to investors or held in portfolio. Servicing
includes collecting payments from borrowers and remitting applicable payments
and required reports to any investors; accounting for principal, interest and
any real estate taxes or other escrow receipts and payments; contacting
delinquent borrowers; supervising foreclosures; and liquidating collateral when
required. Other than tasks performed by the assigned lending officers, loan
servicing functions are centralized in the Hartford, Connecticut headquarters.

The Company receives servicing fees on loans serviced for others in varying
amounts, as determined under the particular terms of the sale. Management
believes that servicing most loans originated enhances the Company's
relationship with borrowers. This contact allows the Company to continue to
offer its loan products to clients who may need additional financing. Further,
these servicing arrangements provide an additional and profitable revenue stream
that is less cyclical than the business of originating and selling loans
themselves.

After a loan is closed, the Loan Servicing business unit reviews the loan files
to confirm that loans were originated in accordance with any applicable
government guarantee program guidelines and Company policies. Thereafter, the
loan officers and the Loan Review business unit conduct periodic reviews of the
borrower's financial condition.

DELINQUENCY AND COLLECTION ACTIVITIES

The assigned loan officer retains responsibility for routine collection of loans
in his or her portfolio. The Company attempts to collect all loans on a 30-day
basis. An officer's initial collection efforts generally begin when an account
is 15 days past due. At 20 days past due, a reminder notice is sent to the
borrower and the officer again attempts to contact the borrower to determine the
reason for the delinquency and if the account will be brought current.

If a borrower is unable to make a payment within 30 days of the due date as of
month-end, and has not made acceptable alternative arrangements with the
Company, the officer issues a past due letter requiring the borrower to make the
required payment within 10 business days by certified or cashiers check. If
payment is not remitted on time, the account is transferred to the Company's
Asset Recovery business unit for consideration of additional collection
procedures, including issuance of a demand letter and possible liquidation of
collateral.

The Asset Recovery business unit is responsible for contacting the borrower and
analyzing its current and projected financial condition, the reasons leading to
the delinquency and the value of the collateral available to the Company. The
Asset Recovery Officer then proposes a workout plan to the Chief Credit Officer
and other involved members of senior management. The Asset




                                       16
<PAGE>   20
Recovery business unit will also provide any required notices and generally seek
to comply with applicable government guarantee program or investor requirements.

If a modification of loan terms or other acceptable workout cannot be achieved
within a reasonable time frame, the Company will liquidate the collateral
securing the loan. The Company prefers not to take title to real property or
equipment unless required to facilitate the collection process. The Company
solicits assistance from the principals of the delinquent borrower to effect the
liquidation of any property, with title remaining in the borrower's name,
thereby avoiding a lengthy foreclosure or repossession process and exposure to
the Company regarding environmental or other liability issues. The Company has
generally found principals of borrowers to be cooperative in assisting the
Company in liquidating collateral efficiently. The Company follows the same
general workout procedures for substantially all of the loans serviced.

If a loan carries an SBA guarantee, the responsible SBA District Office will be
notified of the delinquency and will be presented with a liquidation plan within
60-90 days of such delinquency. Unless the SBA objects, the Company will carry
out the terms of the liquidation plan. As a Preferred Lender, the Bank has
responsibility and authority over liquidation procedures on all SBA guaranteed
loans serviced. Any loss after liquidation of collateral is allocated pro rata
between the guaranteed and unguaranteed portions of an SBA Loan. After an SBA
loan becomes 60-90 days past due, the SBA, at the Company's request, will
repurchase the guaranteed portion of the principal balance of the loan at par
from the secondary market investor, together with accrued interest covering a
period of up to 120 days.

USDA procedures require that the Company file a liquidation plan when it is
believed action should be taken on a delinquent loan, which is generally when
the loan is 60-90 days delinquent. The USDA has 30 days to review the plan. The
Company will then execute the approved plan or work with the USDA to arrive at a
mutually acceptable plan. Any loss after liquidation of collateral is allocated
pro rata between the guaranteed and unguaranteed portions of the USDA loan. The
holder of the guaranteed portion may request that the USDA repurchase the
guaranteed portion at any time, or the Company will request repayment on that
holder's behalf when liquidation is complete. The USDA does not impose any
restrictions on the number of days for which interest will be paid on the
guaranteed portions.

The liquidation of delinquent working capital and medium and short term Ex-Im
Bank loans is handled in conjunction with Ex-Im Bank. If deemed appropriate, the
Company may submit a plan to Ex-Im Bank to approve a workout plan to provide
additional time for the borrower to repay the loan. The Company may submit a
claim for repurchase at any time between 30 and 120 days after a delinquency
occurs, but at no time may such claim be made more than 150 days after the
delinquency unless properly extended in the event of a workout plan. Ex-Im Bank
will make payment under its guarantee within 30 days after acceptance of the
Company's request.

In the event of default on a private sector insured loan, the Company handles
the liquidation of the loan during a 150-day waiting period. At the end of the
waiting period, subject to certain deductibles being satisfied, the private
sector insurance company pays the Company 95% of the principal balance, plus
accrued interest and may ask the Company to continue to handle the






                                       17
<PAGE>   21
liquidation of the loan. The Company may also seek approval of a workout plan
from the insurance company if deemed appropriate.

The Company retains responsibility for the proper documentation and servicing of
all loans serviced for others, and may incur losses related to these loans if it
is found to be negligent by a guaranteeing agency, insurer or investor in
carrying out these duties.

Unguaranteed and uninsured loans or unguaranteed and uninsured portions of loans
held by investors are subject to negotiated servicing agreements, which in some
cases, provide investors with the option of assuming responsibility for all
collection efforts after a loan becomes 60-90 days delinquent. If the Company is
contractually responsible for collection efforts, the servicing agreements
generally require that the investor pre-approve liquidation actions.

CREDIT RISK MANAGEMENT

The Chief Credit Officer has primary responsibility for credit risk management,
ensuring the appropriateness of underwriting criteria and application thereof,
the implementation of RISCOPE(sm) (the Company's proprietary commercial credit
scoring and risk assessment model), and the independent analyses of loans by the
Loan Review business unit.

The Credit Policy Officer, who reports to the Chief Credit Officer, reviews all
credit memoranda for compliance with the requirements of government guarantee
programs and Company credit policies. If, based on particular facts and
circumstances, policy exceptions are proposed by lending officers, the Credit
Policy Officer will ensure that all appropriate policy exceptions are documented
and approved by the authorized party. The Company's management Asset Quality
Committee evaluates the nature and trends of these exceptions monthly. The Chief
Credit Officer reports these exceptions to the Board of Directors' Loan
Committee quarterly.

The Bank "risk rates" its loan portfolio by monitoring changes in the financial
condition of borrowers, assessing overall economic trends, and assigning
numerical ratings to individual loans. The Company applies a nine tiered risk
rating system. The rating system, in conjunction with other available
quantitative and qualitative data, is utilized to assist management in its
quarterly evaluation of the adequacy of the Allowance for Loan Losses.

The assigned lending officer has primary responsibility for risk ratings, and
that officer's decisions are periodically reviewed by the Loan Review business
unit. Risk ratings are based on the borrower's operating cash flow, industry,
product line, earnings, assets, liability, management experience, debt capacity,
and prior credit history with the Company.

The Company has developed a proprietary credit scoring and risk analysis model,
RISCOPE(sm), used in the initial underwriting, post-closing loan monitoring and
on-going rating process by lending officers and the Loan Review business unit.
RISCOPE(sm) assists the Company in quantifying the credit risk of commercial
clients. The model takes into account quantitative and qualitative factors and
is designed to analyze the Company's primary client base: small and






                                       18
<PAGE>   22
medium size industrial companies. Additionally, the model facilitates an
efficient completion of the underwriting process and, once loans are originated,
helps management identify weaknesses in loans earlier than might otherwise be
done if payment default were their only manifestation.

The Loan Review business unit reviews the loan portfolio to evaluate the
appropriateness of officer risk ratings and overall trends in the portfolio.
Loan Review results are reported to the Loan Committee of the Board quarterly.

COMMUNITY FINANCE

The Company's Community Finance business unit, formerly named "Private Banking,"
provided funding for the Company by managing its deposit base, which consisted
of demand deposits, money market accounts and time certificates of deposits, by
targeting the commercial depository accounts of small and medium size industrial
companies, as well as the personal accounts of their principals, and by offering
a full array of financial products. Subsequent to the sale of the Company's
checking, savings and money market accounts in March 1999, the unit solicited
retail certificates of deposit. Currently, retail certificates of deposit are
solicited by an officer in the Finance business unit.

In November 1999, the efforts of the Community Finance officers were directed to
the solicitation of loans to businesses located in the greater Hartford area. As
a federally-insured depository, the Bank must comply with the Community
Reinvestment Act ("CRA") regulations by offering lending, investment and other
financial services to its "assessment area" as determined under the CRA. The
Company believes that the lending to be offered by the Community Finance
business unit in conjunction with other loans offered by the Hartford-based
Commercial lenders will enable it to meet its obligations under the CRA.

COMPETITION

The Company competes for clients with other commercial and savings banks,
finance companies, mutual funds, insurance companies, brokerage and investment
banking firms and certain other nonfinancial institutions, many of whom are able
to devote far greater resources than the Company to market, underwrite and
service loans to the same client base. The Company competes by emphasizing its
expertise and knowledge of its clients' businesses, commitment to service, and
flexibility in structuring financial transactions. Through the combined
utilization of government guaranteed loan programs, the Company is able to
provide flexible longer-term financing than would otherwise be available to
borrowers.

REGULATION AND SUPERVISION

Financial Services Modernization

On November 12, 1999, President Clinton signed into law The Gramm-Leach-Bliley
Act ("Gramm-Leach") which significantly altered banking laws in the United
States. Gramm-Leach enables combinations among banks, securities firms and
insurance companies beginning






                                       19
<PAGE>   23
March 11, 2000. As a result of Gramm-Leach, many of the depression-era laws
which restricted these affiliations and other activities which may be engaged in
by banks and bank holding companies, were repealed. Under Gramm-Leach, bank
holding companies are permitted to offer their customers virtually any type of
financial service that is financial in nature or incidental thereto, including
banking, securities underwriting, insurance (both underwriting and agency) and
merchant banking.

In order to engage in these new financial activities, a bank holding company
must qualify and register with the Federal Reserve Board as a "financial holding
company" by demonstrating that each of its bank subsidiaries is "well
capitalized," "well managed," and has at least a "satisfactory" rating under the
CRA.

These new financial activities authorized by Gramm-Leach may also be engaged in
by a "financial subsidiary" of a national or state bank, except for insurance or
annuity underwriting, insurance company portfolio investments, real estate
investment and development and merchant banking, which must be conducted in a
financial holding company. In order for the new financial activities to be
engaged in by a financial subsidiary of a national or state bank, Gramm-Leach
requires each of the parent bank (and its sister-bank affiliates) to be well
capitalized and well managed; the aggregate consolidated assets of all of that
bank's financial subsidiaries may not exceed the lesser of 45% of its
consolidated total assets or $50 billion; the bank must have at least a
satisfactory CRA rating; and, if that bank is one of the 100 largest national
banks, it must meet certain financial rating or other comparable requirements.

Gramm-Leach establishes a system of functional regulation, under which the
federal banking agencies will regulate the banking activities of financial
holding companies and banks' financial subsidiaries, the U.S. Securities and
Exchange Commission will regulate their securities activities and state
insurance regulators will regulate their insurance activities. Gramm-Leach also
provides new protections against the transfer and use by financial institutions
of consumers' nonpublic, personal information.

Holding Company Regulation

The Company is registered as a bank holding company and regulated and subject to
periodic examination, by the Board of Governors of the Federal Reserve System
("FRB") under the Bank Holding Company Act ("BHCA").

Although the Company may meet the qualifications for electing to become a
financial holding company under Gramm-Leach, the Company has elected to retain
its pre-Gramm-Leach status for the present time under the BHCA.

The Company is currently limited to the business of owning, managing or
controlling banks and engaging in certain other bank-related activities,
including those activities that the FRB determines from time to time to be
closely related to banking. The BHCA requires, among other things, the prior
approval of the FRB if a bank holding company proposes to (i) acquire all or
substantially all of the assets of a bank, (ii) acquire direct or indirect
ownership or control of






                                       20
<PAGE>   24
more than 5% of the outstanding voting stock of any bank (unless it already owns
a majority of such bank's voting shares) or (iii) merge or consolidate with any
other bank holding company.

As a bank holding company, the Company is required by the FRB to act as a source
of financial strength and to take measures to preserve and protect the Bank. As
a result, the Company may be required to inject capital in the Bank if that need
arises. The FRB may charge a bank holding company such as the Company with
unsafe and unsound practices for failure to commit resources to a subsidiary
bank when required.

To be considered regulatory capital, loans from the Company to the Bank must be
on terms subordinate in right of payment to deposits and to most other
indebtedness of the Bank.

The FRB, FDIC and, in the case of a Connecticut state bank and trust company,
the CDB, collectively have extensive enforcement authority over bank holding
companies and Connecticut state banks. This enforcement authority, initiated
generally for violations of law and unsafe and unsound practices, includes,
among other things, the ability to assess civil money penalties, to initiate
injunctive actions and to terminate deposit insurance in extreme cases.

INTERSTATE BANKING

The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, as
amended (the "Interstate Banking Act") generally permits bank holding companies
to acquire banks in any state, and preempts all state laws restricting the
ownership by a bank holding company of banks in more than one state. The
Interstate Banking Act also permits a bank to merge with an out-of-state bank
and convert any offices into branches of the resulting bank if both states have
not opted out of interstate branching; permits a bank to acquire branches from
an out-of-state bank if the law of the state where the branches are located
permits the interstate branch acquisition; and permits banks to establish and
operate de novo interstate branches whenever the host state opts-in to de novo
branching. Bank holding companies and banks seeking to engage in transactions
authorized by the Interstate Banking Act must be adequately capitalized and
managed.

Connecticut has allowed interstate mergers and acquisitions, the establishment
of Connecticut-chartered banks by foreign bank holding companies and interstate
de novo branching since 1995, subject to certain reciprocity requirements.
Connecticut law also places a minimum permissible age of five years on the
target bank and a 30% limit on concentration of deposits in both interstate and
intrastate acquisitions. Legislation was enacted in 1996 which expressly permits
an out-of-state bank to merge or consolidate with or acquire a branch of another
out-of-state bank which has a branch in Connecticut.

REGULATION OF THE BANK

General

As a Connecticut-chartered bank and trust company, the deposits of which are
insured by the FDIC, the Bank is subject to regulation and supervision by both
the Connecticut Department of






                                       21
<PAGE>   25
Banking and the FDIC. This regulation and supervision is intended primarily to
protect depositors and the FDIC's Bank Insurance Fund, not stockholders.

The Connecticut Department of Banking regulates the Bank's internal organization
as well as its deposit, lending and investment activities. The approval of the
Connecticut Banking Commissioner (the "Commissioner") is required for the
establishment of branch offices and business combination transactions. The CDB,
through its Bank Examination Division, conducts periodic examinations of the
Bank. The FDIC also regulates many of the areas regulated by the Department.

Under Connecticut banking law, no person may acquire beneficial ownership of
more than 10% of any class of voting securities of a Connecticut-chartered bank,
or any bank holding company of such a bank, without prior notification of, and
lack of disapproval by, the Commissioner. Similar restrictions apply to any
person who holds in excess of 10% of any such class and desires to increase
these holdings to 25% or more of such class.

Connecticut banking laws grant banks broad lending authority. Subject to certain
limited exceptions, however, total secured and unsecured loans made to any one
obligor pursuant to this statutory authority may not exceed 25% of the Bank's
equity capital and the allowance for loan losses.

Federal law also imposes additional restrictions on the Bank with respect to
loans and credit to certain related parties and transactions with the Company's
principal stockholders, officers, directors and affiliates. Extensions of credit
to such persons (i) must be made on substantially the same terms (including
interest rates and collateral) as, and follow credit underwriting procedures not
less stringent than, those prevailing for comparable transactions with members
of the general public, and (ii) must not involve more than the normal risk of
repayment or present other unfavorable features.

Capital Adequacy

The federal bank regulatory authorities have adopted risk-based capital
guidelines to which the Bank is subject. The guidelines establish a systematic
framework that makes regulatory capital requirements more sensitive to
differences in risk profile among banking organizations, takes off-balance sheet
exposures into explicit account in assessing capital adequacy, and minimizes
disincentives to holding liquid, low-risk assets. These risk-based capital
ratios are determined by allocating assets and specified off-balance sheet
financial instruments into four weighting categories, with higher levels of
capital required for the categories perceived as representing greater risk.

Under these guidelines, a banking organization's capital is divided into two
tiers. The first tier ("Tier 1") includes common equity, perpetual preferred
stock (excluding auction rate, money market or remarketable issues) and minority
interests held by others in a consolidated subsidiary, less goodwill and any
disallowed intangibles. Supplementary ("Tier 2") capital includes, among other
items, cumulative and limited-life preferred stock, mandatory convertible
securities,






                                       22
<PAGE>   26
subordinated debt and the allowance for loan and lease losses, subject to
certain limitations and less required deductions as provided by regulation.

Banking organizations are required to maintain a risk-based capital ratio of
total capital (Tier 1 plus Tier 2) to risk-weighted assets of 8%, of which at
least 4% must be Tier 1 capital. Federal bank regulatory authorities may,
however, set higher capital requirements when a banking organization's
particular circumstances warrant. As a general matter, banking organizations are
expected to maintain capital ratios well above the regulatory minimums.

In addition, federal bank regulatory authorities have established guidelines for
a minimum leverage ratio (Tier 1 capital to average total assets). These
guidelines provide for a minimum leverage ratio of 3% for banking organizations
that meet certain specified criteria, including excellent asset quality, high
liquidity, low interest rate exposure and the highest regulatory rating. Banking
organizations not meeting these criteria or which are experiencing or
anticipating significant growth are required to maintain a leverage ratio which
exceeds the 3% minimum by a least 100 to 200 basis points. The risk based
capital and leverage ratios of the Bank as of December 31, 1999 and December 31,
1998 are set forth in Note 8 to the Company's Consolidated Financial Statements.

Federal banking agencies must take "prompt corrective action" with respect to
depository institutions that do not meet minimum capital requirements. Federal
bank regulatory authorities have adopted regulations setting forth a five-tiered
system for measuring the capital adequacy of the depository institutions they
supervise. Under these regulations, a depository institution is classified in
one of the following capital categories: "well capitalized," "adequately
capitalized," "undercapitalized," "significantly undercapitalized" and
"critically undercapitalized." Based on the Bank's current regulatory capital
position, management believes that the Bank is "well capitalized."

The Bank is generally prohibited from making any capital distribution (including
payment of a cash dividend) or paying any management fees to the Company if the
Bank would thereafter be undercapitalized. Undercapitalized depository
institutions are subject to growth limitations and are required to submit a
capital restoration plan acceptable to federal banking agencies. If a depository
institution fails to submit an acceptable plan, it is treated as if it is
"significantly undercapitalized."

Failure to meet applicable capital guidelines could subject a bank or bank
holding company to a variety of enforcement remedies available to the federal
bank regulatory authorities, including limitation on the ability to pay
dividends, the issuance of a capital directive to increase capital and, in the
case of a bank, the termination of deposit insurance by the FDIC or (in severe
cases) the appointment of a conservator or receiver.

Federal bank regulatory authorities have recently proposed amendments to current
risk based capital regulations that may require the Company to set aside
additional risk based capital for loans securitized or sold that meet certain
criteria. The Company is currently evaluating the implications of such proposal.







                                       23
<PAGE>   27
Dividends

The Bank is subject to legal limitations on the frequency and amount of
dividends that can be paid to the Company. The FDIC and CDB, in general, also
have the power to prohibit the payment of dividends by the Bank which would
otherwise be permitted under applicable regulations if the agencies determine
that these dividends would constitute an unsafe or unsound practice.

CDB approval is required for the payment of dividends by the Bank in any
calendar year if the total of all dividends declared by the Bank in that year
exceeds the current year's net income combined with the retained net income of
the two preceding years. "Retained net income" means the net income of a
specified period less any common or preferred stock dividends declared for that
period. Moreover, no dividends may be paid by a state bank in excess of its
undivided profits account. In addition, the FRB and the FDIC have issued policy
statements which provide that, as a general matter, insured banks and bank
holding companies may pay dividends only out of current operating earnings.

There are also statutory limits on other transfers of funds to the Company and
any other future non-banking subsidiaries of the Company by the Bank, whether in
the form of loans or other extensions of credit, investments or asset purchases.
These transfers by the Bank generally are limited in amount to 10% of the Bank's
capital and surplus to the Company and any such future subsidiary of the
Company, or 20% in the aggregate to the Company and all such subsidiaries.
Furthermore, these loans and extensions of credit are required to be fully
collateralized in specified amounts depending on the nature of the collateral
involved.

Community Reinvestment Act

The Federal and State of Connecticut Community Reinvestment Acts require the
FDIC and CDB to evaluate the Bank's performance in helping to meet the credit
needs of the community. The Bank defines its CRA marketplace as Hartford County.
This definition is not intended to restrict the availability of credit services
throughout the Bank's general service area, but represents a special commitment
the Bank has made to provide lending and depository services to the community.
As a part of the CRA program, the Bank is subject to periodic examinations by
the FDIC and CDB and maintains comprehensive records of its CRA activities for
this purpose. Following its most recent examination in March 1998 by its former
primary regulator, the Comptroller of the Currency, the Bank received a rating
of "Satisfactory." The Bank has recently filed a CRA Strategic Plan with the
FDIC and CDB. The Plan details the manner and level of performance to be
achieved to obtain a satisfactory or an outstanding rating in each of the
lending, investment and service categories as specified in the CRA. The
Company's CRA Strategic Plan has been approved by the FDIC and is still under
consideration by the CDB.





                                       24
<PAGE>   28
The Bank is specifically interested in making financing available to small and
medium size businesses in its defined lending area. The Bank evaluates credit
applications without regard to race, color, religion, national origin, gender,
marital status or age, and does not discriminate against any loan applicant
whose income may come entirely or in part from any public assistance program, or
against any applicant who has exercised in good faith any right under the
Consumer Protection Act. The Company maintains preferred status with the SBA,
USDA and Ex-Im Bank which enables it to provide access to credit products that
might otherwise be unavailable.

ITEM 2.  PROPERTIES

The Company leases approximately 50,000 square feet in Hartford, Connecticut to
house its headquarters and lending and support staff. The Company maintains
leased space for representative offices in Boston and Springfield,
Massachusetts; Providence, Rhode Island; Morristown, New Jersey; Rochester, New
York; Philadelphia and Pittsburgh, Pennsylvania; Washington, D.C.; Detroit,
Michigan; St. Louis, Missouri; and Cleveland, Ohio. The Company's leases
generally provide for two five-year renewal options and options on additional
space. Management believes that its existing facilities are adequate for their
present and proposed uses and that suitable facilities will be available on
reasonable terms for any additional space required.

ITEM 3.  LEGAL PROCEEDINGS

Because the nature of the business of the Company involves the collection of
numerous accounts, the validity of liens and compliance with state and federal
laws, the Company is subject to claims and legal actions in the ordinary course
of its business. While it is impossible to estimate with certainty the ultimate
legal and financial liability with respect to these claims and actions, the
Company believes that the ultimate resolution of these actions is unlikely to
have a material adverse effect on the financial position, results of operations
or cash flows of the Company.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted during the fourth quarter of 1999 to a vote of
security holders through solicitation of proxies or otherwise.






                                       25
<PAGE>   29

PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Information required by this item may be found on the inside back cover of the
Company's 1999 Annual Report to Shareholders, which is incorporated herein by
reference and is filed as Exhibit 13.1 hereto.

ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA

Information required by this item may be found on page 4 of the Company's 1999
Annual Report to Shareholders, which is incorporated herein by reference and is
filed as Exhibit 13.1 hereto.

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

Information required by this item may be found on pages 5 through 22. of the
Company's 1999 Annual Report to Shareholders, which is incorporated herein by
reference and is filed as Exhibit 13.1 hereto.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Information required by this item may be found on pages 19 through 21 of the
Company's 1999 Annual Report to Shareholders, which is incorporated herein by
reference and is filed as Exhibit 13.1 hereto.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Information required by this item may be found on pages 23 through 46 of the
Company's 1999 Annual Report to Shareholders, which is incorporated herein by
reference and is filed as Exhibit 13.1 hereto.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

None.



                                       26
<PAGE>   30
PART III

ITEMS 10 - 13

Information required by these items may be found in the Company's proxy
statement for its Annual Meeting of Shareholders, which will be filed by the
Company within 120 days of the end of its most recent fiscal year.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K

A.       The following documents are filed as a part of this report:

         1.       Financial Statements set forth on pages 23 through 46 of the
                  1999 Annual Report to Shareholders which is filed herewith as
                  Exhibit 13.1.

                  (i)      Report of Independent Accountants

                  (ii)     Consolidated Balance Sheets as of December 31, 1999
                           and 1998

                  (iii)    Consolidated Statements of Income for the Years Ended
                           December 31, 1999, 1998 and 1997

                  (iv)     Consolidated Statements of Changes in Stockholders'
                           Equity for the Years Ended December 31, 1999, 1998
                           and 1997

                  (v)      Consolidated Statements of Cash Flows for the Years
                           Ended December 31, 1999, 1998 and 1997

         2.       Financial Schedules:

                  None required.

         3.       Exhibits:

                  Exhibit
                  Number   Description
                  ------   -----------
                  3.1      Amended and Restated Certificate of Incorporation of
                           the Registrant.*

                  3.2      Amended and Restated By-laws of the Registrant.*

                  10.1     Employment Agreement among Registrant, First National
                           Bank of New England and Brett N. Silvers dated April
                           15, 1994; as amended by Letter Agreement dated July
                           3, 1997.*

                  10.1.1   Letter dated March 31, 1999, to amend the Employment
                           Agreement among the Registrant, First International
                           Bank, N.A. and Brett N. Silvers.***






                                       27
<PAGE>   31
                  10.1.2   Letter dated March 15, 2000, to amend the Employment
                           Agreement among the Registrant, First International
                           Bank and Brett N. Silvers.

                  10.1.3   Registration Rights Agreement by and among First
                           International Bancorp, Inc. and Nancy W. Silvers and
                           The Silvers Family Trust, dated March 31, 1999.***

                  10.1.4   Letter Agreement dated October 27, 1999, between
                           Brett N. Silvers and First International Bancorp,
                           Inc. regarding temporary restrictions on the transfer
                           and voting of 200,000 shares sold to Mr. Silvers.

                  10.2     Promissory Note of Brett N. Silvers, payable to the
                           Registrant, dated June 30, 1994, as amended.*

                  10.2.1   Promissory Note of Brett N. Silvers, payable to the
                           Registrant dated March 31, 1999.

                  10.3     Stock Pledge Agreement, dated June 30, 1994, between
                           the Registrant and Brett N. Silvers, as amended.*

                  10.3.1   Stock Pledge Agreement dated March 31, 1999, between
                           the Registrant and Brett N. Silvers.

                  10.4     Amended and Restated 1996 Stock Option Plans.

                  10.5     1994 Incentive Stock Option Plan, as amended.*

                  10.6     401(k) Plan.

                  10.7     Lease between Cambridge One Commercial Plaza, LLC
                           and the Bank dated June 1, 1997.*

                  10.8     First Amendment of Lease between Cambridge One
                           Commercial Plaza, LLC and the Bank dated November 30,
                           1998.****

                  10.9     Second Amendment of Lease between Cambridge One
                           Commercial Plaza, LLC and the Bank dated as of March
                           26, 1999.****

                  10.10    Employment Agreement between the Bank and Leslie A.
                           Galbraith dated March 15, 2000.

                  10.11    Employment Agreement between the Bank and Shaun P.
                           Williams dated March 6, 2000.

                  10.12    Revolving Commercial Loan Warehouse and Security
                           Agreement among Prudential Securities Credit
                           Corporation, First National Bank of New England and
                           First International Bancorp, Inc., dated as of
                           December 4, 1998.****

                  10.12.1  First Amendment among Prudential Securities Credit
                           Corporation, First International Bank and First
                           International Bancorp, Inc., dated as of June 30,
                           1999.

                  10.12.2  Second Amendment among Prudential Securities Credit
                           Corporation, First International Bank and First
                           International Bancorp, Inc., dated as of January 12,
                           2000.

                  10.13    Amended and Restated Loan Purchase and Servicing
                           Agreement among FNBNE Funding Corp., First
                           International Bank, Variable



                                       28
<PAGE>   32
                           Funding Capital Corporation, First Union Capital
                           Markets Corp., First Union National Bank and HSBC
                           Bank USA, dated September 24, 1999.

                  10.13.1  Amendment No. 1 to Amended and Restated Purchase and
                           Servicing Agreement among FNBNE Funding Corp., First
                           International Bank, Variable Funding Capital
                           Corporation, First Union Securities, Inc., First
                           Union National Bank and HSBC Bank USA, dated November
                           23, 1999.

                  10.14    Pooling and Servicing Agreement between Marine
                           Midland Bank and First National Bank of New England,
                           dated as of May 31, 1998.****

                  10.15    Sale and Servicing Agreement between FNBNE Business
                           Loan Trust 1998-A and First National Bank of New
                           England, dated as of December 1, 1998.****

                  10.15.1  Pooling and Servicing Agreement between HSBC Bank USA
                           and First International Bank, National Association
                           for the SBA Loan-Backed Series 1999-1 dated as of May
                           31, 1999.

                  10.15.2  Sale and Servicing Agreement between FIB Business
                           Loan Trust 1999-A and First International Bank, dated
                           as of September 1, 1999.

                  10.16    Revolving Commercial Loan Warehouse and Security
                           Agreement between Prudential Securities Credit
                           Corporation and FIB Holdings, Inc., dated as of
                           December 1, 1999.

                  10.17    Commercial Loan Sale Agreement between First
                           International Bank and FIB Holdings, Inc., dated as
                           of December 1, 1999.

                  10.18    Guaranty from First International Bancorp, Inc. in
                           favor of Prudential Securities Credit Corporation,
                           dated as of December 1, 1999.

                  10.19    Sale and Servicing Agreement between FIB Funding
                           Trust and First International Bank dated as of
                           October 1, 1999

                  10.20    Note Purchase Agreement among FIB Funding Trust,
                           First International Bank, Variable Funding Capital
                           Corporation, First Union Securities, Inc. and First
                           Union National Bank dated as of October 1, 1999

                  10.21    Guaranty from First International Bank in favor of
                           First Union Securities, Inc. dated as of October 1,
                           1999

                  13.1     1999 Annual Report to Shareholders.

                  21.1     Subsidiaries of Registrant.

                  23.1     Consent of PricewaterhouseCoopers LLP.

                  27.1     Financial Data Schedule for the Year Ended December
                           31, 1999.

                  99       Agreement for Purchase and Sale of Assets and
                           Assumption of Liabilities between First National Bank
                           of New England and Hudson United Bank, dated as of
                           December 31, 1998.**





                                       29
<PAGE>   33
                  * Denotes an exhibit which has previously been filed as an
exhibit to the Company's Registration Statement on Form S-1, Commission File No.
333-31339.

                  ** Denotes an exhibit which has previously been filed as an
exhibit to the Company's Report on Form 8-K, Commission File No. 0-22861.

                  *** Denotes an exhibit which has previously been filed as an
exhibit to the Company's Report on Form 10-Q, Commission File No. 0-22861.

                  **** Denotes an exhibit which has previously been filed as an
exhibit to the Company's Report on Form 10-K, Commission File No. 0-22861.

B.       Reports on Form 8-K.

         The Company did not file any Current Reports on Form 8-K during the
quarter ended December 31, 1999.






                                       30
<PAGE>   34
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

Date:  March 29, 2000
                                            First International Bancorp, Inc.

                                            By:/s/ Brett N. Silvers
                                               -----------------------
                                                 Brett N. Silvers
                                                 Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated:

<TABLE>
<CAPTION>
         Signature                                   Title                              Date
         ---------                                   -----                              ----
<S>                                            <C>                                <C>
/s/ Brett N. Silvers                            Director and                        March 29, 2000
- ---------------------------------               Chief Executive Officer
Brett N. Silvers

/s/ Michael R. Carter                           Director                           March 29, 2000
- ---------------------------------
Michael R. Carter

/s/ Arnold L. Chase                             Director                           March 29, 2000
- ---------------------------------
Arnold L. Chase

/s/ Cheryl A. Chase                             Director                           March 29, 2000
- ---------------------------------
Cheryl A. Chase

/s/ Frank P. Longobardi                         Director                           March 29, 2000
- ---------------------------------
Frank P. Longobardi

/s/ Leslie A. Galbraith                         Executive Vice President           March 29, 2000
- ---------------------------------               and Secretary
Leslie A. Galbraith


/s/ Shaun P. Williams                           Executive Vice President, Chief    March 29, 2000
- ---------------------------------               Financial Officer and Treasurer
Shaun P. Williams

</TABLE>




                                       31



<PAGE>   1
                                                                  Exhibit 10.1.2

                                 March 15, 2000


Mr. Brett N. Silvers
61 Ledyard Road
West Hartford, CT  06117

Dear Brett:

         Reference is made to that certain Employment Agreement (the "EMPLOYMENT
AGREEMENT") dated as of April 15, 1994 among Brett N. Silvers ("SILVERS"), First
International Bancorp, Inc. ("FIB") and First National Bank of New England (now
known as First International Bank) ("FIRST INTERNATIONAL"), as amended by those
certain letter agreements (collectively, the "LETTER AGREEMENTS") dated July 3,
1997 and March 31, 1999 among Silvers, FIB and First International.

         Silvers, FIB and First International agree that the first sentence in
Section 2.1 of the Employment Agreement, as amended by the Letter Agreements, is
deleted in its entirety and the following is substituted in its place:

         ""Term of Employment" shall mean the period commencing as of April 1,
1994 and ending June 30, 2001."

         Except to the extent expressly amended herein, the Employment
Agreement, as amended by the Letter Agreements, remains unmodified and in full
force and effect in accordance with its terms.

         Please sign in the space provided below to indicate your acceptance of
the foregoing, whereupon the provisions of this letter shall take effect.

                                        Very truly yours,

                                        FIRST INTERNATIONAL BANCORP, INC.



                                        By:/s/Leslie A. Galbraith
                                        -------------------------
                                           Leslie A. Galbraith
                                           Its Executive Vice President


<PAGE>   2


                                      -2-



                               FIRST INTERNATIONAL BANK



                               By:/s/Leslie A. Galbraith
                               -------------------------
                                  Leslie A. Galbraith
                                  Its President


Agreed to and Accepted this 17th day of March, 2000.



/s/Brett N. Silvers
- ---------------------
Brett N. Silvers


<PAGE>   1
                                                                  Exhibit 10.1.4

[BRETT N. SILVERS LETTERHEAD]


October 27, 1999


First International Bancorp, Inc.
280 Trumbull Street
Hartford, Connecticut  06103

         Attention: Leslie A. Galbraith, Executive Vice President

Ladies and Gentlemen:

         As you know, in connection with the recent amendment of my employment
agreement, First International Bancorp, Inc. (the "Company") agreed to sell to
me, and I agreed to purchase from the Company, 200,000 shares of common stock of
the Company (the "Shares") at an aggregate purchase price of $2,000,000. As
payment of the purchase price for the Shares, I delivered to the Company,
$20,000 in cash and a promissory note (the "Note") for the balance of the
purchase price. In addition, I executed and delivered a pledge agreement (the
"Pledge Agreement") pursuant to which I pledged the Shares to the Company to
secure my obligations under the Note. Subsequent to the sale, as the Company is
aware, I made certain estate planning transfers of the Shares to members of my
immediate family (subject to the Pledge Agreement). As of the date hereof, all
of the Shares are owned by members of my immediate family.

         The Company has informed me that in order to ensure full compliance
with the rules and regulations of the Nasdaq-AMEX Stock Market, the Company
intends to submit to the stockholders of the Company (the "Company
Stockholders") for their consideration and approval at the next meeting of the
Company Stockholders, the sale of the Shares to me on the terms set forth above.
Furthermore, I have agreed to enter into this letter agreement by which I am
agreeing to certain temporary restrictions on the transfer and voting of the
Shares.

         Based on the foregoing, while this letter agreement is in effect:

         1. I acknowledge and agree on behalf of myself and any immediate family
members to whom I have transferred the Shares, that the Shares shall not be
voted on any matter, whether by proxy, at a special or regularly scheduled
meeting of the Company Stockholders or by any unanimous
<PAGE>   2
First International Bancorp, Inc.
October 27, 1999
Page 2


consent or similar vote or consent of the Company Stockholders, which may be
called or requested by the Company.

         2. I agree on behalf of myself and any immediate family members to whom
I have transferred the Shares, that I will not sell, assign, transfer or
otherwise dispose of or permit to be sold, assigned, transferred or otherwise
disposed of, any of the Shares, excepting however, any transfer by operation of
law, and in a conversion into cash or securities of another issuer upon
consummation of a merger or similar transaction to which the Company is a party.

         3. I represent that I have the complete and unrestricted power and the
unqualified right to enter into and perform the terms of this letter agreement.
I further represent that this letter agreement constitutes a valid and binding
agreement, enforceable against me in accordance with its terms, except as
enforcement may be limited by general principles of equity whether applied in a
court of law or a court of equity and by bankruptcy, insolvency and similar laws
affecting creditors' rights and remedies generally. I represent that either I or
immediate family members to whom I have transferred the Shares, beneficially own
the Shares, free and clear of any liens, claims, charges or other encumbrances
or restrictions of any kind whatsoever, other than pursuant to the Pledge
Agreement referred to above or the Securities Act of 1933, as amended or the
Securities Exchange Act of 1934, as amended, and have sole and otherwise
unrestricted, voting power with respect to such Shares.

         4. The agreements contained herein shall remain in full force and
effect until such time as the Company Stockholders shall have approved the sale
of the Shares to me in accordance with the first paragraph of this letter
agreement, at which time, the agreements contained herein shall automatically
terminate and be of no further force and effect without any action on my or the
Company's part. In the event that the Company Stockholders shall have failed to
approve the sale of the Shares to me after taking a vote on such matter at the
next meeting of the Company Stockholders to be held after the date hereof, I
agree that the sale of the Shares to me shall be rescinded. In such event, I and
the Company agree to take all necessary actions to effect such rescission.
<PAGE>   3
First International Bancorp, Inc.
October 27, 1999
Page 3


         5. The Company hereby agrees that it will use its best efforts to cause
the sale of the Shares to me to be included in any proxy materials prepared and
delivered to the Company Stockholders by the Company in connection with the next
meeting of the Company Stockholders to be held after the date hereof.

         6. I have signed this letter agreement intending to be bound thereby. I
expressly agree that this letter agreement shall be specifically enforceable in
any court of competent jurisdiction in accordance with its terms against me. All
of the covenants and agreements contained in this letter agreement shall be
binding upon, and inure to the benefit of, the respective parties and their
permitted successors, assigns, heirs, executors, administrators and other legal
representatives, as the case may be.

         7. This letter agreement may be executed in one or more counterparts,
each of which will be deemed an original but all of which together shall
constitute one and the same instrument.

         8. This letter agreement is deemed to be signed as a sealed instrument
and is to be governed by the laws of the State of Connecticut, without giving
effect to the principles of conflicts of laws thereof. If any provision hereof
is deemed unenforceable, the enforceability of the other provisions hereof shall
not be affected.

         If the foregoing accurately reflects your understanding of the subject
matter intended to be contained herein, please confirm our agreement by signing
this letter where indicated below.

                                                     Very truly yours,

                                                     /S/ Brett N. Silvers
                                                     --------------------

ACCEPTED AND AGREED
AS OF THE DATE FIRST
ABOVE WRITTEN.

FIRST INTERNATIONAL BANCORP, INC.
By: /S/ Leslie Galbraith
- ------------------------
        Name: Leslie Galbraith
        Title:   Executive Vice President


<PAGE>   1
                                                                  Exhibit 10.2.1


                                 PROMISSORY NOTE



$1,980,000                                                       March 31, 1999



         FOR VALUE RECEIVED, the undersigned Brett N. Silvers (hereinafter
called "MAKER") promises to pay to the order of First International Bancorp,
Inc. (hereinafter called "PAYEE") at its address at 280 Trumbull Street,
Hartford, Connecticut, or at such other place as the holder hereof (including
the Payee, hereinafter referred to as "HOLDER") may designate in lawful money of
the United States, the principal sum of One Million Nine Hundred Eighty Thousand
Dollars ($1,980,000), together with interest on the unpaid balance of this note,
beginning as of the date hereof, at an interest rate of seven (7%) percent per
annum, together with all expenses, including reasonable attorneys' fees,
incurred in any action to collect this note.

         The principal of this note, together with accrued interest, shall be
due and payable in full on April 1, 2002. Such interest shall be calculated as
simple interest, rather than being compounded; however, notwithstanding the
interest rate and payment of interest and principal required above, no interest
or principal shall be payable under this note upon the occurrence of a Change of
Control (as defined in that certain Employment Agreement dated as of April 15,
1994 among Maker, Payee and First National Bank of Connecticut (now known as
First International Bank, National Association) ("FIRST INTERNATIONAL"), as
amended by those certain letter agreements dated July 3, 1997 and March 31, 1999
among Maker, Payee and First International).

         Maker agrees that (i) if Maker shall fail to pay any sum due under this
note within ten (10) days after receiving notice from the Holder that such
amount is due; or (ii) if Maker shall suffer or permit the filing by or against
it of any petition for adjudication, arrangement, reorganization or the like
under any bankruptcy or insolvency law or make an assignment for the benefit of
creditors, and if, in the case of an involuntary petition, such petition is not
dismissed within thirty (90) days of the filing thereof (each of the events and
circumstances in (i) and (ii) being events of default), then, upon the happening
of any of such event, the entire indebtedness with accrued interest thereon (if
any) due under this note shall be immediately due and payable at the option of
the Holder.
<PAGE>   2
         Maker may prepay any amounts on account of principal at any time
without the imposition of any fee or penalty.

         Notwithstanding any other provision hereof, in enforcing the provisions
hereof, the Holder shall not have the right to attach or execute upon any asset
of Maker unless and until the Holder shall have exhausted its remedies pursuant
to the Stock Pledge Agreement entered into between the Maker and the Payee this
day (that is, unless and until all of the shares of Payee Common Stock, par
value $.10 per share, pledged by Maker as collateral for this note have been
sold, and the proceeds thereof have been applied to the obligations of Maker set
forth in this note).

         This note shall be governed by and construed in accordance with the
laws of the State of Connecticut.

         Dated this 31st day of March, 1999.


                                                /s/ Brett N. Silvers
                                                --------------------------------
                                                Brett N. Silvers



<PAGE>   1
                                                                  EXHIBIT 10.3.1

                             STOCK PLEDGE AGREEMENT


         AGREEMENT dated this 31st day of March, 1999, by and between BRETT N.
SILVERS, of West Hartford, Connecticut ("PLEDGOR"), and FIRST INTERNATIONAL
BANCORP, INC., a Delaware corporation ("PLEDGEE").

                               W I T N E S E T H:

         WHEREAS, Pledgor is indebted to Pledgee pursuant to a Promissory Note
dated March 31, 1999, in the principal amount of $1,980,000 (the "NOTE"); and

         WHEREAS, such indebtedness is being incurred by Pledgor in connection
with Pledgor's purchase from Pledgee of 200,000 shares of Common Stock of
Pledgee (the "STOCK"); and

         WHEREAS, Pledgor has agreed to pledge the Stock to Pledgee as
collateral for the Note, on the terms set forth herein.

         NOW, THEREFORE, it is hereby agreed as follows:

         1. Pledge. As collateral for the Note and any substitutions or
replacements for the Note (collectively, the "OBLIGATIONS"), Pledgor hereby
pledges, assigns and delivers to the Pledgee and grants to Pledgee a first lien
security interest in the Stock. The Pledgor will deliver or cause to be
delivered to Pledgee, as soon as it is received by Pledgor or becomes available
to Pledgor from the issuer or any transfer agent for the issuer, a certificate
evidencing the ownership of the Stock. Contemporaneously herewith, Pledgor is
delivering to Pledgee a stock power executed in blank with respect to the Stock.
The Pledgee shall hold the Stock as security for the payment of and performance
of the Obligations and Pledgor shall not encumber, assign or dispose of the
Stock except in accordance with the provisions of this Agreement and except that
Pledgor shall have the right to transfer the Stock, subject to the first lien
security interest granted in this Agreement, to one or more family members of
Pledgor and/or trusts as to which the sole beneficiaries are Pledgor and/or
family members of Pledgor. However, Pledgor shall have the right at any time or
times to sell all or any of the Stock, free and clear of the lien of Pledgee, so
long as the proceeds of such sale are applied first to reduce the balance, if
any, of the Obligations.

         2. Dividends And Other Rights. If the Pledgor becomes entitled to
receive or receives cash dividends or any other distribution with respect to the
Stock, Pledgor shall be entitled to retain all of such dividend or distribution.
<PAGE>   2
         3. Representation. The Pledgor warrants and represents that (i) the
Stock is duly and validly pledged to the Pledgee; and (ii) Pledgor has good
title to all the Stock, free and clear of all pledges and other encumbrances.

         4. Stock Adjustments or Additions. In the event that during the term of
this pledge any stock dividend is declared or made, or if any reclassification,
readjustment or other change is made in the capital structure of the Company
(collectively, "STOCK DIVIDEND OR CHANGE"), 100% of all new, substituted and
additional shares or securities of the Company issued to or acquired by Pledgor
by reason of such Stock Dividend or Change shall be forthwith delivered to the
Pledgee to be held by it under this Agreement, and the term "STOCK" shall be
deemed to include such shares or securities.

         5. Term. The pledge shall terminate upon payment of and performance of
all Obligations. Upon termination of this pledge, any Stock still held hereunder
shall be delivered forthwith to the Pledgor.

         6. Default. The Pledgee shall have all of the rights and remedies with
respect to the Stock subject to the Uniform Commercial Code in force in
Connecticut on the date hereof (the "CODE"). Upon the occurrence of an event of
default under the Note, and during the continuation thereof, the Pledgee may (i)
cause all or any part of the Stock to be transferred into its name or into the
name of its nominee or nominees, and (ii) apply the Stock against the payment or
performance of the Obligations. Pledgor agrees that because of the Securities
Act of 1933, as amended, or any other laws or regulations, and for other
reasons, there may be legal and/or practical restrictions or limitations
affecting Pledges in any attempts to dispose of certain portions of the Stock
and for enforcement of its rights. For these reasons, Pledgee is hereby
authorized by Pledgor, but not obligated, in the event of the occurrence of an
event of default under the Documents, to sell all or any part of the Stock at
private sale, subject to investment letter or in any other manner which will not
require the Stock, or any part thereof, to be registered in accordance with the
Securities Act of 1933, as amended, or the rules and regulations promulgated
thereunder, or any other law or regulation, at a commercially reasonable price
obtainable by Pledgee at any such private sale or other disposition in the
manner mentioned above. Pledgee is also hereby authorized by Pledgor, but not
obligated, to take such actions, give such notices, obtain such consents, and do
such other things as Pledgee may deem to be required or appropriate in the event
of sale or disposition of any of the Stock. Pledgee may in its discretion
approach a restricted number of potential purchasers and Pledgor acknowledges
that a sale under such circumstances may yield a lower price for the Stock, or
any part or parts thereof, than would otherwise be obtainable if same were
either offered to a large number of potential purchasers, or registered and sold
in the open market. Pledgor agrees (a) that in the event Pledgee shall upon the
occurrence of an event of default under the Documents (an "EVENT OF DEFAULT"),
sell the Stock, or any portion thereof, at such private sale or sales, Pledgee
shall have the right to rely upon the advice and opinion of any member firm of a
national securities exchange as to the commercially
<PAGE>   3
reasonably price obtainable upon such a private sale thereof, and (b) that such
reliance shall be conclusive evidence that Pledgee handled such matter in a
commercially reasonable manner under the Code.

         7. Voting. Until the occurrence of an event of default under the Note,
Pledgor shall have the exclusive right to vote the Stock, at any and all
meetings of the shareholders of the Company. Following the occurrence of an
event of default under the Note, and during the continuance thereof, Pledgee
shall have the right, after either giving written notice thereof to Pledgor that
it intends thereafter to do so or after transferring the shares into the name of
Pledgee or its nominee, at its sole discretion and without liability therefor,
to cause such shares not to be voted.

         8. Duty of Care. Beyond the exercise of reasonable care to assure the
safe custody of the certificates evidencing Stock while held hereunder, the
Pledgee shall have no duty or liability to collect any sums due in respect
thereof or to protect or preserve rights pertaining thereto, and shall be
relieved of all responsibility for the Stock upon surrendering the same to the
Pledgor.

         9. Remedies Not Exclusive. The rights and remedies herein provided are
cumulative and are in addition to, and not exclusive of, any rights or remedies
provided by law, including without limitation, the rights and remedies of a
secured party under the Uniform Commercial Code in force in Connecticut on the
date hereof and as may be amended from time to time.

         10. Effect. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.

         11. Applicable Law. This Agreement shall be governed by and construed
according to the laws of the State of Connecticut and may not be amended except
in writing.

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered on the date first above written.


                                   FIRST INTERNATIONAL BANCORP, INC.


                                   By:/s/ Leslie A, Galbraith
                                      ------------------------------
                                       Leslie A. Galbraith
                                       Its Executive Vice President


                                   /s/ Brett N. Silvers
                                   ---------------------------------
                                   Brett N. Silvers


<PAGE>   1
                                                                    Exhibit 10.4


                        FIRST INTERNATIONAL BANCORP, INC.
                  AMENDED AND RESTATED 1996 STOCK OPTION PLANS

        1. Purpose of the Plan. The purpose of the 1996 Stock Option Plans is to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to certain key Directors and
officers of FIRST INTERNATIONAL BANCORP, INC. and any subsidiaries which FIRST
INTERNATIONAL BANCORP, INC. presently owns or controls or may hereafter organize
or acquire, and to promote the success of the business.

        2. Definitions. As used herein the following definitions shall apply.

               (a) "Bank Holding Company" shall mean FIRST INTERNATIONAL
BANCORP, INC. or any direct or indirect subsidiary now owned or hereafter
acquired by Bank Holding Company.

               (b) "Board" shall mean the Board of Directors of FIRST
INTERNATIONAL BANCORP, INC.

               (c) "Cause" means any of the following: (a) insubordination or
other refusal or failure to carry out the instructions or policies of the Board
or the board of directors of any of the Bank Holding Company's subsidiaries or
the officers to whom the Optionee reports; (b) dishonesty, crime or action
involving moral turpitude, or any other conduct that is illegal, immoral or
materially injurious to the Bank Holding Company or any of its subsidiaries; or
(c) breach of Optionee's covenants or obligations under any agreement with the
Bank Holding Company or any of its subsidiaries; or (d) non-performance in the
performance of Optionee's duties, evaluated primarily with reference to the Bank
Holding Company's or any of its subsidiaries' credit and organization policies
and with reference to the goals and budgets approved by the Board or the board
of directors of any of the Bank Holding Company's subsidiaries, and, if such
non-performance referred to in this clause (d) is capable of being corrected,
continuation of such non-performance for 30 days after the Bank Holding Company
or any of its subsidiaries, as the case may be, gives notice to the Optionee
describing such non-performance.

               (d) "Code" shall mean the Internal Revenue Code of 1986, as
amended.

               (e) "Common Stock" shall mean the Common Stock of the Bank
Holding Company.

               (f) "Directors" means Directors of First International Bancorp,
Inc. or of any direct or indirect subsidiary now owned or hereafter acquired by
First International Bancorp, Inc.

               (g) "Employee" shall mean a regular, salaried full-time
("full-time" as used herein is defined as an employee working 20 or more hours
per week) employee (as the term
<PAGE>   2
"employee" is used in Section 422 of the Code) of the Bank Holding Company or
one of its subsidiaries, as the term "subsidiary corporation" is defined in
Section 424 of the code.

               (h) "Option" shall mean a stock option granted pursuant to the
Plan.

               (i) "Option Price" shall mean the price determined by the Board
pursuant to the Plan.

               (j) "Optioned Stock" shall mean the stock subject to an Option
granted pursuant to the Plan.

               (k) "Optionee" shall mean an Employee who received an Option.

               (l) "Plan" or "Plans" shall mean collectively the Amended and
Restated 1996 Stock Option Plans. Although the Plans shall be subject to the
same terms and conditions except as otherwise expressly stated herein, they
shall be deemed to be two Plans. One of the Plans encompasses Options granted to
the Directors, while Options will be granted on the terms set forth herein
without discretion by the Board with respect thereto; the other Plan encompasses
Options granted to persons other than Directors, which Options will be granted
as and when determined by the Board.

               (m) "Share" shall mean a share of Common Stock of the Bank
Holding Company as adjusted in accordance with Section 12 of the Plan.

        3. Stock Subject to the Plan. Subject to the provisions of Section 12 of
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is Two hundred thousand three hundred sixteen (200,316) of Common
Stock of the Bank Holding Company. Such Shares may be authorized but unissued
shares.

               If an option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were subject
thereto shall, unless the Plan shall have been terminated, become available for
other Options under the Plan.

        4. Administration of the Plan.

               (a) Procedure. The Plan shall be administered by the Board. The
Board may act hereunder through a Committee of two or more Directors (a
"Committee"). References herein to the granting of Options by the Board, the
authority of the Board, and the decisions, determinations and interpretations of
the Board are intended to include any Options granted by the Committee, exercise
of authority by the Committee, and any decisions, determinations and
interpretations by the Committee.

               (b) Powers of the Board. Subject to the provisions of the Plan,
the Board shall have the authority: (i) to grant to any officer who is an
Employee an Option to purchase Shares of the Bank Holding Company, which shall
be conditioned on the execution by such




                                       2
<PAGE>   3
officer of a Stock Option Agreement substantially in the form of Exhibit A
hereto (with such modifications as the Board may desire, within the terms of
this Plan and within the requirements of the law); (ii) to determine the Option
Price for any Shares to be issued pursuant to an Option granted under the Plan,
the officer to whom, and the time or times at which, Options shall be granted,
and the number of Shares to be represented by each Option, the time or times at
which Options may be exercised, and the term of each Option which in no event
shall be more than ten (10) years from the date of the grant of the Option;
(iii) to interpret the Plan; (iv) to prescribe, amend and rescind rules and
regulations relating to the Plan; (v) to determine the terms and provisions of
each Option granted under the Plan (which need not be identical) and, with the
consent of the holder thereof, to modify or amend each Option; (vi) to authorize
any person to execute on behalf of the Bank Holding Company any instrument
required to effectuate the grant of an Option previously granted by the Board;
and (vii) to make all other determinations deemed necessary or advisable for the
administration of the Plan. Options shall be granted to members of the Board of
Directors of the Company only pursuant to section 4(e) below.

               (c) Effect of Board's Decision. All decisions, determinations and
interpretations of the Board shall be final and binding on all Optionees and any
other holders of any Options granted under the Plan.

               (d) Minimum Grants to Officers. The grants of Options pursuant to
Section 4(b) above shall include the following (in addition to any other Options
that may be granted):

                      (i) Each Vice President, Senior Vice President, and
        Executive Vice President of the Company employed by the Bank Holding
        Company prior to January 1, 1996 shall receive, on the date that this
        Plan is adopted by the Board, an Option to purchase the number of shares
        by which the Applicable Initial Option exceeds the sum of (A) the number
        of Shares that each such person had the option to buy from the Bank
        Holding Company immediately prior to the adoption of this Plan by the
        Board, plus (B) the number of Shares purchased by such Employee from the
        Bank Holding Company at any time prior to the adoption of the Plan
        pursuant to the exercise of a stock option (regardless of whether such
        existing or previous options were granted pursuant to an option plan and
        regardless of whether such existing options were vested or immediately
        exercisable). For the purposes of this Plan, the "Applicable Initial
        Option" shall be the number of Shares obtained by (A) taking the
        Compensation Percentage Amount of each such person's aggregate (i.e.,
        cumulative) base salary since the date of such person's employment by
        the Bank Holding Company, and (B) dividing such Compensation Percentage
        Amount by the fair market value of each Share, as determined by the
        Board on the date that this Plan is adopted by the Board, and the
        "Compensation Percentage Amount" is 5% of such cumulative base salary
        for Vice Presidents, 10% of such cumulative base salary for Senior Vice
        Presidents, and 20% of such cumulative base salary for Executive Vice
        Presidents.

                      (ii) Each Vice President, Senior Vice President, and
        Executive Vice President of the Bank Holding Company shall receive, at
        such time as the Board shall determine during the first 4 months of each
        fiscal year of the Company while such person







                                       3
<PAGE>   4
         continues to hold such position, an option to purchase the number of
         Shares equal to their Applicable Additional Option. For the purposes
         hereof, the "Applicable Additional Option" shall be the number of
         shares obtained by (A) taking the Compensation Percentage Amount (as
         defined in clause (i) above) of each such person's annual base salary
         as of the end of the immediately preceding fiscal year of the Company,
         and (B) dividing such Compensation Percentage amount by the fair market
         value of each Share, as determined by the Board on the date that the
         Options are granted.

               (e) Grants to Directors.

                      (i) Options to Directors shall be granted only pursuant to
        this Section 4(e). Immediately subsequent to the annual meeting of
        shareholders of the Company each year during the term of the Plan (the
        "Director Option Date"), commencing with the 1998 Director Option Date,
        each Director who was a Director immediately prior to such annual
        meeting and who physically attended at least 80% of the sum of (A) the
        meetings of the board of directors of the Bank Holding Company (if such
        person is a Director of the Bank Holding Company) and (B) the meetings
        of any subsidiary thereof of which such person is a Director (including
        for such purpose meetings of committees of which such person is a
        member) since the previous year's annual meeting (or, if such person
        became a Director after the previous year's annual meeting, during the
        time that such person was a Director) shall receive an Option to
        purchase 1,000 Shares of Common Stock. Each Director who was not a
        Director immediately prior to such annual meeting shall also receive an
        Option to purchase 1,000 Shares of Common Stock. Each Option granted to
        a Director under this paragraph shall remain outstanding for a term of
        ten years. Each such Option shall vest and become exercisable 25% one
        year after the granting of the option; 50% two years after the granting
        of the option; 75% three years after the granting of the option; and
        100% four years after the granting of the option; by way of example, if
        12% of the option is exercised between one year and two years after the
        granting of the option, an additional 38% of the option may be exercised
        after two years. If a person is a director of more than one entity, such
        Director nevertheless may only receive one 1,000 share Option in any
        year under this paragraph.

                      (ii) The Option Price for Options granted hereunder to
        directors shall be the fair market value of the Shares on the applicable
        Director Option Date. If the Shares are traded on a stock exchange on
        the applicable Director Option Date, the fair market value for Options
        granted to directors shall be the closing price on the primary stock
        exchange on which the Shares are traded; if the Shares are not traded on
        a stock exchange but are publicly traded, the fair market value for
        Options granted to directors shall be the average of the closing bid and
        asked prices on such date; if the Shares are not publicly traded, the
        fair market value shall be such price per Share as is determined by a
        disinterested Committee of the Board or by an independent appraiser
        retained by the Board.





                                       4
<PAGE>   5
        5. Eligibility. Options under the Plan may be granted only (a) to
members of the Board of Directors of the Bank Holding Company, or (b) to
officers who are Employees and who have been appointed as a Vice President or a
higher position with the Bank Holding Company as the Board shall select. An
officer or Director who has been granted an Option may, if such officer or
Director is otherwise eligible, be granted an additional Option or Options.

        6. Term of Plan. The Plan shall become effective upon its adoption by
the Board; subject, however, to approval by the holders of at least two-thirds
of the outstanding stock of each class of the Bank Holding Company within twelve
(12) months thereafter. The exercise of any Option granted prior to such
shareholder approval shall be conditioned on such shareholder approval. The Plan
shall continue in effect for a term of ten (10) years unless sooner terminated
under Section 14 of the Plan.

        7. Term of Option. The term of each Option granted under the Plan shall
be no greater than ten (10) years from the date of grant thereof.

        8. Option Price. The Option Price for the Shares to be issued pursuant
to any such Option granted under the Plan (except for Options granted to
Directors) shall be any price determined by the Board; provided, however, such
Option Price shall in no event be less than one hundred percent (100%) of the
fair market value per share of the Bank Holding Company's Common Stock at the
date of the grant of the Option, as determined by the Board.

        9. Vesting. Except as the Board may otherwise provide in an Optionee's
written Stock Option Agreement and except for Options granted hereunder to
Directors, the Option shall be 25% vested one year after the granting of the
option; 50% vested after two years; 75% vested after 3 years; and 100% vested
after 4 years. An Option may not be exercised for a number of shares (including
previous exercises under such Option) that is greater than the percentage of the
Option that has vested.

        10.    Exercise of Option.

               (a) Procedure for Exercise. Any Option granted hereunder shall be
exercisable on such terms and conditions as are set forth in the Stock Option
Agreement entered into between the Bank Holding Company and the Optionee with
respect to the grant of such Option. The Option Price of the Shares as to which
an Option shall be exercised shall be paid in full at the time of exercise, at
the election of the Optionee, in cash or currency of the United States of
America, certified check or bank cashier's check.

               An Option shall be exercised when written notice of such exercise
has been given to the Bank Holding Company in accordance with the terms of the
Optionee's Stock Option Agreement by the person entitled to exercise the Option
and payment as described above for the Shares with respect to which the Option
is exercised has been received by the Bank Holding Company accompanied by any
other representations or agreements required by the terms of this Plan or the
Optionee's Stock Option Agreement granted hereunder.





                                       5
<PAGE>   6
               (b) Termination of Employment or Cessation of Directorship. If an
Optionee ceases to be a Director or an Employee of the Bank Holding Company for
any reason, whether voluntary or involuntary, including without limitation
retirement (but not including termination without Cause or due to death or
permanent disability (as such term is used in Section 22(e)(3) of the Code), the
Option will automatically expire as of the date of the termination of such
Optionee's directorship or employment as the case may be. The Plan shall not
confer upon any Optionee any right with respect to continuation of directorship
or employment by the Bank Holding Company, nor shall it interfere in any way
with such Employee's right or the Bank Holding Company's right to terminate such
Director's term or Employee's employment at any time. If the Optionee's
directorship or employment is terminated without Cause or due to the Optionee's
death or permanent disability, the Option will automatically expire as of the
date 90 days after the termination of such Optionee's directorship or
employment, as the case may be.

        11. Non-Transferability of Options. Except to the extent expressly
provided in Section 10(b) above, the Option may not be sold, pledged, assigned,
hypothecated, transferred or disposed of in any manner and may be exercised,
during the lifetime of the Optionee, only by the Optionee.

        12. Adjustment Upon Changes in Capitalization. In the event there is any
change in the Common Stock through the declaration of stock dividends, or
through recapitalization resulting in a stock split, or combination or exchange
of Shares, or otherwise, the Board shall appropriately adjust the number of
class of Shares covered by any Option but which are unexercised, as well as the
price to be paid therefor so as to equal the same number of Shares that a record
holder of an equal number of Shares immediately prior to such event would own or
be entitled to receive after the happening of such event. Any such adjustment
shall be determined by the Board as to Options other than those held by
Directors, but Options held by Directors shall be adjusted in the same manner.
In the event of any such change in the outstanding Common Stock, the Board shall
appropriately adjust the aggregate number and class of shares available under
the Plan.

               In the case of any such change in the Common Stock, the aggregate
option price in each Optionee's Stock Option Agreement of all the Shares covered
thereby prior to such change, shall be the aggregate option price for all the
shares or other securities substituted for such shares or to which such shares
are adjusted, and the Option Price per share after such change shall be
determined accordingly.

               In the case of any consolidation of the Bank Holding Company
with, or merger of the Bank Holding Company into, any other corporation (other
than a consolidation or merger in which the Bank Holding Company is the
continuing corporation), or in case of any sale or transfer of all or
substantially all of the assets of the Bank Holding Company, and, in particular,
in the event of the acquisition of the majority of the Common Stock of the Bank
Holding Company by a holding company, the corporation formed by such
consolidation or the corporation into which the Bank Holding Company shall have
been merged or the corporation which shall have acquired such assets or Common
Stock, as the case may be (the "Acquiring Corporation"), shall execute and
deliver to each Optionee a supplemental stock option agreement







                                       6
<PAGE>   7
providing that the Holder of each Option then outstanding shall have the right,
during the period such Option shall be outstanding pursuant to its terms, to
exercise such Option (to the extent vested) as to the kind and amount of shares
of stock receivable upon such acquisition, consolidation, merger, sale or
transfer by a holder, immediately prior to such acquisition, consolidation,
merger, sale or transfer, of the total number of shares subject to the Option.
Such supplemental stock option agreement shall provide for adjustments which
shall be as nearly equivalent as may be practical to the adjustments provided
for in this Article. The provisions of this Section shall similarly apply to
successive acquisitions, consolidations, mergers, sales or transfers. The
supplemental stock option agreement shall also provide for the exercise of
Options using stock of the corporation which is the subject of the Option.

               No fractional Shares of the Common Stock shall be issuable on
account of any action aforesaid, and the aggregate number of Shares into which
Shares then covered by the Option when changed as a result of such action shall
be reduced to the largest number of whole shares resulting from such action,
unless the Board (or in the event of an acquisition, consolidation, merger, sale
or transfer as described above, the Board of Directors of the Acquiring
Corporation), in its discretion, shall determine to issue scrip certificates. In
such event, the scrip certificates shall be in a form and have such terms and
conditions as the Board (or the Board of Directors of Acquiring Corporation, as
the case may be) in its discretion shall prescribe.

        13. Time of Granting Options. The date of grant of an Option under the
Plan other than Options granted to Directors shall, for all purposes, be the
date on which the Board makes the determination granting such Option. Notice of
the determination shall be given to each Employee to whom an Option is so
granted within a reasonable time after the date of such grant. Options to
Directors shall be granted at the times provided for in Section 4(e) above.

        14. Amendment and Termination of the Plan.

               (a) Amendment. The Board, without approval of the shareholders,
may amend the Plan from time to time in such respects as the Board may deem
desirable; provided, however, the Board may not extend the term of the Plan,
increase or decrease the aggregate number of Shares subject to the Plan (except
as provided in Section 12 of the Plan), or alter the class of employees eligible
to receive Options without the approval of the Bank Holding Company's
shareholders; and further provided that the Board may not amend Sections 4(e)
and 9 more than once every six months, other than to comport with changes in the
Code, the Employee Retirement Income Security Act, or the rules thereunder.

               (b) Termination. The Board, without approval of the shareholders,
may at any time terminate the Plan.

               (c) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated and shall be deemed to incorporate the terms of this Plan
as it existed on the dates the Options were granted.





                                       7
<PAGE>   8
        15. Conditions Upon Issuance of Shares. Shares shall not be issued with
respect to an Option granted under the Plan unless the exercise of such Option
and the issuance and delivery of such Shares pursuant thereto shall comply with
all relevant provisions of law, including, without limitation, the Securities
Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, the
rules and regulations promulgated thereunder, the requirements of any stock
exchange upon which the Shares may then be listed, and the applicable counsel
for the Bank Holding Company with respect to such compliance.

               As a condition to the exercise of an Option, the Bank Holding
Company may require a person exercising such Option to represent and warrant at
the time of any such exercise that the Shares are being purchased only for
investment and without any present intention to sell or distribute such Shares
if, in the opinion of counsel for the Bank Holding Company such a representation
is necessary or desirable under any of the aforementioned relevant provisions of
law.

        16. Reservation of Shares. The Bank Holding Company, during the term of
this Plan, will at all times reserve and keep available, the number of Shares as
shall be sufficient to satisfy the requirements of the Plan.

               Inability of the Bank Holding Company to obtain from any
regulatory body having jurisdiction such as authority as is deemed by the Bank
Holding Company's counsel to be necessary for the lawful issuance and sale of
any shares hereunder shall relieve the Bank Holding Company of any liability
with respect of the non-issuance or sale of such Shares as to which such
requisite authority shall not have been obtained.

        17. Use of Proceeds. All proceeds received by the Bank Holding Company
under the Plan shall be used for its general corporate purposes.

        18. Tax Withholding Requirement. The Board may require the Optionee, in
the Optionee's Stock Option Agreement, to agree to remit to the Bank Holding
Company any amount of federal, state or local taxes required to be withheld by
the Bank Holding Company in connection with the issuance of the Shares.


Amended and restated as of the 24th day of January, 2000.






                                       8

<PAGE>   1
                                                                    Exhibit 10.6

NON-STANDARDIZED PROFIT SHARING/THRIFT PLAN WITH 401(k) FEATURE
ADOPTION AGREEMENT NUMBER 001-03

This Adoption Agreement, when executed by the Employer and accepted by the Plan
Administrator, and the Trustee, if applicable, and accepted by Connecticut
General Life Insurance Company, establishes the Employer's Plan and Trust, if
applicable, for the benefit of its eligible Employees and their Beneficiaries.
The terms of the Connecticut General Life Insurance Company Defined Contribution
Plan are expressly incorporated therein and shall form a part hereof as fully as
if set forth herein except that if more than one election is provided, only that
election made by the Employer shall be so incorporated. The terms of the Plan so
incorporated together with the terms of this Adoption Agreement shall constitute
the sole terms of the Employer's Plan and Trust, if applicable, and no further
trust instrument or other instrument of any nature whatsoever shall be required.
The Employer's participation under the Plan shall be subject to all the terms
set forth therein and in this Adoption Agreement.

- -> Note: Section 414(d) governmental plans and section 414(e) nonelecting
church plans that do not wish to provide ERISA-required benefits should not
adopt this document.


<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION            GENERAL INFORMATION
- --------------------------------------------------------------------------------

<S>                <C>
                   Legal Name of Employer:  First International Bancorp, Inc.



                   Address:  280 Trumbull Street

                   City:  Hartford                  State:  CT       Zip:  06103



                   Plan Name:  First International Bancorp, Inc. 401(k) Plan



                   Plan Number:  002

                   ->  To be assigned by the Employer.  For example: 001, 002, and so on.



                   Employer's EIN:  06-1151731



                   Classification of Business:

                   [X]  C Corporation            [ ]  S Corporation         [ ] Partnership
                   [ ]  Sole Proprietorship      [ ]  Tax-Exempt/Nonprofit Organization
                   [ ]  Other: __________________________________________________
</TABLE>






                                      -1-
<PAGE>   2
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION            GENERAL INFORMATION
- --------------------------------------------------------------------------------
<S>                <C>

                   Employer Tax Status:

                   Tax Year Ends (MM/DD):  December 31

                   Tax Basis:       [ ]   Cash     [X]   Accrual



1.20               Effective Date:

                   The adoption of the CONNECTICUT GENERAL LIFE INSURANCE COMPANY Non-Standardized Profit Sharing/Thrift Plan with
                   401(k) Feature shall:

                   [ ]  A.  Establish a new Plan effective as of (MM/DD/YY): _______________.
                   [X]  B.  Constitute an amendment and restatement in its entirety of a previously
                            established Qualified Plan of the Employer which was effective October 1, 1990 (hereinafter
                            called the "Effective Date").  The effective date of this amendment and restatement is July 1, 1999.


                   Merger Data:

                   This Plan includes funds from a prior or coincidental merger of a:

                   [ ]   A.  Money Purchase Plan
                   [ ]   B.  Target Benefit Plan
                   [X]   C.  Not Applicable



                   Sponsoring Organization:

                   Connecticut General Life Insurance Company
                   P.O. Box 2975
                   Hartford, CT 06104
                   860.534.2298
</TABLE>






                                      -2-
<PAGE>   3
                                       TABLE OF CONTENTS

<TABLE>
<CAPTION>
   ARTICLE                                                                                PAGE
<S>                                                                                      <C>
      I.   Nontrusteed, Trust, and Trustee..............................................  4

     II.   Plan Administrator...........................................................  4

    III.   Plan Year....................................................................  5

     IV.   Compensation.................................................................  6

      V.   Highly Compensated Employee..................................................  7

     VI.   Service......................................................................  8

    VII.   Eligibility Requirements.....................................................  10

   VIII.   Entry Date...................................................................  13

     IX.   Vesting......................................................................  15

      X.   Contributions................................................................  18

     XI.   Contribution Period..........................................................  28

    XII.   Allocation of Contributions..................................................  29

   XIII.   Limitations on Allocations...................................................  31

    XIV.   Investment of Participant's Accounts.........................................  32

     XV.   Life Insurance...............................................................  32

    XVI.   Employer Stock...............................................................  33

   XVII.   Withdrawals Preceding Termination............................................  34

  XVIII.   Loans to Participants, Beneficiaries and Parties-in-Interest.................  38

    XIX.   Retirement and Disability....................................................  39

     XX.   Distribution of Benefits.....................................................  40

    XXI.   Qualified Preretirement Survivor Annuity.....................................  41

   XXII.   Amendment of the Plan........................................................  41

  XXIII.   Top-Heavy Provisions.........................................................  42

   XXIV.   Other Adopting Employer......................................................  44
</TABLE>





                                      -3-
<PAGE>   4
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION               I. NONTRUSTEED, TRUST, AND TRUSTEE
- --------------------------------------------------------------------------------

- -> The Plan must have a Trustee if the Employer has elected Employer Stock,
Loans, investment in Life Insurance, and/or any investment other than through a
contract with Connecticut General Life Insurance Company.

- -> If the Plan is trusteed, the Employee must apply for a Trust Tax
Identification Number, unless the Trust already has obtained one, even if CG
Trust Company has been appointed as the Plan's Trustee.



               The Plan is:

1.39           []   A.   Nontrusteed.



1.73, 1.74     []   B.   Trusteed and Trustees are:

                        Trustee(s) Name(s): ___________________________________

                        Address: ______________________________________________

                        City: ___________________   State: ________ Zip: ______

                        Trust EIN: _______________



1.73, 1.74     [X] C.   Trusteed and CG Trust Company has been appointed as the
                        Plan's Trustee:

                            Trust Name:   CG Trust Company

                            Address:      525 West Monroe Street, Suite 1900
                                          Chicago, IL 60661-3629

                        Employer's Trust EIN:  TBD




- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION                     II. PLAN ADMINISTRATOR
- --------------------------------------------------------------------------------

1.50           The Plan Administrator is:

                   Name:     First International Bancorp, Inc.

                   Address:      280 Trumbull Street

                   City:     Hartford        State:  CT       Zip:  06103






                                      -4-
<PAGE>   5
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION                     III. PLAN YEAR
- --------------------------------------------------------------------------------

1.51           A.  The Plan Year will mean:

                   [ ]  1.  The 12-consecutive-month period commencing on
                            (MM/DD/YY) and each anniversary thereof except that
                            the first plan year will commence on (MM/DD/YY).

                        This election may be made only for new plans.

                   [X]  2.  The 12-consecutive-month period commencing on
                            (MM/DD/YY) January 1, 1999  and each anniversary
                            thereof.






                                      -5-
<PAGE>   6
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION                     IV. COMPENSATION
- --------------------------------------------------------------------------------

             ->    (i)     Election of options 1-6 below does not require a
                           separate nondiscrimination test.

             ->    (ii)    If option 1, 2 or 3 is elected, you must elect the
                           same definition of Compensation in Section XIII,
                           Limitations on Allocations.

             ->    (iii)   Options 1-6 include lump sum amounts and/or cash
                           bonuses. These amounts are included in compensation
                           in the year in which paid.

             ->    (iv)    Options 4-9 may not be elected by a plan that uses an
                           integrated allocation formula.

             ->    (v)     This compensation definition is for purposes of
                           allocating contributions under the Plan. For
                           nondiscrimination testing, the Employer may use any
                           definition of compensation that is based upon Code
                           section 414(s) or 415(c)(3). Use of options 7, 8 or 9
                           for nondiscrimination testing requires that the
                           employer satisfy a separate compensation
                           nondiscrimination test.


               A.  Indicate the number of the Compensation definition that will
                   be used for allocating each type of contribution.
                        Elective Deferral Contributions:  9
                        Matching Contributions:     9
                        Nonelective  Contributions:     9
                        Employee Contributions:

1.12           For purposes of allocating contributions, Compensation means:

1.12(a)        1.  Wages, Tips and Other Compensation Box on Form W-2.

1.12(b)        2.  Section 3401(a) wages.

1.12(c)        3.  415 safe-harbor compensation

1.12(d)        4.  Modified Wages, Tips, and Other Compensation Box on Form W-2

1.12(e)        5.  Modified section 3401(a) wages

1.12(f)        6.  Modified 415 safe-harbor compensation.

1.12(g)        7.  Regular or base salary or wages.

1.12(h)        8.  Regular or base salary or wages plus [ ] OVERTIME and/or
                   [ ] BONUSES

1.12(i)        9.  A "reasonable alternative definition of Compensation," as
                   that term is used under Code section 414(s)(3) and the
                   regulations thereunder.

                   The definition of Compensation is: W-2 wages excluding
                   bonuses, taxable fringe benefits & moving expenses

                   -> Lump sum amounts and/or cash bonuses may be excluded only
                   if specified in this definition. Also see note (v) above.






                                      -6-
<PAGE>   7
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION                       IV. COMPENSATION
- --------------------------------------------------------------------------------

1.12           B.  Compensation shall be determined over the following
                   determination period:

                   [X]   1. The Plan Year
                   [ ]   2. A 12-consecutive-month period beginning on (MM/DD)
                           ________ and ending with or within the Plan Year. For
                           Employees whose date of hire is less than 12 months
                           before the end of the designated 12-month period,
                           Compensation will be determined over the Plan Year.

                   [ ]  3. The Plan Year. However, for the Plan Year in which an
                           Employee's participation begins, the applicable
                           period is the portion of the Plan Year during which
                           the Employee is eligible to participate in the Plan.



1.12           C. Compensation SHALL/SHALL NOT include Employer contributions
                  made pursuant to a salary reduction agreement, which are not
                  includable in the gross income of the Employee under Code
                  Section 125, 402(e)(3), 402(h)(1)(B) or 403(b).

                                   [X] SHALL      [ ] SHALL NOT



1.12           D.  The highest annual Compensation to be used in determining
                   allocations to a Participant's Account shall be:

                   $ __________

                   ->    Enter an amount if less than the $150,000 (as indexed)
                         limitation on compensation.



- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION                  V. HIGHLY COMPENSATED EMPLOYEE
- --------------------------------------------------------------------------------


1.29           A.  Highly Compensated Employees shall be determined using:

1.29(a)            [X]  1. The Traditional Method.

1.29(b)            [ ]  2. The Simplified Method for Employers in more than one
                           geographical area.

1.29(c)            [ ]  3. The alternative Simplified Method.

1.29(d)            [ ]  4. The alternative Simplified Method with Snapshot Day
                           basis.

                     The Snapshot Day is ________ (fill in).






                                      -7-
<PAGE>   8
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION                 V. HIGHLY COMPENSATED EMPLOYEE
- --------------------------------------------------------------------------------

1.29(a)         B. If A.1 or A.2 is chosen above, the Look-Back Year shall be:

                   [ ]   1.  The 12-month period immediately preceding the
                            Determination Year.

                   [X]   2.  The calendar year ending with or within the
                            Determination Year.

                        -> If B.2. is selected and the Determination Year (Plan
                           Year) is the calendar year, then the Look-Back Year
                           is the same 12-month period as the Determination
                           Year. This avoids having to look back at data from a
                           prior year.

                        -> However, if the Determination Year is not the
                           calendar year, the Determination Year calculation
                           must be made on the basis of a lag period (the period
                           running from the end of the Look-Back Year to the end
                           of the Determination Year), with the applicable
                           dollar amounts adjusted on a pro rata basis for the
                           number of months in the lag period.


- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION                          VI. SERVICE
- --------------------------------------------------------------------------------

- ->  Check off appropriate basis for determining service.



2A.3, 2A.9     A.  Hours of Service or Elapsed Time

                   1. Years of Service shall be determined on the following
                      basis:
<TABLE>
<S>                                                         <C>                        <C>
                        A.  Eligibility:                     [X]    Hours of Service    []  Elapsed Time
                        B.  Vesting:                         [X]    Hours of Service    []  Elapsed Time
                        C.  Allocation of Contributions:     [X]    Hours of Service    []  Elapsed Time
</TABLE>


                   2. If service is based on Hours of Service, Hours shall be
                      determined on the basis of:

                      [X] A. Actual hours for which paid or entitled to payment.
                      [ ] B. Days Worked (10 Hours of Service).
                      [ ] C. Weeks Worked (45 Hours of Service).
                      [ ] D. Semimonthly payroll periods (95 Hours of Service).
                      [ ] E. Months Worked (910 Hours of Service).

                  -> For options b, c, d and e: If the Employee would be
                  credited with 1 Hour of Service during the period, the
                  Employee shall be credited with the number of Hours of Service
                  indicated in parentheses.






                                      -8-
<PAGE>   9
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION                          VI. SERVICE
- --------------------------------------------------------------------------------


                  B.    Service with other employers.

1.24              1.    Service with members of the Employer's controlled group
                        of corporations, affiliated service group, or group of
                        business under common control ("controlled group").

                        ->  Service for an employer while the employer is part
                            of the controlled group must be taken into account.

                        a.  Service with a member of the controlled group prior
                            to it becoming part of the controlled group will be
                            included for all purposes.

                                         [ ]  YES       [X]  NO


2A.5              2. Service with a predecessor organization.

                        -> Service with a predecessor organization of the
                        Employer must be taken into account if the Employer
                        maintains the Plan of the predecessor organization.

                        a.    Service with a predecessor organization will be
                              included for all purposes even if the Employer
                              does not maintain the plan of the predecessor
                              organization.

                                        [X]  YES       [ ]  NO

2A.5              3.    Service with the following subsidiary(ies) or affiliated
                        organization, not related to the Employer under the
                        rules of Code sections 414(b), (c) or (m), shall be
                        considered Service for all purposes of this plan:

                        ________________________________________________________
                        ________________________________________________________
                        ________________________________________________________

                  -> Service credited under 1.a, 2.a and 3 must apply to all
                  similarly situated Employees, must be credited for a
                  legitimate business reason, and must not by design or
                  operation discriminate significantly in favor of Highly
                  Compensated Employees.






                                      -9-
<PAGE>   10
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION                   VII. ELIGIBILITY REQUIREMENTS
- --------------------------------------------------------------------------------


- ->    Check or fill out appropriate requirements for each type of contribution
      in the Plan.

- --------------------------------------------------------------------------------

2A.5(a), 2B.1  A. Eligibility Requirements

                  1.    If Employer is a Partnership or Sole Proprietorship:
                        Self-Employed Individuals are eligible to participate in
                        the Plan.

                                    [ ]  YES       [ ]  NO

                   2.   Immediate Participation.

                        ->    No age or service requirement

                            [ ]  Elective Deferral Contributions
                            [ ]  Matching Contributions
                            [ ]  Nonelective Contributions
                            [ ]  Employee Contributions

                   3.   Service Requirement

                  ->    Not to exceed 1 year if graded vesting; not to exceed 2
                        years if 100% immediate vesting. Not to exceed 1/2 year
                        if graded vesting or 1 1/2 years if 100% immediate
                        vesting if annual Entry Date is chosen in Section VIII
                        "Entry Date." Not to exceed 1 year for Elective Deferral
                        Contributions.

                            [X] Elective Deferral Contributions: 1/2  indicate
                                number of years)
                            [X] Matching Contributions:  1  (indicate number
                                of years)
                            [X] Nonelective Contributions:  1  (indicate
                                number of years)
                            [ ] Employee Contributions: ______ (indicate
                                number of years)

                        -> Fill in the blank(s) above with the amount of
                        service required. Any service requirement not in units
                        of whole years requires service for eligibility to be
                        determined based on elapsed time (see Section VI.A.1.a).

                   4.   Age Requirement.

                        -> Not greater than 21 years. If annual entry date is
                        chosen in Section VIII "Entry Date," not greater than
                        20 1/2 years.

                            [ ] Elective Deferral Contributions: ______
                                (indicate minimum age)
                            [ ] Matching Contributions: ______ (indicate
                                minimum age)
                            [ ] Nonelective Contributions: ______ (indicate
                                minimum age)
                            [ ] Employee Contributions: ______ (indicate
                                minimum age)

                  5.    Employees who were employed on or before the initial
                        Effective Date of the Plan or the Effective Date of the
                        amendment and restatement of the Plan, as indicated on
                        page 2, SHALL/SHALL NOT be immediately eligible without
                        regard to any Age and/or Service requirements specified
                        in 2 or 3 above.

                                         [ ] SHALL      [X] SHALL NOT





                                      -10-
<PAGE>   11
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION                   VII. ELIGIBILITY REQUIREMENTS
- --------------------------------------------------------------------------------


2B.1
               B.  Job Class Requirements

                   An Employee must be a member of one or more of the following
                   selected classifications:

                   1.   No Job Class Requirements:
                            [X] Elective Deferral Contributions
                            [X] Matching Contributions
                            [X] Nonelective Contributions
                            [ ] Employee Contributions

                   2.   Salaried:
                            [ ] Elective Deferral Contributions
                            [ ] Matching Contributions
                            [ ] Nonelective Contributions
                            [ ] Employee Contributions

                   3.   Hourly:
                            [ ] Elective Deferral Contributions
                            [ ] Matching Contributions
                            [ ] Nonelective Contributions
                            [ ] Employee Contributions

                   4.   Clerical:
                            [ ] Elective Deferral Contributions
                            [ ] Matching Contributions
                            [ ] Nonelective Contributions
                            [ ] Employee Contributions

                   5.   Employees whose employment is governed by a collective
                        bargaining Agreement represented by the following
                        union:_________________________________

                            [ ] Elective Deferral Contributions
                            [ ] Matching Contributions
                            [ ] Nonelective Contributions
                            [ ] Employee Contributions

                   6.   Other: (fill in):______________________
                            [ ] Elective Deferral Contributions
                            [ ] Matching Contributions
                            [ ] Nonelective Contributions
                            [ ] Employee Contributions
                         -> "Part-time" Employees may not be excluded.





                                      -11-
<PAGE>   12
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION                   VII. ELIGIBILITY REQUIREMENTS
- --------------------------------------------------------------------------------


2B.1           C. Additional Requirements

                  An Employee must be in the following designated division(s)
                  of the Employer:
                  ___________________________________________________________

                  ___________________________________________________________

                  ___________________________________________________________

                        [ ]   Elective Deferral Contributions
                        [ ]   Matching Contributions
                        [ ]   Nonelective Contributions
                        [ ]   Employee Contributions



2B.1           D. An Employee must not be a member of any one of the following
                  groups:

                   1.   Union.

                        ->  Employees who are members of a union are defined as:
                        Employees included in a unit of Employees covered by a
                        collective bargaining agreement between the Employer and
                        employee representatives, if retirement benefits were
                        the subject of good faith bargaining and if two percent
                        or less of the employees of the Employer who are covered
                        pursuant to that agreement are professional employees as
                        defined in section 1.410(b)-9 of the regulations. For
                        this purpose, the term "employee representatives" does
                        not include any organization more than half of whose
                        members are Employees who are owners, officers, or
                        executives of the Employer, unless the collective
                        bargaining agreement provides for coverage under the
                        Plan.

                            [X]   Elective Deferral Contributions
                            [X]   Matching Contributions
                            [X]   Nonelective Contributions
                            [ ]   Employee Contributions

                   2.   Nonresident aliens (within the meaning of Code section
                        7701(b)(1)(B)) who receive no earned income (within the
                        meaning of Code section 911(d)(2)) from the Employer
                        that constitutes income from sources within the United
                        States (within the meaning of Code section 861(a)(3)).

                            [X]   Elective Deferral Contributions
                            [X]   Matching Contributions
                            [X]   Nonelective Contributions
                            [ ]   Employee Contributions





                                      -12-
<PAGE>   13
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION                  VII. ELIGIBILITY REQUIREMENTS
- --------------------------------------------------------------------------------

               3. Employees covered by the following designated qualified
                  employee benefit plans:

                  ________________________________________________________

                  ________________________________________________________

                  ________________________________________________________

                        [ ]   Elective Deferral Contributions
                        [ ]   Matching Contributions
                        [ ]   Nonelective Contributions
                        [ ]   Employee Contributions


1.15           E. The Plan covers Employees whose conditions of employment are
                  mandated under the Davis-Bacon Act

                                    [ ]  YES       [X]  NO

- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION                         VIII. ENTRY DATE
- --------------------------------------------------------------------------------

 ->   Check the appropriate requirement for Entry Date.


1.25           A.  Immediately.
                        [ ]   Elective Deferral Contributions
                        [ ]   Matching Contributions
                        [ ]   Nonelective Contributions
                        [ ]   Employee Contributions


1.25           B.  The first day of any month.
                        [X]   Elective Deferral Contributions
                        [X]   Matching Contributions
                        [X]   Nonelective Contributions
                        [ ]   Employee Contributions


1.25           C.  Quarterly (that is, three months apart) on each:

                        (MM/DD) ____________, or (MM/DD) ____________ or
                        (MM/DD) ____________, or (MM/DD) ____________.
                    ->  Fill in dates.
                        [ ]   Elective Deferral Contributions
                        [ ]   Matching Contributions
                        [ ]   Nonelective Contributions
                        [ ]   Employee Contributions




                                      -13-
<PAGE>   14



- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION                         VIII. ENTRY DATE
- --------------------------------------------------------------------------------

1.25           D. Semiannually (that is, six months apart) on each:
                  (MM/DD) ____________, or (MM/DD) ____________.
                    ->  Fill in dates.
                        [ ]   Elective Deferral Contributions
                        [ ]   Matching Contributions
                        [ ]   Nonelective Contributions
                        [ ]   Employee Contributions



1.25           E.  Annually, on each (MM/DD) ____________.
                    ->  Fill in date.
                        [ ]   Elective Deferral Contributions
                        [ ]   Matching Contributions
                        [ ]   Nonelective Contributions
                        [ ]   Employee Contributions



1.25           F. The first day nearest to the date(s) selected in B, C, D,
                  or E above, whether before or after that date, that the
                  Participant meets the Eligibility Requirements.
                        [ ]   Elective Deferral Contributions
                        [ ]   Matching Contributions
                        [ ]   Nonelective Contributions
                        [ ]   Employee Contributions
                    ->  Allows retroactive entry into the Plan. This may have an
                    effect on various nondiscrimination tests for the Plan.






                                      -14-
<PAGE>   15
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION                           IX. VESTING
- --------------------------------------------------------------------------------

1.76           A.  Vesting Percentage

                   The Vesting Schedule, based on number of Years or Periods of
                   Service, shall be as indicated below. Indicate the number of
                   the vesting schedule that applies to any Nonelective
                   Contributions, Matching Contributions, and Prior Employer
                   Contributions.
                   The vesting schedules are depicted in 1 through 8, below.

                        Nonelective Contributions are subject to vesting
                        schedule: 3

                        Matching Contributions are subject to vesting
                        schedule: 3

                        Prior Employer Contributions are subject to vesting
                        schedule:

<TABLE>
<S>                     <C>              <C>
                   1.   Immediately =    100%

                   2.   0-3 Years   =    0%
                        3 Years     =    100%

                   3.   1 Year      =    20%
                        2 Years     =    40%
                        3 Years     =    60%
                        4 Years     =    80%
                        5 Years     =    100%

                   4.   0-3 Years   =    0%
                        3 Years     =    20%
                        4 Years     =    40%
                        5 Years     =    60%
                        6 Years     =    80%
                        7 Years     =    100%

                   5.   0-2 Years   =    0%
                        2 Years     =    20%
                        3 Years     =    40%
                        4 Years     =    60%
                        5 Years     =    80%
                        6 Years     =    100%

                   6.   0-5 Years   =    0%
                        5 Years     =    100%

                   7.   1 Year      =    25%
                        2 Years     =    50%
                        3 Years     =    75%
                        4 Years     =    100%
</TABLE>






                                      -15-
<PAGE>   16
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION                           IX. VESTING
- --------------------------------------------------------------------------------

                   8. Other. Must be at least as liberal as #4 or #6 above.

<TABLE>
<S>                                <C>   <C>
                        ---------   =    ---------
                        ---------   =    ---------
                        ---------   =    ---------
                        ---------   =    ---------
                        ---------   =    ---------
                        ---------   =    ---------
                        ---------   =    ---------
</TABLE>


2A.5(b)     B.    The vesting computation period shall be based on the
                  Employee's service in the:

                        [X]  PLAN YEAR         [ ]  EMPLOYMENT YEAR



2A.7, 2A.10 C.    Excluded Years or Periods of Service.

                  The vesting percentage shall be based on all Years of Service
                  (i.e., completing 1000 hours of Service) or Periods of Service
                  (i.e., Elapsed Time), EXCEPT that the following shall be
                  excluded:

                   Years or Periods of Service:
                   [ ]   1. Prior to the time the Participant attained age 18.

                   [ ]   2. During which the Employer did not maintain the plan
                            or predecessor plan.

                   [ ]   3. During which the Participant elected not to
                            contribute to a plan which required Employee
                            Contributions.

                   [ ]   4.  Rule of Parity (Elapsed Time).
                            ->  Rule of Parity (Elapsed Time): In the event a
                            reemployed Employee has no vested interest in
                            Employer Contributions at the time the break
                            occurred, and has since incurred 5 consecutive
                            1-year Breaks-in-Service, and has a Period of
                            Severance which equals or exceeds his prior Period
                            of Service, such prior Service may be disregarded.

                   [ ]    5. Rule of Parity (Hours of Service).

                        ->  Rule of Parity (Hours of Service): Years of Service
                        prior to a Break-in-Service may be disregarded if the
                        participant had no vested interest in Employer
                        Contributions at the time the break occurred, and the
                        Participant has since incurred 5 consecutive 1-year
                        Breaks-in-Service, and the number of consecutive 1-year
                        Breaks-in-Service is at least as great as the Years of
                        Service before the break occurred.

                   [ ]   6.   Prior to any 1-Year Break-in-Service until the
                              Employee completes a Year of Service following
                              reemployment.

                   [X]   7.  None of the above.




                                      -16-
<PAGE>   17
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION                           IX. VESTING
- --------------------------------------------------------------------------------


3D.1, 3D.2,    D.  Forfeitures.
2A.7, 2A.10
                   1.   Forfeitures will occur:
                        [X] A.  Immediately
                                [ ]  (1)  Optional Payback Method
                                [X]  (2)  Required Payback Method
                        [ ]  B.  Upon a 1-Year Break-in-Service
                                [ ]  (1)  Optional Payback Method
                                [ ]  (2)  Required Payback Method
                        [ ]  C.  Upon 5 consecutive 1-Year Breaks-in-Service


                   2.   Forfeitures will be:
                        [X]  A. Used as an Employer Credit
                        [ ]  B. Reallocated to Participants' Accounts
                        [ ]  C. Used as an Employer Credit and then, to the
                                extent any Forfeitures remain, reallocated to
                                Participants' Accounts.

                        ->  If choice IX.D.2.b or c is selected and the Plan
                        provides Matching Contributions, the Actual Contribution
                        Percentage (ACP) Test will
                        be affected.






                                      -17-
<PAGE>   18
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION                         X. CONTRIBUTIONS
- --------------------------------------------------------------------------------


2C.1(k)(1)     A.  Elective Deferral Contributions

                   1.   Availability/Amount
                        [ ]  Not Available under the Plan.
                        [X]  Available under the Plan (complete the following).

                        Each Participant MAY elect to have his Compensation
                        actually paid during the Plan Year reduced by:

                        [ ]  A.  __________ %
                        [ ]  B.  up to  __________ %
                        [X]  C.  from  1% to  15%
                        [ ]  D.  up to the maximum percentage allowable, not to
                                 exceed the limits of Code sections 402(g)
                                 and 415.

                        ->  Lump sum amounts and/or cash bonuses must be subject
                        to the salary deferral election unless the definition of
                        compensation in Section IV.A.9 has been elected and
                        these amounts have been specifically excluded from that
                        compensation definition. Lump sum amounts and cash
                        bonuses are deferred upon and tested in the Plan Year in
                        which paid.

                   2.   Modification

                        A Participant may change the amount of Elective Deferral
                        Contributions the Participant makes to the Plan
                        (complete a and b):

                        [X] a. twelve per calendar year (may be less frequent
                               than one).
                        [X] b. As of the following date(s) (MM/DD):
                               at any time






                                      -18-
<PAGE>   19
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION                       X. CONTRIBUTIONS
- --------------------------------------------------------------------------------

               B.  Required Employee Contributions

2C.1(b)            1.   Availability/Amount
                        [X] Not Available under the Plan.
                        [ ] Available under the Plan and must be made as a
                            condition of receiving an Employer Contribution

                        ->  Required Employee Contributions are NOT AVAILABLE
                        unless Elective Deferral Contributions are available.

                        Required Contributions shall be in the amount of:
                        [ ] a. ______ % of Compensation actually paid during the
                               Contribution Period.

2C.1(k)(1)              [ ] b. Not less than _______ % nor more than  _______ %
                               of Compensation actually paid during the
                               Contribution Period.

                   2.   Modification

                        A Participant may suspend Required Employee
                        Contributions for a minimum period of:
                        [ ]  a.  1 month
                        [ ]  b.  2 months.
                        [ ]  c.  3 months.

                        -> The suspension period may be of indefinite duration.
                        A Participant's reentry into the Plan shall be as of the
                        first Entry Date following the end of the suspension
                        period.






                                      -19-
<PAGE>   20
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION                         X. CONTRIBUTIONS
- --------------------------------------------------------------------------------


2C.1           C. Matching Contributions

                  Availability/Amount

                  [ ]   Not Available under the Plan.

                  [X]   Available under the Plan (elect one from option 1 and,
                        if applicable, elect one from option 2).

                        1.  [ ] a.  Matching Contributions SHALL be based upon
                                    a percentage of Considered Net Profits

                            [X] b.  Matching Contributions SHALL NOT be based
                                    upon a percentage of Considered Net Profits.

                        2.  Partnership Plans.

                            [ ] a.  The Employer SHALL make Matching
                                    Contributions to Partners

                                    -> Matching Contributions to Partners are
                                    treated in all respects as Elective Deferral
                                    Contributions

                            [ ] b.  The Employer SHALL NOT make Matching
                                    Contributions to Partners.

                        For each $1.00 of either Elective Deferral Contributions
                        or Required Employee Contributions, as selected above,
                        the Employer will contribute and allocate to each
                        Participant"s Matching Contribution Account an amount
                        equal to:

                        [ ] 1.  $ __________ (e.g., $.50).

                        [X] 2.  A discretionary percentage, to be determined by
                                the Employer.

                               -> If option 2 is elected, the amount of the
                               discretionary percentage should be determined by
                               an annual Board of Directors resolution setting
                               the percentage.

                        [ ] 3.  Graded Match.

                            -> If a or b is elected, the minimum and maximum
                            percentages must be within the parameters of the
                            Elective Deferral election in Section X.A or the
                            Required Employee Contribution election in Section
                            X.B of this Adoption Agreement.

                            -> Percentage for higher amounts must be lower than
                            the percentages for lower amounts. For example: 100%
                            of the first $500, plus 75% of the next $500, plus
                            50% of the next $500.

                                [ ] a.   Graded based upon the dollar amount of
                                         each Participant"s Elective Deferral
                                         Contributions or Required Employee
                                         Contributions as follows:

                                         ________ % of the first $________ plus
                                         ________ % of the first $________ plus
                                         ________ % of the first $________ plus
                                         ________ % of the first $________.




                                      -20-
<PAGE>   21
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION                         X. CONTRIBUTIONS
- --------------------------------------------------------------------------------

                                [ ]   b. Graded based upon the percentage of
                                         Compensation of each Participant's
                                         Elective Deferral Contribution or
                                         Required Employee Contribution as
                                         follows:

                                         _________ % of the first $________ plus
                                         _________ % of the next $_________ plus
                                         _________ % of the next $_________ plus
                                         _________ % of the next $_________.

                                -> If 3.a or b is elected, additional testing
                                will be required to prove that the different
                                contributions are available on a discriminatory
                                basis.

                        [ ] 4.  Separate specific dollar amounts for different
                                employees (e.g., employees in different job
                                classifications):

                                -> This option is available only for Plans
                                covering Employees whose conditions of
                                employment are mandated under the Davis-Bacon
                                Act.

<TABLE>
<S>                             <C>
                                $ __________  (e.g., $.50) to employees in __________ (fill in)
                                $ __________  (e.g., $.50) to employees in __________ (fill in)
                                $ __________  (e.g., $.50) to employees in __________ (fill in)
                                $ __________  (e.g., $.50) to employees in __________ (fill in)
                                $ __________  (e.g., $.50) to employees in __________ (fill in)
</TABLE>

                                Additional Formulas (fill in below):

                                ->  Formulas must be the same type as above.

                                _______________________________________________

                                _______________________________________________

                                _______________________________________________

                                -> If 4 is selected, additional testing will be
                                required to prove that the different
                                contributions are available on a
                                nondiscriminatory basis.






                                      -21-
<PAGE>   22
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION                        X. CONTRIBUTIONS
- --------------------------------------------------------------------------------


                   [ ]  5.  Different graded matches for different employees
                            (e.g., employees in different job classifications,
                            divisions, organizations, members of a controlled
                            group of corporations, etc.):

                            -> This option is available only for Plans covering
                            Employees whose conditions of employment are
                            mandated under the Davis-Bacon Act.

                            ->  Percentages for higher amounts must be lower
                            than the percentages for lower amounts. For example:
                            100% of the first $500, plus 75% of the next $500,
                            plus 50% of the next $500.

                            [ ] a.  Graded based upon the dollar amount of
                                    Elective Deferral Contributions or Required
                                    Contributions of each Participant as
                                    follows:

                                    Employees in __________ (fill in)

                                    __________ % of the first $__________ plus
                                    __________ % of the next $__________ plus
                                    __________ % of the next $__________ plus
                                    __________ % of the next $__________ .

                                    Employees in __________ (fill in)

                                    __________ % of the first $__________ plus
                                    __________ % of the next $__________ plus
                                    __________ % of the next $__________ plus
                                    __________ % of the next $__________ .

                                    Employees in __________ (fill in)

                                    __________ % of the first $__________ plus
                                    __________ % of the next $__________ plus
                                    __________ % of the next $__________ plus
                                    __________ % of the next $__________ .


                                    Additional Formulas (fill in below):

                                    -> Formulas must be the same type as above.


                                    ___________________________________________

                                    ___________________________________________

                                    ___________________________________________



                                      -22-
<PAGE>   23
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION                       X. CONTRIBUTIONS
- --------------------------------------------------------------------------------

                         [ ]     b. Graded based upon the percentage of
                                    compensation of the Elective Deferral
                                    Contributions or Required Contributions of
                                    each Participant as follows:

                                    -> This option is available only for Plans
                                    covering Employees whose conditions of
                                    employment are mandated under the
                                    Davis-Bacon Act.

                                    -> Matching percentages for higher
                                    compensation percentages must be lower than
                                    matching percentages for lower compensation
                                    percentages. For example: 100% for the first
                                    3%, plus 75% of the next 2%, plus 50% of the
                                    next 2%.

                                    Employees in __________ (fill in)

                                    __________ % of the first $__________ plus
                                    __________ % of the next $__________ plus
                                    __________ % of the next $__________ plus
                                    __________ % of the next $__________ .

                                    Employees in __________ (fill in)

                                    __________ % of the first $__________ plus
                                    __________ % of the next $__________ plus
                                    __________ % of the next $__________ plus
                                    __________ % of the next $__________ .

                                    Employees in __________ (fill in)

                                    __________ % of the first $__________ plus
                                    __________ % of the next $__________ plus
                                    __________ % of the next $__________ plus
                                    __________ % of the next $__________ .


                                    Additional Formulas (fill in below):

                                    -> Formulas must be the same type as above.

                                    __________________________________________

                                    __________________________________________

                                    __________________________________________

                        -> If 5.a or b is selected, additional testing will be
                        required to prove that the different contributions are
                        available on a nondiscriminatory basis.






                                      -23-
<PAGE>   24
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION                         X. CONTRIBUTIONS
- --------------------------------------------------------------------------------

                The Elective Deferral or Required Employee Contributions, upon
                which Matching Contributions are made by the Employer, shall not
                exceed:

                [ ] 1.   $ __________ for the Plan Year.
                [X] 2.   6% of the Participant"s Compensation for the
                         Contribution Period.
                [ ] 3.   N/A.

                True-Up Contributions:

                The Employer MAY/MAY NOT contribute a True-Up Contribution for
                each Participant at the end of the Plan Year so that the total
                Matching Contribution for each Participant is calculated on an
                annual basis.

                                [ ] MAY        [X] MAY NOT

                Additional Matching Contributions:

                In addition, at the end of the Plan Year, the Employer may
                contribute Additional Matching Contributions to be allocated in
                the same proportion that the Matching Contribution made on
                behalf of each Participant during the Plan Year bears to the
                Matching Contribution made on behalf of all Participants during
                the Plan Year.

                               [ ] YES       [X]  NO






                                      -24-
<PAGE>   25
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION                       X. CONTRIBUTIONS
- --------------------------------------------------------------------------------

2C.1           D.  Nonelective Contributions

                   -> If you choose to make a Nonelective Contribution, each
                   Employee eligible to participate in the Plan and who
                   satisfies the Annual Allocation Requirement of Section XII.A
                   or XII.B MUST be given an allocation, regardless of whether
                   they make Elective Deferral Contributions.

                   Availability/Amount
                   [ ] Not Available under the Plan.
                   [X] Available under the Plan (complete the following).

                        The Contribution for each Contribution Period shall be:

                        [ ] 1.  _________ % of Considered Net Profits.
                        [ ] 2.  _________ % of Compensation of each Participant.
                        [ ] 3.  The Employer will contribute an amount equal to
                                $ _________ for each Participant.
                        [X] 4.  Discretionary.

                        -> If option 4 is elected, the amount of the
                        discretionary contribution should be determined by an
                        annual Board of Directors resolution setting a fixed
                        amount of contribution or a formula by which a fixed
                        amount can be determined.

                        [ ] 5. The Employer will contribute an amount equal to
                        $___________________/hour or unit of each Participant
                        (indicate dollar or cents amount).

                        -> Option 5 may be chosen ONLY for Employees who are
                        subject to a Collective Bargaining Agreement.

<TABLE>
<S>                     <C>
                        [ ] 6.  __________ % of Considered Net Profits to __________ (fill in)
                                __________ % of Considered Net Profits to __________ (fill in)
                                __________ % of Considered Net Profits to __________ (fill in)
                                __________ % of Considered Net Profits to __________ (fill in)
                                __________ % of Considered Net Profits to __________ (fill in)
</TABLE>

                        ->  Fill in job classification






                                      -25-
<PAGE>   26
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION                       X. CONTRIBUTIONS
- --------------------------------------------------------------------------------

                                Additional Formulas (fill in below):

                                _______________________________________________

                                _______________________________________________

                                _______________________________________________

                                ->   Formulas must be the same type as above.

<TABLE>
<S>                     <C>
                        [ ] 7.  __________ % of Considered Net Profits to __________ (fill in)
                                __________ % of Considered Net Profits to __________ (fill in)
                                __________ % of Considered Net Profits to __________ (fill in)
                                __________ % of Considered Net Profits to __________ (fill in)
                                __________ % of Considered Net Profits to __________ (fill in)
</TABLE>


                        ->    Fill in job classification

                                Additional Formulas (fill in below):

                                ->   Formulas must be the same type as above.

                                _______________________________________________

                                _______________________________________________

                                _______________________________________________

                                -> Options 6 and 7 may be selected ONLY when a
                                Plan covers Employees whose conditions of
                                employment are mandated under the Davis-Bacon
                                Act.

                                -> If option 6 or 7 is selected, subsection A.1
                                (Compensation to Compensation allocation) MUST
                                be chosen in Section XIII, "Allocation of
                                Contributions."

                                -> If options 6 or 7 is selected, additional
                                testing will be required to prove that the
                                different contributions are available on a
                                nondiscriminatory basis.

                        Nonelective Contributions SHALL / SHALL NOT be based on
                        Considered Net Profits.

                                    [X] SHALL      [ ] SHALL NOT

                        ->  "Shall" must be chosen if option 1 is selected.





                                      -26-
<PAGE>   27
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION                       X. CONTRIBUTIONS
- --------------------------------------------------------------------------------


2C.1(b)        E.  Voluntary Employee Contributions

                   Availability/Amount
                   [X]  Not Available under the Plan.
                   [ ]  Available under the Plan (complete the following).

                        [ ] Voluntary Employee Contributions SHALL be permitted
                            up  _________ % of Compensation actually paid during
                            the Plan Year.

                        [ ] Voluntary Employee Contributions made in a Lump Sum
                            SHALL be permitted.

                        -> Voluntary Employee Contributions are NOT AVAILABLE
                        unless Elective Deferral Contributions are available


2C.3           F.  Rollover Contributions

                   Availability

                   [x]  1.  Rollover Contributions out of the Plan are always
                            available.

                            [X] Cash only.

                            [ ] Cash and Loan Notes from this and/or a prior
                                plan.

                   [x]  2.  Rollover Contributions into the Plan.

                            [ ] Not Available under the Plan.

                            [X] Available under the Plan (complete the
                                following).

                            Cash Only or Cash and Loan Notes.

                            [X] Cash only.
                            [ ] Cash and Loan Notes from prior plan.

                            Rollover contributions into the Plan may be made by:

                                [X] Both eligible Employees and Employees who
                                    would be eligible except they do not yet
                                    meet the Plan's age and/or service
                                    requirement.
                                [ ] Eligible Employees only.






                                      -27-
<PAGE>   28
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION                        X. CONTRIBUTIONS
- --------------------------------------------------------------------------------


7B.8, 7B.9     G.  Transfers of Account Balances

                   Availability

                   [X]  1.  Transfers of Account Balances out of the Plan are
                            always available.

                   [X]  2.  Transfers of Account Balances into the Plan.

                            [ ] Not Available under the Plan.

                            [X] Available under the Plan.


- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION                     XI. CONTRIBUTION PERIOD
- --------------------------------------------------------------------------------


1.14            A. The regular Contribution Period (by contribution type) shall
                be:

                -> For 1 and 2 below, "Other" Contribution Period may not be
                longer than annual, but may be shorter than 4-weekly.

                -> For 3 below, "Other" Contribution Period may not be longer
                than monthly, but may be shorter than 4-weekly.

                   1.   Matching Contributions:
                        [ ] Annual       [ ] 4-Weekly
                        [ ] Monthly      [X] Other (specify)  bi-weekly.

                   2.   Nonelective Contributions:
                        [X] Annual       [ ] 4-Weekly
                        [ ] Monthly      [ ] Other (specify) _______________.

                   3.   Elective Deferral Contributions, Required Employee
                        Contributions, and/or Voluntary Employee Contributions:


                   -> Annual contribution period is not available for
                      contributions in option 3.
                        [ ] Monthly      [X] 4-Weekly
                        [ ] Other (specify) _______________.






                                      -28-
<PAGE>   29
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION                XII. ALLOCATION OF CONTRIBUTIONS
- --------------------------------------------------------------------------------

2C.1(f)        A.  Allocation Formula for Nonelective Contribution

                   Complete the following ONLY if Section X.D is 1, 4, 6 or 7.

                   -> If Section X.D is 6 or 7, the Compensation to
                   Compensation allocation formulas (1 below) must be chosen.

                   The Nonelective Contribution will be allocated to
                   Participants who meet the requirements of Section XII.B or C
                   as follows:

                   [ ]  1.  Compensation to Compensation:

                            In the same ratio as each Participant's Compensation
                            bears to the total Compensation of all Participants.

                   [X]  2.  Integrated with Social Security:

                            a.  Choose one of the following methods:
                                [ ] Step-Rate Method

                                    For each Plan year, the Employer will
                                    contribute an amount equal to __________ %
                                    of each Participant's Compensation up to the
                                    Social Security Integration Level, plus
                                    __________ % of each Participant's
                                    Compensation in excess of the Social
                                    Security Integration Level. However, in no
                                    event will the Excess Contribution
                                    percentage exceed the amount specified in
                                    Section 2C.1(f)(2)(B) of the Plan.

                                [X] Maximum Disparity Method

                                    For each Plan Year, the Employer's
                                    Nonelective Contribution shall be allocated
                                    in the manner stated in Section 2C.1(f)(3)
                                    of the Plan in order to maximize permitted
                                    disparity.

                            b.  Social Security Integration Level:
                                [ ] i.   $ __________ (not to exceed the Social
                                         Security Taxable Wage Base).

                                [X] ii.  The Social Security Taxable Wage Base
                                         in effect on the first day of the Plan
                                         Year.
                                [ ] iii. __________ % of the Social
                                         Security Taxable Wage Base (not to
                                         exceed 100%).






                                      -29-
<PAGE>   30
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION                  XII. ALLOCATION OF CONTRIBUTIONS
- --------------------------------------------------------------------------------

2C.1(g)        B.  Annual Allocation Requirements

                   An allocation of the annual Nonelective Contribution, annual
                   Matching Contribution, and/or Additional Matching
                   Contribution made by the Employer will be made to each
                   Participant who:

                   [ ]  1. Is a Participant on ANY day during the Plan Year
                           regardless of Service credited during the Plan Year.

                   [X]  2. Is credited with a Year of Service in the Plan Year
                           for which the contribution is made.

                   [ ]  3. Is a Participant on the last day of the Plan Year.

                   [ ]  4. Is credited with a Year of Service in the Plan Year
                           for which the contribution is made and is a
                           Participant on the last day of the Plan Year.

                   In addition, an allocation will be made by the Employer on
                   behalf of any Participant who retires, dies or becomes
                   disabled during the Plan Year, regardless of the number of
                   Hours of Service credited to such Participant and regardless
                   of whether such Participant is a participant on the last day
                   of the Plan Year.

                       Annual Nonelective Contribution      [X]  YES    [ ]  NO
                       Annual Matching Contribution         [ ]  YES    [ ]  NO
                       Additional Matching Contribution     [ ]  YES    [ ]  NO



2C.1(g)        C.  Nonannual Allocation Requirement

                   An allocation of the nonannual Matching Contribution or
                   nonannual Nonelective Contribution made by the Employer will
                   be made to each Participant who:

                   [X] 1. Is a Participant on any day of the Contribution
                          Period.

                   [ ] 2. Is a Participant as of the last day of the
                          Contribution Period.

                   In addition, an allocation will be made by the Employer on
                   behalf of any Participant who retires, dies, or becomes
                   disabled during the Contribution Period, regardless of
                   whether such Participant is a Participant as of the last day
                   of the Contribution Period.


                       Nonannual Nonelective Contribution    [ ] YES    [ ] NO
                       Nonannual Matching Contribution       [X] YES    [ ] NO






                                      -30-
<PAGE>   31
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION                  XIII. LIMITATION ON ALLOCATIONS
- --------------------------------------------------------------------------------


4B        A.      If any Participant is covered by another qualified
                  defined contribution plan maintained by the Employer,
                  other than a Master or Prototype plan:

                  -> Complete part A if you: (1) maintain, or at any
                  time maintained, another qualified retirement plan in
                  which any Participant in this Plan is, was, or could be,
                  a participant; or (2) maintain a Code section 415(l)(2)
                  individual medical account, for which amounts are
                  treated as Annual Additions for any Participant in this
                  Plan.

                 [X]  1.  N/A. The Employer has no other defined
                          contribution plan(s).

                 [ ]  2.  The provisions of Section 4B.5 of the Plan will
                          apply, as if the other plan were a Master or
                          Prototype plan.

                 [ ]  3.  The plans will limit total Annual Additions to
                          the Maximum Permissible Amount, and will reduce
                          any Excess Amounts in a manner that precludes
                          Employer discretion, in the following manner:

                          ________________________________________________

                          ________________________________________________

                          ________________________________________________


4B        B.      If any Participant is or ever has been a Participant in
                  a qualified defined benefit plan maintained by the
                  Employer:

                  -> Complete part B if you maintain, or at any time
                  maintained, another qualified retirement plan in which
                  any Participant in this Plan is, was, or could be a
                  participant.

                 [X]     1.   N/A.  The Employer has no defined benefit plan(s).

                 [ ]     2.   In any Limitation Year, the Annual Additions
                              credited to the Participant under this Plan may
                              not cause the sum of the Defined Benefit Plan
                              Fraction and the Defined Contribution Fraction
                              to exceed 1.0. If the Employer contributions
                              that would otherwise be allocated to the
                              Participant's account during such year would
                              cause the 1.0 limitation to be exceeded, the
                              allocation will be reduced so that the sum of
                              the fraction equals 1.0. Any contributions not
                              allocated because of the preceding sentence will
                              be allocated to the remaining Participants
                              according to the Plan's allocation formula. If
                              the 1.0 limitation is exceeded because of an
                              Excess Amount, such Excess Amount will be
                              reduced in accordance with Section 4B.4 of the
                              Plan.

                 [ ]     3.   Provide the method under which the Plan involved
                              will satisfy the 1.0 limitation in a manner that
                              precludes Employer discretion

                             ________________________________________________

                             ________________________________________________

                             ________________________________________________


                                      -31-
<PAGE>   32
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION                  XIII. LIMITATION ON ALLOCATIONS
- --------------------------------------------------------------------------------

               C.  Compensation will mean all of each Participant's:

                   -> Everyone must complete Section C. If option 1, 2, or 3 was
                   selected in Section IV.A., you must make the same selection
                   here.

4B.1(b)(1)         [X]  1.  Wages, Tips, and Other Compensation Box on Form W-2.

4B.1(b)(2)         [ ]  2.  Section 3401(a) wages.

4B.1(b)(3)         [ ]  3.  415 safe-harbor compensation



4B.1(h)        D.  The Limitation Year shall be:

                   ->   Everyone must complete Section D.

                   [ ]  1.  The Calendar Year.

                   [X]  2.  The 12-month period coinciding with the Plan Year.

                   [ ]  3.  The 12-month period beginning on (MM/DD): _________


- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION             XIV. INVESTMENT OF PARTICIPANT'S ACCOUNTS
- --------------------------------------------------------------------------------

5A.1           A. The Participant SHALL/SHALL NOT have the authority to
                  direct the Investment of Contributions made by the Employer.

                                [X] SHALL      [ ] SHALL NOT



5A.1           B.  If SHALL is elected above, complete the following:

                   Those having authority to direct the investment of the
                   Participant's Account are (choose all that apply):
                   [X]  1.  Participants who are active Employees.
                   [X]  2.  Participants who are former employees and continue
                            to maintain an account in the Plan or Trust.
                   [X]  3.  Beneficiaries.
                   [X]  4.  Alternate Payees.

- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION                     XV. LIFE INSURANCE
- --------------------------------------------------------------------------------

5B.1           A.  Available as a Participant investment:

                            [ ]  YES       [X]  NO






                                      -32-
<PAGE>   33
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION                       XV. LIFE INSURANCE
- --------------------------------------------------------------------------------

               B. If yes is elected above, Life Insurance shall be available to:

                  [ ]  1.  All Participants.

                  [ ]  2.  Only to the specified group of Participants (fill
                           in below):

                           __________________________________________________

                           __________________________________________________

                           __________________________________________________

                       -> If subsection 2 is checked, separate nondiscrimination
                       testing will be required.



- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION                     XVI. EMPLOYER STOCK
- --------------------------------------------------------------------------------

- -> Before electing Employer Stock as an investment option, you should consult
your legal counsel on any federal or state securities law requirements arising
from offering Employer Stock as an investment option under your Plan and whether
use of this document is appropriate for you under those laws. Neither
Connecticut General Life Insurance Company nor any of its employees can advise
you on these matters.



1.45           A.  Investment in Employer Stock is:
                   [X]  Permitted
                   [ ]  Not Permitted
                   -> You must complete the following subsections B and C if
                   investment in Employer Stock is permitted and Participants
                   have the authority to direct the investment of Employer
                   Contributions.



1.45           B.  Investment in Employer Stock within the Plan by officers or
                   directors of the Employer or by an individual who owns more
                   than 10% of the Employer's Stock is:
                   [X]  Permitted
                   [ ]  Not Permitted



1.45           C.  The Trustee:
                   [ ]  1.  Will vote the shares of the Employer Stock.

                   [X]  2.  Will vote the shares of the Employer Stock in
                            accordance with any instructions received by the
                            Trustee from the Participant.

                            -> Option 2 must be selected if CG Trust Company
                            is the Trustee.

                   [ ]  3.  May request voting instructions from the
                            Participants.



                                      -33-
<PAGE>   34
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION              XVII. WITHDRAWALS PRECEDING TERMINATION
- --------------------------------------------------------------------------------

- ->   Complete only the sections for the type of contributions in your plan.



3E.1(a)        A.  Withdrawal of Required Employee Contributions.

                    ->   Withdrawal may be for any reason.

                   [X]  Not Available under the Plan.
                   [ ]  Available under the Plan.

                        If available, Required Employee Contributions may be
                        withdrawn:

                        [ ] Once each 6 months.
                        [ ] Once each 12 months.
                        [ ] Other (specify): _______________.

                        The Contribution suspension period following a
                        withdrawal of Required Employee Contributions shall be:

                        ->  You must choose one of the suspension periods shown.
                        Related Employer Contributions will be suspended for the
                        same period.

                        [ ] 6 months.
                        [ ] 12 months.
                        [ ] 24 months.



3E.1(b)        B.  Withdrawal of Voluntary Employee Contributions.

                   ->   Withdrawal may be for any reason.

                   [X]  Not Available under the Plan.
                   [ ]  Available under the Plan.

                        If available, Voluntary Employee Contributions may be
                        withdrawn:
                        [ ] Once each 6 months.
                        [ ] Once each 12 months.
                        [ ] Other (specify): _______________.




                                      -34-
<PAGE>   35
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION              XVII. WITHDRAWALS PRECEDING TERMINATION
- --------------------------------------------------------------------------------

               C.  Withdrawal of Elective Deferral Contributions.

                   [ ]  Not Available under the Plan.
                   [X]  Available under the Plan.

                        If available, select the conditions for withdrawal:
3E.2                    [X] Withdrawal upon Participant"s attainment of
                            age 59 1/2.
3E.5                    [X] Withdrawal for Serious Financial hardship.

                        ->  If a Participant makes a withdrawal of Elective
                        Deferral Contributions due to a Serious Financial
                        Hardship, the Participant must be suspended from making
                        any additional Elective Deferral Contributions for a
                        period of 12 months.



               D.  Withdrawal of Employer Contributions (Matching, Nonelective
                   and/or Prior Employer Contributions).

                   [ ]  Not Available under the Plan.
                   [X]  Available under the Plan.
                   ->   If Prior Employer Contributions are money purchase plan
                    contributions, they may not be withdrawn.

                        If available, select the conditions for withdrawal:
3E.3                    [X] 1.  Withdrawal upon Participant"s attainment of
                                age 59 1/2

                                Available from:
                                [X] a.   Matching Contributions.
                                [X] b.   Nonelective Contributions.
                                [ ] c.   Prior Employer Contributions






                                      -35-
<PAGE>   36
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION              XVII. WITHDRAWALS PRECEDING TERMINATION
- --------------------------------------------------------------------------------


3E.3                    [ ] 2.  Withdrawals to active Participants who have been
                                Participants for a minimum of 60 consecutive
                                months.

                                Available from:
                                [ ] a.   Matching Contributions.
                                [ ] b.   Nonelective Contributions.
                                [ ] c.   Prior Employer Contributions

                                Frequency of withdrawal:
                                [ ] Once each 6 months.
                                [ ] Once each 12 months.
                                [ ] Other (specify) _______________ .

                                Suspension Period following withdrawal:
                                [ ] N/A.
                                [ ] 6 months.
                                [ ] 12 months.
                                [ ] 24 months.

3E.4                    [ ] 3.  Withdrawal for Serious Financial Hardship.

                                Available from:
                                [ ] a.   Matching Contributions.
                                [ ] b.   Nonelective Contributions.
                                [ ] c.   Prior Employer Contributions

                                         Prior Employer Contributions are
                                         contributions made to the Plan by the
                                         Employer prior to the Plan's original
                                         and/or retirement on _______________
                                         (fill in date).






                                      -36-
<PAGE>   37
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION              XVII. WITHDRAWALS PRECEDING TERMINATION
- --------------------------------------------------------------------------------

3E.6           E.  Withdrawal of Rollover Contributions:

                   [ ]  Not Available under the Plan.
                   [X]  Available under the Plan.

                        If available, Rollover Contributions may be withdrawn:
                        [ ] Once per Plan Year.
                        [ ] Every 6 months.
                        [ ] Every 3 months.
                        [ ] Every month.
                        [X] Anytime.



3E.6           F.  Withdrawal of Qualified Voluntary Employee Contributions
                   (QVEC Contributions)

                   ->   Applicable only if this is a readoption of an existing
                   plan. If selected, Contributions may be withdrawn for any
                   reason.

                   [X]  Not Available under the Plan.
                   [ ]  Available under the Plan.

                        If available, Qualified Voluntary Employee Contributions
                        may be withdrawn:
                        [ ]  Once per Plan Year.
                        [ ]  Every 6 months.
                        [ ]  Every 3 months.
                        [ ]  Every month.
                        [ ]  Anytime.






                                      -37-
<PAGE>   38
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION              XVII. WITHDRAWALS PRECEDING TERMINATION
- --------------------------------------------------------------------------------

3E.1(c)      G. Withdrawal of Prior Required Employee Contributions

                ->      Withdrawal may be for any reason.

                [X]     Not Available under the Plan.

                [ ]     Available under the Plan.

                        If available, Prior Required Employee Contributions may
                        be withdrawn:
                        [ ] Once each 6 months.
                        [ ] Once each 12 months.
                        [ ] Other (specify) _______________.

                Prior Required Employee Contributions are posttax contributions
                made by Employees in order to receive an Employer contribution
                and which were made before the Plan's original conversion and/or
                restatement on __________ (fill in date).



3E.1(d)      H. Withdrawal of Prior Voluntary Employee Contributions:

                ->  Withdrawal may be for any reason and may be taken at any
                time.

                [X]  Not Available under the Plan.

                [ ]  Available under the Plan.

                Prior Voluntary Employee Contributions are voluntary
                contributions made by Employees prior to these types of
                contributions being eliminated as a plan option on
                _______________ (fill in date)


- --------------------------------------------------------------------------------
PLAN DOCUMENT       XVIII. LOANS TO PARTICIPANTS, BENEFICIARIES AND PARITIES-IN-
SECTION             INTEREST
- --------------------------------------------------------------------------------

5C             A.  Loans are permitted.
                        [X] Yes
                   ->    If Yes, Plan must be trusteed
                        [ ] No





                                      -38-
<PAGE>   39
- --------------------------------------------------------------------------------
PLAN DOCUMENT       XVIII. LOANS TO PARTICIPANTS, BENEFICIARIES AND PARITIES-IN-
SECTION             INTEREST
- --------------------------------------------------------------------------------

5C              B. Loans are available only from the following sources:

                   -> Qualified Voluntary Employee Contributions (QVEC
                   Contributions) may not be taken in a loan.

                   [X]  All Sources.
                   [ ]  List Sources:

                        ________________________________________________________
                        ________________________________________________________
                        ________________________________________________________


- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION              XIX. RETIREMENT AND DISABILITY
- --------------------------------------------------------------------------------


1.40           A.  Normal Retirement Age is:

                   [X]  1.  The date the Participant attains age  65  (not to
                            exceed 65).
                   [ ]  2.  The later of:

                                a.      The date the Participant attains age
                                        __________ (not to exceed 65), or

                                b.      The __________ (not to exceed 5th)
                                        anniversary of the Participation
                                        Commencement Date

                                 -> Note regarding 2.b above: If, for Plan
                                 Years beginning before January 1, 1988, Normal
                                 Retirement Age was determined with reference to
                                 the anniversary of the Participation
                                 Commencement Date (more than 5 but not to
                                 exceed 10 years), the anniversary date for
                                 Participants who first commenced participation
                                 under the Plan before the first Plan Year
                                 beginning on or after January 1, 1988 shall be
                                 the earlier of (A) the tenth anniversary of the
                                 date the Participant commenced participation in
                                 the Plan (or such anniversary as had been
                                 elected by the Employer, if less than 10) or
                                 (B) the fifth anniversary of the first day of
                                 the first Plan Year beginning on or after
                                 January 1, 1988. The Participation Commencement
                                 Date is the first day of the first Plan Year in
                                 which the Participant commenced participation
                                 in the Plan.






                                      -39-
<PAGE>   40
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION              XIX. RETIREMENT AND DISABILITY
- --------------------------------------------------------------------------------

1.18           B.  Early Retirement by Participants:

                   1.   Early Retirement by Participants is:
                        [X] a.  Not Permitted.
                        [ ] b.  Permitted.  Subject to the following conditions:
                                [ ] i    Age __________ (not to exceed 65).
                                [ ] ii   Years of Service __________.
                                [ ] iii  Age __________ (not to exceed 65) and
                                         __________ Years of Service.
                                [ ] iv   Age __________ (not to exceed 65) and
                                         __________ Years of Participation.



1.16           C.  Disability

                   1.   The Employer SHALL/SHALL NOT make contributions on
                        behalf of disabled Participants who are Nonhighly
                        Compensated Employees on the basis of the Compensation
                        each such Participant would have received for the
                        Limitation Year if the Participant had been paid at the
                        rate of Compensation paid immediately before becoming
                        permanently and totally disabled.

                                         [ ] SHALL      [X] SHALL NOT

                  ->  All such contributions are 100% vested and nonforfeitable
                        when made.


- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION              XX. DISTRIBUTION OF BENEFITS
- --------------------------------------------------------------------------------

3A.1           A.  Distribution of benefits should be in the form of (check all
                   that apply):
                   [X]  1.  Single Sum.
                   [ ]  2.  Life Annuity.
                   [X]  3.  Installment Payments.
                   [ ]  4.  Installment Refund Annuity.
                   [X]  5.  Employer Stock, to the extent the Participant is
                            invested therein.



               B.  Distribution Timing
                   [ ]  1.  All Participants may elect to defer their
                            distributions.

                   [X]  2.  Participants who terminate employment and whose
                            account balances never exceeded $3,500 shall receive
                            an immediate, lump sum cash distribution.






                                      -40-
<PAGE>   41
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION              XX. DISTRIBUTION OF BENEFITS
- --------------------------------------------------------------------------------

               C. Expenses - Deferred Participants.

                  1.    Participants who elect to defer distribution of their
                        benefits SHALL/SHALL NOT pay for all fees associated
                        with administration of their deferral payment.

                                [X] SHALL      [ ] SHALL NOT



- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION          XXI. QUALIFIED PRERETIREMENT SURVIVOR ANNUITY
- --------------------------------------------------------------------------------

3C.4           The Qualified Preretirement Survivor Annuity shall be:

               -> 100% is required for Plans allowing only single sum
               distributions.

               [X]  100% to the surviving spouse.
               [ ]  50% to the surviving spouse.


- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION                   XXII. AMENDMENT TO THE PLAN
- --------------------------------------------------------------------------------

7B          A. The party having the authority to amend the Adoption Agreement is
               the:

            [ ]  1.  Trustee(s).
            ->       Trustee(s) cannot be chosen if the Trustee is the CG Trust.
            [ ]  2.  Plan Administrator.
            [X]  3.  Plan Committee.
            [ ]  4.  Designated Representative of the Employer.






                                      -41-
<PAGE>   42
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION                   XXIII. TOP-HEAVY PROVISIONS
- --------------------------------------------------------------------------------

7A.1(i)     A.    Method to be used to avoid duplication of Top-Heavy Minimum
                  benefits when a non-Key Employee is a Participant in both this
                  Plan and a defined benefit plan maintained by the Employer
                  (select one response):

                   [X]  1. N/A. The Employer has no other plan(s).

                   [ ]  2. Single Plan Minimum Top-Heavy Allocation. A
                           minimum Top-Heavy contribution will be allocated
                           to each non-Key Employee's Participant Account in
                           an amount equal to:

                              [ ] a. The lesser of 3% of Compensation or the
                                     highest percentage allocated to any Key
                                     Employee.

                              [ ] b. ____ % of Compensation (must be at least
                                     3%).

                   [ ]  3.    Multiple Plans Top-Heavy Allocation. In order to
                              satisfy Code sections 415 and 416, and because of
                              the required aggregation of multiple plans, a
                              minimum Top-Heavy contribution will be allocated
                              to each non-Key Employee in an amount equal to:

                              [ ] a. Not Applicable. No other plan was in
                                     existence prior to the Effective Date of
                                     this Adoption Agreement.

                              [ ] b. 5% of Compensation, to be provided in a
                                     defined contribution plan of the Employer.

                              [ ] c. 72% of Compensation, to be nonintegrated,
                                     and provided in this Plan.

                             -> If c is chosen, for all Plan Years in which this
                             Plan is Top-Heavy (but not Super Top-Heavy), the
                             Defined Benefit and Defined Contribution fractions
                             shall be computed using 125%.

                   [ ]  4.  Enter the name of the plan(s) and specify the method
                            under which the plan(s) will provide Top-Heavy
                            Minimum Benefits to non-Key Employees [include any
                            adjustments required under Code section 415(e)]:


                   -> If 4 is selected, the method specified must preclude
                   Employer discretion and inadvertent omissions.






                                      -42-
<PAGE>   43
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION                   XXIII. TOP-HEAVY PROVISIONS
- --------------------------------------------------------------------------------


7A.1        B.    Present Value: In order to establish the present value to
                  compute the Top-Heavy Ratio, any benefit shall be discounted
                  only for mortality and interest, based on:

                    ->  Complete B only if response to A is 2,3 or 4.  Fill in
                        all blanks.
                   [ ]  1.  Interest Rate __________%.
                   [ ]  2.  Mortality Table Rate __________.
                   [ ]  3.  Valuation Date __________.



7A.2        C.    Where a non-Key Employee is a Participant in this and another
                  defined contribution plan(s) of the Employer, choose which
                  plan will provide the minimum Top-Heavy contribution:

                   [X]  1.  N/A.  The Employer has no other plan.
                   [ ]  2.  The minimum allocation will be met in this Plan.
                   [ ]  3.  The minimum allocation will be met in the other
                            defined contribution plan.
                            Enter the name of the plan:________________________
                            ___________________________________________________

7A.3        D.    Top-Heavy Vesting Schedule. In the event the plan becomes
                  Top-Heavy, the vesting schedule shall be:

                   -> Must meet one of the schedules below and must be at least
                  as liberal as the vesting schedule elected in Section IX.A.

                   [ ]  1.  100% vesting after __________ (not to exceed 3)
                            years of Service.

                   [ ]  2.  __________% vesting after 1 Year of Service.
                            __________% (not less than 20) vesting after 2 Years
                                        of Service.
                            __________% (not less than 40) vesting after 3 Years
                                        of Service.
                            __________% (not less than 60) vesting after 4 Years
                                        of Service.
                            __________% (not less than 80) vesting after 5 Years
                                        of Service.
                               100    % vesting after 6 Years of Service.

                   [X]  3.    Same vesting schedule(s) as elected in Adoption
                              Agreement Section IX (already means Top-Heavy
                              minimum vesting requirements).

                   -> If the vesting schedule under the Plan shifts into the
                  above schedule for any Plan Year because of the Plan's
                  Top-Heavy status, such shift is an amendment to the vesting
                  schedule and the election provisions in Section 7B.1 of the
                  Plan shall apply.

                   -> The Top-Heavy vesting schedule will remain in effect even
                  if the Plan ceases to be Top Heavy.






                                      -43-
<PAGE>   44
- --------------------------------------------------------------------------------
PLAN DOCUMENT
SECTION                  XXIV. OTHER ADOPTING EMPLOYER
- --------------------------------------------------------------------------------

6E.1, 6E.2  A.    The following Adopting Employer(s) also adopt this plan and
                  have executed this Adoption Agreement:

                   -> Fill in below the names and the Employer Identification
                  Numbers (EINs) of Adopting Employers.

                   -> Must meet requirements of Plan definition of Employer,
                  Plan Section 1.24.

                      First International Bank
                      Employer Identification Number:  06-0703598







                                      -44-
<PAGE>   45
The Employer hereby adopts the Connecticut General Life Insurance Company
Defined Contribution Prototype Profit Sharing/Thrift Plan with 401(k) Feature,
including all elections made in this Non-Standardized Adoption Agreement, and
the Employer agrees to be bound by all the terms of the Plan and by all the
terms of this Adoption Agreement and of the Annuity Contract. The Employer
further agrees that it will furnish promptly all information required by the
Trustee, if applicable, the Plan Administrator and the Insurance Company in
order to carry out their functions. The Employer shall notify the Trustee, if
applicable, the Plan Administrator and the Insurance Company promptly of any
changes in the status of the Employer which might affect the Employer's duties
and responsibilities hereunder.

The elections under this Adoption Agreement may be changed by the Employer from
time to time by a written instrument signed by the Employer, the Plan
Administrator and the Trustee, if applicable, and accepted by the Plan Sponsor.
The Employer consents to the exercise by the Plan Sponsor of the right to amend
the Plan and the Annuity Contract from time to time as it may deem necessary or
advisable.

By signing this Adoption Agreement, the Employer specifically acknowledges that
the Insurance Company has no authority: (1) to answer legal questions and that
all such questions shall be answered by legal counsel for the Employer; and (2)
to make determinations involved in the administration of the Plan and that all
such determinations shall be answered by the Employer's Plan Administrator or
other designated representative.

Upon execution of this Adoption Agreement by the Employer, the Plan shall be
effective with respect to that Employer as of the Effective Date specified
herein, provided the Plan Administrator and the Trustee, if applicable, shall
then or thereafter execute this Adoption Agreement to signify their acceptance
of their duties and responsibilities hereunder and provided further, the Plan
Sponsor will indicate its acceptance of the Employer in accordance with its
usual rules and practices.

The Adopting Employer may not rely on an opinion letter issued by the National
Office of the Internal Revenue Service as evidence that the Plan is qualified
under Internal Revenue Code section 401. In order to obtain reliance with
respect to plan qualification, the Employer must apply to the appropriate key
district office for a determination letter.

Connecticut General Life Insurance Company will inform the Employer of any
amendments made to the Plan or of the discontinuance or abandonment of such
Plan.

CAUTION: You should very carefully examine the elections you have made in this
Adoption Agreement and discuss them with your legal counsel. Failure to properly
fill out the Adoption Agreement may result in disqualification of your plan.
This Adoption Agreement may only be used in conjunction with Basic Plan Document
Number 03.

(Note: The Employer, Plan Administrator and Trustee, if applicable, must all
sign below.)



Executed at  Hartford, CT , this 13th day of September, 1999.


                        Employer's Exact Name: First International Bancorp, Inc.

Witness: /s/ Leona M. Rapelye            By: /s/ Leslie A. Galbraith

                                      Title: Executive Vice President

    Additional Adopting Employer's Exact Name:__________________________

Witness: ____________________                          By:___________________

                                                    Title:___________________




                                      -45-
<PAGE>   46
                  Additional Adopting Employer's Exact Name:___________________


Witness: ____________________                          By:___________________

                                                    Title:___________________



                  Additional Adopting Employer's Exact Name:___________________


Witness: ____________________                          By:___________________

                                                    Title:___________________



                  Additional Adopting Employer's Exact Name:___________________


Witness: ____________________                          By:___________________

                                                    Title:___________________



ACCEPTED this 13th day of September, 1999.



Witness: /s/ Connie Perrine        By (Plan Administrator): /s/ Leona M. Rapelye


Witness:__________________________ By (Trustee):  C G Trust Company


Witness:__________________________ By (Trustee):________________________________


Witness:__________________________ By (Trustee):________________________________



ACCEPTED this ______________ day of _____________________, ____.



                              CONNECTICUT GENERAL LIFE INSURANCE COMPANY


                              By (Authorized Representative): _________________






                                      -46-


<PAGE>   1
                                                                   Exhibit 10.10

                                                                  March 15, 2000



Leslie A. Galbraith
53 Collie Brook Road
East Hampton, CT  06424

Dear Leslie:

This agreement is intended to set forth the basic terms under which you ("YOU"
or the "EMPLOYEE") will continue to be employed by First International Bank (the
"BANK") and, therefore, to constitute an employment agreement between us. We
have agreed with you that:

1.       Nature and Term of Employment. You will continue to be employed as
         President and Chief Operating Officer of the Bank (or equivalent title)
         in accordance with the terms and conditions in this agreement, and you
         accept such employment and agree to serve in such capacity. The term of
         employment under this agreement will extend from the date set forth
         above through June 30, 2001 (the "TERM"). Nothing in this agreement
         will prohibit the continuation of employment beyond the Term if and as
         agreed by the Bank and Employee.

2.       Performance of Duties. While employed by the Bank, you will apply, in
         good faith and on a full-time basis, all of your skill and experience
         to the performance of your duties in such employment. You will have
         such responsibilities and authority as are designated (and as may be
         revised from time to time) by the Chairman and Chief Executive Officer
         and the Board of Directors of the Bank.

3.       Base Compensation. Commencing upon your acceptance of this agreement,
         the Bank will pay or cause to be paid to you during your employment a
         salary at the rate of $225,000 per annum. Your salary will be paid at
         such times as the salaries of other salaried officers of the Bank are
         generally paid.

4.       Benefits. During your employment, the Bank shall provide health,
         dental, disability, life insurance and retirement benefits for you and
         your dependents comparable to such coverage as is provided for officers
         of the Bank generally. In addition, during your employment provided
         that you are insurable at standard rates, the Bank shall sponsor and
         pay for (a) an individually-owned supplemental term life insurance
         policy on your life in the amount of $2,000,000, and (b) an
         individually-owned supplemental disability income insurance policy with
         a benefit to you of approximately $4,000 per month. The insurance
         policies shall remain in full force and effect during the term of this
         agreement, shall provide for such persons as you may designate to be
         the beneficiaries of the benefits thereof, and shall be portable. You
         agree to be available for such medical and other examinations and
         inquiries as the insurance carriers may request.


<PAGE>   2


5.       Bonuses. You will be eligible to receive cash bonuses in 2000 and 2001,
         which bonuses shall be determined by the Chairman and Chief Executive
         Officer and Board of Directors of the Bank (or a committee of the Board
         of Directors of the Bank) in their discretion based upon your
         performance as evaluated primarily with reference to the policies and
         budgets approved by the Bank's Board.

6.       Supplemental Option. As further compensation for the services to be
         provided by you hereunder, First International Bancorp, Inc. (the
         "HOLDING COMPANY") is granting to you today pursuant to the Holding
         Company's Amended and Restated Stock Option Plans (the "PLANS") an
         additional option to purchase 25,000 shares of the Common Stock of the
         Holding Company for the price and on the other terms set forth in a new
         stock option agreement that you are entering into with the Holding
         Company on the date hereof (the "SUPPLEMENTAL OPTION"). Notwithstanding
         any option agreements between you and the Holding Company dated before
         the date hereof, all stock options held by you before the date hereof
         to purchase Common Stock of the Holding Company will be vested
         immediately. Any additional stock options granted to you pursuant to
         the Plans after the date hereof but prior to June 30, 2001 to purchase
         Common Stock of the Holding Company would be vested as of the earliest
         of (a) June 30, 2001, (b) a Change in Control (as defined in paragraph
         7 below), and (c) any termination by the Bank without Cause (as defined
         in paragraph 8(c) below) of Employee's employment hereunder.

7.       Change in Control Provisions. A "CHANGE IN CONTROL" will have occurred
         if the Chase Family and the Silvers Family cease, in the aggregate, to
         beneficially own at least 25% of the outstanding Common Stock of the
         Holding Company or any successor thereto or to have the right to
         exercise, directly or indirectly, at least 25% of the aggregate voting
         power of the Bank or of any successor thereto. As used in this
         paragraph, "CHASE FAMILY" means Arnold Chase, Cheryl Chase, Rhoda L.
         Chase, David T. Chase and the parents, other family members, affiliates
         and personal representatives and heirs of each of them, "SILVERS
         FAMILY" means Brett N. Silvers, Nancy W. Silvers, their children and
         any trusts or other entities as to which the beneficiaries or owners
         are Brett N. Silvers, Nancy W. Silvers and/or their children. As
         described above, any additional stock options granted to you pursuant
         to the Plans after the date hereof to purchase common stock of the
         Holding Company will be vested immediately upon the occurrence of a
         Change in Control.


<PAGE>   3


8.       Termination Provisions.

         (a) Voluntary Termination - If Employee quits Employee's employment
         hereunder (except as otherwise provided in the next paragraph), dies or
         is terminated due to disability, as defined under the Bank's then
         current long-term disability policy, whether before or after a Change
         in Control, Employee will receive Employee's base salary through the
         date as of which Employee's employment ceases (net of any amounts owed
         by Employee to the Bank) plus accrued vacation time, but will not
         receive any severance, bonuses or other benefits.

         (b) Termination Without Cause - If Employee (i) is fired without
         "Cause", as defined below or (ii) quits Employee's employment hereunder
         within three months after a Change in Control that results in a
         reduction in Employee's title, responsibilities, compensation and/or
         benefits, or a change of more than 40 miles in Employee's place of
         employment (any of the foregoing reasons being "GOOD REASONS"),
         Employee will receive, as Employee's sole remedy for such firing or
         quitting for Good Reason (in addition to any vesting of stock options
         provided for in paragraph 6 above), a lump sum cash payment equal to
         the Employee's then existing base salary (net of any amounts owed by
         Employee to the Bank) for one year. The Bank may, as a condition to
         being required to pay the severance payments provided for in this
         agreement, require the Employee to execute a general release of any
         claim (other than the obligation of the Bank to make such severance
         payments) or cause of action that Employee may have against the Bank,
         the Holding Company, or any of their officers, directors, employees,
         agents, or representatives.

         (c) Termination With Cause - If Employee is fired for "Cause", Employee
         will receive Employee's base salary through the date as of which
         Employee's employment is terminated (net of any amounts owed by
         Employee to the Bank and any costs incurred by the Bank due to such
         "Cause") plus accrued vacation time, but will not receive any
         severance, bonuses or other benefits. "CAUSE" means any of the
         following: (a) insubordination or other refusal or failure to carry out
         the instructions or policies of the Board or the officers to whom the
         Employee reports; (b) dishonesty, crime or action involving moral
         turpitude, or any other conduct that is illegal, immoral or materially
         injurious to the Bank; (c) breach of Employee's covenants or
         obligations under this agreement, or (d) non-performance in the
         performance of Employee's duties, evaluated primarily with reference to
         the Bank's credit and organizational policies, and with reference to
         the goals and budgets approved by the Bank's Board of directors, and,
         if such non-performance referred to in this clause (d) is capable of
         being corrected, continuation of such non-performance for 30 days after
         the Bank gives notice to the Employee describing such non-performance.

9.       Covenant Not to Compete. During the time that Employee is employed by
         the Bank, and if Employee's employment terminates at any time during
         the Term (regardless of whether the termination is voluntary or
         involuntary, with or without Cause or Good Reason) for a period of 12
         months from the date of such termination, Employee shall not (a) become
         engaged directly in a management, lending, financial or consulting
         capacity in the


<PAGE>   4


         origination, processing, purchasing or selling of SBA, USDA or Ex-Im
         Bank loans, or (b) seek to cause any employee or customer of the Bank,
         the Holding Company or any direct or indirect Subsidiary of either of
         them to cease, reduce or change in a manner adverse to the business or
         interests of the Bank, the Holding Company or any direct or indirect
         Subsidiary of either of them, such employee's or customer's employment
         by or relationship with the Bank, the Holding Company or any direct or
         indirect Subsidiary of either of them. As used herein, (i) "SUBSIDIARY"
         means any corporation, association, limited liability company, trust,
         or other business entity of which the Bank or the Holding Company shall
         at any time own directly or indirectly through a Subsidiary or
         Subsidiaries at least a majority (by number of votes) of the
         outstanding Voting Stock, and (ii) "VOTING STOCK" means stock or other
         equity interests, of any class or classes (however designated), the
         holders of which are at the time entitled, as such holders, to vote for
         the election of a majority of the directors, managers or trustees (or
         persons performing similar functions) of the corporation, association,
         limited liability company, trust or other business entity involved,
         whether or not the right so to vote exists by reason of the happening
         of a contingency.

10.      Exclusivity of Services:  Confidentiality.

         (a) In addition to the more specific provisions of paragraph 9 above,
         you agree that during the Term of this agreement, you will not, without
         the prior written approval of the Chairman and Chief Executive Officer
         and the Board of Directors of the Bank, directly or indirectly engage
         or participate in, or become an owner, partner, officer of, director
         of, or become employed by, or render advisory, consulting or other
         services to or in connection with, any other business enterprise during
         the time that you are employed by the Bank; provided, however, that you
         may hold outside directorships which may, from time to time, require
         minor portions of time, but which shall not interfere or be
         inconsistent with your duties hereunder.

         (b) You also acknowledge that any information and documentation
         relating to the Bank or the Holding Company, including but not limited
         to their products, programs, business strategies, clients, employees,
         forms, financial matters, and matters discussed by the Board of
         Directors of the Bank and the Holding Company, are the sole property of
         the Bank and the Holding Company and are strictly confidential; and you
         agree that you will not, at any time before, during or at any time
         after your employment by the Bank (regardless of whether the
         termination of your employment is voluntary or involuntary, with or
         without Cause or Good Reason), disclose any of such information or
         documentation to any person or entity for any purpose whatsoever,
         except for your use of such information and documentation in the course
         of carrying out your duties during the time that you are employed by
         the Bank and except to comply with requirements of law or regulatory
         authorities with jurisdiction over the Bank and the Holding Company and
         except to counsel or independent auditors for you, the Bank or the
         Holding Company. The foregoing sentence does not, however, prohibit the
         disclosure by you of information that (i) is generally available to the
         public other than as a result of a disclosure of such information
         directly or indirectly by you, or (b) becomes available to you on a
         non-confidential basis from a source other than the Bank, the Holding
         Company and their


<PAGE>   5


         officers, directors, employees, representatives and advisors, provided
         that such source is not known by you to be bound by any obligation of
         secrecy to the Bank or the Holding Company or another party.

         (c) You also agree that you will not discuss or disclose any of the
         terms or provisions of this agreement, either before, during or at any
         time after the Term of this agreement, with any other employee of the
         Bank or the Holding Company, except for your superior officers, members
         of the Operating Committee of the Bank, the Chairman and Chief
         Executive Officer of the Bank, and the Board of Directors of the Bank
         and the Holding Company.

11.      Equitable Relief. You acknowledge that any violation of Section 9 or 10
         above will cause the Bank and the Holding Company irreparable harm and
         that, in addition to any other remedy that they may have, the Bank and
         the Holding Company will have the right to obtain such injunctive or
         other equitable relief as they may deem to be necessary or appropriate.

12.      Tax Withholding Requirement. The amounts paid by the Bank to you
         hereunder will have withheld and deducted therefrom any taxes required
         to be withheld by the Bank under any federal, state or local law.

13.      Regulatory Limitation. Notwithstanding any other provision of the
         Agreement, the Bank shall not be obligated to make, and the Employee
         shall have no right to receive, any payment, benefit or amount under
         this Agreement which would violate any law, regulation or regulatory
         order applicable to the Bank to the Holding Company at the time such
         payment, benefit or amount is due (a "PROHIBITED PAYMENT"). If an
         amount payable hereunder is not paid because it is a Prohibited
         Payment, Employee shall continue to be bound by all of Employee's
         obligations and agreements hereunder and the Bank shall make or provide
         to the Employee the payment, benefit or other amount (or such portion
         thereof the making of which ceases to be a violation) that is the
         subject of the Prohibited Payment at such later date, if any, as the
         applicable law, regulation or regulatory order no longer would be
         violated by the Bank's making or providing such payment, benefit or
         amount to the Employee.

14.      Limitation on Benefits. It is the intention of the Employee and Bank
         that no payments by Bank to or for the benefit of Employee under this
         agreement or any other agreement or plan pursuant to which Employee is
         entitled to receive payments or benefits shall be nondeductible to Bank
         or any other payor by reason of Section 280G of the Internal Revenue
         Code of 1986, as amended (the "Code") and subject to a tax pursuant to
         Section 4999 of the Code, as a result of payments that would constitute
         "parachute payments". Accordingly, such payments shall be reduced in
         such amounts as are required to reduce the aggregate "present value"
         (as the term is defined in Section 280G(d)(4) of the Code) of such
         payments to one dollar less than an amount equal to three times the
         Employee's "base amount" (as the term is defined in Section
         280G(b)(3)(a) and (d)(1) and (2) of the Code), to the end that the
         Employee is not subject to tax pursuant to Section 4999 and no
         deduction is disallowed to the Bank by reason of Section 280G(a). The
         determination as to the


<PAGE>   6


         amount of the reduction of such payments, if any, shall be made by the
         Bank's independent certified public accountants.

15.      Notices. All notices under this agreement shall be in writing and shall
         be deemed effective when delivered in person or by recognized overnight
         delivery service to you or to the Bank, or if mailed, postage prepaid,
         registered or certified mail, addressed, in the case of you, to your
         last known address as carried on the personnel records of the Bank and,
         in the case of the Bank, to its corporate headquarters, attention of
         the Chairman and Chief Executive Officer, or to such other address as
         the party to be notified may specify by notice to the other party
         pursuant to this paragraph.

16.      Successors and Assigns. The rights and obligations of the Bank under
         this agreement shall inure to the benefit of and shall be binding upon
         the successors and assigns of the Bank, including, without limitation,
         any corporation, individual or other person or entity which may acquire
         all or substantially all of the assets and business of the Bank or with
         or into which the Bank may be consolidated or merged.

17.      Arbitration. Any dispute which may arise between the parties hereto
         shall be settled by binding arbitration in accordance with the National
         Rules for the Resolution of Employment Disputes of the American
         Arbitration Association. The parties shall mutually agree in writing
         upon an arbitrator. If the parties shall fail to agree upon an
         arbitrator within 5 days after a written demand, delivered as provided
         for notices hereunder, for arbitration hereunder is made, each party
         shall have the right within the succeeding 10 days to select an
         arbitrator (the failure by either party to exercise such right within
         said 10 days will be equivalent to a consent to the selection of the
         other party's arbitrator by mutual agreement); within 20 days after
         such selection, if 2 arbitrators are selected, the 2 arbitrators shall
         select a third arbitrator. The arbitrator or arbitrators shall have at
         least 5 years of experience in employment law. Any claim or dispute
         arising hereunder shall be decided by the arbitrator or arbitrators
         based upon the rights and obligations of the parties set forth in this
         agreement. The decision of the arbitrator or of the majority of the
         arbitrators, as the case may be, shall not include any award for
         punitive damages or penalties, but the arbitrator or majority of
         arbitrators may award or prorate attorneys fees in accordance with his
         or their judgment as to who is the prevailing party in the arbitration.
         An arbitration award rendered in accordance with this agreement shall
         be binding and conclusive upon the parties, and may be entered in any
         court of competent jurisdiction. The costs of arbitration shall be
         borne equally, except that each party shall bear the cost of their own
         counsel and experts, if any. Venue for any arbitration proceedings
         hereunder shall be in Hartford, Connecticut.

18.      Severability. If any of the terms or conditions of this agreement shall
         be declared void or unenforceable by any court or administrative body
         of competent jurisdiction, such term or condition shall be deemed
         severable from the remainder of this agreement, and the other terms and
         conditions of this agreement shall continue to be valid and
         enforceable.


<PAGE>   7


19.      Construction. This agreement sets forth the entire agreement of the
         Bank, the Holding Company and the Employee regarding the employment of
         the Employee by the Bank, and this agreement supersedes any prior or
         contemporaneous oral or written agreement with respect to the
         Employee's employment or any other matter set forth herein. This
         agreement shall be construed under the laws of the State of Connecticut
         and may not be amended except by a writing signed by the Employee and
         the Bank. Section headings are for convenience only and shall not be
         considered a part of the terms and provisions of this agreement.

If this agreement is acceptable to you, please sign below.

                               Very truly yours,

                               FIRST INTERNATIONAL BANK



                               By:/s/Brett N. Silvers
                               ----------------------
                                     Brett N. Silvers
                                     Its Chairman and Chief Executive Officer

Agreed to:



/s/Leslie A. Galbraith
- ----------------------
NAME:  Leslie A. Galbraith


         The undersigned hereby agrees to be bound by the provisions of this
agreement with respect to stock options and the exercise thereof.

                              FIRST INTERNATIONAL BANCORP, INC.



                              By:/s/Brett N. Silvers
                              ----------------------
                                   Brett N. Silvers
                                   Its Chairman and Chief Executive Officer




<PAGE>   8
                                                                   Exhibit 10.11

                                                                   March 6, 2000


Shaun P. Williams
162 Tavern Circle
Middletown, CT  06456

Dear Shaun:

This agreement is intended to set forth the basic terms under which you ("YOU"
or the "EMPLOYEE") will continue to be employed by First International Bank (the
"BANK") and, therefore, to constitute an employment agreement between us. We
have agreed with you that:

1.       Nature and Term of Employment. You will continue to be employed as
         Executive Vice President and Chief Financial Officer of the Bank (or
         equivalent title) in accordance with the terms and conditions in this
         agreement, and you accept such employment and agree to serve in such
         capacity. The term of employment under this agreement will extend from
         the date set forth above through February 28, 2002 (the "TERM").
         Nothing in this agreement will prohibit the continuation of employment
         beyond the Term if and as agreed by the Bank and Employee.

2.       Performance of Duties. While employed by the Bank, you will apply, in
         good faith and on a full-time basis, all of your skill and experience
         to the performance of your duties in such employment. You will have
         such responsibilities and authority as are designated (and as may be
         revised from time to time) by the Chairman and Chief Executive Officer
         and the Board of Directors of the Bank.

3.       Base Compensation. Commencing upon your acceptance of this agreement,
         the Bank will pay or cause to be paid to you during your employment a
         salary at the rate of $155,000 per annum, with the amount increasing by
         not less than 2% during 2000 and increasing by not less than 2% during
         2001. Your salary will be paid at such times as the salaries of other
         salaried officers of the Bank are generally paid.

4.       Benefits. During your employment, the Bank shall provide health,
         dental, disability, life insurance and retirement benefits for you and
         your dependents comparable to such coverage as is provided for officers
         of the Bank generally. In addition, during your employment provided
         that you are insurable at standard rates, the Bank shall sponsor and
         pay for (a) an individually-owned supplemental term life insurance
         policy on your life in the amount of $1,500,000, and (b) an
         individually-owned supplemental disability income insurance policy with
         a benefit to you of approximately $4,000 per month. The insurance
         policies shall remain in full force and effect during the term of this
         agreement, shall provide for such persons as you may designate to be
         the beneficiaries of the benefits thereof, and shall be portable. You
         agree to be available for such medical and other examinations and
         inquiries as the insurance carriers may request.


<PAGE>   9


5.       Bonuses. You will be eligible to receive cash bonuses in 2000, 2001 and
         2002, which bonuses shall be determined by the Chairman and Chief
         Executive Officer and Board of Directors of the Bank (or a committee of
         the Board of Directors of the Bank) in their discretion based upon your
         performance as evaluated primarily with reference to the policies and
         budgets approved by the Bank's Board.

6.       Supplemental Option. As further compensation for the services to be
         provided by you hereunder, First International Bancorp, Inc. (the
         "HOLDING COMPANY") is granting to you today pursuant to the Holding
         Company's 1994 Incentive Stock Option Plan and the Amended and Restated
         1996 Stock Option Plans (the "PLANS") additional options to purchase
         11,500 shares of the Common Stock of the Holding Company for the price
         and on the other terms set forth in new stock option agreements that
         you are entering into with the Holding Company on the date hereof (the
         "SUPPLEMENTAL OPTION"). The Supplemental Option will be in addition to
         the option to purchase 3,500 shares of the Common Stock of the Holding
         Company that would otherwise be made to you during 2000 in accordance
         with the Bank's present compensation policies and Plans.
         Notwithstanding any option agreements between you and the Holding
         Company dated before the date hereof, the Supplemental Option and all
         stock options held by you before the date hereof to purchase Common
         Stock of the Holding Company will be vested immediately. Any additional
         stock options granted to you pursuant to the Plans after the date
         hereof but prior to February 28, 2002 to purchase Common Stock of the
         Holding Company would be vested as of the earliest of (a) February 28,
         2002, (b) a Change in Control (as defined in paragraph 7 below), and
         (c) any termination by the Bank without Cause (as defined in paragraph
         8(c) below) of Employee's employment hereunder.

7.       Change in Control Provisions. A "CHANGE IN CONTROL" will have occurred
         if the Chase Family and the Silvers Family cease, in the aggregate, to
         beneficially own at least 25% of the outstanding Common Stock of the
         Holding Company or any successor thereto or to have the right to
         exercise, directly or indirectly, at least 25% of the aggregate voting
         power of the Bank or of any successor thereto. As used in this
         paragraph, "CHASE FAMILY" means Arnold Chase, Cheryl Chase, Rhoda L.
         Chase, David T. Chase and the parents, other family members, affiliates
         and personal representatives and heirs of each of them, "SILVERS
         FAMILY" means Brett N. Silvers, Nancy W. Silvers, their children and
         any trusts or other entities as to which the beneficiaries or owners
         are Brett N. Silvers, Nancy W. Silvers and/or their children. As
         described above, any additional stock options granted to you pursuant
         to the Plans after the date hereof to purchase common stock of the
         Holding Company will be vested immediately upon the occurrence of a
         Change in Control.


<PAGE>   10


8.       Termination Provisions.

         (a) Voluntary Termination - If Employee quits Employee's employment
         hereunder (except as otherwise provided in the next paragraph), dies or
         is terminated due to disability, as defined under the Bank's then
         current long-term disability policy, whether before or after a Change
         in Control, Employee will receive Employee's base salary through the
         date as of which Employee's employment ceases (net of any amounts owed
         by Employee to the Bank) plus accrued vacation time, but will not
         receive any severance, bonuses or other benefits.

         (b) Termination Without Cause - If Employee (i) is fired without
         "Cause", as defined below or (ii) quits Employee's employment hereunder
         within three months after a Change in Control that results in a
         reduction in Employee's title, responsibilities, compensation and/or
         benefits, or a change of more than 40 miles in Employee's place of
         employment (any of the foregoing reasons being "GOOD REASONS"),
         Employee will receive, as Employee's sole remedy for such firing or
         quitting for Good Reason (in addition to any vesting of stock options
         provided for in paragraph 6 above), a lump sum cash payment equal to
         the Employee's then existing base salary (net of any amounts owed by
         Employee to the Bank) for one year. The Bank may, as a condition to
         being required to pay the severance payments provided for in this
         agreement, require the Employee to execute a general release of any
         claim (other than the obligation of the Bank to make such severance
         payments) or cause of action that Employee may have against the Bank,
         the Holding Company, or any of their officers, directors, employees,
         agents, or representatives.

         (c) Termination With Cause - If Employee is fired for "Cause", Employee
         will receive Employee's base salary through the date as of which
         Employee's employment is terminated (net of any amounts owed by
         Employee to the Bank and any costs incurred by the Bank due to such
         "Cause") plus accrued vacation time, but will not receive any
         severance, bonuses or other benefits. "CAUSE" means any of the
         following: (a) insubordination or other refusal or failure to carry out
         the instructions or policies of the Board or the officers to whom the
         Employee reports; (b) dishonesty, crime or action involving moral
         turpitude, or any other conduct that is illegal, immoral or materially
         injurious to the Bank; (c) breach of Employee's covenants or
         obligations under this agreement, or (d) non-performance in the
         performance of Employee's duties, evaluated primarily with reference to
         the Bank's credit and organizational policies, and with reference to
         the goals and budgets approved by the Bank's Board of directors, and,
         if such non-performance referred to in this clause (d) is capable of
         being corrected, continuation of such non-performance for 30 days after
         the Bank gives notice to the Employee describing such non-performance.

9.       Covenant Not to Compete. During the time that Employee is employed by
         the Bank, and if Employee's employment terminates at any time during
         the Term (regardless of whether the termination is voluntary or
         involuntary, with or without Cause or Good Reason) for a period of 12
         months from the date of such termination, Employee shall not (a) become
         engaged directly in a management, lending, financial or consulting
         capacity in the


<PAGE>   11


         origination, processing, purchasing or selling of SBA, USDA or Ex-Im
         Bank loans, or (b) seek to cause any employee or customer of the Bank,
         the Holding Company or any direct or indirect Subsidiary of either of
         them to cease, reduce or change in a manner adverse to the business or
         interests of the Bank, the Holding Company or any direct or indirect
         Subsidiary of either of them, such employee's or customer's employment
         by or relationship with the Bank, the Holding Company or any direct or
         indirect Subsidiary of either of them. As used herein, (i) "SUBSIDIARY"
         means any corporation, association, limited liability company, trust,
         or other business entity of which the Bank or the Holding Company shall
         at any time own directly or indirectly through a Subsidiary or
         Subsidiaries at least a majority (by number of votes) of the
         outstanding Voting Stock, and (ii) "VOTING STOCK" means stock or other
         equity interests, of any class or classes (however designated), the
         holders of which are at the time entitled, as such holders, to vote for
         the election of a majority of the directors, managers or trustees (or
         persons performing similar functions) of the corporation, association,
         limited liability company, trust or other business entity involved,
         whether or not the right so to vote exists by reason of the happening
         of a contingency.

10.      Exclusivity of Services:  Confidentiality.

         (a) In addition to the more specific provisions of paragraph 9 above,
         you agree that during the Term of this agreement, you will not, without
         the prior written approval of the Chairman and Chief Executive Officer
         and the Board of Directors of the Bank, directly or indirectly engage
         or participate in, or become an owner, partner, officer of, director
         of, or become employed by, or render advisory, consulting or other
         services to or in connection with, any other business enterprise during
         the time that you are employed by the Bank; provided, however, that you
         may hold outside directorships which may, from time to time, require
         minor portions of time, but which shall not interfere or be
         inconsistent with your duties hereunder.

         (b) You also acknowledge that any information and documentation
         relating to the Bank or the Holding Company, including but not limited
         to their products, programs, business strategies, clients, employees,
         forms, financial matters, and matters discussed by the Board of
         Directors of the Bank and the Holding Company, are the sole property of
         the Bank and the Holding Company and are strictly confidential; and you
         agree that you will not, at any time before, during or at any time
         after your employment by the Bank (regardless of whether the
         termination of your employment is voluntary or involuntary, with or
         without Cause or Good Reason), disclose any of such information or
         documentation to any person or entity for any purpose whatsoever,
         except for your use of such information and documentation in the course
         of carrying out your duties during the time that you are employed by
         the Bank and except to comply with requirements of law or regulatory
         authorities with jurisdiction over the Bank and the Holding Company and
         except to counsel or independent auditors for you, the Bank or the
         Holding Company. The foregoing sentence does not, however, prohibit the
         disclosure by you of information that (i) is generally available to the
         public other than as a result of a disclosure of such information
         directly or indirectly by you, or (b) becomes available to you on a
         non-confidential basis from a source other than the Bank, the Holding
         Company and their


<PAGE>   12


         officers, directors, employees, representatives and advisors, provided
         that such source is not known by you to be bound by any obligation of
         secrecy to the Bank or the Holding Company or another party.

         (c) You also agree that you will not discuss or disclose any of the
         terms or provisions of this agreement, either before, during or at any
         time after the Term of this agreement, with any other employee of the
         Bank or the Holding Company, except for your superior officers, members
         of the Operating Committee of the Bank, the Chairman and Chief
         Executive Officer of the Bank, and the Board of Directors of the Bank
         and the Holding Company.

11.      Equitable Relief. You acknowledge that any violation of Section 9 or 10
         above will cause the Bank and the Holding Company irreparable harm and
         that, in addition to any other remedy that they may have, the Bank and
         the Holding Company will have the right to obtain such injunctive or
         other equitable relief as they may deem to be necessary or appropriate.

12.      Tax Withholding Requirement. The amounts paid by the Bank to you
         hereunder will have withheld and deducted therefrom any taxes required
         to be withheld by the Bank under any federal, state or local law.

13.      Regulatory Limitation. Notwithstanding any other provision of the
         Agreement, the Bank shall not be obligated to make, and the Employee
         shall have no right to receive, any payment, benefit or amount under
         this Agreement which would violate any law, regulation or regulatory
         order applicable to the Bank to the Holding Company at the time such
         payment, benefit or amount is due (a "PROHIBITED PAYMENT"). If an
         amount payable hereunder is not paid because it is a Prohibited
         Payment, Employee shall continue to be bound by all of Employee's
         obligations and agreements hereunder and the Bank shall make or provide
         to the Employee the payment, benefit or other amount (or such portion
         thereof the making of which ceases to be a violation) that is the
         subject of the Prohibited Payment at such later date, if any, as the
         applicable law, regulation or regulatory order no longer would be
         violated by the Bank's making or providing such payment, benefit or
         amount to the Employee.

14.      Limitation on Benefits. It is the intention of the Employee and Bank
         that no payments by Bank to or for the benefit of Employee under this
         agreement or any other agreement or plan pursuant to which Employee is
         entitled to receive payments or benefits shall be nondeductible to Bank
         or any other payor by reason of Section 280G of the Internal Revenue
         Code of 1986, as amended (the "Code") and subject to a tax pursuant to
         Section 4999 of the Code, as a result of payments that would constitute
         "parachute payments". Accordingly, such payments shall be reduced in
         such amounts as are required to reduce the aggregate "present value"
         (as the term is defined in Section 280G(d)(4) of the Code) of such
         payments to one dollar less than an amount equal to three times the
         Employee's "base amount" (as the term is defined in Section
         280G(b)(3)(a) and (d)(1) and (2) of the Code), to the end that the
         Employee is not subject to tax pursuant to Section 4999 and no
         deduction is disallowed to the Bank by reason of Section 280G(a). The
         determination as to the


<PAGE>   13


         amount of the reduction of such payments, if any, shall be made by the
         Bank's independent certified public accountants.

15.      Notices. All notices under this agreement shall be in writing and shall
         be deemed effective when delivered in person or by recognized overnight
         delivery service to you or to the Bank, or if mailed, postage prepaid,
         registered or certified mail, addressed, in the case of you, to your
         last known address as carried on the personnel records of the Bank and,
         in the case of the Bank, to its corporate headquarters, attention of
         the Chairman and Chief Executive Officer, or to such other address as
         the party to be notified may specify by notice to the other party
         pursuant to this paragraph.

16.      Successors and Assigns. The rights and obligations of the Bank under
         this agreement shall inure to the benefit of and shall be binding upon
         the successors and assigns of the Bank, including, without limitation,
         any corporation, individual or other person or entity which may acquire
         all or substantially all of the assets and business of the Bank or with
         or into which the Bank may be consolidated or merged.

17.      Arbitration. Any dispute which may arise between the parties hereto
         shall be settled by binding arbitration in accordance with the National
         Rules for the Resolution of Employment Disputes of the American
         Arbitration Association. The parties shall mutually agree in writing
         upon an arbitrator. If the parties shall fail to agree upon an
         arbitrator within 5 days after a written demand, delivered as provided
         for notices hereunder, for arbitration hereunder is made, each party
         shall have the right within the succeeding 10 days to select an
         arbitrator (the failure by either party to exercise such right within
         said 10 days will be equivalent to a consent to the selection of the
         other party's arbitrator by mutual agreement); within 20 days after
         such selection, if 2 arbitrators are selected, the 2 arbitrators shall
         select a third arbitrator. The arbitrator or arbitrators shall have at
         least 5 years of experience in employment law. Any claim or dispute
         arising hereunder shall be decided by the arbitrator or arbitrators
         based upon the rights and obligations of the parties set forth in this
         agreement. The decision of the arbitrator or of the majority of the
         arbitrators, as the case may be, shall not include any award for
         punitive damages or penalties, but the arbitrator or majority of
         arbitrators may award or prorate attorneys fees in accordance with his
         or their judgment as to who is the prevailing party in the arbitration.
         An arbitration award rendered in accordance with this agreement shall
         be binding and conclusive upon the parties, and may be entered in any
         court of competent jurisdiction. The costs of arbitration shall be
         borne equally, except that each party shall bear the cost of their own
         counsel and experts, if any. Venue for any arbitration proceedings
         hereunder shall be in Hartford, Connecticut.

18.      Severability. If any of the terms or conditions of this agreement shall
         be declared void or unenforceable by any court or administrative body
         of competent jurisdiction, such term or condition shall be deemed
         severable from the remainder of this agreement, and the other terms and
         conditions of this agreement shall continue to be valid and
         enforceable.


<PAGE>   14


19.      Construction. This agreement sets forth the entire agreement of the
         Bank, the Holding Company and the Employee regarding the employment of
         the Employee by the Bank, and this agreement supersedes any prior or
         contemporaneous oral or written agreement with respect to the
         Employee's employment or any other matter set forth herein. This
         agreement shall be construed under the laws of the State of Connecticut
         and may not be amended except by a writing signed by the Employee and
         the Bank. Section headings are for convenience only and shall not be
         considered a part of the terms and provisions of this agreement.

If this agreement is acceptable to you, please sign below.

                                 Very truly yours,

                                 FIRST INTERNATIONAL BANK



                                 By:/s/Brett N. Silvers
                                 ----------------------
                                       Brett N. Silvers
                                       Its Chairman and Chief Executive Officer

Agreed to:



/s/Shaun P. Williams
- ------------------------
NAME:  Shaun P. Williams


         The undersigned hereby agrees to be bound by the provisions of this
agreement with respect to stock options and the exercise thereof.

                                FIRST INTERNATIONAL BANCORP, INC.



                                By:/s/Brett N. Silvers
                                ----------------------
                                     Brett N. Silvers
                                     Its Chairman and Chief Executive Officer





<PAGE>   1
                                                                   Exhibit 10.11

                                                                   March 6, 2000


Shaun P. Williams
162 Tavern Circle
Middletown, CT  06456

Dear Shaun:

This agreement is intended to set forth the basic terms under which you ("YOU"
or the "EMPLOYEE") will continue to be employed by First International Bank (the
"BANK") and, therefore, to constitute an employment agreement between us. We
have agreed with you that:

1.       Nature and Term of Employment. You will continue to be employed as
         Executive Vice President and Chief Financial Officer of the Bank (or
         equivalent title) in accordance with the terms and conditions in this
         agreement, and you accept such employment and agree to serve in such
         capacity. The term of employment under this agreement will extend from
         the date set forth above through February 28, 2002 (the "TERM").
         Nothing in this agreement will prohibit the continuation of employment
         beyond the Term if and as agreed by the Bank and Employee.

2.       Performance of Duties. While employed by the Bank, you will apply, in
         good faith and on a full-time basis, all of your skill and experience
         to the performance of your duties in such employment. You will have
         such responsibilities and authority as are designated (and as may be
         revised from time to time) by the Chairman and Chief Executive Officer
         and the Board of Directors of the Bank.

3.       Base Compensation. Commencing upon your acceptance of this agreement,
         the Bank will pay or cause to be paid to you during your employment a
         salary at the rate of $155,000 per annum, with the amount increasing by
         not less than 2% during 2000 and increasing by not less than 2% during
         2001. Your salary will be paid at such times as the salaries of other
         salaried officers of the Bank are generally paid.

4.       Benefits. During your employment, the Bank shall provide health,
         dental, disability, life insurance and retirement benefits for you and
         your dependents comparable to such coverage as is provided for officers
         of the Bank generally. In addition, during your employment provided
         that you are insurable at standard rates, the Bank shall sponsor and
         pay for (a) an individually-owned supplemental term life insurance
         policy on your life in the amount of $1,500,000, and (b) an
         individually-owned supplemental disability income insurance policy with
         a benefit to you of approximately $4,000 per month. The insurance
         policies shall remain in full force and effect during the term of this
         agreement, shall provide for such persons as you may designate to be
         the beneficiaries of the benefits thereof, and shall be portable. You
         agree to be available for such medical and other examinations and
         inquiries as the insurance carriers may request.


<PAGE>   2


5.       Bonuses. You will be eligible to receive cash bonuses in 2000, 2001 and
         2002, which bonuses shall be determined by the Chairman and Chief
         Executive Officer and Board of Directors of the Bank (or a committee of
         the Board of Directors of the Bank) in their discretion based upon your
         performance as evaluated primarily with reference to the policies and
         budgets approved by the Bank's Board.

6.       Supplemental Option. As further compensation for the services to be
         provided by you hereunder, First International Bancorp, Inc. (the
         "HOLDING COMPANY") is granting to you today pursuant to the Holding
         Company's 1994 Incentive Stock Option Plan and the Amended and Restated
         1996 Stock Option Plans (the "PLANS") additional options to purchase
         11,500 shares of the Common Stock of the Holding Company for the price
         and on the other terms set forth in new stock option agreements that
         you are entering into with the Holding Company on the date hereof (the
         "SUPPLEMENTAL OPTION"). The Supplemental Option will be in addition to
         the option to purchase 3,500 shares of the Common Stock of the Holding
         Company that would otherwise be made to you during 2000 in accordance
         with the Bank's present compensation policies and Plans.
         Notwithstanding any option agreements between you and the Holding
         Company dated before the date hereof, the Supplemental Option and all
         stock options held by you before the date hereof to purchase Common
         Stock of the Holding Company will be vested immediately. Any additional
         stock options granted to you pursuant to the Plans after the date
         hereof but prior to February 28, 2002 to purchase Common Stock of the
         Holding Company would be vested as of the earliest of (a) February 28,
         2002, (b) a Change in Control (as defined in paragraph 7 below), and
         (c) any termination by the Bank without Cause (as defined in paragraph
         8(c) below) of Employee's employment hereunder.

7.       Change in Control Provisions. A "CHANGE IN CONTROL" will have occurred
         if the Chase Family and the Silvers Family cease, in the aggregate, to
         beneficially own at least 25% of the outstanding Common Stock of the
         Holding Company or any successor thereto or to have the right to
         exercise, directly or indirectly, at least 25% of the aggregate voting
         power of the Bank or of any successor thereto. As used in this
         paragraph, "CHASE FAMILY" means Arnold Chase, Cheryl Chase, Rhoda L.
         Chase, David T. Chase and the parents, other family members, affiliates
         and personal representatives and heirs of each of them, "SILVERS
         FAMILY" means Brett N. Silvers, Nancy W. Silvers, their children and
         any trusts or other entities as to which the beneficiaries or owners
         are Brett N. Silvers, Nancy W. Silvers and/or their children. As
         described above, any additional stock options granted to you pursuant
         to the Plans after the date hereof to purchase common stock of the
         Holding Company will be vested immediately upon the occurrence of a
         Change in Control.


<PAGE>   3


8.       Termination Provisions.

         (a) Voluntary Termination - If Employee quits Employee's employment
         hereunder (except as otherwise provided in the next paragraph), dies or
         is terminated due to disability, as defined under the Bank's then
         current long-term disability policy, whether before or after a Change
         in Control, Employee will receive Employee's base salary through the
         date as of which Employee's employment ceases (net of any amounts owed
         by Employee to the Bank) plus accrued vacation time, but will not
         receive any severance, bonuses or other benefits.

         (b) Termination Without Cause - If Employee (i) is fired without
         "Cause", as defined below or (ii) quits Employee's employment hereunder
         within three months after a Change in Control that results in a
         reduction in Employee's title, responsibilities, compensation and/or
         benefits, or a change of more than 40 miles in Employee's place of
         employment (any of the foregoing reasons being "GOOD REASONS"),
         Employee will receive, as Employee's sole remedy for such firing or
         quitting for Good Reason (in addition to any vesting of stock options
         provided for in paragraph 6 above), a lump sum cash payment equal to
         the Employee's then existing base salary (net of any amounts owed by
         Employee to the Bank) for one year. The Bank may, as a condition to
         being required to pay the severance payments provided for in this
         agreement, require the Employee to execute a general release of any
         claim (other than the obligation of the Bank to make such severance
         payments) or cause of action that Employee may have against the Bank,
         the Holding Company, or any of their officers, directors, employees,
         agents, or representatives.

         (c) Termination With Cause - If Employee is fired for "Cause", Employee
         will receive Employee's base salary through the date as of which
         Employee's employment is terminated (net of any amounts owed by
         Employee to the Bank and any costs incurred by the Bank due to such
         "Cause") plus accrued vacation time, but will not receive any
         severance, bonuses or other benefits. "CAUSE" means any of the
         following: (a) insubordination or other refusal or failure to carry out
         the instructions or policies of the Board or the officers to whom the
         Employee reports; (b) dishonesty, crime or action involving moral
         turpitude, or any other conduct that is illegal, immoral or materially
         injurious to the Bank; (c) breach of Employee's covenants or
         obligations under this agreement, or (d) non-performance in the
         performance of Employee's duties, evaluated primarily with reference to
         the Bank's credit and organizational policies, and with reference to
         the goals and budgets approved by the Bank's Board of directors, and,
         if such non-performance referred to in this clause (d) is capable of
         being corrected, continuation of such non-performance for 30 days after
         the Bank gives notice to the Employee describing such non-performance.

9.       Covenant Not to Compete. During the time that Employee is employed by
         the Bank, and if Employee's employment terminates at any time during
         the Term (regardless of whether the termination is voluntary or
         involuntary, with or without Cause or Good Reason) for a period of 12
         months from the date of such termination, Employee shall not (a) become
         engaged directly in a management, lending, financial or consulting
         capacity in the


<PAGE>   4


         origination, processing, purchasing or selling of SBA, USDA or Ex-Im
         Bank loans, or (b) seek to cause any employee or customer of the Bank,
         the Holding Company or any direct or indirect Subsidiary of either of
         them to cease, reduce or change in a manner adverse to the business or
         interests of the Bank, the Holding Company or any direct or indirect
         Subsidiary of either of them, such employee's or customer's employment
         by or relationship with the Bank, the Holding Company or any direct or
         indirect Subsidiary of either of them. As used herein, (i) "SUBSIDIARY"
         means any corporation, association, limited liability company, trust,
         or other business entity of which the Bank or the Holding Company shall
         at any time own directly or indirectly through a Subsidiary or
         Subsidiaries at least a majority (by number of votes) of the
         outstanding Voting Stock, and (ii) "VOTING STOCK" means stock or other
         equity interests, of any class or classes (however designated), the
         holders of which are at the time entitled, as such holders, to vote for
         the election of a majority of the directors, managers or trustees (or
         persons performing similar functions) of the corporation, association,
         limited liability company, trust or other business entity involved,
         whether or not the right so to vote exists by reason of the happening
         of a contingency.

10.      Exclusivity of Services:  Confidentiality.

         (a) In addition to the more specific provisions of paragraph 9 above,
         you agree that during the Term of this agreement, you will not, without
         the prior written approval of the Chairman and Chief Executive Officer
         and the Board of Directors of the Bank, directly or indirectly engage
         or participate in, or become an owner, partner, officer of, director
         of, or become employed by, or render advisory, consulting or other
         services to or in connection with, any other business enterprise during
         the time that you are employed by the Bank; provided, however, that you
         may hold outside directorships which may, from time to time, require
         minor portions of time, but which shall not interfere or be
         inconsistent with your duties hereunder.

         (b) You also acknowledge that any information and documentation
         relating to the Bank or the Holding Company, including but not limited
         to their products, programs, business strategies, clients, employees,
         forms, financial matters, and matters discussed by the Board of
         Directors of the Bank and the Holding Company, are the sole property of
         the Bank and the Holding Company and are strictly confidential; and you
         agree that you will not, at any time before, during or at any time
         after your employment by the Bank (regardless of whether the
         termination of your employment is voluntary or involuntary, with or
         without Cause or Good Reason), disclose any of such information or
         documentation to any person or entity for any purpose whatsoever,
         except for your use of such information and documentation in the course
         of carrying out your duties during the time that you are employed by
         the Bank and except to comply with requirements of law or regulatory
         authorities with jurisdiction over the Bank and the Holding Company and
         except to counsel or independent auditors for you, the Bank or the
         Holding Company. The foregoing sentence does not, however, prohibit the
         disclosure by you of information that (i) is generally available to the
         public other than as a result of a disclosure of such information
         directly or indirectly by you, or (b) becomes available to you on a
         non-confidential basis from a source other than the Bank, the Holding
         Company and their


<PAGE>   5


         officers, directors, employees, representatives and advisors, provided
         that such source is not known by you to be bound by any obligation of
         secrecy to the Bank or the Holding Company or another party.

         (c) You also agree that you will not discuss or disclose any of the
         terms or provisions of this agreement, either before, during or at any
         time after the Term of this agreement, with any other employee of the
         Bank or the Holding Company, except for your superior officers, members
         of the Operating Committee of the Bank, the Chairman and Chief
         Executive Officer of the Bank, and the Board of Directors of the Bank
         and the Holding Company.

11.      Equitable Relief. You acknowledge that any violation of Section 9 or 10
         above will cause the Bank and the Holding Company irreparable harm and
         that, in addition to any other remedy that they may have, the Bank and
         the Holding Company will have the right to obtain such injunctive or
         other equitable relief as they may deem to be necessary or appropriate.

12.      Tax Withholding Requirement. The amounts paid by the Bank to you
         hereunder will have withheld and deducted therefrom any taxes required
         to be withheld by the Bank under any federal, state or local law.

13.      Regulatory Limitation. Notwithstanding any other provision of the
         Agreement, the Bank shall not be obligated to make, and the Employee
         shall have no right to receive, any payment, benefit or amount under
         this Agreement which would violate any law, regulation or regulatory
         order applicable to the Bank to the Holding Company at the time such
         payment, benefit or amount is due (a "PROHIBITED PAYMENT"). If an
         amount payable hereunder is not paid because it is a Prohibited
         Payment, Employee shall continue to be bound by all of Employee's
         obligations and agreements hereunder and the Bank shall make or provide
         to the Employee the payment, benefit or other amount (or such portion
         thereof the making of which ceases to be a violation) that is the
         subject of the Prohibited Payment at such later date, if any, as the
         applicable law, regulation or regulatory order no longer would be
         violated by the Bank's making or providing such payment, benefit or
         amount to the Employee.

14.      Limitation on Benefits. It is the intention of the Employee and Bank
         that no payments by Bank to or for the benefit of Employee under this
         agreement or any other agreement or plan pursuant to which Employee is
         entitled to receive payments or benefits shall be nondeductible to Bank
         or any other payor by reason of Section 280G of the Internal Revenue
         Code of 1986, as amended (the "Code") and subject to a tax pursuant to
         Section 4999 of the Code, as a result of payments that would constitute
         "parachute payments". Accordingly, such payments shall be reduced in
         such amounts as are required to reduce the aggregate "present value"
         (as the term is defined in Section 280G(d)(4) of the Code) of such
         payments to one dollar less than an amount equal to three times the
         Employee's "base amount" (as the term is defined in Section
         280G(b)(3)(a) and (d)(1) and (2) of the Code), to the end that the
         Employee is not subject to tax pursuant to Section 4999 and no
         deduction is disallowed to the Bank by reason of Section 280G(a). The
         determination as to the


<PAGE>   6


         amount of the reduction of such payments, if any, shall be made by the
         Bank's independent certified public accountants.

15.      Notices. All notices under this agreement shall be in writing and shall
         be deemed effective when delivered in person or by recognized overnight
         delivery service to you or to the Bank, or if mailed, postage prepaid,
         registered or certified mail, addressed, in the case of you, to your
         last known address as carried on the personnel records of the Bank and,
         in the case of the Bank, to its corporate headquarters, attention of
         the Chairman and Chief Executive Officer, or to such other address as
         the party to be notified may specify by notice to the other party
         pursuant to this paragraph.

16.      Successors and Assigns. The rights and obligations of the Bank under
         this agreement shall inure to the benefit of and shall be binding upon
         the successors and assigns of the Bank, including, without limitation,
         any corporation, individual or other person or entity which may acquire
         all or substantially all of the assets and business of the Bank or with
         or into which the Bank may be consolidated or merged.

17.      Arbitration. Any dispute which may arise between the parties hereto
         shall be settled by binding arbitration in accordance with the National
         Rules for the Resolution of Employment Disputes of the American
         Arbitration Association. The parties shall mutually agree in writing
         upon an arbitrator. If the parties shall fail to agree upon an
         arbitrator within 5 days after a written demand, delivered as provided
         for notices hereunder, for arbitration hereunder is made, each party
         shall have the right within the succeeding 10 days to select an
         arbitrator (the failure by either party to exercise such right within
         said 10 days will be equivalent to a consent to the selection of the
         other party's arbitrator by mutual agreement); within 20 days after
         such selection, if 2 arbitrators are selected, the 2 arbitrators shall
         select a third arbitrator. The arbitrator or arbitrators shall have at
         least 5 years of experience in employment law. Any claim or dispute
         arising hereunder shall be decided by the arbitrator or arbitrators
         based upon the rights and obligations of the parties set forth in this
         agreement. The decision of the arbitrator or of the majority of the
         arbitrators, as the case may be, shall not include any award for
         punitive damages or penalties, but the arbitrator or majority of
         arbitrators may award or prorate attorneys fees in accordance with his
         or their judgment as to who is the prevailing party in the arbitration.
         An arbitration award rendered in accordance with this agreement shall
         be binding and conclusive upon the parties, and may be entered in any
         court of competent jurisdiction. The costs of arbitration shall be
         borne equally, except that each party shall bear the cost of their own
         counsel and experts, if any. Venue for any arbitration proceedings
         hereunder shall be in Hartford, Connecticut.

18.      Severability. If any of the terms or conditions of this agreement shall
         be declared void or unenforceable by any court or administrative body
         of competent jurisdiction, such term or condition shall be deemed
         severable from the remainder of this agreement, and the other terms and
         conditions of this agreement shall continue to be valid and
         enforceable.


<PAGE>   7


19.      Construction. This agreement sets forth the entire agreement of the
         Bank, the Holding Company and the Employee regarding the employment of
         the Employee by the Bank, and this agreement supersedes any prior or
         contemporaneous oral or written agreement with respect to the
         Employee's employment or any other matter set forth herein. This
         agreement shall be construed under the laws of the State of Connecticut
         and may not be amended except by a writing signed by the Employee and
         the Bank. Section headings are for convenience only and shall not be
         considered a part of the terms and provisions of this agreement.

If this agreement is acceptable to you, please sign below.

                                 Very truly yours,

                                 FIRST INTERNATIONAL BANK



                                 By:/s/Brett N. Silvers
                                 ----------------------
                                       Brett N. Silvers
                                       Its Chairman and Chief Executive Officer

Agreed to:



/s/Shaun P. Williams
- ------------------------
NAME:  Shaun P. Williams


         The undersigned hereby agrees to be bound by the provisions of this
agreement with respect to stock options and the exercise thereof.

                                FIRST INTERNATIONAL BANCORP, INC.



                                By:/s/Brett N. Silvers
                                ----------------------
                                     Brett N. Silvers
                                     Its Chairman and Chief Executive Officer





<PAGE>   1
                                                                 Exhibit 10.12.1

                                                                  EXECUTION COPY

                  FIRST AMENDMENT, dated as of June 30, 1999 (this "Amendment")
to the REVOLVING COMMERCIAL LOAN WAREHOUSE AND SECURITY AGREEMENT, dated as of
December 4, 1998 (as the same may be further amended or otherwise modified from
time to time, the "Agreement"), among PRUDENTIAL SECURITIES CREDIT CORPORATION,
a Delaware corporation, having an office at One Seaport Plaza, New York, New
York 10292 (the "Lender"), and FIRST INTERNATIONAL BANK, (formerly known as
First National Bank of New England), a Connecticut bank and trust company,
having its principal office at 280 Trumbull Street, Hartford, Connecticut 06103
(the "Borrower"), and its parent, FIRST INTERNATIONAL BANCORP, INC., a Delaware
corporation, having its principal office at 280 Trumbull Street, Hartford,
Connecticut 06103 (the "Guarantor").Terms not otherwise defined in this
Amendment shall have the meanings ascribed to such terms in the Agreement.

                              W I T N E S S E T H :

                  WHEREAS, the parties wish to extend the Maturity Date of the
Loan from December 3, 1999 to June 30, 2000;

                  WHEREAS, the Engagement Letter is simultaneously being amended
to reflect that PSI will have the right of first refusal, but not the
obligation, to serve in the Manager Role with respect to up to $300,000,000 in
Securitizations; and

                  WHEREAS, the parties to the Agreement desire to execute this
Amendment to provide for such amended terms;

                  NOW, THEREFORE, in consideration of the premises and mutual
agreements herein contained, it is hereby agreed as follows:

                  ARTICLE 1.        AMENDMENTS

                  1.1 Amendment to Second Recital. The second recital of the
Agreement is hereby deleted in its entirety and the following is substituted in
lieu thereof:

                  WHEREAS, the Lender's Affiliate, Prudential Securities
         Incorporated ("PSI"), will have the right of first refusal, but not the
         obligation, to act as the sole manager (such role as sole manager, the
         "Manager Role") on any securities issuances ("Securitizations")
         sponsored by the Borrower or one of its Affiliates relating to up to
         $300,000,000 of the Commercial Loans, on the terms and under the
         conditions set forth in the Engagement Letter, dated as of December 4,
         1998, as amended by the First Amendment, dated as of June 30, 1999,
         among PSI, the Borrower and the Guarantor (as the same may be further
         amended or otherwise modified from time to time, the "Engagement
         Letter"). Such Securitizations shall be structured in a manner as shall
         be consented to by PSI.
<PAGE>   2
                  1.2 Extending Maturity Date. Section 1(c) of the Agreement is
hereby deleted in its entirety and the following is substituted in lieu thereof:

                  The Loan shall mature on June 30, 2000, as such date may be
         extended by means of a Credit Increase Confirmation and Note Amendment
         (the "Maturity Date"), pursuant to the terms of Section 1(f) below.

                  1.3 Extending Other Dates. Section 1(h) of the Agreement is
hereby amended by replacing the date December 3, 2000 appearing in clause (v)(x)
thereof with the date June 30, 2001.

                  ARTICLE 2 MISCELLANEOUS

                  2.1 Limited Effect. Except as expressly amended hereby, all of
the provisions , covenants, terms and conditions of the Agreement shall continue
to be, and shall remain, in full force and effect in accordance with its terms.

                  2.2 Guarantor Consent. The Guarantor hereby consents to this
Amendment and agrees that the Guaranty shall remain in full force and effect.

                  2.3 Governing Law. THIS AMENDMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HERETO SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE
CONFLICT OF LAW PRINCIPLES THEREOF.

                  2.4 Counterparts. This Amendment may be executed by one or
more of the parties on any number of separate counterparts, and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.

                                       2
<PAGE>   3
                  IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered by their respective proper and duly
authorized officers as of the day and year first above written.


                                          FIRST INTERNATIONAL BANK



                                          By:  /s/Theodore J. Horan
                                             -----------------------------------
                                                Name:  Theodore J. Horan
                                                Title: Senior Vice President


                                          FIRST INTERNATIONAL BANCORP, INC.




                                          By:  /s/Leslie Galbraith
                                             -----------------------------------
                                                Name:  Leslie Galbraith
                                                Title: Executive Vice President


                                          PRUDENTIAL SECURITIES CREDIT
                                                   CORPORATION



                                          By:  /s/Jeffrey K. French
                                             -----------------------------------
                                                Name:  Jeffrey K. French
                                                Title: Senior Vice President

                                       3

<PAGE>   1
                                                                 Exhibit 10.12.2


                  SECOND AMENDMENT, dated as of January 12, 2000 (this
"Amendment"), to the REVOLVING COMMERCIAL LOAN WAREHOUSE AND SECURITY AGREEMENT,
dated as of December 4, 1998 (as the same may be further amended or otherwise
modified from time to time, the "Agreement"), among PRUDENTIAL SECURITIES CREDIT
CORPORATION, a Delaware corporation, having an office at One New York Plaza, New
York, New York 10292 (the "Lender"), and FIRST INTERNATIONAL BANK, (formerly
known as First National Bank of New England), a Connecticut bank and trust
company, having its principal office at 280 Trumbull Street, Hartford,
Connecticut 06103 (the "Borrower"), and its parent, FIRST INTERNATIONAL BANCORP,
INC., a Delaware corporation, having its principal office at 280 Trumbull
Street, Hartford, Connecticut 06103 (the "Guarantor").Terms not otherwise
defined in this Amendment shall have the meanings ascribed to such terms in the
Agreement.

                              W I T N E S S E T H :

                  WHEREAS, the parties entered into a First Amendment, dated as
of June 30, 1999 (the "First Amendment"), to the Agreement; and

                  WHEREAS, the parties wish to extend the Maturity Date of the
Loan from June 30, 2000 to December 28, 2000;

                  WHEREAS, the Engagement Letter is simultaneously being amended
to reflect that PSI will have the right of first refusal, but not the
obligation, to serve in the Manager Role with respect to up to $340,000,000 in
Securitizations; and

                  WHEREAS, the parties to the Agreement desire to execute this
Amendment to provide for such amended terms;

                  NOW, THEREFORE, in consideration of the premises and mutual
agreements herein contained, it is hereby agreed as follows:

                  ARTICLE 1. AMENDMENTS

                  1.1 Amendment to Second Recital. The second recital of the
Agreement is hereby deleted in its entirety and the following is substituted in
lieu thereof:

                  WHEREAS, the Lender's Affiliate, Prudential Securities
         Incorporated ("PSI"), will have the right of first refusal, but not the
         obligation, to act as the sole manager (such role as sole manager, the
         "Manager Role") on any securities issuances ("Securitizations")
         sponsored by the Borrower or one of its Affiliates relating to up to
         $340,000,000 of the Commercial Loans, on the terms and under the
         conditions set forth in the Engagement Letter, dated as of December 4,
         1998, as amended by the First Amendment, dated as of June 30, 1999, and
         the Second Amendment, dated as of January 12, 2000, among PSI, the

                                       1
<PAGE>   2
         Borrower and the Guarantor (as the same may be further amended or
         otherwise modified from time to time, the "Engagement Letter"). Such
         Securitizations shall be structured in a manner as shall be consented
         to by PSI.

                  1.2 Aggregating Loans. Section 1(a)1 of the Agreement is
hereby amended by inserting the following after the phrase "up to $75,000,000,":

         less any amounts outstanding under any loans from Lender to the
         Borrower's subsidiary, FIB Holdings, Inc.

                  1.3 Extending Maturity Date. Section 1(c) of the Agreement is
hereby deleted in its entirety and the following is substituted in lieu thereof:

                  The Loan shall mature on December 28, 2000, as such date may
         be extended by means of a Credit Increase Confirmation and Note
         Amendment (the "Maturity Date"), pursuant to the terms of Section 1(f)
         below.

                  1.4 Extending Other Dates. Section 1(h) of the Agreement is
hereby amended by replacing the date June 30, 2001 appearing in clause (v)(x)
thereof (which was added by the First Amendment) with the date December 28,
2001.

                  ARTICLE 2 MISCELLANEOUS

                  2.1 Limited Effect. Except as expressly amended hereby, all of
the provisions , covenants, terms and conditions of the Agreement shall continue
to be, and shall remain, in full force and effect in accordance with its terms.

                  2.2 Guarantor Consent. The Guarantor hereby consents to this
Amendment and agrees that the Guaranty shall remain in full force and effect.

                  2.3 Governing Law. THIS AMENDMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HERETO SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE
CONFLICT OF LAW PRINCIPLES THEREOF.

                  2.4 Counterparts. This Amendment may be executed by one or
more of the parties on any number of separate counterparts, and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.

                  [Remainder of Page Intentionally Left Blank]

                                       2
<PAGE>   3
                  IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered by their respective proper and duly
authorized officers as of the day and year first above written.


                                           FIRST INTERNATIONAL BANK



                                           By:  /s/ Theodore J. Horan
                                              ----------------------------------
                                                 Name:  Theodore J. Horan
                                                 Title:    Senior Vice President


                                           FIRST INTERNATIONAL BANCORP, INC.




                                           By:  /s/Leslie Galbraith
                                              ----------------------------------
                                                 Name:  Leslie Galbraith
                                                 Title: Executive Vice President


                                           PRUDENTIAL SECURITIES CREDIT
                                                    CORPORATION



                                           By:  /s/Jeffrey K. French
                                              ----------------------------------
                                                 Name:  Jeffrey K. French
                                                 Title: Senior Vice President

                                       3

<PAGE>   1
                                                                   Exhibit 10.13

================================================================================

                                   $65,000,000

                     AMENDED AND RESTATED LOAN PURCHASE AND
                               SERVICING AGREEMENT

                         Dated as of September 24, 1999

                                      Among

                               FNBNE FUNDING CORP.

                                  as the Seller

                            FIRST INTERNATIONAL BANK

                                 as the Servicer

                                  the INVESTORS

                                  named herein

                      VARIABLE FUNDING CAPITAL CORPORATION

                                 as a Purchaser

                        FIRST UNION CAPITAL MARKETS CORP.

                                as the Deal Agent

                            FIRST UNION NATIONAL BANK

                             as the Liquidity Agent

                                       and

                                  HSBC BANK USA

                 as the Collateral Custodian and Backup Servicer


================================================================================
<PAGE>   2
                                TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                                                             Page
<S>                                                                                                          <C>
ARTICLE I  DEFINITIONS....................................................................................     1
         Section 1.1    Certain Defined Terms.............................................................     1
         Section 1.2    Other Terms.......................................................................    27
         Section 1.3    Computation of Time Period........................................................    27

ARTICLE II  THE PURCHASE FACILITY.........................................................................    27
         Section 2.1    Purchases of Asset Interests......................................................    27
         Section 2.2    The Initial Purchase and Incremental Purchases....................................    28
         Section 2.3    Reduction of the Purchase Limit...................................................    28
         Section 2.4    Determination of Yield............................................................    28
         Section 2.5    Percentage Evidenced by Asset Interest............................................    28
         Section 2.6    Dividing or Combining Asset Interests.............................................    29
         Section 2.7    Settlement Procedures.............................................................    29
         Section 2.8    [Reserved]........................................................................    31
         Section 2.9    Substitution of Loans.............................................................    31
         Section 2.10   Collections and Allocations.......................................................    32
         Section 2.11   Payments, Computation, Etc........................................................    33
         Section 2.12   Optional Repurchase...............................................................    33
         Section 2.13   Fees..............................................................................    34
         Section 2.14   Increased Costs; Capital Adequacy; Illegality.....................................    34
         Section 2.15   Taxes.............................................................................    35
         Section 2.16   Assignment of the Purchase Agreement..............................................    37

ARTICLE III  CLOSING; CONDITIONS OF CLOSING AND PURCHASES.................................................    38
         Section 3.1    Conditions to Closing and Initial Purchase........................................    38
         Section 3.2    Conditions Precedent to All Purchases and Remittances of Collections..............    38

ARTICLE IV  REPRESENTATIONS AND WARRANTIES................................................................    39
         Section 4.1    Representations and Warranties of the Seller......................................    39
         Section 4.2    Representations and Warranties of Seller Relating to the Agreement and the Loans..    43
         Section 4.3    Representations and Warranties of the Seller Relating to the Purchase Limit and
                        Capital Limit.....................................................................    45

ARTICLE V  GENERAL COVENANTS OF THE SELLER................................................................    45
         Section 5.1    General Covenants.................................................................    45
         Section 5.2    Covenants of Seller...............................................................    45
         Section 5.3    Release of Lien...................................................................    50
         Section 5.4    Hedge Agreement...................................................................    50
         Section 5.5    Retransfer of Ineligible Loans....................................................    51
         Section 5.6    Retransfer of Assets..............................................................    52
         Section 5.7    Year 2000 Compatibility...........................................................    53
</TABLE>


                                       i
<PAGE>   3
<TABLE>
<S>                                                                                                          <C>
ARTICLE VI  ADMINISTRATION AND SERVICING OF LOANS.........................................................    53
         Section 6.1    Appointment and Acceptance; Duties................................................    53
         Section 6.2    Duties and Responsibilities of the Servicer and the Collateral Custodian..........    53
         Section 6.3    Authorization of the Servicer.....................................................    57
         Section 6.4    Collection of Payments............................................................    58
         Section 6.5    Servicer Advances.................................................................    59
         Section 6.6    Realization Upon Defaulted Loans..................................................    60
         Section 6.7    Representations and Warranties of Backup Servicer and Collateral Custodian........    60
         Section 6.8    Maintenance of Insurance Policies.................................................    62
         Section 6.9    Representations and Warranties of Servicer........................................    62
         Section 6.10   Covenants of Servicer.............................................................    64
         Section 6.11   Covenants of Backup Servicer and Collateral Custodian.............................    65
         Section 6.12   Servicing Compensation............................................................    65
         Section 6.13   Custodial Compensation............................................................    66
         Section 6.14   Payment of Certain Expenses by Servicer...........................................    66
         Section 6.15   Reports...........................................................................    66
         Section 6.16   Annual Statement as to Compliance.................................................    67
         Section 6.17   Annual Independent Public Accountant's Servicing Reports..........................    67
         Section 6.18   Adjustments.......................................................................    67
         Section 6.19   Merger or Consolidation of the Servicer...........................................    68
         Section 6.20   Limitation on Liability of the Servicer and Others................................    68
         Section 6.21   Indemnification of the Seller, the Deal Agent, the Liquidity Agent and the Secured
                        Parties...........................................................................    69
         Section 6.22   The Servicer and Backup Servicer Not to Resign....................................    70
         Section 6.23   Access to Certain Documentation and Information Regarding the Loans...............    70
         Section 6.24   Backup Servicer...................................................................    70
         Section 6.25   Identification of Records.........................................................    73
         Section 6.26   Servicer Termination Events.......................................................    73
         Section 6.27   Appointment of Successor Servicer.................................................    74
         Section 6.28   Notification......................................................................    75
         Section 6.29   Protection of Right, Title and Interest in Assets.................................    75
         Section 6.30   Release of Loan Files.............................................................    75

ARTICLE VII  EARLY AMORTIZATION EVENTS....................................................................    76
         Section 7.1    Early Amortization Events.........................................................    76

ARTICLE VIII  INDEMNIFICATION 78
         Section 8.1    Indemnities by the Seller.........................................................    78

ARTICLE IX  THE DEAL AGENT AND THE LIQUIDITY AGENT........................................................    80
         Section 9.1    Authorization and Action..........................................................    80
         Section 9.2    Delegation of Duties..............................................................    81
         Section 9.3    Exculpatory Provisions............................................................    81
</TABLE>


                                       ii
<PAGE>   4
<TABLE>
<S>                                                                                                          <C>
         Section 9.4    Reliance..........................................................................    82
         Section 9.5    Non-Reliance on Deal Agent, Liquidity Agent and Others............................    83
         Section 9.6    Reimbursement and Indemnification.................................................    83
         Section 9.7    Deal Agent and Liquidity Agent in their Individual Capacities.....................    83
         Section 9.8    Successor Deal Agent or Liquidity Agent...........................................    84

ARTICLE X  ASSIGNMENTS; PARTICIPATIONS....................................................................    84
         Section 10.1   Assignments and Participations....................................................    84

ARTICLE XI  MISCELLANEOUS     88
         Section 11.1   Amendments and Waivers............................................................    88
         Section 11.2   Notices, Etc......................................................................    88
         Section 11.3   [Reserved.].......................................................................    88
         Section 11.4   No Waiver, Rights and Remedies....................................................    88
         Section 11.5   Binding Effect....................................................................    89
         Section 11.6   Term of this Agreement............................................................    89
         Section 11.7   GOVERNING LAW; CONSENT TO JURISDICTION;    WAIVER OF OBJECTION TO VENUE...........    89
         Section 11.8   WAIVER OF JURY TRIAL..............................................................    89
         Section 11.9   Costs, Expenses and Taxes.........................................................    90
         Section 11.10  No Proceedings....................................................................    90
         Section 11.11  Recourse Against Certain Parties..................................................    91
         Section 11.12  Protection of Ownership Interest; Appointment of Deal Agent as Attorney-in-Fact...    92
         Section 11.13  Confidentiality...................................................................    92
         Section 11.14  Execution in Counterparts; Severability; Integration..............................    93
</TABLE>


                                      iii
<PAGE>   5
                                    EXHIBITS


<TABLE>
<S>          <C>
EXHIBIT A    Form of Notice of Sale
EXHIBIT B    Form of Lock-Box Notice
EXHIBIT C    "Limited Purpose" Provisions
EXHIBIT D    Form of Assignment and Acceptance
EXHIBIT E    Form of Monthly Report
EXHIBIT F    Form of Servicer's Certificate
EXHIBIT G    Credit and Collection Policies
EXHIBIT H    Form of Purchase Certificate
EXHIBIT I    Form of Hedging Agreement (including Schedule and Confirmation)
EXHIBIT J    Form of Officer's Certificate as to Solvency
EXHIBIT K    Form of Officer's Closing Certificate
EXHIBIT L    Form of Power of Attorney
</TABLE>




                                    SCHEDULES


<TABLE>
<S>            <C>
SCHEDULE I     Conditions Precedent
SCHEDULE II    Concentration and Mix Requirements
SCHEDULE III   Tradenames, Fictitious Names and "Doing Business As" Names
SCHEDULE IV    List of Loans
SCHEDULE V     Locations of Loan Documents
SCHEDULE VI    Lock-Box Banks and Lock-Box Accounts
</TABLE>




                                       iv
<PAGE>   6
         THIS LOAN PURCHASE AND SERVICING AGREEMENT (the "Agreement") is made as
of September 24, 1999, among:

         (1) FNBNE FUNDING CORP., a Delaware corporation, as borrower (the
"Seller"):

         (2) FIRST INTERNATIONAL BANK (f/k/a First National Bank of New
England), a Connecticut bank and trust company ("FIB"), as servicer (the
"Servicer");

         (3) the financial institutions listed on the signature pages of this
Agreement under the heading "Investors" and their respective successors and
assigns (the "Investors");

         (4) VARIABLE FUNDING CAPITAL CORPORATION, a Delaware corporation
("VFCC");

         (5) FIRST UNION CAPITAL MARKETS CORP. ("FCMC"), as deal agent (the
"Deal Agent");

         (6) FIRST UNION NATIONAL BANK ("First Union"), as liquidity agent (the
"Liquidity Agent"); and

         (7) HSBC BANK USA (f/k/a Marine Midland Bank) ("HSBC"), as collateral
custodian (the "Collateral Custodian") and as backup servicer (the "Backup
Servicer").

         WHEREAS, the Seller, First National Bank of New England, the Investors,
VFCC, FCMC, First Union and Marine Midland Bank entered into a Loan Purchase and
Servicing Agreement, dated as of December 23, 1998 (the "Original Agreement"),
which Original Agreement the parties hereto desire to amend and restate to make
certain modifications as set forth herein.

         IT IS AGREED as follows:


                                    ARTICLE I

                                   DEFINITIONS

         SECTION 1.1 CERTAIN DEFINED TERMS.

         (a) Certain capitalized terms used throughout this Agreement are
defined above or in this Section 1.1.

         (b) As used in this Agreement and its exhibits, the following terms
shall have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined).



                                       1
<PAGE>   7
         Addition Date: With respect to any Additional Loans, the date on which
such Additional Loans become Pool Assets.

         Additional Loans: All Loans that become Pool Assets after the Closing
Date (or, if no Purchase is made on the Closing Date, then on the date of the
initial Purchase hereunder).

         Adjusted Eurodollar Rate: On any day, an interest rate per annum equal
to the quotient expressed as a percentage and rounded upwards (if necessary), to
the nearest 1/100 of 1%, obtained by dividing (i) the LIBOR Rate, as applicable,
on such day by (ii) the decimal equivalent of 100% minus the Eurodollar Reserve
Percentage on such day.

         Administration Agreement: That certain Amended and Restated
Administration Agreement executed between VFCC and FCMC as the same may be
amended, supplemented, or otherwise modified from time to time.

         Adverse Claim: A lien, security interest, pledge, charge, encumbrance
or other right or claim of any Person.

         Affected Party: As defined in Section 2.14(a).

         Affiliate: With respect to a Person means any other Person controlling,
controlled by or under common control with such Person. For purposes of this
definition, "control" when used with respect to any specified Person means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" or "controlled" have meanings correlative
to the foregoing.

         Aggregate Outstanding Loan Balance: As of any date of determination,
the sum of the Outstanding Loan Balances of all Eligible Loans included as part
of the Asset Pool on such date.

         Aggregate Unpaids: At any time, an amount, equal to the sum of all
Yield (accrued and to accrue), Capital and all other amounts owed hereunder,
under any Hedging Agreement (including, without limitation, payments in respect
of the termination of any such Hedging Agreement) or under any fee letter
delivered by the Originator to the Deal Agent and the Purchasers and outstanding
at such time (whether due or accrued).

         Agent's Account: A special account (account number 0l 41 96 47) in the
name of the Deal Agent or, so long as VFCC is the sole Purchaser hereunder, in
the name of VFCC, at Bankers Trust Company.

         Agreement: This Amended and Restated Loan Purchase and Servicing
Agreement, dated as of September 24, 1999, as amended, modified, supplemented or
restated from time to time.



                                       2
<PAGE>   8
         AIG: National Union Fire Insurance Company of Pittsburgh, PA, which is
a member company of American International Group, Inc.

         AIG 2 Loans: Loans to an Obligor that are Inventory Buyer Program Loans
or Equipment Buyer Program Loans, a portion of the Outstanding Balance of which
is insured by the AIG Policy 2.

         AIG Loan: A Loan to an Obligor that is a short term import loan, with a
term of 360 days or less and with interest and principal payable at maturity, a
portion of the Outstanding Loan Balance of which is insured by the AIG Policy.

         AIG Policy: That policy no. 649-8512, dated July 28, 1998, of AIG in
favor of FIB, which insures the AIG Loans, as such policy or successor policy
may be replaced or renewed from time to time, so long as the Deal Agent, as
agent for the Secured Parties, is (i) named as a loss payee, or as an additional
insured, on such policy and on such renewal or replacement policy or (ii)
otherwise satisfied that the AIG Policy inures to its benefit.

         AIG Policy 2: That policy no. 649-8471, dated April 17, 1998, of AIG in
favor of FIB, which insures the AIG 2 Loans, as such policy or successor policy
may be replaced or renewed from time to time, so long as the Deal Agent, as
agent for the Secured Parties is (i) named as loss payee, or as an additional
insured, on such policy and on such renewal or replacement policy or (ii)
otherwise satisfied that the AIG Policy 2 inures to its benefit.

         Amortization Period: The period beginning on the Termination Date and
ending on the Collection Date.

         Asset: All right, title and interest of the transferring party to and
under any and all of the following:

                  (i) the Transferred Loans, and all monies due or to become due
         in payment of such Loans on and after the related Transfer Date;

                  (ii) any Related Property securing the Transferred Loans
         including all proceeds from any sale or other disposition of such
         Related Property;

                  (iii) the Loan Documents;

                  (iv) the Lock-Box Account, all funds held in such account, and
         all certificates and instruments, if any, from time to time
         representing or evidencing the Lock-Box Account or such funds;

                  (v) the Cash Collateral Account, all funds held in such
         account, and all certificates and instruments, if any, from time to
         time representing or evidencing the Cash Collateral Account or such
         funds;



                                       3
<PAGE>   9
                  (vi) the Collection Account, all funds held in such account,
         and all certificates and instruments, if any, from time to time
         representing or evidencing the Collection Account or such funds;

                  (vii) all Collections and all other payments made or to be
         made in the future with respect to such Loans or by the Obligor
         thereunder and under any guarantee or similar form of credit
         enhancement with respect to such Loans, including but not limited to
         Export-Import Bank guarantees, the Ex-Im Policy, the AIG Policy and the
         AIG Policy 2;"

                  (viii) all payments received pursuant to any Hedging Agreement
         or Hedge Transaction; and

                  (ix) all income and Proceeds of the foregoing.

         Asset Interest: At any time, an undivided variable percentage ownership
interest in all Assets. Each Asset Interest shall be calculated in accordance
with Section 2.5. The undivided percentage interest of an Asset Interest shall
equal

                           C+R
                           ----
                           AOLB

         where:

            C = equals the Capital in respect of such Asset Interest.

            R = equals the aggregate Reserves in respect of such Asset Interest.

         AOLB = equals the Aggregate Outstanding Loan Balance.

         Asset Pool: At any time, all then outstanding Assets.

         Assignment and Acceptance: An assignment and acceptance entered into by
an Investor and an Eligible Assignee, and accepted by the Deal Agent, in
substantially the form of Exhibit D hereto.

         Available Collections: As defined in Section 2.7 hereof.

         Average Default Ratio: For any Determination Date, the arithmetic
average of the Default Ratios, expressed as percentages, for the three (3)
Collection Periods ended on such date, except that (i) in the case of the first
Determination Date following the Closing Date, the "Average Default Ratio" shall
be the Default Ratio for the Collection Period ended on such date, and (ii) in
the case of the second Determination Date following the Closing Date, the
"Average


                                       4
<PAGE>   10
Default Ratio" shall be the arithmetic average of the Default Ratios for the
two (2) Collection Periods ended on such date.

         Average Net Loss Ratio: For any Determination Date, the arithmetic
average of the Net Loss Ratios, expressed as percentages, for the three (3)
Collection Periods ended on such date, except that (i) in the case of the first
Determination Date following the Closing Date, the "Average Net Loss Ratio"
shall be the Net Loss Ratio for the Collection Period ended on such date, and
(ii) in the case of the second Determination Date following the Closing Date,
the "Average Net Loss Ratio" shall be the arithmetic average of the Net Loss
Ratios for the two (2) Collection Periods ended on such date.

         Backup Servicer: HSBC Bank USA, and its permitted successors and
assigns.

         Backup Servicer Fee: As set forth in the Backup Servicer and Collateral
Custodian Fee Letter.

         Backup Servicer and Collateral Custodian Fee Letter: The letter, dated
as of the Closing Date, among FNBNE, the Seller, the Backup Servicer, the
Collateral Custodian, the Deal Agent and First Union, setting forth among other
things the Backup Servicer Fee and the Collateral Custodian Fee.

         Bankruptcy Code: The Federal Bankruptcy Code, as amended from time to
time (Title II of the United States Code).

         Base Rate: On any date, a fluctuating rate of interest per annum equal
to the higher of (a) the Prime Rate or (b) the Federal Funds Rate plus one-half
of one percent (0.5%).

         Benefit Plan: Any employee benefit plan as defined in Section 3(3) of
ERISA in respect of which the Seller or any ERISA Affiliate of the Seller is, or
at any time during the immediately preceding six years was, an "employer" as
defined in Section 3(5) of ERISA.

         Breakage Costs: Any amount or amounts as shall compensate a Purchaser
for any loss, cost or expense incurred by such Purchaser (as determined in such
Purchaser's sole discretion) as a result of a prepayment by the Seller of
Capital or Yield pursuant to the terms hereof.

         Business Day: Any day of the year other than a Saturday or a Sunday on
which (a) banks are not required or authorized to be closed in New York City,
Charlotte, North Carolina, and Hartford, Connecticut, and (b) if the term
"Business Day" is used in connection with the Adjusted Eurodollar Rate, means
the foregoing only if such day is also a day of year on which dealings in United
States dollar deposits are carried on in the London interbank market.

         Capital: The sum of the amounts paid to the Seller for the initial
Purchase and in connection with each Incremental Purchase pursuant to Section
2.2, reduced from time to time by Collections and other payments received and
distributed to Purchasers on account of such Capital


                                       5
<PAGE>   11
pursuant to Section 2.7; provided, however, that such Capital shall not be
reduced by any distribution of any portion of Principal Collections if at any
time such distribution is rescinded or must be returned for any reason.

         Capital Limit: At any time the sum of (i) the Aggregate Outstanding
Loan Balance for all Eligible Loans that are Commercial Loans multiplied by the
Purchase Rate with respect to Commercial Loans, (ii) the Aggregate Outstanding
Loan Balance for all Eligible Loans that are AIG Loans multiplied by the
Purchase Rate with respect to the AIG Loans, (iii) the Aggregate Outstanding
Loan Balance for all Eligible Loans that are AIG 2 Loans multiplied by the
Purchase Rate with respect to the AIG 2 Loans and (iv) the Aggregate Outstanding
Loan Balance for all Eligible Loans that are Ex-Im Loans or Ex-Im 2 Loans
multiplied by the Purchase Rate with respect to the Ex-Im Loans or Ex-Im 2
Loans.

         Cash Collateral Account: As defined in Section 6.4(g).

         Casual Loss: With respect to any item of Related Property, the loss,
theft, damage beyond repair or governmental condemnation or seizure of such item
of Related Property.

         Change in Control: The date on which (i) any Person or "group" acquires
any "beneficial ownership" (as such terms are defined under Rule 13d-3 of, and
Regulation 13D under, the Securities Exchange Act of 1934, as amended), either
directly or indirectly, of membership interests or other equity interests or any
interest convertible into any such interest in the Originator having more than
fifty percent (50%) of the voting power for the election of directors of the
Originator, if any, under ordinary circumstances, or (ii) (except in connection
with any Securitization or in connection with the sale of Assets under the
Purchase Agreement) the Originator sells, transfers, conveys, assigns or
otherwise disposes of all or substantially all of the assets of the Originator;
provided, however, it shall not be a Change in Control for any one or more of
the following Persons, individually or collectively, to gain more than fifty
percent (50%) of such voting power: Arnold Chase, Cheryl Chase, Rhoda L. Chase,
David T. Chase, Brett N. Silvers, Nancy W. Silvers, and any family members,
Affiliates, and heirs of any of the foregoing (collectively, the "Permitted
Owners"), and any trusts, partnerships or other entities as to which the sole
beneficiaries are any of the Permitted Owners.

         Charged-Off Loan: Any Loan (i) for which an Insolvency Event has
occurred with respect to the related Obligor, (ii) for which the related Obligor
has suffered any other change which materially and adversely affects its
viability as a going concern, or (iii) which is or otherwise should be written
off as uncollectible by the Servicer in accordance with the Credit and
Collection Policies.

         Closing Date: December 23, 1998.

         Code: The Internal Revenue Code of 1986, as amended.

         Collateral Custodian: HSBC Bank USA, and its permitted successors and
assigns.


                                       6
<PAGE>   12
         Collateral Custodian Fee: As set forth in the Backup Servicer and
Collateral Custodian Fee Letter.

         Collection Account: As defined in Section 2.10.

         Collection Date: The date following the Termination Date on which the
aggregate outstanding Capital has been reduced to zero, the Purchasers have
received all Yield and other amounts due to the Purchasers in connection with
this Agreement each Hedge Transaction has been terminated and each Hedge
Counterparty has received all amounts owing to it under its respective Hedging
Agreement and the Deal Agent has received all amounts due to it in connection
with this Agreement.

         Collection Period: Each calendar month, except in the case of the first
Collection Period, the period beginning on the Closing Date to and including the
last day of the calendar month in which the Closing Date occurs.

         Collections: With respect to any Transferred Loan, all cash collections
or other cash proceeds of such Loan received by the Servicer, Originator or
Seller from or on behalf of any Obligor in payment of any amounts owed in
respect of such Loan, including, without limitation, any Interest Collections,
any Principal Collections, Deemed Collections, Insurance Proceeds, interest
earnings in the Collection Account, all recoveries on Charged-Off Loans, and all
payments received pursuant to any Hedging Agreement or Hedge Transaction.

         Commercial Line of Credit: A revolving line of credit Loan to an
Obligor that is not an Ex-Im Loan, an Ex-Im 2 Loan, an AIG Loan or an AIG 2
Loan.

         Commercial Loans: All of the Commercial Lines of Credit and the
Commercial Term Loans.

         Commercial Term Loan: A term loan to an Obligor that is not an Ex-Im
Loan, an Ex-Im 2 Loan, an AIG Loan, or an AIG 2 Loan.

         Commercial Paper Notes: On any day, any short-term promissory notes
issued by VFCC with respect to financing its purchase of any Asset Interest
hereunder.

         Commitment: For each Investor, the commitment of such Investor to
purchase Asset Interests from the Seller in an amount not to exceed the amount
set forth opposite such Investor's name on the signature pages of this
Agreement, as such amount may be modified in accordance with the terms hereof.

         Commitment Fee: As defined in Section 2.13(a) hereof.



                                       7
<PAGE>   13
         Commitment Termination Date: December 23, 2001 or such later date to
which the Commitment Termination Date may be extended (if extended) in the sole
discretion of VFCC and each Investor in accordance with the terms of Section
2.1(b).

         Conversion: As defined in Section 2.1(c).

         Cost of Funds Adjustment: The difference by which the CP Rate exceeds
the Adjusted Eurodollar Rate.

         CP Rate: For any Fixed Period, the per annum rate equivalent to the
weighted average of the per annum rates paid or payable by VFCC from time to
time as interest on or otherwise (by means of interest rate hedges or otherwise)
in respect of the promissory notes issued by VFCC that are allocated, in whole
or in part, by the Deal Agent (on behalf of VFCC) to fund or maintain the Asset
Interest during such period, as determined by the Deal Agent (on behalf of VFCC)
and reported to the Seller and the Servicer, which rates shall reflect and give
effect to (i) the commissions of placement agents and dealers in respect of such
promissory notes, to the extent such commissions are allocated, in whole or in
part, to such promissory notes by the Deal Agent (on behalf of VFCC), (ii) any
incremental carrying costs associated with the issuance of such promissory notes
maturing on dates other than those dates on which funds are received by VFCC,
and (iii) other borrowings by VFCC, including, without limitation, borrowings to
fund small or odd dollar amounts that are not easily accommodated in the
commercial paper market; provided, however, that if any component of such rate
is a discount rate, in calculating the "CP Rate," the Deal Agent shall for such
component use the rate resulting from converting such discount rate to an
interest bearing equivalent rate per annum.

         Credit and Collection Policies: Those credit, collection, customer
relation and service policies of the Originator and the Servicer as of the date
hereof relating to the Loans and related Loan Documents, set forth in Exhibit G,
as the same may be amended or modified from time to time in accordance with
Section 6.10(e).

         Deal Agent: FCMC, as Deal Agent hereunder, together with its successors
and assigns.

         Deemed Collections: On any day, an amount equal to the unpaid balance
(including any principal and accrued interest thereon) of any Loan included in
the Asset Pool if on such day (a) the Deal Agent, as agent for the Secured
Parties, does not have a valid perfected security interest in such Loan and any
Related Property, or (b) a Warranty Event has occurred with respect to such
Loan.

         Default Ratio: For any Collection Period, the percentage equivalent of
a fraction, the numerator which is the Outstanding Loan Balance of Defaulted
Loans at the end of such Collection Period, and the denominator of which is the
Aggregate Outstanding Loan Balance at the end of such Collection Period.



                                       8
<PAGE>   14
         Defaulted Loan: As of any day of determination, a Loan (i) as to which
the Obligor thereof has failed to make any payment, or part thereof, required to
be made thereunder for 60 days following the due date thereof, or (ii) that is a
Charged-Off Loan.

         Delinquent: On any day with respect to any Loan and any specified time
period any payment, or portion thereof, due with respect thereto, has not been
made by the Obligor of such loan for the specified time period from the due date
of such payment.

         Derivatives: Any exchange-traded or over-the-counter (i) forward,
future, option, swap, cap, collar, floor, foreign exchange contract, any
combination thereof, whether for physical delivery or cash settlement, relating
to any interest rate, interest rate index, currency, currency exchange rate,
currency exchange rate index, debt instrument, debt price, debt index,
depository instrument, depository price, depository index, equity instrument,
equity price, equity index, commodity, commodity price or commodity index, (ii)
any similar transaction, contract, instrument, undertaking or security, or (iii)
any transaction, contract, instrument, undertaking or security containing any of
the foregoing.

         Determination Date: With respect to any Payment Date, the last day of
the immediately preceding Collection Period.

         Early Amortization Event: As defined in Section 7.1.

         Eligible Assignee: A Person whose short-term rating is at least A-1
from S&P and P-1 from Moody's, or whose obligations under this Agreement are
guaranteed by a Person whose short-term rating is at least A-1 from S&P and P-1
from Moody's and is satisfactory to VFCC and the Deal Agent.

         Eligible Loan: On any date of determination, each Loan (a) that is a
Transferred Loan and identified on the list of Loans delivered by the Seller to
the Collateral Custodian as part of a Notice of Sale, (b) that is a Commercial
Loan, an AIG Loan, an AIG 2 Loan, an Ex-Im Loan or an Ex-Im 2 Loan and (c) that
satisfies each of the following requirements (unless otherwise agreed to in
writing by the Deal Agent in its sole discretion):

                  (i) the Loan is evidenced by a promissory note which has been
         duly authorized and which, together with the related Loan Documents, is
         in full force and effect and constitutes the legal, valid and binding
         obligation of the Obligor of such Loan to pay the stated amount of the
         Loan and interest thereon, and the related Loan Documents are
         enforceable against such Obligor in accordance with their respective
         terms;

                  (ii) the Loan was originated and maintained in accordance with
         the terms of the Credit and Collection Policies and arose in the
         ordinary course of the Originator's business from the loaning of money
         to the Obligor thereof;



                                       9
<PAGE>   15
                  (iii) the Loan is not a Defaulted Loan or a Charged-Off Loan
         or a Loan any payment or portion thereof is more than 30 days
         Delinquent;

                  (iv) the Obligor of such Loan is an Eligible Obligor and has
         executed all appropriate documentation including documentation relating
         to its collateral required by the Originator;

                  (v) the promissory note which evidences the Loan is an
         "instrument" and is not a "general intangible," an "account," or
         "chattel paper" as such terms are defined and used in the UCC of all
         jurisdictions which govern the perfection of the security interest
         granted therein;

                  (vi) all material consents, licenses, approvals or
         authorizations of, or registrations or declarations with, any
         Governmental Authority required to be obtained, effected or given in
         connection with the making of such Loan have been duly obtained,
         effected or given and are in full force and effect and the Loan was
         otherwise originated in accordance with all federal and state
         governmental consumer and other applicable laws and regulations;

                  (vii) The Loan is denominated and payable only in United
         States dollars in the United States and the collateral securing such
         Loan is located only in the United States unless otherwise consented to
         in writing by the Deal Agent upon completion of any necessary credit
         approval, including receipt and review of due diligence conducted by
         FIB; provided, however, no written consent will be required from the
         Deal Agent with respect to AIG Loans, AIG 2 Loans, Ex-Im Loans or Ex-Im
         2 Loans in which the collateral securing such Loans is located in a
         foreign country approved under the AIG Policy, AIG Policy 2, Ex-Im
         Guarantee or Ex-Im Policy as long as the Deal Agent is given prior
         written notice of any such Loans that the Seller proposes to sell and
         assign Asset Interests in and provided the Deal Agent receives evidence
         satisfactory to it concerning the approval of the foreign country under
         the AIG Policy, AIG Policy 2, Ex-Im Guarantee or Ex-Im Policy prior to
         such Loan being included as part of the Asset Pool.

                  (viii) [Reserved]

                  (ix) the Loan, together with the Loan Documents related
         thereto, does not contravene in any material respect any laws, rules or
         regulations applicable thereto (including, without limitation, laws,
         rules and regulations relating to usury, truth in lending, fair credit
         billing, fair credit reporting, equal credit opportunity, fair debt
         collection practices and privacy) and with respect to which no party to
         the Loan Documents related thereto is in material violation of any such
         law, rule or regulation in any respect;

                  (x) the Loan, together with the related Loan Documents, is
         fully assignable;



                                       10
<PAGE>   16
                  (xi) the Loan was documented and closed in accordance with the
         Originator's policies and procedures, including the relevant opinions
         and assignments, and only one current original promissory note with
         respect to such Loan, which promissory note has been delivered to the
         Collateral Custodian, duly endorsed for transfer under this Agreement;

                  (xii) except for Permitted Liens, the Loan and all Related
         Property are free of any Liens; and all filings and other actions
         required to perfect the security interest of the Deal Agent as agent
         for the Secured Parties in the Assets related thereto have been made or
         taken;

                  (xiii) the Required Loan Documents relating to such Loan are
         in the possession of the Collateral Custodian;

                  (xiv) [Reserved]

                  (xv) no right of rescission, set off, counterclaim, defense or
         other material dispute has been asserted with respect to such Loan;

                  (xvi) the Loan was made under the existing Loan Documents,
         which Loan Documents have not been modified in any respect or such Loan
         extended as a result of any adverse credit reason (including, without
         limitation, rescheduling of installment payments);

                  (xvii) any Related Property with respect to such Loan is
         insured in accordance with the Credit and Collection Policies;

                  (xviii) the Loan Documents with respect to such Loan are
         complete in accordance with the Credit and Collection Policies;

                  (xix) the Obligor with respect to such Loan is an Eligible
         Obligor;

                  (xx) the Loan has an Eligible Risk Rating of 3.0 or better and
         was approved according to the Originator's Credit and Collection
         Policies; provided, however, an AIG Loan, an AIG 2 Loan or an Ex-Im 2
         Loan constituting either an Inventory Buyer Program Loan or Equipment
         Buyer Program Loan shall have an Eligible Risk Rating of 4.0 or better
         and shall have been approved according to the Originator's Credit and
         Collection Policies;

                  (xxi) if a Loan is a Commercial Line of Credit, (i) interest
         is due and payable monthly, (ii) the initial term of the Loan does not
         exceed 12 months, with all outstanding principal and interest due at
         the end of 12 months, and (iii) its respective Loan


                                       11
<PAGE>   17
         Documents provide that if it is not renewed it shall be amortized over
         a period not to exceed 36 additional months;

                  (xxii) [Reserved]

                  (xxiii) if a Loan is a Commercial Term Loan, (i) the first
         Scheduled Payment on such Loan is due within 45 days after its Purchase
         Date, (ii) its term does not exceed 25 years, and (iii) its Schedule of
         Payments has equal payments of principal and interest except for the
         final payment which may be less than the other payments; and

                  (xxiv) if a Loan is either an AIG Loan or an AIG 2 Loan (i)
         its term to maturity does not exceed 3 years and such term may not be
         extended unless approved by AIG, (ii) the Obligor thereunder qualifies
         as a covered "Buyer" under the AIG Policy or AIG Policy 2, as
         applicable, and is not on the "Excluded Buyer List" provided for under
         the AIG Policy or AIG Policy 2, as applicable, and a portion of such
         Loan is supported by AIG Insurance pursuant to the AIG Policy or AIG
         Policy 2, as applicable, (iii) it qualifies as an "Insured Transaction"
         under the AIG Policy or AIG Policy 2, as applicable, (iv) AIG's
         corporate unsecured debt rating is at least AA by S&P and Aa2 by
         Moody's and (v) either the pledge of the FIB Bond is in full force and
         effect or amounts sufficient to cover the deductible amount of the AIG
         Policy or AIG Policy 2 are on deposit in the Cash Collateral Account.

         Eligible Obligor: Any Obligor which satisfies each of the following
requirements at all times:

                  (i) the Obligor is not in the gaming, nuclear waste, bio-tech,
         oil and gas or real estate industries;

                  (ii) the Obligor is a legal operating entity, duly organized
         and validly existing under the laws of its jurisdiction of
         organization;

                  (iii) the Obligor is not the subject of any Insolvency Event;

                  (iv) the Obligor is not an Affiliate of any of the parties
         hereto;

                  (v) the Obligor is not the Obligor of any Loan, any payment or
         portion thereof is more than 30 days Delinquent or any Charged-Off
         Loans;

                  (vi) the Obligor is not a Governmental Authority;

                  (vii) the Obligor is in compliance with all material terms and
         conditions of its Loan Documents;



                                       12
<PAGE>   18
                  (viii) the Obligor's principal office and any Related Property
         are located in (i) the United States or any other country or territory
         of the United States, or (ii)(a) any country approved under the AIG
         Policy or AIG 2 Policy for FIB's Inventory Buyer Program Loans or
         Equipment Buyer Program Loans, or (b) any country approved by the Deal
         Agent upon receipt and review of satisfactory legal due diligence,
         Rating Agency discussions and credit approval.

                  (ix) the Obligor has an Eligible Risk Rating of 3.0 or better
         and was approved according to the Originator's Credit and Collection
         Policies; provided, however, an AIG Loan, an AIG 2 Loan or an Ex-Im 2
         Loan constituting either an Inventory Buyer Program Loan or an
         Equipment Buyer Program Loan shall have an Eligible Risk Rating of 4.0
         or better and shall have been approved accordingly to the Originator's
         Credit and Collection Policies.

         Eligible Risk Rating: As of any date of determination, with respect to
a designated Loan or Obligor, a risk rating of "1.0," "2.0," "3.0," or, in the
case of AIG 2 Loans or Ex-Im 2 Loans, "3.5," "4.0," as determined by or should
have been determined by, the Servicer in accordance with the Credit and
Collection Policies or as designated by the Originator.

         Equipment Buyer Program Loan: A loan originated under FIB's equipment
buyer program.

         ERISA: The U.S. Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and rulings issued
thereunder.

         ERISA Affiliate: (a) Any corporation which is a member of the same
controlled group of corporations (within the meaning of Section 414(b) of the
Code) as the Seller; (b) a trade or business (whether or not incorporated) under
common control (within the meaning of Section 414(c) of the Code) with the
Seller; or (c) a member of the same affiliated service group (within the meaning
of Section 414(m) of the Code) as the Seller, any corporation described in
clause (a) above or any trade or business described in clause (b) above.

         Eurodollar Disruption Event: The occurrence of any of the following:
(a) a determination by a Purchaser that it would be contrary to law or to the
directive of any central bank or other governmental authority (whether or not
having the force of law) to obtain United States dollars in the London interbank
market to make, fund or maintain any Purchase, (b) the failure of one or more of
the Reference Banks to furnish timely information for purposes of determining
the Adjusted Eurodollar Rate, (c) a determination by a Purchaser that the rate
at which deposits of United States dollars are being offered to such Purchaser
in the London interbank market does not accurately reflect the cost to such
Purchaser of making, funding or maintaining any Purchase or (d) the inability of
a Purchaser to obtain United States dollars in the London interbank market to
make, fund or maintain any Purchase.



                                       13
<PAGE>   19
         Eurodollar Reserve Percentage: For any day, that percentage (expressed
as a decimal) which is in effect from time to time under Regulation D of the
Board of Governors of the Federal Reserve System (or any successor), as such
regulation may be amended from time to time or any successor regulation, as the
reserve requirement (including, without limitation, any basic, supplemental,
emergency, special, or marginal reserves) applicable with respect to
Eurocurrency Liabilities as that term is defined in Regulation D (or against any
other category of liabilities that includes deposits by reference to which the
LIBOR Rate is determined), whether or not the Purchasers have any Eurocurrency
Liabilities subject to such reserve requirement at that time. All Capital whose
Yield is computed by reference to the Adjusted Eurodollar Rate shall be deemed
to constitute Eurocurrency Liabilities and as such shall be deemed subject to
reserve requirements without benefits of credits for proration, exceptions or
offsets that may be available from time to time to a Purchaser. The Adjusted
Eurodollar Rate shall be adjusted automatically on and as of the effective date
of any change in the Eurodollar Reserve Percentage.

         Ex-Im Guarantee. That guarantee no. 0079, dated as of October 3, 1995,
in favor of FIB, which guarantees the Ex-Im Loans and Ex-Im 2 Loans, as such
guarantee or successor guarantee may be replaced or renewed from time to time.

         Ex-Im Loan: A Loan to an Obligor that is a revolving line of credit,
90% of the Outstanding Loan Balance of which is guaranteed through the
Export-Import Bank.

         Ex-Im 2 Loans: Loans to an Obligor that are either Inventory Buyer
Program Loans or Equipment Buyer Program Loans, a portion of the Outstanding
Balance of which is insured or guaranteed through the Export-Import Bank.

         Ex-Im Policy: Those certain policies in favor of FIB that insure the
Ex-Im 2 Loans, as such policy or successor policy may be replaced or renewed
from time to time, so long as the Deal Agent, as agent for the Secured Parties,
is (i) named as loss payee or as an additional insured, on such policy and on
such renewal or replacement policy or (ii) otherwise satisfied that the Ex-Im
Policy inures to its benefit.

         Export-Import Bank: The Export-Import Bank of the United States.

         Facility: This Amended and Restated Loan Purchase and Servicing
Agreement, dated as of September 24, 1999, as amended, modified, supplemented or
restated from time to time.

         Federal Funds Rate: For any period, a fluctuating interest rate per
annum equal for each day during such period to the weighted average of the
federal funds rates as quoted by First Union and confirmed in Federal Reserve
Board Statistical Release H.15(519) or any successor or substitute publication
selected by First Union (or, if such day is not a Business Day, for the
preceding Business Day), or, if, for any reason, such rate is not available on
any day, the rate determined, in the sole opinion of First Union, to be the rate
at which federal funds are being offered for sale in the national federal funds
market at 9:00 A.M. Charlotte, North Carolina time.



                                       14
<PAGE>   20
         Fee Letter: The letter, dated as of the Closing Date, among the Seller,
the Servicer, the Deal Agent and First Union setting forth, among other things,
the Commitment Fee rate.

         FIB Existing Account: Account No. 2005 maintained at FIB for the
purpose of receiving Collections.

         FIB Security: A corporate bond that FIB or an Affiliate of FIB will
pledge to the Deal Agent, as agent for VFCC, or that FIB or an affiliate of FIB
will sell to the Seller for Seller to pledge to the Deal Agent, as agent for
VFCC, at any time AIG Loans or AIG 2 Loans are outstanding; provided, however,
such FIB Bond will in no event be less than the amount at least equal to the
amount of any deductible under both the AIG Policy or the AIG Policy 2,
provided, further, however, that if the deductible is drawn down, the FIB Bond
need only be in the amount of the deductible remaining under the AIG Policy or
AIG Policy 2, as applicable, provided, further, however, that the FIB Bond shall
not be pledged unless the Deal Agent has received such Opinion of Counsel
regarding true sale and non-consolidation acceptable to it and its counsel as it
shall request.

         First Union: First Union National Bank, in its individual capacity, and
its successors or assigns.

         Fixed Period: For any Payment Date the period beginning on, and
including the sixteenth day of the immediately preceding calendar month (or,
with respect to the first Fixed Period, the Closing Date) and ending on, and
including the fifteenth day of the calendar month in which such Payment Date
occurs.

         GAAP: Generally accepted accounting principles as in effect from time
to time in the United States.

         Governmental Authority: Any nation or government, any state or other
political subdivision thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government
and any court or arbitrator having jurisdiction over such Person.

         H.15: Federal Reserve Statistical Release H.15.

         Hedge Breakage Costs: For any Hedge Transaction, any amount payable by
the Seller for the early termination of that Hedge Transaction or any portion
thereof.

         Hedge Counterparty: Any entity which (a) on the date of entering into
any Hedge Transaction (i) is an interest rate swap dealer that is either a
Purchaser or an Affiliate of a Purchaser, or has been approved in writing by the
Deal Agent (which approval shall not be unreasonably withheld), and (ii) has a
long-term unsecured debt rating of not less than "A" by S&P and not less than
"A-2" by Moody's ("Long-term Rating Requirement") and a short-term unsecured
debt rating of not less than "A-1" by S&P and not less than "P-1" by Moody's


                                       15
<PAGE>   21
("Short-term Rating Requirement"), and (b) in a Hedging Agreement (i) consents
to the assignment of the Seller's rights under the Hedging Agreement to the Deal
Agent pursuant to Section 5.4(a) and (ii) agrees that in the event that Moody's
or S&P reduces its long-term unsecured debt rating below the Long-term Rating
Requirement, it shall transfer its rights and obligations under each Hedging
Transaction to another entity that meets the requirements of clause (a) and (b)
hereof and has entered onto a Hedging Agreement with the Seller on or prior to
the date of such transfer.

         Hedge Notional Amount: For any Purchase, the aggregate notional amount
in effect on any day under all Hedge Transactions entered into pursuant to
Section 5.4(a) for that Purchase.

         Hedge Transaction: Each interest rate swap transaction between the
Seller and a Hedge Counterparty which is entered into pursuant to Section 5.4(a)
and is governed by a Hedging Agreement.

         Hedging Agreement: Each agreement between the Seller and a Hedge
Counterparty which governs one or more Hedge Transactions entered into pursuant
to Section 5.4, which agreement shall consist of a "Master Agreement" in a form
published by the International Swaps and Derivatives Association, Inc., together
with a "Schedule" thereto substantially in the form of Exhibit I hereto or such
other form as the Deal Agent shall approve in writing, and each "Confirmation"
thereunder confirming the specific terms of each such Hedge Transaction.

         Increased Costs: Any amounts required to be paid by the Seller to an
Affected Party pursuant to Section 2.14.

         Incremental Purchase: Any Purchase that increases the aggregate
outstanding Capital hereunder.

         Indebtedness: With respect to any Person at any date, (a) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services (other than current liabilities incurred in the
ordinary course of business and payable in accordance with customary trade
practices) or which is evidenced by a note, bond, debenture or similar
instrument, (b) all obligations of such Person under capital leases, (c) all
obligations of such Person in respect of acceptances issued or created for the
account of such Person, (d) all liabilities secured by any Lien on any property
owned by such Person even though such Person has not assumed or otherwise become
liable for the payment thereof, and (e) all indebtedness, obligations or
liabilities of that Person in respect of Derivatives.

         Indemnified Amounts: As defined in Section 8.1.

         Indemnified Party: As defined in Section 8.1.

         Industry: The industry of an Obligor as determined by reference to the
four digit standard industry classification codes.



                                       16
<PAGE>   22
         Insolvency Event: With respect to a specified Person, (a) the filing of
a decree or order for relief by a court having jurisdiction in the premises in
respect of such Person or any substantial part of its property in an involuntary
case under any applicable Insolvency Law now or hereafter in effect, or
appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official for such Person or for any substantial part of its property, or
ordering the winding-up or liquidation of such Person's affairs, and such decree
or order shall remain unstayed and in effect for a period of 60 consecutive
days; or (b) the commencement by such Person of a voluntary case under any
applicable Insolvency Law now or hereafter in effect, or the consent by such
Person to the entry of an order for relief in an involuntary case under any such
law, or the consent by such Person to the appointment of or taking possession by
a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar
official for such Person or for any substantial part of its property, or the
making by such Person of any general assignment for the benefit of creditors, or
the failure by such Person generally to pay its debts as such debts become due,
or the taking of action by such Person in furtherance of any of the foregoing.

         Insolvency Laws: The Bankruptcy Code of the United States and all other
applicable liquidation, conservatorship, bankruptcy, moratorium, rearrangement,
receivership, insolvency, reorganization, suspension of payments, or similar
debtor relief laws from time to time in effect affecting the rights of creditors
generally.

         Insurance Policy: With respect to any Loan included in the Asset Pool,
an insurance policy covering physical damage to or loss to any assets or Related
Property of the Obligor securing such Loan.

         Insurance Proceeds: Any amounts payable or any payments made, to the
Servicer under any Insurance Policy.

         Interest Collections: Any and all amounts received in respect of any
interest, fees or other similar charges on a Loan from or on behalf of any
Obligors that are deposited into the Collection Account, or received by the
Servicer, Originator, or Seller in respect of Loans, in the form of cash,
checks, wire transfers, electronic transfers or any other form of cash payment
(net of any payment owed by the Seller to, and including any receipts from, any
Hedge Counterparties).

         Inventory Buyer Program Loan: A loan originated under FIB's inventory
buyer program.

         Investment: With respect to any Person, any direct or indirect loan,
advance or investment by such Person in any other Person, whether by means of
share purchase, capital contribution, loan or otherwise, excluding the
acquisition of assets pursuant to the Purchase Agreement and excluding
commission, travel and similar advances to officers, employees and directors
made in the ordinary course of business.



                                       17
<PAGE>   23
         Issuer: VFCC and any other Investor whose principal business consists
of issuing commercial paper or other securities to fund its acquisition and
maintenance of receivables, accounts, instruments, chattel paper, general
intangibles and other similar Assets.

         Jurisdiction: Delaware and Connecticut.

         LIBOR Rate: For a Fixed Period, an interest rate per annum equal to the
average (rounded upward to the nearest one-sixteenth (1/16) of one percent) per
annum rate of interest determined by First Union at its the principal office in
Charlotte, North Carolina as its LIBOR Rate (each such determination, absent
manifest error, to be conclusive and binding) as of two Business Days prior to
the first day of the applicable Fixed Period, as the rate at which deposits in
immediately available funds in U.S. dollars are being, have been, or would be
offered or quoted by First Union to major banks in the applicable interbank
market for Eurodollar deposits at or about 11:00 a.m. (Charlotte, North Carolina
time) on the Business Day which is the second Business Day immediately preceding
the first day of the applicable Fixed Period, for delivery on the first day of
such Fixed Period, for a term comparable to such Fixed Period and in an amount
approximately equal to the requested Capital. If no such offers or quotes are
generally available for such amount, then the LIBOR Rate shall be the rate
appearing on the Telerate Page 3750 as of 11:00 A.M. (London time) on the
Business Day which is the second Business Day immediately preceding the first
day of such Fixed Period for a term comparable to such Fixed Period.

         Lien: With respect to any Asset, (a) any mortgage, lien, pledge, charge
security interest or encumbrance of any kind in respect of such Asset or (b) the
interest of a vendor or lessor under any conditional sale agreement, financing
lease or other title retention agreement relating to such Asset.

         Liquidation Expenses: With respect to any Defaulted Loan, the aggregate
amount of all out-of pocket expenses reasonably incurred by the Servicer
(including amounts paid to any subservicer) in connection with the repossession,
refurbishing and disposition of any related assets securing such Loan including
the attempted collection of any amount owing pursuant to such Loan.

         Liquidity Bank: Each liquidity bank that is a party to the Liquidity
Purchase Agreement.

         Liquidity Purchase Agreement: The Liquidity Purchase Agreement, dated
as of December 23, 1998, among VFCC, the Deal Agent, the Liquidity Agent, and
First Union, as an investor, and each other liquidity bank a party thereto.

         Loan: A secured commercial loan arising from the extension of credit to
an Obligor by the Originator or one of its subsidiaries in the ordinary course
of the Originator's business including, without limitation, all Commercial
Loans, all Ex-Im Loans, all AIG Loans and all AIG 2 Loans, which loan is secured
by accounts receivable, inventory, machinery and equipment or real property or
all Ex-Im 2 Loans that are not secured; and such term further includes all


                                       18
<PAGE>   24
monies due or owing and all Interest Collections, Principal Collections and
other amounts received from time to time with respect to such loan receivable
and all Proceeds.

         Loan Document: With respect to any Loan, (i) the related original
promissory note, (ii) any related loan agreement, (iii) any security agreement,
(iv) where real property serves as the primary Collateral for the Loan, the
mortgage, if any, related thereto, (v) any assignment of leases, and (vi) any
other documents, instruments, certificates or assignments (including amendments
or modifications thereof) executed by the Obligor thereof or by another Person
on the Obligor's behalf in respect of such Loan and related promissory note,
including, without limitation, general or limited guaranties, and any power of
attorney.

         Lock-Box: A post office box to which Collections are remitted for
retrieval by a Lock-Box Bank and deposited by such Lock-Box Bank into a Lock-Box
Account.

         Lock-Box Account: An account maintained for the purpose of receiving
Collections at a bank or other financial institution which has executed a
Lock-Box Notice for the purpose of receiving Collections, but specifically
excluding the FIB Existing Account.

         Lock-Box Bank: Any of the banks or other financial institutions holding
one or more Lock-Box Accounts.

         Lock-Box Notice: A notice, in substantially the form of Exhibit B,
among the Seller, the Originator (if applicable) and a Lock-Box Bank.

         Minimum Net Portfolio Yield: 2.0%.

         Monthly Report: As defined in Section 6.15(a).

         Moody's: Moody's Investors Service, Inc., and any successor thereto.

         Multiemployer Plan: A "multiemployer plan" as defined in Section
4001(a)(3) of ERISA which is or was at any time during the current year or the
immediately preceding five years contributed to by the Seller or any ERISA
Affiliate on behalf of its employees.

         Net Loss Ratio: For any Collection Period, the product of (a) the
percentage equivalent of a fraction, the numerator which is the Outstanding Loan
Balance of Charged-Off Loans during such Collection Period, and the denominator
of which is the Aggregate Outstanding Loan Balance at the end of such Collection
Period and (b) 12.

         Net Portfolio Yield: For any Fixed Period, the difference between the
Portfolio Yield for such Fixed Period and the Yield for such Fixed Period.

         Notice of Sale: A notice, substantially in the form of Exhibit A
hereto, delivered pursuant to Section 2.2.



                                       19
<PAGE>   25
         Obligor: With respect to any Loan, the Person or Persons obligated to
make payments pursuant to the respective Loan Documents, including any guarantor
thereof (but not including Export-Import Bank or AIG). For purposes of
calculating any of the concentration and mix criteria set forth on Schedule II,
all Loans in the Asset Pool or to be transferred to the Asset Pool, the Obligor
of which is an Affiliate of another Obligor, shall be aggregated with all Loans
of such other Obligor. For example, if Obligor A is an Affiliate of Obligor B,
and the aggregate Outstanding Loan Balance of all of Obligor A's Loans in the
Asset Pool constitutes 5% of the Aggregate Outstanding Loan Balance, and the
aggregate Outstanding Loan Balance of all of Obligor B's Loans in the Asset Pool
constitutes 5% of the Aggregate Outstanding Loan Balance, then the Obligor
concentration for Obligor A would be 10% and the Obligor concentration for
Obligor B would also be 10%.

         Officer's Certificate: A certificate signed by any officer of the
Seller or the Servicer, as the case may be, and delivered to the Deal Agent.

         Officer's Certificate as to Solvency: A certificate signed by any
officer of the Seller or FIB, as the case may be, and delivered to the Deal
Agent in the form of Exhibits J-1 and J-2 attached hereto.

         Officer's Closing Certificate: A certificate signed by any officer of
the Seller or FIB, as the case may be, and delivered to the Deal Agent in the
form of Exhibits K-1 and K-2.

         Opinion of Counsel: A written opinion of counsel, who may be counsel
for the Seller or the Servicer and who shall be reasonably acceptable to the
Deal Agent.

         Originator: FIB.

         Originator Assets: Any Asset that was transferred to the Seller by the
Originator.

         Outstanding Loan Balance: With respect to any Loan, the then
outstanding principal balance thereof.

         Payment Date: The twenty-first (21st) day of each calendar month or, if
such day is not a Business Day, the next succeeding Business Day, commencing
with January 21, 1999.

         Permitted Investments: Any one or more of the following types of
investments:

                  (a) marketable obligations of the United States, the full and
         timely payment of which are backed by the full faith and credit of the
         United States and which have a maturity of not more than 270 days from
         the date of acquisition;



                                       20
<PAGE>   26
                  (b) marketable obligations, the full and timely payment of
         which are directly and fully guaranteed by the full faith and credit of
         the United States and which have a maturity of not more than 270 days
         from the date of acquisition;

                  (c) bankers' acceptances and certificates of deposit and other
         interest-bearing obligations (in each case having a maturity of not
         more than 270 days from the date of acquisition) denominated in dollars
         and issued by any bank with capital, surplus and undivided profits
         aggregating at least $100,000,000, the short-term obligations of which
         are rated A-1 by S&P and P-1 by Moody's;

                  (d) repurchase obligations with a term of not more than ten
         days for underlying securities of the types described in clauses (a),
         (b) and (c) above entered into with any bank of the type described in
         clause (c) above;

                  (e) commercial paper rated at least A-1 by S&P and P-1 by
         Moody's; and,

                  (f) demand deposits, time deposits or certificates of deposit
         (having original maturities of no more than 365 days) of depository
         institutions or trust companies incorporated under the laws of the
         United States or any state thereof (or domestic branches of any foreign
         bank) and subject to supervision and examination by federal or state
         banking or depository institution authorities; provided, however that
         at the time such investment, or the commitment to make such investment,
         is entered into, the short-term debt rating of such depository
         institution or trust company shall be at least A-1 by S&P and P-1 by
         Moody's.

         Permitted Liens: Liens in favor of the Deal Agent as agent for the
Secured Parties created pursuant to this Agreement.

         Person: An individual, partnership, corporation (including a business
trust), limited liability company, joint stock company, trust, unincorporated
association, sole proprietorship, joint venture, government (or any agency or
political subdivision thereof) or other entity.

         Pool Assets: On any day any and all Assets in the Asset Pool.

         Portfolio Rate: On any day, with respect to any Collection Period, the
annualized percentage equivalent of a fraction, the numerator of which is equal
to all Interest Collections deposited in the Collection Account for such
Collection Period, and the denominator of which is equal to the Capital of the
last day of such Collection Period.

         Portfolio Yield: As of any date of determination, the excess, if any,
of (a) the Rolling Three Month Portfolio Rate on such day over (b) the Yield
Rate plus the Program Fee for such day.



                                       21
<PAGE>   27
         Power of Attorney: A power of attorney signed by any officer of the
Seller in the form of Exhibit L hereto.

         Prepaid Loan: Other than Commercial Lines of Credit which may be
prepaid but for which the commitment to make advances thereunder is still in
effect, any Loan that has terminated or been prepaid in full prior to its
scheduled maturity date (including because of a Casualty Loss), other than a
Defaulted Loan.

         Prime Rate: The rate announced by First Union from time to time as its
prime rate in the United States, such rate to change as and when such designated
rate changes. The Prime Rate is not intended to be the lowest rate of interest
charged by First Union in connection with extensions of credit to debtors.

         Principal Collections: Any and all amounts received in respect of any
principal due and payable under any Loan from or on behalf of Obligors that are
deposited into the Collection Account, or received by the Servicer, Originator,
or Seller in respect of Loans, in the form of cash, checks, wire transfers,
electronic transfers or any other form of cash payment.

         Proceeds: With respect to any Pool Asset, whatever is receivable or
received when such Pool Asset is sold, collected, liquidated, foreclosed,
exchanged, or otherwise disposed of, whether such disposition is voluntary or
involuntary, and includes all rights to payment with respect to any insurance
relating to such Pool Asset.

         Program Fee: As defined in the Section 2.13(b).

         Purchase: A purchase by a Purchaser of an undivided interest in the
Assets from the Seller pursuant to Article II, including a reinvestment under
Clause ELEVENTH of Section 2.7.

         Purchase Agreement: The Purchase and Sale Agreement dated as of the
Closing Date between the Originator and the Seller, as amended, modified,
supplemented or restated from time to time.

         Purchase Date: The Closing Date (or, if a Purchase is not made on the
Closing Date, then the date of the initial Purchase after the Closing Date), and
as to any Incremental Purchase, any Business Day that is (i) at least one (1)
calendar week following the immediately preceding Purchase Date and (ii) five
(5) Business Days immediately following the receipt by the Deal Agent of a
written request by the Seller to sell an Asset Interest, such notice to be in
the form of Exhibit A hereto.

         Purchase Limit: At any time, $65,000,000, on or after the Termination
Date, the "Purchase Limit" shall mean the aggregate outstanding Capital.

         Purchase Rate: (i) With respect to Commercial Loans, 85%, (ii) with
respect to either AIG Loans or AIG 2 Loans, a fraction expressed as a percentage
the numerator of which is the


                                       22
<PAGE>   28
portion of the Outstanding Loan Balance of such AIG Loans or AIG 2 Loans, as
applicable, which is insured by an AIG Policy or AIG Policy 2, as applicable,
and the denominator of which is the Outstanding Loan Balance of such AIG Loans
or AIG 2 Loans, as applicable, (iii) with respect to Ex-Im Loans, 100% of the
guaranteed portion of the Outstanding Loan Balance of such Ex-Im Loans which is
guaranteed through the Export-Import Bank and (iv) with respect to Ex-Im 2
Loans, 100% of the guaranteed or insured portion of the Outstanding Loan Balance
of such Ex-Im 2 Loans that is guaranteed or insured through the Export-Import
Bank.

         Purchasers: Collectively, VFCC, First Union, and the Investors and any
other Person that agrees, pursuant to the pertinent Assignment and Acceptance,
to purchase an Asset Interest pursuant to this Agreement.

         Qualified Institution: As defined in Section 6.4(d).

         Rating Agency: Each of S&P, Moody's and any other rating agency that
has been requested to issue a rating with respect to the commercial paper notes
issued by the Issuer.

         Recoveries: With respect to a Defaulted Loan, proceeds from the sale of
the Related Property, proceeds of any related Insurance Policy and any other
recoveries with respect to such Defaulted Loan and the related Equipment and
related property, and other amounts representing late fees and penalties net of
Liquidation Expenses and amounts, if any, so received that are required to be
refunded to the Obligor on such Loan.

         Records: With respect to any Loans, all documents, books, records and
other information (including without limitation, computer programs, tapes,
disks, punch cards, data processing software and related property and rights)
maintained with respect to any Pool Asset and the related Obligors, other than
the Loan Documents.

         Register: As defined in Section 10.1(c).

         Related Property: With respect to a Loan, any property or other assets
of the Obligor thereunder pledged as collateral to the Originator to secure such
Loan.

         Replaced Loan: As defined in Section 2.9.

         Reporting Date: The date which is two Business Days after the end of
the Fixed Period.

         Required Investors: At a particular time, Investors with Commitments
equal to or in excess of 66 2/3 % of the Purchase Limit.

         Required Loan Documents: The documents described in clause (i), (ii),
(iii) and (iv) of the definition of Loan Document.



                                       23
<PAGE>   29
         Required Reports: Collectively, the Monthly Report, the Servicer's
Certificate and the financial statements of the Servicer required to be
delivered to the Deal Agent pursuant to Section 6.12(c) hereof.

         Requirements of Law: For any Person shall mean the certificate of
incorporation or articles of association and by-laws or other organizational or
governing documents of such Person, and any law, treaty, rule or regulation, or
order or determination of an arbitrator or Governmental Authority, in each case
applicable to or binding upon such Person or to which such Person is subject,
whether Federal, state or local (including, without limitation, usury laws, the
Federal Truth in Lending Act, and Regulation Z and Regulation B of the Board of
Governors of the Federal Reserve System).

         Reserve Percentage: The percentage that is 100% minus the applicable
Purchase Rate.

         Reserves: As to any Asset Interest on any day, an amount equal to the
Reserve Percentage multiplied by the Capital of such Asset Interest as of the
close of business of the Collateral Custodian on such day.

         Responsible Officer: As to any Person, any officer of such Person with
direct responsibility for the administration of this Agreement and also, with
respect to a particular matter, any other officer to whom such matter is
referred because of such officer's knowledge of and familiarity with the
particular subject.

         Retransfer Amount: As defined in Section 5.6.

         Retransfer Date: As defined in Section 5.6.

         Revolving Period: The period commencing on the Closing Date and ending
on the day immediately preceding the Termination Date.

         Rolling Three-Month Portfolio Rate: For any day, the percentage
equivalent of a fraction the numerator of which is equal to the sum of the three
(3) most recent Portfolio Rates and the denominator of which is equal to three
(3).

         S&P: Standard & Poor's, a division of The McGraw-Hill Companies, Inc.
and any successor thereto.

         Scheduled Payment: With respect to a date on which a payment is due
under a Loan, the periodic payment (exclusive of any amounts in respect of
insurance or taxes and reflecting any adjustment for any partial prepayment) set
forth in the applicable Loan Documents as due from the Obligor.



                                       24
<PAGE>   30
         Secured Party: (i) Each Purchaser and (ii) each Hedge Counterparty that
is either a Purchaser or an Affiliate of a Purchaser if that Affiliate executes
a counterpart of this Agreement agreeing to be bound by the terms of this
Agreement applicable to a Secured Party.

         Securitization: A disposition of Loans in one or a series of structured
finance securitization transactions.

         Seller: FNBNE Funding Corp., or any permitted successor thereto.

         Servicer: FIB and its permitted successors and assigns.

         Servicer Advance: An advance of Scheduled Payments made by the Servicer
pursuant to Section 6.5.

         Servicer Assignee: As defined in Section 6.19.

         Servicer Termination Event: As defined in Section 6.23.

         Servicer's Certificate: As defined in Section 6.12(b).

         Servicing Duties: As defined in Section 6.1.

         Servicing Fee: As defined in Section 2.13(c).

         Servicing Fee Rate: As defined in the Fee Letter.

         Servicing Records: All documents, books, records and other information
(including, without limitation, computer programs, tapes, disks, data processing
software and related property rights) prepared and maintained by the Servicer
with respect to the Loans and the related Obligors.

         Solvent: As to any Person at any time, having a state of affairs such
that all of the following conditions are met: (a) the fair value of the property
owned by such Person is greater than the amount of such Person's liabilities
(including disputed, contingent and unliquidated liabilities) as such value is
established and liabilities evaluated for purposes of Section 101(31) of the
Bankruptcy Code; (b) the present fair saleable value of the property owned by
such Person in an orderly liquidation of such Person is not less than the amount
that will be required to pay the probable liability of such Person on its debts
as they become absolute and matured; (c) such Person is able to realize upon its
property and pay its debts and other liabilities (including disputed, contingent
and unliquidated liabilities) as they mature in the normal course of business;
(d) such Person does not intend to, and does not believe that it will, incur
debts or liabilities beyond such Person's ability to pay as such debts and
liabilities mature; and (e) such Person is not engaged in business or a
transaction, and is not about to engage in a business or a transaction, for
which such Person's property would constitute unreasonably small capital.



                                       25
<PAGE>   31
         Structuring Fee: The structuring fee agreed to between the Seller and
the Deal Agent in the Fee Letter.

         Substitute Loan: As defined in Section 2.9.

         Successor Servicer: As defined in Section 6.27(a).

         Taxes: Any present or future taxes levies, imposts, duties, charges,
assessments or fees of any nature (including interest, penalties, and additions
thereto) that are imposed by any Government Authority.

         Termination Date: The earliest to occur of (a) the date of the
occurrence of an Early Amortization Event pursuant to Section 7.1, (b) the
Commitment Termination Date, (c) the termination of the Purchase Limit pursuant
to Section 2.3, and (d) the occurrence of an Insolvency Event with respect to
either FIB or the Seller.

         Termination Notice: As defined in Section 6.26.

         Transaction: As defined in Section 3.2.

         Transaction Documents: This Agreement, the Purchase Agreement, the
Liquidity Purchase Agreement, the Hedge Agreement, dated as of the date hereof
among the Seller, the Servicer and the Deal Agent, and any additional document
the execution of which is necessary or incidental to carrying out the terms of
the foregoing documents.

         Transfer Date: As defined in the Purchase Agreement.

         Transferred Loans: Each Loan that is sold by the Originator to the
Seller under the Purchase Agreement.

         Trigger Event: Any of the Early Amortization Events described in
clauses (n), (o), (p) and (u) of Section 7.1, without regard to any applicable
cure period.

         UCC: The Uniform Commercial Code as from time to time in effect in the
specified jurisdiction.

         United States: The United States of America.

         Unreimbursed Servicer Advances: At any time, the amount of all previous
Servicer Advances (or portions thereof) as to which the Servicer has not been
reimbursed as of such time pursuant to Section 2.7 and which the Servicer has
determined in its sole discretion will not be recoverable from Collections with
respect to the related Loan.



                                       26
<PAGE>   32
         Warranty Event: As to any Loan included as part of the Asset Pool, the
occurrence and continuance of a material breach of any representation or
warranty relating to such Loan and such breach is not cured within the relevant
cure period.

         Yield: For each Asset Interest for any Fixed Period, the products (for
each day during such Fixed Period) of:

                           YRxCx  1
                                 ---
                                 360

         where:

         C  = the Capital of such Asset Interest, and

         YR = the Yield Rate applicable on such day;

provided, however, that (a) no provision of this Agreement shall require the
payment or permit the collection of Yield in excess of the maximum permitted by
applicable law and (b) Yield shall not be considered paid by any distribution if
at any time such distribution is rescinded or must otherwise be returned for any
reason.

         Yield Rate: With respect to any Fixed Period and for each Asset
Interest purchased by a Purchaser for each day during such period, a per annum
rate equal to the Adjusted Eurodollar Rate; provided, however, that if the CP
Rate is greater than the Adjusted Eurodollar Rate on any day during such Fixed
Period, then the "Yield Rate" for that day will include a Cost of Funds
Adjustment; and provided, further, that if any portion of the Capital is funded
under the Liquidity Purchase Agreement by the Investors, then the "Yield Rate"
for such portion shall be a rate equal to (i) the Adjusted Eurodollar Rate, or
(ii) the Base Rate if the relevant Investor shall have notified the Deal Agent
that a Eurodollar Disruption Event has occurred.

         SECTION 1.2 OTHER TERMS.

         All accounting terms not specifically defined herein shall be construed
in accordance with GAAP. All terms used in Article 9 of the UCC in the States of
New York and Connecticut, as applicable, and not specifically defined herein,
are used herein as defined in such Article 9.

         SECTION 1.3 COMPUTATION OF TIME PERIOD.

         Unless otherwise stated in this Agreement, in the computation of a
period of time from a specified date to a later specified date, the word "from"
means "from and including" and the words "to" and "until" each mean "to but
excluding."




                                       27
<PAGE>   33
                                   ARTICLE II

                              THE PURCHASE FACILITY

         SECTION 2.1 PURCHASES OF ASSET INTERESTS.

         (a) On the terms and conditions hereinafter set forth, the Seller may
on any Purchase Date during the period from the date hereof to but not including
the Termination Date, at its option, sell and assign Asset Interests to the
Purchasers. The Deal Agent may act on behalf of and for the benefit of the
Purchasers in this regard. VFCC may, in its sole discretion, purchase, or if
VFCC shall decline to purchase, the Liquidity Agent shall purchase on behalf of
the Investors, Asset Interests from time to time during the period from the date
hereof to but not including the Termination Date. Under no circumstances shall
any Purchaser make the initial Purchase or any Incremental Purchase if, after
giving effect to such Purchase or Incremental Purchase, the aggregate Capital
outstanding hereunder would exceed the lesser of (i) the Purchase Limit or (ii)
the Capital Limit. Each Asset Interest purchased by any Purchaser hereunder is
subject to the interests of the Hedge Counterparties under Sections 2.7(a)(i)
and (x) of this Agreement.

         (b) The Seller may, within 60 days, but no later than 45 days, prior to
each one year anniversary of the Closing Date, by written notice to the Deal
Agent, make written request for VFCC and the Investors to extend the Commitment
Termination Date for an additional period of one year following the then
existing Commitment Termination Date. The Deal Agent will give prompt notice to
VFCC and each of the Investors of its receipt of such request for extension of
the Commitment Termination Date. VFCC and each Investor shall make a
determination, in their sole discretion and after a full credit review, not less
than 15 days prior to such anniversary date, as to whether or not it will agree
to extend the Commitment Termination Date; provided, however, that the failure
of VFCC or any Investor to make a timely response to the Seller's request for
extension of the Commitment Termination Date shall be deemed to constitute a
refusal by VFCC or the Investor, as the case may be, to extend the Commitment
Termination Date. The Commitment Termination Date shall only be extended upon
the consent of both (i) VFCC and (ii) 100% of the Investors.

         (c) Notwithstanding the foregoing Section 2.1(b), upon the proposed
conversion of FIB from a regulated bank to a commercial finance company (the
"Conversion"), which is otherwise subject to the provisions of this Agreement,
the Commitment Termination Date shall be the date that is the earlier of (i) the
date that is 364 days after the date of the Conversion, or (ii) the then
Commitment Termination Date, unless the Deal Agent and 100% of the Investors,
upon appropriate due diligence and credit approvals agree that the then
Commitment Termination Date should not be accelerated.



                                       28
<PAGE>   34
         SECTION 2.2 THE INITIAL PURCHASE AND INCREMENTAL PURCHASES.

         (a) Subject to the conditions described in Section 2.1, the initial
Purchase and each Incremental Purchase shall be made in accordance with the
procedures described in Section 2.2(b). After the Collection Date has occurred,
each of the Purchasers and the Deal Agent, in accordance with their respective
interests, shall assign and transfer to the Seller their respective remaining
interest in Asset Interests without any representation or warranty, express or
implied and without recourse of any kind.

         (b) The initial Purchase and each Incremental Purchase shall be made
pursuant to the terms of a Purchase Certificate in the form of Exhibit H hereto,
after receipt by the Purchaser of a Notice of Sale delivered by the Seller to
the Deal Agent (with a copy to the Collateral Custodian) at least one (1)
Business Day prior to the Closing Date in the case of the initial Purchase and
at least two (2) Business Days prior to such proposed Purchase Date in the case
of any Incremental Purchase.

         SECTION 2.3 REDUCTION OF THE PURCHASE LIMIT.

         The Seller may, upon at least five Business Days' notice to the Deal
Agent, terminate in whole or reduce in part the portion of the Purchase Limit
that exceeds the sum of the aggregate Capital and Yield accrued and to accrue
thereon, and the Commitments of the Investors shall be reduced proportionately;
provided, however, that each partial reduction of the Purchase Limit shall be in
an aggregate amount equal to $1,000,000 or an integral multiple of $l00,000 in
excess thereof. Each notice of reduction or termination pursuant to this Section
2.3 shall be irrevocable.

         SECTION 2.4 DETERMINATION OF YIELD.

         The Deal Agent shall determine the Yield (including unpaid Yield, if
any, due and payable on a prior Payment Date) to be paid on each Payment Date
for the Fixed Period and shall advise the Servicer thereof on the first Business
Day after the Fixed Period.

         SECTION 2.5 PERCENTAGE EVIDENCED BY ASSET INTEREST.

         The variable percentage represented by an Asset Interest shall be
initially computed on its date of purchase. Thereafter, until the Termination
Date, each Asset Interest shall be automatically recomputed (or deemed to be
recomputed) on each day prior to the Termination Date. The variable percentage
represented by an Asset Interest as computed (or deemed recomputed) as of the
close of business on the day immediately preceding the Termination Date shall
remain constant at all times after the Termination Date. The variable percentage
represented by the Asset Interest shall become zero when its Capital and Yield
has been paid in full.



                                       29
<PAGE>   35
         SECTION 2.6 DIVIDING OR COMBINING ASSET INTERESTS.

         The Deal Agent may, with the consent of a Purchaser, take any of the
following actions at the end of such Fixed Period with respect to any Asset
Interest: (i) divide the Asset Interest owned by such Purchaser into two or more
portions of Asset Interests having aggregate Capital equal to the Capital of
such divided Asset Interest, (ii) combine one portion of an Asset Interest of
such Purchaser with another portion of an Asset Interest of such Purchaser with
a Fixed Period ending on the same day, creating a new portion of an Asset
Interest having Capital equal to the Capital of the two portions of Asset
Interest combined or (iii) combine the Asset Interest of such Purchaser with the
Asset Interest to be purchased on such day by such Purchaser, creating a new
Asset Interest having Capital equal to the Capital of the two Asset Interests
combined; provided, that an Asset Interest of VFCC may not be combined with an
Asset Interest of the Investors.

         SECTION 2.7 SETTLEMENT PROCEDURES.

         (a) On each Payment Date, the Servicer shall pay to the following
Persons, from (i) the Collection Account, to the extent of available funds
including interest earnings on the Collection Account, (ii) a Servicer Advance
if made or required pursuant to Section 6.5, and (iii) amounts received in
respect of any Hedge Agreement during the applicable Collection Period (the sum
of such amounts described in clauses (i), (ii) and (iii) being the "Available
Collections") the following amounts in the following order of priority:

                           (A) FIRST, pro rata to each Hedge Counterparty, any
                  amounts, including any Hedge Breakage Costs, owing that Hedge
                  Counterparty under its respective Hedging Agreement in respect
                  of any Hedge Transaction(s) (other than payments in respect of
                  Termination of any Hedging Agreement), for the payment
                  thereof;

                           (B) SECOND, to the Servicer, but only out of proceeds
                  on the AIG Policy, AIG Policy 2 or Ex-Im Policy or Ex-Im
                  Guarantee that were paid with respect to such AIG Loan, AIG 2
                  Loan, Ex-Im Loans or Ex-Im 2 Loans, as applicable, in an
                  amount equal to any Unreimbursed Servicer Advances with
                  respect to an AIG Loan, AIG 2 Loan, Ex-Im Loans or Ex-Im 2
                  Loans, as applicable, for the payment thereof;

                           (C) THIRD, to the Servicer, but only out of Interest
                  Collections, in an amount equal to any Unreimbursed Servicer
                  Advances, for the payment thereof;

                           (D) FOURTH, to the Servicer, in an amount equal to
                  its accrued and unpaid Servicing Fees to the end of the
                  preceding Collection Period;

                           (E) FIFTH, to the extent not paid for by FIB, to the
                  Backup Servicer, in an amount equal to any accrued and unpaid
                  Backup Servicer Fee, for the payment thereof;



                                       30
<PAGE>   36
                           (F) SIXTH, to the extent not paid for by FIB, to the
                  Collateral Custodian, in an amount equal to any accrued and
                  unpaid Collateral Custodian Fee, for the payment thereof;

                           (G) SEVENTH, to the Deal Agent for the ratable
                  payment to each Purchaser, in an amount equal to any accrued
                  and unpaid Yield for such Payment Date;

                           (H) EIGHTH, to the Deal Agent for the ratable payment
                  to each Purchaser in an amount equal (I) to the extent not
                  paid by FIB, to any accrued and unpaid Commitment Fees and
                  (II) to any accrued and unpaid Program Fees;

                           (I) NINTH, to the Deal Agent, in the amount of unpaid
                  Increased Costs and/or Taxes, for payment to the Purchasers in
                  respect thereof;

                           (J) TENTH, so long as any AIG Loans or AIG 2 Loans
                  are outstanding, to the Cash Collateral Account, to the extent
                  that the balance in such account is less than the lesser of
                  (i) an amount sufficient to cover the deductible amount of the
                  AIG Policy and/or AIG Policy 2 or (ii) the Aggregate
                  Outstanding Loan Balance of AIG Loans and AIG 2 Loans on such
                  Payment Date; provided, however, that if the FIB Bond is
                  pledged, no such amounts need to be deposited in the Cash
                  Collateral Account;

                           (K) ELEVENTH, to the extent that funds are available,
                  any remaining amounts may be reinvested in Eligible Loans;
                  provided, however, that if the aggregate Capital exceeds the
                  lesser of (i) the Capital Limit or (ii) the Purchase Limit, an
                  amount equal to such excess shall be paid to the Deal Agent to
                  pay down Capital outstanding;

                           (L) TWELFTH, pro rata to each Hedge Counterparty, any
                  amounts owing that Hedge Counterparty under its respective
                  Hedging Agreement in respect of the termination of such
                  Hedging Agreement;

                           (M) THIRTEENTH, to the extent funds are available to
                  satisfy any unpaid Indemnified Amounts, amounts required to be
                  paid by the Seller pursuant to the indemnification provisions
                  of Section 8.1 and any other amounts due hereunder; and

                           (N) FOURTEENTH, (A) if such Payment Date occurs
                  during the Revolving Period, any remaining amount shall be
                  distributed to the Seller, and (B) if such Payment Date occurs
                  during the Amortization Period, to the Deal Agent in reduction
                  of the outstanding Capital to zero and the payment in full of
                  the Aggregate Unpaids.



                                       31
<PAGE>   37
         (b) On each Business Day during the Revolving Period, the Servicer may,
to the extent of any Principal Collections on deposit in the Collection Account
as of the last day of the related Collection Period, use such funds toward the
Purchase of Eligible Loans pursuant to item ELEVENTH in subsection (a) above.

         (c) Notwithstanding anything to the contrary contained in this Section
2.7 or any other provision in this Agreement, if on any Business Day during the
Revolving Period the aggregate outstanding amount of Capital shall exceed the
lesser of (i) the Purchase Limit or (ii) the Capital Limit, then the Seller
shall remit to the Deal Agent, prior to any reinvestment of funds as set forth
in item ELEVENTH of Section 2.7(a) and in any event no later than the close of
business of the Deal Agent on the next succeeding Business Day, a payment (to be
applied by the Deal Agent to outstanding Capital) in such amount as may be
necessary to reduce outstanding Capital to an amount less than or equal to the
lesser of (i) the Purchase Limit or (ii) the Capital Limit.

         (d) On each Business Day occurring during the Amortization Period, all
Principal Collections on deposit in the Collection Account as of such Business
Day shall be paid to the Deal Agent in reduction, to zero, of the outstanding
Capital and repayment in full of the Aggregate Unpaids.

         SECTION 2.8 [RESERVED]

         SECTION 2.9 SUBSTITUTION OF LOANS.

         On any day prior to the occurrence of an Early Amortization Event, the
Seller may, and upon the request of the Deal Agent shall, subject to the
conditions set forth in this Section 2.9, replace any Loan subject to a Warranty
Event or in respect of which the Obligor thereunder has requested the rewriting
and/or restructuring of such Loan with one or more other Loans (each, a
"Substitute Loan"), provided that no such replacement shall occur unless each of
the following conditions is satisfied as of the date of such replacement and
substitution:

         (a) the Loan to be replaced (i) is a Defaulted Loan, (ii) has suffered
a credit rating downgrading below 3 in accordance with the Servicer's internal
credit scoring system, or (iii) has experienced a decline in its fair market
value at least 25% compared to its Purchase Price;

         (b) the Seller has previously recommended to the Deal Agent (with a
copy to the Collateral Custodian) in writing that the Loan to be replaced should
be replaced (each a "Replaced Loan");

         (c) each Substitute Loan is an Eligible Loan on the date of
substitution having an approximate Outstanding Loan Balance equal to that of the
Replaced Loan (with any difference paid in cash);



                                       32
<PAGE>   38
         (d) after giving effect to any such substitution, the aggregate of all
outstanding Capital does not exceed the lesser of the (i) Purchase Limit and
(ii) the Capital Limit;

         (e) the aggregate Outstanding Loan Balance of such Substitute Loans
shall be equal to or greater than the lesser of (i) the aggregate Outstanding
Loan Balance of the Replaced Loans and (ii) the amount necessary to prevent the
occurrence of a Trigger Event;

         (f) all representations and warranties of the Seller contained in
Sections 4.1 and 4.2 shall be true and correct as of the date of substitution of
any such Substitute Loan;

         (g) the substitution of any Substitute Loan does not cause an Early
Amortization Event to occur; and

         (h) the Seller shall deliver to the Deal Agent on the date of such
substitution a certificate of a Responsible Officer certifying that each of the
foregoing is true and correct as of such date.

         In connection with any such substitution, the Deal Agent as agent for
the Secured Parties shall, automatically and without further action, be deemed
to transfer to the Seller, free and clear of any Lien created pursuant to this
Agreement, all of the right, title and interest of the Deal Agent as agent for
the Secured Parties in, to and under such Replaced Loans, and the Deal Agent as
agent for the Secured Parties shall be deemed to represent and warrant that it
has the corporate authority and has taken all necessary corporate action to
accomplish such transfer, but without any other representation and warranty,
express or implied. The Deal Agent, as agent for the Purchasers, shall, at the
sole expense of the Servicer execute such documents and instruments of transfer
as may be prepared by the Servicer on behalf of the Seller and take other such
actions as shall reasonably be requested by the Seller to effect the transfer of
such Replaced Loan pursuant to this Section. Any right of the Deal Agent as
agent for the Secured Parties to substitute any Loan in the Asset Pool pursuant
to this Section 2.9 shall be in addition to, and without limitation of, any
other rights and remedies that the Deal Agent as agent for the Secured Parties
or any Secured Party may have to require the Seller or the Servicer, as
applicable, to substitute for, or accept retransfer of; any Loan pursuant to the
terms of this Agreement.

         SECTION 2.10 COLLECTIONS AND ALLOCATIONS.

         The Servicer shall promptly (but in no event later than two (2)
Business Days after the receipt thereof) identify any Collections received by it
as being on account of Interest Collections or Principal Collections and deposit
all such Interest Collections or Principal Collections received directly by it
into the Collection Account (the "Collection Account"). The Servicer shall make
such deposits or payments by wire transfer, in immediately available funds.



                                       33
<PAGE>   39

     SECTION 2.11 PAYMENTS, COMPUTATION, ETC.

     (a) Unless otherwise expressly provided herein, all amounts to be paid or
deposited by the Seller or the Servicer hereunder shall be paid or deposited in
accordance with the terms hereof no later than 11:00 A.M. (Charlotte, North
Carolina time) on the day when due in lawful money of the United States in
immediately available funds to the Agent's Account. The Seller shall, to the
extent permitted by law, pay to the Secured Parties interest on all amounts not
paid or deposited when due hereunder at 1% per annum above the Base Rate,
payable on demand; provided, however, that such interest rate shall not at any
time exceed the maximum rate permitted by applicable law. Such interest shall be
retained by the Deal Agent except to the extent that such failure to make a
timely payment or deposit has continued beyond the date for distribution by the
Deal Agent of such overdue amount to the Secured Parties, in which case such
interest accruing after such date shall be for the account of, and distributed
by the Deal Agent to, the Secured Parties. All computations of interest and all
computations of Yield and other fees hereunder shall be made on the basis of a
year of 360 days for the actual number of days (including the first but
excluding the last day) elapsed.

     (b) Whenever any payment hereunder shall be stated to be due on a day other
than a Business Day, such payment shall be made on the next succeeding Business
Day, and such extension of time shall in such case be included in the
computation of payment of Yield, interest or any fee payable hereunder, as the
case may be.

     (c) If any Purchase or Incremental Purchase requested by the Seller and
approved by a Purchaser and the Deal Agent pursuant to Section 2.2, is not, for
any reason whatsoever related to a default or nonperformance by the Seller, made
or effectuated, as the case may be, on the date specified therefor, the Seller
shall indemnify such Purchaser against any reasonable loss, cost or expense
incurred by such Purchaser, including, without limitation, any loss (including
loss of anticipated profits, net of anticipated profits in the reemployment of
such funds in the manner determined by such Purchaser), cost or expense incurred
by reason of the liquidation or reemployment of deposits or other funds acquired
by such Purchaser to fund or maintain such Purchase or Incremental Purchase, as
the case may be, during such Fixed Period.

     SECTION 2.12 OPTIONAL REPURCHASE.

     At any time following the Termination Date when the Aggregate Outstanding
Loan Balance is less than ten percent of the Aggregate Outstanding Loan Balance
as of the Termination Date, the Servicer may notice the Deal Agent in writing of
its intent to purchase all remaining Assets in the Asset Pool, provided that all
Hedge Transactions have been terminated. On the Payment Date next succeeding any
such notice, the Servicer shall purchase all such Assets for a price equal to
the sum of the Aggregate Unpaids, including for illustrative purposes but not in
limitation, all Yield accrued and to accrue, as reasonably determined by the
Deal Agent, and all accrued and unpaid Commitment Fees, Backup Servicer Fees,
Custodial Fees, Increased Costs, Taxes, Hedge Breakage Costs, Breakage Costs and
any other amounts payable by the Seller hereunder or under or with respect to
any Hedging Agreement, and the proceeds of

                                       34
<PAGE>   40

such purchase will be deposited into the Collection Account and paid in
accordance with Section 2.9(b).

     SECTION 2.13 FEES.

     (a) FIB, in its individual capacity, shall pay to the Deal Agent from its
own funds on each Payment Date, monthly in arrears, a fee (the "Commitment
Fee"), as set forth in the Fee Letter.

     (b) The Seller shall pay to the Deal Agent, on each Payment Date, monthly
in arrears, a Program Fee (the "Program Fee"), as set forth in the Fee Letter.

     (c) The Servicer shall be entitled to receive out of Interest Collections a
fee (the "Servicing Fee"), monthly in arrears in accordance with Section 2.7(a),
which fee shall be equal to the product of (i) the Servicing Fee Rate and (ii)
the Aggregate Outstanding Loan Balance as of the close of business on the
immediately preceding Determination Date.

     (d) The Backup Servicer shall be entitled to receive the Backup Servicer
Fee in accordance with Section 2.7(a).

     (e) The Collateral Custodian shall be entitled to receive the Custodial Fee
in accordance with Section 2.7(a).

     (f) The Seller shall pay to the Deal Agent, on the Closing Date, the
Structuring Fee (net of any amounts previously paid) in immediately available
funds.

     SECTION 2.14 INCREASED COSTS; CAPITAL ADEQUACY; ILLEGALITY.

     (a) If either (i) the introduction of or any change (including, without
limitation, any change by way of imposition or increase of reserve requirements)
in or in the interpretation of any law or regulation or (ii) the compliance by a
Purchaser or any Affiliate thereof (each of which, an "Affected Party") with any
guideline or request from any central bank or other governmental agency or
authority (whether or not having the force of law), (a) shall subject an
Affected Party to any Tax (except for Taxes on the overall net income of such
Affected Party), duty or other charge with respect to an Asset Interest, or any
right to make Purchases hereunder, or on any payment made hereunder or (b) shall
impose, modify or deem applicable any reserve requirement (including, without
limitation, any reserve requirement imposed by the Board of Governors of the
Federal Reserve System, but excluding any reserve requirement, if any, included
in the determination of Yield), special deposit or similar requirement against
assets of, deposits with or for the amount of, or credit extended by, any
Affected Party or (c) shall impose any other condition affecting an Asset
Interest or a Purchaser's rights hereunder, the result of which is to increase
the cost to any Affected Party or to reduce the amount of any sum received or
receivable by an Affected Party under this Agreement, then within ten days after
demand by such Affected Party (which demand shall be accompanied by a statement
setting forth the basis

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<PAGE>   41

for such demand), the Seller shall pay directly to such Affected Party such
additional amount or amounts as will compensate such Affected Party for such
additional or increased cost incurred or such reduction suffered.

     (b) If either (i) the introduction of or any change in or in the
interpretation of any law, guideline, rule, regulation, directive or request or
(ii) compliance by any Affected Party with any law, guideline, rule, regulation,
directive or request from any central bank or other governmental authority or
agency (whether or not having the force of law), including, without limitation,
compliance by an Affected Party with any request or directive regarding capital
adequacy, has or would have the effect of reducing the rate of return on the
capital of any Affected Party as a consequence of its obligations hereunder or
arising in connection herewith to a level below that which any such Affected
Party could have achieved but for such introduction, change or compliance
(taking into consideration the policies of such Affected Party with respect to
capital adequacy) by an amount deemed by such Affected Party to be material,
then from time to time, within ten days after demand by such Affected Party
(which demand shall be accompanied by a statement setting forth the basis for
such demand), the Seller shall pay directly to such Affected Party such
additional amount or amounts as will compensate such Affected Party for such
reduction.

     (c) If as a result of any event or circumstance similar to those
described in clauses (a) or (b) of this section, and not in duplication of any
payments made under those clauses, any Affected Party is required to compensate
a bank or other financial institution providing liquidity support, credit
enhancement or other similar support to such Affected Party in connection with
this Agreement or the funding or maintenance of Purchases hereunder, then within
ten days after demand by such Affected Party, the Seller shall pay to such
Affected Party such additional amount or amounts as may be necessary to
reimburse such Affected Party for any amounts paid by it.

     (d) In determining any amount provided for in this section, the Affected
Party may use any reasonable averaging and attribution methods. Any Affected
Party making a claim under this section shall submit to the Seller a certificate
as to such additional or increased cost or reduction, which certificate shall be
conclusive absent demonstrable error.

     (e) If a Purchaser shall notify the Deal Agent that a Eurodollar Disruption
Event as described in clause (a) of the definition of "Eurodollar Disruption
Event" has occurred, the Deal Agent shall in turn so notify the Seller,
whereupon all Capital in respect of which Yield accrues at the Adjusted
Eurodollar Rate shall immediately be converted into Capital in respect of which
Yield accrues at the Base Rate.

     SECTION 2.15 TAXES.

     (a) All payments made by an Obligor in respect of a Loan and all payments
made by the Seller or the Servicer under this Agreement will be made free and
clear of and without deduction or withholding for or on account of any Taxes,
unless such withholding or deduction is

                                       36
<PAGE>   42

required by law. If withholding or deduction is required by law, the Obligor,
Seller, or Servicer (as the case may be) shall pay to the appropriate taxing
authority any such Taxes required to be deducted or withheld and the amount
payable to each Purchaser or the Deal Agent (as the case may be) will be
increased (such increase, the "Additional Amount") such that every net payment
made under this Agreement after deduction or withholding for or on account of
any Taxes (including, without limitation, any Taxes on such increase) is not
less than the amount that would have been paid had no such deduction or
withholding been deducted or withheld. The foregoing obligation to pay
Additional Amounts, however, will not apply with respect to net income or
franchise taxes imposed on a Purchaser or the Deal Agent, respectively, with
respect to payments required to be made by the Seller or Servicer under this
Agreement, by a taxing jurisdiction in which such Purchaser or Deal Agent is
organized, conducts business or is paying taxes as of the Closing Date (as the
case may be). If a Purchaser or the Deal Agent pays any Taxes in respect of
which the Seller is obligated to pay Additional Amounts under this Section
2.15(a), the Seller shall promptly reimburse such Purchaser or Deal Agent the
amount of such Additional Amounts.

     (b) The Seller will indemnify each Purchaser and the Deal Agent for the
full amount of Taxes in respect of which the Seller is required to pay
Additional Amounts (including, without limitation, any Taxes imposed by any
jurisdiction on such Additional Amounts) paid by such Purchaser or the Deal
Agent (as the case may be) and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto; provided, however, that
such Purchaser or the Deal Agent, as appropriate, making a demand for indemnity
payment shall provide the Seller, at its address set forth under its name on the
signature pages hereof, with a certificate from the relevant taxing authority or
from a responsible officer of such Purchaser or the Deal Agent stating or
otherwise evidencing that such Purchaser or the Deal Agent has made payment of
such Taxes and will provide a copy of or extract from documentation, if
available, furnished by such taxing authority evidencing assertion or payment of
such Taxes. This indemnification shall be made within ten days from the date the
Purchaser or the Deal Agent (as the case may be) makes written demand therefor.

     (c) Within 30 days after the date of any payment by the Seller of any
Taxes, the Seller will furnish to the Deal Agent, at its address set forth under
its name on the signature pages hereof, appropriate evidence of payment thereof.

     (d) If a Purchaser is not created or organized under the laws of the United
States or a political subdivision thereof; such Purchaser shall, to the extent
that it may then do so under applicable laws and regulations, deliver to the
Seller with a copy to the Deal Agent (i) within 15 days after the date hereof,
or, if later, the date on which such Purchaser becomes a Purchaser hereof two
(or such other number as may from time to time be prescribed by applicable laws
or regulations) duly completed copies of IRS Form 4224 or Form 1001 (or any
successor forms or other certificates or statements which may be required from
time to time by the relevant United States taxing authorities or applicable laws
or regulations), as appropriate, to permit the Seller to make payments hereunder
for the account of such Purchaser, as the case may be, without deduction or
withholding of United States federal income or similar Taxes and (ii) upon the
obsolescence of or after the occurrence of any event requiring a change in, any
form or certificate

                                       37
<PAGE>   43

previously delivered pursuant to this Section 2.15(d), copies (in such numbers
as may from time to time be prescribed by applicable laws or regulations) of
such additional, amended or successor forms, certificates or statements as may
be required under applicable laws or regulations to permit the Seller to make
payments hereunder for the account of such Purchaser, without deduction or
withholding of United States federal income or similar Taxes.

     (e) For any period with respect to which a Purchaser or the Deal Agent has
failed to provide the Seller with the appropriate form, certificate or statement
described in clause (d) of this section (other than if such failure is due to a
change in law occurring after the date of this Agreement), the Deal Agent or
such Purchaser, as the case may be shall not be entitled to indemnification
under clauses (a) or (b) of this section with respect to any Taxes.

     (f) Within 30 days of the written request of the Seller therefor, the Deal
Agent and the Purchasers, as appropriate, shall execute and deliver to the
Seller such certificates forms or other documents which can be furnished
consistent with the facts and which are reasonably necessary to assist the
Seller in applying for refunds of Taxes remitted hereunder, provided, however,
that the Deal Agent and the Purchasers shall not be required to deliver such
certificates forms or other documents if in their respective sole discretion it
is determined that the deliverance of such certificate, form or other document
would have a material adverse effect on the Deal Agent or any Purchaser and
provided further, however, that the Seller shall reimburse the Deal Agent or any
such Purchaser for any reasonable expenses incurred in the delivery of such
certificate, form or other document.

     (g) If, in connection with an agreement or other document providing
liquidity support, credit enhancement or other similar support to the Purchasers
in connection with this Agreement or the funding or maintenance of Purchases
hereunder, the Purchasers are required to compensate a bank or other financial
institution in respect of Taxes under circumstances similar to those described
in this section then within ten days after demand by the Purchasers, the Seller
shall pay to the Purchasers such additional amount or amounts (without
duplication) as may be necessary to reimburse the Purchasers for any amounts
paid by them.

     (h) Without prejudice to the survival of any other agreement of the Seller
hereunder, the agreements and obligations of the Seller contained in this
section shall survive the termination of this Agreement.

     SECTION 2.16 ASSIGNMENT OF THE PURCHASE AGREEMENT.

     The Seller hereby represents, warrants and confirms to the Deal Agent that
the Seller has assigned to the Deal Agent, for the ratable benefit of the
Secured Parties hereunder, all of the Seller's right and title to and interest
in the Purchase Agreement. The Seller confirms that following an Early
Amortization Event the Deal Agent shall have the sole right to enforce the
Seller's rights and remedies under the Purchase Agreement for the benefit of the
Secured Parties, but without any obligation on the part of the Deal Agent, the
Purchasers or any of their respective Affiliates, to perform any of the
obligations of the Seller under the Purchase Agreement. The

                                       38
<PAGE>   44

Seller further confirms and agrees that such assignment to the Deal Agent shall
terminate upon the Collection Date; provided, however, that the rights of the
Deal Agent and the Secured Parties pursuant to such assignment with respect to
rights and remedies in connection with any indemnities and any breach of any
representation, warranty or covenants made by the Originator pursuant to the
Purchase Agreement, which rights and remedies survive the termination of the
Purchase Agreement, shall be continuing and shall survive any termination of
such assignment.


                                   ARTICLE III

                  CLOSING; CONDITIONS OF CLOSING AND PURCHASES

     SECTION 3.1 CONDITIONS TO CLOSING AND INITIAL PURCHASE.

     The initial Purchase hereunder is subject to the conditions precedent
listed in Schedule I, each of which shall have been satisfied or waived, in the
Deal Agent's and the Purchasers' sole discretion, on or before the Closing Date
(unless otherwise indicated), in form and substance satisfactory to the Deal
Agent and the Purchasers.

     SECTION 3.2 CONDITIONS PRECEDENT TO ALL PURCHASES AND REMITTANCES OF
COLLECTIONS.

     Each Purchase (including the Initial Purchase) from the Seller by a
Purchaser, the right of the Servicer to remit Collections to the Seller pursuant
to Section 2.7(b) and each Incremental Purchase (each, a "Transaction") shall be
subject to the further conditions precedent that (a) with respect to any
Purchase (including the Initial Purchase) or Incremental Purchase, the Servicer
shall have delivered to the Deal Agent, at least one (1) Business Day prior to
the initial Purchase and at least five (5) Business Days prior to the date of
any Incremental Purchase in form and substance satisfactory to the Deal Agent,
(i) a Purchase Notice (Exhibit A), (ii) a Purchase Certificate (Exhibit H), and
(iii) a Certificate of Assignment (Exhibit A to the Purchase Agreement)
including Schedule I thereto and such additional information as may be
reasonably requested by the Deal Agent; (b) on the date of such Transaction the
following statements shall be true and the Seller shall be deemed to have
certified that:

          (i) The representations and warranties contained in Sections 4.1 and
     4.2 are true and correct on and as of such day as though made on and as of
     such date;

          (ii) No event has occurred and is continuing, or would result from
     such Transaction, that constitutes an Early Amortization Event;

          (iii) on and as of such day, after giving effect to such Transaction,
     the outstanding Capital does not exceed the lesser of (x) the Purchase
     Limit, or (y) the Capital Limit;


                                       39
<PAGE>   45


          (iv) on and as of such day, the seller and the servicer each has
     performed all of the agreements contained in this Agreement to be performed
     by such person at or prior to such day;

          (v) no law or regulation shall prohibit, and no order, judgment or
     decree of any federal, state or local court or governmental body, agency or
     instrumentality shall prohibit or enjoin, the making of such Purchase,
     remittance of Collections or Incremental Purchase by the Purchaser in
     accordance with the provisions hereof;

          (vi) no servicer termination event shall have occurred;

     (c) The Commitment Termination Date shall not have occurred;

     (d) There shall have been no material adverse change in the condition
(financial or otherwise), business, operations, results of operations, or
properties of the Originator or the Seller since the preceding Purchase; and

     (e) The Originator and Seller shall have taken such other action, including
delivery of approvals, consents, opinions, documents, and instruments to the
Purchasers and the Deal Agent as each may reasonably request.


                                   ARTICLE IV

                         REPRESENTATIONS AND WARRANTIES

     SECTION 4.1 REPRESENTATIONS AND WARRANTIES OF THE SELLER.

     The Seller represents and warrants as follows:

     (a) Organization and Good Standing. The Seller is a corporation organized,
validly existing, and in good standing under the laws of the jurisdiction of its
formation, and has full corporate power, authority and legal right to own or
loan its properties and conduct its business as such properties are presently
owned or loaned and such business is presently conducted, and to execute,
deliver and perform its obligations under this Agreement and the Purchase
Agreement.

     (b) Due Qualification. The Seller is duly qualified to do business and is
in good standing as a corporation, and has obtained or will obtain all necessary
licenses and approvals, in each jurisdiction in which the nature of its business
requires it to be so qualified.

     (c) Due Authorization. The execution and delivery of this Agreement and the
Purchase Agreement and the consummation of the transactions provided for herein
and therein have been duly authorized by the Seller by all necessary corporate
action on the part of the Seller.



                                       40
<PAGE>   46

     (d) No Conflict. The execution and delivery of this Agreement and the
Purchase Agreement, the performance by the Seller of the transactions
contemplated hereby and thereby and the fulfillment of the terms hereof and
thereof will not conflict with or result in any breach of any of the material
terms and provisions of, and will not constitute (with or without notice or
lapse of time or both) a default under, any indenture, contract, agreement,
mortgage, deed of trust, or other instrument to which the Seller is a party or
by which it or any of its property is bound.

     (e) No Violation. The execution and delivery of this Agreement and
the Purchase Agreement, the performance of the transactions contemplated hereby
and thereby and the fulfillment of the terms hereof and thereof will not
conflict with or violate, in any material respect, any Requirements of Law
applicable to the Seller.

     (f) No Proceedings. There are no proceedings or investigations pending or,
to the best knowledge of the Seller, threatened against the Seller, before any
Governmental Authority (i) asserting the invalidity of this Agreement or the
Purchase Agreement, (ii) seeking to prevent the consummation of any of the
transactions contemplated by this Agreement or the Purchase Agreement or (iii)
seeking any determination or ruling that could reasonably be expected to be
adversely determined, and if adversely determined, would materially and
adversely affect the performance by the Seller of its obligations under this
Agreement or the Purchase Agreement.

     (g) All Consents Required. All approvals, authorizations, consents, orders
or other actions of any Person or of any Governmental Authority required in
connection with the execution and delivery by the Seller of this Agreement and
the Purchase Agreement, the performance by the Seller of the transactions
contemplated by this Agreement and the Purchase Agreement, and the fulfillment
of the terms hereof and thereof by the Seller, have been obtained, unless the
failure to obtain such shall not materially and adversely affect the Seller's
performance of its obligations under this Agreement or under the Purchase
Agreement.

     (h) Bulk Sales. The execution, delivery and performance of this Agreement
do not require compliance with any "bulk sales" law by Seller.

     (i) Solvency. The transactions under this Agreement and Purchase Agreement
do not and will not render the Seller not Solvent.

     (j) Selection Procedures; Credit and Collection Policies. No procedures
believed by the Seller to be materially adverse to the interests of VFCC or the
Purchasers were utilized by the Seller in identifying and/or selecting the Loans
that are in the Asset Pool. In addition, each Loan shall comply in all respects
with the Credit and Collection Policies.

     (k) Taxes. The Seller has filed or caused to be filed all Tax returns
which, to its knowledge, are required to be filed. The Seller has paid or made
adequate provisions for the payment of all Taxes and all assessments made
against it or any of its property (other than any

                                       41
<PAGE>   47

amount of Tax the validity of which is currently being contested in good faith
by appropriate proceedings and with respect to which reserves in accordance with
generally accepted accounting principles have been provided on the books of the
Seller), and no Tax lien has been filed and, to the Seller's knowledge, no claim
is being asserted, with respect to any such Tax, fee or other charge.

     (l) Agreements Enforceable. This Agreement and the Purchase Agreement
constitute the legal, valid and binding obligation of the Seller enforceable
against the Seller in accordance with their respective terms, except as such
enforceability may be limited by Insolvency Laws and except as such
enforceability may be limited by general principles of equity (whether
considered in a suit at law or in equity).

     (m) Exchange Act Compliance. No proceeds of any Purchase will be used by
the Seller to acquire any security in any transaction which is subject to
Section 13 or 14 of the Securities Exchange Act of 1934, as amended.

     (n) No Liens. Each Asset, together with the Loan Documents related thereto,
shall, at all times, be owned by the Seller free and clear of any Adverse Claim
except as provided herein, and upon each Purchase, Incremental Purchase or
remittance of Collections, the relevant Secured Party shall acquire (subject to
recordation where necessary) a valid and perfected first priority undivided
ownership interest in each Asset then existing or thereafter arising and
Collections with respect thereto, free and clear of any Adverse Claim except as
provided hereunder. No effective financing statement or other instrument similar
in effect covering any Asset or Collections shall at any time be on file in any
recording office except such as may be filed in favor of the Deal Agent relating
to this Agreement.

     (o) Reports Accurate. No Monthly Report (if prepared by the Seller, or to
the extent that information contained therein is supplied by the Seller),
information, exhibit, financial statement, document, book, record or report
furnished or to be furnished by the Seller to the Deal Agent or a Purchaser in
connection with this Agreement is or will be inaccurate in any material respect
as of the date it is or shall be dated or (except as otherwise disclosed to the
Deal Agent or such Purchaser, as the case may be, at such time) as of the date
so furnished.

     (p) Location of Offices. The principal place of business and chief
executive office of the Seller and the office where the Seller keeps all the
Records is located at the address of the Seller referred to in Section 11.2
hereof (or at such other locations as to which the notice and other requirements
specified in Section 5.2(1) shall have been satisfied).

     (q) Tradenames. Except as described in Schedule III, the Seller has no
trade names, fictitious names, assumed names or "doing business as" names or
other names under which it has done or is doing business.

     (r) Purchase Agreement. The Purchase Agreement is the only agreement
pursuant to which the Seller purchases Assets.

                                       42
<PAGE>   48

     (s) Value Given. The Seller shall have given reasonably equivalent value to
the Originator in consideration for the transfer to the Seller of the Assets
under the Purchase Agreement, no such transfer shall have been made for or on
account of an antecedent debt owed by the Originator to the Seller, and no such
transfer is or may be voidable or subject to avoidance under any section of the
Bankruptcy Code; no event or circumstance has occurred that would constitute an
Early Amortization Event.

     (t) Special Purpose Entity. The Certificate of Incorporation of the Seller
includes substantially the provisions set forth on Exhibit C hereto, and the
Originator has confirmed in writing to the Seller that, so long as the Seller is
not "insolvent" within the meaning of the Bankruptcy Code, the Originator will
not cause the Seller to file a voluntary petition under the Bankruptcy Code or
any other Insolvency Laws. Each of the Seller and the Originator is aware that
in light of the circumstances described in the preceding sentence and other
relevant facts, the filing of a voluntary petition under the Bankruptcy Code for
the purpose of making the assets of the Seller available to satisfy claims of
the creditors of the Originator would not result in making such assets available
to satisfy such creditors under the Bankruptcy Code.

     (u) Accounting. The Seller accounts for the transfers to it from the
Originator of interests in Assets and Collections under the Purchase Agreement
as sales of such Asset Interests in its books, records and financial statements,
in each case consistent with GAAP and with the requirements set forth herein.

     (v) Separate Entity. The Seller is operated as an entity with assets and
liabilities distinct from those of the Originator and any Affiliates thereof
(other than the Seller), and the Seller hereby acknowledges that the Deal Agent
and the Purchasers are entering into the transactions contemplated by this
Agreement in reliance upon the Seller's identity as a separate legal entity from
the Originator and from each such other Affiliate of the Originator.

     (w) Security Interest. The Seller has granted a security interest (as
defined in the UCC) to the Deal Agent, as agent for the Secured Parties, in the
Assets and Collections, which is enforceable in accordance with applicable law
upon execution and delivery of this Agreement. Upon the making of each Purchase,
the Deal Agent, as agent for the Secured Parties, shall have acquired a first
priority perfected security interest in Assets and Collections as may be
perfected under the UCC by filing a financing statement or the delivery of
possession (except for any Permitted Liens). All filings (including, without
limitation, such UCC filings) as are necessary in any Jurisdiction to perfect
the interest of the Deal Agent as agent for the Secured Parties, in the Assets
and Collections have been (or prior to the applicable Purchase will be) made.

     (x) Investments. The Seller does not own or hold directly or indirectly,
any capital stock or equity security of, or any equity interest in, any Person.



                                       43
<PAGE>   49

     (y) Business. Since its formation, the Seller has conducted no business
other than the sale of Assets from the Originator under the Purchase Agreement,
the sale of Assets under this Agreement and such other activities as are
incidental to the foregoing.

     (z) Investment Company Act.

          (i) The Seller represents and warrants that the Seller has never been,
     is not now, and will not in the future be operated in such a manner as to
     cause the Seller to be an "investment company," as such term is defined in
     Section 3 of the Investment Company Act of 1940, as amended (the "1940
     Act");

          (ii) The Seller represents and warrants that the business and other
     activities of the Seller, including but not limited to, the sale of the
     Asset Interests to the Purchasers the application and use of the proceeds
     thereof by the Seller and the consummation and conduct of the transactions
     contemplated by the Transaction Documents to which the Seller is a party
     (a) do now and will in the future comply in all respects with the
     provisions of Rule 3a-7 promulgated under the 1940 Act; and (b) do not now
     and will not in the future result in a violation by the Seller, the
     Servicer or any other person or entity of the 1940 Act or the rules and
     regulations promulgated thereunder.

     (aa) Lock-Boxes. The names and addresses of all the Lock-Box Banks,
together, with the account numbers of the Lock-Box Accounts of the Seller at
such Lock-Box Banks and the names, addresses and account numbers of all accounts
to which Collections of the Assets outstanding before the initial Purchase
hereunder have been sent, are specified in Schedule VI (which shall be deemed to
be amended in respect of terminating or adding any Lock-Box Account or Lock-Box
Bank upon satisfaction of the notice and other requirements specified in respect
thereof).

     (bb) FIB Existing Account. All Collections in the FIB Existing Account are
free and clear of any Adverse Claim. As long as any Collections are held
therein, no effective financing statement or other instruments similar in effect
shall at any time be on file in any recording office with respect to the FIB
Existing Account except such as may be filed in favor of the Deal Agent relating
to this Agreement.

     (cc) Accuracy of Representations and Warranties. Each representation or
warranty by the Seller contained herein or in any certificate or other document
furnished by the Seller pursuant hereto or in connection herewith is true and
correct in all material respects.

     The representations and warranties set forth in this section shall survive
the transfer of the Assets to the Deal Agent as agent for the Secured Parties.
Upon discovery by the Seller, the Servicer, any Secured Party, the Liquidity
Agent or the Deal Agent of a breach of any of the foregoing representations and
warranties, the party discovering such breach shall give prompt written notice
to the others.



                                       44
<PAGE>   50

     SECTION 4.2    REPRESENTATIONS AND WARRANTIES OF SELLER RELATING TO THE
                    AGREEMENT AND THE LOANS.

     The Seller hereby represents and warrants to the Deal Agent, each Secured
Party, the Liquidity Agent and each Investor that, as of the Closing Date and as
of each Purchase Date:

     (a) Binding Obligation, Valid Transfer and Security Interest.

          (i) This Agreement and the Purchase Agreement each constitute legal,
     valid and binding obligations of the Seller, enforceable against the Seller
     in accordance with its respective terms, except as such enforceability may
     be limited by Insolvency Laws and except as such enforceability may be
     limited by general principles of equity (whether considered in a suit at
     law or in equity).

          (ii) This Agreement constitutes either (A) a valid transfer to the
     Deal Agent as agent for the Secured Parties of all right, title and
     interest of the Seller in, to and under all Assets in the Asset Pool to the
     extent of the Asset Interest, and such transfer will be free and clear of
     any Lien of any Person claiming through or under the Seller or its
     Affiliates, except for Permitted Liens, or (B) a grant of a security
     interest in all Assets in the Asset Pool to the Deal Agent as agent for the
     Secured Parties. In connection with the foregoing clause (B), upon the
     filing of the financing statements described in Section 6.9(c) the Deal
     Agent as agent for the Secured Parties shall have a first priority
     perfected security interest in such Assets in the Asset Pool as may be
     perfected under the UCC by filing a financing statement or the delivery of
     possession, subject only to Permitted Liens. Neither the Seller nor any
     Person claiming through or under the Seller shall have any claim to or
     interest in the Collection Account, except, if this Agreement is deemed to
     grant a security interest in such property, for the interest of the Seller
     in such property as a debtor for purposes of the UCC.

     (b) Eligibility of Loans. As of the later of the Closing Date or the
initial Purchase Date, (i) Schedule IV to this Agreement and the information
contained in the Notice of Sale and Purchase Certificate delivered pursuant to
Section 2.2 is an accurate and complete listing in all material respects of all
the Loans that are in the Asset Pool as of such date and the information
contained therein with respect to the identity of such Loans and the amounts
owing thereunder is true and correct in all material respects as of such date,
(ii) each such Loan is an Eligible Loan, (iii) each such Loan and the Related
Property is free and clear of any Lien of any Person (other than Permitted
Liens) and in compliance with all Requirements of Law applicable to the Seller
and/or the Originator and (iv) with respect to each such Loan, all consents,
licenses, approvals or authorizations of or registrations or declarations with
any Governmental Authority required to be obtained, effected or given by the
Seller in connection with the transfer of an interest in such Loan and the
Related Property to the Deal Agent, as agent for the Secured Parties, have been
duly obtained, effected or given and are in full force and effect. On each
Purchase Date, the Seller shall be deemed to represent and warrant that (i)
Additional Loan referenced on the related Seller Notice delivered pursuant to
Section 2.2 is an Eligible Loan, (ii) each such Loan and the

                                       45
<PAGE>   51

related Property is free and clear of any Lien of any Person (other than
Permitted Liens) and in compliance with all Requirements of Law applicable to
Seller and/or the Originator, (iii) with respect to each such Loan, all
consents, licenses, approvals, authorizations, registrations or declarations
with any Governmental Authority required to be obtained, effected or given by
the Seller in connection with the addition of such Loan and the Related Property
to the Asset Pool have been duly obtained, effected or given and are in full
force and effect and (iv) the representations and warranties set forth in
Section 4.2(a) are true and correct with respect to each Loan transferred on
such day as if made on such day.

     (c) Notice of Breach. The representations and warranties set forth in this
Section 4.2 shall survive the transfer of an interest in the respective Assets
to the Deal Agent as agent for the Secured Parties. Upon discovery by the
Seller, the Servicer, any Secured Party, the Deal Agent, the Liquidity Agent of
any Investor of a breach of any of the foregoing representations and warranties,
the party discovering such breach shall give prompt written notice to the
others.


     SECTION 4.3    REPRESENTATIONS AND WARRANTIES OF THE SELLER RELATING TO THE
                    PURCHASE LIMIT AND CAPITAL LIMIT.

     The Seller is hereby deemed to represent and warrant that on each day prior
to the Termination Date, the amount of Capital outstanding on such day shall not
exceed the lesser of (x) the Purchase Limit or (y) the Capital Limit.


                                    ARTICLE V

                         GENERAL COVENANTS OF THE SELLER


     SECTION 5.1.   GENERAL COVENANTS.

     Until the date on which all Aggregate Unpaids have been indefeasibly paid
in full, the Seller hereby covenants that it will comply in all material
respects with all applicable laws, rules, regulations and orders and preserve
and maintain its corporate existence, rights, franchises, qualifications and
privileges the loss of which rights, franchises, qualifications and privileges
would have a material adverse effect on the Seller.

     SECTION 5.2.   COVENANTS OF SELLER.

     The Seller hereby covenants that:

     (a) Security Interests. Except as contemplated in this Agreement, the
Seller will not sell, pledge, assign or transfer to any other Person, or grant,
create, incur, assume or suffer to exist any Lien on any Loan or Related
Property that is in the Asset Pool, whether now existing or hereafter
transferred hereunder, or any interest therein, and the Seller will not sell,
pledge, assign or suffer to exist any Lien on its interest, if any, hereunder.
The Seller will promptly notify the

                                       46
<PAGE>   52

Deal Agent of the existence of any Lien on any Loan or Related Property that is
in the Asset Pool and the Seller shall defend the right, title and interest of
the Deal Agent as agent for the Secured Parties in, to and under any Loan and
the Related Property that is in the Asset Pool, against all claims of third
parties, provided, however, that nothing in this Section 5.2(a) shall prevent or
be deemed to prohibit the Seller from suffering to exist Permitted Liens upon
any Loan or any Related Property that is in the Asset Pool.

     (b) Delivery of Collections. The Seller agrees to pay to the Servicer
promptly (but in no event later than two Business Days after receipt) all
Collections (including any Deemed Collections) received by Seller in respect of
the Loans that are in the Asset Pool.

     (c) Compliance with the Law. The Seller hereby agrees to comply in all
respects with all Requirements of Law applicable to the Seller, the Loans that
are in the Asset Pool and the Related Property, if the failure to do so would
have a material adverse effect on the Seller, the Loans that are in the Asset
Pool or the Related Property.

     (d) Activities of Seller. The Seller shall not engage in any business or
activity of any kind, or enter into any transaction or indenture, mortgage,
instrument, agreement, contract, lease or other undertaking, which is not
authorized by or related to the transactions contemplated by the Transaction
Documents.

     (e) Indebtedness. The Seller shall not create, incur, assume or suffer to
exist any Indebtedness or other liability whatsoever, except (i) obligations
incurred under this Agreement or the Purchase Agreement and instruments related
thereto, or under any Hedging Agreement required by Section 5.4(a), or (ii)
liabilities incident to the maintenance of its corporate existence in good
standing.

     (f) Guarantees. The Seller shall not become or remain liable, directly or
indirectly, in connection with any Indebtedness or other liability of any other
Person, whether by guarantee, endorsement (other than endorsements of negotiable
instruments for deposit or collection in the ordinary course of business),
agreement to purchase or repurchase, agreement to supply or advance funds, or
otherwise.

     (g) Investments. The Seller shall not make or suffer to exist any loans or
advances to, or extend any credit to, or make any investments (by way of
transfer of property, contributions to capital, purchase of stock or securities
or evidences of indebtedness, acquisition of the business or assets, or
otherwise) in, any Person except for purchases of Loans and other Assets
pursuant to the Purchase Agreement, or for investments in Permitted Investments
in accordance with the terms of this Agreement.

     (h) Merger Sales. The Seller shall not enter into any transaction of merger
or consolidation, or liquidate or dissolve itself (or suffer any liquidation or
dissolution), or acquire or be acquired by any Person, or convey, sell, lease or
otherwise dispose of all or substantially all of its property or business,
except as provided for in this Agreement.


                                       47
<PAGE>   53



     (i) Distributions. The Seller may, provided it is in compliance with any
applicable State laws and no Early Amortization Event has occurred or will occur
as a result thereof, declare or pay, directly or indirectly, any dividend or
make any other distribution (whether in cash or other property) with respect to
the profits, assets or capital of the Seller or any Person's interest therein,
or purchase, redeem or otherwise acquire for value any of its capital stock now
or hereafter outstanding.

     (j) Agreements. The Seller shall not become a party to, or permit any of
its properties to be bound by, any indenture, mortgage, instrument, contract,
agreement, lease or other undertaking, except this Agreement, the Purchase
Agreement and any Hedging Agreement or amend or modify the provisions of its
operating agreement, without the consent of the Deal Agent, or issue any power
of attorney except to the Deal Agent or the Servicer.

     (k) Separate Corporate Existence. The Seller shall:

          (i) Maintain its own deposit account or accounts, separate from those
     of any Affiliate, with commercial banking institutions. The funds of the
     Seller will not be diverted to any other Person or for other than corporate
     uses of the Seller.

          (ii) Ensure that, to the extent that it shares the same officers or
     other employees as any of its stockholders or Affiliates, the salaries of
     and the expenses related to providing benefits to such officers and other
     employees shall be fairly allocated among such entities, and each such
     entity shall bear its fair share of the salary and benefit costs associated
     with all such common officers and employees.

          (iii) Ensure that, to the extent that it jointly contracts with any of
     its stockholders or Affiliates to do business with vendors or service
     providers or to share overhead expenses, the costs incurred in so doing
     shall be allocated fairly among such entities, and each such entity shall
     bear its fair share of such costs. To the extent that the Seller contracts
     or does business with vendors or service providers when the goods and
     services provided are partially for the benefit of any other Person, the
     costs incurred in so doing shall be fairly allocated to or among such
     entities for whose benefit the goods and services are provided, and each
     such entity shall bear its fair share of such costs. All material
     transactions between Seller and any of its Affiliates shall be only on an
     arm's length basis.

          (iv) Maintain a principal executive and administrative office through
     which its business is conducted separate from those of its Affiliates. To
     the extent that Seller and any of its stockholders or Affiliates have
     offices in the same location, there shall be a fair and appropriate
     allocation of overhead costs among them, and each such entity shall bear
     its fair share of such expenses.



                                       48
<PAGE>   54



          (v) Conduct its affairs strictly in accordance with its Certificate of
     Incorporation and observe all necessary, appropriate and customary
     corporate formalities, including, but not limited to, holding all regular
     and special stockholders, and directors' meetings appropriate to authorize
     all corporate action, keeping separate and accurate minutes of its
     meetings, passing all resolutions or consents necessary to authorize
     actions taken or to be taken, and maintaining accurate and separate books,
     records and accounts, including, but not limited to, payroll and
     intercompany transaction accounts.

          (vi) Take or refrain from taking, as applicable, each of the
     activities specified in the "non-consolidation" opinion of Bingham Dana LLP
     delivered on the Closing Date, upon which the conclusions expressed therein
     are based.

     (l) Location of Seller Records Instruments. The Seller (x) shall not move
the location of its principal executive office, without 30 days' prior written
notice to the Deal Agent and (y) shall not move, or consent to the Servicer or
Collateral Custodian moving, the Loan Documents without 30 days' prior written
notice to the Deal Agent and (z) will promptly take all actions required of each
relevant jurisdiction in order to continue the first priority perfected security
interest of the Deal Agent as agent for the Secured Parties (except for
Permitted Liens) in all Assets in the Asset Pool, including delivery of an
opinion of counsel acceptable to the Deal Agent.

     (m) ERISA Matters. The Seller will not (a) engage or permit any ERISA
Affiliate to engage in any prohibited transaction for which an exemption is not
available or has not previously been obtained from the United States Department
of Labor; (b) permit to exist any accumulated funding deficiency, as defined in
Section 302(a) of ERISA and Section 412(a) of the Code, or funding deficiency
with respect to any Benefit Plan other than a Multiemployer Plan; (c) fail to
make any payments to a Multiemployer Plan that the Seller or any ERISA Affiliate
may be required to make under the agreement relating to such Multiemployer Plan
or any law pertaining thereto; (d) terminate any Benefit Plan so as to result in
any liability; or (e) permit to exist any occurrence of any reportable event
described in Title IV of ERISA.

     (n) Originator Assets. With respect to each Asset acquired by the Seller,
the Seller will (i) acquire such Asset pursuant to and in accordance with the
terms of the Purchase Agreement, (ii) take all action necessary to perfect,
protect and more fully evidence the Seller's ownership of such Asset, including,
without limitation, (a) filing and maintaining, effective financing statements
(Form UCC-l) against the Originator in all necessary or appropriate filing
offices, and filing continuation statements, amendments or assignments with
respect thereto in such filing offices and (b) executing or causing to be
executed such other instruments or notices as may be necessary or appropriate,
(iii) perform in accordance with those terms of the Assets requiring performance
thereof by the Seller, and (vi) take all additional action that the Deal Agent
may reasonably request to perfect, protect and more fully evidence the
respective interests of the parties to this Agreement in the Assets and interest
therein represented by the Asset Interests.


                                       49
<PAGE>   55


     (o) Transactions with Affiliates. The Seller will not enter into, or be a
party to, any transaction with any of its Affiliates, except (i) the
transactions permitted or contemplated by this Agreement, the Purchase Agreement
and any Hedging Agreements and (ii) other transactions (including, without
limitation, the lease of office space or computer equipment or software by the
Seller to or from an Affiliate) (A) in the ordinary course of business, (B)
pursuant to the reasonable requirements of the Seller's business, (C) upon fair
and reasonable terms that are no less favorable to the Seller than could be
obtained in a comparable arm's-length transaction with a Person not an Affiliate
of the Seller, and (D) not inconsistent with the factual assumptions set forth
in the "non-consolidation" legal opinion letter issued by Bingham Dana LLP and
delivered to the Deal Agent as a condition to the initial Purchase, as such
assumptions may be modified in any subsequent opinion letters delivered to the
Deal Agent pursuant to Section 3.2 or otherwise. It is understood that any
compensation arrangement for officers shall be permitted under clause (ii)(A)
through (C) above if such arrangement has been expressly approved by the board
of directors of the Seller.

     (p) Change in the Purchase Agreement. The Seller will not amend, modify,
waive or terminate any terms or conditions of the Purchase Agreement, without
the consent of Deal Agent.

     (q) Amendment to Certificate of Incorporation. The Seller will not amend,
modify or otherwise make any change to its Certificate of Incorporation which
would delete or otherwise nullify or circumvent the provisions set forth on
Exhibit C hereto.

     (r) Credit and Collection Policies. The Seller shall take all actions
necessary to comply with the terms of the Credit and Collection Policies, and
the Seller shall not cause or permit any changes to be made to the Credit and
Collection Policies in any manner that would materially and adversely affect the
collectibility of the Loans that are in the Asset Pool without the prior written
consent of the Deal Agent.

     (s) Accounting of Purchases. Other than for federal, state and local income
tax purposes, the Seller will not account for or treat (whether in financial
statements or otherwise) the transactions contemplated hereby in any manner
other than as the sale, or absolute assignment, of Assets by the Seller to a
Purchaser. The Seller will not account for or treat (whether in financial
statements or otherwise) the transaction contemplated by the Purchase Agreement
in any manner other than as the sale, or absolute assignment, of the Originator
Assets by the Originator to the Seller, as the case may be.

     (t) AIG Policy, AIG 2 Policy and Ex-Im Policy. If any AIG Loans, AIG 2
Loans, or Ex-Im 2 Loans are outstanding, (i) on or before the expiration of the
then existing AIG Policy, AIG Policy 2 or Ex-Im Policy, as applicable, the
Seller will deliver to the Deal Agent a copy of a renewal or replacement AIG
Policy, AIG Policy 2 or Ex-Im Policy, as applicable, showing the Seller as an
insured and the Deal Agent as loss payee, and the Seller will notify the Deal
Agent on or before such expiration date of any Obligor under an AIG Loan, AIG 2
Loan or Ex-Im 2 Loan, as applicable, that has been excluded from policy coverage
upon such renewal or replacement; (ii) the Seller will comply with all
warranties, covenants and agreements of the

                                       50
<PAGE>   56

"Insured" under the AIG Policy, AIG Policy 2 or Ex-Im Policy, as applicable;
(iii) the Seller will cooperate with the Servicer and take all actions
reasonably required by the Servicer to collect amounts due under the AIG Policy,
AIG Policy 2 or Ex-Im Policy, as applicable and (iv) either (a) the FIB Bond
will have been pledged to the Deal Agent to cover the deductible under the AIG
Policy and AIG Policy 2 or (b) amounts sufficient to cover the deductible amount
of the AIG Policy or AIG Policy 2 will be on deposit in the Cash Collateral
Account, as applicable.

     (u) FIB Existing Account/Establishment of Lock-Box Account. As long as any
Collections are held therein, the Seller will not grant, create, incur or suffer
to exist any Adverse Claim with respect to the Collections in the FIB Existing
Account. The Seller will promptly notify the Deal Agent of the existence of any
Adverse Claim with respect to any Collections in the FIB Existing Account and
the Seller shall defend the right, title and interest of the Deal Agent as agent
for the Secured Parties in such Collections against all claims of third parties.
Upon the request of the Deal Agent, the Seller shall cause a Lock-Box Account to
be established within five (5) Business Days and shall promptly transfer all
Collections in the FIB Existing Account into such Lock-Box Account.

     SECTION 5.3 RELEASE OF LIEN.

         At the same time as (i) any Loan in the Asset Pool expires by its terms
and all amounts in respect thereof have been paid by the related Obligor and
deposited in the Collection Account or (ii) any Loan becomes a Prepaid Loan and
all amounts in respect thereof have been paid by the related Obligor and
deposited in the Collection Account, the Deal Agent as agent for the Purchasers
will, to the extent requested by the Servicer, release its interest in such Loan
and Loan Documents.

     SECTION 5.4 HEDGE AGREEMENT.

     (a) On or prior to each Purchase Date for any Purchase, the Seller shall
enter into one or more Hedge Transactions for that Purchase, provided that each
such Hedge Transaction shall:

          (i) be entered into with a Hedge Counterparty and governed by a
     Hedging Agreement;

          (ii) have monthly payment periods the first of which commences on the
     Purchase Date of that Purchase and the last of which ends on the last
     Scheduled Payment due to occur under the Loans to which that Purchase
     relates;

          (iii) have an amortizing notional amount such that the Hedge Notional
     Amount in effect during any monthly payment period shall be equal to at
     least seventy-five percent (75%) but not more than one hundred percent
     (100%) of the aggregate Capital outstanding of Commercial Loans hereunder;
     provided, however, that the above percentage shall increase to one hundred
     percent (100%) for any period during which the

                                       51
<PAGE>   57

     difference between the Portfolio Yield and the Adjusted Eurodollar Rate is
     less than 2%; and

          (iv) provide for two series of monthly payments to be netted against
     each other, one such series being payments to be made by the Seller to a
     Hedge Counterparty (solely on a net basis) by reference to a fixed interest
     rate, and the other such series being payments to be made by the Hedge
     Counterparty to the Deal Agent (solely on a net basis) by reference to the
     money market yield of the rate set forth in Federal Reserve Statistical
     Release H.15 (519) under the caption "Commercial Paper-Nonfinancial" for a
     30-day maturity as in effect on the first day of each monthly payment
     period, the net amount of which shall be paid into the Collection Account
     (if payable by the Hedge Counterparty) or from the Collection Account to
     the extent funds are available under Section 2.7 or 2.9 of this Agreement
     (if payable by the Seller).

     (b) As additional security hereunder, Seller hereby assigns to the Deal
Agent, as agent for the Secured Parties, all right, title and interest of Seller
in each Hedging Agreement, each Hedge Transaction, and all present and future
amounts payable by a Hedge Counterparty to Seller under or in connection with
the respective Hedging Agreement and Hedge Transaction(s) with that Hedge
Counterparty ("Hedge Collateral"), and grants a security interest to the Deal
Agent, as agent for the Secured Parties, in the Hedge Collateral. Seller
acknowledges that, as a result of that assignment, Seller may not, without the
prior written consent of the Deal Agent, exercise any rights under any Hedging
Agreement or Hedge Transaction, except for Seller's right under any Hedging
Agreement to enter into Hedge Transactions in order to meet the Seller's
obligations under Section 5.4(a) hereof. Nothing herein shall have the effect of
releasing the Seller from any of its obligations under any Hedging Agreement or
any Hedge Transaction, nor be construed as requiring the consent of the Deal
Agent or any Secured Party for the performance by Seller of any such
obligations.

     SECTION 5.5 RETRANSFER OF INELIGIBLE LOANS.

     In the event of a breach of any representation or warranty set forth in
Section 4.2 with respect to a Loan in the Asset Pool (each such Loan, an
"Ineligible Loan") which breach results in a Trigger Event, or would result in a
Trigger Event at the next Determination Date or other date of determination, no
later than thirty (30) days after the earlier of (i) knowledge by the Seller of
such Loan becoming an Ineligible Loan and causing a Trigger Event or prospective
Trigger Event, and (ii) receipt by the Seller from the Deal Agent or Servicer of
written notice thereof, the Seller shall either (a) accept the retransfer of
each such Ineligible Loan, and the Deal Agent as agent for the Purchasers shall
convey to the Seller, without recourse, representation or warranty, all of its
right, title and interest in such Ineligible Loan; or (b) subject to the
satisfaction of the conditions in Section 2.9, substitute for such Ineligible
Loan a Substitute Loan; provided, however, that no such retransfer shall be
required to be made with respect to such Ineligible Loan (and such Loan shall
cease to be an Ineligible Loan) if, on or before the expiration of such 30-day
period, the representations and warranties in Section 4.2 with respect to such
Loan shall be made true and correct in all material respects with respect to
such Loan as if such Loan had been

                                       52
<PAGE>   58

transferred to the Purchasers on such day. Notwithstanding anything contained in
this Section 5.5 to the contrary, in the event of breach of any representation
and warranty set forth in Section 4.2, with respect to any interest in each Loan
and the Related Property having been conveyed to the Purchasers free and clear
of any Lien of any Person claiming through or under the Seller and its
Affiliates (other than Permitted Liens) and in compliance in all material
respects, with all Requirements of Law applicable to the Seller, immediately
upon the earlier to occur of the discovery of such breach by the Seller or
receipt by the Seller of written notice of such breach given by the Deal Agent,
the Seller shall repurchase and the Deal Agent on behalf of the Secured Parties
shall convey, free and clear of any Lien created pursuant to this Agreement, all
of its right, title and interest in such Ineligible Loan, and the Deal Agent
shall, in connection with such conveyance and without further action, be deemed
to represent and warrant on behalf of the Secured Parties that it has the
corporate authority and has taken all necessary corporate action to accomplish
such conveyance, but without any other representation or warranty, express or
implied. In any of the foregoing instances, the Seller shall accept the
retransfer of each such Ineligible Loan, and the Aggregate Outstanding Loan
Balance shall be reduced by the Outstanding Loan Balance of each such Ineligible
Loan and, if applicable, increased by the Outstanding Loan Balance of each such
Substitute Loan. On and after the date of retransfer, the Ineligible Loan so
retransferred shall not be included in the Asset Pool and, as applicable, the
Substitute Loan shall be included in the Asset Pool. In consideration of such
retransfer without substitution of a Substitute Loan, the Seller shall, on the
date of retransfer of such Ineligible Loan, make a deposit to the Collection
Account (for allocation pursuant to Section 2.7) in immediately available funds
in an amount equal to the Outstanding Loan Balance of such Ineligible Loan (to
the extent that the Deemed Collections with respect to such Ineligible Loan have
not already been deposited in the Collection Account), plus interest thereon
from the last day of the immediately preceding Fixed Period to and including the
date of repurchase at a rate per annum equal to the weighted average of the
Yield Rates. Upon each retransfer to the Seller of such Ineligible Loan, the
Deal Agent, as agent for the Purchasers, shall automatically and without further
action be deemed to transfer, assign and set-over to the Seller without
recourse, representation or warranty, all the right, title and interest of the
Deal Agent, as agent for the Purchasers, in, to and under such Ineligible Loan
and all monies due or to become due with respect thereto, and all proceeds of
such Ineligible Loan and Recoveries and Insurance Proceeds relating thereto and
all rights to Related Property and other security for any such Ineligible Loan,
and all proceeds and products of the foregoing. The Deal Agent, as agent for the
Purchasers, shall, at the sole expense of the Servicer execute such documents
and instruments of transfer as may be prepared by the Servicer on behalf of the
Seller and take other such actions as shall reasonably be requested by the
Seller to effect the transfer of such Ineligible Loan pursuant to this
subsection.

     SECTION 5.6 RETRANSFER OF ASSETS.

     In the event of a breach of any representation or warranty set forth in
Section 4.2 hereof which breach could reasonably be expected to have a material
adverse effect on the rights of the Secured Parties or the Deal Agent, as agent
of the Secured Parties, or on the ability of the Seller to perform its
obligations hereunder, by notice then given in writing to the Seller, the Deal
Agent

                                       53
<PAGE>   59

may direct the Seller to accept the retransfer of all of the Assets, in which
case the Seller shall be obligated to accept retransfer of such Assets on a
Payment Date specified by the Seller which date shall be at least thirty (30)
days after the date of such notice (such date, the "Retransfer Date") and to
terminate all Hedge Transactions prior to the Retransfer Date; provided,
however, that no such retransfer shall be required to be made if, on or before
expiration of such applicable period, the representations and warranties
contained in Section 4.2 shall then be true and correct in all material
respects. The Seller shall deposit on the Retransfer Date an amount equal to the
deposit amount provided below for such Assets in the Collection Account for
distribution to the Secured Parties in accordance with Section 2.7. The deposit
amount (the "Retransfer Amount") for such retransfer will be equal to (a) the
Aggregate Unpaids minus (b) the amount, if any, available in the Collection
Account on such Payment Date. On the Retransfer Date, provided that the full
Retransfer Amount has been deposited into the Collection Account, the Assets
shall be transferred to the Seller; and the Deal Agent as agent for the Secured
Parties shall, at the sole expense of the Servicer, execute and deliver such
instruments of transfer, in each case without recourse, representation or
warranty, as shall be prepared and reasonably requested by the Servicer on
behalf of the Seller to vest in the Seller, or its designee or assignee, all
right, title and interest of the Deal Agent as agent for the Secured Parties in,
to and under the Assets. If the Deal Agent gives a notice directing the Seller
to accept such a retransfer as provided above, the obligation of Seller to
accept a retransfer pursuant to this Section 5.6 shall constitute the sole
remedy respecting a breach of the representations and warranties contained in
Section 4.2 available to the Secured Parties and the Deal Agent on behalf of the
Secured Parties.

     SECTION 5.7 YEAR 2000 COMPATIBILITY.

     The Seller shall take all action necessary to assure that, prior to January
1, 2000, the Seller's computer system is able to operate and effectively process
data including dates on and after January 1, 2000. At the request of the Deal
Agent, the Seller shall provide assurance acceptable to the Deal Agent of the
Seller's Year 2000 compatibility.


                                   ARTICLE VI

                      ADMINISTRATION AND SERVICING OF LOANS

     SECTION 6.1 APPOINTMENT AND ACCEPTANCE; DUTIES.

     The Seller hereby appoints FIB as Servicer pursuant to this Agreement. FIB
accepts such appointment and agrees to act as the Servicer pursuant to this
Agreement to service the Transferred Loans and to serve in such capacity until
the termination of its responsibilities pursuant to Section 6.26. HSBC is hereby
appointed as Backup Servicer and Collateral Custodian pursuant to this
Agreement. HSBC accepts the appointment and agrees to act as the Backup Servicer
and Collateral Custodian pursuant to this Agreement.


                                       54
<PAGE>   60



     SECTION 6.2 DUTIES AND RESPONSIBILITIES OF THE SERVICER AND THE COLLATERAL
                 CUSTODIAN.

     (a) The Servicer shall conduct the servicing, administration and collection
of the Transferred Loans and shall take, or cause to be taken, all such actions
as may be necessary or advisable to service, administer and collect Transferred
Loans from time to time on behalf of the Purchasers. The Servicer will perform
its servicing duties with reasonable care, using that degree of skill and
attention that a prudent person engaging in such activities would exercise, but
in any event shall not act with less care than the Servicer exercises with
respect to all comparable loans that it services for itself or others. Neither
the Secured Parties, the Deal Agent nor the Collateral Custodian shall have any
obligation or liability with respect to any Transferred Loans, nor shall any of
them be obligated to perform any of the obligations of the Servicer hereunder.

     (b) The duties of the Servicer, as the Purchasers' agent, shall include,
without limitation:

          (i) preparing and submitting of claims to, and post-billing liaison
     with, Obligors on Transferred Loans;

          (ii) maintaining all necessary Servicing Records with respect to the
     Transferred Loans and providing such reports to the Liquidity Agent and the
     Deal Agent in respect of the servicing of the Transferred Loans (including
     information relating to its performance under this Facility) as may be
     required hereunder or as the Liquidity Agent or the Deal Agent may
     reasonably request;

          (iii) maintaining and implementing administrative and operating
     procedures (including, without limitation, an ability to recreate Servicing
     Records evidencing the Transferred Loans in the event of the destruction of
     the originals thereof) and keeping and maintaining all documents, books,
     records and other information reasonably necessary or advisable for the
     collection of the Transferred Loans (including, without limitation, records
     adequate to permit the identification of each new Transferred Loan and all
     Collections of and adjustments to each existing Transferred Loan);

          (iv) promptly delivering to the Deal Agent, from time to time, such
     information and Servicing Records relating to the Transferred Loans
     (including information relating to its performance under this Facility) as
     the Deal Agent may from time to time reasonably request;

          (v) identifying each Transferred Loan clearly and unambiguously in its
     Servicing Records to reflect that such Transferred Loan is owned by the
     Purchasers;

          (vi) complying in all material respects with the Credit and Collection
     Policies in regard to each Transferred Loan;


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<PAGE>   61



          (vii) complying in all material respects with all applicable laws,
     rules, regulations and orders with respect to it, its business and
     properties and all Transferred Loans and Collections with respect thereto;

          (viii) preserving and maintaining its existence, rights, franchises
     and privileges as a bank and trust company organized under the laws of the
     State of Connecticut and qualifying to and remaining authorized to perform
     obligations as Servicer (including enforcement of collection of Transferred
     Loans on behalf of the Secured Parties) in each jurisdiction where the
     failure to preserve and maintain such existence, rights, franchises,
     privileges and qualification would materially adversely affect (a) the
     rights or interests of the Secured Parties in the Transferred Loans, (b)
     the collectibility of any Transferred Loan, or (c) the ability of the
     Servicer to perform its obligations hereunder;

          (ix) immediately, but not later than three (3) Business Days after
     such occurrence, notifying the Liquidity Agent and the Deal Agent of the
     occurrence of an Early Amortization Event (including, without limitation, a
     material adverse change in the financial condition of the Originator);

          (x) notifying the Liquidity Agent and the Deal Agent of any material
     action, suit, proceeding, dispute, offset deduction, defense or
     counterclaim that is or may be (1) asserted by an Obligor with respect to
     any Transferred Loan; or (2) reasonably expected to have a material adverse
     effect on the Loans as a whole or on the ability of the Servicer or the
     Originator to perform its obligations under the Transaction Documents or on
     the Servicer or the Seller or any of their respective property; and

          (xi) notifying the Deal Agent of any change in the Credit and
     Collections Policies.

     (c) Disposition Upon Defaulted Loan. Upon any Loan in the Asset Pool
becoming a Defaulted Loan, the Servicer will use commercially reasonable efforts
in accordance with the Credit and Collection Policies to dispose of any Related
Property. Without limiting the generality of the foregoing, to the extent
provided by law, the Servicer may dispose of any such Related Property by
purchasing such Related Property or by selling such Related Property to any of
its Affiliates for a purchase price equal to the fair market value thereof, any
such sale to be evidenced by a certificate of a Responsible Officer of the
Servicer delivered to the Deal Agent setting forth the Loan, the Related
Property, the sale price of the Related Property and certifying that such sale
price is the fair market value of such Related Property.

     (d) Further Assurances. The Deal Agent will, at the sole expense of the
Servicer, furnish the Servicer with any powers of attorney and other documents
necessary or appropriate to enable the Servicer to carry out its servicing and
administrative duties under this Agreement.

     (e) Custodial Duties. The Collateral Custodian shall take and retain
custody of the Required Loan Documents delivered by the Seller in accordance
with the terms and conditions of

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<PAGE>   62

this Agreement, all for the benefit of the Purchasers and subject to the Lien
thereon in favor of the Deal Agent as agent for the Secured Parties. Within five
Business Days of its receipt of any Required Loan Document, the Collateral
Custodian shall review the related Required Loan Documents to verify that such
Required Loan Documents have been executed and have no missing or mutilated
pages and to confirm that such Loan is referenced on the related list of Loans
delivered in connection with the related Purchase Certificate. In order to
facilitate the foregoing review by the Collateral Custodian, in connection with
each delivery of Required Loan Documents hereunder to the Collateral Custodian,
the Servicer shall provide to the Collateral Custodian an electronic file (in
EXCEL or a comparable format) that contains the related list of Required Loan
Documents or which otherwise contains the Loan number and the name of the
Obligor with respect to each related Loan. If, at the conclusion of such review,
the Collateral Custodian shall determine that such Required Loan Documents are
not executed or in proper form on its face, or that the respective Loan is not
referenced on such list of Required Loan Documents, the Collateral Custodian
shall promptly notify the Seller and the Deal Agent of such determination by
providing a written report to such Persons setting forth, with particularity,
the lack of execution of such Required Loan Documents, that such Required Loan
Documents have missing or mutilated pages, or the fact that such Loan was not
referenced on the related list. In addition, unless instructed otherwise in
writing by the Seller or the Deal Agent within 10 days of the Collateral
Custodian's delivery of such report, the Collateral Custodian shall return any
Required Loan Documents not referenced on such list of Loans to the Seller.
Other than the foregoing, the Collateral Custodian shall not have any
responsibility for reviewing any Required Loan Documents.

     In taking and retaining custody of the Required Loan Documents, the
Collateral Custodian shall be deemed to be acting as the agent of the Deal Agent
as agent for the Purchasers and Secured Parties, provided, however, that the
Collateral Custodian makes no representations as to the existence, perfection or
priority of any Lien on the Required Loan Documents or the instruments therein,
and provided, further, that the Collateral Custodian's duties as agent shall be
limited to those expressly contemplated herein. All Required Loan Documents
shall be kept in fireproof vaults or cabinets at the locations specified on
Schedule V attached hereto, or at such other office as shall be specified to the
Deal Agent by the Collateral Custodian in a written notice delivered at least 45
days prior to such change. All Required Loan Documents shall be placed together
in a separate file cabinet with an appropriate identifying label and maintained
in such a manner so as to permit retrieval and access. All Required Loan
Documents shall be clearly segregated from any other documents or instruments
maintained by the Collateral Custodian. The Collateral Custodian shall clearly
indicate that such Required Loan Documents are the sole property of the
Purchasers and that the Seller has granted an interest therein to the Deal Agent
on behalf of the Secured Parties. In performing its duties, the Collateral
Custodian shall use the same degree of care and attention as it employs with
respect to similar contracts which it holds as Collateral Custodian.


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<PAGE>   63



     (f) Concerning the Collateral Custodian.

          (i) The Collateral Custodian may conclusively rely on and shall be
     fully protected in acting upon any certificate, instrument, opinion,
     notice, letter, telegram or other document delivered to it and which in
     good faith it reasonably believes to be genuine and which has been signed
     by the proper party or parties. The Collateral Custodian may rely
     conclusively on and shall be fully protected by in acting upon (a) the
     written instructions of any designated officer of the Deal Agent (and shall
     provide a copy thereof to the Seller) or (b) the verbal instructions of the
     Deal Agent, which the Collateral Custodian shall promptly confirm in
     writing (and shall provide a copy thereof to the Seller).

          (ii) The Collateral Custodian may consult counsel satisfactory to it
     and the written advice or opinion of such counsel shall be full and
     complete authorization and protection in respect of any action taken,
     suffered or omitted by it hereunder in good faith and in accordance with
     the advice or opinion of such counsel.

          (iii) The Collateral Custodian shall not be liable for any error of
     judgment, or for any act done or step taken or omitted by it, in good
     faith, or for any mistakes of fact or law, or for anything which it may do
     or refrain from doing in connection herewith except in the case of its
     willful misconduct or grossly negligent performance or omission.

          (iv) The Collateral Custodian makes no warranty or representation and
     shall have no responsibility (except as expressly set forth in this
     Agreement) as to the content, enforceability, completeness, validity,
     sufficiency, value, genuineness, ownership or transferability of the Loans,
     and will not be required to and will not make any representations as to the
     validity or value (except as expressly set forth in this Agreement) of any
     of the Loans. The Collateral Custodian shall not be obligated to take any
     legal action hereunder which might in its judgment involve any expense or
     liability unless it has been furnished with an indemnity reasonably
     satisfactory to it.

          (v) The Collateral Custodian shall have no duties or responsibilities
     except such duties and responsibilities as are specifically set forth in
     this Agreement and no covenants or obligations shall be implied in this
     Agreement against the Collateral Custodian.

          (vi) Except for overhead and general administrative expenses, the
     Collateral Custodian shall not be required to expend or risk its own funds
     in the performance of its duties hereunder.

          (vii) It is expressly agreed and acknowledged that the Collateral
     Custodian is not guaranteeing performance of or assuming any liability for
     the obligations of the other parties hereto or any parties to the Loans.


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<PAGE>   64



     SECTION 6.3 AUTHORIZATION OF THE SERVICER.

     (a) Each of the Originator, the Seller and the Deal Agent on behalf of the
Secured Parties and each Hedge Counterparty hereby authorizes the Servicer
(including any successor thereto) to take any and all reasonable steps in its
name and on its behalf necessary or desirable and not inconsistent with the sale
of the Transferred Loans to the Purchasers, in the determination of the
Servicer, to collect all amounts due under any and all Transferred Loans,
including, without limitation, endorsing any of their names on checks and other
instruments representing Collections, executing and delivering any and all
instruments of satisfaction or cancellation, or of partial or full release or
discharge, and all other comparable instruments, with respect to the Transferred
Loans and, after the delinquency of any Transferred Loan and to the extent
permitted under and in compliance with applicable law and regulations, to
commence proceedings with respect to enforcing payment thereof, to the same
extent as the Originator could have done if it had continued to own such Loan.
The Originator, the Seller and the Deal Agent on behalf of the Secured Parties
and each Hedge Counterparty shall furnish the Servicer (and any successors
thereto) with any powers of attorney and other documents necessary or
appropriate to enable the Servicer to carry out its servicing and administrative
duties hereunder, and shall cooperate with the Servicer to the fullest extent in
order to ensure the collectibility of the Transferred Loans. In no event shall
the Servicer be entitled to make any Secured Party, any Hedge Counterparty, the
Collateral Custodian or the Deal Agent a party to any litigation without such
party's express prior written consent, or to make the Seller a party to any
litigation (other than any routine foreclosure or similar collection procedure)
without the Deal Agent's consent.

     (b) After an Early Amortization Event has occurred and is continuing, at
the Agent's direction the Servicer shall take such action as the Deal Agent may
deem necessary or advisable to enforce collection of the Transferred Loans;
provided, however, that the Deal Agent may, at any time that an Early
Amortization Event has occurred and is continuing, notify any Obligor with
respect to any Transferred Loans of the assignment of such Transferred Loans, to
the Deal Agent and direct that payments of all amounts due or to become due to
any other party thereunder be made directly to the Deal Agent or any servicer,
collection agent or lockbox or other account designated by the Deal Agent and,
upon such notification and at the expense of the Seller, the Deal Agent may
enforce collection of any such Transferred Loans and adjust, settle or
compromise the amount or payment thereof.

     SECTION 6.4  COLLECTION OF PAYMENTS.

     (a) Collection Efforts, Modification of Loans. The Servicer will make
reasonable efforts to collect all payments called for under the terms and
provisions of the Loans included in the Asset Pool as and when the same become
due, and will follow those collection procedures which it follows with respect
to all comparable Loans that it services for itself or others; provided,
however, that so long as FIB or the Servicer Assignee is the Servicer the
Servicer shall collect all payments in accordance with the Credit and Collection
Policies. The Servicer may not waive, modify or otherwise vary any provision of
a Loan that is included in the Asset Pool other than as permitted in the Credit
and Collection Policies or as permitted by the Deal Agent. The

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<PAGE>   65

Servicer may in its discretion waive any late payment charge or any other fees
that may be collected in the ordinary course of servicing any Loan included in
the Asset Pool.

     (b) Prepaid Loan. The Servicer may not permit a Loan in the Asset Pool to
become a Prepaid Loan (which shall not include a Loan that becomes a Prepaid
Loan due to a Casualty Loss), unless (x) the Servicer provides an Additional
Loan or (y) such prepayment will not result in the Collection Account receiving
an amount (the "Prepayment Amount") less than the sum of (a) the Outstanding
Loan Balance on the date of such prepayment, (b) any outstanding Servicer
Advances thereon, (c) all Hedge Breakage Costs owing to the relevant Hedge
Counterparty for any termination of one or more Hedge Transactions, in whole or
in part, as required by the terms of any Hedging Agreement as the result of any
such Loan becoming a Prepaid Loan, and (d) any accrued and unpaid Yield thereon
and all Breakage Costs arising as a result of such prepayment. After an Early
Amortization Event has occurred, the Servicer may not permit a Loan in the Asset
Pool to become a Prepaid Loan (which shall not include a Loan that becomes a
Prepaid Loan due to a Casualty Loss), unless the Servicer collects an amount
equal to the sum of (a) the Outstanding Loan Balance on the date of such
prepayment, (b) any outstanding Servicer Advances thereon, (c) all Hedge
Breakage Costs owing to the relevant Hedge Counterparty for any termination of
one or more Hedge Transactions, in whole or in part, as required by the terms of
any Hedging Agreement as the result of any such Loan becoming a Prepaid Loan,
and (d) any accrued and unpaid Yield thereon and all Breakage Costs arising as a
result of such prepayment.

     (c) Acceleration. The Servicer shall accelerate the maturity of all or any
Scheduled Payments under any Loan included in the Asset Pool under which a
default under the terms thereof has occurred and is continuing (after the lapse
of any applicable grace period) promptly after such Loan becomes a Defaulted
Loan; provided, however, that so long as FIB or the Servicer Assignee is the
Servicer the Servicer shall collect all Defaulted Loans in accordance with the
Credit and Collections Policies.

     (d) Taxes and other Amounts. To the extent provided for in any Loan
included in the Asset Pool, the Servicer will use its best efforts to collect
all payments with respect to amounts due for taxes, assessments and insurance
premiums relating to such Loans or the Related Property and remit such amounts
to the appropriate Governmental Authority or insurer on or prior to the date
such payments are due.

     (e) Payments to FIB Existing Account and Lock-Box Account. On or before
each applicable Purchase Date, the Servicer shall have instructed all Obligors
to make all payments in respect of the Loans in the Asset Pool to the FIB
Existing Account; provided, however, notwithstanding the foregoing, upon the
establishment of a Lock-Box Account pursuant to Section 5.2 hereof, the Servicer
shall promptly instruct all Obligors to make all payments in respect of the
Loans in the Asset Pool to a Lock-Box or directly to a Lock-Box Account.

     (f) Establishment of the Collection Account. The Servicer shall cause to be
established, on or before the Closing Date, and maintained in the name of the
Deal Agent, with a "Qualified Institution" (as hereinafter defined) the
Collection Account. A "Qualified Institution"

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<PAGE>   66

shall be a depository institution or trust company that at all times shall be
organized under the laws of the United States or any one of the States thereof
or the District of Columbia (or any domestic branch of a foreign bank), (i) (a)
which has either (1) a long-term unsecured debt rating of A- or better by S&P
and A3 or better by Moody's or (2) a short-term unsecured debt rating or
certificate of deposit rating of A-l or better by S&P or P-l or better by
Moody's, (b) the parent corporation of which has either (1) a long-term
unsecured debt rating of A- or better by S&P and A3 or better by Moody's or (2)
a short-term unsecured debt rating or certificate of deposit rating of A-l or
better by S&P and P-1 or better by Moody's or (c) is otherwise acceptable to the
Deal Agent and (ii) whose deposits are insured by the Federal Deposit Insurance
Corporation.

     (g) Establishment and Maintenance of the Cash Collateral Account. During
the time any AIG Loans or AIG 2 Loans are outstanding, the Servicer shall cause
to be established and maintained in the name of the Deal Agent, with a
"Qualified Institution" (as defined in subsection (f) above) the Cash Collateral
Account (the "Cash Collateral Account") unless the FIB Bond is pledged as
described herein.

     SECTION 6.5  SERVICER ADVANCES.

     For each Collection Period, if the Servicer determines that any Scheduled
Payment (or portion thereof) which was due and payable pursuant to a Loan in the
Asset Pool during such Collection Period was not received prior to the end of
such Collection Period, the Servicer may make an advance in an amount up to the
amount of such delinquent Scheduled Payment (or portion thereof); in addition,
if on any day there are not sufficient funds on deposit in the Collection
Account to pay accrued Yield on any Asset Interest the Fixed Period of which
ends on such day, the Servicer shall make an advance in the amount necessary to
pay such Yield (in either case, any such advance, a "Servicer Advance").
Notwithstanding the preceding sentence, (i) the Servicer shall be required to
make a Servicer Advance with respect to any Loan if, and only if, the Servicer
determines (such determination to be conclusive and binding) in good faith that
such Servicer Advance will ultimately be recoverable from future collections on,
or the liquidation of, the Asset Pool and payments by one or more Hedge
Counterparties under one or more Hedging Agreements, (ii) the Servicer's
obligation to make a Servicer Advance for any Loan shall cease on the day such
Loan becomes a Defaulted Loan or a Charged-Off Loan and (iii) any successor
Servicer, including the Backup Servicer, will not be obligated to make any
Servicer Advances. The Servicer will deposit any Servicer Advances into the
Collection Account on or prior to 11:00 a.m. (Charlotte, North Carolina time) on
the related Payment Date, in immediately available funds.

     SECTION 6.6 REALIZATION UPON DEFAULTED LOANS.

         The Servicer will use reasonable efforts to repossess or otherwise
comparably convert the ownership of any Related Property with respect to a
Defaulted Loan and will act as sales and processing agent for Related Property
which it repossesses. The Servicer will follow such other practices and
procedures as it deems necessary or advisable and as are customary and usual in
its servicing of loans and other actions by the Servicer in order to realize
upon such Related

                                       61
<PAGE>   67

Property, which practices and procedures may include reasonable efforts to
enforce all obligations of Obligors and repossessing and selling such Related
Property at public or private sale in circumstances other than those described
in the preceding sentence, provided, however, that so long as FIB or the
Servicer Assignee is Servicer the Servicer shall follow the practices and
procedures with respect to the servicing of loans and the realization upon any
Related Property as are set forth in the Credit and Collection Policies. Without
limiting the generality of the foregoing, the Servicer may sell any such Related
Property with respect to the Servicer or its Affiliates for a purchase price
equal to the then fair market value thereof, any such sale to be evidenced by a
certificate of a Responsible Officer of the Servicer delivered to the Deal Agent
setting forth the Loan, the Related Property, the sale price of the Related
Property and certifying that such sale price is the fair market value of such
Related Property. In any case in which any such Related Property has suffered
damage, the Servicer will not expend funds in connection with any repair or
toward the repossession of such Related Property unless it reasonably determines
that such repair and/or repossession will increase the Recoveries by an amount
greater than the amount of such expenses. The Servicer will remit to the
Collection Account the Recoveries received in connection with the sale or
disposition of Related Property with respect to a Defaulted Loan.

     SECTION 6.7 REPRESENTATIONS AND WARRANTIES OF BACKUP SERVICER AND
                 COLLATERAL CUSTODIAN.

     Each of the Backup Servicer and the Collateral Custodian represents and
warrants to the Deal Agent, as agent for the Secured Parties, and the Secured
Parties that, as of the Closing Date and on each Purchase Date, insofar as any
of the following affects the Backup Servicer's or the Collateral Custodian's, as
the case may be, ability to perform its obligations pursuant to this Agreement
in any material respect:

     (a) Organization and Good Standing. HSBC is a New York banking corporation
duly organized, validly existing and in good standing under the laws of the
State of New York with all requisite corporate power and authority to own its
properties and to conduct its business as presently conducted and to enter into
and perform its obligations pursuant to this Agreement.

     (b) Power and Authority. Each of the Backup Servicer and the Collateral
Custodian has the corporate power and authority to execute and deliver this
Agreement and to carry out its terms. Each of the Backup Servicer and the
Collateral Custodian has duly authorized the execution, delivery and performance
of this Agreement by all requisite corporate action.

     (c) No Violation. The consummation of the transactions contemplated by, and
the fulfillment of the terms of, this Agreement by the Backup Servicer and the
Collateral Custodian will not (i) conflict with, result in any breach of any of
the terms or provisions of, or constitute a default under, the charter or bylaws
of the Backup Servicer or the Collateral Custodian, or any term of any material
agreement, indenture, mortgage, deed of trust or other instrument to which the
Backup Servicer or the Collateral Custodian is a party or by which it or any of
its property is bound, (ii) result in the creation or imposition of any Lien
upon any of its properties pursuant to

                                       62
<PAGE>   68

the terms of any such indenture, agreement, mortgage, deed of trust or other
instrument, or (iii) violate any law, regulation, order, writ, judgment,
injunction, decree, determination or award of any Governmental Authority
applicable to HSBC or any of its properties that might (in the reasonable
judgment of the Backup Servicer or the Collateral Custodian, as the case may be)
materially and adversely affect the performance by the Backup Servicer or the
Collateral Custodian of its obligations under, or the validity or enforceability
of, this Agreement.

     (d) No Consent. No consent, approval, authorization, order, registration,
filing, qualification, license or permit (collectively, the "Consents") of or
with any Governmental Authority having jurisdiction over the Backup Servicer or
the Collateral Custodian or any of its respective properties is required to be
obtained by or with respect to the Backup Servicer or the Collateral Custodian
in order for the Backup Servicer or the Collateral Custodian, as the case may
be, to enter into this Agreement or perform its obligations hereunder (except
with respect to performance only, such Consents as the Backup Servicer or the
Collateral Custodian, as the case may be, may need to obtain prior to the
commencement of its performance of its duties hereunder in the certain
jurisdictions outside of New York, provided that in lieu of obtaining for itself
the requisite Consents, the Backup Servicer or the Collateral Custodian, as the
case may be, may and shall be permitted to delegate the performance of its
duties to parties having the requisite Consents in such jurisdictions; provided,
however, in the case of such delegation of performance the Backup Servicer or
the Collateral Custodian, as the case may be, shall not be relieved of their
responsibility under this Agreement with respect to such duties).

     (e) Binding Obligation. This Agreement constitutes a legal, valid and
binding obligation of HSBC, enforceable against the Backup Servicer and the
Collateral Custodian in accordance with its terms, except as such enforceability
may be limited by (i) applicable Insolvency Laws and (ii) general principles of
equity (whether considered in a suit at law or in equity).

     (f) No Proceeding. There are no proceedings or investigations pending or,
to the best of its knowledge, threatened, against the Backup Servicer or the
Collateral Custodian, before any Governmental Authority (i) asserting the
invalidity of this Agreement, (ii) seeking to prevent the consummation of any of
the transactions contemplated by this Agreement or (iii) seeking any
determination or ruling that might (in the reasonable judgment of the Backup
Servicer or the Collateral Custodian, as the case may be) materially and
adversely affect the performance by the Backup Servicer or the Collateral
Custodian of its obligations under, or the validity or enforceability of, this
Agreement.

     SECTION 6.8 MAINTENANCE OF INSURANCE POLICIES.

     The Servicer will require that each Obligor with respect to a Loan included
in the Asset Pool maintains an Insurance Policy with respect to each Loan and
the Related Property, in accordance with the Credit and Collection Policies. In
connection with its activities as Servicer, the Servicer agrees to present, or
to require the Obligor to present, on behalf of the Deal Agent as agent for the
Secured Parties, claims to the insurer under each Insurance Policy and any such


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liability policy, and to settle, adjust and compromise such claims, in each
case, consistent with the terms of each related Loan.

     SECTION 6.9 REPRESENTATIONS AND WARRANTIES OF SERVICER.

     The Servicer represents and warrants to the Deal Agent, as agent for the
Secured Parties, each Secured Party, the Liquidity Agent and each Investor that,
as of the Closing Date and on each Purchase Date:

     (a) Organization and Good Standing. The Servicer is a bank and trust
company organized under the laws of the State of Connecticut duly organized and
validly existing with all requisite corporate power and authority to own its
properties and to conduct its business as presently conducted and to enter into
and perform its obligations pursuant to this Agreement.

     (b) Due Qualification. The Servicer is qualified to do business, is in good
standing, and has obtained all licenses and approvals as required under the laws
of all jurisdictions in which the ownership or lease of its property and or the
conduct of its business (other than the performance of its obligations
hereunder) requires such qualification, standing, license or approval, except to
the extent that the failure to so qualify, maintain such standing or be so
licensed or approved would not have a material adverse effect on the interests
of the Seller or of the Purchasers. The Servicer is qualified to do business, is
in good standing, and has obtained all licenses and approvals as required under
the laws of all states in which the performance of its obligations pursuant to
this Agreement requires such qualification, standing, license or approval and
where the failure to qualify or obtain such license or approval would have
material adverse effect on its ability to perform hereunder.

     (c) Power and Authority. The Servicer has the corporate power and authority
to execute and deliver this Agreement and to carry out its terms. The Servicer
has duly authorized the execution, delivery and performance of this Agreement by
all requisite corporate action. The execution, delivery and performance of this
Agreement does not contravene the Servicer's Certificate of Incorporation or
by-laws.

     (d) No Violation. The consummation of the transactions contemplated by, and
the fulfillment of the terms of, this Agreement by the Servicer (with or without
notice or lapse of time) will not (i) conflict with, result in any breach of any
of the terms or provisions of, or constitute a default under, the certificate of
incorporation or by-laws of the Servicer, or any term of any agreement,
indenture, mortgage, deed of trust of other instrument to which the Servicer is
a party or by which it or any of its property is bound, (ii) result in the
creation or imposition of any Lien upon any of its properties pursuant to the
terms of any such indenture, agreement, mortgage, deed of trust or other
instrument, or (iii) violate any law, regulation, order, writ, judgment,
injunctions, decree, determination or award of any Governmental Authority
applicable to the Servicer or any of its properties.


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     (e) No Consent. No consent, approval, authorization, order, registration,
filing, qualification, license or permit of or with any Governmental Authority
having jurisdiction over the Servicer or any of its properties is required to be
obtained by or with respect to the Servicer in order for the Servicer to enter
into this Agreement or perform its obligations hereunder.

     (f) Binding Obligation. This Agreement constitutes a legal, valid and
binding obligation of the Servicer, enforceable against the Servicer in
accordance with its terms, except as such enforceability may be limited by (i)
applicable Insolvency Laws and (ii) general principles of equity (whether
considered in a suit at law or in equity).

     (g) No Proceeding. There are no proceedings or investigations pending or
threatened against the Servicer, before any Governmental Authority (i) asserting
the invalidity of this Agreement, (ii) seeking to prevent the consummation of
any of the transactions contemplated by this Agreement or (iii) seeking any
determination or ruling that might (in the reasonable judgment of the Servicer)
materially and adversely affect the performance by the Servicer of its
obligations under, or the validity or enforceability of, this Agreement.

     (h) Reports Accurate. No Servicer Certificate, information, exhibit,
financial statement, document, book, Servicer Record or report furnished or to
be furnished by the Servicer to the Deal Agent or a Secured Party in connection
with this Agreement is or will be inaccurate in any material respect as of the
date it is or shall be dated or (except as otherwise disclosed to the Deal Agent
or such Secured Party, as the case may be, at such time) as of the date so
furnished.

     (i) Investment Company Act.

          (i) The Servicer represents and warrants that the Servicer has never
     been, is not now, and will not in the future be operated in such a manner
     as to cause the Servicer to be an "investment company," as such term is
     defined in Section 3 of the 1940 Act; and

          (ii) The Servicer represents and warrants that the business and other
     activities of the Servicer, including but not limited to, the consummation
     and conduct of the transactions contemplated by the Transaction Documents
     to which the Servicer is a party do not now and will not in the future
     result in a violation by the Servicer, the Borrower, or any other person or
     entity of the 1940 Act or the rules and regulations promulgated thereunder.

     SECTION 6.10 COVENANTS OF SERVICER.

     The Servicer hereby covenants that:

     (a) Compliance with Law. The Servicer will comply with all laws and
regulations of any Governmental Authority applicable to the Servicer or the
Loans included in the Asset Pool and Related Property and Loan Documents or any
part thereof.


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     (b) Obligations with Respect to Loans; Modifications. The Servicer will
duly fulfill and comply with all obligations on the part of the Seller to be
fulfilled or complied with under or in connection with each Loan included in the
Asset Pool and will do nothing to impair the rights of the Deal Agent as agent
for the Secured Parties or of the Secured Parties in, to and under the Assets.
The Servicer will perform its obligations under the Loans included in the Asset
Pool and will not change or modify such Loans other than as permitted in the
Credit and Collection Policies or as approved by the Deal Agent.

     (c) Preservation of Security Interest. The Servicer will execute and file
such financing and continuation statements and any other documents which may be
required by any law or regulation of any Governmental Authority to preserve and
protect fully the interest of the Deal Agent as agent for the Secured Parties
in, to and under the Assets.

     (d) No Bankruptcy Petition. Prior to the date that is one year and one day
after the payment in full of all amounts owing in respect of all outstanding
commercial paper issued by VFCC, the Servicer will not institute against the
Seller or VFCC, or join any other Person in instituting against the Seller or
VFCC, any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings or other similar proceedings under the laws of the United States or
any state of the United States. This Section 6.10(d) will survive the
termination of this Agreement.

     (e) Amendments to Credit and Collection Policies. The Servicer, without the
prior written consent of the Deal Agent, will not agree or consent to or
otherwise permit to occur any amendment, modification, change, supplement, or
recission of the Credit and Collection Policies in whole or in part or in any
manner that could have a material adverse effect upon the Loans or the interests
of the Deal Agent or the Secured Parties.

     (f) Year 2000 Compatibility. The Servicer shall take all action necessary
to assure that, prior to January 1, 2000, the Servicer's computer system is able
to operate and effectively process data including dates on and after January 1,
2000. At the request of the Deal Agent, the Servicer shall provide assurance
acceptable to the Deal Agent of the Servicer's Year 2000 compatibility.

     (g) Backup Servicer and Collateral Custodian Fee Letter. The Servicer will
not amend, modify, waive or terminate any terms or provisions of the Backup
Servicer and Collateral Custodian Fee Letter without the prior written consent
of the Deal Agent.

     SECTION 6.11 COVENANTS OF BACKUP SERVICER AND COLLATERAL CUSTODIAN.

     Each of the Backup Servicer and the Collateral Custodian hereby covenants
that:

     (a) Loan Files. The Collateral Custodian will not dispose of any documents
constituting the Loan Files in any manner which is inconsistent with the
performance of its

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<PAGE>   72

obligations as the Collateral Custodian pursuant to this Agreement and will not
dispose of any Loan Files except as contemplated by this Agreement.

     (b) Compliance with Law. Each of the Backup Servicer and the Collateral
Custodian will comply with all laws and regulations of any Governmental
Authority applicable to the Backup Servicer and the Collateral Custodian.

     (c) No Bankruptcy Petition. Prior to the date that is one year and one day
after the payment in full of all amounts owing in respect of all outstanding
commercial paper issued by VFCC, neither the Backup Servicer nor the Collateral
Custodian will institute against the Seller or VFCC, or join any other Person in
instituting against the Seller or VFCC, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings or other similar proceedings
under the laws of the United States or any state of the United States. This
Section 6.11(c) will survive the termination of this Agreement.

     (d) Location of Loan Files. The Loan Files shall remain at all times in the
possession of the Collateral Custodian at the address set forth herein unless
notice of a different address is given in accordance with the terms hereof.

     (e) No Changes in Backup Servicer and Collateral Custodian Fee. The Backup
Servicer and Collateral Custodian will not make any changes to the fees set
forth in the Backup Servicer and Collateral Custodian Fee Letter without the
prior written approval of the Deal Agent.

     (f) Year 2000 Compatibility. The Backup Servicer and Collateral Custodian
shall take all action necessary to assure that, prior to January 1, 2000, the
Backup Servicer and Collateral Custodian's computer system is able to operate
and effectively process data including dates on and after January 1, 2000. At
the request of the Deal Agent, the Backup Servicer and Collateral Custodian
shall provide assurance acceptable to the Deal Agent of the Backup Servicer and
Collateral Custodian's Year 2000 Compatibility.

     SECTION 6.12 SERVICING COMPENSATION.

     As compensation for its servicing activities hereunder and reimbursement
for its expenses, the Servicer shall be entitled to receive a servicing fee (the
"Servicing Fee") in respect of each Collection Period (or portion thereof) equal
to one-twelfth of the product of (a) the Servicing Fee Rate and (b) the
Aggregate Outstanding Loan Balance as on the most recent Determination Date,
such Servicing Fee to be payable monthly in arrears on each Payment Date to the
extent of funds available therefor pursuant to the provisions of Section 2.7.


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     SECTION 6.13 CUSTODIAL COMPENSATION.

     As compensation for its custodial activities hereunder and reimbursement
for its expenses, the Collateral Custodian shall be entitled to receive a
custodial fee (the "Custodial Fee") as provided in the Backup Servicer and
Collateral Custodian Fee Letter.

     SECTION 6.14 PAYMENT OF CERTAIN EXPENSES BY SERVICER.

     The Servicer will be required to pay all expenses incurred by it in
connection with its activities under this Agreement, including fees and
disbursements of legal counsel and independent accountants, Taxes imposed on the
Servicer, expenses incurred in connection with payments and reports pursuant to
this Agreement, and all other fees and expenses not expressly stated under this
Agreement for the account of the Seller, but excluding Liquidation Expenses. The
Servicer will be required to pay all reasonable fees and expenses owing to any
bank or trust company in connection with the maintenance of the FIB Existing
Account, the Collection Account and the Lock-Box Account. The Servicer shall be
required to pay such expenses for its own account and shall not be entitled to
any payment therefor other than the Servicing Fee.

     SECTION 6.15 REPORTS.

     (a) Monthly Report. With respect to each Determination Date and the related
Collection Period the Servicer will provide to the Seller and the Deal Agent and
the Backup Servicer, on the related Reporting Date, a monthly statement (a
"Monthly Report"), signed by a Responsible Officer of the Servicer and
substantially in the form of Exhibit E.

     (b) Servicer's Certificate. Together with each Monthly Report, the Servicer
shall submit to the Seller, the Deal Agent and the Backup Servicer a certificate
(a "Servicer's Certificate"), signed by a Responsible Officer of the Servicer
and substantially in the form of Exhibit F.

     (c) Financial Statements. The Servicer will submit to the Deal Agent,
within 45 days of the end of each of the Servicer's fiscal quarters, commencing
March 31, 1999 unaudited consolidated financial statements of the Servicer (or,
so long as FIB or the Servicer Assignee is the Servicer, First International
Bancorp, Inc.) (including an analysis of delinquencies and losses for each
fiscal quarter) as of the end of each such fiscal quarter. The Servicer shall
submit to the Deal Agent, within 90 days of the end of the Servicer's fiscal
year, commencing December 31, 1999, annual consolidated audited financial
statements of the Servicer (or, so long as the Originator is the Servicer, First
International Bancorp, Inc.) as of the end of such fiscal year.

     SECTION 6.16 ANNUAL STATEMENT AS TO COMPLIANCE.

     The Servicer will provide to the Deal Agent, on or prior to March 31 of
each year, commencing March 31, 1999, an annual report signed by a Responsible
Officer of the Servicer certifying that (a) a review of the activities of the
Servicer, and the Servicer's performance

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<PAGE>   74

pursuant to this Agreement, for the period ending on the last day of the
preceding fiscal year has been made under such Person's supervision and (b) the
Servicer has performed or has caused to be performed in all material respects
all of its obligations under this Agreement throughout such year and no Servicer
Termination Event has occurred and is continuing (or if a Servicer Termination
Event has so occurred and is continuing, specifying each such event, the nature
and status thereof and the steps necessary to remedy such event, and, if a
Servicer Termination Event occurred during such year and no notice thereof has
been given to the Deal Agent, specifying such Servicer Termination Event and the
steps taken to remedy such event).

     SECTION 6.17 ANNUAL INDEPENDENT PUBLIC ACCOUNTANT'S SERVICING REPORTS.

     The Servicer will cause a firm of nationally recognized independent public
accountants (who may also render other services to the Servicer) to furnish to
the Deal Agent, on or prior to March 31 of each year, commencing March 31, 1999,
(i) a report relating to the previous fiscal year to the effect that (a) such
firm has reviewed certain documents and records relating to the servicing of the
Loans included in the Asset Pool, and (b) based on such examination, such firm
is of the opinion that the Monthly Reports for such year were prepared in
compliance with this Agreement, except for such exceptions as it believes to be
immaterial and such other exceptions as will be set forth in such firm's report
and (ii) a report covering the preceding fiscal year to the effect that such
accountants have applied certain agreed-upon procedures to certain documents and
records relating to the servicing of Loans under this Agreement, compared the
information contained in the Servicer's Certificates delivered during the period
covered by such report with such documents and records and that no matters came
to the attention of such accountants that caused them to believe that such
servicing was not conducted in compliance with this Article VI of this
Agreement, except for such exceptions as such accountants shall believe to be
immaterial and such other exceptions as shall be set forth in such statement.

     SECTION 6.18 ADJUSTMENTS.

     If (i) the Servicer makes a deposit into the Collection Account in respect
of a Collection of a Loan included in the Asset Pool and such Collection was
received by the Servicer in the form of a check which is not honored for any
reason or (ii) the Servicer makes a mistake with respect to the amount of any
Collection and deposits an amount that is less than or more than the actual
amount of such Collection, the Servicer shall appropriately adjust the amount
subsequently deposited into the Collection Account to reflect such dishonored
check or mistake. Any Scheduled Payment in respect of which a dishonored check
is received shall be deemed not to have been paid.

     SECTION 6.19 MERGER OR CONSOLIDATION OF THE SERVICER.

     The Servicer shall not consolidate with or merge into any other Person or
convey or transfer its properties and assets substantially as an entirety to any
Person, unless the Servicer is the surviving entity and unless:


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          (i) the Servicer has delivered to the Deal Agent and the Backup
     Servicer an Officer's Certificate and an Opinion of Counsel each stating
     that any consolidation, merger, conveyance or transfer and such
     supplemental agreement comply with this Section 6.19 and that all
     conditions precedent herein provided for relating to such transaction have
     been complied with and, in the case of the Opinion of Counsel, that such
     supplemental agreement is legal, valid and binding with respect to the
     Servicer and such other matters as the Deal Agent may reasonably request;

          (ii) the Servicer shall have delivered notice of such consolidation,
     merger, conveyance or transfer to the Deal Agent; and

          (iii) after giving effect thereto, no Early Amortization Event or
     event which with notice or lapse of time would constitute an Early
     Amortization Event shall have occurred.

     Notwithstanding anything to the contrary contained herein, so long as the
Servicer and the Originator are the same Person, the Servicer is permitted as
part of a Conversion to assign its rights hereunder to, and the Servicer's
obligations hereunder can be assumed by, another wholly-owned subsidiary of
First International Bancorp, Inc. (the "Servicer Assignee") (in which case all
of the provisions of this Agreement shall, to the same extent as they apply to
the Servicer hereunder, apply to the Servicer Assignee rather than to the
Servicer) on the condition that (a) the Servicer Assignee acquires substantially
all of the Servicer's assets relating to its commercial lending business, (b)
the Servicer Assignee assumes substantially all of the Servicer's liabilities
relating to its commercial lending business, but expressly excluding the
Servicer's deposits, (c) Deal Agent receives such documents evidencing (a) and
(b) above as Deal Agent shall reasonably request, and (d) the Servicer Assignee
executes and deliver to Deal Agent such amendments to this Agreement and such
opinions of counsel as Deal Agent may deem necessary including, but not limited
to opinions to evidence that the Servicer Assignee has assumed all of the
Servicer's rights and obligations, and is bound by all of the Servicer's
agreements, set forth herein. Upon such conversion, the Commitment Termination
Date may be accelerated pursuant to the provisions of Section 2.1(c).

     SECTION 6.20 LIMITATION ON LIABILITY OF THE SERVICER AND OTHERS.

     Except as provided herein, neither the Servicer nor any of the directors or
officers or employees or agents of the Servicer shall be under any liability to
the Deal Agent, the Secured Parties or any other Person for any action taken or
for refraining from the taking of any action pursuant to this Agreement whether
arising from express or implied duties under this Agreement; provided, however,
that this provision shall not protect the Servicer or any such Person against
any liability which would otherwise be imposed by reason of its willful
misfeasance, bad faith or gross negligence in the performance of duties or by
reason of its willful misconduct hereunder.


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     SECTION 6.21 INDEMNIFICATION OF THE SELLER, THE DEAL AGENT, THE LIQUIDITY
                  AGENT AND THE SECURED PARTIES.

     The Servicer shall indemnify and hold harmless the Seller, the Deal Agent,
the Liquidity Agent and each Secured Party and their respective officers,
directors, employees and agents (collectively, the "Indemnified Persons") from
and against any loss, liability, expense, damage or injury suffered or sustained
by any Indemnified Person by reason of any acts, omissions or alleged acts or
omissions of the Servicer, including, but not limited to any judgment, award,
settlement, reasonable attorneys' fees and other costs or expenses incurred in
connection with the defense of any actual or threatened action, proceeding or
claim, but excluding allocations of overhead expenses of any such Indemnified
Party or other non-monetary damages of any such Indemnified Party.
Notwithstanding the foregoing, the Servicer shall not indemnify an Indemnified
Person if such loss, liability, expense, damage or injury results or arises (i)
as a result of fraud, gross negligence or willful misconduct by any Indemnified
Person; and (ii) under any federal, state or local income or franchise taxes or
any other Tax imposed on or measured by income (or any interest or penalties
with respect thereto or arising from a failure to comply therewith) required to
be paid by the Seller, the Deal Agent, the Liquidity Agent or the Secured
Parties in connection herewith to any taxing authority. The provisions of this
indemnity shall run directly to and be enforceable by an injured party subject
to the limitations hereof. If the Servicer has made any indemnity payment
pursuant to this Section 6.21 and such payment fully indemnified the recipient
thereof and the recipient thereafter collects any payments from others in
respect of such Indemnified Amounts, the recipient shall repay to the Servicer
an amount equal to the amount it has collected from others in respect of such
indemnified amounts.

     If for any reason the indemnification provided above in this Section 6.21
is unavailable to the Indemnified Person or is insufficient to hold an
Indemnified Person harmless, then Servicer shall contribute to the amount paid
or payable by such Indemnified Person as a result of such loss, claim, damage or
liability in such proportion as is appropriate to reflect not only the relative
benefits received by such Indemnified Person on the one hand and Servicer on the
other hand but also the relative fault of such Indemnified Person as well as any
other relevant equitable considerations.

     The parties hereto agree that the provisions of this Section 6.21 shall not
be interpreted to provide recourse to the Seller against loss by reason of the
bankruptcy or insolvency (or other credit condition) of, or default by, related
Obligor on, any Loan.

     Any indemnification pursuant to this Section shall not be payable from the
Assets.

     Any indemnification pursuant to this Section shall not be in duplication of
any other indemnification for the same loss under Section 8.1.

     The obligations of the Servicer under this Section 6.21 shall survive the
resignation or removal of the Deal Agent and the Liquidity Agent, and the
termination of this Agreement.



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     SECTION 6.22 THE SERVICER AND BACKUP SERVICER NOT TO RESIGN.

     Neither the Servicer nor the Backup Servicer shall resign from the
obligations and duties hereby imposed on it except upon such Person's
determination that (i) the performance of its duties hereunder is or becomes
impermissible under applicable law and (ii) there is no reasonable action which
such Person could take to make the performance of its duties hereunder
permissible under applicable law. Any such determination permitting the
resignation of the Servicer or Backup Servicer shall be evidenced as to clause
(i) above by an Opinion of Counsel to such effect delivered to the Deal Agent.
No such resignation shall become effective until a Successor Servicer shall have
assumed the responsibilities and obligations of the Servicer in accordance with
Section 6.27, or a successor Backup Servicer shall have assumed the
responsibilities and obligations of the Backup Servicer, respectively.

     SECTION 6.23 ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION REGARDING THE
                  LOANS.

     The Servicer shall provide to the Deal Agent access to the Loan Documents
and all other documentation regarding the Loans included in the Asset Pool and
the Related Property in such cases where the Deal Agent is required in
connection with the enforcement of the rights or interests of the Secured
Parties, or by applicable statutes or regulations, to review such documentation,
such access being afforded without charge but only (i) upon two Business Days
prior written request, (ii) during normal business hours and (iii) subject to
the Servicer's normal security and confidentiality procedures. Prior to the
Closing Date and periodically thereafter at the discretion of the Deal Agent,
the Deal Agent may review the Servicer's collection and administration of the
Loans in order to assess compliance by the Servicer with the Servicer's written
policies and procedures, as well as with this Agreement and may conduct an audit
of the Loans, Loan Documents and Records in conjunction with such a review. Such
review shall be reasonable in scope and shall be completed in a reasonable
period of time. The Seller shall bear the cost of up to four of such audits per
calendar year in an amount not to exceed $5,000 per audit.

     SECTION 6.24 BACKUP SERVICER.

     (a) On or before the date on which the initial Purchase occurs, until the
receipt by the Servicer of a Termination Notice, the Backup Servicer shall
perform, on behalf of the Deal Agent and the Secured Parties, the following
duties and obligations:

          (i) On or before the Closing Date, the Backup Servicer shall accept
     from the Servicer delivery of the information required to be set forth in
     the Monthly Reports in hard copy and on computer tape; provided, however,
     the computer tape is in an MS-DOS, PC readable ASCII format or format to be
     agreed upon by the Backup Servicer and the Servicer on or prior to closing.


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          (ii) Not later than 12:00 noon New York time two Business Days prior
     to each Reporting Date, the Backup Servicer shall accept delivery of tape
     from the Servicer, which shall include but not be limited to the following
     information: the name, number and name of the related Obligor for each
     Loan, the collection status, the contract status, the principal balance and
     the Aggregate Outstanding Loan Balance (the "Tape").

     The Servicer shall provide the Tape on each Reporting Date as described
above.

     (b) On or before the date on which the initial Purchase occurs, and until
the receipt by the Servicer of a Termination Notice, the Backup Servicer shall
perform, on behalf of the Secured Parties and the Deal Agent, the following
duties and obligations:

          (i) Prior to the related Payment Date, the Backup Servicer shall
     review the Monthly Report to ensure that it is complete on its face and
     that the following items in such Monthly Report have been accurately
     calculated, if applicable, and reported: (a) the Aggregate Outstanding Loan
     Balance, (b) the Backup Servicing Fee, (c) the Loans that are 30-60 days
     past due, (d) the Loans that are 61-90 days past due, (E) the Loans that
     are 90+ days past due, (F) the Loans that are Defaulted Loans, (G) the
     Average Default Rate, and (H) the Average Net Loss Ratio. The Backup
     Servicer shall notify the Deal Agent and the Servicer of any disagreements
     with the Monthly Report based on such review not later than the Business
     Day preceding such Payment Date to such Persons.

          (ii) If the Servicer disagrees with the report provided under
     paragraph (i) above by the Backup Servicer or if the Servicer or any
     subservicer has not reconciled such discrepancy, the Backup Servicer agrees
     to confer with the Servicer to resolve such disagreement on or prior to the
     next succeeding Determination Date and shall settle such discrepancy with
     the Servicer if possible, and notify the Deal Agent of the resolution
     thereof. The Servicer hereby agrees to cooperate at its own expense, with
     the Backup Servicer in reconciling any discrepancies herein. If within 20
     days after the delivery of the report provided under paragraph (i) above by
     the Backup Servicer, such discrepancy is not resolved, the Backup Servicer
     shall promptly notify the Deal Agent of the continued existence of such
     discrepancy. Following receipt of such notice by the Deal Agent, the
     Servicer shall deliver to the Deal Agent, the Secured Parties, and the
     Backup Servicer no later than the related Payment Date a certificate
     describing the nature and amount of such discrepancies and the actions the
     Servicer proposes to take with respect thereto.

     With respect to the foregoing, the Backup Servicer, in the performance of
its duties and obligations hereunder, is entitled to rely conclusively, and
shall be fully protected in so relying, on the contents of each Tape, including,
but not limited to, the completeness and accuracy thereof, provided by the
Servicer.

     (c) After the receipt of an effective Termination Notice by the Servicer in
accordance with this Agreement, all authority, power, rights and
responsibilities of the Servicer, under this

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Agreement, whether with respect to the Loans or otherwise shall pass to and be
vested in the Backup Servicer, subject to and in accordance with the provisions
of Section 6.27, as long as the Backup Servicer is not prohibited by an
applicable provision of law from fulfilling the same, as evidenced by an Opinion
of Counsel.

     (d) Any Person (i) into which the Backup Servicer may be merged or
consolidated, (ii) which may result from any merger or consolidation to which
the Backup Servicer shall be a party, or (iii) which may succeed to the
properties and assets of the Backup Servicer substantially as a whole, which
Person in any of the foregoing cases executes an agreement of assumption to
perform every obligation of the Backup Servicer hereunder, shall be the
successor to the Backup Servicer under this Agreement without further act on the
part of any of the parties to this Agreement.

     (e) As compensation for its back-up servicing obligations hereunder, the
Backup Servicer shall be entitled to receive the Backup Servicing Fee in respect
of each Monthly Period (or portion thereof) until the first to occur of the date
on which the Backup Servicer becomes a Successor Servicer, resigns or is removed
as Backup Servicer or termination of this Agreement.

     (f) The Backup Servicer may be removed without cause by the Deal Agent by
notice then given in writing to the Servicer, the Seller and the Backup
Servicer. In the event of any such removal, the Backup Servicer may be replaced
by (i) the Servicer, acting with the consent of the Deal Agent or (ii) if no
such replacement is appointed within 30 days following such removal or
resignation, by the Deal Agent.

     (g) The Backup Servicer undertakes to perform only such duties and
obligations as are specifically set forth in this Agreement, it being expressly
understood by all parties hereto that there are no implied duties or obligations
of the Backup Servicer hereunder. Without limiting the generality of the
foregoing, the Backup Servicer, except as expressly set forth herein, shall have
no obligation to supervise, verify, monitor or administer the performance of the
Servicer. The Backup Servicer may act through its agents, attorneys and
custodians in performing any of its duties and obligations under this Agreement,
it being understood by the parties hereto that the Backup Servicer will be
responsible for any misconduct or negligence on the part of such agents,
attorneys or custodians acting on the routine and ordinary day-to-day operations
for and on behalf of the Backup Servicer. Neither the Backup Servicer nor any of
its officers, directors, employees or agents shall be liable, directly or
indirectly, for any damages or expenses arising out of the services performed
under this Agreement other than damages or expenses which result from the gross
negligence or willful misconduct of it or them or the failure to perform
materially in accordance with this Agreement.

     (h) The Backup Servicer shall not be liable for any obligation of the
Servicer contained in this Agreement or for any errors of the Servicer contained
in any computer tape, certificate or other data or document delivered to the
Backup Servicer hereunder or on which the Backup Servicer must rely in order to
perform its obligations hereunder, and the Seller, Secured Parties, Deal Agent,
Liquidity Agent, Collateral Custodian and Backup Servicer, shall look only

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to the Servicer to perform such obligations. The Backup Servicer and the
Collateral Custodian shall have no responsibility and shall not be in default
hereunder or incur any liability for any failure, error, malfunction or any
delay in carrying out any of their respective duties under this Agreement if
such failure or delay results from the Backup Servicer acting in accordance with
information prepared or supplied by a Person other than the Backup Servicer or
the failure of any such other Person to prepare or provide such information.

     SECTION 6.25 IDENTIFICATION OF RECORDS.

     The Servicer shall clearly and unambiguously identify each Loan that is in
the Asset Pool and the Related Property in its computer or other records to
reflect that the Asset Interests in such Loans and Related Property have been
transferred to and are owned by the Purchasers and that the Deal Agent has the
interest therein granted by the Seller pursuant to this Agreement.

     SECTION 6.26 SERVICER TERMINATION EVENTS.

     (a) If any one of the following events (a "Servicer Termination Event")
shall occur and be continuing on any day:

          (i) any failure by the Servicer to make any payment, transfer or
     deposit on or before the date occurring two (2) Business Days after the
     date such payment, transfer or deposit is required to be made, or any
     failure by the Servicer to give instructions or notice to the Deal Agent as
     required by this Agreement or to deliver any Required Reports hereunder and
     such failure continues unremedied more than two (2) Business Days after
     notice thereof to the Servicer.

          (ii) any failure on the part of the Servicer duly to observe or
     perform in any material respect any other covenants or agreements of the
     Servicer set forth in this Agreement or any other Transaction Document
     which continues unremedied for a period of 30 days after the first to occur
     of (i) the date on which written notice of such failure requiring the same
     to be remedied shall have been given to the Servicer by the Deal Agent and
     (ii) the date on which the Servicer becomes aware thereof;

          (iii) any representation, warranty or certification made by the
     Servicer in this Agreement or in any certificate delivered pursuant to this
     Agreement shall prove to have been incorrect when made, and which continues
     to be unremedied for a period of 30 days after the first to occur of (i)
     the date on which written notice of such incorrectness requiring the same
     to be remedied shall have been given to the Servicer by the Deal Agent and
     (ii) the date on which the Servicer becomes aware thereof;

          (iv) the Servicer shall fail in any material respect to service the
     Loans in accordance with the Credit and Collection Policies;

          (v) an Insolvency Event shall occur with respect to the Servicer; or


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          (vi) (x) the Servicer ceases to be a wholly-owned subsidiary of First
     International Bancorp., Inc., or (y) the Servicer's principal place of
     business and chief executive office ceases to be located in the United
     States, without the prior written consent of the Deal Agent, VFCC and the
     Required Investors.

Notwithstanding anything herein to the contrary, so long as any such Servicer
Termination Events shall not have been remedied at the expiration of any
applicable cure period, the Deal Agent, by written notice to the Servicer (a
"Termination Notice"), may, subject to the provisions of Section 6.27, terminate
all of the rights and obligations of the Servicer as Servicer under this
Agreement. The Seller shall pay all reasonable set-up and conversion costs
associated with the transfer of servicing rights to the Successor Servicer.

     SECTION 6.27 APPOINTMENT OF SUCCESSOR SERVICER.

     (a) On and after the receipt by the Servicer of a Termination Notice
pursuant to Section 6.26, the Servicer shall continue to perform all servicing
functions under this Agreement until the date specified in the Termination
Notice or otherwise specified by the Deal Agent in writing or, if no such date
is specified in such Termination Notice or otherwise specified by the Deal
Agent, until a date mutually agreed upon by the Servicer and the Deal Agent. The
Deal Agent may at the time described in the immediately preceding sentence in
its sole discretion, appoint the Backup Servicer as the Servicer hereunder, and
the Backup Servicer shall on such date assume all obligations of the Servicer
hereunder, and all authority and power of the Servicer under this Agreement
shall pass to and be vested in the Backup Servicer (the Backup Servicer or such
other successor, the "Successor Servicer"); provided, however, that the
Successor Servicer shall not be responsible or liable for any past actions or
omissions of the outgoing Servicer. In the event that a Successor Servicer has
not been appointed and has not accepted its appointment at the time when the
Servicer ceases to act as Servicer, the Deal Agent shall petition a court of
competent Jurisdiction to appoint any established financial institution having a
net worth of not less than U.S. $25,000,000 and whose regular business includes
the servicing of Loans as the Successor Servicer hereunder.

     (b) Upon its appointment, the Backup Servicer (subject to 6.27(a)) or the
Successor Servicer, as applicable, shall be the successor in all respects to the
Servicer with respect to servicing functions under this Agreement and shall be
subject to all the responsibilities, duties and liabilities relating thereto
placed on the Servicer by the terms and provisions hereof, and all references in
this Agreement to the Servicer shall be deemed to refer to the Backup Servicer
or the Successor Servicer, as applicable.

     (c) All authority and power granted to the Servicer under this Agreement
shall automatically cease and terminate upon termination of this Agreement and
shall pass to and be vested in the Seller and, without limitation, the Seller is
hereby authorized and empowered to execute and deliver, on behalf of the
Servicer, as attorney-in-fact or otherwise, all documents and other instruments,
and to do and accomplish all other acts or things necessary or appropriate to


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effect the purposes of such transfer of servicing rights. The Servicer agrees to
cooperate with the Seller in effecting the termination of the responsibilities
and rights of the Servicer to conduct servicing with respect to the Loans
included in the Asset Pool.

     (d) Upon the Backup Servicer receiving notice that it is required to serve
as Servicer hereunder pursuant to the foregoing provisions of this Section 6.27,
the Backup Servicer will promptly begin the transition to its role as Servicer.

     SECTION 6.28 NOTIFICATION.

     Upon the Servicer becoming aware of the occurrence of any Servicer
Termination Event, the Servicer shall promptly give written notice thereof to
the Deal Agent.

     SECTION 6.29 PROTECTION OF RIGHT, TITLE AND INTEREST IN ASSETS.

     The Servicer shall cause this Agreement, all amendments hereto and/or all
financing statements and continuation statements and any other necessary
documents covering the right, title and interest of the Deal Agent as agent for
the Secured Parties and of the Secured Parties to the Assets to be promptly
recorded, registered and filed, and at all times to be kept recorded, registered
and filed, all in such manner and in such places as may be required by law fully
to preserve and protect the right, title and interest of the Deal Agent as agent
for the Secured Parties hereunder to all property comprising the Asset Pool. The
Servicer shall deliver to the Deal Agent file-stamped copies of, or filing
receipts for, any document recorded, registered or filed as provided above, as
soon as available following such recording, registration or filing. The Seller
shall cooperate fully with the Servicer in connection with the obligations set
forth above and will execute any and all documents reasonably required to
fulfill the intent of this Section.

     SECTION 6.30 RELEASE OF LOAN FILES.

     The Seller may, with the prior written consent of the Deal Agent (such
consent not to be unreasonably withheld), require that the Collateral Custodian
release each Loan File (a) delivered to the Collateral Custodian in error, (b)
for which a Substitute Loan has been substituted in accordance with Section 2.9,
(c) as to which the lien on the Related Property has been so released pursuant
to Section 5.3, (d) which has been retransferred to the Seller pursuant to
Section 5.5 or 5.6, or (e) which is required to be redelivered to the Seller in
connection with the termination of this Agreement, in each case by submitting to
the Collateral Custodian and the Deal Agent a written request (signed by both
the Seller and the Deal Agent) specifying the Loans to be so released and
reciting that the conditions to such release have been met (and specifying the
section or sections of this Agreement being relied upon for such release). The
Collateral Custodian shall upon its receipt of each such request for release
executed by the Seller and the Deal Agent promptly, but in any event within 5
Business Days, release the Loan Files so requested to the Seller.


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                                   ARTICLE VII

                            EARLY AMORTIZATION EVENTS

     SECTION 7.1 .EARLY AMORTIZATION EVENTS.

     If any of the following events (each, an "Early Amortization Event") shall
occur and be continuing:

     (a) the Seller or the Servicer shall default in the payment of any amount
required to be made under the terms of this Facility and such failure continues
unremedied for a period of three (3) Business Days after written notice thereof
shall have been given by the Deal Agent or the Collateral Custodian to the
Seller or Servicer; or

     (b) the amount of outstanding Capital shall exceed the Capital Limit for
more than three (3) Business Days; or

     (c) (i) the Seller or the Originator shall fail to perform or observe in
any material respect any other covenant or other agreement of the Seller or the
Originator set forth in this Facility, or (ii) the Originator shall fail to
perform or observe in any material respect any term covenant or agreement of
such Originator set forth in the Purchase Agreement, in each case when such
failure continues unremedied for more than thirty (30) days after the earlier of
(x) the date written notice thereof shall have been given by the Deal Agent or
the Collateral Custodian to such Person or (y) the date of actual knowledge
thereof by the Seller; or

     (d) any representation or warranty made or deemed made hereunder shall
prove to be incorrect in any material respect as of the time when the same shall
have been made, and such incorrect representation or warranty shall not have
been eliminated or otherwise cured within a period of thirty (30) days after
written notice thereof shall have been given by the Deal Agent or the Collateral
Custodian to the Seller; or

     (e) an Insolvency Event shall occur with respect to the Seller or the
Originator; or

     (f) a Servicer Termination Event occurs; or

     (g) any Change in Control of the Seller or Originator occurs; or

     (h) the Seller or the Originator defaults in making any payment required to
be made under any material agreement for borrowed money to which either is a
party and such default gives the relevant lender a right to accelerate the
Seller's or Originator's obligations thereunder and is not cured within the
relevant cure period; or


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<PAGE>   84


     (i) the Deal Agent, as agent for the Secured Parties, shall fail for any
reason to have a valid and perfected first priority security interest in any of
the Assets; or

     (j) (i) a final judgment for the payment of money in excess of $5,000,000
shall have been rendered against the Originator or $1,000,000 against the Seller
by a court of competent jurisdiction and, if such judgment relates to the
Originator, the Originator shall not have either: (1) discharged or provided for
the discharge of such judgment in accordance with its terms, or (2) perfected a
timely appeal of such judgment and caused the execution thereof to be stayed (by
supersedes or otherwise during the pendency of such appeal or (ii) the Seller,
shall have made payments of amounts in excess of $100,000 in settlement of any
litigation; or

     (k) the Seller or Originator agrees or consents to, or otherwise permits to
occur, any amendment, modification, change, supplement or recission of or to the
Credit and Collection Policies in whole or in part that could have a material
adverse effect upon the Loans or interest of any Purchaser, without the prior
consent of the Deal Agent or the Purchaser; or

     (l) any failure to comply with Section 5.4 and such failure continues for a
period of fifteen (15) days; or

     (m) on any Determination Date, the Net Portfolio Yield does not equal or
exceed the Minimum Net Portfolio Yield and such failure continues for a period
of fifteen (15) consecutive days; or

     (n) As of any Determination Date, the Average Default Ratio is greater than
four percent (4.0%); or

     (o) As of any Determination Date, the Average Net Loss Ratio is greater
than one and one-half percent (1.5%); or

     (p) [Reserved]

     (q) the Originator ceases to be a wholly-owned subsidiary of First
International Bancorp., Inc.; or

     (r) the Seller ceases to be a "bankruptcy-remote entity" under customary
criteria; or

     (s) the Seller shall become an "investment company" within the meaning of
the 1940 Act; or

     (t) the noncompliance at any time of the composition of the Asset Pool with
the concentration and mix requirements set forth on Schedule II hereof and such
noncompliance is not cured within five (5) Business Days; or


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<PAGE>   85


     (u) the business and other activities of the Seller or the Servicer (if the
Originator is the Servicer), including but not limited to, the Purchases made by
the Purchasers, the application and use of the proceeds thereof by the Seller
and the consummation and conduct of the transactions contemplated by the
Transaction Documents to which the Seller or Servicer is a party do not now and
will not in the future result in a violation by the Servicer, the Seller, or any
other person or entity of the 1940 Act or the rules and regulations promulgated
thereunder,

then, and in any such event, the Deal Agent shall, at the request, or may with
the consent, of the Required Investors, by notice to the Seller declare the
Termination Date to have occurred, without demand, protest or future notice of
any kind, all of which are hereby expressly waived by the Seller, and all
Aggregate Unpaids and all other amounts owing by the Seller under this Facility
shall be accelerated and become immediately due and payable, provided, that in
the event that the Termination Event described in subsection (f) herein has
occurred, the Termination Date shall automatically occur, without demand,
protest or any notice of any kind, all of which are hereby expressly waived by
the Seller.


                                  ARTICLE VIII

                                 INDEMNIFICATION

     SECTION 8.1 INDEMNITIES BY THE SELLER.

     Without limiting any other rights which the Deal Agent, the Liquidity
Agent, any Secured Party or its assignee, or any of their respective Affiliates
may have hereunder or under applicable law, the Seller hereby agrees to
indemnify the Deal Agent, the Liquidity Agent, any Secured Party or its assignee
and each of their respective Affiliates and officers, directors, employees and
agents thereof (collectively, the "Indemnified Parties") from and against any
and all damages, losses, claims, liabilities and related costs and expenses,
including reasonable attorneys' fees and disbursements (all of the foregoing
being collectively referred to as "Indemnified Amounts") awarded against or
incurred by, any such Indemnified Party or other non-monetary damages of any
such Indemnified Party any of them arising out of or as a result of this
Agreement, excluding, however, Indemnified Amounts to the extent resulting from
gross negligence or willful misconduct on the part of any Indemnified Party.
Without limiting the foregoing, the Seller shall indemnify the Indemnified
Parties for Indemnified Amounts relating to or resulting from:

          (i) any Loan treated as or represented by the Seller to be an Eligible
     Loan which is not at the applicable time an Eligible Loan;

          (ii) reliance on any representation or warranty made or deemed made by
     the Seller, the Servicer (or one of its Affiliates) or any of their
     respective officers under or in connection with this Agreement, which shall
     have been false or incorrect in any material respect when made or deemed
     made or delivered;


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<PAGE>   86


          (iii) the failure by the Seller or the Servicer (or one of its
     Affiliates) to comply with any term, provision or covenant contained in
     this Agreement or any agreement executed in connection with this Agreement,
     or with any applicable law, rule or regulation with respect to any Loan
     comprising a portion of the Assets Pool, the Related Property, or the
     nonconformity of any Loan, the Related Property with any such applicable
     law, rule or regulation or any failure by the Originator, the Seller or any
     Affiliate thereof to perform its respective duties under the Loans included
     as a part of the Assets;

          (iv) the failure to vest and maintain vested in the relevant Purchaser
     or to transfer to such Purchaser, an undivided ownership interest in the
     Assets, together with all Collections, free and clear of any Adverse Claim
     whether existing at the time of any Purchase or at any time thereafter;

          (v) the failure to file, or any delay in filing, financing statements
     or other similar instruments or documents under the UCC of any applicable
     jurisdiction or other applicable laws with respect to any Asset whether at
     the time of any Purchase or at any subsequent time and as required by the
     Transaction Documents;

          (vi) any dispute, claim, offset or defense (other than the discharge
     in bankruptcy of the Obligor) of the Obligor to the payment of any Loan
     included in the Asset Pool which is, or is purported to be, an Eligible
     Loan (including, without limitation, a defense based on the Loan not being
     a legal, valid and binding obligation of such Obligor enforceable against
     it in accordance with its terms);

          (vii) any failure of the Seller or the Servicer (if the Originator or
     one of its Affiliates) to perform its duties or obligations in accordance
     with the provisions of this Agreement or any failure by the Originator, the
     Seller or any Affiliate thereof to perform its respective duties under the
     Loans;

          (viii) any products liability claim or personal injury or property
     damage suit or other similar or related claim or action of whatever sort
     arising out of or in connection with merchandise or services which are the
     subject of any Loan included in the Asset Pool or the Related Property
     included in the Asset Pool;

          (ix) the failure by Seller to pay when due any Taxes for which the
     Seller is liable, including without limitation, sales, excise or personal
     property taxes payable in connection with the Assets Pool;

          (x) any repayment by the Deal Agent, the Liquidity Agent or a Secured
     Party of any amount previously distributed in reduction of Capital or
     payment of Yield or any other amount due hereunder or under any Hedging
     Agreement, in each case which

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<PAGE>   87

     amount the Deal Agent, the Liquidity Agent or a Secured Party believes in
     good faith is required to be repaid;

          (xi) any investigation, litigation or proceeding related to this
     Agreement or the use of proceeds of Purchases or in respect of any Loan
     included in the Asset Pool or the Related Property included in the Asset
     Pool;

          (xii) any failure by the Seller to give reasonably equivalent value to
     the Originator in consideration for the transfer by the Originator to the
     Seller of any Loan or the Related Property or any attempt by any Person to
     void or otherwise avoid any such transfer under any statutory provision or
     common law or equitable action, including, without limitation, any
     provision of the Bankruptcy Code;

          (xiii) the failure of the Seller, the Originator or any of their
     respective agents or representatives to remit to the Servicer or the Deal
     Agent, Collections on the Pool Assets remitted to the Seller or any such
     agent or representative; or

          (xiv) the failure to maintain, as of the close of business on each
     Business Day prior to the Termination Date, an amount of Capital
     outstanding which is less than or equal to the lesser of (x) the Purchase
     Limit on such Business Day, or (y) the Capital Limit on such Business Day.

Any amounts subject to the indemnification provisions of this Section 8.1 shall
be paid by the Seller solely pursuant to the provisions of Sections 2.7 and 2.9
hereof as the case may be to the Deal Agent within two Business Days following
the Deal Agent's demand therefor.

     Any indemnification pursuant to this Section 8.1 shall not be in
duplication of any other indemnification for the same loss under Section 6.21.


                                   ARTICLE IX

                     THE DEAL AGENT AND THE LIQUIDITY AGENT

     SECTION 9.1 AUTHORIZATION AND ACTION.

     (a) Each Secured Party hereby designates and appoints the Deal Agent as
Deal Agent hereunder, and authorizes the Deal Agent to take such actions as
agent on its behalf and to exercise such powers as are delegated to the Deal
Agent by the terms of this Agreement together with such powers as are reasonably
incidental thereto. The Deal Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Purchaser, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities on the part of the Deal
Agent shall be read into this Agreement or otherwise exist for the Deal Agent.
In performing its functions and duties hereunder, the Deal Agent shall act
solely as agent

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<PAGE>   88

for the Secured Parties and does not assume nor shall be deemed to have assumed
any obligation or relationship of trust or agency with or for the Seller or any
of its successors or assigns. The Deal Agent shall not be required to take any
action which exposes the Deal Agent to personal liability or which is contrary
to this Agreement or applicable law. The appointment and authority of the Deal
Agent hereunder shall terminate at the indefeasible payment in full of the
Aggregate Unpaids.

         (b) Each Investor hereby designates and appoints First Union as
Liquidity Agent hereunder, and authorizes the Liquidity Agent to take such
actions as agent on its behalf and to exercise such powers as are delegated to
the Liquidity Agent by the terms of this Agreement together with such powers as
are reasonably incidental thereto. The Liquidity Agent shall not have any duties
or responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Investor, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities on the part of the
Liquidity Agent shall be read into this Agreement or otherwise exist for the
Liquidity Agent. In performing its functions and duties hereunder, the Liquidity
Agent shall act solely as agent for the Investors and does not assume nor shall
be deemed to have assumed any obligation or relationship of trust or agency with
or for the Seller or any of its successors or assigns. The Liquidity Agent shall
not be required to take any action which exposes the Liquidity Agent to personal
liability or which is contrary to this Agreement or applicable law. The
appointment and authority of the Liquidity Agent hereunder shall terminate at
the indefeasible payment in full of the Aggregate Unpaids.

     SECTION 9.2 DELEGATION OF DUTIES.

     (a) The Deal Agent may execute any of its duties under this Agreement by or
through agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Deal Agent shall not be
responsible for the negligence or misconduct of any agents or attorneys-in-fact
selected by it with reasonable care.

     (b) The Liquidity Agent may execute any of its duties under this Agreement
by or through agents or attorneys-in-fact and shall be entitled to advice of
counsel concerning all matters pertaining to such duties. The Liquidity Agent
shall not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care.

     SECTION 9.3  EXCULPATORY PROVISIONS.

     (a) Neither the Deal Agent nor any of its directors, officers, agents or
employees shall be (i) liable for any action lawfully taken or omitted to be
taken by it or them under or in connection with this Agreement (except for its,
their or such Person's own gross negligence or willful misconduct or, in the
case of the Deal Agent, the breach of its obligations expressly set forth in
this Agreement), or (ii) responsible in any manner to any of the Secured Parties
for any recitals, statements, representations or warranties made by the Seller
contained in this Agreement or in any certificate, report, statement or other
document referred to or provided for in, or received under or in connection
with, this Agreement for the value, validity, effectiveness,

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<PAGE>   89

genuineness, enforceability or sufficiency of this Agreement or any other
document furnished in connection herewith, or for any failure of the Seller to
perform its obligations hereunder, or for the satisfaction of any condition
specified in Article III. The Deal Agent shall not be under any obligation to
any Secured Party to ascertain or to inquire as to the observance or performance
of any of the agreements or covenants contained in, or conditions of, this
Agreement, or to inspect the properties, books or records of the Seller. The
Deal Agent shall not be deemed to have knowledge of any Early Amortization Event
unless the Deal Agent has received notice from the Seller or a Secured Party.

     (b) Neither the Liquidity Agent nor any of its directors, officers, agents
or employees shall be (i) liable for any action lawfully taken or omitted to be
taken by it or them under or in connection with this Agreement (except for its,
their or such Person's own gross negligence or willful misconduct or, in the
case of the Liquidity Agent, the breach of its obligations expressly set forth
in this Agreement), or (ii) responsible in any manner to the Deal Agent or any
of the Secured Parties for any recitals, statements, representations or
warranties made by the Seller contained in this Agreement or in any certificate,
report, statement or other document referred to or provided for in, or received
under or in connection with, this Agreement or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any other document furnished in connection herewith, or for any failure of the
Seller to perform its obligations hereunder, or for the satisfaction of any
condition specified in Article III. The Liquidity Agent shall not be under any
obligation to the Deal Agent or any Secured Party to ascertain or to inquire as
to the observance or performance of any of the agreements or covenants contained
in, or conditions of, this Agreement, or to inspect the properties, books or
records of the Seller. The Liquidity Agent shall not be deemed to have knowledge
of any Early Amortization Event unless the Liquidity Agent has received notice
from the Seller, the Deal Agent or a Secured Party.

     SECTION 9.4 RELIANCE.

     (a) The Deal Agent shall in all cases be entitled to rely, and shall be
fully protected in relying, upon any 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 Seller), independent accountants and other
experts selected by the Deal Agent. The Deal Agent shall in all cases be fully
justified in failing or refusing to take any action under this Agreement or any
other document furnished in connection herewith unless it shall first receive
such advice or concurrence of VFCC or the Required Investors or all of the
Secured Parties, as applicable, as it deems appropriate or it shall first be
indemnified to its satisfaction by the Secured Parties; provided, that, unless
and until the Deal Agent shall have received such advice, the Deal Agent may
take or refrain from taking any action, as the Deal Agent shall deem advisable
and in the best interests of the Secured Parties. The Deal Agent shall in all
cases be fully protected in acting, or in refraining from acting, in accordance
with a request of VFCC or the Required Investors or all of the Secured Parties,
as applicable, and such request and any action taken or failure to act pursuant
thereto shall be binding upon all the Secured Parties.


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<PAGE>   90


     (b) The Liquidity Agent shall in all cases be entitled to rely, and shall
be fully protected in relying, upon any 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 Seller), independent accountants and other
experts selected by the Liquidity Agent. The Liquidity Agent shall in all cases
be fully justified in failing or refusing to take any action under this
Agreement or any other document furnished in connection herewith unless it shall
first receive such advice or concurrence of Required Investors as it deems
appropriate or it shall first be indemnified to its satisfaction by the
Investors, provided that unless and until the Liquidity Agent shall have
received such advice, the Liquidity Agent may take or refrain from taking any
action, as the Liquidity Agent shall deem advisable and in the best interests of
the Investors. The Liquidity Agent shall in all cases be fully protected in
acting, or in refraining from acting, in accordance with a request of the
Required Investors and such request and any action taken or failure to act
pursuant thereto shall be binding upon all the Investors.

     SECTION 9.5 NON-RELIANCE ON DEAL AGENT, LIQUIDITY AGENT AND OTHERS.

     Each Secured Party expressly acknowledges that neither the Deal Agent, the
Liquidity Agent nor any of their respective officers, directors, employees,
agents, attorneys-in-fact or affiliates has made any representations or
warranties to it and that no act by the Deal Agent or the Liquidity Agent
hereafter taken, including, without limitation, any review of the affairs of the
Seller, shall be deemed to constitute any representation or warranty by the Deal
Agent or the Liquidity Agent. Each Secured Party represents and warrants to the
Deal Agent and to the Liquidity Agent that it has and will, independently and
without reliance upon the Deal Agent. the Liquidity Agent or any other Secured
Party and based on such documents and information as it has deemed appropriate,
made its own appraisal of and investigation into the business. operations,
property, prospects, financial and other conditions and creditworthiness of the
Seller and made its own decision to enter into this Agreement.

     SECTION 9.6 REIMBURSEMENT AND INDEMNIFICATION.

     The Investors agree to reimburse and indemnify VFCC, the Deal Agent. the
Liquidity Agent and each of their respective officers, directors, employees,
representatives and agents ratably according to their pro rata shares, to the
extent not paid or reimbursed by the Seller (i) for any amounts for which VFCC,
the Liquidity Agent, acting in its capacity as Liquidity Agent, or the Deal
Agent, acting in its capacity as Deal Agent, is entitled to reimbursement by the
Seller hereunder and (ii) for any other expenses incurred by VFCC, the Liquidity
Agent, acting in its capacity as Liquidity Agent, or the Deal Agent, in its
capacity as Deal Agent and acting on behalf of the Secured Parties, in
connection with the administration and enforcement of this Agreement.


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     SECTION 9.7 DEAL AGENT AND LIQUIDITY AGENT IN THEIR INDIVIDUAL CAPACITIES.

     The Deal Agent, the Liquidity Agent and each of their respective Affiliates
may make loans to, accept deposits from and generally engage in any kind of
business with the Seller or any Affiliate of the Seller as though the Deal Agent
or the Liquidity Agent, as the case may be, were not the Deal Agent or the
Liquidity Agent, as the case may be, hereunder. With respect to the making of
Purchases pursuant to this Agreement, the Deal Agent, the Liquidity Agent and
each of their respective Affiliates shall have the same rights and powers under
this Agreement as any Purchaser and may exercise the same as though it were not
the Deal Agent or the Liquidity Agent, as the case may be, and the terms
"Investor," "Purchaser," "Investors" and "Purchasers" shall include the Deal
Agent or the Liquidity Agent, as the case may be, in its individual capacity.

     SECTION 9.8 SUCCESSOR DEAL AGENT OR LIQUIDITY AGENT.

     (a) The Deal Agent may, upon 5 days' notice to the Seller and the Secured
Parties, and the Deal Agent will, upon the direction of all of the Secured
Parties (other than the Deal Agent, in its individual capacity) resign as Deal
Agent. If the Deal Agent shall resign, then the Required Investors during such
5-day period shall appoint from among the Secured Parties a successor agent. If
for any reason no successor Deal Agent is appointed by the Required Investors
during such 5-day period, then effective upon the expiration of such 5-day
period, the Secured Parties shall perform all of the duties of the Deal Agent
hereunder and the Seller shall make all payments in respect of the Aggregate
Unpaids or under any fee letter delivered by the Originator to the Deal Agent
and the Secured Parties directly to the applicable Purchaser and for all
purposes shall deal directly with the Secured Parties. After any retiring Deal
Agent's resignation hereunder as Deal Agent, the provisions of Article VIII and
Article IX shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Deal Agent under this Agreement.

     (b) The Liquidity Agent may, upon 5 days' notice to the Seller, the Deal
Agent and the Investors, and the Liquidity Agent will, upon the direction of all
of the Investors (other than the Liquidity Agent, in its individual capacity)
resign as Liquidity Agent. If the Liquidity Agent shall resign, then the
Required Investors during such 5-day period shall appoint from among the
Investors a successor Liquidity Agent. If for any reason no successor Liquidity
Agent is appointed by the Required Investors during such 5-day period, then
effective upon the expiration of such 5-day period, the Investors shall perform
all of the duties of the Liquidity Agent hereunder and all payments in respect
of the outstanding Capital. After any retiring Liquidity Agent's resignation
hereunder as Liquidity Agent, the provisions of Article VIII and Article IX
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Liquidity Agent under this Agreement.



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                                    ARTICLE X

                           ASSIGNMENTS; PARTICIPATIONS

     SECTION 10.1 ASSIGNMENTS AND PARTICIPATIONS.

     (a) Each Investor may upon at least 30 days' notice to VFCC, the Deal Agent
and the Liquidity Agent, and prior to the Termination Date with the consent of
the Seller (which consent shall not be unreasonably withheld), assign to one or
more banks or other entities all or a portion of its rights and obligations
under this Agreement; provided, however, that (i) each such assignment shall be
of a constant, and not a varying percentage of all of the assigning Investor's
rights and obligations under this Agreement, (ii) the amount of the Commitment
of the assigning Investor being assigned pursuant to each such assignment
(determined as of the date of the Assignment and Acceptance with respect to such
assignment) shall in no event be less than the lesser of (a) $10,000,000 or an
integral multiple of $1,000,000 in excess of that amount and (b) the full amount
of the assigning Investor's Commitment, (iii) each such assignment shall be to
an Eligible Assignee, (iv) the parties to each such assignment shall execute and
deliver to the Deal Agent, for its acceptance and recording in the Register, an
Assignment and Acceptance, together with a processing and recordation fee of
$3,000 or such lesser amount as shall be approved by the Deal Agent, (v) the
parties to each such assignment shall have agreed to reimburse the Deal Agent,
the Liquidity Agent and VFCC for all reasonable fees, costs and expenses
(including, without limitation, the reasonable fees and out-of-pocket expenses
of counsel for each of the Deal Agent, the Liquidity Agent and VFCC) incurred by
the Deal Agent the Liquidity Agent and VFCC, respectively, in connection with
such assignment and (vi) there shall be no increased costs, expenses or taxes
incurred by the Deal Agent, the Liquidity Agent or VFCC upon such assignment or
participation; and provided, further, that upon the effective date of such
assignment the provisions of Section 3.03(f) of the Administration Agreement
shall be satisfied. Upon such execution, delivery and acceptance by the Deal
Agent and the Liquidity Agent and the recording by the Deal Agent, from and
after the effective date specified in each Assignment and Acceptance, which
effective date shall be the date of acceptance thereof by the Deal Agent and the
Liquidity Agent, unless a later date is specified therein, (i) the assignee
thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, have the rights and obligations of an Investor hereunder and (ii)
the Investor assignor thereunder shall, to the extent that rights and
obligations hereunder have been assigned by it pursuant to such Assignment and
Acceptance, relinquish its rights and be released from its obligations under
this Agreement (and, in the case of an Assignment and Acceptance covering all or
the remaining portion of an assigning Investor's rights and obligations under
this Agreement, such Investor shall cease to be a party hereto).

     (b) By executing and delivering an Assignment and Acceptance, the Investor
assignor thereunder and the assignee thereunder confirm to and agree with each
other and the other parties hereto as follows: (i) other than as provided in
such Assignment and Acceptance, such assigning Investor makes no representation
or warranty and assumes no responsibility with respect to any

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<PAGE>   93

statements, warranties or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other instrument or document
furnished pursuant hereto; (ii) such assigning Investor makes no representation
or warranty and assumes no responsibility with respect to the financial
condition of VFCC or the performance or observance by VFCC of any of its
obligations under this Agreement or any other instrument or document furnished
pursuant hereto; (iii) such assignee confirms that it has received a copy of
this Agreement, together with copies of such financial statements and other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into such Assignment and Acceptance; (iv) such
assignee will, independently and without reliance upon the Deal Agent or the
Liquidity Agent, such assigning Investor or any other Investor and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under this
Agreement; (v) such assigning Investor and such assignee confirm that such
assignee is an Eligible Assignee; (vi) such assignee appoints and authorizes
each of the Deal Agent and the Liquidity Agent to take such action as agent on
its behalf and to exercise such powers under this Agreement as are delegated to
such agent by the terms hereof, together with such powers as are reasonably
incidental thereto; and (vii) such assignee agrees that it will perform in
accordance with their terms all of the obligations which by the terms of this
Agreement are required to be performed by it as an Investor.

     (c) The Deal Agent shall maintain at its address referred to herein a copy
of each Assignment and Acceptance delivered to and accepted by it and a register
for the recordation of the names and addresses of the Investors and the
Commitment of, and principal amount of, each Asset Interest owned by each
investor from time to time (the "Register"). The entries in the Register shall
be conclusive and binding for all purposes, absent manifest error, and VFCC, the
Seller and the Investors may treat each Person whose name is recorded in the
Register as an Investor hereunder for all purposes of this Agreement. The
Register shall be available for inspection by VFCC, the Liquidity Agent or any
Investor at any reasonable time and from time to time upon reasonable prior
notice.

     (d) Subject to the provisions of Section 10.1(a), upon its receipt of an
Assignment and Acceptance executed by an assigning Investor and an assignee, the
Deal Agent and the Liquidity Agent shall each, if such Assignment and Acceptance
has been completed and is in substantially the form of Exhibit D hereto, accept
such Assignment and Acceptance, and the Deal Agent shall then (i) record the
information contained therein in the Register and (ii) give prompt notice
thereof to VFCC.

     (e) Each Investor may sell participations to one or more banks or other
entities in or to all or a portion of its rights and obligations under this
Agreement (including, without limitation, all or a portion of its Commitment and
each Asset Interest owned by it); provided, however, that (i) such Investor's
obligations under this Agreement (including, without limitation, its Commitment
hereunder) shall remain unchanged, (ii) such Investor shall remain solely
responsible to the other parties hereto for the performance of such obligations
and (iii) the Deal Agent and the other Investors shall continue to deal solely
and directly with such Investor in

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<PAGE>   94

connection with such Investor's rights and obligations under this Agreement; and
provided, further, that the Deal Agent shall have confirmed that upon the
effective date of such participation the provisions of Section 3.03(f) of the
Administration Agreement shall be satisfied. Notwithstanding anything herein to
the contrary, each participant shall have the rights of an Investor (including
any right to receive payment) under Sections 2.14 and 2.15; provided, however,
that no participant shall be entitled to receive payment under either such
Section in excess of the amount that would have been payable under such Section
by the Seller to the Investor granting its participation had such participation
not been granted, and no Investor granting a participation shall be entitled to
receive payment under either such Section in an amount which exceeds the sum of
(i) the amount to which such Investor is entitled under such Section with
respect to any portion of any Asset Interest owned by such Investor which is not
subject to any participation plus (ii) the aggregate amount to which its
participants are entitled under such Sections with respect to the amounts of
their respective participations. With respect to any participation described in
this Section 10.1, the participant's rights as set forth in the agreement
between such participant and the applicable Investor to agree to or to restrict
such Investor's ability to agree to any modification, waiver or release of any
of the terms of this Agreement or to exercise or refrain from exercising any
powers or rights which such Investor may have under or in respect of this
Agreement shall be limited to the right to consent to any of the matters set
forth in Section 11.1 of this Agreement.

     (f) Each Investor may, in connection with any assignment or participation
or proposed assignment or participation pursuant to this Section 10.1, disclose
to the assignee or participant or proposed assignee or participant any
information relating to the Seller or VFCC furnished to such Investor by or on
behalf of the Seller or VFCC, but such Investor shall require such assignee or
participant or proposed assignee or participant to keep all such information
confidential.

     (g) In the event (i) an Investor ceases to qualify as an Eligible Assignee,
or (ii) an Investor makes demand for compensation pursuant to Section 2.15 or
Section 2.16, VFCC may, and, upon the direction of the Seller and prior to the
occurrence of the Termination Date, shall, in any such case, notwithstanding any
provision to the contrary herein, replace such Investor with an Eligible
Assignee by giving three Business Days' prior written notice to such Investor.
In the event of the replacement of an Investor, such Investor agrees (i) to
assign all of its rights and obligations hereunder to an Eligible Assignee
selected by VFCC upon payment to such Investor of the amount of such Investor's
Asset Interests together with any accrued and unpaid Yield thereon, all accrued
and unpaid commitment fees owing to such Investor and all other amounts owing to
such Investor hereunder and (ii) to execute and deliver an Assignment and
Acceptance and such other documents evidencing such assignment as shall be
necessary or reasonably requested by VFCC or the Deal Agent. In the event that
any Investor ceases to qualify as an Eligible Assignee, such affected Investor
agrees (1) to give the Deal Agent, the Seller and VFCC prompt written notice
thereof and (2) subject to the following proviso, to reimburse the Deal Agent,
the Liquidity Agent, the Seller, VFCC and the relevant assignee for all fees,
costs and expenses (including, without limitation, the reasonable fees and
out-of-pocket expenses of counsel for each of the Deal Agent, the Liquidity
Agent, the Seller and VFCC and such assignee)

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<PAGE>   95

incurred by the Deal Agent, the Liquidity Agent, the Seller, VFCC and such
assignee. respectively, in connection with any assignment made pursuant to this
Section 10.1(g) by such affected Investor; provided, however, that such affected
Investor's liability for such costs, fees and expenses shall be limited to the
amount of any up-front fees paid to such affected Investor at the time that it
became a party to this Agreement.

     (h) Nothing herein shall prohibit any Investor from pledging or assigning
as collateral any of its rights under this Agreement to any Federal Reserve Bank
in accordance with applicable law and any such pledge or collateral assignment
may be made without compliance with Section 10.1(a) or Section 10.1(b).

     (i) In the event any Investor causes increased costs, expenses or taxes to
be incurred by the Deal Agent, Liquidity Agreement or VFCC in connection with
the assignment or participation of such Investor's rights and obligations under
this Agreement to an Eligible Assignee then such Investor agrees that it will
make reasonable efforts to assign such increased costs, expenses or taxes to
such Eligible Assignee in accordance with the provisions of this Agreement.


                                   ARTICLE XI

                                  MISCELLANEOUS

     SECTION 11.1 AMENDMENTS AND WAIVERS.

     (a) Except as provided in this Section 11.1, no amendment, waiver or other
modification of any provision of this Agreement shall be effective without the
written agreement of the Seller, the Deal Agent, VFCC and the Required
Investors; provided, however, that any amendment of this Agreement which is
solely for the purpose of adding a Purchaser or increasing the Commitment of all
Purchasers may be effected with the written consent of the Deal Agent. Any
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given.

     (b) No amendment, waiver or other modification affecting the rights or
obligations of any Hedge Counterparty shall be effective against such Hedge
Counterparty without the written agreement of such Hedge Counterparty.

     (c) No amendment, waiver or other modification adversely affecting the
rights or obligations of the Backup Servicer or Collateral Custodian shall be
effective against such Backup Servicer or Collateral Custodian without their
written agreement.

     (d) The Seller shall not agree to any amendment, waiver or other
modification if the effect thereof is to jeopardize the Seller's status as a
qualifying special purpose entity under FASB Statement 125, as amended and
interpreted.


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     SECTION 11.2 NOTICES, ETC.

     All notices and other communications provided for hereunder shall, unless
otherwise stated herein, be in writing (including telex communication and
communication by facsimile copy) and mailed, telexed, transmitted or delivered,
as to each party hereto, at its address set forth under its name on the
signature pages hereof or specified in such party's Assignment and Acceptance or
at such other address as shall be designated by such party in a written notice
to the other parties hereto. All such notices and communications shall be
effective, upon receipt, or in the case of (a) notice by mail, five days after
being deposited in the United States mail, first class postage prepaid, (b)
notice by telex, when telexed against receipt of answer back, or (c) notice by
facsimile copy, when verbal communication of receipt is obtained, except that
notices and communications pursuant to Article II shall not be effective until
received with respect to any notice sent by mail or telex.

     SECTION 11.3 [RESERVED.]

     SECTION 11.4 NO WAIVER, RIGHTS AND REMEDIES.

     No failure on the part of the Deal Agent, the Liquidity Agent or any
Secured Party or any assignee of any Secured Party to exercise, and no delay in
exercising, any right or remedy hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any right or remedy hereunder preclude
any other or further exercise thereof or the exercise of any other right. The
rights and remedies herein provided are cumulative and not exclusive of any
rights and remedies provided by law.

     SECTION 11.5 BINDING EFFECT.

     This Agreement shall be binding upon and inure to the benefit of the
Seller, the Deal Agent, the Liquidity Agent, the Secured Parties and their
respective successors and permitted assigns and, in addition, the provisions of
Section 2.7 and 2.9 applicable to the Hedge Counterparty shall inure to the
benefit of each Hedge Counterparty, whether or not that Hedge Counterparty is a
Secured Party.

     SECTION 11.6 TERM OF THIS AGREEMENT.

     This Agreement, including, without limitation, the Seller's obligation to
observe its covenants set forth in Article V, and the Servicer's obligation to
observe its covenants set forth in Article VI, shall remain in full force and
effect until the Collection Date; provided, however, that the rights and
remedies with respect to any breach of any representation and warranty made or
deemed made by the Seller pursuant to Articles III and IV and the
indemnification and payment provisions of Article VIII and Article IX and the
provisions of Section 11.10 and Section 11.11 shall be continuing and shall
survive any termination of this Agreement.


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     SECTION 11.7   GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF OBJECTION
                    TO VENUE.

     THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK. EACH OF THE SECURED PARTIES, THE SELLER, THE
LIQUIDITY AGENT AND THE DEAL AGENT HEREBY AGREES TO THE NON-EXCLUSIVE
JURISDICTION OF ANY FEDERAL COURT LOCATED WITHIN THE STATE OF NEW YORK. EACH OF
THE PARTIES HERETO AND EACH SECURED PARTY HEREBY WAIVES ANY OBJECTION BASED ON
FORUM NON CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED
HEREUNDER IN ANY OF THE AFOREMENTIONED COURTS AND CONSENTS TO THE GRANTING OF
SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT.

     SECTION 11.8 WAIVER OF JURY TRIAL.

     TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE SECURED PARTIES, THE
SELLER AND THE DEAL AGENT WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN
RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE BETWEEN
THE PARTIES HERETO ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO
THE RELATIONSHIP BETWEEN ANY OF THEM IN CONNECTION WITH THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY. INSTEAD, ANY SUCH DISPUTE RESOLVED IN COURT
WILL BE RESOLVED IN A BENCH TRIAL WITHOUT A JURY.

     SECTION 11.9 COSTS, EXPENSES AND TAXES.

     (a) In addition to (but without duplication of) the rights of
indemnification granted to the Deal Agent, the Liquidity Agent, the Secured
Parties and its or their Affiliates and officers, directors, employees and
agents thereof under Article VIII hereof, the Seller agrees to pay on demand all
reasonable costs and expenses of the Deal Agent, the Liquidity Agent, and the
Secured Parties incurred in connection with the preparation, execution,
delivery, administration (including periodic auditing), amendment or
modification of, or any waiver or consent issued in connection with, this
Agreement and the other documents to be delivered hereunder or in connection
herewith, including, without limitation, the reasonable fees and out-of-pocket
expenses of counsel for the Deal Agent, the Liquidity Agent, and the Secured
Parties with respect thereto and with respect to advising the Deal Agent, the
Liquidity Agent, and the Secured Parties as to their respective rights and
remedies under this Agreement and the other documents to be delivered hereunder
or in connection herewith in an amount not to exceed $85,000 (excluding any
Hedge Agreement) provided that the transaction contemplated herein closes on or
before December 29, 1998, and the structure described in the summary of terms
does not materially change, and all costs and expenses, if any (including
reasonable counsel fees and expenses), incurred by the Deal Agent, the Liquidity
Agent, or the Secured Parties in connection with the enforcement of this
Agreement and the other documents to be delivered hereunder or in

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connection herewith (including any Hedge Agreement); provided, that the fees
above other than legal fees may not exceed $5,000 per occurrence and per service
provider without FIB's consent which shall not unreasonably be withheld.

     (b) The Seller shall pay on demand any and all stamp, sales, excise and
other taxes (excluding taxes based on income) and fees payable or determined to
be payable in connection with the execution, delivery, filing and recording of
this Agreement, the other documents to be delivered hereunder or any agreement
or other document providing liquidity support, credit enhancement or other
similar support to the Purchasers in connection with this Agreement or the
funding or maintenance of Capital hereunder.

     (c) The Seller shall pay on demand all other costs, expenses and taxes
(excluding income taxes) ("Other Costs"), including, without limitation, all
reasonable costs and expenses incurred by the Deal Agent in connection with
periodic audits of the Seller's or the Servicer's books and records and the cost
of rating VFCC's commercial paper by independent financial rating agencies,
which are incurred as a result of the execution of this Agreement.

     SECTION 11.10 NO PROCEEDINGS.

     Each of the Seller, the Deal Agent, the Liquidity Agent and the Secured
Parties hereby agrees that it will not institute against, or join any other
Person in instituting against VFCC any proceedings of the type referred to in
Section 4.1(f) 50 long as any commercial paper issued by VFCC shall be
outstanding and there shall not have elapsed one year and one day since the last
day on which any such commercial paper shall have been outstanding.

     SECTION 11.11 RECOURSE AGAINST CERTAIN PARTIES.

     (a) No recourse under or with respect to any obligation, covenant or
agreement (including, without limitation, the payment of any fees or any other
obligations) of any Secured Party as contained in this Agreement or any other
agreement, instrument or document entered into by it pursuant hereto or in
connection herewith shall be had against any manager or administrator of such
Secured Party or any incorporator, affiliate, stockholder, officer, employee or
director of such Secured Party or of any such manager or administrator, as such,
by the enforcement of any assessment or by any legal or equitable proceeding, by
virtue of any statute or otherwise it being expressly and understood that the
agreements of such Secured Party contained in this Agreement and all of the
other agreements, instruments and documents entered into by it pursuant hereto
or in connection herewith are, in each case, solely the corporate obligations of
such Secured Party, and that no personal liability whatsoever shall attach to or
be incurred by any manager or administrator of such Secured Party or any
incorporator, stockholder, affiliate, officer, employee or director of such
Secured Party or of any such manager or administrator, as such, or any other of
them, under or by reason of any of the obligations. covenants or agreements of
such Secured Party contained in this Agreement or in any other such instruments,
documents or agreements, or which are implied therefrom, and that any and all
personal liability of every such manager or administrator of such Secured Party
and each

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incorporator, stockholder, affiliate, officer, employee or director of such
Secured Party or of any such administrator, or any of them, for breaches by such
Secured Party of any such obligations, covenants or agreements, which liability
may arise either at common law or at equity, by statute or constitution, or
otherwise, is hereby expressly waived as a condition of and in consideration for
the execution of this Agreement.

     (b) Notwithstanding anything in this Agreement or any other Transaction
Document to the contrary, VFCC shall have no obligation to pay any amount
required to be paid by it hereunder or thereunder in excess of any amount
available to VFCC after paying or making provision for the payment of its
Commercial Paper Notes. All payment obligations of VFCC hereunder are contingent
upon the availability of funds in excess of the amounts necessary to pay
Commercial Paper Notes; and each of the Seller, the Servicer, the Backup
Servicer, the Deal Agent, the Liquidity Agent and the Secured Parties agrees
that they shall not have a claim under Section 101(5) of the Bankruptcy Code if
and to the extent that any such payment obligation exceeds the amount available
to VFCC to pay such amounts after paying or making provision for the payment of
its Commercial Paper Notes.

     (c) The provisions of this Section 11.11 shall survive the termination of
this Agreement.

     SECTION 11.12  PROTECTION OF OWNERSHIP INTEREST; APPOINTMENT OF DEAL AGENT
                    AS ATTORNEY-IN-FACT.

     (a) The Seller agrees that from time to time, at its expense, it will
promptly execute and deliver all instruments and documents, and take all
actions, that may reasonably be necessary or desirable, or that the Deal Agent
may reasonably request, to perfect, protect or more fully evidence the Asset
Interests and the undivided ownership interest in the Assets in the Asset Pool
represented by such Asset Interests, or to enable the Deal Agent or the Secured
Parties to exercise and enforce their rights and remedies hereunder.

     (b) If the Seller or the Servicer fails to perform any of its obligations
hereunder after five Business Days' notice from the Deal Agent, the Deal Agent
or any Secured Party may (but shall not be required to) perform, or cause
performance of, such obligation; and the Deal Agent's or such Secured Party's
reasonable costs and expenses incurred in connection therewith shall be payable
by the Seller (if the Servicer that fails to so perform is the Seller or an
Affiliate thereof) as provided in Article VIII, as applicable. The Seller
irrevocably authorizes the Deal Agent and appoints the Deal Agent as its
attorney-in-fact to act on behalf of the Seller (i) to execute on behalf of the
Seller as debtor and to file financing statements necessary or desirable in the
Deal Agent's sole discretion to perfect and to maintain the perfection and
priority of the interest of the Secured Parties in the Asset Pool and (ii) to
file a carbon, photographic or other reproduction of this Agreement or any
financing statement with respect to the Asset Pool as a financing statement in
such offices as the Deal Agent in its sole discretion deems necessary or
desirable to perfect and to maintain the perfection and priority of the
interests of the Secured Parties in the Asset Pool. This appointment is coupled
with an interest and is irrevocable.


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     (c) The parties hereto intend that the conveyance of Asset Interests by the
Seller to the Purchasers shall be treated as sales for all purposes. If, despite
such intention, a determination is made that such transactions shall not be
treated as sales, then the parties hereto intend that this Agreement constitutes
a security agreement and the transactions effected hereby constitute secured
loans by the Purchasers to the Seller under applicable law. For such purpose,
the Seller hereby transfers, conveys, assigns and grants to the Deal Agent, for
the benefit of the Secured Parties, a continuing security interest in all
Assets, all Collections, all Hedging Agreements and the proceeds of the
foregoing to secure the repayment of all Capital, all payments at any time due
or accrued in respect of the Yield on any Asset Interest and all other payments
at any time due (whether accrued or due) by the Seller hereunder (including
without limit any amount owing under Article VIII hereof), under any Hedging
Agreement (including, without limitation, payments in respect of the termination
of any such Hedging Agreement) or under any fee letter to the Deal Agent and
each Purchaser.

     SECTION 11.13 CONFIDENTIALITY

     (a) Each of the Deal Agent, the Secured Parties, the Liquidity Agent and
the Seller shall maintain and shall cause each of its employees and officers to
maintain the confidentiality of the Agreement and the other confidential
proprietary information with respect to the other parties hereto and their
respective businesses obtained by it or them in connection with the structuring,
negotiating and execution of the transactions contemplated herein, except that
each such party and its officers and employees may (i) disclose such information
to its external accountants and attorneys and as required by an applicable law
or order of any judicial or administrative proceeding, (ii) disclose the
existence of this Agreement, but not the financial terms thereof and (iii)
disclose the Agreement and such information in any suit, action. proceeding or
investigation (whether in law or in equity or pursuant to arbitration) involving
and of the Transaction Documents or any Hedging Agreement for the purpose of
defending itself, reducing itself, reducing its liability, or protecting or
exercising any of its claims, rights, remedies, or interests under or in
connection with any of the Transaction Documents or any Hedging Agreement.

     (b) Anything herein to the contrary notwithstanding, the Seller hereby
consents to the disclosure of any nonpublic information with respect to it (i)
to the Deal Agent, the Liquidity Agent, or the Secured Parties by each other,
(ii) by the Liquidity Agent, the Deal Agent or the Secured Parties to any
prospective or actual Eligible Assignee or participant of any of them or (iii)
by the Deal Agent, the Liquidity Agent or the Secured Parties to any Rating
Agency, commercial paper dealer or provider of a surety, guaranty or credit or
liquidity enhancement to a Secured Party and to any officers, directors,
employees, outside accountants and attorneys of any of the foregoing, provided
each such Person is informed of the confidential nature of such information and
agree to be bound hereby. In addition, the Secured Parties, the Liquidity Agent
and the Deal Agent may disclose any such nonpublic information pursuant to any
law, rule. regulation, direction, request or order of any judicial,
administrative or regulatory authority or proceedings.


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     SECTION 11.14 EXECUTION IN COUNTERPARTS; SEVERABILITY; INTEGRATION.

     This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which when taken together
shall constitute one and the same agreement. In case any provision in or
obligation under this Agreement shall be invalid, illegal or unenforceable in
any jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby. This
Agreement contains the final and complete integration of all prior expressions
by the parties hereto with respect to the subject matter hereof and shall
constitute the entire agreement among the parties hereto with respect to the
subject matter hereof, superseding all prior oral or written understandings
other than any fee letter delivered by the Originator to the Deal Agent and the
Purchasers.


                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]







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

THE SELLER:                               FNBNE FUNDING CORP.

                                          By:      /s/Theodore Horan
                                          Name:    Theodore Horan
                                          Title:   Vice President


THE SERVICER:                             FIRST INTERNATIONAL BANK
                                          (f/k/a First National Bank of England)

                                          By:         /s/ Theodore Horan
                                          Name:       Theodore Horan
                                          Title:       Senior Vice President



                  [SIGNATURES CONTINUED ON THE FOLLOWING PAGE]




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THE REQUIRED INVESTORS:             FIRST UNION NATIONAL BANK

                                    By:      /s/Bill A. Shirley
                                    Name:    Bill A. Shirley
                                    Title:   Senior Vice President

                                    Commitment:  $65,000,000

                                    First Union National Bank
                                    One First Union Center, TW-9
                                    Charlotte, North Carolina  28288
                                    Attention:  Capital Markets Credit
                                                Administration
                                    Facsimile:  (704) 374-3254
                                    Telephone:  (704) 374-4001


THE DEAL AGENT:                     FIRST UNION CAPITAL MARKETS CORP.

                                    By:     /s/James L. Sigman
                                    Name:   James L. Sigman
                                    Title:  Director

                                    First Union National Bank
                                    One First Union Center, TW-9
                                    Charlotte, North Carolina  28288
                                    Attention:  Conduit Administration
                                    Facsimile:  (704) 383-6036
                                    Telephone:  (704) 383-9343



                  [SIGNATURES CONTINUED ON THE FOLLOWING PAGE]




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THE HEDGE COUNTERPARTY:             FIRST UNION NATIONAL BANK

                                    By:       /s/Bill A. Shirley
                                    Name:     Bill A. Shirley
                                    Title:    Senior Vice President

                                    First Union National Bank
                                    One First Union Center, TW-9
                                    Charlotte, North Carolina  28288
                                    Attention:  Capital Markets Credit
                                                Administration
                                    Facsimile:  (704) 374-3254
                                    Telephone:  (704) 374-4001


THE LIQUIDITY AGENT:                FIRST UNION NATIONAL BANK

                                    By:     /s/Bill A. Shirley
                                    Name:   Bill A. Shirley
                                    Title:  Senior Vice President

                                    First Union National Bank
                                    One First Union Center, TW-9
                                    Charlotte, North Carolina  28288
                                    Attention:  Capital Markets Credit
                                                Administration
                                    Facsimile:  (704) 374-3254
                                    Telephone:  (704) 374-4001

                  [SIGNATURES CONTINUED ON THE FOLLOWING PAGE]



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THE COLLATERAL CUSTODIAN            HSBC BANK USA

                                    By:      /s/Susan Barstock
                                    Name:    Susan Barstock
                                    Title:   Assistant Vice President

                                    HSBC Bank USA
                                    140 Broadway
                                    Corporate Trust Department, 12th Floor
                                    New York, New York 10005
                                    Attention:  Susan Barstock
                                    Facsimile:  (212) 658-6425
                                    Telephone:  (212) 658-2079



THE BACKUP SERVICER                 HSBC BANK USA

                                    By:       /s/Susan Barstock
                                    Name:    Susan Barstock
                                    Title:   Assistant Vice President


                                    HSBC Bank USA
                                    140 Broadway
                                    Corporate Trust Department, 12th Floor
                                    New York, New York 10005
                                    Attention:  Susan Barstock
                                    Facsimile:  (212) 658-6425
                                    Telephone:


                                      100


<PAGE>   1
                                                                 Exhibit 10.13.1

                                                                  EXECUTION COPY



                               AMENDMENT NO. 1 TO
                            AMENDED AND RESTATED LOAN
                        PURCHASE AND SERVICING AGREEMENT


         THIS AMENDMENT NO. 1 TO AMENDED AND RESTATED LOAN PURCHASE AND
SERVICING AGREEMENT, dated as of NOVEMBER 23, 1999 (this "Amendment"), is
entered into by and among FNBNE FUNDING CORP., as the Seller, FIRST
INTERNATIONAL BANK (f/k/a First National Bank of New England), certain
INVESTORS, VARIABLE FUNDING CAPITAL CORPORATION ("VFCC"), as a Purchaser, FIRST
UNION SECURITIES, INC. (successor-in-interest to First Union Capital Markets
Corp.), as the Deal Agent, FIRST UNION NATIONAL BANK, as the Liquidity Agent,
and HSBC BANK USA, as the Collateral Custodian and Backup Servicer. Capitalized
terms used but not otherwise defined herein shall have the meanings given to
such terms in the Agreement (as defined below).

         WHEREAS, the parties hereto entered into that certain Amended and
Restated Loan Purchase and Servicing Agreement, dated as of September 24, 1999
(the "Agreement");

         WHEREAS, the parties hereto desire to amend the Agreement in certain
respects as provided herein;

         NOW, THEREFORE, in consideration of the premises and other mutual
covenants contained herein, the parties hereto agree as follows:

         SECTION 1.        AMENDMENTS.

         (a) The definition of "Commitment Termination Date" set forth in
Section 1.1 of the Agreement is hereby amended and restated as follows:

                  "Commitment Termination Date: November 15, 2002 or such later
                  date to which the Commitment Termination Date may be extended
                  (if extended) in the sole discretion of VFCC and each Investor
                  in accordance with the Terms of Section 2.1(b)."

         (b) Section 1.1 of the Agreement is hereby amended by adding the
following defined term:

                  "Permitted Securitization Transaction: Any (a) financing
                  transaction undertaken by the Seller or an Affiliate of the
                  Seller that is secured, directly or indirectly, by the Assets
                  or any portion thereof or any interest therein, and (b) any
                  securitization, including any sale, lease, whole loan sale,
                  asset securitization,
<PAGE>   2
                  secured loan or other transfer, to the extent approved in
                  writing by the Deal Agent in its sole discretion."

         (c) The definition of "Purchase Limit" set forth in Section 1.1 of the
Agreement is hereby amended and restated in its entirety as follows:

                  "Purchase Limit: At any time $95,000,000, on or after the
                  Termination Date, the "Purchase Limit" shall mean the
                  aggregate outstanding Capital."

         (d) Section 1.1 of the Agreement is hereby amended by adding the
following defined term:

                  "Servicer's Put Option Date Certificate: A certificate
                  delivered by the Servicer pursuant to Section 2.17(a) in the
                  form of Exhibit M hereto."

         (e) Article II of the Agreement is hereby amended to add the following
new Section 2.17:

                  "SECTION 2.17     PUT OPTION.

                  (a) The Seller hereby grants to the Deal Agent, on behalf of
                  the Purchasers, the option (the "Put Option") to require the
                  Seller to prepay all or a portion of the aggregate Capital in
                  connection with the sale and assignment to the Seller by the
                  Deal Agent, on behalf of the Purchasers, of the Assets,
                  subject to the following terms and conditions:

                           (i) The Deal Agent, on behalf of the Purchasers,
                  shall have given the Seller at least fifteen (15) days prior
                  written notice of its intention to exercise its Put Option.
                  Such notice shall specify the portion of the aggregate Capital
                  for which the Put Option is being exercised and shall set for
                  closing a date (the "Put Option Purchase Date"), which is not
                  less than fifteen (15) nor more than ninety (90) days after
                  the date such notice is sent. The Deal Agent, on behalf of the
                  Purchasers, may rescind such notice, without liability of any
                  kind, at any time prior to the Put Option Purchase Date by
                  giving written notice thereof to the Seller;

                           (ii) Any Put Option shall be exercised solely in
                  connection with a Permitted Securitization Transaction;

                           (iii) No portion of the proceeds used by the Seller
                  to prepay Capital on a Put Option Purchase Date shall be
                  realized from the Seller's sale or assignment of Assets back
                  to the Originator on such date;

                           (iv) Unless a Put Option Purchase Date is a Payment
                  Date (in which case the relevant calculations with respect to
                  such Put Option shall be reflected on the applicable Monthly
                  Report), the Servicer shall deliver to the Deal Agent a
<PAGE>   3
                  Servicer's Put Option Purchase Date Certificate, together with
                  evidence to the reasonable satisfaction of the Deal Agent
                  (which evidence may consist solely of the Servicer's Put
                  Option Purchase Date Certificate) that the Seller shall have
                  sufficient funds on the related Put Option Purchase Date to
                  effect the contemplated Put Option in accordance with this
                  Agreement. In effecting a Put Option, the Seller may use the
                  proceeds of sales of the Assets (which sales must be made in
                  arm's-length transactions to Persons other than the
                  Originator);

                           (v) After giving effect to the prepayment of Capital
                  pursuant to the exercise of the Put Option and the assignment
                  to the Seller of the Assets on any Put Option Purchase Date,
                  (x) the remaining aggregate Capital shall be less than or
                  equal to the lesser of the Capital Limit and the Purchase
                  Limit, (y) the representations and warranties contained in
                  Section 4.1 and Section 4.2 hereof shall continue to be
                  correct in all material respects, except to the extent
                  relating to an earlier date, and (z) neither an Early
                  Amortization Event nor an event that, with the giving of
                  notice of the lapse of time, or both, would become an Early
                  Amortization Event, shall have resulted.

                           (vi) On the related Put Option Purchase Date, the
                  Deal Agent shall have received, for the benefit of the
                  Purchasers and the Hedge Counterparties, as applicable, in
                  immediately available funds, an amount equal to the sum of (i)
                  the portion of the aggregate Capital to be prepaid plus (ii)
                  an amount equal to all unpaid Yield to the extent reasonably
                  determined by the Deal Agent to be attributable to that
                  portion of the aggregate Capital to be paid in connection with
                  the Put Option plus (iii) an aggregate amount equal to the sum
                  of all other amounts due and owing to the Deal Agent, the
                  Purchasers and the Hedge Counterparties, as applicable, under
                  this Agreement and the other Transaction Documents, to the
                  extent accrued to such date and to accrue thereafter
                  (including, without limitation, Breakage Costs and Hedge
                  Breakage Costs).

                           (vii) On or prior to each Put Option Purchase Date,
                  the Deal Agent shall designate the Assets to be sold and
                  assigned to the Seller.

                  (b) In connection with any Put Option that does not constitute
                  a prepayment in full of the outstanding aggregate Capital,
                  then, following receipt by the Deal Agent of the amounts
                  referred to in clause (v) above, there shall be sold and
                  assigned to the Seller all of the right, title and interest of
                  the Deal Agent in, to and under the portion of the Assets so
                  retransferred and such portion of the Assets so retransferred
                  shall be released from the Lien of this Agreement (subject to
                  the requirements of clause (iv) above).

                  (c) The Seller hereby agrees to pay the reasonable legal fees
                  and expenses of the Deal Agent, the Purchasers and the Hedge
                  Counterparties in connection with any Put Option (including,
                  but not limited to, expenses incurred in connection with the
                  release of the Lien of the Deal Agent, the Purchasers, the
                  Hedge
<PAGE>   4
                  Counterparties and any other party having such an interest in
                  the Assets in connection with such Put Option).

                  (d) In connection with any Put Option, on the related Put
                  Option Purchase Date, the Deal Agent, on behalf of the
                  Purchasers and the Hedge Counterparties, shall, at the expense
                  of the Seller (i) execute such instruments of release with
                  respect to the portion of the Assets to be retransferred to
                  the Seller, in recordable form if necessary, in favor of the
                  Seller as the Seller may reasonably request, (ii) deliver any
                  portion of the Assets to be retransferred to the Seller in its
                  possession to the Seller and (iii) otherwise take such
                  actions, and cause or permit the Collateral Custodian to take
                  such actions, as are necessary and appropriate to release the
                  Lien of the Deal Agent on the portion of the Assets to be
                  retransferred to the Seller and release and deliver to the
                  Seller such portion of the Assets to be retransferred to the
                  Seller."

                  (e) Notwithstanding any other provision of this Section 2.17,
                  the closing of the Put Option may only occur if the Seller
                  obtains the Capital for which the Put Option is being
                  exercised by transferring the applicable Assets in a Permitted
                  Securitization Transaction.

         (g) The amount of the "Commitment" for the Required Investors set forth
         on the signature pages of the Agreement is hereby amended and restated
         to be "$95,000,000."

         SECTION 2. AGREEMENT IN FULL FORCE AND EFFECT AS AMENDED. Except as
specifically amended hereby, the Agreement shall remain in full force and
effect. All references to the Agreement shall be deemed to mean the Agreement as
modified hereby. This Amendment shall not constitute a novation of the
Agreement, but shall constitute an amendment thereof. The parties hereto agree
to be bound by the terms and conditions of the Agreement, as amended by this
Amendment, as though such terms and conditions were set forth herein.

         SECTION 3. REPRESENTATIONS. Each of the Seller and Servicer represent
and warrant as of the date of this Amendment as follows:

                  (i) it is duly incorporated or organized, validly existing and
         in good standing under the laws of its jurisdiction of incorporation or
         organization;

                  (ii) the execution, delivery and performance by it of this
         Amendment are within its powers, have been duly authorized, and do not
         contravene (A) its charter, by-laws, or other organizational documents,
         or (B) any Requirements of Law applicable to it;

                  (iii) no consent, license, permit, approval or authorization
         of, or registration, filing or declaration with any governmental
         authority, is required in connection with the execution, delivery,
         performance, validity or enforceability of this Amendment by or against
         it;
<PAGE>   5
                  (iv) this Amendment has been duly executed and delivered by
         it;

                  (v) this Amendment constitutes its legal, valid and binding
         obligation enforceable against it in accordance with its terms, except
         as enforceability may be limited by applicable bankruptcy, insolvency,
         reorganization, moratorium or similar laws affecting the enforcement of
         creditors' rights generally or by general principles of equity;

                  (vi)     it is not in default under the Agreement; and

                  (vii) there is no Early Amortization Event, Servicer
         Termination Event or event that, with the giving of notice or the lapse
         of time, or both, would become an Early Amortization Event or Servicer
         Termination Event.

         SECTION 4. CONDITIONS PRECEDENT. The effectiveness of this Amendment is
subject to the following conditions precedent: (i) delivery to the Deal Agent of
a copy of the Amendment, duly executed by each of the parties hereto; (ii)
delivery to the Deal Agent (in a form acceptable to it) of a due authorization,
execution, and enforceability opinion with respect to this Amendment; and (iii)
such other documents, agreements, certificates or legal opinions as the Deal
Agent, may reasonably require.

         SECTION 5. MISCELLANEOUS.

         (a) This Amendment may be executed in any number of counterparts, and
by the different parties hereto on the same or separate counterparts, each of
which shall be deemed to be an original instrument but all of which together
shall constitute one and the same agreement.

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

         (c) This Amendment may not be amended or otherwise modified except as
provided in the Agreement.

         (d) First Union certifies by execution hereof that it is an Investor
with Commitments in excess of 66-2/3% of the Purchase Limit, and therefore is a
Required Investor pursuant to the Agreement.

         (e) The failure or unenforceability of any provision hereof shall not
affect the other provisions of this Amendment.

         (f) Whenever the context and construction so require, all words used in
the singular number herein shall be deemed to have been used in the plural, and
vice versa, and the masculine gender shall include the feminine and neuter and
the neuter shall include the masculine and feminine.
<PAGE>   6
         (g) This Amendment represents the final agreement between the parties
and 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.

         (h) THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER
THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO ITS CONFLICT OF LAWS
PROVISIONS.







                  [Remainder of Page Intentionally Left Blank]
<PAGE>   7
         IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.

THE SELLER:                   FNBNE FUNDING CORP.



                              By:      /s/ Ted Horan
                                       --------------------------
                              Name:    Ted Horan
                                       --------------------------
                              Title:   Vice President
                                       --------------------------


THE SERVICER:                 FIRST INTERNATIONAL BANK
                              (f/k/a First National Bank of England)



                              By:      /s/Ted Horan
                                       --------------------------
                              Name:    Ted Horan
                                       --------------------------
                              Title:   Senior Vice President
                                       --------------------------


THE REQUIRED INVESTORS:       FIRST UNION NATIONAL BANK



                              By:      /s/Bill A. Shirley
                                       --------------------------
                              Name:    Bill A. Shirley
                                       --------------------------
                              Title:   Senior Vice President
                                       --------------------------

                              Commitment:  $95,000,000

                              First Union National Bank
                              One First Union Center, TW-9
                              Charlotte, North Carolina  28288
                              Attention:  Capital Markets Credit Administration
                              Facsimile:  (704) 374-3254
                              Telephone:  (704) 374-4001






                                      S-1
<PAGE>   8
VFCC:                       VARIABLE FUNDING CAPITAL CORPORATION

                            By First Union Securities, Inc. (successor-in-
                            interest to First Union Capital Markets Corp.)


                            By:      /s/Paul S. Zajac
                                     --------------------------
                            Name:    Paul S. Zajac
                                     --------------------------
                            Title:   Vice President
                                     --------------------------

                            First Union Securities, Inc.
                            One First Union Center, TW-9
                            Charlotte, North Carolina  28288
                            Attention:  Conduit Administration
                            Facsimile:  (704) 383-6036
                            Telephone:  (704) 383-9343

With a copy to:             Lord Securities Corp.
                            2 Wall Street, 19th Floor
                            New York, New York 10005
                            Attention: Vice President
                            Facsimile:  (212) 346-9012
                            Confirmation No.: (212) 346-9008

THE DEAL AGENT:             FIRST UNION SECURITIES, INC.
                            (successor-in-interest First Union Capital Markets
                            Corp.)


                            By:      /s/James L. Sigman
                                     --------------------------
                            Name:    James L. Sigman
                                     --------------------------
                            Title:   Director
                                     --------------------------

                            First Union Securities, Inc.
                            One First Union Center, TW-9
                            Charlotte, North Carolina  28288
                            Attention:  Conduit Administration
                            Facsimile:  (704) 383-6036
                            Telephone:  (704) 383-9343






                                      S-2
<PAGE>   9
THE HEDGE COUNTERPARTY:        FIRST UNION NATIONAL BANK



                               By:      /s/ Bill A. Shirley
                                     --------------------------
                               Name:    Bill A. Shirley
                                     --------------------------
                               Title:   Senior Vice President
                                     --------------------------

                               First Union National Bank
                               One First Union Center, TW-9
                               Charlotte, North Carolina  28288
                               Attention:  Capital Markets Credit Administration
                               Facsimile:  (704) 374-3254
                               Telephone:  (704) 374-4001


THE LIQUIDITY AGENT:           FIRST UNION NATIONAL BANK



                               By:      /s/Bill A. Shirley
                                     --------------------------
                               Name:    Bill A. Shirley
                                     --------------------------
                               Title:   Senior Vice President
                                     --------------------------

                               First Union National Bank
                               One First Union Center, TW-9
                               Charlotte, North Carolina  28288
                               Attention:  Capital Markets Credit Administration
                               Facsimile:  (704) 374-3254
                               Telephone:  (704) 374-4001





                                      S-3
<PAGE>   10
THE COLLATERAL CUSTODIAN:      HSBC BANK USA


                               By:      /s/Susan Barstock
                                     --------------------------
                               Name:    Susan Barstock
                                     --------------------------
                               Title:   Assistant Vice President
                                     --------------------------

                               HSBC Bank USA
                               140 Broadway
                               Corporate Trust Department, 12th Floor
                               New York, New York  10005
                               Attention:  Susan Barstock
                               Facsimile:  (212) 658-6425

THE BACKUP SERVICER:           HSBC BANK USA


                               By:      /s/Susan Barstock
                                     --------------------------
                               Name:    Susan Barstock
                                     --------------------------
                               Title:   Assistant Vice President
                                     --------------------------

                               HSBC Bank USA
                               140 Broadway
                               Corporate Trust Department, 12th Floor
                               New York, New York  10005
                               Attention:  Susan Barstock
                               Facsimile:  (212) 658-6425







                                      S-4






<PAGE>   1
                                                                 Exhibit 10.15.1














                         POOLING AND SERVICING AGREEMENT
                            Dated as of May 31, 1999



                                  HSBC Bank USA
                                    (Trustee)


                                       and

                 FIRST INTERNATIONAL BANK, NATIONAL ASSOCIATION
                              (Seller and Servicer)




                            First International Bank
                         SBA Loan-Backed Adjustable Rate
            Certificates, Series 1999-1, Class A, Class M and Class B
<PAGE>   2
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
Section                                                                                                           Page
- -------                                                                                                           ----
<S>                                                                                                               <C>


                                                         ARTICLE I



                                                        DEFINITIONS

Definitions ...................................................................................................   1


                                                        ARTICLE II



                                           SALE AND CONVEYANCE OF THE TRUST FUND

2.01          Sale and Conveyance of Trust Fund................................................................   II-1
2.02          Possession of SBA Files..........................................................................   II-1
2.03          Books and Records................................................................................   II-1
2.04          Delivery of SBA Loan Documents...................................................................   II-2
2.05          Acceptance by Trustee of the Trust Fund; Certain Substitutions; Certification by Trustee;........   II-5

2.06          [Intentionally Omitted]..........................................................................   II-7
2.07          Authentication of Certificates...................................................................   II-7
2.08          Fees and Expenses of the Trustee.................................................................   II-7
2.09          Sale and Conveyance of the Subsequent SBA Loans..................................................   II-7
2.10          Optional Purchase of Defaulted SBA Loans.........................................................   II-10


                                                        ARTICLE III



                                              REPRESENTATIONS AND WARRANTIES

3.01          Representations of the Bank.....................................................................  III-1
3.02          Individual SBA Loans............................................................................  III-4
3.03          Purchase and Substitution of Defective SBA Loans...............................................  III-10
</TABLE>

                                      (i)
<PAGE>   3
<TABLE>
<S>                                                                                                              <C>
                                                        ARTICLE IV



                                                     THE CERTIFICATES

4.01          The Certificates.................................................................................  IV-1
4.02          Registration of Transfer and Exchange of Certificates............................................  IV-1
4.03          Mutilated, Destroyed, Lost or Stolen Certificates................................................  IV-9
4.04          Persons Deemed Owners............................................................................  IV-10


                                                         ARTICLE V



                                         ADMINISTRATION AND SERVICING OF SBA LOANS

5.01          Duties of the Servicer............................................................................   V-1
5.02          Liquidation of SBA Loans..........................................................................   V-5
5.03          Establishment of Principal and Interest Accounts; Deposits in Principal and Interest Accounts.....   V-6
5.04          Permitted Withdrawals From the Principal and Interest Account.....................................   V-8
5.05          [Intentionally Omitted]...........................................................................   V-9
5.06          Transfer of Accounts..............................................................................   V-9
5.07          Maintenance of Hazard Insurance...................................................................   V-10
5.08          [Intentionally Omitted]...........................................................................   V-10
5.09          Fidelity Bond.....................................................................................   V-10
5.10          Title, Management and Disposition of Foreclosed Property..........................................   V-11
5.11          [Omitted.]........................................................................................   V-12
5.12          Collection of Certain SBA Loan Payments...........................................................   V-12
5.13          Access to Certain Documentation and Information Regarding the SBA Loans...........................   V-13


                                                        ARTICLE VI



                                            PAYMENTS TO THE CERTIFICATEHOLDERS

6.01          Establishment of Certificate Account; Deposits in Certificate Account; Permitted Withdrawals from
                  Certificate Account...........................................................................   VI-1
6.02          Establishment of Spread Account; Deposits in Spread Account; Permitted Withdrawals from
                  Spread Account ...............................................................................   VI-2
</TABLE>

                                      (ii)
<PAGE>   4
<TABLE>
<S>                                                                                                               <C>
6.03          Establishment of Expense Account; Deposits in Expense Account; Permitted Withdrawals from
                  Expense Account ..............................................................................   VI-4
6.04          Pre-Funding Account and Capitalized Interest Account..............................................   VI-5
6.05          [Intentionally Omitted]...........................................................................   VI-7
6.06          Investment of Accounts............................................................................   VI-7
6.07          Distributions.....................................................................................   VI-8
6.08          [Omitted].........................................................................................   VI-10
6.09          Statements........................................................................................   VI-10
6.10          Advances by the Servicer..........................................................................   VI-14
6.11          Compensating Interest.............................................................................   VI-15
6.12          Reports of Foreclosure and Abandonment of Mortgaged Property......................................   VI-15


                                                        ARTICLE VII



                                                GENERAL SERVICING PROCEDURE

7.01          [Omitted].........................................................................................   VII-1
7.02          Satisfaction of Mortgages and Collateral and Release of SBA Files.................................   VII-1
7.03          Servicing Compensation............................................................................   VII-2
7.04          Annual Statement as to Compliance.................................................................   VII-3
7.05          Annual Independent Public Accountants' Servicing Report...........................................   VII-3
7.06          SBA's and Trustee's Right to Examine Servicer Records and Audit Operations........................   VII-3
7.07          Reports to the Trustee; Principal and Interest Account Statements.................................   VII-4
7.08          Premium Protection Fee and Servicing Fee..........................................................   VII-4


                                                       ARTICLE VIII



                                            REPORTS TO BE PROVIDED BY SERVICER

8.01          Financial Statements..............................................................................  VIII-1
</TABLE>

                                     (iii)
<PAGE>   5
<TABLE>
<S>                                                                                                              <C>
                                                       ARTICLE IX



                                                       THE SERVICER

9.01          Indemnification; Third Party Claims..............................................................  IX-1
9.02          Merger or Consolidation of the Servicer; Assignment of the Servicer's Duties.....................  IX-2
9.03          Limitation on Liability of the Servicer and Others...............................................  IX-3
9.04          Servicer Not to Resign...........................................................................  IX-3


                                                         ARTICLE X



                                                          DEFAULT

10.01         Events of Default.................................................................................  X-1
10.02         Trustee to Act; Appointment of Successor..........................................................  X-3
10.03         Waiver of Defaults................................................................................  X-5
10.04         Control by Majority Certificateholders and Others.................................................  X-5


                                                        ARTICLE XI



                                                        TERMINATION

11.01         Termination......................................................................................  XI-1
11.02         Accounting Upon Termination of Servicer..........................................................  XI-2


                                                        ARTICLE XII



                                                        THE TRUSTEE

12.01         Duties of Trustee...............................................................................  XII-1
12.02         Certain Matters Affecting the Trustee...........................................................  XII-2
12.03         Trustee Not Liable for Certificates or SBA Loans................................................  XII-4
12.04         Trustee May Own Certificates....................................................................  XII-4
12.05         Servicer To Pay Trustee's Fees and Expenses.....................................................  XII-5
12.06         Eligibility Requirements for Trustee............................................................  XII-5
12.07         Resignation and Removal of the Trustee..........................................................  XII-6
12.08         Successor Trustee...............................................................................  XII-7
12.09         Merger or Consolidation of Trustee..............................................................  XII-8
</TABLE>

                                      (iv)
<PAGE>   6
<TABLE>
<S>                                                                                                             <C>
12.10         Appointment of Co-Trustee or Separate Trustee...................................................  XII-8
12.11         Authenticating Agent............................................................................  XII-10
12.12         Tax Returns and Reports.........................................................................  XII-10
12.13         Protection of Trust Fund........................................................................  XII-11
12.14         Representations, Warranties and Covenants of Trustee............................................  XII-12


                                                       ARTICLE XIII



                                                 MISCELLANEOUS PROVISIONS

13.01         Acts of Certificateholders......................................................................  XIII-1
13.02         Amendment.......................................................................................  XIII-1
13.03         Recordation of Agreement........................................................................  XIII-2
13.04         Duration of Agreement...........................................................................  XIII-2
13.05         Governing Law...................................................................................  XIII-2
13.06         Notices.........................................................................................  XIII-2
13.07         Severability of Provisions......................................................................  XIII-3
13.08         No Partnership..................................................................................  XIII-3
13.09         Counterparts....................................................................................  XIII-3
13.10         Successors and Assigns..........................................................................  XIII-3
13.11         Headings........................................................................................  XIII-3
13.12         Paying Agent....................................................................................  XIII-4
13.13         Notification to Rating Agency...................................................................  XIII-4
13.14         Third Party Rights..............................................................................  XIII-5
13.15         Inconsistencies.................................................................................  XIII-5
</TABLE>

                                      (v)
<PAGE>   7
                                  EXHIBIT INDEX

EXHIBIT A                 Contents of SBA File
EXHIBIT B-1               Form of Class A Certificate
EXHIBIT B-2               Form of Class M Certificate
EXHIBIT B-3               Form of Class B Certificate
EXHIBIT C                 Principal and Interest Account Letter Agreement
EXHIBIT D                 [Omitted]
EXHIBIT E                 Wiring Instructions Form
EXHIBIT F-1               Initial Certification
EXHIBIT F-2               Final Certification
EXHIBIT G                 [Omitted]
EXHIBIT H                 SBA Loan Schedule
EXHIBIT I                 Request for Release of Documents
EXHIBIT J                 Form of Liquidation Report
EXHIBIT K                 Form of Delinquency Report
EXHIBIT L                 Servicer's Monthly Computer Diskette Format
EXHIBIT M                 Multi-Party Agreement
EXHIBIT N                 Spread Account Agreement
EXHIBIT O-1               Form of Transferee Letter
EXHIBIT O-2               Form of Rule 144A Certification
EXHIBIT P                 List of SBA Loans with lost SBA Notes

                                      (vi)
<PAGE>   8
                  Agreement dated as of May 31, 1999, between HSBC Bank USA, as
trustee (the "Trustee"), First International Bank, National Association, as
Seller (in such capacity, the "Seller") and as Servicer (in such capacity, the
"Servicer", and collectively or in another capacity, the "Bank"):

                              PRELIMINARY STATEMENT

                  The Seller, in the ordinary course of its business, originates
and acquires SBA Section 7(a) Loans (the "SBA Section 7(a) Loans") to small
businesses in compliance with the provisions of the Small Business Act and the
rules and regulations thereunder, which SBA Section 7(a) Loans are evidenced by
the SBA Notes in favor of the Seller.

                  Pursuant to and in accordance with the provisions of the Small
Business Act and the Loan Guaranty Agreement, a portion of each SBA Section 7(a)
Loan has been guaranteed by the Small Business Administration (the "SBA").

                  The Seller has previously sold the Guaranteed Interest (as
defined herein) in the SBA Section 7(a) Loans to certain Registered Holders
pursuant to SBA Form 1086 Agreements between such Registered Holders, the SBA
and the Seller. In accordance with such SBA Form 1086 Agreements, the parties
hereto acknowledge that the SBA is the party in interest with respect to the
Guaranteed Interest.

                  Pursuant to and in accordance with policies of the SBA, the
Servicer is required to retain a portion of the interest received on the
Guaranteed Interest of each SBA Section 7(a) Loan sold to the Trust Fund (such
portion, the "Premium Protection Fee").

                  To facilitate the sale of the Unguaranteed Interest (as
defined herein) in the SBA Section 7(a) Loans, and the servicing of the SBA
Loans by the Servicer, the Bank is entering into this Agreement with the
Trustee. The Seller is transferring the Unguaranteed Interest in the SBA Loans
to the Trustee for the benefit of the SBA and the Certificateholders under this
Agreement, pursuant to which Certificates are being issued, denominated on the
face thereof as First International Bank SBA Loan-Backed Adjustable Rate
Certificates, Series 1999-1, Class A, Class M and Class B, representing in the
aggregate a 100% undivided beneficial ownership interest in the right to receive
the principal portion of the Unguaranteed Interests of the SBA Loans together
with interest thereon at the then applicable Class A, Class M or Class B
Interest Distribution Amount, as the case may be. The Unguaranteed Interest of
the Initial SBA Loans have an aggregate outstanding principal balance of
$28,419,589.23 as
<PAGE>   9
of May 31, 1999 (the "Cut-Off Date"), after application of payments received by
the Seller on or before such date.

                  The parties hereto agree as follows:


                                      -2-
<PAGE>   10
                                    ARTICLE I

                                   DEFINITIONS

                  Whenever used herein, the following words and phrases, unless
the context otherwise requires, shall have the following meanings. This
Agreement relates to a Trust Fund evidenced by First International Bank SBA
Loan-Backed Adjustable Rate Certificates, Series 1999-1, Class A, Class M and
Class B. Unless otherwise provided, all calculations of interest pursuant to
this Agreement including, but not limited to, the Class A, Class M and Class B
Interest Distribution Amounts, are based on a 360-day year and twelve 30-day
months.

                  ACCOUNT: The Certificate Account, the Pre-Funding Account and
the Capitalized Interest Account established by the Trustee for the benefit of
the Certificateholders; the Expense Account established by the Trustee for the
benefit of the Trustee; and the Spread Account held by the Spread Account
Custodian pursuant to the Spread Account Agreement. The Trustee's obligation to
establish and maintain the Certificate Account is not delegable.

                  ACCOUNT NUMBER: The number assigned to each SBA Loan by the
Seller, as set forth in Exhibit H hereto.

                  ACCOUNT PROPERTY: Has the meaning set forth in Section 3 of
the Spread Account Agreement.

                  ADDITION NOTICE: With respect to the transfer of Subsequent
SBA Loans to the Trust Fund pursuant to Section 2.09 herein, notice, which shall
be given not later than three Business Days prior to the related Subsequent
Transfer Date, of the Seller's designation of Subsequent SBA Loans to be sold to
the Trust Fund and the aggregate Principal Balance of such Subsequent SBA Loans.

                  ADDITIONAL FEE: With respect to each Additional Fee SBA Loan,
the fee payable to the SBA by the Seller equal to 40 basis points or 50 basis
points per annum, as the case may be, on the outstanding balance of the
Guaranteed Interest of such Additional Fee SBA Loan.

                  ADDITIONAL FEE SBA LOAN: An SBA Section 7(a) Loan sold in the
secondary market on or after September 1, 1993 (unless the related SBA Section
7(a) Loan was approved by the SBA on or after October 12, 1995), for which the
related Additional Fee is 40 basis points per annum, or an SBA Section 7(a) Loan
approved by the SBA on or after October 12, 1995 (regardless of whether it was
sold

                                      I-1
<PAGE>   11
in the secondary market), for which the related Additional Fee is 50 basis
points per annum.

                  ADJUSTED CLASS A INTEREST DISTRIBUTION AMOUNT: With respect to
each Remittance Date, the product of (A) the aggregate amount of interest
payable with respect to each SBA Loan in accordance with its terms, net of the
interest payable to the Registered Holder, the Premium Protection Fee, the
Excess Spread, the Servicing Fee, the FTA's Fee, the Additional Fee, the Extra
Interest and the Annual Expense Escrow Amount allocable to such interest (plus,
for the Remittance Dates occurring in July, August and September 1999, any
amounts transferred from the Pre-Funding Account and the Capitalized Interest
Account for such Remittance Date to be applied as a payment of interest on the
Certificates) and (B) a fraction, the numerator of which is the amounts set
forth in clauses (i) and (ii) of the definition of Class A Interest Distribution
Amount with respect to such Remittance Date, and the denominator of which is the
sum of the amounts set forth in clauses (i) and (ii) of the definitions of Class
A Interest Distribution Amount, Class M Interest Distribution Amount and Class B
Interest Distribution Amount, each with respect to such Remittance Date.

                  ADJUSTED CLASS B INTEREST DISTRIBUTION AMOUNT: With respect to
each Remittance Date, the product of (A) the aggregate amount of interest
payable with respect to each SBA Loan in accordance with its terms, net of the
interest payable to the Registered Holder, the Premium Protection Fee, the
Excess Spread, the Servicing Fee, the FTA's Fee, the Additional Fee, the Extra
Interest and the Annual Expense Escrow Amount allocable to such interest (plus,
for the Remittance Dates occurring in July, August and September 1999, any
amounts transferred from the Pre-Funding Account and the Capitalized Interest
Account for such Remittance Date to be applied as a payment of interest on the
Certificates) and (B) a fraction, the numerator of which is the amounts set
forth in clauses (i) and (ii) of the definition of Class B Interest Distribution
Amount with respect to such Remittance Date, and the denominator of which is the
sum of the amounts set forth in clauses (i) and (ii) of the definitions of Class
A Interest Distribution Amount, Class M Interest Distribution Amount and Class B
Interest Distribution Amount, each with respect to such Remittance Date.

                  ADJUSTED CLASS M INTEREST DISTRIBUTION AMOUNT: With respect to
each Remittance Date, the product of (A) the aggregate amount of interest
payable with respect to each SBA Loan in accordance with its terms, net of the
interest payable to the Registered Holder, the Premium Protection Fee, the
Excess Spread, the Servicing Fee, the FTA's Fee, the Additional Fee, the Extra
Interest and the Annual Expense Escrow Amount allocable to such

                                      I-2
<PAGE>   12
interest (plus, for the Remittance Dates occurring in July, August and September
1999 any amounts transferred from the Pre-Funding Account and the Capitalized
Interest Account for such Remittance Date to be applied as a payment of interest
on the Certificates) and (B) a fraction, the numerator of which is the amounts
set forth in clauses (i) and (ii) of the definition of Class M Interest
Distribution Amount with respect to such Remittance Date, and the denominator of
which is the sum of the amounts set forth in clauses (i) and (ii) of the
definitions of Class A Interest Distribution Amount, Class M Interest
Distribution Amount and Class B Interest Distribution Amount, each with respect
to such Remittance Date.

                  ADJUSTED SBA LOAN BENCHMARK RATE: With respect to any SBA
Loan, a percentage per annum equal to the sum of (i) the then applicable
weighted average Class A, Class M and Class B Benchmark Rates and (ii) .06% per
annum, relating to the Annual Expense Escrow Amount.

                  ADJUSTMENT DATE: For each Interest Accrual Period, the first
Business Day of such Interest Accrual Period, commencing July 15, 1999. The
Prime Rate in effect for each Adjustment Date shall be the Prime Rate published
in The Wall Street Journal on the first Business Day of the month preceding the
start of such Interest Accrual Period (i.e., the Prime Rate in effect for the
July 15, 1999 Adjustment Date shall be the Prime Rate published on the first
Business Day in June 1999).

                  AGGREGATE CLASS A CERTIFICATE PRINCIPAL BALANCE: As of any
date of determination, the Original Class A Certificate Principal Balance less
the sum of all amounts previously distributed to the Class A Certificateholders
in respect of principal.

                  AGGREGATE CLASS B CERTIFICATE PRINCIPAL BALANCE: As of any
date of determination, the Original Class B Certificate Principal Balance less
the sum of all amounts previously distributed to the Class B Certificateholders
in respect of principal.

                  AGGREGATE CLASS M CERTIFICATE PRINCIPAL BALANCE: As of any
date of determination, the Original Class M Certificate Principal Balance less
the sum of all amounts previously distributed to the Class M Certificateholders
in respect of principal.

                  AGREEMENT: This Pooling and Servicing Agreement and all
amendments hereof and supplements hereto.

                                      I-3
<PAGE>   13
                  ANNUAL EXPENSE ESCROW AMOUNT: The product of .06% per annum
and the Pool Principal Balance, which is computed and payable on a monthly basis
and represents the estimated annual Trustee's fees and Trust Fund expenses.

                  ASSIGNMENT OF MORTGAGE: With respect to those SBA Loans
secured by a Mortgaged Property, an assignment of the Mortgage, notice of
transfer or equivalent instrument sufficient under the laws of the jurisdiction
wherein the related Mortgaged Property is located to reflect of record the
transfer of the related SBA Loan to the Trustee subject to the Multi-Party
Agreement.

                  AUTHENTICATING AGENT: Initially, HSBC Bank USA and thereafter,
any successor appointed pursuant to Section 12.11.

                  AVAILABLE FUNDS: With respect to each Remittance Date, the sum
of (i) all amounts received from any source by the Servicer or any Subservicer
during the preceding calendar month (including Excess Spread) with respect to
principal and interest on the SBA Loans (net of the amount payable to the
Registered Holders, the Premium Protection Fee, the FTA's Fee, the Additional
Fee and the Servicing Fee), (ii) advances by the Servicer, (iii) amounts to be
transferred from the Pre-Funding Account and the Capitalized Interest Account
with respect to the Remittance Dates in July, August and September 1999, and
(iv) amounts in the Spread Account.

                  BANK: First International Bank, National Association, in its
individual capacity or in its capacities as Seller and Servicer hereunder.

                  BIF:  The Bank Insurance Fund, or any successor thereto.

                  BUSINESS DAY: Any day other than (i) a Saturday or Sunday, or
(ii) a day on which banking institutions in the States of New York or
Connecticut are authorized or obligated by law or executive order to be closed.

                  CAPITALIZED INTEREST ACCOUNT:  As described in Section 6.04.

                  CAPITALIZED INTEREST REQUIREMENT: With respect to the
Remittance Dates in July, August and September 1999, the excess, if any, of (i)
30 days' interest calculated at the weighted average Class A, Class M and Class
B Benchmark Rates on the excess of (a) the Aggregate Class A, Class M and Class
B Certificate Principal Balances for such Remittance Date over (b) the aggregate
Principal Balances of the SBA Loans for such

                                      I-4
<PAGE>   14
Remittance Date over (ii) any Pre-Funding Earnings to be transferred to the
Certificate Account on such Remittance Date pursuant to Section 6.04(d). With
respect to the Special Remittance Date, accrued interest calculated at the
weighted average Class A, Class M and Class B Benchmark Rates on the amount to
be transferred on the Special Remittance Date from the Pre-Funding Account to
the Certificate Account pursuant to Section 6.04(c).

                  CERTIFICATE: Any Class A, Class M or Class B Certificate
executed by the Servicer and authenticated by the Trustee or the Authenticating
Agent substantially in the form annexed hereto as Exhibits B-1, B-2, and B-3.

                  CERTIFICATE ACCOUNT:  As described in Section 6.01.

                  CERTIFICATEHOLDER or HOLDER: Each Person in whose name a Class
A, Class M or Class B Certificate is registered in the Certificate Register,
except that, solely for the purposes of giving any consent, waiver, request or
demand pursuant to this Agreement, any Certificate registered in the name of the
Seller, the Servicer, any Subservicer or any affiliate of any of them, shall be
deemed not to be outstanding and the undivided Percentage Interest evidenced
thereby shall not be taken into account in determining whether the requisite
percentage of Certificates necessary to effect any such consent, waiver, request
or demand has been obtained.

                  CERTIFICATE REGISTER:  As described in Section 4.02.

                  CERTIFICATE REGISTRAR: Initially, HSBC Bank USA, and
thereafter, any successor appointed pursuant to Section 4.02.

                  CLASS A BENCHMARK RATE: During the initial Interest Accrual
Period 5.82% per annum. During each subsequent Interest Accrual Period, the
Prime Rate in effect on the related Adjustment Date minus 1.93% per annum.

                  CLASS A CERTIFICATE: A Certificate denominated as a Class A
Certificate.

                  CLASS A CERTIFICATEHOLDER:  A holder of a Class A Certificate.

                  CLASS A INTEREST DISTRIBUTION AMOUNT: With respect to each
Remittance Date, the sum of (i) the interest accrued for the related Interest
Accrual Period at the then applicable Class A Benchmark Rate on the Aggregate
Class A Certificate Principal Balance outstanding immediately prior to such
Remittance Date and (ii) the amount of the shortfall, if any, of the interest
that

                                      I-5
<PAGE>   15
the Class A Certificates were entitled to receive on a preceding Remittance Date
but did not receive plus interest thereon at the then applicable Class A
Benchmark Rate compounded monthly; provided, however, that on each Remittance
Date after the first Remittance Date the amount set forth in Clause (i) of Class
A Interest Distribution Amount will be increased or decreased, as the case may
be, to equal the Adjusted Class A Interest Distribution Amount for such
Remittance Date.

                  CLASS A PERCENTAGE: With respect to each Remittance Date,
90.0%, representing the beneficial ownership interest of the Class A
Certificates in the Trust Fund.

                  CLASS B BENCHMARK RATE: During the initial Interest Accrual
Period 12.25% per annum. During each subsequent Interest Accrual Period, the
Prime Rate in effect on the related Adjustment Date plus 4.50% per annum.

                  CLASS B CERTIFICATE: A Certificate denominated as a Class B
Certificate.

                  CLASS B CERTIFICATEHOLDER:  A holder of a Class B Certificate.

                  CLASS B INTEREST DISTRIBUTION AMOUNT: With respect to each
Remittance Date, the sum of (i) the interest accrued for the related Interest
Accrual Period at the then applicable Class B Benchmark Rate on the Aggregate
Class B Certificate Principal Balance outstanding immediately prior to such
Remittance Date and (ii) the amount of the shortfall, if any, of the interest
that the Class B Certificates were entitled to receive on a preceding Remittance
Date but did not receive plus interest thereon at the then applicable Class B
Benchmark Rate compounded monthly; provided, however, that on each Remittance
Date after the first Remittance Date the amount set forth in Clause (i) of Class
B Interest Distribution Amount will be increased or decreased, as the case may
be, to equal the Adjusted Class B Interest Distribution Amount for such
Remittance Date.

                  CLASS B INTEREST SHORTFALL AMOUNT: For any Remittance Date the
amount, if any, determined pursuant to Clause (ii) of the definition of Class B
Interest Distribution Amount.

                  CLASS B PERCENTAGE: With respect to each Remittance Date,
2.00%, representing the beneficial ownership interest of the Class B
Certificates in the Trust Fund.

                  CLASS CARRY-FORWARD AMOUNT: The amount, if any, by which (i)
the Class Principal Distribution Amount for each Class of Certificates with
respect to any preceding Remittance Date

                                      I-6
<PAGE>   16
exceeded (ii) the amount of the actual principal distribution to the Class of
Certificates on such Remittance Date.

                  CLASS M BENCHMARK RATE: During the initial Interest Accrual
Period 6.40% per annum. During each subsequent Interest Accrual Period, the
Prime Rate in effect on the preceding Adjustment Date minus 1.35% per annum.

                  CLASS M CERTIFICATE: A certificate denominated as a Class M
Certificate.

                  CLASS M CERTIFICATEHOLDER:  A holder of a Class M Certificate.

                  CLASS M INTEREST DISTRIBUTION AMOUNT: With respect to each
Remittance Date, the sum of (i) the interest accrued for the related Interest
Accrual Period at the then applicable Class M Benchmark Rate on the Aggregate
Class M Certificate Principal Balance outstanding immediately prior to such
Remittance Date and (ii) the amount of the shortfall, if any, of the interest
that the Class M Certificates were entitled to receive on a preceding Remittance
Date but did not receive plus interest thereon at the then applicable Class M
Benchmark Rate compounded monthly; provided, however, that on each Remittance
Date after the first Remittance Date the amount set forth in clause (i) of Class
M Interest Distribution Amount will be increased or decreased, as the case may
be, to equal the Adjusted Class M Interest Distribution Amount for such
Remittance Date.

                  CLASS M INTEREST SHORTFALL AMOUNT: For any Remittance Date the
amount, if any, determined pursuant to Clause (ii) of the definition of Class M
Interest Distribution Amount.

                  CLASS M PERCENTAGE: With respect to each Remittance Date,
approximately 8.0% representing the beneficial ownership interest of the Class M
Certificates in the Trust Fund.

                  CLASS PRINCIPAL DISTRIBUTION AMOUNT: With respect to each
Remittance Date, for each Class of Certificates, an amount equal to the Class A,
Class M or Class B Percentage, as the case may be, multiplied by the sum of,
without duplication, (i) the Unguaranteed Percentage of all payments and other
recoveries of principal of an SBA Loan (net of amounts reimbursable to the
Servicer pursuant to this Agreement) received by the Servicer or any Subservicer
in the related Due Period, excluding amounts received relating to SBA Loans
which have been delinquent 24 months or have been determined to be
uncollectible, in whole or in part, by the Servicer to the extent that the
applicable Class of Certificateholders has previously received the Class A,
Class M or Class B Percentage as the case may be, of the Principal

                                      I-7
<PAGE>   17
Balance of such SBA Loans; (ii) the principal portion of any Unguaranteed
Interest actually purchased by the Seller for breach of a representation and
warranty or other defect and actually received by the Trustee as of the related
Determination Date; (iii) any Substitution Adjustments deposited in the
Principal and Interest Account and transferred to the Certificate Account as of
the related Determination Date; (iv) the Unguaranteed Percentage of all losses
on SBA Loans which were finally liquidated during the applicable Due Period; (v)
the Unguaranteed Percentage of the then outstanding principal balance of any SBA
Loan which, as of the first day of the related Due Period, has been delinquent
24 months or has been determined to be uncollectible, in whole or in part, by
the Servicer; and (vi) the amount, if any, released from the Pre-Funding Account
on the July, August and September 1999 Remittance Dates.

                  CLOSING DATE:  June 17, 1999

                  CODE: The Internal Revenue Code of 1986, as amended, or any
successor legislation thereto.

                  COLLATERAL: All items of property (including a Mortgaged
Property), whether real or personal, tangible or intangible, or otherwise,
pledged by an Obligor or others to the Seller (including guarantees on behalf of
the Obligor) to secure payment under an SBA Loan.

                  COMMERCIAL PROPERTY: Real property (other than agricultural
property or Residential Property) that generally is used by the Obligor in the
conduct of its business.

                  COMPENSATING INTEREST:  As defined in Section 6.11.

                  CONFIDENTIAL PLACEMENT MEMORANDUM: The Confidential Private
Placement Memorandum dated June 16, 1999 prepared by the Seller in connection
with the offer and sale of the Class A and Class M Certificates.

                  CORPORATE TRUST OFFICE: The principal office of the Trustee at
which at any particular time its corporate trust business shall be administered
which office at the date of the execution of this Agreement is located at HSBC
Bank USA, 140 Broadway, New York, New York 10005, 12th Floor, Attention
Corporate Trust Department or at any other time at such other address as the
Trustee may designate from time to time by notice to the parties hereto.

                  CURTAILMENT: With respect to an SBA Loan, any payment of
principal received during a Due Period as part of a payment that is in excess of
five times the amount of the Monthly Payment

                                      I-8
<PAGE>   18
due for such Due Period and which is not intended to satisfy the SBA Loan in
full, nor is intended to cure a delinquency.

                  CUT-OFF DATE:  May 31, 1999.

                  DEFAULTED SBA LOAN: Any SBA Loan as to which the Obligor has
failed to make payment in full of three or more consecutive Monthly Payments.

                  DELETED SBA LOAN: An SBA Loan replaced by a Qualified
Substitute SBA Loan.

                  DEPOSITORY: The Depository Trust Company and any successor
Depository hereafter named.

                  DESIGNATED DEPOSITORY INSTITUTION: With respect to the
Principal and Interest Account or items of Account Property held in deposit
accounts, an entity which is an institution whose deposits are insured by either
the BIF or SAIF administered by the FDIC, the unsecured and uncollateralized
long-term debt obligations of which shall be rated A2 or better by Moody's, and
which is either (i) a federal savings association duly organized, validly
existing and in good standing under the federal banking laws, (ii) an
institution duly organized, validly existing and in good standing under the
applicable banking laws of any state, (iii) a national banking association duly
organized, validly existing and in good standing under the federal banking laws,
or (iv) a principal subsidiary of a bank holding company, in each case acting or
designated by the Servicer as the depository institution for the Principal and
Interest Account or the Spread Account Depositor with respect to items of
Account Property, as the case may be.

                  DETERMINATION DATE: That day of each month which is the third
Business Day prior to the Remittance Date.

                  DIRECT PARTICIPANT: Any broker-dealer, bank or other financial
institution for which the Depository holds Certificates from time to time as a
securities depository.

                  DUE DATE: The day of the month on which the Monthly Payment is
due from the Obligor on an SBA Loan.

                  DUE PERIOD: With respect to each Remittance Date, the calendar
month preceding the month in which such Remittance Date occurs.

                  ERISA: The Employee Retirement Income Security Act of 1974, as
amended, or any successor legislation thereto.

                                      I-9
<PAGE>   19
                  EVENT OF DEFAULT:  As described in Section 10.01.

                  EXCESS PAYMENTS: With respect to a Due Period, any amounts
received on an SBA Loan in excess of the Monthly Payment due on the Due Date
relating to such Due Period which does not constitute either a Curtailment or a
Principal Prepayment or payment with respect to an overdue amount. Excess
Payments are payments of principal for purposes of this Agreement.

                  EXCESS PROCEEDS: As of any Remittance Date, with respect to
any Liquidated SBA Loan, the excess, if any, of (a) the Unguaranteed Percentage
of the total Net Liquidation Proceeds, over (b) the Unguaranteed Percentage of
the Principal Balance of such SBA Loan as of the date such SBA Loan became a
Liquidated SBA Loan plus 30 days interest thereon at the then applicable
Adjusted SBA Loan Benchmark Rate; provided, however, that such excess shall be
reduced by the amount by which interest accrued on the advance, if any, made by
the Servicer at the related SBA Loan Interest Rate(s) exceeds interest accrued
on such advance at the then applicable weighted average Class A, Class M and
Class B Benchmark Rates.

                  EXCESS SPREAD: With respect to any Remittance Date, the
amount, if any, by which (i) the interest collected by the Servicer or any
Subservicer on the principal portion of the Guaranteed Interest of each SBA
Section 7(a) Loan exceeds (ii) the sum of (a) the interest payable to the
Registered Holder, (b) the FTA's Fee, (c) the Premium Protection Fee, (d) with
respect to the Additional Fee SBA Loans, the Additional Fee and (e) the
Servicing Fee attributable to the Guaranteed Interest.

                  EXPENSE ACCOUNT: The expense account established and
maintained by the Trustee in accordance with Section 6.03 hereof.

                  EXTRA INTEREST: With respect to each SBA Loan, for each
Remittance Date the product of (i) the principal portion of the Unguaranteed
Interest of such SBA Loan for such Remittance Date and (ii) one-twelfth of the
Extra Interest Percentage.

                  EXTRA INTEREST PERCENTAGE: With respect to each SBA Loan, the
excess of (i) the SBA Loan Interest Rate that would be in effect for such SBA
Loan as of the Cut-Off Date without giving effect to any applicable lifetime
floors or caps over (ii) the sum of the rates used in determining the Servicing
Fee and the Annual Expense Escrow Amount and 5.995% per annum (i.e., the initial
weighted average Class A, Class M and Class B Benchmark Rates without giving
effect to any applicable lifetime floors or caps on the SBA Loans).

                                      I-10
<PAGE>   20
                  FDIC: The Federal Deposit Insurance Corporation and any
successor thereto.

                  FHLMC: The Federal Home Loan Mortgage Corporation and any
successor thereto.

                  FIDELITY BOND: As described in Section 5.09.

                  FNMA: The Federal National Mortgage Association and any
successor thereto.

                  FORECLOSED PROPERTY: As described in Section 5.10.

                  FORECLOSED PROPERTY DISPOSITION: The final sale of a
Foreclosed Property acquired in foreclosure or by deed in lieu of foreclosure or
of Repossessed Collateral acquired by legal process. The proceeds of any
Foreclosed Property Disposition constitute part of the definition of Liquidation
Proceeds.

                  FTA: Colson Services Corp., in its capacity as the Fiscal and
Transfer Agent of the SBA under the Multi-Party Agreement, or any successor
thereto appointed by the SBA.

                  FTA'S FEE: With respect to the Guaranteed Interest of each SBA
Section 7(a) Loan sold into the secondary market, the monthly fee payable to the
FTA in accordance with Form 1086 and the SBA Rules and Regulations.

                  FUNDING PERIOD: The period commencing on the Closing Date and
ending on the earliest to occur of (i) the date on which the amount on deposit
in the Pre-Funding Account is less than $100,000, (ii) the date on which an
Event of Default occurs or (iii) at the close of business on September 14, 1999.

                  GLOBAL CERTIFICATE: Any Certificate registered in the name of
the Depository or its nominee, beneficial interests of which are reflected on
the books of the Depository or on the books of a Person maintaining any account
with such Depository (directly or as an indirect participant in accordance with
the rules of such Depository).

                  GUARANTEED INTEREST: As to any SBA Section 7(a) Loan, the
right to receive the guaranteed portion of the principal balance thereof
together with interest thereon at a per annum rate in effect from time to time
in accordance with the terms of the related SBA Form 1086. Certificateholders
have no right or interest in the Guaranteed Interest.

                  INDIRECT PARTICIPANT: Any financial institution for whom any
Direct Participant holds an interest in any Certificate.

                                      I-11
<PAGE>   21
                  INDIVIDUAL CERTIFICATE: Any Certificate registered in the name
of a holder other than the Depository or its nominee.

                  INITIAL SPREAD ACCOUNT DEPOSIT: A deposit of $374,195.89
required to be made by the Spread Account Depositor into the Spread Account on
the Closing Date, such deposit being equal to 1% of the sum of (i) the Original
Pool Principal Balance and (ii) the Original Pre-Funded Amount.

                  INITIAL SBA LOANS: THE SBA Loans listed on Exhibit H hereto
and delivered to the Trustee on the Closing Date.

                  INSTITUTIONAL ACCREDITED INVESTOR: Any Person satisfying the
definition of "Accredited Investor" within the meaning of Rule 501(a)(1), (2),
(3) or (7) of Regulation D under the Securities Act.

                  INSURANCE PROCEEDS: Proceeds paid by any insurer pursuant to
any insurance policy covering an SBA Loan, Collateral, Repossessed Collateral or
Foreclosed Property, including but not limited to title, hazard, life, health
and/or accident insurance policies.

                  INTEREST ACCRUAL PERIOD: With respect to each Remittance Date,
the period commencing on the 15th day of the month preceding such Remittance
Date and ending on the 14th day of the month of such Remittance Date. However,
for the Remittance Date occurring in July 1999, the period commencing on the
Closing Date and ending on July 14, 1999.

                  LIQUIDATED SBA LOAN: Any defaulted SBA Loan, Repossessed
Collateral or Foreclosed Property as to which the Servicer has determined that
all amounts which it reasonably and in good faith expects to recover have been
recovered from or on account of such SBA Loan.

                  LIQUIDATION PROCEEDS: Cash, including Insurance Proceeds,
proceeds of any Foreclosed Property Disposition, revenues received with respect
to the conservation and disposition of a Foreclosed Property or Repossessed
Collateral, and any other amounts received in connection with the liquidation of
defaulted SBA Loans, whether through trustee's sale, foreclosure sale or
otherwise.

                  LOAN GUARANTY AGREEMENT: Collectively, one or more Loan
Guaranty Agreements (Deferred Participation) (SBA Form 750), between the SBA and
the Servicer, as such agreements may be amended, supplemented or replaced from
time to time, or such Loan

                                      I-12
<PAGE>   22
Guaranty Agreement as applicable to a successor to the Servicer, as the case may
be.

                  LOAN-TO-VALUE RATIO OR LTV: With respect to any SBA Loan, (a)
the sum of (i) the original principal amount of such SBA Loan as of origination
and (ii) the principal balance of any Prior Lien as of the date of origination
of the related SBA Loan, divided by (b) the total discounted net collateral
value (as determined by the Seller in accordance with its underwriting criteria)
of the primary and secondary Collateral securing such SBA Loan at the time of
origination.

                  MAJORITY CERTIFICATEHOLDERS: The Holder or Holders of Class A,
Class M and Class B Certificates evidencing an Aggregate Class A, Class M and
Class B Certificate Principal Balance in excess of 50% of the Aggregate Class A,
Class M and Class B Certificate Principal Balance.

                  MONTHLY ADVANCE: An advance made by the Servicer pursuant to
Section 6.10 hereof.

                  MONTHLY PAYMENT: The monthly payment of principal and/or
interest required to be made by an Obligor on the related SBA Loan, as adjusted
pursuant to the terms of the related SBA Note.

                  MOODY'S: Moody's Investors Service, Inc. or any successor
thereto.

                  MORTGAGE: The mortgage, deed of trust or other instrument
creating a lien on a Mortgaged Property.

                  MORTGAGED PROPERTY: The underlying real property, if any,
securing an SBA Loan, consisting of a Commercial Property or Residential
Property and any improvements thereon.

                  MULTI-PARTY AGREEMENT: That certain Multi-Party Agreement
dated as of May 31, 1999 among the Seller, the Trustee, the SBA and the FTA,
substantially in the form of Exhibit M hereto, as amended from time to time by
the parties thereto.

                  NET LIQUIDATION PROCEEDS: Liquidation Proceeds net of (i) any
reimbursements to the Servicer made therefrom pursuant to Section 5.04(b) and
(ii) amounts required to be released to the related Obligor pursuant to
applicable law.

                  OBLIGOR:  The obligor on an SBA Note.

                  OCC: The Office of the Comptroller of the Currency.

                                      I-13
<PAGE>   23
                  OFFICER'S CERTIFICATE: A certificate delivered to the Trustee
signed by the Chairman of the Board, the President, an Executive Vice President,
a Vice President, an Assistant Vice President, the Treasurer, the Secretary, or
one of the Assistant Secretaries of the Bank as required by this Agreement.

                  OPINION OF COUNSEL: A written opinion of counsel, who may,
without limitation, be counsel for the Bank, reasonably acceptable to the
Trustee and experienced in matters relating thereto.

                  ORIGINAL CLASS A CERTIFICATE PRINCIPAL BALANCE:
$33,677,000.

                  ORIGINAL CLASS B CERTIFICATE PRINCIPAL BALANCE:
$749,589.23.

                  ORIGINAL CLASS M CERTIFICATE PRINCIPAL BALANCE: $2,993,000.

                  ORIGINAL POOL PRINCIPAL BALANCE: $28,419,589.23.

                  ORIGINAL PRE-FUNDED AMOUNT: $9,000,000, representing the
amount deposited in the Pre-Funding Account on the Closing Date.

                  OVERFUNDED INTEREST AMOUNT:

                  With respect to each Subsequent Transfer Date occurring in
July 1999, the difference between (i) three-months' interest on the aggregate
Principal Balances of the Subsequent SBA Loans acquired by the Trust Fund on
such Subsequent Transfer Date, calculated at the weighted average Class A, Class
M and Class B Benchmark Rates, and (ii) three-months' interest on the aggregate
Principal Balances of the Subsequent SBA Loans acquired by the Trust Fund on
such Subsequent Transfer Date, calculated at the rate at which Pre-Funding
Account moneys are invested as of such Subsequent Transfer Date.

                  With respect to each Subsequent Transfer Date occurring in
August 1999, the difference between (i) two-month's interest on the aggregate
Principal Balances of the Subsequent SBA Loans acquired by the Trust Fund on
such Subsequent Transfer Date, calculated at the weighted average Class A, Class
M and Class B Benchmark Rates, and (ii) two-month's interest on the aggregate
Principal Balances of the Subsequent SBA Loans acquired by the Trust Fund on
such Subsequent Transfer Date, calculated at the rate at which Pre-Funding
Account moneys are invested as of such Subsequent Transfer Date.

                                      I-14
<PAGE>   24
                  With respect to each Subsequent Transfer Date occurring in
September 1999, the difference between (i) one-month's interest on the aggregate
Principal Balances of the Subsequent SBA Loans acquired by the Trust Fund on
such Subsequent Transfer Date, calculated at the weighted average Class A, Class
M and Class B Benchmark Rates, and (ii) one-month's interest on the aggregate
Principal Balances of the Subsequent SBA Loans acquired by the Trust Fund on
such Subsequent Transfer Date, calculated at the rate at which Pre-Funding
Account moneys are invested as of such Subsequent Transfer Date.

                  PAYING AGENT: Initially, HSBC Bank USA, and thereafter, any
other Person that meets the eligibility standards for the Paying Agent specified
in Section 13.12 hereof and is authorized by the Trustee to make payments on the
Certificates on behalf of the Trustee.

                  PERCENTAGE INTEREST: With respect to a Class A, Class M or
Class B Certificate, the portion of the Trust Fund evidenced by such Class A,
Class M or Class B Certificate, expressed as a percentage, the numerator of
which is the denomination represented by such Class A, Class M or Class B
Certificate and the denominator of which is the Original Class A Certificate
Principal Balance, Original Class M Certificate Principal Balance or Original
Class B Certificate Principal Balance, as the case may be. The Certificates are
issuable only in the minimum Percentage Interest corresponding to a minimum
denomination of $100,000 and integral multiples of $1,000 in excess thereof,
except for one Certificate of each Class which may be issued in a different
denomination to equal the remainder of the Original Class A Certificate
Principal Balance, Original Class M Certificate Principal Balance or Original
Class B Certificate Principal Balance, as the case may be.

                  PERMITTED INSTRUMENTS: As used herein, Permitted Instruments
shall include the following:

                  (i) direct general obligations of, or obligations fully and
         unconditionally guaranteed as to the timely payment of principal and
         interest by, the United States or any agency or instrumentality
         thereof, provided such obligations are backed by the full faith and
         credit of the United States, FHA debentures, Federal Home Loan Bank
         consolidated senior debt obligations, and FNMA senior debt obligations,
         but excluding any of such securities whose terms do not provide for
         payment of a fixed dollar amount upon maturity or call for redemption;

                  (ii) federal funds, certificates of deposit, time deposits and
         banker's acceptances (having original

                                      I-15
<PAGE>   25
         maturities of not more than 365 days) of any bank or trust company
         incorporated under the laws of the United States or any state thereof,
         provided that the short-term debt obligations of such bank or trust
         company at the date of acquisition thereof have been rated Prime-1 or
         better by Moody's;

                  (iii) deposits of any bank or savings and loan association
         which has combined capital, surplus and undivided profits of at least
         $3,000,000 which deposits are held only up to the limits insured by the
         BIF or SAIF administered by the FDIC, provided that the unsecured
         long-term debt obligations of such bank or savings and loan association
         have been rated A3 or better by Moody's;

                  (iv) commercial paper (having original maturities of not more
         than 365 days) rated Prime-1 or better by Moody's;

                  (v) debt obligations rated Aaa by Moody's (other than any such
         obligations that do not have a fixed par value and/or whose terms do
         not promise a fixed dollar amount at maturity or call date);

                  (vi) investments in money market funds rated Aaa or better by
         Moody's, the assets of which are invested solely in instruments
         described in clauses (i)-(v) above (including, without limitation, any
         fund which the Trustee or an affiliate of the Trustee serves as an
         investment advisor, administrator, shareholder, servicing agent and/or
         custodian or sub-custodian, notwithstanding that (a) the Trustee or an
         affiliate of the Trustee charges and collects fees and expenses from
         such funds for services rendered, (b) the Trustee charges and collects
         fees and expenses for services rendered pursuant to this Agreement, and
         (c) services performed for such funds and pursuant to this Agreement
         may converge at any time (the parties hereto specifically authorizes
         the Trustee or an affiliate of the Trustee to charge and collect all
         fees and expenses from such funds for services rendered to such funds,
         in addition to any fees and expenses the Trustee may charge and collect
         for services rendered pursuant to this Agreement));

                  (vii) guaranteed investment contracts or surety bonds
         providing for the investment of funds in an account or insuring a
         minimum rate of return on investments of such funds, which contract or
         surety bond shall:

                           (a) be an obligation of an insurance company or other
                  corporation whose debt obligations or insurance

                                      I-16
<PAGE>   26
                  financial strength or claims paying ability are rated "Aaa" by
                  Moody's; and

                           (b) provide that the Trustee may exercise all of the
                  rights of the Seller under such contract or surety bond
                  without the necessity of the taking of any action by the
                  Seller;

                  (viii) A repurchase agreement that satisfies the following
criteria:

                           (a) Must be between the Trustee and a dealer bank or
                  securities firm described in 1. or 2. below:

                                    1.       Primary dealers on the Federal
                                             Reserve reporting dealer list which
                                             are rated "Aa" or better by
                                             Moody's, or

                                    2.       Banks rated "Aa" or better by
                                             Moody's.

                           (b) The written repurchase agreement must include the
                  following:

                                    1.       Securities which are acceptable for
                                             the transfer are:

                                             A.       Direct U.S. government
                                                      securities, or

                                             B.       Securities of Federal
                                                      Agencies backed by the
                                                      full faith and credit of
                                                      the U.S. government (and
                                                      FNMA & FHLMC),

                                    2.       the term of the repurchase
                                             agreement may be up to 60 days,

                                    3.       the collateral must be delivered to
                                             the Trustee or third party
                                             custodian acting as agent for the
                                             Trustee by appropriate book entries
                                             and confirmation statements must
                                             have been delivered before or
                                             simultaneous with payment
                                             (perfection by possession of
                                             certificated securities),

                                    4.       Valuation of collateral:

                                                 The securities must be valued
                                                 weekly, marked-to-market at
                                                 current market price plus
                                                 accrued interest. The value of
                                                 the collateral must be equal to
                                                 at least 104% of the amount of

                                      I-17
<PAGE>   27
                                                 cash transferred by the Trustee
                                                 or custodian for the Trustee to
                                                 the dealer bank or security
                                                 firm under the repurchase
                                                 agreement plus accrued
                                                 interest. If the value of
                                                 securities held as collateral
                                                 slips below 104% of the value
                                                 of the cash transferred by the
                                                 Trustee plus accrued interest,
                                                 then additional cash and/or
                                                 acceptable securities must be
                                                 transferred. If, however, the
                                                 securities used as collateral
                                                 are FNMA or FHLMC, then the
                                                 value of collateral must equal
                                                 at least 105%; and

                  (ix) any other investment acceptable to the Rating Agency,
         written confirmation of which shall be furnished to the Trustee prior
         to any such investment.

                  PERSON: Any individual, corporation, partnership, limited
liability company, limited liability partnership, joint venture, association,
joint-stock company, trust, national banking association, unincorporated
organization or government or any agency or political subdivision thereof.

                  POOL PRINCIPAL BALANCE: The aggregate Principal Balances as of
any date of determination.

                  PRE-FUNDED AMOUNT: With respect to any date of determination,
the amount on deposit in the Pre-Funding Account.

                  PRE-FUNDING ACCOUNT: The Pre-Funding Account established in
accordance with Section 6.04 hereof and maintained by the Trustee.

                  PRE-FUNDING EARNINGS: With respect to the Remittance Date in
July 1999, the actual investment earnings earned during the period from the
Closing Date through the Business Day immediately preceding the Determination
Date in July 1999 (inclusive) on the Pre-Funded Amount. With respect to the
Remittance Date in August 1999, the actual investment earnings earned during the
period from the Determination Date in July 1999 through the Business Day
immediately preceding the Determination Date in August 1999 (inclusive), on the
Pre-Funded Amount. With respect to the Remittance Date in September 1999, the
actual investment earnings earned during the period from the Closing Date
through the Business Day immediately preceding the Determination Date in
September 1999 (inclusive) on the Pre-Funded Amount.

                                      I-18
<PAGE>   28
                  PREMIUM PROTECTION FEE: As to any SBA Loan and any date of
determination, an amount equal to 0.60% per annum of the then outstanding
principal balance of the related Guaranteed Interest.

                  PRIME RATE: With respect to any date of determination, the
lowest prime lending rate published in the Money Rate Section of The Wall Street
Journal.

                  PRINCIPAL AND INTEREST ACCOUNT: The principal and interest
account established by the Servicer pursuant to Section 5.03 hereof.

                  PRINCIPAL BALANCE: With respect to any SBA Loan or related
Foreclosed Property or Repossessed Collateral, at any date of determination, (i)
the Unguaranteed Percentage of the principal balance of the SBA Loan outstanding
as of the Cut-Off Date (or applicable Subsequent Cut-Off Date with respect to
Subsequent SBA Loans), after application of principal payments received on or
before such date, minus (ii) the sum of (a) the Unguaranteed Percentage of the
principal portion of the Monthly Payments received during each Due Period ending
prior to the most recent Remittance Date, which were distributed pursuant to
Section 6.07 on any previous Remittance Date, and (b) the Unguaranteed
Percentage of all Principal Prepayments, Curtailments, Excess Payments,
Insurance Proceeds, Released Mortgaged Property Proceeds, Net Liquidation
Proceeds and net income from a Foreclosed Property or Repossessed Collateral to
the extent applied by the Servicer as recoveries of principal in accordance with
the provisions hereof, which were distributed pursuant to Section 6.07 on any
previous Remittance Date. The Principal Balance of any Liquidated SBA Loan or
any SBA Loan that has been paid off will equal $0.

                  PRINCIPAL PREPAYMENT: Any payment or other recovery of
principal on an SBA Loan equal to the outstanding principal balance thereof,
received in advance of the final scheduled Due Date which is intended to satisfy
an SBA Loan in full.

                  PRIOR LIEN: With respect to any SBA Loan secured by a lien on
a Mortgaged Property or on other Collateral which is not a first priority lien,
each lien relating to the corresponding Mortgaged Property or other Collateral
having a prior priority lien.

                  QUALIFIED INSTITUTIONAL BUYER: As used herein, has the meaning
ascribed to such term in Rule 144A under the Securities Act.

                                      I-19
<PAGE>   29
                  QUALIFIED SUBSTITUTE SBA LOAN: An SBA loan or SBA loans
substituted for a Deleted SBA Loan pursuant to Section 2.05 or 3.03 hereof,
which (i) has or have an SBA Loan interest rate or rates of not less than (and
not more than two percentage points more than) the SBA Loan Interest Rate for
the Deleted SBA Loan, (ii) substantially relates or relate to the same type of
Collateral as the Deleted SBA Loan, (iii) matures or mature no later than (and
not more than one year earlier than) the Deleted SBA Loan, (iv) has or have a
Loan-to-Value Ratio or Loan-to-Value Ratios at the time of such substitution no
higher than the Loan-to Value Ratio of the Deleted SBA Loan at such time, (v)
has or have a principal balance or principal balances relating to an
unguaranteed interest or unguaranteed interests (after application of all
payments received on or prior to the date of substitution) equal to or less than
the Principal Balance of the Unguaranteed Interest or Unguaranteed Interests as
of such date of the Deleted SBA Loan, (vi) has or have the same Unguaranteed
Percentage at the time of substitution as the Deleted SBA Loan; (vii) was or
were originated under the same program type as the Deleted SBA Loan; and (viii)
complies or comply as the date of substitution with each representation and
warranty set forth in Section 3.02.

                  RATING AGENCY:  Moody's.

                  RATING AGENCY CONDITION: With respect to any specified action,
that the Rating Agency shall have notified the Servicer and the Trustee, orally
or in writing, that such action will not result in a reduction or withdrawal of
the rating assigned by the respective Rating Agency to either Class of
Certificates.

                  RECORD DATE: With respect to any Remittance Date, the close of
business on the last day of the month immediately preceding the month of the
related Remittance Date. With respect to the Special Remittance Date, August 31,
1999.

                  REGISTERED HOLDER: With respect to any SBA Section 7(a) Loan,
the Person identified as such in the applicable SBA Form 1086, and any permitted
assignees thereof.

                  REIMBURSABLE AMOUNTS: As of any date of determination, an
amount payable to the Bank, in its capacity as either Seller or Servicer, with
respect to (i) the Monthly Advances and Servicing Advances reimbursable pursuant
to Section 5.04(b), (ii) any advances reimbursable pursuant to Section 9.01 and
not previously reimbursed pursuant to Section 6.03(c)(i), and (iii) any other
amounts paid by and reimbursable to the Seller or Servicer pursuant to this
Agreement.

                                      I-20
<PAGE>   30
                  RELEASED MORTGAGED PROPERTY PROCEEDS: As to any SBA Loan
secured by a Mortgaged Property, proceeds received by the Servicer in connection
with (a) a taking of an entire Mortgaged Property by exercise of the power of
eminent domain or condemnation or (b) any release of part of the Mortgaged
Property from the lien of the related Mortgage, whether by partial condemnation,
sale or otherwise, which are not released to the Obligor in accordance with
applicable law, the SBA or the Registered Holder in accordance with the SBA
Rules and Regulations, the Servicer's customary SBA loan servicing procedures
and this Agreement.

                  REMITTANCE DATE: The 15th day of any month or if such 15th day
is not a Business Day, the first Business Day immediately following, commencing
in July 1999.

                  REO PROPERTY: Real estate property taken in the name of the
Trustee on behalf of the Trust for the benefit of the Certificateholders and the
SBA as a result of foreclosure on an Obligor's SBA Loan.

                  REPOSSESSED COLLATERAL: Items of Collateral taken in the name
of the Trustee on behalf of the Trust for the benefit of the Certificateholders
and the SBA as a result of legal action enforcing the lien on the Collateral
resulting from a default on the related Obligor's SBA Loan.

                  RESIDENTIAL PROPERTY: Any one or more of the following, (i)
single family dwelling unit not attached in any way to another unit, (ii) row
house, (iii) two-family house, (iv) low-rise condominium, (v) planned unit
development, (vi) three- or four-family house, (vii) high-rise condominium,
(viii) mixed use building or (ix) manufactured home (as defined in the
FNMA/FHLMC Seller-Servicers' Guide) to the extent that it constitutes real
property in the state in which it is located.

                  RESPONSIBLE OFFICER: When used with respect to the Trustee,
any officer assigned to the Corporate Trust Office, including any Vice
President, Assistant Vice President, any Assistant Secretary, any trust officer
or any other officer of the Trustee customarily performing functions similar to
those performed by any of the above designated officers and also, with respect
to a particular matter, any other officer to whom such matter is referred
because of such officer's knowledge of and familiarity with the particular
subject. When used with respect to the Bank, the President, any Vice President,
Assistant Vice President, or any Secretary or Assistant Secretary.

                  RULE 144A CERTIFICATION: A letter substantially in the form
attached hereto as Exhibit O-2.

                                      I-21
<PAGE>   31
                  SAIF: The Savings Association Insurance Fund, or any successor
thereto.

                  SBA: The United States Small Business Administration, an
agency of the United States Government.

                  SBA FILE: As described in Exhibit A.

                  SBA Form 1086: The Secondary Participation Guaranty and
Certification Agreement on SBA Form 1086, pursuant to which investors purchase
the Guaranteed Interest.

                  SBA LOAN: An individual loan, the Unguaranteed Interest of
which is transferred to the Trust Fund pursuant to this Agreement, together with
the rights and obligations of a holder thereof and payments thereon and proceeds
therefrom, the SBA Loans originally subject to this Agreement being identified
on the SBA Loan Schedule as set forth on Exhibit H. Any loan which, although
intended by the parties hereto to have been, and which purportedly was,
transferred and assigned to the Trust Fund by the Seller (as indicated by the
SBA Loan Schedule), in fact was not transferred and assigned to the Trust Fund
for any reason whatsoever, including, without limitation, the incorrectness of
the statement set forth in Section 3.02(h) hereof with respect to the loan,
shall nevertheless be considered an "SBA Loan" for all purposes of this
Agreement. For the purposes of this Agreement, references to SBA Loans are
equivalent to references to SBA Section 7(a) Loans.

                  SBA LOAN INTEREST RATE: With respect to any date of
determination, the then applicable annual rate of interest borne by an SBA Loan,
pursuant to its terms, which, as of the Cut-Off Date, is shown on the SBA Loan
Schedule.

                  SBA LOAN SCHEDULE: The schedule of SBA Loans listed on Exhibit
H attached hereto and delivered to the Trustee on the Closing Date or Subsequent
Transfer Date, as the case may be, such schedule identifying each SBA Loan by
address of the related premises, and the name of the Obligor and setting forth
as to each SBA Loan the following information: (i) the Principal Balance as of
the close of business on the Cut-Off Date, (ii) the Account Number, (iii) the
original principal amount of the SBA Loan, (iv) the SBA Loan date and original
number of months to maturity, in months, (v) the SBA Loan Interest Rate as of
the Cut-Off Date or Subsequent Cut-Off Date, as the case may be, and guaranteed
rate payable to the Registered Holder and the FTA, (vi) when the first Monthly
Payment was due, (vii) the Monthly Payment as of the Cut-Off Date or Subsequent
Cut-Off Date, as the case may be, (viii) the remaining number of months to
maturity as

                                      I-22
<PAGE>   32
of the Cut-Off Date or Subsequent Cut-Off Date, as the case may be, (ix) the
Unguaranteed Percentage, (x) the SBA loan number, (xi) the margin which is added
to the Prime Rate to determine the SBA Loan Interest Rate or, in the case of
fixed rate SBA Loans, the rate of interest specified in the related SBA Note,
and (xii) the lifetime minimum and maximum SBA Loan Interest Rates, if
applicable.

                  SBA NOTE: The note or other evidence of indebtedness
evidencing the indebtedness of an Obligor under an SBA Loan.

                  SBA RULES AND REGULATIONS: The Small Business Act, as amended,
codified at 15 U.S.C. 631 et. seq., the Loan Guaranty Agreement, all legislation
binding on the SBA regarding financial transactions, all rules and regulations
promulgated from time to time thereunder, the Loan Guaranty Agreement and SBA
Standard Operating Procedures and official notices as from time to time are in
effect.

                  SBA Section 7(a) LOAN: An SBA Loan originated pursuant to
Section 7(a) of the SBA Rules and Regulations. For purposes of this Agreement,
references to SBA Section 7(a) Loans are equivalent to references to SBA Loans.

                  SECURITIES ACT:  The Securities Act of 1933, as amended.

                  SECURITIES LEGEND: "THIS CERTIFICATE HAS NOT BEEN AND WILL NOT
BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR UNDER ANY STATE SECURITIES OR BLUE SKY LAW OF ANY STATE. THE HOLDER
HEREOF, BY PURCHASING THIS CERTIFICATE, AGREES THAT THIS CERTIFICATE MAY BE
REOFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE
SECURITIES ACT AND OTHER APPLICABLE LAWS AND ONLY (1) (A) PURSUANT TO RULE 144A
UNDER THE SECURITIES ACT ("RULE 144A") TO A PERSON THAT THE HOLDER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A (A
"QIB"), PURCHASING FOR ITS OWN ACCOUNT OR A QIB PURCHASING FOR THE ACCOUNT OF A
QIB, WHOM THE HOLDER HAS INFORMED THAT THE REOFFER, RESALE, PLEDGE OR OTHER
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, OR (B) IN CERTIFICATED FORM TO
AN INSTITUTIONAL "ACCREDITED INVESTOR" (WITHIN THE MEANING OF RULE 501(a)(1)-(3)
OR (7) UNDER THE SECURITIES ACT) PURCHASING FOR INVESTMENT AND NOT FOR
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, IN EACH CASE, SUBJECT TO (X)
THE RECEIPT BY THE TRUSTEE OF A LETTER SUBSTANTIALLY IN THE FORM PROVIDED IN THE
AGREEMENT AND (Y) THE RECEIPT BY THE TRUSTEE OF SUCH OTHER EVIDENCE ACCEPTABLE
TO THE TRUSTEE THAT SUCH REOFFER, RESALE, PLEDGE OR TRANSFER IS IN COMPLIANCE
WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS OR IN EACH CASE IN ACCORDANCE
WITH ALL APPLICABLE SECURITIES LAWS OF

                                      I-23
<PAGE>   33
THE UNITED STATES AND SECURITIES AND BLUE SKY LAWS OF ANY STATE OF THE UNITED
STATES AND ANY OTHER APPLICABLE JURISDICTION, (2) PURSUANT TO ANOTHER EXEMPTION
AVAILABLE UNDER THE SECURITIES ACT AND IN ACCORDANCE WITH ANY APPLICABLE STATE
SECURITIES LAWS, OR (3) PURSUANT TO A VALID REGISTRATION STATEMENT. "

                  SELLER: First International Bank, National Association, and
its successors and assigns as Seller hereunder.

                  SERIES: 1999-1.

                  SERVICER: First International Bank, National Association, and
its successors and permitted assigns as Servicer hereunder.

                  SERVICER'S CERTIFICATE: The certificate as defined in Section
6.09.

                  SERVICING ADVANCES: All reasonable and customary
"out-of-pocket" costs and expenses incurred in the performance by the Servicer
of its servicing obligations, including, but not limited to, the cost of (i) the
preservation, restoration and protection of the Mortgaged Property or other
Collateral, (ii) any enforcement or judicial proceedings, including
foreclosures, (iii) the management and liquidation of the Foreclosed Property or
Repossessed Collateral, (iv) compliance with the obligations under clause (iv)
of Section 5.01(a) and Sections 5.02 and 5.07, which Servicing Advances are
reimbursable to the Servicer to the extent provided in Section 5.04(b) and (v)
in connection with the liquidation of an SBA Loan, expenditures relating to the
purchase or maintenance of any Prior Lien for all of which costs and expenses
the Servicer is entitled to reimbursement thereon up to a maximum rate per annum
equal to the related SBA Loan Interest Rate, except that any amount of such
interest accrued at a rate in excess of the weighted average Class A, Class M
and Class B Benchmark Rates with respect to the Remittance Date on or prior to
which the Unguaranteed Percentage of the Net Liquidation Proceeds will be
distributed shall be reimbursable only from Excess Proceeds.

                  SERVICING FEE: As to each SBA Loan, the annual fee payable to
the Servicer. Such fee shall be calculated and payable monthly from the amounts
received in respect of interest on the Guaranteed Interest and the Unguaranteed
Interest of such SBA Loan, shall accrue at the rate of 0.40% per annum on the
entire principal balance of such SBA Loan and shall be computed on the basis of
the same principal amount and for the period respecting which any related
interest payment on an SBA Loan is computed. The Servicing Fee is payable solely
from the interest portion of related (i) Monthly Payments, (ii) Liquidation

                                      I-24
<PAGE>   34
Proceeds or (iii) Released Mortgaged Property Proceeds collected by the
Servicer, or as otherwise provided in Section 5.04. The Servicing Fee includes
any servicing fees owed or payable to any Subservicer.

                  SERVICING OFFICER: Any officer of the Servicer involved in, or
responsible for, the administration and servicing of the SBA Loans whose name
appears on a list of servicing officers furnished to the Trustee by the Servicer
on the Closing Date hereof and as such list may from time to time be amended.

                  SPECIAL REMITTANCE DATE:  September 15, 1999.

                  SPECIFIED SPREAD ACCOUNT REQUIREMENT: The maximum amount of
Spread Account Balance required to be on deposit at any time in the Spread
Account which, with respect to any Remittance Date, shall be equal to the sum of
(i) the then outstanding Principal Balance with respect to all SBA Loans 180
days or more delinquent and (ii) the greater of (a) 3% of the then outstanding
Pool Principal Balance or (b) 2% of the Original Pool Principal Balance;
provided, however, that for purposes of clauses (i) and (ii)(a), there shall be
excluded the Principal Balance of SBA Loans which have been delinquent 24 months
or have been determined to be uncollectible, in whole or in part, by the
Servicer, to the extent that the Certificateholders have previously received the
Principal Balance of such SBA Loans; provided, however, that in no event shall
the Spread Account Balance exceed the then outstanding Pool Principal Balance.

                  SPREAD ACCOUNT: The Spread Account established in accordance
with the terms of the Spread Account Agreement and maintained by the Spread
Account Custodian for distribution in accordance with the provisions of Section
6.02 hereof.

                  SPREAD ACCOUNT AGREEMENT: The Agreement dated as of June 17,
1999 by and among the Spread Account Depositor and the Spread Account Custodian,
substantially in the form attached hereto as Exhibit N, as amended from time to
time by the parties thereto.

                  SPREAD ACCOUNT BALANCE: As of any date of determination, the
sum of the aggregate amount then on deposit in the Spread Account.

                  SPREAD ACCOUNT CUSTODIAN: HSBC Bank USA, in its capacity as
Spread Account Custodian under the Spread Account Agreement, or any successor
thereto.

                  SPREAD ACCOUNT DEPOSITOR: FNBNE SBA Holdings, Inc., a
wholly-owned subsidiary of the Bank.

                                      I-25
<PAGE>   35
                  SPREAD ACCOUNT EXCESS:  As defined in Section 6.02(b)(iii).

                  SUBSEQUENT CUT-OFF DATE: The beginning of business on each
date specified in a Subsequent Transfer Agreement with respect to those
Subsequent SBA Loans which are transferred and assigned to the Trust Fund
pursuant to the related Subsequent Transfer Agreement.

                  SUBSEQUENT SBA LOANS: The SBA Loans sold to the Trust Fund
pursuant to Section 2.09, which shall be listed on the Schedule of SBA Loans
attached to the related Subsequent Transfer Agreement.

                  SUBSEQUENT TRANSFER AGREEMENT: Each Subsequent Transfer
Agreement dated as of a Subsequent Transfer Date executed by the Trustee and the
Seller, by which Subsequent SBA Loans are sold and assigned to the Trust Fund.

                  SUBSEQUENT TRANSFER DATE: The date specified as such in each
Subsequent Transfer Agreement.

                  SUBSERVICER: Any person with whom the Servicer has entered
into a Subservicing Agreement and who satisfies any requirements set forth in
Section 5.01(b) hereof in respect of the qualification of a Subservicer.

                  SUBSERVICING AGREEMENT: Any agreement between the Servicer and
any Subservicer relating to subservicing and/or administration of certain SBA
Loans as provided in Section 5.01(b), a copy of which shall be delivered, along
with any modifications thereto, to the Trustee and the SBA.

                  SUBSTITUTION ADJUSTMENT: As to any date on which a
substitution occurs pursuant to Sections 2.05 or 3.03, the amount (if any) by
which the aggregate unguaranteed portions of the principal balances (after
application of principal payments received on or before the date of
substitution) of any Qualified Substitute SBA Loans as of the date of
substitution are less than the aggregate of the Principal Balance of the related
Deleted SBA Loans.

                  TAX RETURN: The federal income tax return to be filed on
behalf of the Trust Fund together with any and all other information reports or
returns that may be required to be furnished to the Certificateholders or filed
with the Internal Revenue Service or any other governmental taxing authority
under any applicable provision of federal, state or local tax laws.

                                      I-26
<PAGE>   36
                  TERMINATION PRICE:  The price defined in Section 11.01
hereof.

                  TRANSFEREE LETTER: A letter substantially in the form attached
hereto as Exhibit O-1.

                  TRUST FUND: The segregated pool of assets subject hereto,
constituting the trust created hereby and to be administered hereunder,
consisting of: (i) the Unguaranteed Interest of such SBA Loans as from time to
time are subject to this Agreement, together with, subject to the Multi-Party
Agreement, the SBA Files relating thereto and all proceeds thereof, (ii) the
Unguaranteed Interest of such assets (including any Permitted Instruments) as
from time to time are identified as Foreclosed Property, Repossessed Collateral
or are deposited in or constitute the Certificate Account, (iii) the
Unguaranteed Interests of any Insurance Proceeds under all insurance policies
with respect to the SBA Loans required to be maintained pursuant to this
Agreement, (iv) the Unguaranteed Interest of any Liquidation Proceeds and (v)
the Unguaranteed Interest of any Released Mortgaged Property Proceeds, including
all earnings thereon and proceeds thereof. Amounts deposited in the Principal
and Interest Account, Spread Account, Pre-Funding Account and Capitalized
Interest Account shall be held by the Trustee or the Spread Account Custodian,
as the case may be, but shall not constitute part of the Trust Fund. Also,
neither the Servicing Fee nor the Premium Protection Fee shall constitute part
of the Trust Fund.

                  TRUSTEE: HSBC Bank USA, or its successor in interest, or any
successor trustee appointed as herein provided.

                  TRUSTEE'S DOCUMENT FILE: The documents delivered pursuant to
Section 2.04.

                  UNGUARANTEED INTEREST: The sum of (i) that portion of an SBA
Loan not guaranteed by the SBA pursuant to the SBA Rules and Regulations and not
constituting the Premium Protection Fee, the FTA's Fee, the Servicing Fee, and,
with respect to the Additional Fee SBA Loans, the Additional Fee, and (ii) the
Excess Spread.

                  UNGUARANTEED PERCENTAGE: With respect to any SBA Section 7(a)
Loan, the quotient, expressed as a percentage, the numerator of which shall be
the principal portion of the Unguaranteed Interest of such SBA Section 7(a) Loan
as of the Cut-Off Date (or, in the case of a Subsequent SBA Loan, as of the
Subsequent Cut-Off Date) and the denominator of which shall be the sum of the
principal portion of the Unguaranteed Interest and the principal portion of the
Guaranteed Interest of such SBA Section 7(a) Loan as of the

                                      I-27
<PAGE>   37
Cut-Off Date (or, in the case of a Subsequent SBA Loan, as of the Subsequent
Cut-Off Date).

                                      I-28
<PAGE>   38
                                   ARTICLE II

                      SALE AND CONVEYANCE OF THE TRUST FUND

                  Section 2.01  Sale and Conveyance of Trust Fund.

                  (a) The Seller hereby sells, transfers, assigns, sets over and
conveys to the Trustee without recourse and for the benefit of the SBA and the
Certificateholders, as their interests may appear, subject to the terms of this
Agreement and the Multi-Party Agreement, all of the right, title and interest of
the Seller in and to the Unguaranteed Interests of the Initial SBA Loans and the
Subsequent SBA Loans and all other assets included or to be included in the
Trust Fund.

                  (b) The rights of the Certificateholders to receive payments
with respect to the SBA Loans in respect of the Certificates, and all ownership
interests of the Certificateholders in such payments, shall be as set forth in
this Agreement. The Servicing Fee and the Premium Protection Fee shall not
constitute part of the Trust Fund and the Certificateholders shall have no
interest in, and are not entitled to receive any portion of, the Servicing Fee
or the Premium Protection Fee.

                  Section 2.02 Possession of SBA Files.

                  (a) Upon the issuance of the Certificates, the ownership of
each SBA Note, the Mortgage and the contents of the related SBA File relating to
the Initial SBA Loans is, and upon each Subsequent Transfer Date the ownership
of each Mortgage Note, the Mortgage and the contents of the related Mortgage
File relating to the applicable Subsequent SBA Loans will be, vested in the
Trustee for the benefit of the SBA and the Certificateholders, as their
interests may appear.

                  (b) Pursuant to Section 2.04, with respect to the Initial SBA
Loans, the Seller has delivered or caused to be delivered, and, on each
Subsequent Transfer Date, the Seller will deliver or cause to be delivered, each
SBA Note relating to an SBA Section 7(a) Loan to the FTA.

                  Section 2.03  Books and Records.

                  The sale of the Unguaranteed Interest of each SBA Loan shall
be reflected on the Seller's balance sheets and other financial statements as a
sale of assets by the Seller and Seller shall respond to any third-party inquiry
that such transfer is so reflected as a sale. The Seller shall be responsible
for maintaining, and shall maintain, a complete set of books and

                                      II-1
<PAGE>   39
records for each SBA Loan which shall be clearly marked to reflect the ownership
of the Unguaranteed Interest in each SBA Loan by the Trustee for the benefit of
the SBA and the Certificateholders, as their interests may appear.

                  Section 2.04  Delivery of SBA Loan Documents.

                  The Seller, (i) contemporaneously with the delivery of this
Agreement, has delivered or caused to be delivered to the Trustee or, with
respect to the SBA Notes relating to the SBA Section 7(a) Loans being delivered
pursuant to (a) below, to the FTA, each of the following documents for each
Initial SBA Loan and (ii) on each Subsequent Transfer Date, will deliver or
cause to be delivered to the Trustee, or with respect to the SBA Notes relating
to the SBA Section 7(a) Loans being delivered pursuant to paragraph (a) below,
to the FTA, each of the following documents for each Subsequent SBA Loan:

                  (a) The original SBA Note, endorsed by means of an allonge as
follows: "Pay to the order of HSBC Bank USA, and its successors and assigns, as
trustee under that certain Pooling and Servicing Agreement dated as of May 31,
1999, for the benefit of the United States Small Business Administration and
holders of First International Bank SBA Loan-Backed Certificates, Series 1999-1,
Class A, Class M and Class B, as their respective interests may appear, without
recourse" and signed, by facsimile or manual signature, in the name of the
Seller by a Responsible Officer, with all prior and intervening endorsements
showing a complete chain of endorsement from the originator to the Seller, if
the Seller was not the originator; provided, however, that in lieu of the
original SBA Note relating to one SBA Loan, with an aggregate Principal Balance
as of the Cut-Off Date of approximately $45,184.58, as identified in the list
delivered to the Trustee by the Seller on the Closing Date and set forth on
Exhibit P hereto, the Seller may deliver a lost note affidavit and, if a copy
exists, a copy of the original SBA Note.

                  (b) With respect to those SBA Loans secured by Mortgaged
Properties, either: (i) the original Mortgage, with evidence of recording
thereon, (ii) a copy of the Mortgage certified as a true copy by a Responsible
Officer of the Seller where the original has been transmitted for recording
until such time as the original is returned by the public recording office or
duly licensed title or escrow officer or (iii) a copy of the Mortgage certified
by the public recording office in those instances where the original recorded
Mortgage has been lost.

                  (c) With respect to those SBA Loans secured by Mortgaged
Properties, either: (i) the original Assignment of Mortgage from the Seller
endorsed as follows: "HSBC Bank USA,

                                      II-2
<PAGE>   40
("Assignee") its successors and assigns, as trustee under the Pooling and
Servicing Agreement dated as of May 31, 1999 subject to the Multi-Party
Agreement dated as of May 31, 1999" with evidence of recording thereon
(provided, however, that where permitted under the laws of the jurisdiction
wherein the Mortgaged Property is located, the Assignment of Mortgage may be
effected by one or more blanket assignments for SBA Loans secured by Mortgaged
Properties located in the same county), or (ii) a copy of such Assignment of
Mortgage certified as a true copy by a Responsible Officer of the Seller where
the original has been transmitted for recording (provided, however, that where
the original Assignment of Mortgage is not being delivered to the Trustee, such
Responsible Officer may complete one or more blanket certificates attaching
copies of one or more Assignments of Mortgage relating to the Mortgages
originated by the Seller);

                  (d) With respect to those SBA Loans secured by Mortgaged
Properties, either: (i) originals of all intervening assignments, if any,
showing a complete chain of title from the originator to the Seller, including
warehousing assignments, with evidence of recording thereon if such assignments
were recorded, (ii) copies of any assignments certified as true copies by a
Responsible Officer of the Seller where the originals have been submitted for
recording until such time as the originals are returned by the public recording
officer, or (iii) copies of any assignments certified by the public recording
office in any instances where the original recorded assignments have been lost;

                  (e) With respect to those SBA Loans secured by Mortgaged
Properties, either: (i) originals of all title insurance policies relating to
the Mortgaged Properties to the extent the Seller obtained such policies or (ii)
copies of any title insurance policies or other evidence of lien position,
including but not limited to Policy Insurance Record of Title ("PIRT") policies,
limited liability reports and lot book reports, to the extent the Seller obtains
such policies or other evidence of lien position, certified as true by the
Seller;

                  (f) With respect to those SBA Loans secured by other items of
Collateral, the original or a certified copy of all filed UCC financing
statements securing such Collateral naming the Seller as "Secured Party;"

                  (g) For all SBA Loans, blanket assignment of all Collateral
securing the SBA Loan, including without limitation, all rights under applicable
guarantees and insurance policies;

                  (h) For all SBA Loans, irrevocable power of attorney of the
Seller to the Trustee to execute, deliver, file or record and otherwise deal
with the Collateral for the SBA Loans in

                                      II-3
<PAGE>   41
accordance with the Agreement. The power of attorney will be delegable by the
Trustee to the Servicer and any successor servicer and will permit the Trustee
or its delegate to prepare, execute and file or record UCC financing statements
and notices to insurers; and

                  (i) For all SBA Loans, blanket UCC-1 financing statements
identifying by type all Collateral for the SBA Loans in the SBA Loan Pool and
naming the Trustee as "Secured Party" and the Seller as the "Debtor". The UCC-1
financing statements will be filed promptly following the Closing Date in
Connecticut and will be in the nature of protective notice filings rather than
true financing statements.

                  The Seller shall, within ten Business Days after the receipt
thereof, and in any event, within one year of the Closing Date (or with respect
to the Subsequent SBA Loans, within one year of the related Subsequent Transfer
Date), unless such documents have been lost, deliver or cause to be delivered to
the Trustee: (i) the original recorded Mortgage in those instances where a copy
thereof certified by the Seller was delivered to the Trustee; (ii) the original
recorded Assignment of Mortgage from the Seller to the Trustee, which, together
with any intervening assignments of Mortgage, evidences a complete chain of
title from the originator to the Trustee in those instances where copies thereof
certified by the Seller were delivered to the Trustee; and (iii) any intervening
assignments of Mortgage in those instances where copies thereof certified by the
Seller were delivered to the Trustee. Notwithstanding anything to the contrary
contained in this Section 2.04, in those instances where the public recording
office retains the original Mortgage, Assignment of Mortgage or the intervening
assignments of the Mortgage after it has been recorded, or if such document has
been lost, the Seller shall be deemed to have satisfied its obligations
hereunder upon delivery to the Trustee of a copy of such Mortgage, Assignment of
Mortgage or assignments of Mortgage certified by the public recording office to
be a true copy of the recorded original thereof. All SBA Loan documents held by
the Trustee or the FTA, as the case may be, as to each SBA Loan are referred to
herein as the "Trustee's Document File."

                  Although it is the intent of the parties to this Agreement
that the conveyance of the Seller's right, title and interest in and to the
Unguaranteed Interests of the SBA Loans and other assets in the Trust Fund
pursuant to this Agreement shall constitute a purchase and sale and not a loan,
in the event that such conveyance is deemed to be a loan, it is the intent of
the parties to this Agreement that the Seller shall be deemed to have granted,
and hereby does grant, to the Trustee for the benefit of the Certificateholders
and the SBA a first priority

                                      II-4
<PAGE>   42
perfected security interest in all of the Seller's right, title and interest in,
to and under the Unguaranteed Interests of the SBA Loans and other assets in the
Trust Fund, and that this Agreement shall constitute a security agreement under
applicable law.

                  All recording required pursuant to this Section 2.04 shall be
accomplished by and at the expense of the Servicer.

                  Section 2.05 Acceptance by Trustee of the Trust Fund; Certain
Substitutions; Certification by Trustee.

                  (a) The SBA shall cause the FTA to execute and deliver on the
Closing Date (or, with respect to the Subsequent SBA Loans, on the related
Subsequent Transfer Date), for each SBA Section 7(a) Loan, an acknowledgment of
receipt of the SBA Note by the FTA in the form attached as Exhibit 1 to the
Multi-Party Agreement, and declares that the FTA will hold such documents and
any amendments, replacements or supplements thereto, as agent for the benefit of
the SBA and the Certificateholders. The Trustee agrees, for the benefit of the
SBA and the Certificateholders, to review each Trustee's Document File within 90
days after the Closing Date or Subsequent Transfer Date, as the case may be (or,
with respect to any Qualified Substitute SBA Loan, within 45 days after the
assignment thereof), and to deliver to the Certificateholders, the Seller, the
Servicer and the SBA a certification in the form attached hereto as Exhibit F-1.
Within 360 days after the Closing Date (or, with respect to any Qualified
Substitute SBA Loan, within 360 days after the assignment thereof), the Trustee
shall deliver to the Seller, the Servicer, the SBA, the Rating Agency and any
Certificateholder who requests a copy from the Trustee a final certification in
the form attached hereto as Exhibit F-2 evidencing the completeness of the
Trustee's Document Files.

                  (b) If the Trustee or the SBA, as the case may be, during the
process of reviewing the Trustee's Document Files finds any document
constituting a part of a Trustee's Document File which is not properly executed,
has not been received, is unrelated to an SBA Loan identified in the SBA Loan
Schedule, or does not conform in a material respect to the requirements of
Section 2.04 or the description thereof as set forth in the SBA Loan Schedule,
the Trustee or the SBA, as the case may be, shall promptly so notify the Seller
and the Servicer. In performing any such review, the Trustee or the SBA, as the
case may be, may conclusively rely on the Seller as to the purported genuineness
of any such document and any signature thereon. It is understood that the scope
of the Trustee's and the SBA's review of the SBA Files is limited solely to
confirming that the documents listed

                                      II-5
<PAGE>   43
in Section 2.04 have been executed and received and relate to the SBA Loans
identified in the SBA Loan Schedule. The Seller agrees to use reasonable efforts
to remedy a material defect in a document constituting part of an SBA File of
which it is so notified by the Trustee or the SBA, as the case may be. If,
however, within 60 days after the Trustee's or the SBA's notice to it respecting
such material defect the Seller has not remedied the defect and such defect
materially and adversely affects the value of the related SBA Loan, the Seller
will (i) substitute in lieu of such SBA Loan a Qualified Substitute SBA Loan in
the manner and subject to the conditions set forth in Section 3.03 or (ii)
purchase the Unguaranteed Interest of such SBA Loan at a purchase price equal to
the Principal Balance of such Unguaranteed Interest as of the date of purchase,
plus 30 days' interest on such Principal Balance, computed at the Adjusted SBA
Loan Benchmark Rate as of the next succeeding Determination Date, plus any
accrued unpaid Servicing Fees, Monthly Advances and Servicing Advances
reimbursable to the Servicer, which purchase price shall be deposited in the
Principal and Interest Account on the next succeeding Determination Date.

                  (c) Upon receipt by the Trustee and the SBA of a certification
of a Servicing Officer of the Servicer of such purchase and the deposit of the
amounts described above in the Principal and Interest Account (which
certification shall be in the form of Exhibit I hereto), the Trustee and the SBA
shall release to the Servicer for release to the Seller the related Trustee's
Document File and the Trustee and the SBA shall execute, without recourse, and
deliver such instruments of transfer necessary to transfer such SBA Loan to the
Seller. All costs of any such transfer shall be borne by the Servicer.

                  (d) If in connection with taking any action the Servicer
requires any item constituting part of the Trustee's Document File, or the
release from the lien of the related SBA Loan of all or part of any Mortgaged
Property or other Collateral, the Servicer shall deliver to the Trustee and the
SBA a certificate to such effect in the form attached as Exhibit I hereto. Upon
receipt of such certification, the Trustee or the SBA, as the case may be, shall
deliver to the Servicer the requested documentation and the Trustee shall
execute, without recourse, and deliver such instruments of transfer necessary to
release all or the requested part of the Mortgaged Property or other Collateral
from the lien of the related SBA Loan.

                  On the Remittance Date in March of each year, the Trustee
shall deliver to the Seller, the SBA and the Servicer a certification detailing
all transactions with respect to the SBA Loans for which the Trustee holds a
Trustee's Document File pursuant to this Agreement during the prior calendar
year. Such

                                      II-6
<PAGE>   44
certification shall list all Trustee's Document Files which were released by or
returned to the Trustee or the FTA during the prior calendar year, the date of
such release or return and the reason for such release or return.

                  Section 2.06  [Intentionally Omitted]

                  Section 2.07  Authentication of Certificates.

                  The Trustee acknowledges the assignment to it on behalf of the
Trust Fund of the Unguaranteed Interests in the SBA Loans and the delivery to
the Trustee and the FTA of the Trustee's Document Files and, concurrently with
such delivery, has authenticated or caused to be authenticated and delivered to
or upon the order of the Seller, in exchange for the Unguaranteed Interests in
the SBA Loans, the Trustee's Document Files and the other assets included in the
definition of Trust Fund, Certificates duly authenticated by the Trustee in
authorized denominations.

                  Section 2.08 Fees and Expenses of the Trustee.

                  The fees and expenses of the Trustee including (i) the annual
fees of the Trustee, payable quarterly in advance, and subject to rebate to the
Servicer as additional servicing compensation hereunder for any fraction of a
calendar quarter in which this Agreement terminates, (ii) any other fees and
expenses to which the Trustee is entitled pursuant to this Agreement or its
written agreement with the Seller, and (iii) reimbursements to the Servicer for
any advances made by the Servicer to the Expense Account pursuant to Section
6.03 hereof, shall be paid from the Expense Account in the manner set forth in
Section 6.03 hereof; provided, however, that the Seller shall be liable for any
expenses of the Trust Fund incurred prior to the Closing Date. The Servicer and
the Trustee hereby covenant with the Certificateholders that every material
contract or other material agreement entered into by the Trustee, or the
Servicer, acting as attorney-in-fact for the Trustee, on behalf of the Trust
Fund shall expressly state therein that no Certificateholder shall be personally
liable in connection with such contract or agreement.

                  Section 2.09 Sale and Conveyance of the Subsequent SBA Loans.

                  (a) Subject to the conditions set forth in paragraph (b)
below, in consideration of the Trustee's delivery on the related Subsequent
Transfer Dates to or upon the order of the Seller of all or a portion of the
balance of funds in the Pre-Funding Account, the Seller shall on any Subsequent
Transfer Date sell, transfer, assign, set over and otherwise convey without

                                      II-7
<PAGE>   45
recourse, to the Trustee all right, title and interest of the Seller in and to
the Unguaranteed Interest of each Subsequent SBA Loan listed on the SBA Loan
Schedule delivered by the Seller on such Subsequent Transfer Date, all their
right, title and interest in and to principal collected and interest accruing on
the Unguaranteed Interest of each such Subsequent SBA Loan on and after the
related Subsequent Cut-Off Date and all their right, title and interest in the
Unguaranteed Interest in all insurance policies; provided, however, that the
Seller reserve and retain all their right, title and interest in and to
principal (including Principal Prepayments) collected and interest accruing on
each such Subsequent SBA Loan prior to the related Subsequent Cut-Off Date. The
transfer by the Seller of the Unguaranteed Interest of the Subsequent SBA Loans
set forth on the SBA Loan Schedule to the Trustee shall be absolute and shall be
intended by all parties hereto to be treated as a sale by the Seller.

                  Although it is the intent of the parties to this Agreement
that the conveyance of the Seller's right, title and interest in and to the
Unguaranteed Interests of the SBA Loans and other assets in the Trust Fund
pursuant to this Agreement shall constitute a purchase and sale and not a loan,
in the event that such conveyance is deemed to be a loan, it is the intent of
the parties to this Agreement that the Seller shall be deemed to have granted,
and hereby does grant, to the Trustee a first priority perfected security
interest in all of the Seller's right, title and interest in, to and under the
Unguaranteed Interests of the SBA Loans and other assets in the Trust Fund, and
that this Agreement shall constitute a security agreement under applicable law.

                  The amount released from the Pre-Funding Account shall be
one-hundred percent (100%) of the aggregate Principal Balances as of the related
Subsequent Cut-Off Date of the Subsequent SBA Loans so transferred on the
related Subsequent Transfer Date.

                  (b) The Seller shall transfer to the Trustee the Unguaranteed
Interest of the Subsequent SBA Loans and the other property and rights related
thereto described in paragraph (a) above only upon the satisfaction of each of
the following conditions on or prior to the related Subsequent Transfer Date:

                           (i) the Seller shall have provided the Trustee with a
                  timely Addition Notice and shall have provided any information
                  reasonably requested by it with respect to the Subsequent SBA
                  Loans;

                           (ii) the Seller shall have delivered to the Trustee a
                  duly executed written assignment (including an acceptance by
                  the Trustee) that shall include SBA

                                      II-8
<PAGE>   46
                  Loan Schedules, listing the Subsequent SBA Loans and any other
                  exhibits listed thereon;

                           (iii) the Seller shall have deposited in the
                  Principal and Interest Account all collections in respect of
                  the Subsequent SBA Loans received on or after the related
                  Subsequent Cut-Off Date;

                           (iv) as of each Subsequent Transfer Date, the Bank
                  was not insolvent nor will it have been made insolvent by such
                  transfer nor is it aware of any pending insolvency;

                           (v) such addition will not result in a material
                  adverse tax consequence to the Trust Fund or the Holders of
                  the Certificates;

                           (vi) the Pre-Funding Period shall not have
                  terminated;

                           (vii) the Seller shall have delivered to the Trustee
                  an Officer's Certificate confirming the satisfaction of each
                  condition precedent specified in this paragraph (b) and in the
                  related Subsequent Transfer Agreement;

                           (viii) the Seller shall have delivered to the Rating
                  Agency and the Trustee, Opinions of Counsel with respect to
                  the transfer of the Subsequent SBA Loans substantially in the
                  form of the Opinions of Counsel delivered to the Trustee on
                  the Closing Date (bankruptcy, corporate and tax opinions); and

                           (ix) the FTA shall have delivered, pursuant to
                  Section 2.05(a) hereof, an acknowledgment of receipt of the
                  SBA Note relating to such SBA Section 7(a) Loan in the form
                  attached as Exhibit 1 to the Multi-Party Agreement.

                  (c) The obligation of the Trust Fund to purchase the
Unguaranteed Interest of a Subsequent SBA Loan on any Subsequent Transfer Date
is subject to the requirement, as evidenced by a certificate from a Responsible
Officer of the Seller, that such Subsequent SBA Loan conforms in all material
respects to the representations and warranties concerning the individual Initial
SBA Loans set forth in Sections 3.01 and 3.02 (except that any reference therein
to the Cut-Off Date shall be deemed a reference to the applicable Subsequent
Cut-Off Date) and that the inclusion of all Subsequent SBA Loans being
transferred to the Trust Fund on such Subsequent Transfer Date will not change,
in any material

                                      II-9
<PAGE>   47
respect, the characteristics of the Initial SBA Loans, in the aggregate, set
forth in Sections 3.01 and 3.02 or in the Confidential Placement Memorandum
under the headings "Summary of Terms -- The SBA Loan Pool" and "The SBA Loan
Pool." Further, each Subsequent SBA Loan must be an SBA Section 7(a) Loan.

                  (d) In connection with the transfer and assignment of the
Subsequent SBA Loans, the Seller agrees to satisfy the conditions set forth in
Sections 2.01, 2.02, 2.03, 2.04 and 2.05.

                  (e) In connection with each Subsequent Transfer Date, on the
Remittance Dates in July, August and September 1999 and the Special Remittance
Date, the Seller shall determine, and the Trustee shall cooperate with the
Seller in determining (i) the amount and correct dispositions of the Capitalized
Interest Requirements, Overfunded Interest Amounts, and Pre-Funding Earnings and
(ii) any other necessary matters in connection with the administration of the
Pre-Funding Account and of the Capitalized Interest Account. If any amounts are
incorrectly released to the Seller from the Capitalized Interest Account, the
Seller shall immediately repay such amounts to the Trustee.

                  Section 2.10  Optional Purchase of Defaulted SBA Loans.

                  The Servicer shall have the right, but not the obligation, to
purchase the Unguaranteed Interest of any Defaulted SBA Loan for a purchase
price equal to the Principal Balance of such Unguaranteed Interest as of the
date of repurchase, plus 30 days' interest on such Principal Balance, computed
at the Adjusted SBA Loan Benchmark Rate as of the next succeeding Determination
Date, plus any accrued unpaid Servicing Fees, Monthly Advances and Servicing
Advances reimbursable to the Servicer, which purchase price shall be deposited
in the Principal and Interest Account on the next succeeding Determination Date.
Any such repurchase shall be accomplished in the manner specified in Section
2.05(b). In no event shall the aggregate Principal Balance of the Unguaranteed
Interests of all Defaulted SBA Loans purchased pursuant to this Section 2.10
exceed 5.0% of the sum of (i) the Original Pool Principal Balance and (ii) the
Original Pre-Funded Amount.

                                     II-10
<PAGE>   48
                                   ARTICLE III

                         REPRESENTATIONS AND WARRANTIES

                  Section 3.01 Representations of the Bank.

                  The Bank hereby represents and warrants to the Trustee and the
Certificateholders as of the Closing Date:

                  (a) The Bank is a nationally chartered bank duly organized and
validly existing under the laws of the United States and has all licenses
necessary to carry on its business as now being conducted and is licensed and
qualified in each state where the laws of such state require licensing or
qualification in order to conduct business of the type conducted by the Bank and
perform its obligations hereunder; the Bank has all requisite power and
authority to execute and deliver this Agreement and to perform in accordance
herewith and therewith; the execution, delivery and performance of this
Agreement (including all instruments of transfer to be delivered pursuant to
this Agreement) by the Bank and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized by all
necessary corporate action; this Agreement evidences the valid, binding and
enforceable obligation of the Bank; and all requisite corporate action has been
taken by the Bank to make this Agreement valid, binding and enforceable upon the
Bank in accordance with its terms, subject to the effect of bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally or the application of equitable principles
in any proceeding, whether at law or in equity, none of which will affect the
ownership of the SBA Loans by the Trustee, as trustee.

                  (b) All actions, approvals, consents, waivers, exemptions,
variances, franchises, orders, permits, authorizations, rights and licenses
required to be taken, given or obtained, as the case may be, by or from any
federal, state or other governmental authority or agency (other than any such
actions, approvals, etc., under any state securities laws, real estate
syndication or "Blue Sky" statutes, as to which the Bank makes no such
representation or warranty), that are necessary or advisable in connection with
the purchase and sale of the Certificates and the execution and delivery by the
Bank of the documents to which it is a party, have been duly taken, given or
obtained, as the case may be, are in full force and effect on the date hereof,
are not subject to any pending proceedings or appeals (administrative, judicial
or otherwise) and either the time within which any appeal therefrom may be taken
or review thereof may be obtained has expired or no review thereof may be
obtained or appeal therefrom taken, and are adequate to authorize

                                     III-1
<PAGE>   49
the consummation of the transactions contemplated by this Agreement and the
other documents on the part of the Bank and the performance by the Bank of its
obligations under this Agreement and such of the other documents to which it is
a party;

                  (c) The consummation of the transactions contemplated by this
Agreement will not result in the breach of any terms or provisions of the
articles of association or by-laws of the Bank or result in the breach of any
term or provision of, or conflict with or constitute a default under or result
in the acceleration of any obligation under, any material agreement, indenture
or loan or credit agreement or other material instrument to which the Bank or
its property is subject, or result in the violation of any law, rule,
regulation, order, judgment or decree to which the Bank or its property is
subject;

                  (d) Neither this Agreement nor any statement, report or other
document furnished or to be furnished pursuant to this Agreement or in
connection with the transactions contemplated hereby and thereby contains any
untrue statement of material fact or omits to state a material fact necessary to
make the statements contained herein or therein not misleading in light of the
circumstances under which they were made;

                  (e) The Bank does not believe, nor does it have any reason or
cause to believe, that it cannot perform each and every covenant contained in
this Agreement;

                  (f) There is no action, order, suit, proceeding or
investigation pending or, to the best of the Bank's knowledge, threatened
against the Bank which, either in any one instance or in the aggregate, may (i)
result in any material adverse change in the business, operations, financial
condition, properties or assets of the Bank or in any material impairment of the
right or ability of the Bank to carry on its business substantially as now
conducted, or in any material liability on the part of the Bank or of any action
taken or to be taken in connection with the obligations of the Bank contemplated
herein, or which would be likely to impair materially the ability of the Bank to
perform under the terms of this Agreement or (ii) which would draw into question
the validity of this Agreement or the SBA Loans;

                  (g) The Trust Fund will not constitute an "investment company"
within the meaning of the Investment Company Act of 1940, as amended;

                  (h) The Bank is not in default with respect to any order or
decree of any court or any order, regulation or demand of any federal, state,
municipal or governmental agency, which default might have consequences that
would materially and

                                     III-2
<PAGE>   50
adversely affect the condition (financial or other) or operations of the Bank or
its properties or might have consequences that would materially and adversely
affect its performance hereunder;

                  (i) The statements contained in the Confidential Placement
Memorandum which describe the Bank or the SBA Loans or matters or activities for
which the Bank is responsible in accordance with the Confidential Placement
Memorandum, this Agreement and all documents referred to therein or herein or
delivered in connection therewith or herewith, or which are attributable to the
Bank therein or herein are true and correct in all material respects, and the
Confidential Placement Memorandum does not contain any untrue statement of a
material fact with respect to the Bank or the SBA Loans and does not omit to
state a material fact necessary to make the statements contained therein with
respect to the Bank or the SBA Loans not misleading in light of the
circumstances under which they were made. The Bank is not aware that the
Confidential Placement Memorandum contains any untrue statement of a material
fact or omits to state any material fact necessary to make the statements
contained therein not misleading in light of the circumstances under which they
were made. There is no fact peculiar to the Bank or the SBA Loans and known to
the Bank that materially adversely affects or in the future may (so far as the
Bank can now reasonably foresee) materially adversely affect the Bank or the SBA
Loans or the ownership interests therein represented by the Certificates that
has not been set forth in the Confidential Placement Memorandum;

                  (j) No Certificateholder is subject to Connecticut state
licensing requirements solely by virtue of holding the Certificates;

                  (k) The transfer, assignment and conveyance of the SBA Notes
and the Mortgages by the Bank pursuant to this Agreement are not or, with
respect to the Subsequent SBA Loans, will not be, subject to the bulk transfer
laws or any similar statutory provisions in effect in any applicable
jurisdiction and do not violate the SBA Rules and Regulations;

                  (l) The origination and collection practices used by the Bank
with respect to each SBA Note and Mortgage relating to the Initial SBA Loans
have been, and the origination and collection practices to be used by the Bank
with respect to each SBA Note and Mortgage relating to the Subsequent SBA Loans
will have been, in all material respects legal, proper, prudent and customary in
the SBA loan origination and servicing business;

                  (m) Each Initial SBA Loan was, and each Subsequent SBA Loan
will be, selected from among the existing SBA loans in the

                                     III-3
<PAGE>   51
Bank's portfolio at the date hereof or, in the case of the Subsequent SBA Loans,
at the related Subsequent Cut-Off Date, in a manner not designed to adversely
affect the Certificateholders;

                  (n) The Bank received fair consideration and reasonably
equivalent value or, in the case of the Subsequent SBA Loans, will have received
fair consideration and reasonably equivalent value, in exchange for the sale of
the Unguaranteed Interest of the SBA Loans evidenced by the Certificates;

                  (o) Neither the Bank nor any of its affiliates sold or, in the
case of the Subsequent SBA Loans, will have sold any interest in any SBA Loan
evidenced by the Certificates with any intent to hinder, delay or defraud any of
their respective creditors;

                  (p) The Bank is solvent, and the Bank will not be rendered
insolvent as a result of the transfer of the SBA Loans to the Trust Fund or the
sale of the Certificates; and

                  (q) The chief executive office and legal name of the Bank is
as set forth on the respective UCC-1 financing statement filed on behalf of the
Bank pursuant to Section 2.04(h), such office is the place where the Bank is
"located" for the purposes of Section 9-103(3)(d) of the Uniform Commercial Code
as in effect in the State of New York, and neither the location of such office
nor the legal name of the Bank has changed in the past four months.

                  Section 3.02  Individual SBA Loans.

                  The Bank hereby represents and warrants to the Trustee, and
the Certificateholders, with respect to each Initial SBA Loan originated or
acquired by the Bank, as of the Closing Date, and with respect to each
Subsequent SBA Loan originated by the Bank, as of the related Subsequent
Transfer Date:

                  (a) The information with respect to each SBA Loan set forth in
the SBA Loan Schedule is true and correct;

                  (b) All of the original or certified documentation set forth
in Section 2.04 (including all material documents related thereto) has been or
will be delivered to the Trustee or the FTA, on behalf of the Trustee, on the
Closing Date or as otherwise provided in Section 2.04;

                  (c) Each Mortgaged Property serving as the primary Collateral
for an SBA Loan is improved by a Commercial Property or a Residential Property
and does not constitute other than real property under state law;

                                     III-4
<PAGE>   52
                  (d) Except for Initial SBA Loans (and up to 10 Subsequent SBA
Loans) that were purchased and reunderwritten by the Bank, each SBA Loan has
been originated by the Bank, in its capacity as Seller and each SBA Loan is
being serviced by the Bank, in its capacity as Servicer;

                  (e) Each SBA Loan is an SBA Section 7(a) Loan;

                  (f) Except for 5 Initial SBA Loans that bear fixed rates of
interest, the SBA Loan Interest Rates adjust monthly to equal the then
applicable Prime Rate plus the margin (if applicable) set forth in the related
SBA Note. Each adjustable rate SBA Note will, with respect to principal
payments, adjust monthly to provide for a schedule of Monthly Payments which
are, if timely paid, sufficient to fully amortize the principal balance of such
SBA Loan on its respective maturity date;

                  (g) With respect to those SBA Loans secured by a Mortgaged
Property, each Mortgage is a valid and subsisting lien of record on the
Mortgaged Property subject only to any applicable Prior Liens on such Mortgaged
Property and subject in all cases to such exceptions that are generally
acceptable to banking institutions in connection with their regular commercial
lending activities, and such other exceptions to which similar properties are
commonly subject and which do not individually, or in the aggregate, materially
and adversely affect the benefits of the security intended to be provided by
such Mortgage;

                  (h) Immediately prior to the transfer and assignment herein
contemplated, the Bank held good and indefeasible title to, and was the sole
owner of, the Unguaranteed Interest of each SBA Loan conveyed by the Bank
subject to no liens, charges, mortgages, encumbrances or rights of others except
as set forth in Sections 3.02(g) or 3.02(kk) or other liens which will be
released simultaneously with such transfer and assignment; and immediately upon
the transfer and assignment herein contemplated, the Trustee will hold good and
indefeasible title, to, and be the sole owner of, each SBA Loan subject to no
liens, charges, mortgages, encumbrances or rights of others except (i) as set
forth in Sections 3.02(g) or 3.02(kk), (ii) the interests of the SBA or (iii)
other liens which will be released simultaneously with such transfer and
assignment;

                  (i) As of the Cut-Off Date (or, with respect to any Subsequent
SBA Loan, as of the related Subsequent Cut-Off Date), no SBA Loan is more than
30 days delinquent in payment;

                  (j) To the best of the Bank's knowledge, there is no
delinquent tax or assessment lien on any Mortgaged Property, and

                                     III-5
<PAGE>   53
each Mortgaged Property is free of material damage and is in good repair;

                  (k) No SBA Loan is subject to any right of rescission,
set-off, counterclaim or defense, including the defense of usury, nor will the
operation of any of the terms of the SBA Note or any related Mortgage, or the
exercise of any right thereunder, render either the SBA Note or any related
Mortgage unenforceable in whole or in part, or subject to any right of
rescission, set-off, counterclaim or defense, including the defense of usury,
and no such right of rescission, set-off, counterclaim or defense has been
asserted with respect thereto;

                  (l) Each SBA Loan at the time it was made complied and, as of
the Closing Date complies, in all material respects with applicable state and
federal laws and regulations, including, without limitation, usury, equal credit
opportunity, disclosure and recording laws and the SBA Rules and Regulations;

                  (m) Each Initial SBA Loan was (and each Subsequent SBA Loan
will be) originated and underwritten or purchased and reunderwritten by the Bank
in accordance with the underwriting criteria set forth in the Confidential
Placement Memorandum; provided, however, that without the prior written consent
of the SBA, no more than 10 Subsequent SBA Loans may have been purchased by the
Bank from a third party;

                  (n) Pursuant to the SBA Rules and Regulations, the Bank
requires that the improvements upon each Mortgaged Property are covered by a
valid and existing hazard insurance policy with a generally acceptable carrier
that provides for fire and extended coverage representing coverage described in
Section 5.07;

                  (o) Pursuant to the SBA Rules and Regulations, the Bank
requires that if a Mortgaged Property is in an area identified in the Federal
Register by the Federal Emergency Management Agency as having special flood
hazards, a flood insurance policy is in effect with respect to such Mortgaged
Property with a generally acceptable carrier in an amount representing coverage
described in Section 5.07;

                  (p) Each SBA Note, any related Mortgage and any other
agreement pursuant to which Collateral is pledged to the Bank is the legal,
valid and binding obligation of the maker thereof and is enforceable in
accordance with its terms, except only as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and by general
principles of equity (whether considered in a proceeding or

                                     III-6
<PAGE>   54
action in equity or at law), none of which will prevent the ultimate realization
of the security provided by the Collateral or other agreement, and all parties
to each SBA Loan had full legal capacity to execute all SBA Loan documents and
convey the estate therein purported to be conveyed;

                  (q) The Bank has caused and will cause to be performed any and
all acts reasonably required to be performed to preserve the rights and remedies
of the Trustee in any insurance policies applicable to the SBA Loans including,
without limitation, in each case, any necessary notifications of insurers,
assignments of policies or interests therein, and establishments of co-insured,
joint loss payee and mortgagee rights in favor of the Trustee or the Bank,
respectively;

                  (r) Each original Mortgage was recorded, and all subsequent
assignments of the original Mortgage have been recorded in the appropriate
jurisdictions wherein such recordation is necessary to perfect the lien thereof
as against creditors of the Bank (or, subject to Section 2.04 hereof, are in the
process of being recorded);

                  (s) Each SBA Loan conforms, and all such SBA Loans in the
aggregate conform, to the description thereof set forth in the Confidential
Placement Memorandum;

                  (t) The terms of the SBA Note and the related Mortgage or
other security agreement pursuant to which Collateral was pledged have not been
impaired, altered or modified in any respect, except by a written instrument
which has been recorded, if necessary, to protect the interest of the SBA and
the Certificateholders and which has been delivered to the Trustee;

                  (u) There are no material defaults in complying with the terms
of any applicable Mortgage, and all taxes, governmental assessments, insurance
premiums, water, sewer and municipal charges, leasehold payments or ground rents
which previously became due and owing have been paid, or an escrow of funds has
been established in an amount sufficient to pay for every such item which
remains unpaid and which has been assessed but is not yet due and payable;

                  (v) There is no proceeding pending or threatened for the total
or partial condemnation of any Mortgaged Property, nor is such a proceeding
currently occurring, and such property is undamaged by waste, fire, earthquake
or earth movement, windstorm, flood, tornado or other casualty, so as to affect
adversely the value of the Mortgaged Property as security for the SBA Loan or
the use for which the premises were intended;

                                     III-7
<PAGE>   55
                  (w) At the time of origination of an SBA Loan, in all
instances where commercial real property serves as the primary collateral for
such SBA Loan, the related Mortgaged Property was free of contamination from
toxic substances or hazardous wastes requiring action under applicable laws or
is subject to ongoing environmental rehabilitation approved by the SBA, and as
of the Cut-Off Date, the Seller has no knowledge of any such contamination from
toxic substances or hazardous waste material on any Mortgaged Property unless
such items are below action levels or such Mortgaged Property is subject to
ongoing environmental rehabilitation approved by the SBA;;

                  (x) The proceeds of the SBA Loan have been fully disbursed,
and there is no obligation on the part of the Bank to make future advances
thereunder and the Guaranteed Portion of the SBA Loan has been sold in the
Secondary Market pursuant to SBA Form 1086. Any and all requirements as to
disbursements of any escrow funds therefor have been complied with. All costs,
fees and expenses incurred in making or closing or recording the SBA Loans were
paid;

                  (y) There is no obligation on the part of the Bank or any
other party (except for any guarantor of an SBA Loan) to make Monthly Payments
(except for Monthly Advances) in addition to those made by the Obligor;

                  (z) No statement, report or other document signed by the Bank
constituting a part of the SBA File contains any untrue statement of a material
fact or omits to state a material fact necessary to make the statements
contained therein not misleading in light of the circumstances under which they
were made;

                  (aa) With respect to each Mortgage constituting a deed of
trust, a trustee, duly qualified under applicable law to serve as such, has been
properly designated and currently so serves and is named in such Mortgage, and
no fees or expenses are or will become payable by the Certificateholders to the
trustee under the deed of trust, except in connection with a trustee's sale
after default by the Obligor;

                  (bb) No SBA Loan has a shared appreciation feature, or other
contingent interest feature;

                  (cc) With respect to each SBA Loan secured by a Mortgaged
Property or other Collateral and that is not a first priority lien, either (i)
no consent for the SBA Loan is required by the holder of any related Prior Lien
or (ii) such consent has been obtained;

                                     III-8
<PAGE>   56
                  (dd) Each SBA Loan was originated to a business located in the
State identified in the SBA Loan Schedule;

                  (ee) All parties which have had any interest in the SBA Loan,
whether as mortgagee, assignee, pledgee or otherwise, are (or, during the period
in which they held and disposed of such interest, were) (1) in compliance with
any and all applicable licensing requirements of the laws of the state wherein
any Mortgaged Property is located, and (2)(A) organized under the laws of such
state, or (B) qualified to do business in such state, or (C) federal savings and
loan associations or national banks having principal offices in such state, or
(D) not doing business in such state;

                  (ff) Any related Mortgage contains customary and enforceable
provisions in accordance with the SBA Rules and Regulations which render the
rights and remedies of the holder thereof adequate for the realization against
the Mortgaged Property of the benefits of the security, including, (i) in the
case of a Mortgage designated as a deed of trust, by trustee's sale, and (ii)
otherwise by judicial foreclosure. There is no homestead or other exemption
available to the Mortgagor which would materially interfere with the right to
sell the Mortgaged Property at a trustee's sale or the right to foreclose the
Mortgage;

                  (gg) There is no default, breach, violation or event of
acceleration existing under the SBA Note and no event which, with the passage of
time or with notice and the expiration of any grace or cure period, would
constitute a default, breach, violation or event of acceleration; and the Bank,
in its capacity as either Servicer or Seller, has not waived any default,
breach, violation or event of acceleration;

                  (hh) All parties to the SBA Note and any related Mortgage or
other document pursuant to which Collateral was pledged had legal capacity to
execute the SBA Note and any such Mortgage or other document and each SBA Note
and Mortgage or other document have been duly and properly executed by such
parties;

                  (ii) The SBA Loan was not selected for inclusion under this
Agreement from the Bank's portfolio of comparable SBA loans on any basis which
would have a material adverse affect on a Certificateholder;

                  (jj) All amounts received after the Cut-Off Date (or, with
respect to the Subsequent SBA Loans, after the related Subsequent Cut-Off Date)
with respect to the SBA Loans have been, to the extent required by this
Agreement, deposited into the

                                     III-9
<PAGE>   57
Principal and Interest Account and are, as of the Closing Date (or with respect
to the Subsequent SBA Loans, as of the related Subsequent Transfer Date), in the
Principal and Interest Account; and

                  (kk) With respect to those SBA Loans secured by Collateral
other than a Mortgaged Property, the related SBA Note, security agreements, if
any, and UCC-1 filed with respect to such Collateral creates a valid and
subsisting lien of record on such Collateral subject only to any Prior Liens, if
any, on such Collateral and subject in all cases to such exceptions that are
generally acceptable to lending institutions in connection with their regular
commercial lending activities, and such other exceptions to which similar
Collateral is commonly subject and which do not individually, or in the
aggregate, materially and adversely affect the benefits of the security intended
to be provided by such SBA Note, security agreement and UCC-1.


                  Section 3.03 Purchase and Substitution of Defective SBA Loans.

                  It is understood and agreed that the representations and
warranties set forth in Sections 3.01 and 3.02 shall survive delivery of the
Certificates to the Certificateholders. Upon discovery by the Servicer, any
Subservicer or the Trustee of a breach of any of such representations and
warranties which materially and adversely affects the value of the SBA Loans or
the interest of the Certificateholders or the SBA therein or which materially
and adversely affects the interests of the Certificateholders and the SBA in the
related SBA Loan in the case of a representation and warranty relating to a
particular SBA Loan (notwithstanding that such representation and warranty was
made to the Bank's best knowledge), the party discovering such breach shall give
prompt written notice to the others. Within 60 days of the earlier of its
discovery or its receipt of notice of any breach of a representation or
warranty, the Bank, in its capacity as Seller shall (a) promptly cure such
breach in all material respects, (b) purchase the Unguaranteed Interest of such
SBA Loan by depositing in the Principal and Interest Account, on the next
succeeding Determination Date, an amount and in the manner specified in Section
2.05(b), or (c) if within two years of the Closing Date, remove such SBA Loan
from the Trust Fund (in which case it shall become a Deleted SBA Loan) and
substitute one or more Qualified Substitute SBA Loans. Any such substitution
shall be accompanied by payment by the Seller of the Substitution Adjustment, if
any.

                  As to any Deleted SBA Loan for which the Seller substitutes a
Qualified Substitute SBA Loan or Loans, the

                                     III-10
<PAGE>   58
Servicer shall effect such substitution by delivering to the Trustee and the FTA
a certification in the form attached hereto as Exhibit I, executed by a
Servicing Officer, and shall also deliver to the Trustee and the FTA, as
applicable, the documents constituting the Trustee's Document File for such
Qualified Substitute SBA Loan or Loans.

                  The Servicer shall deposit in the Principal and Interest
Account the Unguaranteed Percentage of all payments of principal received in
connection with such Qualified Substitute SBA Loan or Loans after the date of
such substitution together with all interest (net of the portion thereof
required to be paid to the related Registered Holder, the FTA's Fee, the Premium
Protection Fee and the Servicing Fee with respect to each SBA Loan and the
Additional Fee with respect to each Additional Fee SBA Loan). Monthly Payments
received with respect to Qualified Substitute SBA Loans on or before the date of
substitution will be retained by the Seller. The Trust Fund will own all
payments received with respect to the Unguaranteed Interest on the Deleted SBA
Loan on or before the date of substitution, and the Seller shall thereafter be
entitled to retain all amounts subsequently received in respect of such Deleted
SBA Loan. The Servicer shall give written notice to the Trustee that such
substitution has taken place and shall amend the SBA Loan Schedule to reflect
the removal of such Deleted SBA Loan from the terms of this Agreement and the
substitution of the Qualified Substitute SBA Loan or Loans. Upon such
substitution, such Qualified Substitute SBA Loan or Loans shall be subject to
the terms of this Agreement in all respects, including Sections 2.04 and 2.05,
and the Seller shall be deemed to have made with respect to such Qualified
Substitute SBA Loan or Loans, as of the date of substitution, the covenants,
representations and warranties set forth in Sections 3.01 and 3.02. On the date
of such substitution, the Seller will remit to the Servicer, and the Servicer
will deposit into the Principal and Interest Account an amount equal to the
Substitution Adjustment.

                  In addition to the cure, purchase and substitution obligation
in Sections 2.04, 2.05 and 3.03, the Bank shall indemnify and hold harmless the
Trust Fund, the Trustee and the Certificateholders against any loss, damages,
penalties, fines, forfeitures, reasonable legal fees and related costs,
judgments and other costs and expenses resulting from any claim, demand, defense
or assertion based on or grounded upon, or resulting from, a breach of the
Bank's representations and warranties contained in this Agreement. It is
understood and agreed that the obligations of the Bank, in its capacity as
Seller set forth in Sections 2.04, 2.05 and 3.03 to cure, purchase or substitute
for a defective SBA Loan and to indemnify the Certificateholders and the Trustee
as provided in Sections 2.04, 2.05 and 3.03

                                     III-11
<PAGE>   59
constitute the sole remedies of the Trustee and the Certificateholders
respecting a breach of the foregoing representations and warranties.

                  Any cause of action against the Bank, in its capacity as
either Servicer or the Seller, relating to or arising out of the breach of any
representations and warranties made in Sections 2.05, 3.01 or 3.02 shall accrue
as to any SBA Loan upon (i) discovery of such breach by any party and notice
thereof to the Seller and or notice thereof by the Seller to the Trustee, (ii)
failure by the Seller to cure such breach or purchase or substitute such SBA
Loan as specified above, and (iii) demand upon the Seller by the Trustee for all
amounts payable hereunder in respect of such SBA Loan.

                                     III-12
<PAGE>   60
                                   ARTICLE IV

                                THE CERTIFICATES

                  Section 4.01  The Certificates.

                  The Class A, Class M and Class B Certificates shall be
substantially in the forms annexed hereto as Exhibits B-1, B-2 and B-3 and
shall, upon original issue, be executed and delivered by the Servicer to the
Trustee for authentication and redelivery to or upon the order of the Seller,
upon receipt by the Trustee and the FTA of the documents specified in Section
2.04. All Certificates shall be executed on behalf of the Servicer by a
Responsible Officer, in the denominations specified in the definition of
Percentage Interest, and shall be authenticated on behalf of the Trustee by one
of its Responsible Officers. Certificates bearing the signatures of individuals
who were at the time of the execution or authentication of the Certificates a
Responsible Officer of the Servicer or a Responsible Officer of the Trustee, as
the case may be, shall bind the Servicer or the Trustee, as the case may be,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the delivery of such Certificates or did not hold such offices
at the date of such Certificates. All Certificates issued hereunder shall be
dated the date of their authentication.

                  Section 4.02 Registration of Transfer and Exchange of
Certificates.

                  (a) The Trustee shall cause to be kept at the office of the
Certificate Registrar, in New York, New York, a Certificate Register in which,
subject to such reasonable regulations as it may prescribe, it shall provide for
the registration of Certificates and of transfers and exchanges of Certificates
as herein provided. The Certificate Register shall contain the name, remittance
instructions, Class and Percentage Interest of each Certificateholder, as well
as the Series and the number in the Series. HSBC Bank USA is initially appointed
Certificate Registrar for the purpose of registering Certificates and transfers
and exchanges of Certificates as herein provided.

                  (b) Each Class of Certificates shall be issued in minimum
denominations of $100,000 original principal amount and integral multiples of
$1,000 in excess thereof, except that one Certificate of each Class may be in a
different denomination so that the sum of the denominations of all outstanding
Class A, Class M and Class B Certificates shall equal the Original Class A,
Class M and Class B Certificate Principal Balance, respectively. On the Closing
Date, the Trustee will execute and authenticate (i) one or more Global
Certificates and/or (ii)

                                      IV-1
<PAGE>   61
Individual Certificates all in an aggregate principal amount that shall equal
the Original Class A, Original Class M and Original Class B Certificate
Principal Balances.

                           The Global Certificates (i) shall be delivered by the
Seller to the Depository or, pursuant to the Depository's instructions, shall be
delivered by the Seller on behalf of the Depository to and deposited with the
Depository's custodian, and in each case shall be registered in the name of Cede
& Co. and (ii) shall bear a legend substantially to the following effect:

                           "Unless this certificate is presented by an
                  authorized representative of The Depository Trust Company, a
                  New York corporation ("DTC"), to the Certificate Registrar or
                  its agent for registration of transfer, exchange or payment,
                  and any certificate issued is registered in the name of Cede &
                  Co. or in such other name as is requested by an authorized
                  representative of DTC (and any payment is made to Cede & Co.
                  or to such other entity as is requested by an authorized
                  representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE
                  HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
                  inasmuch as the registered owner hereof, Cede & Co., has an
                  interest herein."

                           The Global Certificates may be deposited with such
other Depository as the Seller may from time to time
designate, and shall bear such legend as may be appropriate; provided that such
successor Depository maintains a book-entry system that qualifies to be treated
as "registered form" under Section 163(f)(3) of the Code.

                           The Seller and the Trustee are hereby authorized to
and shall execute and deliver a Letter of Representations, in the form provided
by the Depository, with the Depository relating to the Certificates.

                  (c) With respect to Certificates registered in the Certificate
Register in the name of Cede & Co., as nominee of the Depository, the Seller,
the Servicer and the Trustee shall have no responsibility or obligation to
Direct or Indirect Participants or beneficial owners for which the Depository
holds Certificates from time to time as a Depository and the Trustee and its
agents, employees, officers and directors may treat the Depository as the
absolute owner of the Certificates for all purposes whatsoever. Without limiting
the immediately preceding sentence, the Seller, the Servicer and the Trustee
shall have no responsibility or obligation with respect to (a) the accuracy of
the records of the Depository, Cede & Co., or any Direct or Indirect Participant
with respect to the ownership interest in

                                      IV-2
<PAGE>   62
the Certificates, (b) the delivery to any Direct or Indirect Participant or any
other Person, other than a registered Holder of a Certificate, (c) the payment
to any Direct or Indirect Participant or any other Person, other than a
registered Holder of a Certificate as shown in the Certificate Register, of any
amount with respect to any distribution of principal or interest on the
Certificates or (d) the making of book-entry transfers among Direct and Indirect
Participants of the Depository with respect to Certificates registered in the
Certificate Register in the name of the nominee of the Depository. No Person
other than a registered Holder of a Certificate as shown in the Certificate
Register shall receive a certificate evidencing such Certificate.

                  (d) Upon delivery by the Depository to the Trustee of written
notice to the effect that the Depository has determined to substitute a new
nominee in place of Cede & Co., and subject to the provisions hereof with
respect to the payment of distributions by the mailing of checks or drafts to
the registered Holders of Certificates appearing as registered Owners in the
Certificate Register on a Record Date, the name "Cede & Co." in this Agreement
shall refer to such new nominee of the Depository.

                  (e) In the event that (i) the Depository or the Servicer
advises the Trustee in writing that the Depository is no longer willing or able
to discharge properly its responsibilities as nominee and depository with
respect to the Certificates and the Servicer is unable to locate a qualified
successor or (ii) the Servicer at its sole option elects to terminate the
book-entry system through the Depository, the Certificates shall no longer be
restricted to being registered in the Certificate Register in the name of Cede &
Co. (or a successor nominee) as nominee of the Depository. At that time, the
Servicer may determine that the Certificates shall be registered in the name of
and deposited with a successor depository operating a global book-entry system,
as may be acceptable to the Servicer, or such depository's agent or designee
but, if the Servicer does not select such alternative global book-entry system,
then upon surrender to the Certificate Registrar of the Global Certificates by
the Depository, accompanied by the registration instructions from the Depository
for registration, the Trustee shall at the Servicer's expense authenticate
Individual Certificates. Neither the Servicer nor the Trustee shall be liable
for any delay in delivery of such instructions and may conclusively rely on, and
shall be fully protected in relying on, such instructions. Upon the issuance of
Individual Certificates, the Trustee, the Certificate Registrar, the Servicer,
any Paying Agent and the Seller shall recognize the Holders of the Individual
Certificates as Certificateholders hereunder.

                                      IV-3
<PAGE>   63
                  (f) Notwithstanding any other provision of this Agreement to
the contrary, so long as any Certificates are registered in the name of Cede &
Co., as nominee of the Depository, all distributions of principal and interest
on such Certificates and all notices with respect to such Certificates shall be
made and given, respectively, in the manner provided in the Letter of
Representations.

                  (g) Subject to the preceding paragraphs, upon surrender for
registration of transfer of any Certificate at the office of the Certificate
Registrar and, upon satisfaction of the conditions set forth below, the Servicer
shall execute in the name of the designated transferee or transferees, a new
Certificate of the same Percentage Interest and dated the date of authentication
by the Trustee. The Certificate Registrar shall notify the Servicer and the
Trustee of any such transfer. The Certificate Registrar shall not transfer any
Class B Certificate, until 6 years after the issue date of the Class B
Certificates without the prior written consent of the SBA.

                           At the option of the Certificateholders, Certificates
may be exchanged for other Certificates in authorized denominations of a like
Class and aggregate Percentage Interest, upon surrender of the Certificates to
be exchanged at such office. Whenever any Certificates are so surrendered for
exchange, the Servicer shall execute the Certificates which the
Certificateholder making the exchange is entitled to receive. Every Certificate
presented or surrendered for transfer or exchange shall be accompanied by wiring
instructions, if applicable, in the form of Exhibit E.

                  (h) No service charge shall be made for any transfer or
exchange of Certificates, but prior to transfer the Certificate Registrar may
require payment by the transferor of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer or
exchange of Certificates.

                  All Certificates surrendered for transfer and exchange shall
be marked canceled by the Authenticating Agent and retained for one year and
destroyed thereafter.

                  (i) By acceptance of an Individual Certificate, whether upon
original issuance or subsequent transfer, each holder of such a Certificate
acknowledges the restrictions on the transfer of such Certificate set forth in
the Securities Legend and agrees that it will transfer such Certificate only as
provided herein. In addition to the provisions of Section 4.02(n), the following
restrictions shall apply with respect to the transfer and registration of
transfer of an Individual

                                      IV-4
<PAGE>   64
Certificate to a transferee that takes delivery in the form of an Individual
Certificate:

                           (i) The Certificate Registrar shall register the
                  transfer of an Individual Certificate if the requested
                  transfer is being made to a transferee who has provided the
                  Certificate Registrar with a Rule 144A Certification.

                           (ii) The Certificate Registrar shall register the
                  transfer of any Individual Certificate (other than the initial
                  delivery of the Class B Certificates to the Spread Account
                  Depositor) if (x) the transferor has advised the Certificate
                  Registrar in writing that the Certificate is being transferred
                  to an Institutional Accredited Investor; and (y) prior to the
                  transfer the transferee furnishes to the Certificate Registrar
                  a Transferee Letter, provided that, if based upon an Opinion
                  of Counsel to the effect that the delivery of (x) and (y)
                  above are not sufficient to confirm that the proposed transfer
                  is being made pursuant to an exemption from, or in a
                  transaction not subject to, the registration requirements of
                  the Securities Act and other applicable laws, the Certificate
                  Registrar may as a condition of the registration of any such
                  transfer require the transferor to furnish other
                  certifications, legal opinions or other information prior to
                  registering the transfer of an Individual Certificate.

                  (j) Subject to Section 4.02(n), so long as the Global
Certificate remains outstanding and is held by or on behalf of the Depository,
transfers of beneficial interests in the Global Certificate, or transfers by
holders of Individual Certificates to transferees that take delivery in the form
of beneficial interests in the Global Certificate, may be made only in
accordance with this Section 4.02(j) and in accordance with the rules of the
Depository.

                           (i) In the case of a beneficial interest in the
                  Global Certificate being transferred to an Institutional
                  Accredited Investor, such transferee shall be required to take
                  delivery in the form of an Individual Certificate or
                  Certificates and the Certificate Registrar shall register such
                  transfer only upon compliance with the provisions of Section
                  4.02(i)(ii).

                           (ii) In the case of a beneficial interest in the
                  Global Certificate being transferred to a transferee that
                  takes delivery in the form of an Individual

                                      IV-5
<PAGE>   65
                  Certificate or Certificates, except as set forth in clause (i)
                  above, the Certificate Registrar shall register such transfer
                  only upon compliance with the provisions of Section
                  4.02(i)(i).

                           (iii) In the case of an Individual Certificate being
                  transferred to a transferee that takes delivery in the form of
                  a beneficial interest in a Global Certificate, the Certificate
                  Registrar shall register such transfer if the transferee has
                  provided the Certificate Registrar with a Rule 144A
                  Certification.

                           (iv) No restrictions shall apply with respect to the
                  transfer or registration of transfer of a beneficial interest
                  in the Global Certificate to a transferee that takes delivery
                  in the form of a beneficial interest in the Global
                  Certificate.

                  (k) Subject to Section 4.02(n), an exchange of a beneficial
interest in the Global Certificate for an Individual Certificate or
Certificates, an exchange of an Individual Certificate or Certificates for a
beneficial interest in the Global Certificate and an exchange of an Individual
Certificate or Certificates for another Individual Certificate or Certificates
(in each case, whether or not such exchange is made in anticipation of
subsequent transfer, and, in the case of the Global Certificate, so long as such
Certificate remains outstanding and is held by or on behalf of the Depository)
may be made only in accordance with this Section 4.02(k) and in accordance with
the rules of the Depository.

                           (i) A holder of a beneficial interest in the Global
                  Certificate may at any time exchange such beneficial interest
                  for an Individual Certificate or Certificates.

                           (ii) A holder of an Individual Certificate may
                  exchange such Certificate for a beneficial interest in the
                  Global Certificate if such holder furnishes to the Registrar a
                  Rule 144A Certification.

                           (iii)A holder of an Individual Certificate may
                  exchange such Certificate for an equal aggregate principal
                  amount of Individual Certificates in different authorized
                  denominations without any certification.

                  (l) (i) Upon acceptance for exchange or transfer of an
Individual Certificate for a beneficial interest in the Global Certificate as
provided herein, the Certificate Registrar shall

                                      IV-6
<PAGE>   66
cancel such Individual Certificate and shall (or shall request the Depository
to) endorse on the schedule affixed to the applicable Global Certificate (or on
a continuation of such schedule affixed to the Global Certificate and made a
part thereof) an appropriate notation evidencing the date of such exchange or
transfer and an increase in the certificate balance of the Global Certificate
equal to the certificate balance of such Individual Certificate exchanged or
transferred therefor.

                           (ii) Upon acceptance for exchange or transfer of a
                  beneficial interest in the Global Certificate for an
                  Individual Certificate as provided herein, the Certificate
                  Registrar shall (or shall request the Depository to) endorse
                  on the schedule affixed to the Global Certificate (or on a
                  continuation of such schedule affixed to the Global
                  Certificate and made a part thereof) an appropriate notation
                  evidencing the date of such exchange or transfer and a
                  decrease in the certificate balance of the Global Certificate
                  equal to the certificate balance of such Individual
                  Certificate issued in exchange therefor or upon transfer
                  thereof.

                  (m) The Securities Legend shall be placed on any Individual
Certificate issued in exchange for or upon transfer of another Individual
Certificate or of a beneficial interest in the Global Certificate.

                  (n) Subject to the restrictions on transfer and exchange set
forth in this Section 4.02, the holder of any Individual Certificate may
transfer or exchange the same in whole or in part (in an initial certificate
balance equal to the minimum authorized denomination or any integral multiple of
$1,000 in excess thereof) by surrendering such Certificate at the Corporate
Trust Office, or at the office of any transfer agent, together with an executed
instrument of assignment and transfer satisfactory in form and substance to the
Certificate Registrar in the case of transfer and a written request for exchange
in the case of exchange. The holder of a beneficial interest in a Global
Certificate may, subject to the rules and procedures of the Depository, cause
the Depository (or its nominee) to notify the Certificate Registrar in writing
of a request for transfer or exchange of such beneficial interest for an
Individual Certificate or Certificates. Following a proper request for transfer
or exchange, the Certificate Registrar shall, within five Business Days of such
request made at such Corporate Trust Office, cause the Trustee to authenticate
and the Certificate Registrar to deliver at such Corporate Trust Office, to the
transferee (in the case of transfer) or holder (in the case of

                                      IV-7
<PAGE>   67
exchange) or send by first class mail at the risk of the transferee (in the case
of transfer) or holder (in the case of exchange) to such address as the
transferee or holder, as applicable, may request, an Individual Certificate or
Certificates, as the case may require, for a like aggregate Percentage Interest
and in such authorized denomination or denominations as may be requested. The
presentation for transfer or exchange of any Individual Certificate shall not be
valid unless made at the Corporate Trust Office by the registered holder in
person, or by a duly authorized attorney-in-fact.

                  (o) No transfer of any Certificate shall be made unless such
transfer is exempt from the registration requirements of the Securities Act and
any applicable state securities laws or is made in accordance with said Act and
laws. In the event of any such transfer, unless such transfer is made in
reliance upon Rule 144A under the Securities Act and except for the initial
issuance of the Class B Certificates to the Spread Account Depositor, (i) the
Trustee may require a written Opinion of Counsel (which may be in-house counsel)
acceptable to and in form and substance reasonably satisfactory to the Trustee
that such transfer may be made pursuant to an exemption, describing the
applicable exemption and the basis therefor, from said Act and laws or is being
made pursuant to said Act and laws, which Opinion of Counsel shall not be an
expense of the Trustee, the Seller, the Servicer or the Trust Fund and (ii) the
Trustee shall require the transferee to execute a Transferee Letter certifying
to the Seller and the Trustee the facts surrounding such transfer, which
Transferee Letter shall not be an expense of the Trustee, the Seller, the
Servicer or the Trust Fund. The holder of a Certificate desiring to effect such
transfer shall, and does hereby agree to, indemnify the Trustee, the Seller and
the Servicer against any liability that may result if the transfer is not so
exempt or is not made in accordance with such federal and state laws. None of
the Seller, the Servicer, the Trustee or the Trust Fund intends or is obligated
to register or qualify any Certificate under the Securities Act or any state
securities laws.

                  (p) No Certificate may be acquired directly or indirectly, for
or on behalf of an employee benefit plan or other retirement arrangement subject
to ERISA, and/or Section 4975 of the Code, (collectively, a "Plan"). No transfer
of a Certificate representing an Individual Certificate shall be made unless the
Trustee shall have received a certification from the transferee of such
Individual Certificate, acceptable to and in form and substance satisfactory to
the Trustee and the Servicer, to the effect that such transferee is not
acquiring a Certificate, directly or indirectly, for or on behalf of a Plan.
Notwithstanding anything else to the contrary herein, in the event any purported
transfer of any certificate representing an Individual Certificate is made
without delivery of the

                                      IV-8
<PAGE>   68
certification referred to above, such certification shall be deemed to have been
made by the Transferee by its acceptance of such Individual Certificate. In
addition, any purported transfer of a Certificate representing an Individual
Certificate directly or indirectly to or on behalf of a Plan shall be void and
of no effect. The acquisition of a Certificate representing an interest in a
Global Certificate shall be deemed a representation by the acquirer that it is
not acquiring a Certificate, directly or indirectly, for or on behalf of a Plan.

                  (q) Notwithstanding any other provision of this Agreement to
the contrary, on the Closing Date, the Trustee shall authenticate in the name
of, and deliver to, the Spread Account Depositor, the Class B Certificate in the
form of a single Individual Certificate in an aggregate principal amount equal
to the Original Class B Principal Balance. The Class B Certificate may not be
sold, pledged, transferred, assigned, have a participation interest sold in such
Class B Certificate or otherwise conveyed, in whole or in part, for a period of
six years from the issue date of the Class B Certificate, without the prior
written approval of the SBA and a copy of such approval shall be furnished to
the Trustee. A legend to such effect shall be placed on the Class B Certificate.

                  Section 4.03 Mutilated, Destroyed, Lost or Stolen
Certificates.

                  If (i) any mutilated Certificate is surrendered to the
Certificate Registrar, or the Trustee and the Certificate Registrar receives
evidence to its satisfaction of the destruction, loss or theft of any
Certificate, and (ii) there is delivered to the Servicer, the Trustee and the
Certificate Registrar such security or indemnity as may be required by each of
them to save each of them harmless, then, in the absence of notice to the
Servicer, the Trustee and the Certificate Registrar that such Certificate has
been acquired by a bona fide purchaser, the Servicer shall execute and deliver,
and the Trustee shall authenticate, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Certificate, a new Certificate of like
Class, tenor and Percentage Interest, but bearing a number not contemporaneously
outstanding. Upon the issuance of any new Certificate under this Section 4.03,
the Servicer and the Trustee may require the payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in relation
thereto and any other expenses connected therewith. Any duplicate Certificate
issued pursuant to this Section 4.03 shall constitute complete and indefeasible
evidence of ownership in the Trust Fund, as if originally issued, whether or not
the mutilated, destroyed, lost or stolen Certificate shall be found at any time.

                                      IV-9
<PAGE>   69
                  Section 4.04      Persons Deemed Owners.

                  Prior to due presentation of a Certificate for registration of
transfer, the Servicer, the Seller, the Trustee, the Paying Agent and the
Certificate Registrar may treat the Person in whose name any Certificate is
registered as the owner of such Certificate for the purpose of receiving
remittances pursuant to Section 6.07 and for all other purposes whatsoever, and
the Seller, the Servicer, the Trustee and the Certificate Registrar shall not be
affected by notice to the contrary.

                                     IV-10
<PAGE>   70
                                    ARTICLE V

                    ADMINISTRATION AND SERVICING OF SBA LOANS

                  Section 5.01      Duties of the Servicer.

                  (a) The Servicer covenants and agrees that it shall act as
agent (and the Servicer is hereby appointed to act as agent) on behalf of the
Trust Fund and that, in such capacity, it shall: (i) prepare and file, or cause
to be prepared and filed, in a timely manner, any Tax Return required to be
filed by the Trust Fund; (ii) prepare and forward, or cause to be prepared and
forwarded, to the Trustee, the Certificateholders and to the Internal Revenue
Service and any other relevant governmental taxing authority all information
returns or reports as and when required to be provided to them in accordance
with any provision of federal, state or local income tax laws; (iii) to the
extent that the affairs of the Trust Fund are within its control, conduct such
affairs at all times that any Certificates are outstanding so as to maintain the
status of the Trust Fund as a grantor trust under any applicable federal, state
and local laws; (iv) pay the amount of any and all federal, state, and local
taxes, imposed on the Trust Fund when and as the same shall be due and payable
(but such obligation shall not prevent the Servicer or any other appropriate
Person from contesting any such tax in appropriate proceedings and shall not
prevent the Servicer from withholding payment of such tax, if permitted by law,
pending the outcome of such proceedings); (v) ensure that any such returns or
reports filed on behalf of the Trust Fund are properly executed by the
appropriate person; and (vi) represent the Trust Fund in any administrative or
judicial proceedings relating to an examination or audit by any governmental
taxing authority, request an administrative adjustment as to any taxable year of
the Trust Fund, enter into settlement agreements with any governmental taxing
agency, extend any statute of limitations relating to any item of the Trust Fund
and otherwise act on behalf of the Trust Fund in relation to any tax matter
involving the Trust Fund. The Servicer shall indemnify the Trustee and the Trust
Fund for any liability it may incur in connection with this Section 5.01(a),
which indemnification shall survive the termination of the Trust Fund; provided,
however, that the Servicer shall not indemnify the Trustee for the Trustee's
negligence, willful misconduct or bad faith.

                  (b) The Servicer, as independent contract servicer, shall
service and administer the SBA Loans and shall have full power and authority,
acting alone, to do any and all things in connection with such servicing and
administration which the Servicer may deem necessary or desirable and consistent
with the terms of this Agreement and the Multi-Party Agreement and the SBA

                                      V-1
<PAGE>   71
Rules and Regulations. The Servicer may enter into Subservicing Agreements for
any servicing and administration of SBA Section 7(a) Loans with any entity
approved with prior written consent by the SBA. Any such Subservicing Agreement
must be approved by the SBA and shall be consistent with and not violate the
provisions of this Agreement and the Multi-Party Agreement. The Servicer shall
be entitled to terminate any Subservicing Agreement in accordance with the terms
and conditions of such Subservicing Agreement and to either itself directly
service the related SBA Section 7(a) Loans or enter into a Subservicing
Agreement with a successor Subservicer which qualifies hereunder.

                  (c) Notwithstanding any Subservicing Agreement, any of the
provisions of this Agreement relating to agreements or arrangements between the
Servicer and a Subservicer or reference to actions taken through a Subservicer
or otherwise, the Servicer shall remain obligated and primarily liable to the
Trustee, for itself and on behalf of the Certificateholders, the SBA and the
Certificateholders for the servicing and administering of the SBA Loans in
accordance with the provisions of this Agreement and the Multi-Party Agreement
and the SBA Rules and Regulations, without diminution of such obligation or
liability by virtue of such Subservicing Agreements or arrangements or by virtue
of indemnification from the Subservicer and to the same extent and under the
same terms and conditions as if the Servicer alone were servicing and
administering the SBA Loans. For purposes of this Agreement, the Servicer shall
be deemed to have received payments on SBA Loans when any Subservicer has
received such payments. The Servicer shall be entitled to enter into any
agreement with a Subservicer for indemnification of the Servicer by such
Subservicer, and nothing contained in this Agreement shall be deemed to limit or
modify such indemnification.

                  (d) Any Subservicing Agreement that may be entered into and
any transactions or services relating to the SBA Loans involving a Subservicer
in its capacity as such and not as an originator shall be deemed to be between
the Subservicer and the Servicer alone, and the Trustee, the SBA and
Certificateholders shall not be deemed parties thereto and shall have no claims,
rights, obligations, duties or liabilities with respect to the Subservicer
except as set forth in Section 5.01(e).

                  (e) In the event the Servicer shall for any reason no longer
be the Servicer (including by reason of an Event of Default), the Trustee or its
designee shall, subject to Section 10.02 hereof and the Multi-Party Agreement,
thereupon assume all of the rights and obligations of the Servicer under each
Subservicing Agreement that the Servicer may have entered into, unless the
Trustee is then permitted and elects to terminate any Subservicing Agreement in
accordance with its terms. The

                                      V-2
<PAGE>   72
Trustee, its designee or the successor servicer for the Trustee shall be deemed
to have assumed all of the Servicer's interest therein and to have replaced the
Servicer as a party to each Subservicing Agreement to the same extent as if the
Subservicing Agreements had been assigned to the assuming party, except that the
Servicer shall not thereby be relieved of any liability or obligations under the
Subservicing Agreements. The Servicer at its expense and without right of
reimbursement therefor, shall, upon request of the Trustee, deliver to the
assuming party all documents and records relating to each Subservicing Agreement
and the SBA Loans then being serviced and an accounting of amounts collected and
held by it and otherwise use its best efforts to effect the orderly and
efficient transfer of the Subservicing Agreements to the assuming party.

                  (f) So long as it is consistent with the terms of this
Agreement and the Multi-Party Agreement, the SBA Agreement (as defined in the
Multi-Party Agreement) and the SBA Rules and Regulations, the Servicer may
waive, modify or vary any term of any SBA Loan or consent to the postponement of
strict compliance with any such term or in any manner grant indulgence to any
Obligor if in the Servicer's determination such waiver, modification,
postponement or indulgence is not materially adverse to the interests of the SBA
and the Certificateholders, provided, however, that (unless (x) the Obligor is
in default with respect to the SBA Loan, or such default is, in the judgment of
the Servicer, imminent and (y) the Servicer determines that any modification
would not be considered a new loan for federal income tax purposes) the Servicer
may not permit any modification with respect to any SBA Loan that would change
the SBA Loan Interest Rate, defer (subject to Section 5.12), or forgive the
payment of any principal or interest (unless in connection with the liquidation
of the related SBA Loan), or extend the final maturity date on such SBA Loan
without the consent of the SBA, if such consent is then required by the SBA
Rules and Regulations. The Servicer may exercise all unilateral servicing
actions permitted by participating lenders in accordance with the SBA Rules and
Regulations. No costs incurred by the Servicer or any Subservicer in respect of
Servicing Advances shall for the purposes of distributions to Certificateholders
be added to the amount owing under the related SBA Loan. Without limiting the
generality of the foregoing, so long as it is consistent with the SBA Rules and
Regulations, the Servicer shall continue, and is hereby authorized and empowered
to execute and deliver on behalf of the Trustee, the SBA and each
Certificateholder, all instruments of satisfaction or cancellation, or of
partial or full release, discharge and all other comparable instruments, with
respect to the SBA Loans and with respect to any Mortgaged Properties or other
Collateral. If reasonably required by the Servicer, each Certificateholder
and/or the Trustee shall furnish

                                      V-3
<PAGE>   73
the Servicer, within 5 Business Days of receipt of the Servicer's request, with
any powers of attorney and other documents necessary or appropriate to enable
the Servicer to carry out its servicing and administrative duties under this
Agreement. Any such request to the Trustee shall be accompanied by a
certification in the form of Exhibit I attached hereto signed by a Servicing
Officer.

                  The Servicer, in servicing and administering the SBA Loans,
shall employ or cause to be employed procedures (including collection,
foreclosure and Foreclosed Property and Repossessed Collateral management
procedures) and exercise the same care that it customarily employs and exercises
in servicing and administering SBA Loans for its own account and prudent lending
standards, and in accordance with the SBA Rules and Regulations, giving due
consideration to the Certificateholders' and the SBA's reliance on the Servicer.

                  (g) On and after such time as the Trustee receives the
resignation of, or notice of the removal of, the Servicer from its rights and
obligations under this Agreement, and with respect to resignation pursuant to
Section 9.04, after receipt of the Opinion of Counsel required pursuant to
Section 9.04 addressed to the SBA and the Trustee, the Trustee or its designee
shall assume all of the rights and obligations of the Servicer, subject to
Section 10.02 hereof and the Multi-Party Agreement. The Servicer shall, upon
request of the Trustee but at the expense of the Servicer, deliver to the
Trustee all documents and records (including computer tapes and diskettes)
relating to the SBA Loans and an accounting of amounts collected and held by the
Servicer and otherwise use its best efforts to effect the orderly and efficient
transfer of servicing rights and obligations to the assuming party.

                  (h) For so long as any of the Certificates are outstanding and
are "restricted securities" within the meaning of Rule 144(a)(3) of the
Securities Act, (1) the Servicer will provide or cause to be provided to any
holder of such Certificates and any prospective purchaser thereof designated by
such a holder, upon the request of such holder or prospective purchaser, the
information required to be provided to such holder or prospective purchaser by
Rule 144A(d)(4) under the Securities Act; and (2) the Servicer shall update such
information from time to time in order to prevent such information from becoming
false and misleading and will take such other actions as are necessary to ensure
that the safe harbor exemption from the registration requirements of the
Securities Act under Rule 144A is and will be available for resales of such
Certificates conducted in accordance with Rule 144A.

                                      V-4
<PAGE>   74
                  Section 5.02      Liquidation of SBA Loans.

                  In the event that any payment due under any SBA Loan and not
postponed pursuant to Section 5.01 is not paid when the same becomes due and
payable, or in the event the Obligor fails to perform any other covenant or
obligation under the SBA Loan, the Servicer shall take such action as it shall
deem to be in the best interests of the Certificateholders and the SBA. With
respect to any such SBA Section 7(a) Loan for which the SBA has expressed to the
Servicer the SBA's desire to assume servicing of such SBA Loan consistent with
the SBA Rules and Regulations, the Trustee shall, upon written direction of the
Servicer, deliver to the SBA or its designee all or any portion of the Trustee's
Document File relating to such SBA Section 7(a) Loan and the Trustee shall
execute such documents, including but not limited to an endorsement of the
related SBA Note and an assignment of the related Mortgage, as the Servicer or
the SBA shall request. Expenses incurred in connection with any such action
shall be the responsibility of the Servicer and shall not be chargeable to the
Principal and Interest Account or the Certificate Account. Subject to the SBA
Rules and Regulations and with the prior written consent of the SBA (if required
by the SBA Rules and Regulations), the Servicer shall foreclose upon or
otherwise comparably effect the ownership of Mortgaged Properties or other
Collateral relating to defaulted SBA Section 7(a) Loans for which the related
SBA Section 7(a) Loan is still outstanding, as to which no satisfactory
arrangements can be made for collection of delinquent payments in accordance
with the provisions of Section 5.10. In connection with such foreclosure or
other conversion and any other liquidation action, the Servicer shall exercise
collection and foreclosure procedures with the same degree of care and skill in
its exercise or use as it would exercise with respect to its own affairs, in
accordance with prudent lending standards, and in accordance with the applicable
SBA Rules and Regulations. Prior to undertaking foreclosure of any Mortgaged
Property, the Servicer must investigate environmental conditions, including the
performance of a Phase I and/or Phase II environmental site assessment, to
ascertain the actual or potential presence of any hazardous material on or under
such property. For purposes of this Agreement, the term hazardous material
includes (1) any hazardous substance, as defined by the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended by
the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. 9601-9675,
and (2) petroleum (as that term is defined at 42 U.S.C. Section 6991) including
any derivative, fraction, by-product, constituent or breakdown product thereof,
or additive thereto. In the event that the environmental investigation
determines the existence of any hazardous material on or under the Mortgaged
Property in excess of minimum action levels established by relevant regulatory

                                      V-5
<PAGE>   75
agencies, title to such property shall not be taken without prior written
approval from the SBA.

                  After an SBA Loan has become a Liquidated SBA Loan, the
Servicer shall promptly prepare and forward to the Trustee and the SBA and upon
request, any Certificateholder, a Liquidation Report, in the form attached
hereto as Exhibit J, detailing the Liquidation Proceeds received from the
Liquidated SBA Loan, expenses incurred with respect thereto, and any loss
incurred in connection therewith.

                  Section 5.03      Establishment of Principal and
                                    Interest Accounts; Deposits in
                                    Principal and Interest Accounts.

                  (a) The Servicer shall cause to be established and maintained
one or more Principal and Interest Accounts, in one or more Designated
Depository Institutions, in the form of time deposit or demand accounts, which
may be interest-bearing or such accounts may be trust accounts wherein the
moneys therein are invested in Permitted Instruments, titled "First
International Bank, National Association, in trust for the registered holders of
First International Bank SBA Loan-Backed Adjustable Rate Certificates, Series
1999-1, Class A, Class M and Class B." Such Principal and Interest Accounts
shall be insured by the BIF or SAIF administered by the FDIC to the maximum
extent provided by law. The creation of any Principal and Interest Account shall
be evidenced by a letter agreement in the form of Exhibit C hereto.

                  A copy of such letter agreement shall be furnished to the
Trustee, the SBA and, upon request, any Certificateholder.

                  (b) The Servicer and each Subservicer shall deposit without
duplication (within two Business Days of receipt thereof) in the Principal and
Interest Account and retain therein:

                           (i) the Unguaranteed Percentage of all payments
                  received after the Cut-Off Date on account of principal on the
                  SBA Loans, including the Unguaranteed Percentage of all Excess
                  Payments, Principal Prepayments and Curtailments collected
                  after the Cut-Off Date, the Unguaranteed Percentage of all
                  Insurance Proceeds (other than amounts to be applied to
                  restoration or repair of any related Mortgaged Property, or to
                  be released to the Obligor in accordance with customary
                  servicing procedures) and the Unguaranteed Percentage of all
                  Released Mortgaged Property Proceeds;

                                      V-6
<PAGE>   76
                           (ii) all payments received after the Cut-Off Date on
                  account of interest on the SBA Loans (net of the portion
                  thereof required to be paid to the related Registered Holders,
                  the Premium Protection Fee, the FTA's Fee and the Servicing
                  Fee with respect to each SBA Loan, the Additional Fee with
                  respect to each Additional Fee SBA Loan, and other servicing
                  compensation payable to the Servicer as permitted herein);

                           (iii)  the Unguaranteed Percentage of all Net
                  Liquidation Proceeds;

                           (iv) the Unguaranteed Percentage of all Insurance
                  Proceeds (other than amounts to be applied to restoration or
                  repair of any related Mortgaged Property, or to be released to
                  the Obligor in accordance with customary servicing
                  procedures);

                           (v) the Unguaranteed Percentage of all Released
                  Mortgaged Property Proceeds;

                           (vi) any amounts paid in connection with the
                  repurchase of the Unguaranteed Interest of any SBA Loan and
                  the amount of any Substitution Adjustment received pursuant to
                  Sections 2.05 and 3.03;

                           (vii) any amount required to be deposited in the
                  Principal and Interest Account pursuant to Section 5.04 or
                  5.10; and

                           (viii) the amount of any losses incurred in
                  connection with investments in Permitted Instruments.

                  (c) The foregoing requirements for deposit in the Principal
and Interest Account shall be exclusive, it being understood and agreed that,
without limiting the generality of the foregoing, payments with respect to the
Guaranteed Interest to be paid to the Registered Holders, the Premium Protection
Fee, the FTA's Fee and the Servicing Fee, with respect to each SBA Loan, and
additionally the Additional Fee with respect to each Additional Fee SBA Loan,
together with the difference between any Liquidation Proceeds and the related
Net Liquidation Proceeds, should not be deposited by the Servicer in the
Principal and Interest Account.

                  (d) Any interest earnings on funds held in the Principal and
Interest Account paid by a Designated Depository Institution shall be for the
account of the Servicer and may only be withdrawn from the Principal and
Interest Account by the

                                      V-7
<PAGE>   77
Servicer immediately following its monthly remittance to the Trustee pursuant to
Section 5.04(a). Any reference herein to amounts on deposit in the Principal and
Interest Account shall refer to amounts net of such investment earnings.

                  Section 5.04      Permitted Withdrawals From the
                                    Principal and Interest Account

                  The Servicer shall withdraw funds from the Principal and
Interest Account for the following purposes:

                  (a) to effect the remittance to the Trustee on each
Determination Date for deposit in the Certificate Account, the portion of the
Available Funds for the related Remittance Date that is separate from
Compensating Interest, Monthly Advances and amounts then on deposit in the
Spread Account;

                  (b) to reimburse itself for any accrued unpaid Servicing Fees
and Premium Protection Fees allocable to the SBA Loans, unreimbursed Monthly
Advances and for unreimbursed Servicing Advances to the extent deposited in the
Principal and Interest Account (and not netted from Monthly Payments received).
The Servicer's right to reimbursement for unpaid Servicing Fees and Premium
Protection Fees and, except as provided in the following sentence, Servicing
Advances and Monthly Advances shall be limited to Liquidation Proceeds, Released
Mortgaged Property Proceeds, Insurance Proceeds and such other amounts as may be
collected by the Servicer from the Obligor or otherwise relating to the SBA Loan
in respect of which such unreimbursed amounts are owed. The Servicer's right to
reimbursement for Servicing Advances and Monthly Advances in excess of such
amounts shall be limited to any late collections of interest received on the SBA
Loans generally, including Liquidation Proceeds, Released Mortgaged Property
Proceeds, Insurance Proceeds and any other amounts, provided, however, that the
Servicer's right to such reimbursement pursuant to this sentence shall be
subordinate to the rights of the Certificateholders and the Registered Holders;

                  (c) to withdraw any amount received from an Obligor that is
recoverable and sought to be recovered as a voidable preference by a trustee in
bankruptcy pursuant to the United States Bankruptcy Code in accordance with a
final, nonappealable order of a court having competent jurisdiction;

                  (d) (i) to make investments in Permitted Instruments and (ii)
to pay to itself, as permitted by Section 5.03(d), interest paid in respect of
Permitted Instruments or by a Designated Depository Institution on funds
deposited in the Principal and Interest Account;

                                      V-8
<PAGE>   78
                  (e) to withdraw any funds deposited in the Principal and
Interest Account that were not required to be deposited therein or were
deposited therein in error;

                  (f) to pay itself servicing compensation pursuant to Section
7.03 hereof or interest as permitted under the definition of Excess Proceeds;
and

                  (g) to clear and terminate the Principal and Interest Account
upon the termination of this Agreement.

                  So long as no default or Event of Default shall have occurred
and be continuing, and consistent with any requirements of the Code, the
Principal and Interest Account shall either be maintained with a Designated
Depository Institution as an interest-bearing account meeting the requirements
set forth in Section 5.03(a), or the funds held therein may be invested by the
Servicer (to the extent practicable) in Permitted Instruments, as directed in
writing by the Servicer. In either case, funds in the Principal and Interest
Account must be available for withdrawal without penalty, and any Permitted
Instruments must mature not later than the Business Day immediately preceding
the Determination Date next following the date of such investment (except that
if such Permitted Instrument is an obligation of the institution that maintains
such account, then such Permitted Instrument shall mature not later than such
Determination Date) and shall not be sold or disposed of prior to its maturity.
All Permitted Instruments must be held by or registered in the name of "First
International Bank, National Association, in trust for the registered holders of
First International Bank SBA Loan-Backed Adjustable Rate Certificates, Series
1999-1." All interest or other earnings from funds on deposit in the Principal
and Interest Account (or any Permitted Instruments thereof) shall be the
exclusive property of the Servicer, and may be withdrawn from the Principal and
Interest Account pursuant to clause (d) above. The amount of any losses incurred
in connection with the investment of funds in the Principal and Interest Account
in Permitted Instruments shall be deposited in the Principal and Interest
Account by the Servicer from its own funds immediately as realized without
reimbursement therefor.

                  Section 5.05      [Intentionally Omitted]

                  Section 5.06      Transfer of Accounts.

                  The Servicer may, upon written notice to the Trustee and the
SBA, transfer any Principal and Interest Account to a different Designated
Depository Institution.

                                      V-9
<PAGE>   79
                  Section 5.07      Maintenance of Hazard Insurance.

                  The Servicer shall comply with the SBA Rules and Regulations
concerning the issuance and maintenance of fire and hazard insurance with
extended coverage customary in the area where the Mortgaged Property is located.
If at origination of an SBA Loan, to the best of the Servicer's knowledge after
reasonable investigation, the related Mortgaged Property is in an area
identified in the Federal Register by the Flood Emergency Management Agency as
having special flood hazards (and such flood insurance has been made available)
consistent with the SBA Rules and Regulations, the Servicer will require the
related Obligor to purchase a flood insurance policy with a generally acceptable
insurance carrier, in an amount representing coverage not less than the least of
(i) the full insurable value of the Mortgaged Property, or (ii) the maximum
amount of insurance available under the National Flood Insurance Act of 1968, as
amended. The Servicer shall also maintain, to the extent such insurance is
available, and required by the SBA Rules and Regulations and the Servicer's
policies, on Foreclosed Property constituting real property, fire and hazard
insurance in the amounts described above and liability insurance. Any amounts
collected by the Servicer under any such policies (other than amounts to be
applied to the restoration or repair of the Mortgaged Property, or to be
released to the Obligor in accordance with the SBA Rules and Regulations) shall
be deposited in the Principal and Interest Account, subject to withdrawal
pursuant to Section 5.04. It is understood and agreed that no earthquake or
other additional insurance need be required by the Servicer of any Obligor or
maintained on Foreclosed Property, other than pursuant to such applicable laws
and regulations as shall at any time be in force and as shall require such
additional insurance. All policies required hereunder shall be endorsed with
standard mortgagee clauses with losses payable to the Servicer or its
affiliates.

                  Section 5.08      [Intentionally Omitted]

                  Section 5.09      Fidelity Bond.

                  The Servicer shall maintain with a responsible company, and at
its own expense, a blanket fidelity bond and an errors and omissions insurance
policy, in a minimum amount equal to $1,500,000, and a maximum deductible of
$100,000, if commercially available, with coverage on all employees acting in
any capacity requiring such persons to handle funds, money, documents or papers
relating to the SBA Loans ("Servicer Employees"). The fidelity bond shall insure
the Trustee, its officers and employees against losses resulting from forgery,
theft, embezzlement or fraud by such Servicer Employees. The errors and
omissions policy shall insure against losses resulting from the

                                      V-10
<PAGE>   80
errors, omissions and negligent acts of such Servicer employees. No provision of
this Section 5.09 requiring such fidelity bond and errors and omissions
insurance shall relieve the Servicer from its duties as set forth in this
Agreement. Upon the request of the Trustee, the SBA or any Certificateholder,
the Servicer shall cause to be delivered to the Trustee, the SBA or such
Certificateholder a certified true copy of such fidelity bond and insurance
policy. The current issuer of such fidelity bond and insurance policy is The
Hartford Underwriters Insurance Company, located in Hartford, Connecticut.

                  Section 5.10      Title, Management and Disposition
                                    of Foreclosed Property

                  In the event that title to a Mortgaged Property or other
Collateral is acquired in foreclosure, by deed in lieu of foreclosure or by
other legal process(a "Foreclosed Property"), the deed or certificate of sale or
the Repossessed Collateral may be taken in the name of the Trustee on behalf of
the Trust for the benefit of the Certificateholders and the SBA, as their
interests may appear under the Multi-Party Agreement dated the date of this
Agreement.

                  Unless the servicing of a Foreclosed Property or item of
Repossessed Collateral relating to an SBA Section 7(a) Loan is assumed by the
SBA pursuant to the SBA Rules and Regulations, the Servicer, subject to Sections
5.01 and 5.02 hereof, shall manage, conserve, protect and operate each
Foreclosed Property or other Repossessed Collateral for the SBA and the
Certificateholders solely for the purpose of its prudent and prompt disposition
and sale. The Servicer shall, either itself or through an agent selected by the
Servicer, manage, conserve, protect and operate the Foreclosed Property or other
Repossessed Collateral in the same manner that it manages, conserves, protects
and operates other foreclosed or repossessed property for its own account, and
in the same manner that similar property in the same locality as the Foreclosed
Property or other Repossessed Collateral is managed. The Servicer shall attempt
to sell the same (and may temporarily rent the same) on such terms and
conditions as the Servicer deems to be in the best interest of the SBA and the
Certificateholders.

                  The Servicer shall cause to be deposited in the Principal and
Interest Account, no later than five Business Days after the receipt thereof,
the Unguaranteed Percentage of all revenues received with respect to the
conservation and disposition of the related Foreclosed Property or other
Repossessed Collateral net of Servicing Advances.

                                      V-11
<PAGE>   81
                  The disposition of Foreclosed Property or other Repossessed
Collateral shall be carried out by the Servicer at such price, and upon such
terms and conditions, as the Servicer, with SBA concurrence (if required by the
SBA Rules and Regulations), deems to be in the best interest of the SBA and the
Certificateholders. The Unguaranteed Percentage of the proceeds of sale of the
Foreclosed Property or other Repossessed Collateral shall promptly, but in no
event later than two Business Days after receipt, be deposited in the Principal
and Interest Account as received from time to time and, as soon as practicable
thereafter, the expenses of such sale shall be paid. The Servicer shall, subject
to Section 5.04, reimburse itself for any related unreimbursed Servicing
Advances, unpaid Servicing Fees and unreimbursed Monthly Advances, and the
Servicer shall deposit in the Principal and Interest Account the Unguaranteed
Percentage of the net cash proceeds of such sale to be distributed to the
Certificateholders in accordance with Section 6.07 hereof.

                  In the event any Mortgaged Property or other Repossessed
Collateral is acquired as aforesaid or otherwise in connection with a default or
imminent default on an SBA Loan, the Servicer shall dispose of such Mortgaged
Property or other Repossessed Collateral within two years after its acquisition
unless the Servicer and the Trustee shall have received an Opinion of Counsel
also addressed to the SBA to the effect that such longer retention will not
cause the Trust Fund to be subject to Federal income tax.

                  Section 5.11      [Intentionally Omitted.]

                  Section 5.12      Collection of Certain SBA
                                    Loan Payments.

                  The Servicer shall make reasonable efforts to collect all
payments called for under the terms and provisions of the SBA Loans, and shall
cause the Obligor under the SBA Loan, to the extent such procedures shall be
consistent with this Agreement, to comply with the terms and provisions of any
applicable hazard insurance policy. Consistent with the foregoing and the SBA
Rules and Regulations, the Servicer may in its discretion waive or permit to be
waived any fee or charge (other than the Servicing Fee or the Premium Protection
Fee, without the written consent of the SBA) which the Servicer would be
entitled to retain hereunder as servicing compensation and extend the due date
for payments due on an SBA Note for a period (with respect to each payment as to
which the due date is extended) not greater than 180 days after the initially
scheduled due date for such payment provided that the Servicer determines such
extension would not be considered a new mortgage loan for federal income

                                      V-12
<PAGE>   82
tax purposes. In the event the Servicer shall consent to the deferment of the
due dates for payments due on an SBA Note, the Servicer shall nonetheless make
payment of any required Monthly Advance with respect to the payments so extended
to the same extent as if such installment were due, owing and delinquent and had
not been deferred, and shall be entitled to reimbursement therefor in accordance
with Section 5.04(b) hereof.

                  Section 5.13      Access to Certain Documentation and
                                    Information Regarding the SBA Loans.

                  The Servicer shall provide to the Trustee, the SBA, the FDIC,
and the OCC, and the supervisory agents and examiners of each of the foregoing
access to the documentation regarding the SBA Loans required by applicable
local, state and federal regulations, such access being afforded without charge
but only upon reasonable request and during normal business hours at the offices
of the Servicer designated by it.

                                      V-13
<PAGE>   83
                                   ARTICLE VI

                       PAYMENTS TO THE CERTIFICATEHOLDERS

                  Section 6.01            Establishment of Certificate
                                          Account; Deposits in Certificate
                                          Account; Permitted Withdrawals from
                                          Certificate Account.

                  (a) No later than the Closing Date, the Trustee will establish
and maintain with itself in its trust department a trust account, which shall
not be interest-bearing, titled "Certificate Account, HSBC Bank USA, as trustee
for the registered holders of First International Bank SBA Loan-Backed
Adjustable Rate Certificates, Series 1999-1, Class A, Class M and Class B" (the
"Certificate Account"). The Trustee shall, promptly upon receipt, deposit in the
Certificate Account and retain therein:

                           (i) the Available Funds (net of the amount of Monthly
                  Advances and Compensating Interest deposited pursuant to
                  subclause (ii) below and amounts then on deposit in the Spread
                  Account) remitted by the Servicer;

                           (ii) the Compensating Interest and the portion of the
                  Monthly Advance remitted to the Trustee by the Servicer;

                           (iii) amounts transferred from the Spread Account
                  pursuant to Section 6.02(b)(i);

                           (iv) amounts required to be paid by the Servicer
                  pursuant to Section 6.06(e) in connection with losses on
                  investments of amounts in the Certificate Account; and

                           (v) amounts transferred from the Pre-Funding Account
                  and the Capitalized Interest Account on the Special Remittance
                  Date pursuant to Sections 6.04(c) and (h), respectively.

                           (b) Amounts on deposit in the Certificate Account
shall be withdrawn on each Remittance Date by the Trustee, or the Paying Agent,
on its behalf, to effect the distribution described in Section 6.07(b) and
thereafter by the following parties in no particular order of priority:

                                      VI-1
<PAGE>   84
                           (i) by the Trustee, to invest amounts on deposit in
                  the Certificate Account in Permitted Instruments pursuant to
                  Section 6.06;

                           (ii) by the Trustee, to pay on a monthly basis to the
                  Servicer as additional servicing compensation interest paid
                  and earnings realized on Permitted Instruments;

                           (iii) by the Trustee, to withdraw any amount not
                  required to be deposited in the Certificate Account or
                  deposited therein in error; and

                           (iv) by the Trustee, to clear and terminate the
                  Certificate Account upon the termination of this Agreement in
                  accordance with the terms of Section 11.01 hereof.

                  Section 6.02            Establishment of Spread Account;
                                          Deposits in Spread Account; Permitted
                                          Withdrawals from  Spread Account.


                  (a) No later than the Closing Date, the Trustee will establish
with the Spread Account Custodian an Account in accordance with the terms of the
Spread Account Agreement (the "Spread Account"). The Spread Account shall be the
property of the Spread Account Depositor, subject to the terms hereof and of the
Spread Account Agreement, and the funds held therein may be invested in
Permitted Instruments. The Spread Account shall not constitute part of the Trust
Fund. The Trustee or the Spread Account Custodian, as the case may be, shall,
promptly upon receipt, deposit into the Spread Account or, in the case of the
Trustee, transfer to the Spread Account Custodian for deposit in the Spread
Account:

                           (i) on the Closing Date, the Initial Spread Account
                  Deposit made by the Spread Account Depositor;

                           (ii) on each Remittance Date, that portion of the
                  Available Funds, if any, required to be deposited into the
                  Spread Account pursuant to Section 6.07(b)(ix) until the
                  Spread Account Balance equals the then applicable Specified
                  Spread Account Requirement; and

                           (iii) amounts required to be paid by the Servicer
                  pursuant to Section 6.06(e) in connection with losses on
                  investments of amounts in the Spread Account.

                                      VI-2
<PAGE>   85
                  (b) Amounts on deposit in the Spread Account shall be
withdrawn by the Spread Account Custodian and transferred to the Trustee for
distribution in the manner set forth in subclause (c) below on each Remittance
Date in the following order of priority:

                           (i) to deposit in the Certificate Account an amount
                  by which (a) the sum of the Class A and Class M Interest
                  Distribution Amounts, the Class A and Class M Principal
                  Distribution Amounts and the Class A and Class M Carry Forward
                  Amounts exceeds (b) the Available Funds for such Remittance
                  Date (but excluding from such definition of Available Funds,
                  amounts in the Spread Account);

                           (ii) to deposit in the Certificate Account the
                  amount, if any, required to make the full distribution to the
                  Expense Account pursuant to Section 6.07(b)(viii); and

                           (iii) to the extent that the amount then on deposit
                  in the Spread Account after giving effect to all required
                  transfers from the Spread Account to the Certificate Account
                  on such Remittance Date then exceeds the Specified Spread
                  Account Requirement as of such Remittance Date (such excess, a
                  "Spread Account Excess"), an amount equal to such Spread
                  Account Excess shall be distributed by the Spread Account
                  Custodian first, to the Class B Certificateholders, the
                  amount, if any, by which the Class B Interest Distribution
                  Amount, the Class B Principal Distribution Amount and the
                  Class B Carry-Forward Amount for such Remittance Date exceeds
                  the portion of the Available Funds (but excluding from such
                  definition amounts in the Spread Account) being distributed to
                  the Class B Certificates on such Remittance Date, and second,
                  to the Spread Account Depositor;

and also, in no particular order of priority:

                           (iv) to invest amounts on deposit in the Spread
                  Account in Permitted Instruments pursuant to Section 6.06;

                           (v) to withdraw any amount not required to be
                  deposited in the Spread Account or deposited therein in error;
                  and

                           (vi) to clear and terminate the Spread Account upon
                  the termination of this Agreement in accordance with the terms
                  of Section 11.01.

                                      VI-3
<PAGE>   86
                  (c) Any amounts which are required to be withdrawn from the
Spread Account pursuant to paragraph (b) above shall be withdrawn from the
Spread Account in the following order of priority: (i) first, from any
uninvested funds therein, and (ii) second, from the proceeds of the liquidation
of any investments therein pursuant to Section 6.06(b).

                  (d) Any amounts which are distributed by the Spread Account
Custodian to the Spread Account Depositor pursuant to paragraph (b) above will
not be required to be refunded, regardless of whether there are sufficient funds
on a subsequent Remittance Date to make a full distribution to holders of the
Certificates on such Remittance Date.

                  Section 6.03  Establishment of Expense Account;
                                Deposits in Expense Account; Permitted
                                Withdrawals from Expense Account

                  (a) No later than the Closing Date, the Trustee will establish
with itself an account for the benefit of the Trustee to pay its fees and
expenses related to the Trust Fund (the "Expense Account"). The Expense Account
shall not constitute part of the Trust Fund and is for the benefit of the
Trustee and, on a subordinate basis, for the benefit of the Servicer as
described in (b)(ii) and (c) below. The Trustee shall deposit into the Expense
Account:

                           (i) on each Remittance Date from the amounts on
                  deposit in the Certificate Account an amount equal to
                  one-twelfth of the Annual Expense Escrow Amount; and

                           (ii) upon receipt, amounts required to be paid by the
                  Servicer pursuant to Section 6.06(e) in connection with losses
                  on investments of amounts in the Expense Account.

If, at any time the amount then on deposit in the Expense Account shall be
insufficient to pay in full the fees and expenses of the Trustee then due, the
Trustee shall make demand on the Servicer to advance the amount of such
insufficiency, and the Servicer shall promptly advance such amount to the
Trustee. Thereafter, the Servicer shall be entitled to reimbursement from the
Expense Account for the amount of any such advance from any excess funds
available pursuant to subclause (c)(ii) below. Without limiting the obligation
of the Servicer to advance such insufficiency, in the event the Servicer does
not advance the full amount of such insufficiency by the Business Day
immediately preceding the Determination Date, the amount of such insufficiency
shall be deposited into the Expense Account for payment to the Trustee

                                      VI-4
<PAGE>   87
pursuant to Section 6.07(b)(viii), to the extent of available funds in the
Certificate Account.

                  (b) The Trustee, at the direction of the Servicer, may invest
amounts on deposit in the Expense Account in Permitted Instruments pursuant to
Section 6.06 hereof, and the Trustee shall withdraw amounts on deposit in the
Expense Account to:

                           (i) pay the Trustee's fees and expenses as described
                  in Section 2.08 hereof;

                           (ii) pay on a monthly basis to the Servicer as
                  additional servicing compensation interest paid and earnings
                  realized on Permitted Instruments;

                           (iii) withdraw any amounts not required to be
                  deposited in the Expense Account or deposited therein in
                  error; and

                           (iv) clear and terminate the Expense Account upon the
                  termination of this Agreement in accordance with the terms of
                  Section 11.01.

                                    (c) On the twelfth Remittance Date following
the Closing Date, and on each twelfth Remittance
Date thereafter, the Trustee shall determine that all payments required to be
made during the prior twelve month period pursuant to subclauses (b)(i), (b)(ii)
and (b)(iii) above, have been made, and, if all such payments have been made,
from the amounts remaining in the Expense Account, the Trustee shall (in the
following order of priority):

                           (i) reimburse the Servicer and/or the Seller, for
reimbursable advances made pursuant to Section 9.01;

                           (ii) reimburse the Servicer for advances made by it
                  pursuant to the last paragraph of subclause (a) above; and

                           (iii) remit to the Servicer as additional servicing
                  compensation any amounts remaining in the Expense Account
                  after payments made pursuant to subclauses (b)(i), (b)(ii),
                  (b)(iii), (c)(i) and (c)(ii), above.

                  Section 6.04  Pre-Funding Account and Capitalized
                                Interest Account.

                                      VI-5
<PAGE>   88
                  (a) No later than the Closing Date, the Seller shall establish
and maintain with the Trustee in its trust department a trust account, which
shall not be interest-bearing, titled "First International Bank, National
Association SBA Pre-Funding Account 1999-1" (the "Pre-Funding Account"). The
Pre-Funding Account shall not constitute part of the Trust Fund. The Seller
shall be deemed the owner of the Pre-Funding Account for Federal income tax
purposes. The Trustee shall, promptly upon receipt, deposit into the Pre-Funding
Account and retain therein the Original Pre-Funded Amount from the proceeds of
the sale of the Certificates.

                  (b) On each Subsequent Transfer Date, the Seller shall
instruct the Trustee to withdraw from the Pre-Funding Account an amount equal to
100% of the aggregate Principal Balances of the Subsequent SBA Loans as of the
related Subsequent Cut-Off Date sold to the Trust Fund on such Subsequent
Transfer Date and pay such amount to or upon the order of the Seller with
respect to such transfer.

                  (c) If at the end of the Funding Period amounts still remain
in the Pre-Funding Account, the Servicer shall instruct the Trustee to withdraw
from the Pre-Funding Account on the immediately following Remittance Date and
deposit such amounts in the Certificate Account. However, if at the close of
business on September 14, 1999, amounts still remain in the Pre-Funding Account,
the Servicer shall instruct the Trustee to withdraw from the Pre-Funding Account
on the Special Remittance Date and deposit in the Certificate Account any
Pre-Funded Amount then remaining in the Pre-Funding Account, and then the
Pre-Funding Account shall be closed.

                  (d) On the Remittance Dates occurring in July, August and
September 1999, the Trustee shall transfer from the Pre-Funding Account to the
Certificate Account, the Pre-Funding Earnings, if any, applicable to each such
Remittance Date.

                  (e) No later than the Closing Date, the Seller shall establish
and maintain with the Trustee in its trust department a trust account, which
shall not be interest-bearing, titled "First International Bank, National
Association SBA Capitalized Interest Account 1999-1" (the "Capitalized Interest
Account"). The Capitalized Interest Account shall not constitute part of the
Trust Fund. The Seller shall be deemed the owner of the Capitalized Interest
Account for Federal income tax purposes. The Trustee shall, promptly upon
receipt, deposit into the Capitalized Interest Account $76,809.33. If prior to
the end of the Funding Period the funds on deposit in the Pre-Funding Account
are invested in a guaranteed investment contract, repurchase agreement or other
arrangement acceptable to the Rating Agency, that constitutes a Permitted
Instrument, the

                                      VI-6
<PAGE>   89
Trustee shall, within one Business Day of its receipt of notification of
satisfaction of the Rating Agency Condition, withdraw from the Capitalized
Interest Account and pay to the Seller the amount set forth in such
notification.

                  (f) On each Subsequent Transfer Date the Seller may instruct
the Trustee to withdraw from the Capitalized Interest Account and pay on such
Subsequent Transfer Date to the Seller the Overfunded Interest Amount for such
Subsequent Transfer Date, as calculated by the Seller pursuant to Section
2.09(e) hereof.

                  (g) On the Remittance Dates occurring in July, August and
September 1999, the Trustee shall transfer from the Capitalized Interest Account
to the Certificate Account, the Capitalized Interest Requirement, if any, for
such Remittance Dates.

                  (h) On the Special Remittance Date, the Trustee shall transfer
from the Capitalized Interest Account to the Certificate Account the Capitalized
Interest Requirement, if any, for such Special Remittance Date. Any amounts
remaining in the Capitalized Interest Account after taking into account such
transfer shall be paid on such Special Remittance Date to the Seller, and the
Capitalized Interest Account shall be closed.

                  Section 6.05  [Intentionally Omitted]

                  Section 6.06  Investment of Accounts.

                  (a) So long as no default or Event of Default shall have
occurred and be continuing, and consistent with any requirements of the Code,
all or a portion of any Account which is not by the terms of this Agreement to
be held uninvested by the Trustee or the Spread Account Custodian shall be
invested and reinvested by the Trustee or the Spread Account Custodian, as
directed in writing by the Servicer, in one or more Permitted Instruments in the
name of the Trustee or the Spread Account Custodian, as the case may be, bearing
interest or sold at a discount. No such investment in the Certificate Account,
the Pre-Funding Account, the Capitalized Interest Account and the Spread Account
shall mature later than the Business Day immediately preceding the next
Remittance Date and no such investment in the Expense Account shall mature later
than the Business Day immediately preceding the date such funds will be needed
to pay fees or premiums; provided, however, the Trustee or any affiliate
thereof, may be the obligor on any investment which otherwise qualifies as a
Permitted Instrument and any investment on which the Trustee is the obligor may
mature on such Remittance Date or date when needed, as the case may be.

                                      VI-7
<PAGE>   90
                  (b) If any amounts are needed for disbursement from any
Account held by the Trustee or the Spread Account Custodian and sufficient
uninvested funds are not available to make such disbursement, the Trustee or the
Spread Account Custodian, as the case may be, shall cause to be sold or
otherwise converted to cash a sufficient amount of the investments in such
Account. Neither the Trustee nor the Spread Account Custodian shall be liable
for any investment loss or other charge resulting therefrom.

                  (c) Subject to Section 12.01 hereof, neither the Trustee nor
the Spread Account Custodian shall in any way be held liable by reason of any
insufficiency in any Account held by the Trustee or the Spread Account Custodian
resulting from any investment loss on any Permitted Instrument included therein
(except to the extent that the Trustee is the obligor thereon).

                  (d) The Trustee and the Spread Account Custodian shall invest
and reinvest funds in the Accounts held by the Trustee or the Spread Account
Custodian, to the fullest extent practicable, in such manner as the Servicer
shall from time to time direct in writing, but only in one or more Permitted
Instruments.

                  (e) All income or other gain from investments in any Account
held by the Trustee or the Spread Account Custodian shall be deposited in such
Account, as the case may be, immediately on receipt, and the Trustee or the
Spread Account Custodian shall notify the Servicer of any loss resulting from
such investments. The Servicer shall remit the amount of any such loss, to the
extent that such investment was made at the direction of the Servicer, from its
own funds, without reimbursement therefor, to the Trustee or the Spread Account
Custodian, as the case may be, for deposit in the Account from which the related
funds were withdrawn for investment by the next Determination Date following
receipt by the Servicer of such notice.

                  Section 6.07  Distributions.

                  (a) The rights of the Certificateholders to receive
distributions from the proceeds of the Trust Fund, and all ownership interests
of the Certificateholders in such distributions, shall be as set forth in this
Agreement.

                  (b) On each Remittance Date the Trustee shall withdraw from
the Certificate Account the sum of (A) that portion of the Available Funds
received from the Servicer pursuant to Section 6.01(a)(i), (ii) and (iv),and (B)
the amounts deposited therein pursuant to Section 6.02(b)(i) and make
distributions thereof in the following order of priority:

                                      VI-8
<PAGE>   91
                           (i) First, to the Class A Certificates in an amount
                  up to the Class A Interest Distribution Amount;

                           (ii) Second, to the Class M Certificates in an amount
                  up to the Class M Interest Distribution Amount (other than the
                  Class M Interest Shortfall Amount, if any);

                           (iii) Third, to the Class A Certificates in an amount
                  up to the sum of (a) the Class Principal Distribution Amount
                  for the Class A Certificates and (b) the Class Carry Forward
                  Amount for the Class A Certificates;

                           (iv) Fourth, to the Class M Certificates, in an
                  amount up to the sum of (a) the Class Principal Distribution
                  Amount for the Class M Certificates and (b) the Class Carry
                  Forward Amount for the Class M Certificates;

                           (v) Fifth, to the Class M Certificates, the Class M
                  Interest Shortfall Amount.

                           (vi) Sixth, to the Class B Certificates in an amount
                  up to the Class B Interest Distribution Amount (other than the
                  Class B Interest Shortfall Amount, if any);

                           (vii) Seventh, to the Class B Certificates, the Class
                  Principal Distribution Amount for the Class B Certificates;

                           (viii) Eighth, to the Expense Account in an amount up
                  to one-twelfth of the Annual Expense Escrow Amount plus any
                  amount required to be paid to the Trustee pursuant to Section
                  6.03(a) resulting from insufficiencies in the Expense Account;

                           (ix) Ninth, to the Spread Account, any remaining
                  Available Funds unless and until the amount therein equals the
                  Specified Spread Account Requirement;

                           (x) Tenth, to the Class B Certificates, the Class B
                  Interest Shortfall Amount;

                           (xi) Eleventh, to the Class B Certificates, the Class
                  Carry-Forward Amount for the Class B Certificates;

                                      VI-9
<PAGE>   92
                           (xii) Twelfth, to the Servicer in an amount up to the
                  Reimbursable Amounts; and

                           (xiii) Thirteenth, to the Spread Account Depositor,
                  any amounts in excess of the Specified Spread Account
                  Requirement.

                  Additionally, on the Special Remittance Date, the Trustee
shall withdraw from the Certificate Account the amount, if any, deposited
therein pursuant to Section 6.01(a)(v) and make distributions thereof as
follows: (i) from amounts transferred from the Pre-Funding Account,
distributions of principal to the Class A, Class M and Class B Certificates pro
rata based upon the Class A, Class M and Class B Percentages and (ii) from
amounts transferred from the Capitalized Interest Account, distributions of
interest to such Class A, Class M and Class B Certificates equal to the
applicable Capitalized Interest Requirement.

                  (c) All distributions made to the Certificateholders of a
particular Class will be made on a pro rata basis among the Certificateholders
of record of the applicable Class on the next preceding Record Date based on the
Percentage Interest represented by their respective Certificates on such date,
and shall be made by check or, upon request by a Certificateholder, by wire
transfer of immediately available funds to the account of such Certificateholder
at a bank or other entity having appropriate facilities therefor, and, in the
case of wire transfers, at the expense of such Certificateholder unless such
Certificateholder shall own of record Certificates which have initial
Certificate Principal Balances aggregating at least $5,000,000.

                  Section 6.08  [Intentionally Omitted]

                  Section 6.09  Statements.

                  Each month, not later than 12:00 noon New York time on the
Determination Date, the Servicer shall deliver to the Trustee, by telecopy, for
distribution to the Certificateholders, the receipt and legibility of which
shall be confirmed telephonically, with hard copy thereof and the Servicer's
Monthly Computer Diskette in the form attached hereto as Exhibit L (both in hard
copy and in computer diskette form) to be delivered on the Business Day
following the Determination Date, a certificate signed by a Servicing Officer (a
"Servicer's Certificate") stating the date (day, month and year), the Series
number of the Certificates, the date of this Agreement, and, as of the close of
business on the Record Date for such month:

                                     VI-10
<PAGE>   93
                           (i)  Available Funds for the related Remittance Date;

                           (ii) The Aggregate Class A Certificate Principal
                  Balance, the Aggregate Class M Certificate Principal Balance,
                  the Aggregate Class B Certificate Principal Balance and the
                  Pool Principal Balance as reported in the prior Servicer's
                  Certificate pursuant to subclause (xii) below, or, in the case
                  of the first Determination Date, the Original Class A, Class M
                  and Class B Certificate Principal Balance and the Original
                  Pool Principal Balance;

                           (iii) The number and Principal Balances of all SBA
                  Loans which were the subject of Principal Prepayments during
                  the Due Period and the number and Principal Balances of all
                  Defaulted SBA Loans purchased by the Servicer during the Due
                  Period;

                           (iv) The product of the Unguaranteed Percentage
                  multiplied by all Curtailments which were received during the
                  Due Period;

                           (v) The product of the Unguaranteed Percentage
                  multiplied by all Excess Payments and the product of the
                  Unguaranteed Percentage multiplied by all Monthly Payments in
                  respect of principal received during the Due Period;

                           (vi) The aggregate amount of interest received on the
                  Unguaranteed Interest of each SBA Loan net of the FTA's Fee,
                  the Additional Fee and the Servicing Fee attributable to the
                  Unguaranteed Interest;

                           (vii) The amount of the Monthly Advances to be made
                  on the Determination Date and the Compensating Interest
                  payment to be made on the Determination Date;

                           (viii) The delinquency and foreclosure information
                  set forth in the form attached hereto as Exhibit K;

                           (ix) The product of the Unguaranteed Percentage
                  multiplied by the amount of any losses realized on a
                  Liquidated SBA Loan;

                           (x) The Class A, Class M and Class B Interest
                  Distribution Amounts and Principal

                                     VI-11
<PAGE>   94
                  Distribution Amounts for the Remittance Date with the
                  components thereof stated separately;

                           (xi) The amount stated in dollars and as a percentage
                  of the current aggregate Principal Balance of the Class A,
                  Class M and Class B Certificates of the funds available in the
                  Spread Account as of the related Record Date in cash and from
                  liquidation of Permitted Instruments and the amount, if any,
                  to be transferred from the Spread Account to the Certificate
                  Account pursuant to Section 6.02(b)(i);

                           (xii) The Aggregate Class A Certificate Principal
                  Balance, Aggregate Class M Certificate Principal Balance,
                  Aggregate Class B Certificate Principal Balance and the Pool
                  Principal Balance after giving effect to the distribution to
                  be made on the Remittance Date;

                           (xiii) The Spread Account Balance and the Specified
                  Spread Account Requirement with respect to such Remittance
                  Date;

                           (xiv) The weighted average maturity and weighted
                  average SBA Loan Interest Rate;

                           (xv) The Servicing Fees and the Annual Expense Escrow
                  Amount and other amounts to be deposited to the Expense
                  Account;

                           (xvi) The amount of all payments and reimbursements
                  to the Servicer pursuant to Section 5.04 (b), (c), (d)(ii),
                  (e) and (f);

                           (xvii) The Class A, Class M and Class B Benchmark
                  Rates with respect to such Remittance Date and the actual
                  interest rate for the Class A, Class M and Class B
                  Certificates with respect to such Remittance Date based upon
                  the Class A, Class M and Class B Interest Distribution
                  Amounts;

                           (xviii) During the Funding Period, the aggregate
                  Principal Balance of the Subsequent SBA Loans purchased during
                  the prior Due Period and the amount on deposit in the
                  Pre-Funding Account and the Capitalized Interest Account as of
                  the end of such Due Period; and

                           (xix) Such other information as the Trustee, the
                  Certificateholders or the Rating Agency may reasonably
                  require; provided, however, that the

                                     VI-12
<PAGE>   95
                  Servicer shall have no obligation to distribute such
                  information directly to any Certificateholder.

                  The Trustee shall forward such report to the
Certificateholders and the Rating Agency on the Remittance Date, together with a
separate report indicating the amount of funds deposited in the Certificate
Account pursuant to Section 6.01(a)(iv); and the amounts which are reimbursable
to the Servicer or the Seller pursuant to Sections 6.03(c)(i), 6.03(c)(ii) and
6.07(b)(xii) (all reports prepared by the Trustee of such withdrawals and
deposits will be based in whole or in part upon the information provided to the
Trustee by the Servicer).

                  To the extent that there are inconsistencies between the
telecopy of the Servicer's Certificate and the hard copy thereof, the Trustee
shall be entitled to rely upon the telecopy. In the case of information
furnished pursuant to subclauses (ii), (iii), (iv), (v), (x) and (xii), above,
the amounts shall be expressed in a separate section of the report as a dollar
amount for each Class per $1,000 original dollar amount as of the Cut-Off Date.

                  Additionally, on the Special Remittance Date the Trustee
shall, based upon information received from the Servicer, forward to the
Certificateholders and the Rating Agency a report setting forth the amount of
principal and interest, if any, being paid to each Class of Certificates on the
Special Remittance Date.

                  (a) Within a reasonable period of time after the end of each
calendar year, the Servicer shall furnish to the Trustee for distribution to
each Person who at any time during the calendar year was a Certificateholder
such information as is reasonably necessary to provide to such Person a
statement containing the information set forth in subclauses (vi), (x), and
(xiv), above, aggregated for such calendar year or applicable portion thereof
during which such Person was a Certificateholder. Such obligation of the
Servicer shall be deemed to have been satisfied to the extent that substantially
comparable information shall be provided by the Servicer pursuant to any
requirements of the Code as from time to time are in force.

                  (b) Upon reasonable advance notice in writing, the Servicer
will provide to each Certificateholder which is a savings and loan association,
bank or insurance company certain reports and access to information and
documentation regarding the SBA Loans sufficient to permit such
Certificateholder to comply with applicable regulations of its regulatory
authorities with respect to investment in the Certificates.

                                     VI-13
<PAGE>   96
                  (c) The Servicer shall furnish to each Certificateholder,
during the term of this Agreement, such periodic, special, or other reports or
information, whether or not provided for herein, as shall be necessary,
reasonable, or appropriate with respect to the Certificateholder or otherwise
with respect to the purposes of this Agreement, all such reports or information
to be provided by and in accordance with such applicable instructions and
directions as the Certificateholder may reasonably require; provided, that the
Servicer shall be entitled to be reimbursed by such Certificateholder for the
Servicer's actual expenses incurred in providing such reports if such reports
are not producible in the ordinary course of the Servicer's business. The Rating
Agency shall receive copies of any such reports or information furnished to the
Certificateholders.

                  Section 6.10 Advances by the Servicer.

                  Not later than the close of business on each Determination
Date, the Servicer, may in its sole discretion, if it determines such amount is
recoverable, remit to the Trustee for deposit in the Certificate Account an
amount (as indicated in the Servicer's Certificate prepared pursuant to Section
6.09), to be distributed on the related Remittance Date pursuant to Section
6.07, equal to the amount by which (i) 30 days' interest at a rate equal to the
then applicable Adjusted SBA Loan Benchmark Rate on the aggregate Class A, Class
M and Class B Principal Balances immediately prior to the related Remittance
Date (plus or minus the difference, if any, between (A) the sum of the Class A,
Class M and Class B Interest Distribution Amounts and (B) the sum of the
Adjusted Class A, Adjusted Class M and Adjusted Class B Interest Distribution
Amounts for the related Remittance Date) exceeds (ii) the amount received by the
Servicer as of the related Record Date in respect of interest on the SBA Loans
minus the interest payable to the Registered Holders, the Premium Protection
Fee, the Additional Fee, the Servicing Fee and the FTA's Fee (plus, for the
Remittance Dates in July, August and September 1999, the sum of (i) all funds to
be transferred to the Certificate Account from the Capitalized Interest Account
for such Remittance Date pursuant to Section 6.04(g) and (ii) the Pre-Funding
Earnings for the applicable Remittance Date), such excess being defined herein
as the "Monthly Advance." The Servicer may reimburse itself for Monthly Advances
made pursuant to Section 5.04. Notwithstanding the foregoing, the Servicer shall
not be required to make a Monthly Advance with respect to an SBA Loan if it
determines, in good faith, that such advance would be nonrecoverable from
amounts received in respect of the SBA Loans.

                                     VI-14
<PAGE>   97
                  Section 6.11  Compensating Interest.

                  The Certificateholders shall be entitled to a full month's
interest on the principal portion of the Unguaranteed Interest of each SBA Loan
at the then applicable Class A, Class M or Class B Benchmark Rate, as the case
may be. Not later than the close of business on each Determination Date, with
respect to each SBA Loan for which a Principal Prepayment or Curtailment was
received during the related Due Period, the Servicer shall remit to the Trustee
for deposit in the Certificate Account from amounts otherwise payable to it as
servicing compensation (other than the Premium Protection Fee and the Servicing
Fee with respect to the Guaranteed Interest), an amount (such amount required to
be delivered to the Trustee is referred to herein as "Compensating Interest")
(as indicated in the Servicer's Certificate prepared pursuant to Section 6.09)
equal to the difference between (a) 30 days' interest at the Adjusted SBA Loan
Benchmark Rate on the Principal Balance of each such SBA Loan as of the
beginning of the Due Period applicable to the Remittance Date on which such
amount will be distributed, and (b) the amount of interest actually received on
the Unguaranteed Interest of each such SBA Loan for such Due Period net of the
portion thereof payable to the Registered Holder, the Premium Protection Fee,
the FTA's Fee, the Servicing Fee, the Excess Spread and the fees and expenses of
the Trustee allocable to such interest and, with respect to each Additional Fee
SBA Loan, the Additional Fee.

                  Section 6.12            Reports of Foreclosure and Abandonment
                                          of Mortgaged Property

                  Each year the Servicer shall make the reports of foreclosures
and abandonments of any Mortgaged Property required by Section 6050J of the
Code. Promptly after filing each such report with the Internal Revenue Service,
the Servicer shall provide the Trustee with an Officer's Certificate certifying
that such report has been filed.

                                     VI-15
<PAGE>   98
                                                          Exhibit 10.15.1
                                   ARTICLE VII

                           GENERAL SERVICING PROCEDURE

                  Section 7.01  [Intentionally Omitted]

                  Section 7.02  Satisfaction of Mortgages and Collateral and
                                Release of SBA Files

                  The Servicer shall maintain the Fidelity Bond as provided for
in Section 5.09 insuring the Servicer against any loss it may sustain with
respect to any SBA Loan not satisfied in accordance with the procedures set
forth herein.

                  Upon the payment in full of any SBA Loan, or the receipt by
the Servicer of a notification that payment in full will be escrowed in a manner
customary for such purposes, the Servicer will immediately notify the FTA and
the Trustee by a certification in the form of Exhibit I attached hereto (which
certification shall include a statement to the effect that all amounts received
or to be received in connection with such payment which are required to be
deposited in the Principal and Interest Account pursuant to Section 5.03 have
been or will be so deposited) of a Servicing Officer and shall request delivery
to it of the Trustee's Document File. Upon receipt of such certification and
request, the FTA and the Trustee shall release, within 3 Business Days, the
related Trustee's Document File to the Servicer. Expenses incurred in connection
with any instrument of satisfaction or deed of reconveyance shall be payable
only from and to the extent of servicing compensation and shall not be
chargeable to the Principal and Interest Account or the Certificate Account.

                  Subject to the Multi-Party Agreement, from time to time and as
appropriate for the servicing or foreclosure of any SBA Loan, the FTA and the
Trustee shall, upon request of the Servicer and delivery to the FTA and the
Trustee of a certification in the form of Exhibit I attached hereto signed by a
Servicing Officer, release the related Trustee's Document File to the Servicer
within 3 Business Days, and the Trustee shall execute such documents as shall be
necessary to the prosecution of any such proceedings. The Servicer shall return
the Trustee's Document File to the FTA and the Trustee when the need therefor by
the Servicer no longer exists, unless the SBA Loan has been liquidated and the
Unguaranteed Percentage of the Liquidation Proceeds relating to the SBA Loan has
been deposited in the Principal and Interest Account and remitted to the Trustee
for deposit in the Certificate Account or the SBA File or such document has been
delivered to an attorney, or to a public trustee or other public official as
required by law, for purposes


                                      VII-1
<PAGE>   99

of initiating or pursuing legal action or other proceedings for the foreclosure
of the Mortgaged Property or repossession of other Collateral either judicially
or non-judicially, and the Servicer has delivered to the FTA and the Trustee a
certificate of a Servicing Officer certifying as to the name and address of the
Person to whom such SBA File or such document was delivered and the purpose or
purposes of such delivery. Upon receipt of a certificate of a Servicing Officer
stating that such SBA Loan was liquidated, the servicing receipt shall be
released by the Trustee to the Servicer.

                  The Trustee shall execute and deliver to the Servicer any
court pleadings, requests for trustee's sale or other documents provided to it
necessary to the foreclosure or trustee's sale in respect of a Mortgaged
Property or other Collateral or to any legal action brought to obtain judgment
against any Obligor on the SBA Note or Mortgage or other agreement securing
Collateral or to obtain a deficiency judgment, or to enforce any other remedies
or rights provided by the SBA Note or Mortgage or other agreement securing
Collateral or otherwise available at law or in equity. Together with such
documents or pleadings, the Servicer shall deliver to the Trustee a certificate
of a Servicing Officer requesting that such pleadings or documents be executed
by the Trustee and certifying as to the reason such documents or pleadings are
required and that the execution and delivery thereof by the Trustee will not
invalidate or otherwise affect the lien of the Mortgage or other agreement
securing Collateral, except for the termination of such a lien upon completion
of the foreclosure or trustee's sale. The Trustee shall, upon receipt of a
written request from a Servicing Officer, execute any document provided to the
Trustee by the Servicer or take any other action requested in such request, that
is, in the opinion of the Servicer as evidenced by such request, required by any
state or other jurisdiction to discharge the lien of a Mortgage or other
agreement securing Collateral upon the satisfaction thereof and the Trustee will
sign and post, but will not guarantee receipt of, any such documents to the
Servicer, or such other party as the Servicer may direct, within five Business
Days of the Trustee's receipt of such certificate or documents. Such certificate
or documents shall establish to the Trustee's satisfaction that the related SBA
Loan has been paid in full by or on behalf of the Obligor and that such payment
has been deposited in the Principal and Interest Account.

                  Section 7.03  Servicing Compensation.

                  As compensation for its services hereunder, the Servicer shall
be entitled to retain from interest payments on the SBA Loans or withdraw from
the Principal and Interest Account (to the extent deposited therein) the
Servicer's Servicing Fee


                                     VII-2
<PAGE>   100

and the Premium Protection Fee and, in accordance with Section 5.04(b), any
accrued but unreimbursed Premium Protection Fees and Servicing Fees. Additional
servicing compensation in the form of assumption and other administrative fees,
interest paid on funds on deposit in the Principal and Interest Account,
interest paid and earnings realized on Permitted Instruments, amounts remitted
pursuant to Section 6.03(c)(iii) and late payment charges shall be retained by
or remitted to the Servicer to the extent not required to be remitted to the
Trustee for deposit in the Certificate Account. The Servicer shall be required
to pay all expenses incurred by it in connection with its servicing activities
hereunder and shall not be entitled to reimbursement therefor except as
specifically provided for herein.

                  Section 7.04   Annual Statement as to Compliance.

                  The Servicer will deliver to the Trustee, the SBA and the
Rating Agency on or before March 31 of each year beginning March 31, 2000, an
Officer's Certificate stating that (i) the Servicer has fully complied with the
provisions of Articles V and VII, (ii) a review of the activities of the
Servicer during the preceding calendar year and of performance under this
Agreement has been made under such officer's supervision, and (iii) to the best
of such officer's knowledge, based on such review, the Servicer has fulfilled
all its obligations under this Agreement throughout such year, or, if there has
been a default in the fulfillment of any such obligation, specifying each such
default known to such officers and the nature and status thereof and the action
being taken by the Servicer to cure such default.

                  Section 7.05  Annual Independent Public Accountants' Servicing
                                Report

                  On or before March 31 of each year beginning March 31, 2000,
the Servicer, at its expense, shall cause one of the "big five" accounting firms
to furnish a letter or letters to the Trustee and the Rating Agency to the
effect that such firm has with respect to the Servicer's overall servicing
operations examined such operations in accordance with the requirements of the
Uniform Single Audit Program for Mortgage Bankers, and stating such firm's
conclusions relating thereto.

                  Section 7.06  SBA's and Trustee's Right to Examine Servicer
                                Records and Audit Operations

                  The SBA and the Trustee shall have the right upon reasonable
prior notice, during normal business hours and as often as reasonably required,
to examine and audit any and all of the books, records or other information of
the Servicer, whether held by the Servicer or by another on behalf of the
Servicer,


                                     VII-3
<PAGE>   101

which may be relevant to the performance or observance by the Servicer of the
terms, covenants or conditions of this Agreement. No amounts payable in respect
of the foregoing shall be paid from the Trust Fund.

                  Section 7.07  Reports to the Trustee; Principal and Interest
                                Account Statements.

                  Not later than 20 days after each Record Date, the Servicer
shall forward to the Trustee and the SBA a statement, certified by a Servicing
Officer, setting forth the status of the Principal and Interest Account as of
the close of business on the preceding Record Date and showing, for the period
covered by such statement, the aggregate of deposits into the Principal and
Interest Account for each category of deposit specified in Section 5.03, the
aggregate of withdrawals from the Principal and Interest Account for each
category of withdrawal specified in Section 5.04, the aggregate amount of
permitted withdrawals not made in the related Due Period, and the amount of any
Monthly Advances or payments of Compensating Interest, in each case, for the
related Due Period.

                  Section 7.08  Premium Protection Fee and Servicing Fee.

                  Pursuant to and in accordance with the policies of the SBA and
SBA Form 1086, the Servicer shall retain the Premium Protection Fee and the
Servicing Fee for each SBA Section 7(a) Loan. Neither the Premium Protection Fee
nor the Servicing Fee shall constitute part of the Trust Fund and
Certificateholders shall have no interest in, and are not entitled to receive
any portion of, either the Premium Protection Fee or the Servicing Fee. If the
Servicer is replaced as servicer pursuant to any provision of this Agreement, it
shall no longer be entitled to the Premium Protection Fee and the Servicing Fee
but, instead, the successor servicer shall be entitled thereto.


                                     VII-4
<PAGE>   102

                                  ARTICLE VIII

                       REPORTS TO BE PROVIDED BY SERVICER

                  Section 8.01  Financial Statements.

                  The Servicer understands that, in connection with a transfer
of the Certificates, Certificateholders may request that the Servicer make
available to prospective Certificateholders the annual audited financial
statements of the Servicer's parent (First International Bancorp, Inc., and any
successor thereto) for one or more of the most recently completed five fiscal
years for which such statements are publicly available, which request shall not
be unreasonably denied.

                  The Servicer also agrees to make available on a reasonable
basis to any prospective Certificateholder a knowledgeable financial or
accounting officer for the purpose of answering reasonable questions respecting
recent developments affecting the Servicer or the financial statements of the
Servicer and its parent (First International Bancorp, Inc. and any successor
thereto) and to permit any prospective Certificateholder to inspect the
Servicer's servicing facilities during normal business hours for the purpose of
satisfying such prospective Certificateholder that the Servicer has the ability
to service the SBA Loans in accordance with this Agreement.


                                     VIII-1
<PAGE>   103

                                   ARTICLE IX

                                  THE SERVICER

                  Section 9.01  Indemnification; Third Party Claims.

                  (a) The Servicer agrees to indemnify and hold the Trustee, the
SBA, and each Certificateholder harmless against any and all claims, losses,
penalties, fines, forfeitures, legal fees and related costs, judgments, and any
other costs, fees and expenses that the Trustee, the SBA, and any
Certificateholder may sustain in any way related to the failure of the Servicer
to perform its duties and service the SBA Loans in compliance with the terms of
this Agreement. The Servicer shall immediately notify the Trustee, the SBA and
each Certificateholder if a claim is made by any party with respect to this
Agreement, and the Servicer shall assume (with the consent of the Trustee) the
defense of any such claim and pay all expenses in connection therewith,
including reasonable counsel fees, and promptly pay, discharge and satisfy any
judgment or decree which may be entered against the Servicer, the Trustee, the
SBA, and/or a Certificateholder in respect of such claim. The Trustee may
reimburse the Servicer from the Expense Account pursuant to Section 6.03(c)(i)
for all amounts advanced by it pursuant to the preceding sentence except when
the claim relates directly to the failure of the Servicer to service and
administer the SBA Loans in compliance with the terms of this Agreement.

                  (b) The Seller agrees to indemnify and hold the Trustee, the
SBA and each Certificateholder harmless against any and all claims, losses,
penalties, fines, forfeitures, legal fees and related costs, judgments, and any
other costs, fees and expenses that the Trustee, the SBA, and any
Certificateholder may sustain in any way related to the failure of the Servicer,
if it is an affiliate thereof, or the failure of the Seller to perform its
respective duties in compliance with the terms of this Agreement and in the best
interests of the SBA and the Certificateholders. The Seller shall immediately
notify the Trustee, the SBA, and each Certificateholder if a claim is made by a
third party with respect to this Agreement, and the Seller shall assume (with
the consent of the Trustee) the defense of any such claim and pay all expenses
in connection therewith, including reasonable counsel fees, and promptly pay,
discharge and satisfy any judgment or decree which may be entered against the
Servicer, the Seller, the Trustee, the SBA and/or a Certificateholder in respect
of such claim. The Trustee may reimburse the Seller from the Expense Account
pursuant to Section 6.03(c)(i) for all amounts advanced by them pursuant to the
preceding sentence except when the claim relates directly to the Seller's
indemnification pursuant to Section 2.05 and


                                      IX-1
<PAGE>   104

Section 3.03 or to the failure of the Servicer, if it is an affiliate of the
Seller, to perform its obligations to service and administer the Mortgages in
compliance with the terms of this Agreement, or the failure of the Seller to
perform its duties in compliance with the terms of this Agreement and in the
best interests of the SBA and the Certificateholders.

                  Section 9.02  Merger or Consolidation of the Servicer;
Assignment of the Servicer's Duties.

                  The Servicer will keep in full effect its existence, rights
and franchises as a corporation, bank or association (it being understood that
the Servicer intends to convert from a national banking charter to a state
banking charter) and will obtain and preserve its qualification to do business
as a foreign entity in each jurisdiction necessary to protect the validity and
enforceability of this Agreement or any of the SBA Loans and to perform its
duties under this Agreement.

                  Any Person into which the Servicer may be merged or
consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Servicer shall be a party, or any Person succeeding
to all or substantially all of the business of the Servicer, shall be an
established mortgage loan servicing institution that has a net worth of at least
$15,000,000 and shall be an approved SBA guaranteed lender in good standing,
operating pursuant to an effective Loan Guaranty Agreement, and shall be the
successor of the Servicer, hereunder, without the execution or filing of any
paper or any further act on the part of any of the parties hereto, anything
herein to the contrary notwithstanding except as may be otherwise required by
the SBA Rules and Regulations and the Multi-Party Agreement. The Servicer shall
send notice of any such merger or consolidation to the Trustee, the Rating
Agency and the SBA.

                  Subject to the receipt of written approval from the SBA, the
Servicer is permitted to assign its rights and duties hereunder to, and such
rights and duties can be assumed by, an affiliate of the Servicer having a net
worth of at least $15,000,000 and which is an approved SBA guaranteed lender in
good standing, operating pursuant to an effective Loan Guaranty Agreement (the
"Assignee") (in which case all of the provisions of this Agreement and the
Multi-Party Agreement shall, to the same extent as they apply to the Servicer
hereunder, apply to the Assignee rather than the Servicer), without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, anything herein to the contrary notwithstanding except as may be
otherwise required by the SBA Rules and Regulations and the Multi-Party
Agreement. The Servicer shall


                                      IX-2
<PAGE>   105

send notice of any such assignment to the Trustee, the Rating Agency and the
SBA.

                  Section 9.03 Limitation on Liability of the Servicer and
Others.

                  The Servicer and any director, officer, employee or agent of
the Servicer may rely on any document of any kind which it in good faith
reasonably believes to be genuine and to have been adopted or signed by the
proper authorities or persons respecting any matters arising hereunder. Subject
to the terms of Section 9.01 herein, the Servicer shall have no obligation to
appear with respect to, prosecute or defend any legal action which is not
incidental to the Servicer's duty to service the SBA Loans in accordance with
this Agreement.

                  Section 9.04  Servicer Not to Resign.

                  The Servicer shall not resign from the obligations and duties
hereby imposed on it except (i) by mutual consent of the Servicer, the SBA, the
Trustee and the Majority Certificateholders, or (ii) in connection with a
merger, conversion or consolidation permitted pursuant to Section 9.02 and with
the prior written consent of the SBA and written notice to the Rating Agency (in
which case the Person resulting from the merger, conversion or consolidation
shall be the successor of the Servicer), or (iii) in connection with an
assignment permitted pursuant to Section 9.02 and with the consent of the SBA
(in which case the Assignee shall be the successor of the Servicer), or (iv)
upon the determination that the Servicer's duties hereunder are no longer
permissible under applicable law or administrative determination and such
incapacity cannot be cured by the Servicer. Any such determination permitting
the resignation of the Servicer shall be evidenced by a written Opinion of
Counsel (who may be counsel for the Servicer) to such effect delivered to the
Trustee, the SBA and to each Certificateholder, which Opinion of Counsel shall
be in form and substance acceptable to the Trustee. No such resignation shall
become effective until a successor has assumed the Servicer's responsibilities
and obligations hereunder in accordance with Section 10.02.


                                      IX-3
<PAGE>   106

                                    ARTICLE X

                                     DEFAULT

                  Section 10.01  Events of Default.

                  (a) In case one or more of the following Events of Default by
the Servicer shall occur and be continuing, that is to say:

                           (i) (A) the failure by the Servicer to make any
                  required Servicing Advance, to the extent such failure
                  materially and adversely affects the interests of the
                  Certificateholders; (B) the failure by the Servicer to make
                  any required Monthly Advance to the extent such failure
                  materially and adversely affects the interests of the
                  Certificateholders; (C) the failure by the Servicer to remit
                  any Compensating Interest to the extent such failure
                  materially and adversely affects the interests of the
                  Certificateholders; or (D) any failure by the Servicer to
                  remit to Certificateholders, or to the Trustee for the benefit
                  of the Certificateholders, any payment required to be made
                  under the terms of this Agreement which continues unremedied
                  after the date upon which written notice of such failure,
                  requiring the same to be remedied, shall have been given to
                  the Servicer by the Trustee or to the Servicer and the Trustee
                  by any Certificateholder; or

                           (ii) failure by the Servicer or the Seller duly to
                  observe or perform, in any material respect, any other
                  covenants, obligations or agreements of the Servicer or the
                  Seller as set forth in this Agreement, which failure continues
                  unremedied for a period of 60 days after the date on which
                  written notice of such failure, requiring the same to be
                  remedied, shall have been given to the Servicer or the Seller,
                  as the case may be, by the Trustee or to the Servicer, or the
                  Seller, as the case may be, and the Trustee by any
                  Certificateholder; or

                           (iii) a decree or order of a court or agency or
                  supervisory authority having jurisdiction for the appointment
                  of a conservator or receiver or liquidator in any insolvency,
                  readjustment of debt, marshaling of assets and liabilities or
                  similar proceedings, or for the winding-up or liquidation of
                  its affairs, shall have been entered against the Servicer and
                  such decree


                                      X-1
<PAGE>   107

                  or order shall have remained in force, undischarged or
                  unstayed for a period of 60 days; or

                           (iv) the Servicer shall consent to the appointment of
                  a conservator or receiver or liquidator in any insolvency,
                  readjustment of debt, marshaling of assets and liabilities or
                  similar proceedings of or relating to the Servicer or of or
                  relating to all or substantially all of the Servicer's
                  property; or

                           (v) the Servicer shall admit in writing its inability
                  to pay its debts as they become due, file a petition to take
                  advantage of any applicable insolvency or reorganization
                  statute, make an assignment for the benefit of its creditors,
                  or voluntarily suspend payment of its obligations;

                                    (b)  then, and in each and every such case,
so long as an Event of Default shall not have been remedied, and in the case of
clause (i) above (except for clause (i)(B)), if such Event of Default shall not
have been remedied within 30 days after the Servicer has received notice of such
Event of Default, (x) with respect solely to clause (i)(B) above, if such
Monthly Advance is not made earlier than 4:00 p.m. New York time on the
Determination Date, the Trustee shall give immediate telephonic notice of such
failure to a Servicing Officer of the Servicer and, unless such failure is
cured, either by receipt of payment or receipt of evidence (e.g., a wire
reference number communicated by the sending bank) that such funds have been
sent, by 12:00 Noon New York time on the following Business Day, the Trustee
shall immediately assume, pursuant to Section 10.02 hereof, the duties of a
successor servicer; and (y) in the case of clauses (i)(A), (i)(C), (i)(D),
(iii), (iv) and (v), the Majority Certificateholders, by notice in writing to
the Servicer (except with respect to (iii), (iv) and (v) for which no notice is
required) may, in addition to whatever rights such Certificateholders may have
at law or equity including damages, injunctive relief and specific performance,
in each case immediately terminate all the rights and obligations of the
Servicer under this Agreement and in and to the SBA Loans and the proceeds
thereof, as Servicer. Upon such receipt by the Servicer of a second written
notice from the Majority Certificateholders stating that they or it intend to
terminate the Servicer as a result of such Event of Default, all authority and
power of the Servicer under this Agreement, whether with respect to the SBA
Loans or otherwise, shall, subject to Section 10.02 and the Multi-Party
Agreement, pass to and be vested in the Trustee and the Trustee is hereby
authorized and empowered to execute and deliver, on behalf of the Servicer, as
attorney-in-fact or otherwise, any and all documents and other instruments and
do or


                                      X-2
<PAGE>   108

cause to be done all other acts or things necessary or appropriate to effect the
purposes of such notice of termination, including, but not limited to, the
transfer and endorsement or assignment of the SBA Loans and related documents.
The Servicer agrees to cooperate with the Trustee in effecting the termination
of the Servicer's responsibilities and rights hereunder, including, without
limitation, the transfer to the Trustee for administration by it of all amounts
which shall at the time be credited by the Servicer to each Principal and
Interest Account or thereafter received with respect to the SBA Loans. The
Trustee shall provide notice to the SBA of any Event of Default and any actual
termination hereunder.

                  Section 10.02  Trustee to Act; Appointment of Successor

                  On and after the time of the Servicer's immediate termination,
or the Servicer's receipt of notice if required by Section 10.01, or at any time
if the Trustee receives the resignation of the Servicer evidenced by an Opinion
of Counsel pursuant to Section 9.04 or the Servicer is removed as Servicer
pursuant to this Article X, the Trustee shall be the successor in all respects
to the Servicer in its capacity as Servicer under this Agreement and the
transactions set forth or provided for herein and shall be subject to all the
responsibilities, duties and liabilities relating thereto placed on the Servicer
by the terms and provisions hereof; provided, however, that the Trustee shall
not be liable for any actions of any Servicer prior to it, and that the Trustee
shall not be obligated to make advances or payments pursuant to Sections 6.03,
6.10, 6.11 or 5.10 but only to the extent the Trustee determines reasonably and
in good faith that such advances would not be recoverable, such determination to
be evidenced with respect to each such advance by a certification of a
Responsible Officer of the Trustee. As compensation therefor, the Trustee shall
be entitled to all funds relating to the SBA Loans which the Servicer would have
been entitled to receive from the Principal and Interest Account pursuant to
Section 5.04 if the Servicer had continued to act as Servicer hereunder,
together with other servicing compensation in the form of assumption fees, late
payment charges or otherwise as provided in Sections 7.01 and 7.03 and shall be
entitled to the Servicing Fee and the Premium Protection Fee.

                  Notwithstanding the above, the Trustee shall, if it is unable
to so act or if the SBA so requests in writing to the Trustee, appoint, or
petition a court of competent jurisdiction to appoint, any established servicing
institution acceptable to the SBA including but not limited to the SBA and
satisfying the Rating Agency Condition that has a net worth of not less than
$15,000,000, and which is an approved SBA guaranteed lender in good standing,
operating pursuant to an effective Loan Guaranty


                                      X-3
<PAGE>   109

Agreement, as the successor to the Servicer hereunder in the assumption of all
or any part of the responsibilities, duties or liabilities of the Servicer
hereunder. Any collections received by the Servicer after removal or resignation
shall be endorsed by it to the Trustee and remitted directly to the Trustee or,
at the direction of the Trustee, to the successor servicer. As compensation, any
successor servicer (including, without limitation, the Trustee) so appointed
shall be entitled to receive all funds relating to the SBA Loans which the
Servicer would have been entitled to receive from the Principal and Interest
Account pursuant to Section 5.04 if the Servicer had continued to act as
Servicer hereunder, together with any other servicing compensation in the form
of assumption fees, late payment charges or otherwise as provided in Section
7.03 and shall be entitled to the Servicing Fee and the Premium Protection Fee.
In the event the Trustee is required to solicit bids as provided herein, the
Trustee shall solicit, by public announcement, bids from banks and mortgage
servicing institutions meeting the qualifications set forth above. Such public
announcement shall specify that the successor servicer shall be entitled to the
full amount of the aggregate Servicing Fees and Premium Protection Fees as
servicing compensation, together with the other servicing compensation in the
form of assumption fees, late payment charges or otherwise. Within thirty days
after any such public announcement, the Trustee shall negotiate and effect the
sale, transfer and assignment of the servicing rights and responsibilities
hereunder to the qualified party submitting the highest qualifying bid. The
Trustee shall deduct from any sum received by the Trustee from the successor to
the Servicer in respect of such sale, transfer and assignment all costs and
expenses of any public announcement and of any sale, transfer and assignment of
the servicing rights and responsibilities hereunder and the amount of any
unreimbursed Servicing Advances and Monthly Advances. After such deductions, the
remainder of such sum shall be paid by the Trustee as a servicing fee to the SBA
at the time of such sale, transfer and assignment to the Servicer's successor.
The Trustee and such successor shall take such action, consistent with this
Agreement, as shall be necessary to effectuate any such succession. The Servicer
agrees to cooperate with the Trustee and any successor servicer in effecting the
termination of the Servicer's servicing responsibilities and rights hereunder
and shall promptly provide the Trustee or such successor servicer, as
applicable, all documents and records reasonably requested by it to enable it to
assume the Servicer's functions hereunder and shall promptly also transfer to
the Trustee or such successor servicer, as applicable, all amounts which then
have been or should have been deposited in the Principal and Interest Account or
Spread Account by the Servicer or which are thereafter received with respect to
the SBA Loans. Neither the Trustee nor any other successor servicer shall be


                                      X-4
<PAGE>   110

held liable by reason of any failure to make, or any delay in making, any
distribution hereunder or any portion thereof caused by (i) the failure of the
Servicer to deliver, or any delay in delivering, cash, documents or records to
it, or (ii) restrictions imposed by any regulatory authority having jurisdiction
over the Servicer hereunder. No appointment of a successor to the Servicer
hereunder shall be effective until written notice of such proposed appointment
shall have been provided by the Trustee to each Certificateholder and the SBA
and the Trustee and the SBA shall have consented thereto. The Trustee shall not
resign as servicer until a successor servicer reasonably acceptable to the SBA
has been appointed.

                  Pending appointment of a successor to the Servicer hereunder,
the Trustee shall act in such capacity as hereinabove provided. In connection
with such appointment and assumption, the Trustee may make such arrangements for
the compensation of such successor out of payments on SBA Loans as it and such
successor shall agree; provided, however, that no such compensation shall be in
excess of that permitted the Servicer pursuant to Section 7.03 or otherwise as
provided in this Agreement. The Servicer, the Trustee and such successor shall
take such action, consistent with this Agreement, as shall be necessary to
effectuate any such succession.

                  Section 10.03  Waiver of Defaults.

                  The SBA may, or the Majority Certificateholders may on behalf
of all Certificateholders and subject to the consent of the SBA, which consent
may not be unreasonably withheld, and satisfaction of the Rating Agency
Condition, waive any events permitting removal of the Servicer pursuant to this
Article X; provided, however, that the Majority Certificateholders or the SBA
may not waive a default in making a required distribution on a Certificate
without the consent of the holder of such Certificate. Upon any waiver of a past
default, such default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been remedied for every purpose of this
Agreement. No such waiver shall extend to any subsequent or other default or
impair any right consequent thereto except to the extent expressly so waived.

                  Section 10.04. Control by Majority Certificateholders and
                                 Others.

                  The SBA may, or the Majority Certificateholders with the
consent of the SBA may, direct the time, method and place of conducting any
proceeding relating to the Trust Fund or the Certificates or for any remedy
available to the Trustee with respect to the Certificates or exercising any
trust or power


                                      X-5
<PAGE>   111

conferred on the Trustee with respect to the Certificates or the Trust Fund
provided that:

                           (i) such direction shall not be in conflict with any
                  rule of law or with this Agreement;

                           (ii) the Trustee shall have been provided with
                  indemnity satisfactory to it; and

                           (iii) the Trustee may take any other action deemed
                  proper by the Trustee which is not inconsistent with such
                  direction; provided, however, that the Trustee, as the case
                  may be, need not take any action which it determines might
                  involve it in liability or may be unjustly prejudicial to the
                  Certificateholders not so directing.


                                      X-6
<PAGE>   112
                                   ARTICLE XI

                                   TERMINATION

                  Section 11.01  Termination.

                  This Agreement shall terminate upon notice to the Trustee of
the earlier of the following events: (a) the final payment or other liquidation
of the last SBA Loan or the disposition of all property acquired upon
foreclosure or deed in lieu of foreclosure of any SBA Loan and the remittance of
all funds due thereunder, or (b) mutual consent of the Servicer and all
Certificateholders in writing; provided, however, that in no event shall the
Trust Fund established by this Agreement terminate later than twenty-one years
after the death of the last surviving lineal descendant of Joseph P. Kennedy,
late Ambassador of the United States to the Court of St. James, alive as of the
date hereof.

                  The Servicer may, at its option, terminate this Agreement on
any date on which the Pool Principal Balance is less than 5.0% of the sum of (i)
the Original Pool Principal Balance and (ii) the Original Pre-Funded Amount by
purchasing, on the next succeeding Remittance Date, all of the Unguaranteed
Interests in the SBA Loans and Foreclosed Properties at a price equal to the sum
of (i) 100% of the then outstanding Aggregate Class A, Class M and Class B
Certificate Principal Balances, and (ii) 30 days' interest thereon at the then
applicable Class A, Class M and Class B Benchmark Rates, as the case may be (the
"Termination Price"). Notwithstanding the prior sentence, if at the time the
Servicer determines to exercise such option the unsecured long-term debt
obligations of the Servicer are not rated at least Baa3 by Moody's, if such
Rating Agency is still rating the Certificates, the Servicer shall give such
Rating Agency prior written notice of the Servicer's determination to exercise
such option and shall not exercise such option, without the consent of each such
Rating Agency, prior to furnishing each such Rating Agency with an Opinion of
Counsel, in form and substance reasonably satisfactory to each such Rating
Agency, that the exercise of such option would not be deemed a fraudulent
conveyance by the Servicer.

                  Notice of any termination, specifying the Remittance Date upon
which the Trust Fund will terminate and that the Certificateholders shall
surrender their Certificates to the Trustee for payment of the final
distribution and cancellation shall be given promptly by the Servicer by letter
to Certificateholders mailed during the month of such final distribution before
the Determination Date in such month, specifying (i) the Remittance Date upon
which final payment of


                                      XI-1
<PAGE>   113

the Certificates will be made upon presentation and surrender of Certificates at
the office of the Trustee therein designated, (ii) the amount of any such final
payment and (iii) that the Record Date otherwise applicable to such Remittance
Date is not applicable, payments being made only upon presentation and surrender
of the Certificates at the office of the Trustee therein specified. The Servicer
shall give such notice to the Trustee therein specified. The Servicer shall give
such notice to the Trustee at the time such notice is given to
Certificateholders. Any obligation of the Servicer to pay amounts due to the
Trustee shall survive the termination of this Agreement.

                  In the event that all of the Certificateholders shall not
surrender their Certificates for cancellation within six months after the time
specified in the above-mentioned written notice, the Servicer shall give a
second written notice to the remaining Certificateholders to surrender their
Certificates for cancellation and receive the final distribution with respect
thereto and shall at the expense of the Trust Fund cause to be published once,
in the national edition of The Wall Street Journal notice that such money
remains unclaimed. If within six months after the second notice all of the
Certificates shall not have been surrendered for cancellation, the Trustee may
take appropriate steps, or may appoint an agent to take appropriate steps, to
contact the remaining Certificateholders concerning surrender of their
Certificates and the cost thereof shall be paid out of the funds and other
assets which remain subject hereto. If within the period then specified in the
escheat laws of the State of New York after the second notice all the
Certificates shall not have been surrendered for cancellation, the Seller shall
be entitled to all unclaimed funds and other assets which remain subject hereto
and the Trustee upon transfer of such funds shall be discharged of any
responsibility for such funds and the Certificateholders shall look to the
Seller for payment.

                  Section 11.02  Accounting Upon Termination of Servicer

                  Upon termination of the Servicer under Article X hereof, the
Servicer shall:

                  (a) deliver to its successor or, if none shall yet have been
appointed, to the Trustee the funds in any Principal and Interest Account;

                  (b) deliver to its successor or, if none shall yet have been
appointed, to the Trustee all SBA Files and related documents and statements
held by it hereunder and a SBA Loan portfolio computer diskette;


                                      XI-2
<PAGE>   114

                  (c) deliver to its successor or, if none shall yet have been
appointed, to the Trustee and, upon request, to the Certificateholders a full
accounting of all funds, including a statement showing the Monthly Payments
collected by it and a statement of moneys held in trust by it for the payments
or charges with respect to the SBA Loans; and

                  (d) execute and deliver such instruments and perform all acts
reasonably requested in order to effect the orderly and efficient transfer of
servicing of the SBA Loans to its successor and to more fully and definitively
vest in such successor all rights, powers, duties, responsibilities, obligations
and liabilities of the Servicer under this Agreement.


                                      XI-3
<PAGE>   115

                                   ARTICLE XII

                                   THE TRUSTEE

                  Section 12.01  Duties of Trustee.

                  The Trustee, prior to the occurrence of an Event of Default
and after the curing of all Events of Default which may have occurred,
undertakes to perform such duties and only such duties as are specifically set
forth in this Agreement. If an Event of Default has occurred and has not been
cured or waived, the Trustee shall exercise such of the rights and powers vested
in it by this Agreement, and use the same degree of care and skill in its
exercise as a prudent person would exercise or use under the circumstances in
the conduct of such person's own affairs.

                  The Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments furnished
to the Trustee which are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they
conform to the requirements of this Agreement, provided, however that the
Trustee shall not be responsible for the accuracy or content of any resolution,
certificate, statement, opinion, report, document, order or other instrument
furnished by the Servicer or the Seller hereunder. If any such instrument is
found not to conform to the requirements of this Agreement in a material manner,
the Trustee shall take action as it deems appropriate to have the instrument
corrected, and if the instrument is not corrected to the Trustee's satisfaction,
the Trustee will provide notice thereof to the Certificateholders and the
Servicer.

                  No provision of this Agreement shall be construed to relieve
the Trustee from liability for its own negligent action, its own negligent
failure to act or its own willful misconduct or bad faith; provided, however,
that:

                  (a) Prior to the occurrence of an Event of Default, and after
the curing of all such Events of Default which may have occurred, the duties and
obligations of the Trustee shall be determined solely by the express provisions
of this Agreement, the Trustee shall not be liable except for the performance of
such duties and obligations as are specifically set forth in this Agreement, no
implied covenants or obligations shall be read into this Agreement against the
Trustee and, in the absence of bad faith on the part of the Trustee, the Trustee
may conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon any certificates or opinions


                                     XII-1
<PAGE>   116

furnished to the Trustee and conforming to the requirements of this Agreement;

                  (b) The Trustee shall not be personally liable for an error of
judgment made in good faith by officers of the Trustee, unless it shall be
proved that the Trustee was negligent in ascertaining the pertinent facts;

                  (c) The Trustee shall not be personally liable with respect to
any action taken, suffered or omitted to be taken by it in good faith in
accordance with the direction of the Majority Certificateholders, relating to
the time, method and place of conducting any proceeding for any remedy available
to the Trustee, or exercising any trust or power conferred upon the Trustee,
under this Agreement;

                  (d) In the absence of actual knowledge of an officer of the
Trustee in its Corporate Trust Office of an Event of Default, the Trustee shall
not be required to take notice or be deemed to have notice or knowledge of any
default or Event of Default unless the Trustee shall be specifically notified in
writing by the Servicer or any of the Certificateholders. In the absence of
actual knowledge or receipt of such notice, the Trustee may conclusively assume
that there is no default or Event of Default; and

                  (e) The Trustee shall not be required to expend or risk its
own funds or otherwise incur financial liability for the performance of any of
its duties hereunder or the exercise of any of its rights or powers if there is
reasonable ground for believing that the repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it.

                  Section 12.02     Certain Matters Affecting the Trustee.

                  (a)      Except as otherwise provided in Section 12.01:

                           (i) The Trustee may request and rely and shall be
                  protected in acting or refraining from acting upon any
                  resolution, Officer's Certificate, certificate of auditors or
                  any other certificate, statement, instrument, opinion, report,
                  notice, request, consent, order, appraisal, bond or other
                  paper or document believed by it to be genuine and to have
                  been signed or presented by the proper party or parties;

                      (ii) The Trustee may consult with counsel and any opinion
                  of counsel shall be full and complete authorization and
                  protection in respect of any action


                                     XII-2
<PAGE>   117

                  taken or suffered or omitted by it hereunder in good faith and
                  in accordance with such opinion of counsel;

                     (iii) The Trustee shall be under no obligation to exercise
                  any of the trusts or powers vested in it by this Agreement or
                  to institute, conduct or defend by litigation hereunder or in
                  relation hereto at the request, order or direction of the
                  Certificateholders, pursuant to the provisions of this
                  Agreement, unless such Certificateholders shall have offered
                  to the Trustee reasonable security or indemnity against the
                  costs, expenses and liabilities which may be incurred therein
                  or thereby; nothing contained herein shall, however, relieve
                  the Trustee of the obligation, upon the occurrence of an Event
                  of Default (which has not been cured), to exercise such of the
                  rights and powers vested in it by this Agreement, and to use
                  the same degree of care and skill in its exercise as a prudent
                  person would exercise or use under the circumstances in the
                  conduct of such person's own affairs;

                           (iv) The Trustee shall not be personally liable for
                  any action taken, suffered or omitted by it in good faith and
                  reasonably believed by it to be authorized or within the
                  discretion or rights or powers conferred upon it by this
                  Agreement;

                           (v) Prior to the occurrence of an Event of Default
                  hereunder and after the curing of all Events of Default which
                  may have occurred, the Trustee shall not be bound to make any
                  investigation into the facts or matters stated in any
                  resolution, certificate, statement, instrument, opinion,
                  report, notice, request, consent, order, approval, bond or
                  other paper or document, unless requested in writing to do so
                  by Holders of Certificates evidencing Percentage Interests
                  aggregating not less than 25% provided, however, that if the
                  payment within a reasonable time to the Trustee of the costs,
                  expenses or liabilities likely to be incurred by it in the
                  making of such investigation is, in the opinion of the
                  Trustee, not reasonably assured to the Trustee by the security
                  afforded to it by the terms of this Agreement, the Trustee may
                  require reasonable indemnity against such expense or liability
                  as a condition to taking any such action. The reasonable
                  expense of every such examination shall be paid by the
                  Servicer or, if paid by the Trustee, shall be repaid by the
                  Servicer upon demand from the Servicer's own funds;


                                     XII-3
<PAGE>   118

                           (vi) The right of the Trustee to perform any
                  discretionary act enumerated in this Agreement shall not be
                  construed as a duty, and the Trustee shall not be answerable
                  for other than its negligence or willful misconduct or bad
                  faith in the performance of such act;

                           (vii) The Trustee shall not be required to give any
                  bond or surety in respect of the execution of the trust
                  created hereby or the powers granted hereunder;

                           (viii) The Trustee may execute any of the trusts or
                  powers hereunder or perform any duties hereunder either
                  directly or by or through agents or attorneys; and

                           (ix) In the event that the Trustee is also acting as
                  Paying Agent, Certificate Registrar or Spread Account
                  Custodian, the rights and protections afforded to the Trustee
                  shall be afforded to the Trustee in such capacity as Paying
                  Agent, Certificate Registrar or Spread Account Custodian, as
                  the case may be.

                  Section 12.03   Trustee Not Liable for Certificates
                                  or SBA Loans.

                  The recitals contained herein and in the Certificates (other
than the certificate of authentication on the Certificates) shall be taken as
the statements of the Servicer, and the Trustee assumes no responsibility for
their correctness. The Trustee makes no representations as to the validity or
sufficiency of this Agreement or of the Certificates or of any SBA Loan or
related document. The Trustee shall not be accountable for the use or
application by the Servicer of any of the Certificates or of the proceeds of
such Certificates, or for the use or application of any funds paid to the
Servicer in respect of the SBA Loans or deposited in or withdrawn from the
Principal and Interest Account by the Servicer. The Trustee shall not be
responsible for the legality or validity of the Agreement or the validity,
priority, perfection or sufficiency of the security for the Certificates issued
or intended to be issued hereunder.

                  Section 12.04  Trustee May Own Certificates.

                  The Trustee in its individual or any other capacity may become
the owner or pledgee of Certificates with the same rights it would have if it
were not Trustee, and may otherwise deal with the parties hereto.


                                     XII-4
<PAGE>   119

                  Section 12.05  Servicer To Pay Trustee's Fees
                                 and Expenses.

                  The Servicer covenants and agrees to pay to the Trustee from
time to time, and the Trustee shall be entitled to, reasonable compensation
(which shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust) for all services rendered by it
in the execution of the trusts hereby created and in the exercise and
performance of any of the powers and duties hereunder of the Trustee, and the
Servicer will pay or reimburse the Trustee upon its request for all reasonable
expenses, disbursements and advances incurred or made by the Trustee in
accordance with any of the provisions of this Agreement (including the
reasonable compensation and the expenses and disbursements of its counsel and of
all persons not regularly in its employ) except any such expense, disbursement
or advance as may arise from its negligence or bad faith, provided that the
Trustee shall have no lien on the Trust Fund for the payment of its fees and
expenses. To the extent that actual fees and expenses of the Trustee exceed the
amount available for payment thereof on deposit in the Expense Account as of the
date such fees and expenses are due and payable, the Servicer shall reimburse
the Trustee for such shortfall out of its own funds without reimbursement
therefor, except as provided in Section 6.03. The Trustee and any director,
officer, employee or agent of the Trustee and the Spread Account Custodian and
any director, officer, employee or agent of the Spread Account Custodian shall
be indemnified by the Servicer and held harmless against any loss, liability or
expense (i) incurred in connection with any legal action relating to this
Agreement or the Certificates, other than any loss, liability or expense
incurred by reason of willful misfeasance, bad faith or negligence in the
performance of duties hereunder or by reason of reckless disregard of
obligations and duties hereunder, and (ii) resulting from any error in any tax
or information return prepared by the Servicer. The obligations of the Servicer
under this Section 12.05 shall survive payment of the Certificates, and shall
extend to any co-trustee appointed pursuant to this Article XII.

                  Section 12.06  Eligibility Requirements for Trustee.

                  The Trustee hereunder shall at all times be (i) a national
banking association or banking corporation or trust company organized and doing
business under the laws of any state or the United States of America, (ii)
authorized under such laws to exercise corporate trust powers, (iii) having a
combined capital and surplus of at least $30,000,000, (iv) having unsecured and
unguaranteed long-term debt obligations rated at least Baa3 by Moody's or such
other rating as is acceptable to the SBA, (v) is subject to supervision or
examination by federal


                                     XII-5
<PAGE>   120

or state authority, (vi) is an approved SBA guaranteed lender in good standing,
operating pursuant to an effective Loan Guaranty Agreement, and (vii) is
reasonably acceptable to the SBA. If such banking association publishes reports
of condition at least annually, pursuant to law or to the requirements of the
aforesaid supervising or examining authority, then for the purposes of this
Section its combined capital and surplus shall be deemed to be as set forth in
its most recent report of condition so published. In case at any time the
Trustee shall cease to be eligible in accordance with the provisions of this
Section, the Trustee shall (a) give prompt notice to the SBA and each
Certificateholder that it has so ceased to be eligible to be the Trustee and (b)
resign, upon the request of the SBA or the Majority Certificateholders, in the
manner and with the effect specified in Section 12.07.

                  Section 12.07 Resignation and Removal of the Trustee.

                  The Trustee may at any time resign and be discharged from the
trusts hereby created by giving written notice thereof to the Servicer, the SBA,
and to all Certificateholders. Upon receiving such notice of resignation, the
Servicer shall with the consent of the SBA promptly appoint a successor trustee
by written instrument, in duplicate, which instrument shall be delivered to the
resigning Trustee and to the successor trustee. A copy of such instrument shall
be delivered to the Certificateholders by the Servicer. Unless a successor
trustee shall have been so appointed and have accepted appointment within 60
days after the giving of such notice of resignation, the resigning Trustee may
petition any court of competent jurisdiction for the appointment of a successor
trustee. If the resigning Trustee fails to petition an appropriate court, the
SBA may, after such 60 day period, petition any court of competent jurisdiction
for the appointment of a successor trustee.

                  If at any time the Trustee shall cease to be eligible in
accordance with the provisions of Section 12.06 and shall fail to resign after
written request therefor by the Servicer, or if at any time the Trustee shall
become incapable of acting, or shall be adjudged bankrupt or insolvent, or a
receiver of the Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, then the
Servicer may remove the Trustee and appoint, subject to the approval of the SBA,
a successor trustee by written instrument, in duplicate, which instrument shall
be delivered to the Trustee so removed and to the successor trustee. A copy of
such instrument shall be delivered to the Certificateholders and the SBA by the
Servicer.


                                     XII-6
<PAGE>   121

                  The Majority Certificateholders with the consent of the SBA,
which consent will not be unreasonably withheld, and upon satisfaction of the
Rating Agency Condition, or the SBA may at any time remove the Trustee and
appoint a successor trustee by written instrument or instruments, in triplicate,
signed by such Holders or their attorneys-in-fact duly authorized, one complete
set of which instruments shall be delivered to the Servicer, one complete set to
the Trustee so removed and one complete set to the successor Trustee so
appointed.

                  Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section shall become
effective upon acceptance of appointment by the successor trustee as provided in
Section 12.08.

                  Section 12.08  Successor Trustee.

                  Any successor trustee appointed as provided in Section 12.07
shall execute, acknowledge and deliver to the Servicer and to its predecessor
trustee an instrument accepting such appointment hereunder, and thereupon the
resignation or removal of the predecessor trustee shall become effective and
such successor trustee, without any further act, deed or conveyance, shall
become fully vested with all the rights, powers, duties and obligations of its
predecessor hereunder, with the like effect as if originally named as trustee
herein. The predecessor trustee shall deliver to the successor trustee all SBA
Files and related documents and statements held by it hereunder, and the
Servicer and the predecessor trustee shall execute and deliver such instruments
and do such other things as may reasonably be required for more fully and
certainly vesting and confirming in the successor trustee all such rights,
powers, duties and obligations.

                  No successor trustee shall accept appointment as provided in
this Section unless at the time of such acceptance such successor trustee shall
be eligible under the provisions of Section 12.06.

                  Upon acceptance of appointment by a successor trustee as
provided in this Section, the Servicer shall mail notice of the succession of
such trustee hereunder to all Holders of Certificates at their addresses as
shown in the Certificate Register. If the Servicer fails to mail such notice
within 10 days after acceptance of appointment by the successor trustee, the
successor trustee shall cause such notice to be mailed at the expense of the
Servicer.


                                     XII-7
<PAGE>   122

                  Section 12.09  Merger or Consolidation of Trustee.

                  Any Person into which the Trustee may be merged or converted
or with which it may be consolidated or any corporation or national banking
association resulting from any merger, conversion or consolidation to which the
Trustee shall be a party, or any corporation or national banking association
succeeding to the business of the trustee, shall be the successor of the Trustee
hereunder, provided such corporation or national banking association shall be
eligible under the provisions of Section 12.06, without the execution or filing
of any paper or any further act on the part of any of the parties hereto,
anything herein to the contrary notwithstanding. The Trustee shall send notice
of any such merger or consolidation to the Rating Agency.

                  Section 12.10  Appointment of Co-Trustee or Separate
                                 Trustee.

                  Notwithstanding any other provisions hereof, at any time, for
the purpose of meeting any legal requirements of any jurisdiction in which any
part of the Trust Fund or property securing the same may at the time be located,
the Servicer and the Trustee acting jointly shall have the power and shall
execute and deliver all instruments to appoint one or more Persons approved by
the Trustee and the SBA pursuant to the procedure set forth below, to act as
co-trustee or co-trustees, jointly with the Trustee, or separate trustee or
separate trustees, of all or any part of the Trust Fund, and to vest in such
Person or Persons, in such capacity, such title to the Trust Fund, or any part
thereof, and, subject to the other provisions of this Section 12.10, such
powers, duties, obligations, rights and trusts as the Servicer and the Trustee
may consider necessary or desirable. If the Servicer shall not have joined in
such appointment within 15 days after the receipt by it of a request so to do,
or in case an Event of Default shall have occurred and be continuing, the
Trustee alone shall have the power to make such appointment. No co-trustee or
separate trustee hereunder shall be required to meet the terms of eligibility as
a successor trustee under Section 12.06 hereunder. No notice to Holders of
Certificates of the appointment of co-trustee(s) or separate trustee(s) shall be
required under Section 12.08 hereof. The Trustee shall notify the SBA prior to
the appointment of any co-trustee(s) or separate trustee(s) and the SBA shall
have ten Business Days from its receipt of such notice to notify the Trustee
whether it, in its reasonable judgment, disapproves of such co-trustee(s) or
separate trustee(s). If the SBA does not notify the Trustee within such time
frame, it will be deemed to have approved such co-trustee(s) or separate
trustee(s). If the SBA notifies the Trustee within such time frame that it, in
its


                                     XII-8
<PAGE>   123

reasonable judgment, disapproves of such co-trustee(s) or separate trustee(s)
(which notice shall be accompanied by the name(s) of the SBA's alternative
proposed co-trustee(s) or separate trustee(s)), such appointments shall not be
effective.

                  In the case of any appointment of a co-trustee or separate
trustee pursuant to this Section 12.10, all rights, powers, duties and
obligations conferred or imposed upon the trustee shall be conferred or imposed
upon and exercised or performed by the Trustee and such separate trustee or
co-trustee jointly except to the extent that under any law of any jurisdiction
in which any particular act or acts are to be performed (whether as Trustee
hereunder or as successor to the Servicer hereunder), the Trustee shall be
incompetent or unqualified to perform such act or acts, in which event such
rights, powers, duties and obligations (including the holding of title to the
Trust Fund or any portion thereof in any such jurisdiction) shall be exercised
and performed by such separate trustee or co-trustee at the direction of the
Trustee.

                  Any notice, request or other writing given to the Trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article XII. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Trustee or separately, as may be provided therein, subject to all the provisions
of this Agreement, specifically including every provision of this Agreement
relating to the conduct of, affecting the liability of, or affording protection
to, the Trustee. Every such instrument shall be filed with the Trustee.

                  Any separate trustee or co-trustee may, at any time,
constitute the Trustee, its agent or attorney-in-fact, with full power and
authority, to the extent not prohibited by law, to do any lawful act under or in
respect of this Agreement on its behalf and in its name. The Trustee shall not
be responsible for any action or inaction of any such separate trustee or
co-trustee. If any separate trustee or co-trustee shall die, become incapable of
acting, resign or be removed, all of its estates, properties, rights, remedies
and trusts shall vest in and be exercised by the Trustee, to the extent
permitted by law, without the appointment of a new or successor trustee.


                                     XII-9
<PAGE>   124

                  Section 12.11  Authenticating Agent.

                  Upon the request of the Servicer, the Trustee shall appoint an
Authenticating Agent, initially, HSBC Bank USA, with power to act on the
Trustee's behalf and subject to its direction in the authentication and delivery
of the Certificates in connection with transfers and exchanges under Section
4.02, as fully to all intents and purposes as though the Authenticating Agent
had been expressly authorized by that Section to authenticate and deliver
Certificates. For all purposes of this Agreement, the authentication and
delivery of Certificates by the Authenticating Agent pursuant to this Section
shall be deemed to be the authentication and delivery of Certificates by the
Trustee. Such Authenticating Agent shall at all times be a Person meeting the
requirements for the Trustee set forth in Section 12.06.

                  Any corporation or national banking association into which any
Authenticating Agent may be merged or converted or with which it may be
consolidated, or any corporation or national banking association resulting from
any merger, consolidation or conversion to which any Authenticating Agent shall
be a party, or any corporation or national banking association succeeding to the
corporate trust business of any Authenticating Agent, shall be the successor of
the Authenticating Agent hereunder, if such successor corporation or national
banking association is otherwise eligible under this Section, without the
execution or filing of any further act on the part of the parties hereto or the
Authenticating Agent or such successor corporation.

                  Any Authenticating Agent may at any time resign by giving
notice of resignation to the Trustee and the Servicer. The Trustee may at any
time terminate the agency of any Authenticating Agent by giving written notice
of termination to such Authenticating Agent and the Servicer. Upon receiving
such a notice of resignation or upon such a termination, or in case at any time
any Authenticating Agent shall cease to be eligible under this Section, the
Trustee shall promptly appoint a successor Authenticating Agent and shall give
written notice of such appointment to all Certificateholders as their names and
addresses appear on the Certificate Register. The Servicer agrees to pay to the
Authenticating Agent from time to time reasonable compensation for its services.
The provisions of Sections 4.04 and 12.03 shall be applicable to any
Authenticating Agent.

                  Section 12.12  Tax Returns and Reports.

                  The Trustee, upon request, will furnish the Servicer with all
such information as may be reasonably required in


                                     XII-10
<PAGE>   125

connection with the Servicer's preparation of all Tax Returns of the Trust Fund
and, upon request within five (5) Business Days after its receipt thereof, shall
(i) sign on behalf of the Trust Fund any Tax Return that the Trustee is required
to sign pursuant to applicable federal, state or local tax laws, and (ii) cause
such Tax Return to have been returned to the Servicer for filing.

                  The Servicer shall prepare and file or cause to be filed with
the Internal Revenue Service Federal tax information returns with respect to the
Trust Fund and the Certificates containing such information and at the times and
in the manner as may be required by the Code or applicable Treasury regulations,
and shall furnish to each Holder of Certificates at any time during the calendar
year for which such returns or reports are made such statements or information
at the times and in the manner as may be required thereby. The Trustee shall
sign all tax information returns filed pursuant to this Section and any other
returns as may be required by the Code, and in doing so shall rely entirely
upon, and shall have no liability for information provided by, or calculations
provided by, the Servicer.

                  Section 12.13  Protection of Trust Fund.

                  (a) The Trustee will hold the Trust Fund and such other assets
as may from time to time be deposited with it hereunder in trust for the benefit
of the Holders and the SBA and at the request of the Seller or the SBA will from
time to time execute and deliver all such supplements and amendments hereto
pursuant to Section 13.02 hereof and all instruments of further assurance and
other instruments, and will take such other action upon such request as it deems
reasonably necessary or advisable, to:

                           (i) more effectively hold in trust all or any portion
                  of the Trust Fund or such other assets;

                           (ii) perfect, publish notice of, or protect the
                  validity of any grant made or to be made by this Agreement;

                           (iii) enforce any of the SBA Loans; or

                           (iv) preserve and defend title to the Trust Fund and
                  the rights of the Trustee, and the ownership interests of the
                  Certificateholders represented thereby, in such Trust Fund
                  against the claims of all Persons and parties.


                                     XII-11
<PAGE>   126

                  The Trustee shall send copies of any request received from the
Seller or the SBA to take any action pursuant to this Section 12.13 to the
Holders.

                  (b) Subject to Article X hereof, the Trustee shall have the
power to enforce, and shall enforce the obligations of the other parties to this
Agreement by action, suit or proceeding at law or equity, and shall also have
the power to enjoin, by action or suit in equity, any acts or occurrences which
may be unlawful or in violation of the rights of the Holders; provided, however,
that nothing in this Section 12.13 shall require any action by the Trustee
unless the Trustee shall first (i) have been furnished indemnity satisfactory to
it and (ii) when required by this Agreement, have been requested to take such
action by the Majority Certificateholders, the SBA or the Seller in accordance
with the terms of this Agreement.

                  (c) The Trustee shall execute any instrument required pursuant
to this Section so long as such instrument does not conflict with this Agreement
or with the Trustee's fiduciary duties.

                  Section 12.14  Representations, Warranties and Covenants of
Trustee.

                  The Trustee hereby makes the following representations,
warranties and covenants on which the Seller, the Servicer, the SBA and the
Certificateholders shall rely:

                  (a) The Trustee is a banking corporation and trust company
duly organized, validly existing and in good standing under the laws of the
State of New York.

                  (b) The Trustee has full power, authority and legal right to
execute, deliver and perform this Agreement, and shall have taken all necessary
action to authorize the execution, delivery and performance by it of this
Agreement.

                  (c) The execution, delivery and performance by the Trustee of
this Agreement shall not (i) violate any provision of any law or any order,
writ, judgment or decree of any court, arbitrator or governmental authority
applicable to the Trustee or any of its assets, (ii) violate any provision of
the corporate charter or By-laws of the Trustee or (iii) violate any provision
of, or constitute, with or without notice or lapse of time, a default under, or
result in the creation or imposition of any lien on any properties included in
the Trust Fund pursuant to the provisions of, any mortgage, indenture, contract,
agreement or other undertaking to which it is a party, which violation, default
or lien could reasonably be expected to materially and


                                     XII-12
<PAGE>   127

adversely affect the Trustee's performance or ability to perform its duties
under this Agreement or the transactions contemplated in this Agreement.

                  (d) The execution, delivery and performance by the Trustee of
this Agreement shall not require the authorization, consent or approval of, the
giving of notice to, the filing or registration with or the taking of any other
action in respect of any governmental authority or agency regulating the banking
and corporate trust activities of the Trustee.

                  (e) This Agreement has been duly executed and delivered by the
Trustee and constitutes the legal, valid and binding agreement of the Trustee,
enforceable in accordance with its terms, subject to the effect of bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally or the application of equitable principles
in any proceeding, whether at law or in equity. The Trustee hereby agrees and
covenants that it will not at any time in the future, deny that this Agreement
constitutes the legal, valid and binding agreement of the Trustee.

                  (f) The Trustee shall not take any action, or fail to take any
action, if such action or failure to take action will materially interfere with
the enforcement of any rights of the SBA or the Certificateholders under this
Agreement or the Certificates.

                  (g) The Trustee will comply at all times with the provisions
of the SBA Rules and Regulations in respect of its activities concerning the SBA
Loans, and will at all times hold an effective Loan Guaranty Agreement.


                                     XII-13
<PAGE>   128

                                  ARTICLE XIII

                            MISCELLANEOUS PROVISIONS

                  Section 13.01  Acts of Certificateholders

                  Except as otherwise specifically provided herein, whenever
Certificateholder action, consent or approval is required under this Agreement,
such action, consent or approval shall be deemed to have been taken or given on
behalf of, and shall be binding upon, all Certificateholders if the Majority
Certificateholders agree to take such action or give such consent or approval.

                  Section 13.02  Amendment.

                  (a) This Agreement may be amended from time to time by the
Seller, the Servicer and the Trustee by written agreement, upon the prior
written consent of the SBA, without the notice to or consent of the
Certificateholders, to cure any ambiguity, to correct or supplement any
provisions herein, to comply with any changes in the Code, or to make any other
provisions with respect to matters or questions arising under this Agreement
which shall not be inconsistent with the provisions of this Agreement; provided,
however, that such action shall not, as evidenced by an Opinion of Counsel
delivered to the Trustee, adversely affect the interests of any
Certificateholder or any other party and further provided that no such amendment
shall reduce in any manner the amount of, or delay the timing of, any amounts
received on SBA Loans which are required to be distributed on any Certificate
without the consent of the Holder of such Certificate, or change the rights or
obligations of any other party hereto without the consent of such party.

                  (b) This Agreement may be amended from time to time by the
Seller, the Servicer, the Trustee and the Majority Certificateholders, upon the
prior written consent of the SBA, for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Agreement or
of modifying in any manner the rights of the Holders; provided, however, that no
such amendment shall reduce in any manner the amount of, or delay the timing of,
any amounts which are required to be distributed on any Certificate without the
consent of the Holder of such Certificate or reduce the percentage of Holders
which are required to consent to any such amendment without the consent of the
Holders of 100% of the Certificates affected thereby and, provided further, that
no amendment affecting only one class of Certificates shall require the approval
of Holders of Certificates of the other Class.


                                     XIII-1
<PAGE>   129

                  (c) It shall not be necessary for the consent of Holders under
this Section to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent shall approve the substance thereof.

                  Section 13.03  Recordation of Agreement.

                  To the extent permitted by applicable law, this Agreement is
subject to recordation in all appropriate public offices for real property
records in all of the counties or other comparable jurisdictions in which any or
all of the properties subject to the Mortgages are situated, and in any other
appropriate public recording office or elsewhere, such recordation to be
effected by the Servicer at the Certificateholders' expense on direction of the
Majority Certificateholders, but only when accompanied by an Opinion of Counsel
to the effect that such recordation materially and beneficially affects the
interests of the Certificateholders or is necessary for the administration or
servicing of the SBA Loans.

                  Section 13.04  Duration of Agreement.

                  This Agreement shall continue in existence and effect until
terminated as herein provided.

                  SECTION 13.05  GOVERNING LAW.

                  EXCEPT TO THE EXTENT INCONSISTENT WITH FEDERAL LAW, IN WHICH
CASE FEDERAL LAW WILL GOVERN, THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND REMEDIES
OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS,
WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.

                  Section 13.06  Notices.

                  All demands, notices and communications hereunder shall be in
writing and shall be deemed to have been duly given if personally delivered at
or mailed by overnight mail, certified mail or registered mail, postage prepaid,
to (i) in the case of the Bank, First International Bank, National Association,
280 Trumbull Street, Hartford, Connecticut 06103, Attention: Theodore Horan, or
such other addresses as may hereafter be furnished to the Certificateholders in
writing by the Bank, (ii) in the case of the Trustee, HSBC Bank USA, 140
Broadway, New York, New York 10005, 12th Floor, Attention: Corporate Trust
Department, (iii) in the case of the Certificateholders, as set forth in the
Certificate Register, (iv) in the case of Moody's,


                                     XIII-2
<PAGE>   130

to Moody's Investors Service, ABS Monitoring Department, 99 Church Street, 4th
Floor, New York, New York 10007, and (v) in the case of the SBA, the United
States Small Business Administration, 409 Third Street, S.W., Washington, D.C.
20416, Attention: Associate Administrator for Financial Assistance. Any such
notices shall be deemed to be effective with respect to any party hereto upon
the receipt of such notice by such party, except that notices to the
Certificateholders shall be effective upon mailing or personal delivery.

                  Section 13.07  Severability of Provisions.

                  If any one or more of the covenants, agreements, provisions or
terms of this Agreement shall be held invalid for any reason whatsoever, then
such covenants, agreements, provisions or terms shall be deemed severable from
the remaining covenants, agreements, provisions or terms of this Agreement and
shall in no way affect the validity or enforceability of the other covenants,
agreements, provisions or terms of this Agreement.

                  Section 13.08  No Partnership.

                  Nothing herein contained shall be deemed or construed to
create a co-partnership or joint venture between the parties hereto and the
services of the Servicer shall be rendered as an independent contractor and not
as agent for the Certificateholders.

                  Section 13.09  Counterparts.

                  This Agreement may be executed in one or more counterparts and
by the different parties hereto on separate counterparts, each of which, when so
executed, shall be deemed to be an original; such counterparts, together, shall
constitute one and the same agreement.

                  Section 13.10  Permitted Successors and Assigns.

                  This Agreement shall inure to the benefit of and be binding
upon the Seller and the Servicer, the Trustee and the Certificateholders and
their respective permitted successors and assigns.

                  Section 13.11  Headings.

                  The headings of the various sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed to be
part of this Agreement.


                                     XIII-3
<PAGE>   131

                  Section 13.12     Paying Agent.

                  The Trustee hereby appoints HSBC Bank USA as Paying Agent. The
Trustee may appoint one or more other Paying Agents or successor Paying Agents
meeting the eligibility requirements of a Trustee set forth in Section 12.06
(i), (ii), (iii), (iv), (v) and (vii) hereof.

                  Each Paying Agent, immediately upon such appointment, shall
signify its acceptance of the duties and obligations imposed upon it by this
Agreement by written instrument of acceptance deposited with the Trustee.

                  Each such Paying Agent other than the Trustee shall execute
and deliver to the Trustee an instrument in which such Paying Agent shall agree
with the Trustee, subject to the provisions of Section 6.06, that such Paying
Agent will:

                  (a) allocate all sums received for distribution to the Holders
of Certificates for which it is acting as Paying Agent on each Remittance Date
among such Holders in the proportion specified by the Trustee; and

                  (b) hold all sums held by it for the distribution of amounts
due with respect to the Certificates in trust for the benefit of the Holders
entitled thereto until such sums shall be paid to such Holders or otherwise
disposed of as herein provided and pay such sums to such Persons as herein
provided.

                  Any Paying Agent other than the Trustee may at any time resign
and be discharged of the duties and obligations created by this Agreement by
giving at least sixty (60) days written notice to the Trustee. Any such Paying
Agent may be removed at any time by an instrument filed with such Paying Agent
signed by the Trustee.

                  In the event of the resignation or removal of any Paying Agent
other than the Trustee such Paying Agent shall pay over, assign and deliver any
moneys held by it as Paying Agent to its successor, or if there be no successor,
to the Trustee.

                  Upon the appointment, removal or notice of resignation of any
Paying Agent, the Trustee shall notify the Certificateholders by mailing notice
thereof to their addresses appearing on the Certificate Register.

                  Section 13.13  Notification to Rating Agency.

                  The Trustee shall give prompt notice to the Rating Agency of
the occurrence of any of the following events of which


                                     XIII-4
<PAGE>   132

it has received notice: (1) any modification or amendment to this Agreement, (2)
any change of the Trustee, the Servicer or Paying Agent, (3) any Event of
Default or waiver of an Event of Default, (4) that any superior lienholder has
accelerated or intends to accelerate the obligations secured by a Prior Lien,
and (5) the final payment of all the Certificates. The Servicer shall promptly
deliver to the Rating Agency a copy of each of the Servicer's Certificates.
Further, the Servicer shall give prompt notice to the Rating Agency if the
Servicer or any of its affiliates acquire any Certificates.

                  Section 13.14  Third Party Rights

                  The Trustee, the FTA, the Spread Account Custodian and the
Servicer agree that the SBA shall be deemed a third-party beneficiary of this
Agreement entitled to all the rights and benefits set forth herein as fully as
if it were a party hereto.

                  Section 13.15  Inconsistencies

                  If any provision of this Agreement is inconsistent with any
provision in the Multi-Party Agreement, the provision of the Multi-Party
Agreement shall control.


                                     XIII-5
<PAGE>   133

                  IN WITNESS WHEREOF, the Bank and the Trustee have caused their
names to be signed hereto by their respective officers thereunto duly authorized
as of the day and year first above written.

                                     FIRST INTERNATIONAL BANK, NATIONAL
                                     ASSOCIATION, as Seller and Servicer


                                     By:   /s/Leslie Galbraith
                                     Name:  Leslie Galbraith
                                     Title: President



                                     HSBC BANK USA,
                                        as Trustee


                                     By:  /s/Susan Barstock
                                     Name:  Susan Barstock
                                     Title: Assistant Vice President


                                     XIII-6
<PAGE>   134

                           Acceptance of HSBC Bank USA

                  HSBC Bank USA hereby accepts its appointment under the within
instrument to serve as initial Authenticating Agent, Certificate Registrar and
Paying Agent. In connection therewith, HSBC Bank USA agrees to be bound by all
applicable provisions of such instrument.


                                       HSBC BANK USA, as initial
                                       Authenticating Agent, Certificate
                                       Registrar and Paying Agent



                                       By:  /s/Susan Barstock
                                       Name:  Susan Barstock
                                       Title: Assistant Vice President


                                     XIII-7
<PAGE>   135


STATE OF NEW YORK )
                   : ss.:
COUNTY OF NEW YORK)

                  On the 17th day of June, 1999 before me, a Notary Public in
and for said State, personally appeared Susan Barstock known to me to be an
officer of the Trustee, the trust company that executed the within instrument,
and also known to me to be the person who executed it on behalf of said banking
corporation, and acknowledged to me that such banking corporation executed the
within instrument.

                  IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.



                                       /s/ Amanda Scuder
                                              Notary Public

                                       My Commission expires 11/24/99


                                      P-1
<PAGE>   136

STATE OF Connecticut )
                    : ss.:
COUNTY OF Hartford )

                  On the 16th day of June, 1999 before me, a Notary Public in
and for said State, personally appeared Leslie Galbraith known to me to be the
President of First International Bank, National Association, the corporation
that executed the within instrument as seller and servicer, and also known to me
to be the person who executed it on behalf of said corporation, and acknowledged
to me that such corporation executed the within instrument.

                  IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.



                                         /s/ Neal Chorney
                                                Notary Public


                                         My Commission expires 2/28/00


                                      P-2


<PAGE>   1
                                                                 EXHIBIT 10.15.2


                                                                  EXECUTION COPY

================================================================================

                          SALE AND SERVICING AGREEMENT
                          Dated as of September 1, 1999




                                     Between




                         FIB BUSINESS LOAN TRUST 1999-A
                                     (Trust)




                                       and




                            FIRST INTERNATIONAL BANK
                              (Seller and Servicer)


                     FIB Business Loan Notes, Series 1999-A

================================================================================

<PAGE>   2

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
Section                                                                                                          Page


<S>                                                                                                              <C>
                                    ARTICLE I


                                   DEFINITIONS

Section 1.01        Definitions...................................................................................2
Section 1.02        Use of Words and Phrases......................................................................2
Section 1.03        Captions; Table of Contents...................................................................2

                                   ARTICLE II


                      SALE AND CONVEYANCE OF THE TRUST FUND

Section 2.01        Sale and Conveyance of Trust Fund.............................................................2
Section 2.02        Possession of Business Files..................................................................2
Section 2.03        Books and Records.............................................................................3
Section 2.04        Delivery of Business Loan Documents...........................................................3
Section 2.05        Acceptance by Trustee of the Trust Fund; Certain Substitutions; Certification by
                    Indenture Trustee.............................................................................5
Section 2.06        [Reserved]....................................................................................7
Section 2.07        [Reserved]....................................................................................7
Section 2.08        Fees and Expenses of the Owner Trustee and the Indenture Trustee..............................7
Section 2.09        Transfer and Conveyance of the Subsequent Business Loans......................................7
Section 2.10        Optional Repurchase of Defaulted Business Loans..............................................10

                                   ARTICLE III


                         REPRESENTATIONS AND WARRANTIES

Section 3.01        Representations of the Seller................................................................11
Section 3.02        Individual Business Loans....................................................................14
Section 3.03        Purchase and Substitution of Defective Loans.................................................19
</TABLE>


                                      -i-
<PAGE>   3

<TABLE>
<S>                                                                                                              <C>
                                   ARTICLE IV


                 ADMINISTRATION AND SERVICING OF BUSINESS LOANS

Section 4.01        Duties of the Servicer.......................................................................22
Section 4.02        Liquidation of Business Loans................................................................25
Section 4.03        Establishment of Principal and Interest Accounts; Deposits in Principal and Interest
                    Accounts.....................................................................................26
Section 4.04        Permitted Withdrawals From the Applicable Principal and Interest Account.....................27
Section 4.05        [Intentionally Omitted]......................................................................29
Section 4.06        Transfer of Accounts.........................................................................29
Section 4.07        Maintenance of Hazard Insurance..............................................................29
Section 4.08        [Intentionally Omitted]......................................................................29
Section 4.09        Fidelity Bond................................................................................29
Section 4.10        Title, Management and Disposition of Foreclosed Property.....................................30
Section 4.11        [Intentionally Omitted]......................................................................31
Section 4.12        Collection of Certain Business Loan Payments.................................................31
Section 4.13        Access to Certain Documentation and Information Regarding the Business Loans.................31

                                    ARTICLE V


                       PAYMENTS TO THE CERTIFICATEHOLDERS

Section 5.01        Establishment of Note Distribution Account; Deposits in Note Distribution Account;
                    Permitted Withdrawals from Note Distribution Account.........................................32
Section 5.02        Establishment of Spread Account; Deposits in Spread Account; Permitted Withdrawals
                    from Spread Account..........................................................................33
Section 5.03        Establishment of Expense Account; Deposits in Expense Account; Permitted Withdrawals
                    from Expense Account.........................................................................34
Section 5.04        Pre-Funding Account and Capitalized Interest Account.........................................36
Section 5.05        [Intentionally Omitted]......................................................................37
Section 5.06        Investment of Accounts.......................................................................37
Section 5.07        Distributions................................................................................38
Section 5.08        Determination of LIBOR.......................................................................40
Section 5.09        Statements...................................................................................41
Section 5.10        Advances by the Servicer.....................................................................44
Section 5.11        Compensating Interest........................................................................44
Section 5.12        Reports of Foreclosure and Abandonment.......................................................45
</TABLE>


                                      -ii-
<PAGE>   4

<TABLE>
<S>                                                                                                              <C>
                                   ARTICLE VI


                           GENERAL SERVICING PROCEDURE

Section 6.01        [Omitted]....................................................................................46
Section 6.02        Satisfaction of Mortgages and Collateral and Release of Business Files.......................46
Section 6.03        Servicing Compensation.......................................................................47
Section 6.04        Annual Statement as to Compliance............................................................47
Section 6.05        Annual Independent Public....................................................................48
Section 6.06        Trustee's Right to Examine Servicer Records and Audit Operations.............................48
Section 6.07        Reports to the Trustee; Principal and Interest Account Statements............................48

                                   ARTICLE VII


                       REPORTS TO BE PROVIDED BY SERVICER

Section 7.01        Financial Statements.........................................................................50

                                  ARTICLE VIII


                                  THE SERVICER

Section 8.01        Indemnification; Third Party Claims..........................................................51
Section 8.02        Merger or Consolidation of the Servicer......................................................52
Section 8.03        Limitation on Liability of the Servicer and Others...........................................52
Section 8.04        Servicer Not to Resign.......................................................................52

                                   ARTICLE IX


                                     DEFAULT

Section 9.01        Events of Default............................................................................54
Section 9.02        Trustee to Act; Appointment of Successor.....................................................55
Section 9.03        Waiver of Defaults...........................................................................57
Section 9.04.       Control by Majority Noteholders..............................................................57

                                    ARTICLE X


                                   TERMINATION

Section 10.01       Termination..................................................................................59
Section 10.02       Accounting Upon Termination of Servicer......................................................60
</TABLE>


                                     -iii-
<PAGE>   5

<TABLE>
<S>                                                                                                              <C>
                                   ARTICLE XI


                            MISCELLANEOUS PROVISIONS

Section 11.01       Acts of Noteholders..........................................................................61
Section 11.02       Amendment....................................................................................61
Section 11.03       Recordation of Agreement.....................................................................62
Section 11.04       Duration of Agreement........................................................................62
Section 11.05       Governing Law................................................................................62
Section 11.06       Notices......................................................................................62
Section 11.07       Severability of Provisions...................................................................63
Section 11.08       No Partnership...............................................................................63
Section 11.09       Counterparts.................................................................................63
Section 11.10       Successors and Assigns.......................................................................63
Section 11.11       Headings.....................................................................................63
Section 11.12       Notification to Rating Agencies..............................................................63
Section 11.13.      Limitation of Liability......................................................................64
</TABLE>


                                      -iv-
<PAGE>   6

APPENDIX A                        Definitions and Usage

                                  EXHIBIT INDEX

EXHIBIT A                         Contents of Business File
EXHIBIT B                         [Intentionally Omitted]
EXHIBIT C                         Principal and Interest Account
                                    Letter Agreement
EXHIBIT D                         [Intentionally Omitted]
EXHIBIT E                         [Intentionally Omitted]
EXHIBIT F                         Initial Certification
EXHIBIT F-1                       Interim Certification
EXHIBIT F-2                       Final Certification
EXHIBIT G                         [Intentionally Omitted]
EXHIBIT H                         Business Loan Schedule
EXHIBIT I                         Request for Release of Documents
EXHIBIT J                         Form of Liquidation Report
EXHIBIT K                         Form of Delinquency Report
EXHIBIT L                         Servicer's Monthly Computer Tape Format


                                      -v-
<PAGE>   7

         Sale and Servicing Agreement dated as of September 1, 1999, between FIB
Business Loan Trust 1999-A (the "Trust"), and First International Bank, as
Seller (the "Seller") and as Servicer (the "Servicer").

                              PRELIMINARY STATEMENT

         The Trust was formed for the purpose of issuing asset backed notes and
asset backed certificates secured by the Business Loans. The Issuer has entered
into a trust indenture, dated as of September 1, 1999 (the "Indenture"), between
the Trust and the Indenture Trustee, pursuant to which the Trust intends to
issue its FIB Business Loan Notes, Series 1999-A, Adjustable Rate Class A,
Adjustable Rate Class M-1, Adjustable Rate Class M-2 and Adjustable Rate Class B
in the aggregate initial principal amounts of $56,550,000, $2,600,000,
$2,600,000, and $3,250,000, respectively (collectively, the "Notes"). Pursuant
to the Indenture, as security for the indebtedness represented by the Notes, the
Issuer is and will be pledging to the Indenture Trustee, or granting the
Indenture Trustee a security interest in, among other things, certain Business
Loans and Subsequent Business Loans and its rights under this Agreement.

         The parties desire to enter into this Agreement to provide, among other
things, for the servicing of the Business Loans by the Servicer. The Servicer
acknowledges that, in order further to secure the Notes, the Trust is and will
be granting to the Indenture Trustee a security interest in, among other things,
its rights under this Agreement, and the Servicer agrees that all covenants and
agreements made by the Servicer herein with respect to the Business Loans shall
also be for the benefit and security of the Indenture Trustee and Holders of the
Notes. For its services hereunder, the Servicer will receive a Servicing Fee (as
defined herein) with respect to each Business Loan serviced hereunder.

<PAGE>   8

                                    ARTICLE I

                                   DEFINITIONS

         Section 1.01 Definitions. For all purposes of this Agreement,
capitalized terms used herein shall have the meanings set forth in Appendix A,
unless the context clearly indicates otherwise.

         Section 1.02 Use of Words and Phrases. "Herein", "hereby", "hereunder",
"hereof", "hereinbefore", "hereinafter" and other equivalent words refer to this
Agreement as a whole and not solely to the particular section of this Agreement
in which any such word is used.

         Section 1.03 Captions; Table of Contents. The captions or headings in
this Agreement and the Table of Contents are for convenience only and in no way
define, limit or describe the scope and intent of any provisions of this
Agreement.


                                   ARTICLE II

                      SALE AND CONVEYANCE OF THE TRUST FUND

                  Section 2.01  Sale and Conveyance of Trust Fund.

                  The Seller hereby sells, transfers, assigns, sets over and
conveys to the Trust without recourse, subject to the terms of this Agreement,
all of the right, title and interest of the Seller in and to the Initial
Business Loans and all other assets included or to be included in the Trust Fund
in exchange for the Notes and the Certificates.

                  Section 2.02  Possession of Business Files.

                  (a) Upon the issuance of the Notes and Certificates, the
ownership of each Business Note, the Mortgage, if applicable, and the contents
of the related Business File relating to the Initial Business Loans is, and upon
each Subsequent Transfer Date the ownership of each Business Note, the Mortgage,
if applicable, and the contents of the related Business File relating to the
applicable Subsequent Business Loans will be, vested in the Trust for the
benefit of the Noteholders and Certificateholders, as the case may be.

                  (b) Pursuant to Section 2.04, with respect to the Initial
Business Loans the Seller has delivered or caused to be delivered, and, on each
Subsequent Transfer Date, the Seller will deliver or cause to be delivered, each
Business File to the Indenture Trustee.


                                      -2-
<PAGE>   9

                  Section 2.03  Books and Records.

                  The transfer of each Business Loan shall be reflected on the
Seller's balance sheet and other financial statements and for tax purposes as a
sale of assets by the Seller and the Seller shall respond to any third-party
inquiry that such transfer is so reflected as a sale. The Seller shall be
responsible for maintaining, and shall maintain, a complete set of books and
records for each Business Loan which shall be clearly marked to reflect the
ownership of each Business Loan by the Trust for the benefit of the Noteholders
and Certificateholders.

                  Section 2.04  Delivery of Business Loan Documents.

                  The Seller, (i) contemporaneously with the delivery of this
Agreement, has delivered or caused to be delivered to the Indenture Trustee and
(ii) on each Subsequent Transfer Date, will deliver or cause to be delivered to
the Indenture Trustee, each of the following documents:

                  (a) For each Initial Business Loan or Subsequent Business
Loan, as the case may be:

                  (1) The original Business Note, endorsed by means of an
allonge as follows: "Pay to the order of HSBC Bank USA, and its successors and
assigns, as indenture trustee under that certain Indenture dated as of September
1, 1999 relating to FIB Business Loan Trust, 1999-A, without recourse" and
signed, by facsimile or manual signature, in the name of the Seller by a
Responsible Officer, with all prior and intervening endorsements showing a
complete chain of endorsement from the originator to the Seller, if the Seller
was not the originator provided, however that in lieu of the original Business
Note, where the original Business Note has been lost, the Seller shall deliver a
lost note affidavit and, if a copy exists, a copy of the original Business Note;

                  (2) Blanket assignment of all Collateral securing the Business
Loan, including without limitation, all rights under applicable guarantees and
insurance policies;

                  (3) Irrevocable power of attorney of the Seller to the
Indenture Trustee to execute, deliver, file or record and otherwise deal with
the Collateral for the Business Loans in accordance with this Agreement. The
power of attorney will be delegable by the Indenture Trustee to the Servicer and
any successor servicer and will permit the Indenture Trustee or its delegate to
prepare, execute and file or record UCC financing statements and notices to
insurers; and

                  (4) Blanket UCC-1 financing statements identifying by type all
Collateral for the Business Loans and naming the Indenture Trustee, as assignee
of the Trust, as Secured Party and the Seller as the Debtor. The UCC-1 financing
statements will be filed promptly following the Closing Date in New York and
Connecticut and will be in the nature of protective notice filings rather than
true financing statements.


                                      -3-
<PAGE>   10

                  (b) For each Initial Business Loan or Subsequent Business Loan
secured by Commercial Property or Residential Property, as the case may be:

                  (1) Either: (i) the original Mortgage, with evidence of
recording thereon, (ii) a copy of the Mortgage certified as a true copy by a
Responsible Officer of the Seller where the original has been transmitted for
recording until such time as the original is returned by the public recording
office or duly licensed title or escrow officer or (iii) a copy of the Mortgage
certified by the public recording office in those instances where the original
recorded Mortgage has been lost;

                  (2) Either: (i) the original Assignment of Mortgage from the
Seller endorsed as follows: "HSBC Bank USA ("Assignee"), its successors and
assigns, as indenture trustee under the Indenture dated as of September 1, 1999
relating to FIB Business Loan Trust 1999-A" with evidence of recording thereon
(provided, however, that where permitted under the laws of the jurisdiction
wherein the Mortgaged Property is located, the Assignment of Mortgage may be
effected by one or more blanket assignments for Business Loans secured by
Mortgaged Properties located in the same county), or (ii) a copy of such
Assignment of Mortgage certified as a true copy by a Responsible Officer of the
Seller where the original has been transmitted for recording (provided, however,
that where the original Assignment of Mortgage is not being delivered to the
Indenture Trustee, the Responsible Officer may complete one or more blanket
certificates attaching copies of one or more Assignments of Mortgage relating to
the Mortgages originated by the Seller);

                  (3) Either: (i) originals of all intervening assignments, if
any, showing a complete chain of title from the originator to the Seller,
including warehousing assignments, with evidence of recording thereon if such
assignments were recorded, (ii) copies of any assignments certified as true
copies by a Responsible Officer of the Seller where the originals have been
submitted for recording until such time as the originals are returned by the
public recording officer, or (iii) copies of any assignments certified by the
public recording office in any instances where the original recorded assignments
have been lost;

                  (4) Either: (i) originals of all title insurance policies
relating to the Mortgaged Properties to the extent the Seller obtained such
policies or (ii) copies of any title insurance policies or other evidence of
lien position, including but not limited to PIRT policies, limited liability
reports and lot book reports, to the extent the Seller obtain such policies or
other evidence of lien position, certified as true by the Seller;

                  The Seller shall, within ten Business Days after the receipt
thereof, and in any event, within one year of the Closing Date (or, with respect
to the Subsequent Business Loans, within one year of the related Subsequent
Transfer Date), deliver or cause to be delivered to the Indenture Trustee: (i)
the original recorded Mortgage in those instances where a copy thereof certified
by the Seller was delivered to the Indenture Trustee; (ii) the original recorded
Assignment of Mortgage from the Seller to the Indenture Trustee, which, together
with any


                                      -4-
<PAGE>   11

intervening assignments of Mortgage, evidences a complete chain of title from
the originator to the Indenture Trustee in those instances where copies thereof
certified by the Seller were delivered to the Indenture Trustee; and (iii) any
intervening assignments of Mortgage in those instances where copies thereof
certified by the Seller were delivered to the Indenture Trustee. Notwithstanding
anything to the contrary contained in this Section 2.04, in those instances
where the public recording office retains the original Mortgage, Assignment of
Mortgage or the intervening assignments of the Mortgage after it has been
recorded, the Seller shall be deemed to have satisfied its obligations hereunder
upon delivery to the Indenture Trustee of a copy of such Mortgage, Assignment of
Mortgage or assignments of Mortgage certified by the public recording office to
be a true copy of the recorded original thereof. All Business Loan documents
held by the Indenture Trustee as to each Business Loan are referred to herein as
the "Indenture Trustee's Document File."

                  Although it is the intent of the parties to this Agreement
that the conveyance of the Seller's right, title and interest in and to the
Business Loans and other assets in the Trust Fund pursuant to this Agreement
shall constitute a purchase and sale and not a loan, in the event that such
conveyance is deemed to be a loan, it is the intent of the parties to this
Agreement that the Seller shall be deemed to have granted, and hereby does
grant, to the Trust a first priority perfected security interest in all of the
Seller's right, title and interest in, to and under the Business Loans and other
assets in the Trust Fund, and that this Agreement shall constitute a security
agreement under applicable law.

                  All recording required pursuant to this Section 2.04 shall be
accomplished by and at the expense of the Servicer.

                  Section 2.05  Acceptance by Indenture Trustee of the Trust
                                Fund; Certain Substitutions; Certification by
                                Indenture Trustee.

                  (a) The Indenture Trustee shall execute and deliver on the
Closing Date (or, with respect to the Subsequent Business Loans, on the related
Subsequent Closing Date), an acknowledgment of receipt in the form attached as
Exhibit F hereto, stating that it has received, for each Business Loan, a
Business Note, and a file, and declares that the Indenture Trustee will hold
such documents and any amendments, replacements or supplements thereto, for the
benefit of the Noteholders and the Certificateholders. The Indenture Trustee
agrees, for the benefit of the Noteholders and the Certificateholders, to review
each Indenture Trustee's Document File within 90 days after the Closing Date or
Subsequent Closing Date, as the case may be, (or, with respect to any Qualified
Substitute Business Loan, within 45 days after the assignment thereof), and to
deliver to the Seller and the Servicer a certification in the form attached
hereto as Exhibit F-1. Within 360 days after the Closing Date (or, with respect
to any Qualified Substitute Business Loan, within 360 days after the assignment
thereof), the Indenture Trustee shall deliver to the Servicer, the Seller, the
Rating Agencies and any Noteholder who requests a copy from the Indenture
Trustee a final certification in the form attached hereto as Exhibit F-2
evidencing the completeness of the Indenture Trustee's Document Files.


                                      -5-
<PAGE>   12

                  (b) If the Indenture Trustee, during the process of reviewing
the Indenture Trustee's Document Files finds any document constituting a part of
an Indenture Trustee's Document File which is not properly executed, has not
been received, is unrelated to a Business Loan identified in the Business Loan
Schedule, or does not conform in a material respect to the requirements of
Section 2.04 or the description thereof as set forth in the Business Loan
Schedule, the Indenture Trustee shall promptly so notify the Servicer and the
Seller. In performing any such review, the Indenture Trustee may conclusively
rely on the Seller as to the purported genuineness of any such document and any
signature thereon. It is understood that the scope of the Indenture Trustee's
review of the Indenture Trustee's Document Files is limited solely to confirming
that the documents listed in Section 2.04 have been executed and received and
relate to the Business Loans identified in the Business Loan Schedule. The
Seller agrees to use reasonable efforts to remedy a material defect in a
document constituting part of a Business File of which it is so notified by the
Indenture Trustee. If, however, within 60 days after the Indenture Trustee's
notice to it respecting such material defect the Seller has not remedied the
defect and such defect materially and adversely affects the value of the related
Business Loan, the Seller will (i) substitute in lieu of such Business Loan a
Qualified Substitute Business Loan in the manner and subject to the conditions
set forth in Section 3.03 or (ii) purchase such Business Loan at a purchase
price equal to the Principal Balance of such Business Loan as of the date of
purchase, plus 30 days' interest on such Principal Balance, computed at the
Adjusted Business Loan Remittance Rate as of the next succeeding Determination
Date, plus any accrued unpaid Servicing Fees, Monthly Advances and Servicing
Advances reimbursable to the Servicer, which purchase price shall be deposited
in the Principal and Interest Account on the next succeeding Determination Date.

                  (c) Upon receipt by the Indenture Trustee of a certification
of a Servicing Officer of the Servicer of such purchase and the deposit of the
amounts described above in the Principal and Interest Account (which
certification shall be in the form of Exhibit I hereto), the Indenture Trustee
shall release to the Servicer for release to the Seller the related Indenture
Trustee's Document File and the Indenture Trustee shall execute, without
recourse, and deliver such instruments of transfer necessary to transfer such
Business Loan to the Seller. All costs of any such transfer shall be borne by
the Servicer.

                  (d) If in connection with taking any action the Servicer
requires any item constituting part of the Indenture Trustee's Document File, or
the release from the lien of the related Business Loan of all or part of any
Mortgaged Property or other Collateral, the Servicer shall deliver to the
Indenture Trustee a certificate to such effect in the form attached as Exhibit I
hereto. Upon receipt of such certification, the Indenture Trustee shall deliver
to the Servicer the requested documentation and the Indenture Trustee shall
execute, without recourse, and deliver such instruments of transfer necessary to
release all or the requested part of the Mortgaged Property or other Collateral
from the lien of the related Business Loan.

                  On the Remittance Date in March of each year commencing March
2000, the Indenture Trustee shall deliver to the Seller and the Servicer a
certification detailing all


                                      -6-
<PAGE>   13

transactions with respect to the Business Loans for which the Indenture Trustee
holds an Indenture Trustee's Document File pursuant to this Agreement during the
prior calendar year. Such certification shall list all Indenture Trustee's
Document Files which were released by or returned to the Indenture Trustee
during the prior calendar year, the date of such release or return and the
reason for such release or return.

                  Section 2.06  [Reserved].

                  Section 2.07  [Reserved].

                  Section 2.08  Fees and Expenses of the Owner Trustee and the
                                Indenture Trustee.

                  The fees and expenses of the Owner Trustee and the Indenture
Trustee including (i) the annual fees of the Owner Trustee and the Indenture
Trustee, payable quarterly in advance, and subject to rebate to the Servicer as
additional servicing compensation hereunder for any fraction of a calendar
quarter in which this Agreement terminates, (ii) any other fees and expenses to
which the Owner Trustee and the Indenture Trustee are entitled, and (iii)
reimbursements to the Servicer for any advances made by the Servicer to the
Expense Account pursuant to Section 5.03 hereof, shall be paid from the Expense
Account in the manner set forth in Section 5.03 hereof; provided, however, that
the Seller shall be liable for any expenses of the Trust Fund incurred prior to
the Closing Date. The Servicer, the Indenture Trustee and the Owner Trustee
hereby covenant with the Noteholders and the Certificateholders that every
material contract or other material agreement entered into by the Owner Trustee,
the Indenture Trustee, or the Servicer, acting as attorney-in-fact for the
Indenture Trustee or the Owner Trustee, on behalf of the Trust Fund shall
expressly state therein that no Noteholder or Certificateholder shall be
personally liable in connection with such contract or agreement.

                  Section 2.09  Transfer and Conveyance of the Subsequent
                                Business Loans.

                  (a) Subject to the conditions set forth in paragraph (b)
below, in consideration of the Indenture Trustee's delivery on the related
Subsequent Transfer Dates to or upon the order of the Seller of all or a portion
of the balance of funds in the Pre-Funding Account, the Seller shall on any
Subsequent Transfer Date contribute, transfer, assign, set over and otherwise
convey without recourse, to the Trust all right, title and interest of the
Seller in and to each Subsequent Business Loan listed on the Business Loan
Schedule delivered by the Seller on such Subsequent Transfer Date, all its
right, title and interest in and to principal collected and interest accruing on
each such Subsequent Business Loan on and after the related Subsequent Cut-Off
Date and all its right, title and interest in and to all insurance policies;
provided, however, that the Seller reserves and retains all its right, title and
interest in and to principal (including Principal Prepayments) collected and
interest accruing on each such Subsequent Business Loan prior to the related
Subsequent Cut-Off Date. The transfer by the Seller of the Subsequent Business
Loans set forth on the Business Loan Schedule to the Trust shall be absolute and
shall be intended by all parties hereto to be treated as a contribution by the
Seller.


                                      -7-
<PAGE>   14

                  The amount released from the Pre-Funding Account shall be
one-hundred percent (100%) of the aggregate Principal Balances as of the related
Subsequent Transfer Date of the Subsequent Business Loans so transferred.

                  (b) The Seller shall transfer to the Trust the Subsequent
Business Loans and the other property and rights related thereto described in
paragraph (a) above only upon the satisfaction of each of the following
conditions on or prior to the related Subsequent Transfer Date:

                           (i) the Seller shall have provided the Indenture
                  Trustee with a timely Addition Notice and shall have provided
                  any information reasonably requested by it with respect to the
                  Subsequent Business Loans;

                           (ii) the Seller shall have delivered to the Indenture
                  Trustee a duly executed written assignment (including an
                  acceptance by the Indenture Trustee) that shall include a
                  Business Loan Schedule, listing the Subsequent Business Loans
                  and any other exhibits listed thereon;

                           (iii) the Seller shall have deposited in the
                  applicable Principal and Interest Account all collections in
                  respect of the Subsequent Business Loans received on or after
                  the related Subsequent Cut-Off Date;

                           (iv) as of each Subsequent Transfer Date, neither the
                  Seller nor the Servicer was insolvent nor will either of them
                  have been made insolvent by such transfer nor is either of
                  them aware of any pending insolvency;

                           (v) such addition will not result in a material
                  adverse tax consequence to the Trust Fund or the Holders of
                  the Notes and the Certificates;

                           (vi) the Pre-Funding Period shall not have
                  terminated;

                           (vii) the Seller shall have delivered to the
                  Indenture Trustee an Officer's Certificate confirming the
                  satisfaction of each condition precedent specified in this
                  paragraph (b) and in the related Subsequent Transfer
                  Agreement;

                           (viii) the Seller shall have delivered to the Rating
                  Agencies, the Owner Trustee and the Indenture Trustee,
                  Opinions of Counsel with respect to the transfer of the
                  Subsequent Business Loans substantially in the form of the
                  Opinions of Counsel delivered to the Indenture Trustee and the
                  Owner Trustee on the Closing Date (bankruptcy, corporate and
                  tax opinions);


                                      -8-
<PAGE>   15

                           (ix) such addition will not cause the Principal
                  Balance of the Business Loans secured by accounts receivables
                  and inventory to be greater than 25% of the aggregate
                  Principal Balance of the Business Loans;

                           (x) such addition will not cause the Principal
                  Balance of the Business Loans secured by first liens on
                  commercial real estate or machinery and equipment to be less
                  than 70% of the aggregate Principal Balance of the Business
                  Loans; provided however, in no event shall any such transfer
                  cause 50% or more of the aggregate Principal Balance of the
                  Business Loans to be "real estate mortgages (or interest
                  therein)" within the meaning of Section 7701(i)(A)(i) of the
                  Code and Treasury Regulations Section 301.7701-1(d); and

                           (xi) each Subsequent Business Loan shall not have an
                  Original Principal Balance greater than any single balance of
                  the top ten (10) largest Business Loans sold to the Trust.

                  (c) The obligation of the Trust to purchase a Subsequent
Business Loan on any Subsequent Transfer Date is subject to the requirement, as
evidenced by a certificate from a Responsible Officer of the Seller, that such
Subsequent Business Loan conforms in all material respects to the
representations and warranties concerning the individual Initial Business Loans
set forth in Sections 3.01 and 3.02 (except that any reference therein to the
Cut-Off Date shall be deemed a reference to the applicable Subsequent Cut-Off
Date) or in the Private Placement Memorandum under the heading "The Business
Loan Pool - Subsequent Business Loans" and that the inclusion of all Subsequent
Business Loans being transferred to the Trust on such Subsequent Transfer Date
will not change, in any material respect, the characteristics of the Initial
Business Loans in the aggregate, set forth in Sections 3.01 and 3.02.

                  (d) In connection with the transfer and assignment of the
Subsequent Business Loans, the Seller agrees to satisfy the conditions set forth
in Sections 2.02, 2.03, 2.04 and 2.05.

                  (e) In connection with each Subsequent Transfer Date, on the
Remittance Dates in October, November and December 1999 and the Special
Remittance Date, the Seller shall determine, and the Indenture Trustee shall
cooperate with the Seller in determining (i) the amount and correct dispositions
of the Capitalized Interest Requirements and the Pre-Funding Earnings and (ii)
any other necessary matters in connection with the administration of the
Pre-Funding Account and of the Capitalized Interest Account. If any amounts are
incorrectly released to the Seller from the Capitalized Interest Account, the
Seller shall immediately repay such amounts to the Indenture Trustee.

                  (f) No later than December 31, 1999, the Seller shall obtain a
letter from an independent accountant stating whether or not the characteristics
of the Subsequent Business Loans conform to the characteristics set forth
herein.


                                      -9-
<PAGE>   16

                  Section 2.10  Optional Purchase of Defaulted Business Loans.

                  The Servicer shall have the right, but not the obligation, to
purchase any Defaulted Business Loan for a purchase price equal to the then
outstanding principal balance of such Defaulted Business Loan as of the date of
such purchase plus accrued interest thereon at the Adjusted Business Loan
Remittance Rate, which purchase price shall be deposited in the Principal and
Interest Account on the next succeeding Determination Date. In no event,
however, may the aggregate principal balance of all Defaulted Business Loans
purchased pursuant to this Section 2.10 exceed 10% of the sum of (i) the
Original Pool Principal Balance and (ii) the initial Pre-Funded Amount.


                                      -10-
<PAGE>   17

                                   ARTICLE III

                         REPRESENTATIONS AND WARRANTIES

         Section 3.01  Representations of the Seller.

                  The Seller hereby represents and warrants to the Indenture
Trustee, the Owner Trustee, the Certificateholders and the Noteholders as of the
Closing Date:

                  (a) The Seller is a state chartered bank and trust company
organized and validly existing under the laws of the State of Connecticut and
has all licenses necessary to carry on its business as now being conducted and
is licensed and qualified in each state where the laws of such state require
licensing or qualification in order to conduct business of the type conducted by
the Seller and perform its obligations hereunder; the Seller has all requisite
power and authority to execute and deliver this Agreement and each other Basic
Document to which it is a party and to perform in accordance herewith and
therewith; the execution, delivery and performance of this Agreement and each
other Basic Document to which it is a party (including all instruments of
transfer to be delivered pursuant to this Agreement) by the Seller and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly authorized by all necessary corporate action; this Agreement and
each other Basic Document to which it is a party evidence the valid, binding and
enforceable obligations of the Seller; and all requisite corporate action has
been taken by the Seller to make this Agreement and each other Basic Document to
which it is a party valid, binding and enforceable upon the Seller in accordance
with its respective terms, subject to the effect of bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally or the application of equitable principles in any
proceeding, whether at law or in equity, none of which will affect the ownership
of the Business Loans by the Trust.

                  (b) All actions, approvals, consents, waivers, exemptions,
variances, franchises, orders, permits, authorizations, rights and licenses
required to be taken, given or obtained, as the case may be, by or from any
federal, state or other governmental authority or agency (other than any such
actions, approvals, etc., under any state securities laws, real estate
syndication or "Blue Sky" statutes, as to which the Seller makes no such
representation or warranty), that are necessary or advisable in connection with
the purchase and sale of the Notes and the execution and delivery by the Seller
of the documents to which it is a party, have been duly taken, given or
obtained, as the case may be, are in full force and effect on the date hereof,
are not subject to any pending proceedings or appeals (administrative, judicial
or otherwise) and either the time within which any appeal therefrom may be taken
or review thereof may be obtained has expired or no review thereof may be
obtained or appeal therefrom taken, and are adequate to authorize the
consummation of the transactions contemplated by this Agreement and each other
Basic Document to which it is a party and the other documents on the part of the
Seller and the performance by the Seller of its obligations under this Agreement
and the other Basic Documents to which it is a party;


                                      -11-
<PAGE>   18

                  (c) The consummation of the transactions contemplated by this
Agreement and the other Basic Documents to which the Seller is a party will not
result in the breach of any terms or provisions of the certificate of
incorporation or by-laws of the Seller or result in the breach of any term or
provision of, or conflict with or constitute a default under or result in the
acceleration of any obligation under, any material agreement, indenture or loan
or credit agreement or other material instrument to which the Seller or its
property is subject, or result in the violation of any law, rule, regulation,
order, judgment or decree to which the Seller or its property is subject;

                  (d) Neither this Agreement or any other Basic Document to
which the Seller is a party nor any statement, report or other document
furnished or to be furnished pursuant to this Agreement or any other Basic
Document to which the Seller is a party or in connection with the transactions
contemplated hereby and thereby contains any untrue statement of material fact
or omits to state a material fact necessary to make the statements contained
herein or therein not misleading in light of the circumstances under which they
were made;

                  (e) The Seller does not believe, nor does it have any reason
or cause to believe, that it cannot perform each and every covenant contained in
this Agreement or any other Basic Document to which the Seller is a party;

                  (f) There is no action, suit, proceeding or investigation
pending or, to the best of the Seller's knowledge, threatened against the Seller
which, either in any one instance or in the aggregate, may (i) result in any
material adverse change in the business, operations, financial condition,
properties or assets of the Seller or in any material impairment of the right or
ability of the Seller to carry on its business substantially as now conducted,
or in any material liability on the part of the Seller or of any action taken or
to be taken in connection with the obligations of the Seller contemplated
herein, or which would be likely to impair materially the ability of the Seller
to perform under the terms of this Agreement or any other Basic Document to
which the Seller is a party or (ii) which would draw into question the validity
of this Agreement or any other Basic Document to which the Seller is a party or
the Business Loans;

                  (g) The Trust will not constitute an "investment company"
within the meaning of the Investment Company Act of 1940, as amended;

                  (h) The Seller is not in default with respect to any order or
decree of any court or any order, regulation or demand of any federal, state,
municipal or governmental agency, which default might have consequences that
would materially and adversely affect the condition (financial or other) or
operations of the Seller or its properties or might have consequences that would
materially and adversely affect its performance hereunder;

                  (i) The statements contained in the Private Placement
Memorandum which describe the Seller or the Business Loans or matters or
activities for which the Seller is responsible in accordance with the Private
Placement Memorandum, this Agreement or any other Basic Document to which the
Seller is a party and all documents referred to therein or herein or


                                      -12-
<PAGE>   19

delivered in connection therewith or herewith, or which are attributable to the
Seller therein or herein are true and correct in all material respects, and the
Private Placement Memorandum does not contain any untrue statement of a material
fact with respect to the Seller or the Business Loans and does not omit to state
a material fact necessary to make the statements contained therein with respect
to the Seller or the Business Loans not misleading in light of the circumstances
under which they were made. The Seller is not aware that the Private Placement
Memorandum contains any untrue statement of a material fact or omits to state
any material fact necessary to make the statements contained therein not
misleading in light of the circumstances under which they were made. There is no
fact peculiar to the Seller or the Business Loans and known to the Seller that
materially adversely affects or in the future may (so far as the Seller can now
reasonably foresee) materially adversely affect the Seller or the Business Loans
that has not been set forth in the Private Placement Memorandum;

                  (j) No Noteholder or Certificateholder is subject to
Connecticut state licensing requirements solely by virtue of holding the Notes
or the Certificates;

                  (k) The transfer, assignment and conveyance of the Business
Notes and the Mortgages by the Seller pursuant to this Agreement are not or,
with respect to the Subsequent Business Loans, will not be, subject to the bulk
transfer laws or any similar statutory provisions in effect in any applicable
jurisdiction;

                  (l) The origination and collection practices used by the
Seller with respect to each Business Note and Mortgage relating to the Initial
Business Loans have been, and the origination and collection practices to be
used by the Seller with respect to each Business Note and Mortgage relating to
the Subsequent Business Loans will have been, in all material respects legal,
proper, prudent and customary in the business loan origination and servicing
business;

                  (m) Each Initial Business Loan was, and each Subsequent
Business Loan will be, selected from among the existing business loans in the
Seller's portfolio at the date hereof or, in the case of the Subsequent Business
Loans, at the related Subsequent Cut-Off Date, in a manner not designed to
adversely affect the Noteholders or the Certificateholders;

                  (n) The Seller received fair consideration and reasonably
equivalent value or, in the case of the Subsequent Business Loans, will have
received fair consideration and reasonably equivalent value, in exchange for the
sale of the Business Loans;

                  (o) Neither the Seller nor any of its affiliates sold or, in
the case of the Subsequent Business Loans, will have sold any interest in any
Business Loan with any intent to hinder, delay or defraud any of their
respective creditors;

                  (p) The Seller is solvent, and the Seller will not be rendered
insolvent as a result of the transfer of the Business Loans to the Trust or the
sale of the Notes;


                                      -13-
<PAGE>   20
         (q) The chief executive office and legal name of the Seller is as set
forth on the respective UCC-1 financing statement filed on behalf of the Seller
pursuant to Section 2.04(a)(4), such office is the place where the Seller is
"located" for the purposes of Section 9-103(3)(d) of the Uniform Commercial Code
as in effect in the State of New York, and neither the location of such office
nor the legal name of the Seller has changed in the past four months except that
the Seller changed its name from First International Bank, National Association;

         (r) The Seller has filed all required tax returns on a timely basis;

         (s) The pension or profit sharing plans of the Seller and all
consolidated subsidiaries have been fully funded in accordance with the Seller's
obligations;

         (t) The legal name of the Seller has not been changed in the last six
years and the Seller does not have tradenames, fictitious names, assumed names
or "doing business as" names except First National Bank of Connecticut, First
National Bank of New England and First International Bank, N.A. and First
International Capital;

         (u) The Seller will treat the sale of the Business Loans as a sale for
federal income tax reporting and accounting purposes; and

         (v) The Seller conducts its affairs such that the Trust would not be
substantively consolidated in the trust estate of the Seller and their
respective separate existences disregarded in bankruptcy.

                  Section 3.02  Individual Business Loans.

                  The Seller hereby represents and warrants to the Indenture
Trustee and the Noteholders, with respect to each Initial Business Loan as of
the Closing Date, and with respect to each Subsequent Business Loan, as of the
related Subsequent Transfer Date:

                  (a) The information with respect to each Business Loan set
forth in the Business Loan Schedule is true and correct;

                  (b) All of the original or certified documentation set forth
in Section 2.04 (including all material documents related thereto) has been or
will be delivered to the Indenture Trustee on the Closing Date or as otherwise
provided in Section 2.04;

                  (c) Each Mortgaged Property serving as the primary collateral
is improved by a Commercial Property or a Residential Property and does not
constitute other than real property under state law;

                  (d) Each Initial Business Loan was (and each Subsequent
Business Loan will be) originated and underwritten or purchased and
reunderwritten by the Seller, in its capacity as Seller and each Business Loan
is being serviced by the Seller, in its capacity as Servicer;


                                      -14-
<PAGE>   21

                  (e) [Intentionally Omitted];

                  (f) Approximately 33.22% of the Initial Business Loans (by
Principal Balance) bear fixed rates of interest and approximately 50.02%, 3.03%,
1.73%, 11.86% and 0.13% of the Business Loans (by Principal Balance) bear
interest that adjusts monthly based on the Prime Rate, annually based on
One-Year CMT, every three years based on Three-Year CMT, every five years based
on Five-Year CMT, and every ten years based on Ten-Year CMT, respectively. Each
Business Note will, with respect to principal payments, provide for a schedule
of Monthly Payments which are, if timely paid, sufficient to fully amortize the
principal balance of such Business Loan on its respective maturity date;

                  (g) With respect to those Business Loans secured by a
Mortgaged Property, each Mortgage is a valid and subsisting lien of record on
the Mortgaged Property subject only to any applicable Prior Liens on such
Mortgaged Property and subject in all cases to such exceptions that are
generally acceptable to banking institutions in connection with their regular
commercial lending activities, and such other exceptions to which similar
properties are commonly subject and which do not individually, or in the
aggregate, materially and adversely affect the benefits of the security intended
to be provided by such Mortgage;

                  (h) Immediately prior to the transfer and assignment herein
contemplated, the Seller held good and indefeasible title to, and was the sole
owner of, each Business Loan conveyed by the Seller subject to no liens,
charges, mortgages, encumbrances or rights of others except liens which will be
released simultaneously with such transfer and assignment; and immediately upon
the transfer and assignment herein contemplated, the Trust will hold good and
indefeasible title, to, and be the sole owner of, each Business Loan subject to
no liens, charges, mortgages, encumbrances or rights of others except liens
which will be released simultaneously with such transfer and assignment;

                  (i) As of the Cut-Off Date (or, with respect to any Subsequent
Business Loan, as of the related Subsequent Cut-Off Date), no Business Loan is
more than 30 days delinquent in payment;

                  (j) To the best of the Seller's knowledge, there is no
delinquent tax or assessment lien on any Mortgaged Property which is the primary
Collateral for the related Business Loan, and each Mortgaged Property is free of
material damage and is in good repair;

                  (k) No Business Loan is subject to any right of rescission,
set-off, counterclaim or defense, including the defense of usury, nor will the
operation of any of the terms of the Business Note or any related Mortgage, or
the exercise of any right thereunder, render either the Business Note or any
related Mortgage unenforceable in whole or in part, or subject to any right of
rescission, set-off, counterclaim or defense, including the defense of usury,
and no such right of rescission, set-off, counterclaim or defense has been
asserted with respect thereto;


                                      -15-
<PAGE>   22

                  (l) Each Business Loan at the time it was made complied, and
as of the Closing Date complies, in all material respects with applicable state
and federal laws and regulations, including, without limitation, usury, equal
credit opportunity, disclosure and recording laws;

                  (m) Each Initial Business Loan was (and each Subsequent
Business Loan will be) originated and underwritten or purchased and
reunderwritten by the Seller in accordance with the underwriting criteria set
forth in the Private Placement Memorandum;

                  (n) The Seller requires that the improvements upon each
Mortgaged Property are covered by a valid and existing hazard insurance policy
with a generally acceptable carrier that provides for fire and extended coverage
representing coverage described in Section 4.07;

                  (o) The Seller requires that if a Mortgaged Property is in an
area identified in the Federal Register by the Federal Emergency Management
Agency as having special flood hazards, a flood insurance policy is in effect
with respect to such Mortgaged Property with a generally acceptable carrier in
an amount representing coverage described in Section 4.07;

                  (p) Each Business Note, any related Mortgage and any other
agreement pursuant to which Collateral is pledged to the Seller is the legal,
valid and binding obligation of the maker thereof and is enforceable in
accordance with its terms, except only as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and by general
principles of equity (whether considered in a proceeding or action in equity or
at law), none of which will prevent the ultimate realization of the security
provided by the Collateral or other agreement, and all parties to each Business
Loan had full legal capacity to execute all Business Loan documents and convey
the estate therein purported to be conveyed;

                  (q) The Seller has caused and will cause to be performed any
and all acts reasonably required to be performed to preserve the rights and
remedies of the Indenture Trustee and the Owner Trustee in any insurance
policies applicable to the Business Loans including, without limitation, in each
case, any necessary notifications of insurers, assignments of policies or
interests therein, and establishments of co-insured, joint loss payee and
mortgagee rights in favor of the Indenture Trustee or the Seller, respectively;

                  (r) Each original Mortgage was recorded, and all subsequent
assignments of the original Mortgage have been recorded in the appropriate
jurisdictions wherein such recordation is necessary to perfect the lien thereof
as against creditors of the Seller (or, subject to Section 2.04 hereof, are in
the process of being recorded);

                  (s) Each Business Loan conforms, and all such Business Loans
in the aggregate conform, to the description thereof set forth in the Private
Placement Memorandum;


                                      -16-
<PAGE>   23

                  (t) The terms of the Business Note and the related Mortgage or
other security agreement pursuant to which Collateral was pledged have not been
impaired, altered or modified in any respect, except by a written instrument
which has been recorded, if necessary, to protect the interest of the
Noteholders and the Certificateholders and which has been delivered to the
Indenture Trustee;

                  (u) There are no material defaults in complying with the terms
of any applicable Mortgage, and all taxes, governmental assessments, insurance
premiums, water, sewer and municipal charges, leasehold payments or ground rents
which previously became due and owing have been paid, or an escrow of funds has
been established in an amount sufficient to pay for every such item which
remains unpaid and which has been assessed but is not yet due and payable;

                  (v) There is no proceeding pending or threatened for the total
or partial condemnation of any Mortgaged Property, nor is such a proceeding
currently occurring, and such property is undamaged by waste, fire, earthquake
or earth movement, windstorm, flood, tornado or other casualty, so as to affect
adversely the value of the Mortgaged Property as security for the Business Loan
or the use for which the premises were intended;

                  (w) Each Mortgaged Property which is the primary collateral
for the related Business Loan underwent, at the time of origination of such
Business Loan, the standard environmental studies and such studies revealed that
such Mortgaged Property was free of contamination from toxic substances or
hazardous wastes requiring action under applicable laws or is subject to ongoing
environmental rehabilitation satisfactory to the Seller;

                  (x) The proceeds of the Business Loan have been fully
disbursed, and there is no obligation on the part of the Seller to make future
advances thereunder. Any and all requirements as to disbursements of any escrow
funds therefor have been complied with. All costs, fees and expenses incurred in
making or closing or recording the Business Loans were paid;

                  (y) There is no obligation on the part of the Seller or any
other party (except for any guarantor of a Business Loan) to make Monthly
Payments (except for Monthly Advances) in addition to those made by the Obligor;

                  (z) No statement, report or other document signed by the
Seller constituting a part of the Business File contains any untrue statement of
a material fact or omits to state a material fact necessary to make the
statements contained therein not misleading in light of the circumstances under
which they were made;

                  (aa) With respect to each Mortgage constituting a deed of
trust, a trustee, duly qualified under applicable law to serve as such, has been
properly designated and currently so serves and is named in such Mortgage, and
no fees or expenses are or will become payable by the


                                      -17-
<PAGE>   24

Noteholders and/or the Certificateholders to the trustee under the deed of
trust, except in connection with a trustee's sale after default by the Obligor;

                  (bb) No Business Loan has a shared appreciation feature, or
other contingent interest feature;

                  (cc) With respect to each Business Loan secured by a Mortgaged
Property or other Collateral and that is not a first priority lien, either (i)
no consent for the Business Loan is required by the holder of any related Prior
Lien or (ii) such consent has been obtained;

                  (dd) Each Business Loan was originated to a business located
in the State identified in the Business Loan Schedule;

                  (ee) All parties which have had any interest in the Business
Loan, whether as mortgagee, assignee, pledgee or otherwise, are (or, during the
period in which they held and disposed of such interest, were) (1) in compliance
with any and all applicable licensing requirements of the laws of the state
wherein any Mortgaged Property is located, and (2)(A) organized under the laws
of such state, or (B) qualified to do business in such state, or (C) federal
savings and loan associations or national banks having principal offices in such
state, or (D) not doing business in such state;

                  (ff) Any related Mortgage contains customary and enforceable
provisions which render the rights and remedies of the holder thereof adequate
for the realization against the Mortgaged Property of the benefits of the
security, including, (i) in the case of a Mortgage designated as a deed of
trust, by trustee's sale, and (ii) otherwise by judicial foreclosure. There is
no homestead or other exemption available to the Mortgagor which would
materially interfere with the right to sell the Mortgaged Property at a
trustee's sale or the right to foreclose the Mortgage;

                  (gg) There is no default, breach, violation or event of
acceleration existing under the Business Note and no event which, with the
passage of time or with notice and the expiration of any grace or cure period,
would constitute a default, breach, violation or event of acceleration; and the
Seller, in its capacity as either Servicer or Seller, has not waived any
default, breach, violation or event of acceleration;

                  (hh) All parties to the Business Note and any related Mortgage
or other document pursuant to which Collateral was pledged had legal capacity to
execute the Business Note and any such Mortgage or other document and each
Business Note and Mortgage or other document have been duly and properly
executed by such parties;

                  (ii) The Business Loan was not selected for inclusion under
this Agreement from the Seller's portfolio of comparable business loans on any
basis which would have a material adverse affect on a Noteholder or
Certificateholder;


                                      -18-
<PAGE>   25

                  (jj) All amounts received on or after the Cut-Off Date (or,
with respect to the Subsequent Business Loans, on or after the related
Subsequent Cut-Off Date) with respect to the Business Loans have been, to the
extent required by this Agreement, deposited into the Principal and Interest
Account and are, as of the Closing Date (or with respect to the Subsequent
Business Loans, as of the related Subsequent Closing Date), in the Principal and
Interest Account;

                  (kk) With respect to those Business Loans secured by
Collateral other than a Mortgaged Property, the related Business Note, security
agreements, if any, and UCC-1 filed with respect to such Collateral creates a
valid and subsisting lien of record on such Collateral subject only to any Prior
Liens, if any, on such Collateral and subject in all cases to such exceptions
that are generally acceptable to lending institutions in connection with their
regular commercial lending activities, and such other exceptions to which
similar Collateral is commonly subject and which do not individually, or in the
aggregate, materially and adversely affect the benefits of the security intended
to be provided by such Business Note, security agreement and UCC-1;

                  (ll) As of the Closing Date, less than 50% of the Business
Loans, by Principal Balance, are (and after the Funding Period less than 50% of
Initial Business Loans and Subsequent Business Loans will be) "real estate
mortgages (or interests therein)" within the meaning of Section 7701(i)(A)(i) of
the Code and Treasury regulations Section 301.7701-1(d); and

                  (mm) The Seller has no knowledge that at the time of the sale
of the Business Loans, the obligations thereunder would not be paid in full.

                  Section 3.03  Purchase and Substitution of Defective
                                Loans.

                  It is understood and agreed that the representations and
warranties set forth in Sections 3.01 and 3.02 shall survive delivery of the
Notes to the Noteholders and the Certificates to the Certificateholders. Upon
discovery by the Servicer, any Subservicer, the Owner Trustee or the Indenture
Trustee of a breach of any of such representations and warranties which
materially and adversely affects the value of the Business Loans or the interest
of the Notes and Certificates therein or which materially and adversely affects
the interests of the Notes and Certificates in the related Business Loan in the
case of a representation and warranty relating to a particular Business Loan
(notwithstanding that such representation and warranty was made to the Seller's
best knowledge), the party discovering such breach shall give prompt written
notice to the others. Within 60 days of the earlier of its discovery or its
receipt of notice of any breach of a representation or warranty, the Seller
shall (a) promptly cure such breach in all material respects, (b) purchase such
Business Loan by depositing in the applicable Principal and Interest Account, on
the next succeeding Determination Date, an amount in the manner specified in
Section 2.05(b), or (c) if within two years of the Closing Date, remove such
Business Loan from the Trust Fund (in which case it shall become a Deleted
Business Loan) and substitute one or more Qualified Substitute Business Loans
provided such substitution is effected not later than the


                                      -19-
<PAGE>   26

date which is two years after the Closing Date or at such later date, if the
Indenture Trustee receives an Opinion of Counsel that such substitution would
not constitute a Prohibited Transaction at any time the Notes are outstanding.
Any such substitution shall be accompanied by payment by the Seller of the
Substitution Adjustment, if any.

                  As to any Deleted Business Loan for which the Seller
substitutes a Qualified Substitute Business Loan or Loans, the Servicer shall
effect such substitution by delivering to the Indenture Trustee a certification
in the form attached hereto as Exhibit I, executed by a Servicing Officer, and
shall also deliver to the Indenture Trustee, the documents constituting the
Indenture Trustee's Document File for such Qualified Substitute Business Loan or
Loans.

                  The Servicer shall deposit in the applicable Principal and
Interest Account all payments of principal received in connection with such
Qualified Substitute Business Loan or Loans after the date of such substitution
together with all interest (net of the Servicing Fee). Monthly Payments received
with respect to Qualified Substitute Business Loans on or before the date of
substitution will be retained by the Seller. The Trust will own all payments
received with respect to the Deleted Business Loan on or before the date of
substitution, and the Seller shall thereafter be entitled to retain all amounts
subsequently received in respect of such Deleted Business Loan. The Servicer
shall give written notice to the Indenture Trustee that such substitution has
taken place and shall amend the Business Loan Schedule to reflect the removal of
such Deleted Business Loan from the terms of this Agreement and the substitution
of the Qualified Substitute Business Loan or Loans. Upon such substitution, such
Qualified Substitute Business Loan or Loans shall be subject to the terms of
this Agreement in all respects, including Sections 2.04 and 2.05, and the Seller
shall be deemed to have made with respect to such Qualified Substitute Business
Loan or Loans, as of the date of substitution, the covenants, representations
and warranties set forth in Sections 3.01 and 3.02. On the date of such
substitution, the Seller will remit to the Servicer, and the Servicer will
deposit into the applicable Principal and Interest Account an amount equal to
the Substitution Adjustment.

                  In addition to the cure, purchase and substitution obligation
in Section 2.05 and this Section 3.03, the Seller shall indemnify and hold
harmless the Trust, the Indenture Trustee, the Noteholders and the
Certificateholders against any loss, damages, penalties, fines, forfeitures,
reasonable legal fees and related costs, judgments and other costs and expenses
resulting from any claim, demand, defense or assertion based on or grounded
upon, or resulting from, a breach of the Seller's representations and warranties
contained in this Agreement. It is understood and agreed that the obligations of
the Seller set forth in Sections 2.05 and 3.03 to cure, purchase or substitute
for a defective Business Loan and to indemnify the Noteholders, the
Certificateholders, the Indenture Trustee and the Owner Trustee as provided in
Sections 2.05 and 3.03 constitute the sole remedies of the Indenture Trustee,
the Noteholders, the Certificateholders and the Owner Trustee, respecting a
breach of the foregoing representations and warranties.

                  Any cause of action against the Servicer or the Seller
relating to or arising out of the breach of any representations and warranties
made in Sections 2.05, 3.01 or 3.02 shall accrue as to any Business Loan upon
(i) discovery of such breach by any party and notice thereof to the


                                      -20-
<PAGE>   27

Seller and or notice thereof by the Seller to the Indenture Trustee, (ii)
failure by the Seller to cure such breach or purchase or substitute such
Business Loan as specified above, and (iii) demand upon the Seller by the
Indenture Trustee for all amounts payable hereunder in respect of such Business
Loan.


                                      -21-


<PAGE>   28

                                   ARTICLE IV.

                 ADMINISTRATION AND SERVICING OF BUSINESS LOANS

         Section 4.01 Duties of the Servicer.

         (a) The Servicer, as an independent contract servicer, shall service
and administer the Business Loans and shall have full power and authority,
acting alone, to do any and all things in connection with such servicing and
administration which the Servicer may deem necessary or desirable and consistent
with the terms of this Agreement. The Servicer may enter into Subservicing
Agreements for any servicing and administration of Business Loans so long as the
Rating Agency Condition is satisfied. The Servicer shall be entitled to
terminate any Subservicing Agreement in accordance with the terms and conditions
of such Subservicing Agreement and to either itself directly service the related
Business Loans or enter into a Subservicing Agreement with a successor
subservicer which qualifies hereunder.

         (b) Notwithstanding any Subservicing Agreement, any of the provisions
of this Agreement relating to agreements or arrangements between the Servicer
and Subservicer or reference to actions taken through a Subservicer or
otherwise, the Servicer shall remain obligated and primarily liable to the
Indenture Trustee and the Noteholders for the servicing and administering of the
Business Loans in accordance with the provisions of this Agreement, without
diminution of such obligation or liability by virtue of such Subservicing
Agreements or arrangements or by virtue of indemnification from the Subservicer
and to the same extent and under the same terms and conditions as if the
Servicer alone were servicing and administering the Business Loans. For purposes
of this Agreement, the Servicer shall be deemed to have received payments on
Business Loans when any Subservicer has received such payments. The Servicer
shall be entitled to enter into any agreement with a Subservicer for
indemnification of the Servicer by such Subservicer, and nothing contained in
this Agreement shall be deemed to limit or modify such indemnification.

         (d) Any Subservicing Agreement that may be entered into and any
transactions or services relating to the Business Loans involving a Subservicer
in its capacity as such and not as an originator shall be deemed to be between
the Subservicer and the Servicer alone, and the Indenture Trustee and the
Noteholders shall not be deemed parties thereto and shall have no claims,
rights, obligations, duties or liabilities with respect to the Subservicer
except as set forth in Section 4.01(e).

         (e) In the event the Servicer shall for any reason no longer be the
Servicer (including by reason of a Servicer Termination Event), the Indenture
Trustee or its designee shall, subject to Section 9.02 hereof, thereupon assume
all of the rights and obligations of the Servicer under each Subservicing
Agreement that the Servicer may have entered into, unless the Indenture Trustee
is then permitted and elects to terminate any Subservicing Agreement in
accordance with its terms. The Indenture Trustee, its designee or the successor
servicer for the Indenture Trustee shall be deemed to have assumed all of the
Servicer's interest therein and to

                                      -22-
<PAGE>   29
have replaced the Servicer as a party to each Subservicing Agreement to the same
extent as if the Subservicing Agreements had been assigned to the assuming
party, except that the Servicer shall not thereby be relieved of any liability
or obligations under the Subservicing Agreements. The Servicer at its expense
and without right of reimbursement therefor, shall, upon request of the
Indenture Trustee, deliver to the assuming party all documents and records
relating to each Subservicing Agreement and the Business Loans then being
serviced and an accounting of amounts collected and held by it and otherwise use
its best efforts to effect the orderly and efficient transfer of the
Subservicing Agreements to the assuming party.

         (f) Consistent with the terms of this Agreement, the Servicer may
waive, modify or vary any term of any Business Loan or consent to the
postponement of strict compliance with any such term or in any manner grant
indulgence to any Obligor if in the Servicer's determination such waiver,
modification, postponement or indulgence is not materially adverse to the
interests of the Noteholders, provided, however, that (unless (x) the Obligor is
in default with respect to the Business Loan, or such default is, in the
judgment of the Servicer, imminent and (y) the Servicer determines that any
modification would not be considered a new loan for federal income tax purposes)
the Servicer may not permit any modification with respect to any Business Loan
that would change the Business Loan Interest Rate, defer (subject to Section
4.12), or forgive the payment of any principal or interest (unless in connection
with the liquidation of the related Business Loan), or extend the final maturity
date on such Business Loan. No costs incurred by the Servicer or any Subservicer
in respect of Servicing Advances shall for the purposes of distributions to
Noteholders be added to the amount owing under the related Business Loan.
Without limiting the generality of the foregoing, the Servicer shall continue,
and is hereby authorized and empowered to execute and deliver on behalf of the
Trust, the Indenture Trustee, the Owner Trustee, each Noteholder and each
Certificateholder, all instruments of satisfaction or cancellation, or of
partial or full release, discharge and all other comparable instruments, with
respect to the Business Loans and with respect to any Mortgaged Properties or
other Collateral. If reasonably required by the Servicer, the Indenture Trustee,
on behalf of the Trust, shall furnish the Servicer, within 5 Business Days of
receipt of the Servicer's request, with any powers of attorney and other
documents necessary or appropriate to enable the Servicer to carry out its
servicing and administrative duties under this Agreement. Any such request to
the Indenture Trustee, on behalf of the Trust, shall be accompanied by a
certification in the form of Exhibit I attached hereto signed by a Servicing
Officer.

         The Servicer, in servicing and administering the Business Loans, shall
employ or cause to be employed procedures (including collection, foreclosure and
Foreclosed Property management procedures) and exercise the same care that it
customarily employs and exercises in servicing and administering business loans
for its own account, giving due consideration to the Noteholders' and
Certificateholders' reliance on the Servicer.

         (g) On and after such time as the Indenture Trustee and the Trust
receive the resignation of, or notice of the removal of, the Servicer from its
rights and obligations under this Agreement, and with respect to resignation
pursuant to Section 8.04, after receipt of the Opinion of Counsel required
pursuant to Section 8.04 addressed to the Indenture Trustee, the Indenture


                                      -23-
<PAGE>   30
Trustee or its designee shall assume all of the rights and obligations of the
Servicer, subject to Section 9.02 hereof. The Servicer shall, upon request of
the Indenture Trustee but at the expense of the Servicer, deliver to the
Indenture Trustee all documents and records (including computer tapes and
diskettes) relating to the Business Loans and an accounting of amounts collected
and held by the Servicer and otherwise use its best efforts to effect the
orderly and efficient transfer of servicing rights and obligations to the
assuming party.

         (h) The Servicer shall perform the duties of the Issuer and the Owner
Trustee under the Basic Documents. In furtherance of the foregoing, the Servicer
shall consult with the Owner Trustee as the Servicer deems appropriate regarding
the duties of the Issuer and the Owner Trustee under the Basic Documents. The
Servicer shall monitor the performance of the Issuer and the Owner Trustee and
shall advise the Owner Trustee when action is necessary to comply with the
Issuer's or the Owner Trustee's duties under the Basic Documents. The Servicer
shall prepare for execution by the Owner Trustee or shall cause the preparation
by other appropriate Persons of all such documents, reports, filings,
instruments, certificates and opinions as it shall be the duty of the Issuer or
the Owner Trustee to prepare, file or deliver pursuant to the Basic Documents.

         (i) In addition to the duties of the Servicer set forth in this
Agreement or any of the Basic Documents, the Servicer shall perform such
calculations and shall prepare for execution by the Issuer or the Owner Trustee
or shall cause the preparation by other appropriate Persons of all such
documents, reports, filings, instruments, certificates and opinions as it shall
be the duty of the Issuer to prepare, file or deliver pursuant to state and
federal tax and securities laws. In accordance with the directions of the Issuer
or the Owner Trustee, the Servicer shall administer, perform or supervise the
performance of such other activities in connection with the Issuer as are not
covered by any of the foregoing provisions and as are expressly requested by the
Issuer or the Owner Trustee and are reasonably within the capability of the
Servicer.

         (j) Notwithstanding anything in this Agreement or any of the Basic
Documents to the contrary, the Servicer shall be responsible for promptly
notifying the Owner Trustee and the Paying Agent in the event that any
withholding tax is imposed on the Issuer's payments (or allocations of income)
to a Noteholder or a Certificateholder. Any such notice shall be in writing and
specify the amount of any withholding tax required to be withheld by the Owner
Trustee or the Paying Agent pursuant to such provision.

         (k) The Servicer shall prepare and file, on behalf of the Issuer, all
tax returns tax elections, financial statements and such annual or other reports
of the Issuer as are necessary for the preparation of tax reports as provided in
the Trust Agreement or required by applicable law. All tax returns will be
signed by the Servicer on behalf of the Issuer.

         (l) The Servicer shall maintain appropriate books of account and
records relating to services performed under this Agreement, which books of
account and records shall be accessible for inspection by the Owner Trustee at
any time during normal business hours.


                                      -24-
<PAGE>   31
         (m) The Servicer shall furnish to the Owner Trustee from time to time
such additional information regarding the Issuer or the Basic Documents as the
Owner Trustee shall reasonably request.

         For so long as any of the Notes are outstanding and are "restricted
securities" within the meaning of Rule 144 (a) (3) of the Securities Act, (1)
the Servicer will provide or cause to be provided to any holder of such Notes
and any prospective purchaser thereof designated by such holder, upon the
request of such a holder or prospective purchaser, the information required to
be provided to such holder or prospective purchaser by Rule 144A(d) (4) under
the Securities Act; and (2) the Servicer shall update such information from time
to time in order to prevent such information from becoming false and misleading
and will take such other actions as are necessary to ensure that the safe harbor
exemption from the registration requirements of the Securities Act under Rule
144A is and will be available for resales of such Notes conducted in accordance
with Rule 144A.

         Section 4.02 Liquidation of Business Loans.

         In the event that any payment due under any Business Loan and not
postponed pursuant to Section 4.01 is not paid when the same becomes due and
payable, or in the event the Obligor fails to perform any other covenant or
obligation under the Business Loan, the Servicer shall take such action as it
shall deem to be in the best interests of the Noteholders and
Certificateholders. The Servicer shall foreclose upon or otherwise comparably
effect the ownership in the name of the Trust of Mortgaged Properties or other
Collateral relating to defaulted Business Loans for which the related Business
Loan is still outstanding, as to which no satisfactory arrangements can be made
for collection of delinquent payments in accordance with the provisions of
Section 4.10. In connection with such foreclosure or other conversion, the
Servicer shall exercise collection and foreclosure procedures with the same
degree of care and skill in its exercise or use as it would exercise or use
under the circumstances in the conduct of its own affairs. Any amounts advanced
in connection with such foreclosure or other action shall constitute "Servicing
Advances." The Servicer shall take into account the existence of any hazardous
substances, hazardous wastes or solid wastes on Mortgaged Properties in
determining whether to foreclose upon or otherwise comparably convert the
ownership of such Mortgaged Property, and will not foreclose on a Mortgaged
Property where it has cause to believe such substances exist unless it (i) has
received a Phase I environmental report and such report reveals no environmental
problems, or (ii) any problems revealed by such Phase I environmental report
have been corrected or such Mortgaged Property is subject to an environmental
rehabilitation for which the Servicer is not responsible.

         After a Business Loan has become a Liquidated Business Loan, the
Servicer shall promptly prepare and forward to the Indenture Trustee and upon
request, any Noteholder or Certificateholder, a Liquidation Report, in the form
attached hereto as Exhibit J, detailing the Liquidation Proceeds received from
the Liquidated Business Loan, expenses incurred with respect thereto, and any
loss incurred in connection therewith.


                                      -25-
<PAGE>   32
         Section 4.03   Establishment of Principal and
                        Interest Accounts; Deposits in
                        Principal and Interest Accounts.

         (a) The Servicer shall cause to be established and maintained one or
more Principal and Interest Accounts, in one or more Eligible Deposit Accounts,
in the form of time deposit or demand accounts, which may be interest-bearing or
such accounts may be trust accounts wherein the moneys therein are invested in
Permitted Instruments, titled "First International Bank, as Servicer, in trust
for the registered holders of FIB Business Loan Notes, Series 1999-A." All funds
in such Principal and Interest Accounts shall be insured by the BIF or SAIF
administered by the FDIC to the maximum extent provided by law. The creation of
any Principal and Interest Account shall be evidenced by a letter agreement in
the form of Exhibit C hereto.

         A copy of such letter agreement shall be furnished to the Indenture
Trustee, the Owner Trustee and, upon request, any Noteholder or
Certificateholder.

         (b) The Servicer and each Subservicer shall deposit without duplication
(within two Business Days of receipt thereof) in the applicable Principal and
Interest Account and retain therein:

                           (i) all payments received on or after the Cut-Off
                  Date on account of principal on the Business Loans, including
                  all Excess Payments, Principal Prepayments and Curtailments
                  collected on or after the Cut-Off Date;

                           (ii) all payments received on or after the Cut-Off
                  Date on account of interest on the Business Loans (net of the
                  Servicing Fee with respect to each Business Loan and other
                  servicing compensation payable to the Servicer as permitted
                  herein);

                           (iii) all Net Liquidation Proceeds;

                           (iv) all Insurance Proceeds (other than amounts to be
                  applied to restoration or repair of any related Mortgaged
                  Property, or to be released to the Obligor in accordance with
                  customary servicing procedures);

                           (v) all Released Mortgaged Property Proceeds and any
                  other proceeds from any other released property securing the
                  Business Loans;

                           (vi) any amounts paid in connection with the
                  repurchase of any Business Loan and the amount of any
                  Substitution Adjustment received pursuant to Sections 2.05 and
                  3.03;

                                      -26-
<PAGE>   33
                           (vii) any amount required to be deposited in the
                  Principal and Interest Account pursuant to Section 4.04 or
                  4.10; and

                           (viii) the amount of any losses incurred in
                  connection with investments in Permitted Instruments.

         (c) The foregoing requirements for deposit in the applicable Principal
and Interest Account shall be exclusive, it being understood and agreed that,
without limiting the generality of the foregoing, payments with respect to the
Servicing Fee (to the extent received and permitted by Section 6.03), with
respect to each Business Loan, together with the difference between any
Liquidation Proceeds and the related Net Liquidation Proceeds, need not be
deposited by the Servicer in the applicable Principal and Interest Account.

         (d) Any interest earnings on funds held in the applicable Principal and
Interest Account paid by an Eligible Deposit Account shall be for the account of
the Servicer and may only be withdrawn from the applicable Principal and
Interest Account by the Servicer immediately following its monthly remittance to
the Indenture Trustee pursuant to Section 4.04(a). Any reference herein to
amounts on deposit in the applicable Principal and Interest Account shall refer
to amounts net of such investment earnings.

         Section 4.04   Permitted Withdrawals From the Applicable
                        Principal and Interest Account.

         The Servicer shall withdraw funds from the applicable Principal and
Interest Account for the following purposes:

         (a) to effect the remittance to the Indenture Trustee on each
Determination Date for deposit into the Note Distribution Account that portion
of the Available Funds for the related Remittance Date that is net of
Compensating Interest, the Monthly Advances and amounts then on deposit in the
Spread Account (and, with respect to the Determination Dates occurring during
the Funding Period, net of amounts then on deposit in the Pre-Funding Account
and the Capitalized Interest Account);

         (b) to reimburse itself for any accrued unpaid Servicing Fees,
unreimbursed Monthly Advances and for unreimbursed Servicing Advances to the
extent deposited in the Principal and Interest Account (and not netted from
Monthly Payments received). The Servicer's right to reimbursement for unpaid
Servicing Fees and, except as provided in the following sentence, Servicing
Advances and Monthly Advances shall be limited to Liquidation Proceeds, Released
Mortgaged Property Proceeds, Insurance Proceeds and such other amounts as may be
collected by the Servicer from the Obligor or otherwise relating to the Business
Loan in respect of which such unreimbursed amounts are owed. The Servicer's
right to reimbursement for Servicing Advances and Monthly Advances in excess of
such amounts shall be limited to any late collections of interest received on
the Business Loans generally, including Liquidation Proceeds, Released Mortgaged
Property Proceeds, Insurance Proceeds and any other amounts;

                                      -27-
<PAGE>   34
provided, however, that the Servicer's right to such reimbursement pursuant
hereto shall be subordinate to the rights of the Noteholders and may be
exercised only if the Spread Balance equals the then applicable Specified Spread
Account Requirement;

         (c) to withdraw any amount received from an Obligor that is recoverable
and sought to be recovered as a voidable preference by a trustee in bankruptcy
pursuant to the United States Bankruptcy Code in accordance with a final,
nonappealable order of a court having competent jurisdiction;

         (d) (i) to make investments in Permitted Instruments and (ii) to pay to
itself, as permitted by Section 4.03(d), interest paid in respect of Permitted
Instruments or by an Eligible Deposit Account on funds deposited in the
Principal and Interest Account;

         (e) to withdraw any funds deposited in the Principal and Interest
Account that were not required to be deposited therein or were deposited therein
in error;

         (f) to pay itself servicing compensation pursuant to Section 6.03
hereof or interest as permitted under the definition of Excess Proceeds; and

         (g) to clear and terminate the Principal and Interest Accounts upon the
termination of this Agreement.

         So long as no default or Servicer Termination Event shall have occurred
and be continuing, and consistent with any requirements of the Code, the
Principal and Interest Accounts shall either be maintained with an Eligible
Deposit Account as an interest-bearing account meeting the requirements set
forth in Section 4.03(a), or the funds held therein may be invested by the
Servicer (to the extent practicable) in Permitted Instruments, as directed in
writing by the Servicer. In either case, funds in the Principal and Interest
Account must be available for withdrawal without penalty, and any Permitted
Instruments must mature not later than the Business Day immediately preceding
the Determination Date next following the date of such investment (except that
if such Permitted Instrument is an obligation of the institution that maintains
such account, then such Permitted Instrument shall mature not later than such
Determination Date) and shall not be sold or disposed of prior to its maturity.
All Permitted Instruments must be held by or registered in the name of "First
International Bank, as Servicer, in trust for the registered holders of FIB
Business Loan Notes, Series 1999-A." All interest or other earnings from funds
on deposit in the Principal and Interest Account (or any Permitted Instruments
thereof) shall be the exclusive property of the Servicer, and may be withdrawn
from the Principal and Interest Account pursuant to clause (d) above. The amount
of any losses incurred in connection with the investment of funds in the
Principal and Interest Account in Permitted Instruments shall be deposited in
the Principal and Interest Account by the Servicer from its own funds
immediately as realized without reimbursement therefor.

         Section 4.05 [Intentionally Omitted]


                                      -28-
<PAGE>   35
         Section 4.06 Transfer of Accounts.

         The Servicer may, upon written notice to the Indenture Trustee,
transfer any Principal and Interest Account to a different Eligible Deposit
Account.

         Section 4.07 Maintenance of Hazard Insurance.

         The Servicer shall comply with the customary servicing procedures
concerning the issuance and maintenance of fire and hazard insurance with
extended coverage customary in the area where the Mortgaged Property is located.
If at origination of a Business Loan, to the best of the Servicer's knowledge
after reasonable investigation, the related Mortgaged Property is in an area
identified in the Federal Register by the Flood Emergency Management Agency as
having special flood hazards (and such flood insurance has been made available),
the Servicer will require the related Obligor to purchase a flood insurance
policy with a generally acceptable insurance carrier, in an amount representing
coverage not less than the least of (i) the full insurable value of the
Mortgaged Property, or (ii) the maximum amount of insurance available under the
National Flood Insurance Act of 1968, as amended. The Servicer shall also
maintain, to the extent such insurance is available, and in accordance with the
Servicer's policies, on Foreclosed Property constituting real property, fire and
hazard insurance in the amounts described above and liability insurance. Any
amounts collected by the Servicer under any such policies (other than amounts to
be applied to the restoration or repair of the Mortgaged Property, or to be
released to the Obligor in accordance with applicable law) shall be deposited in
the Principal and Interest Account, subject to withdrawal pursuant to Section
4.04. It is understood and agreed that no earthquake or other additional
insurance need be required by the Servicer of any Obligor or maintained on
Foreclosed Property, other than pursuant to such applicable laws and regulations
as shall at any time be in force and as shall require such additional insurance.
All policies required hereunder shall be endorsed with standard mortgagee
clauses with losses payable to the Servicer or its affiliates.

         Section 4.08 [Intentionally Omitted].

         Section 4.09 Fidelity Bond.

         The Servicer shall maintain with a responsible company, and at its own
expense, a blanket fidelity bond and an errors and omissions insurance policy,
in a minimum amount equal to $1,500,000,and a maximum deductible of $100,000, if
commercially available, with coverage on all employees acting in any capacity
requiring such persons to handle funds, money, documents or papers relating to
the Business Loans ("Servicer Employees"). The fidelity bond shall insure the
Indenture Trustee and the Owner Trustee, their respective officers and employees
against losses resulting from forgery, theft, embezzlement or fraud by such
Servicer Employees. The errors and omissions policy shall insure against losses
resulting from the errors, omissions and negligent acts of such Servicer
employees. No provision of this Section 4.09 requiring such fidelity bond and
errors and omissions insurance shall relieve the Servicer from its duties as set
forth in this Agreement. Upon the request of the Indenture Trustee, the Owner
Trustee or any

                                      -29-
<PAGE>   36
Noteholder or Certificateholder, the Servicer shall cause to be delivered to the
Indenture Trustee, Owner Trustee or such Noteholder or such Certificateholder a
certified true copy of such fidelity bond and insurance policy. The current
issuer of such fidelity bond and insurance policy is The Hartford Underwriters
Insurance Company.

         Section 4.10 Title, Management and Disposition of Foreclosed Property.

         In the event that title to a Mortgaged Property or other Collateral is
acquired in foreclosure or by deed in lieu of foreclosure or by other legal
process (a "Foreclosed Property"), the deed or certificate of sale, or the
repossessed Collateral shall be taken in the name of the Trust for the benefit
of the Noteholders and Certificateholders.

         The Servicer, subject to Sections 4.01 and 4.02 hereof, shall manage,
conserve, protect and operate each Foreclosed Property for the Noteholders and
the Certificateholders solely for the purpose of its prudent and prompt
disposition and sale. The Servicer shall, either itself or through an agent
selected by the Servicer, manage, conserve, protect and operate the Foreclosed
Property in the same manner that it manages, conserves, protects and operates
other foreclosed property for its own account, and in the same manner that
similar property in the same locality as the Foreclosed Property is managed. The
Servicer shall attempt to sell the same (and may temporarily rent the same) on
such terms and conditions as the Servicer deems to be in the best interest of
the Noteholders and Certificateholders.

         The Servicer shall cause to be deposited in the Principal and Interest
Account, no later than five Business Days after the receipt thereof, all
revenues received with respect to the conservation and disposition of the
related Foreclosed Property net of Servicing Advances.

         The disposition of Foreclosed Property shall be carried out by the
Servicer at such price, and upon such terms and conditions, as the Servicer,
deems to be in the best interest of the Noteholders and the Certificateholders.
The proceeds of sale of the Foreclosed Property shall promptly, but in no event
later than two Business Days after receipt, be deposited in the Principal and
Interest Account as received from time to time and, as soon as practicable
thereafter, the expenses of such sale shall be paid, the Servicer shall, subject
to Section 4.04, reimburse itself for any related unreimbursed Servicing
Advances, unpaid Servicing Fees and unreimbursed Monthly Advances, and the
Servicer shall deposit in the Principal and Interest Account the net cash
proceeds of such sale to be distributed to the Noteholders in accordance with
Section 5.07 hereof.

         Section 4.11 [Intentionally Omitted].


                                      -30-
<PAGE>   37
          Section 4.12      Collection of Certain Business
                            Loan Payments.

         The Servicer shall make reasonable efforts to collect all payments
called for under the terms and provisions of the Business Loans, and shall, to
the extent such procedures shall be consistent with this Agreement, comply with
the terms and provisions of any applicable hazard insurance policy. Consistent
with the foregoing , the Servicer may in its discretion waive or permit to be
waived any fee or charge which the Servicer would be entitled to retain
hereunder as servicing compensation and extend the due date for payments due on
a Business Note for a period (with respect to each payment as to which the due
date is extended) not greater than 180 days after the initially scheduled due
date for such payment provided that the Servicer determines such extension would
not be considered a new mortgage loan for federal income tax purposes. In the
event the Servicer shall consent to the deferment of the due dates for payments
due on a Business Note, the Servicer shall nonetheless make payment of any
required Monthly Advance with respect to the payments so extended to the same
extent as if such installment were due, owing and delinquent and had not been
deferred, and shall be entitled to reimbursement therefor in accordance with
Section 4.04(b) hereof.

         Section 4.13      Access to Certain Documentation and
                           Information Regarding the Business Loans.

         The Servicer shall provide to the Owner Trustee, the Indenture Trustee,
the FDIC, the OCC, the Federal Reserve, the Office of Thrift Supervision and the
supervisory agents and examiners of the foregoing, access to the documentation
regarding the Business Loans required by applicable local, state and federal
regulations, such access being afforded without charge but only upon reasonable
request and during normal business hours at the offices of the Servicer
designated by it.


                                      -31-
<PAGE>   38
                                    ARTICLE V

                       PAYMENTS TO THE CERTIFICATEHOLDERS

          Section 5.01       Establishment of Note Distribution Account;
                             Deposits in Note Distribution Account; Permitted
                             Withdrawals from Note Distribution Account.

         (a) No later than the Closing Date, the Indenture Trustee will
establish and maintain with itself in its trust department a trust account,
which shall not be interest-bearing, titled "Note Distribution Account, HSBC
Bank USA, as Indenture Trustee for the registered holders of FIB Business Loan
Notes, Series 1999-A" (the " Note Distribution Account"). The Indenture Trustee
shall, promptly upon receipt, deposit in the Note Distribution Account and
retain therein:

                           (i) the Available Funds (net of the amount of Monthly
                  Advances and Compensating Interest deposited pursuant to
                  subclause (ii) below and the amount on deposit in the Spread
                  Account);

                           (ii) the Compensating Interest and the portion of the
                  Monthly Advance remitted to the Indenture Trustee by the
                  Servicer;

                           (iii) amounts transferred from the Spread Account
                  pursuant to Section 5.02(b)(i);

                           (iv) amounts required to be paid by the Servicer
                  pursuant to Section 5.06(e) in connection with losses on
                  investments of amounts in the Accounts; and

                           (v) amounts transferred from the Pre-Funding Account
                  and the Capitalized Interest Account on the Special Remittance
                  Date pursuant to Sections 5.04(c) and (h), respectively.

         (b) Amounts on deposit in the Note Distribution Account shall be
withdrawn on each Remittance Date by the Indenture Trustee, or the Paying Agent,
on its behalf, to effect the distribution described in Section 5.07(b) and
thereafter by the following parties in no particular order of priority:

                           (i) by the Indenture Trustee, to invest amounts on
                  deposit in the Note Distribution Account in Permitted
                  Instruments pursuant to Section 5.06;

                           (ii) by the Indenture Trustee, to pay on a monthly
                  basis to the Servicer as additional servicing compensation
                  interest paid and earnings realized on Permitted Instruments;


                                      -32-
<PAGE>   39
                           (iii) by the Indenture Trustee, to withdraw any
                  amount not required to be deposited in the Note Distribution
                  Account or deposited therein in error; and

                           (iv) by the Indenture Trustee, to clear and terminate
                  the Note Distribution Account upon the termination of this
                  Agreement in accordance with the terms of Section 10.01
                  hereof.

         Section 5.02      Establishment of Spread Account;
                           Deposits in Spread Account; Permitted
                           Withdrawals from Spread Account.

         (a) No later than the Closing Date, the Indenture Trustee will
establish and maintain with itself in its trust department a trust account,
which shall not be interest bearing, titled "Spread Account, HSBC Bank USA, as
Indenture Trustee for the registered holders of FIB Business Loan Notes, Series
1999-A" (the "Spread Account"). The Spread Account shall constitute part of the
Trust Fund, and the funds held therein may be invested in Permitted Instruments.
On the Closing Date, the Indenture Trustee will make an initial cash deposit
from the proceeds of the sale of the Class A, Class M-1 and Class M-2 Notes into
the Spread Account in an amount equal to $3,900,000. Thereafter, on each
Remittance Date, the Indenture Trustee shall, promptly upon receipt, deposit
into the Spread Account:

                           (i) that portion of the Available Funds required to
                  be deposited into the Spread Account pursuant to Section
                  5.07(b)(x) until the Spread Balance equals the then applicable
                  Specified Spread Account Requirement; and

                           (ii) amounts required to be paid by the Servicer
                  pursuant to Section 5.06(e) in connection with losses on
                  investments of amounts in the Spread Account.

         (b) Amounts on deposit in the Spread Account shall be withdrawn by
Indenture Trustee for distribution in the manner set forth in subclause (c)
below on each Remittance Date in the following order of priority:

                           (i) to deposit in the Note Distribution Account an
                  amount by which (a) the sum of (i) the Class A, Class M-1 and
                  Class M-2 Interest Distribution Amounts, (ii) the Class A,
                  Class M-1 and Class M-2 Principal Distribution Amounts, (iii)
                  the Class M-1 and Class M-2 Carry Forward Interest Amounts and
                  (iv) the Class A, Class M-1 and Class M-2 Carry Forward
                  Amounts exceeds (b) the Available Funds for such Remittance
                  Date (but excluding from such definition, amounts in the
                  Spread Account);

                           (ii) to deposit in the Note Distribution Account the
                  amount, if any, required to make the full distribution to the
                  Expense Account pursuant to Section 5.07(b)(vii); and


                                      -33-
<PAGE>   40
                           (iii) to the extent that the amount then on deposit
                  in the Spread Account after giving effect to all required
                  transfers from the Spread Account to the Note Distribution
                  Account on such Remittance Date then exceeds the Specified
                  Spread Account Requirement as of such Remittance Date (such
                  excess, a "Spread Account Excess"), an amount equal to such
                  Spread Account Excess shall be distributed first, to make any
                  payments required pursuant to Section 5.07(b)(xi) -- (xviii),
                  in that order, and then, to the Holders of the Certificates;

and also, in no particular order of priority:

                           (iv) to invest amounts on deposit in the Spread
                  Account in Permitted Instruments pursuant to Section 5.06;

                           (v) to withdraw any amount not required to be
                  deposited in the Spread Account or deposited therein in error;
                  and

                  (vi) to clear and terminate the Spread Account upon the
                  termination of this Agreement in accordance with the terms of
                  Section 10.01.

         (c) Any amounts which are required to be withdrawn from the Spread
Account pursuant to paragraph (b) above shall be withdrawn from the Spread
Account in the following order of priority: (i) first, from any uninvested funds
therein, and (ii) second, from the proceeds of the liquidation of any
investments therein pursuant to Section 5.06(b).

         (d) Any amounts which are distributed by the Indenture Trustee to the
holders of the Certificates pursuant to paragraph (b) above will not be required
to be refunded, regardless of whether there are sufficient funds on a Subsequent
Remittance Date to make a full distribution to holders of the Notes on such
Remittance Date.

         Section 5.03      Establishment of Expense Account;
                           Deposits in Expense Account; Permitted
                           Withdrawals from Expense Account

         (a) No later than the Closing Date, the Indenture Trustee will
establish with itself an account (the "Expense Account"). The Expense Account
shall not constitute part of the Trust Fund and is for the benefit of the
Indenture Trustee and the Owner Trustee to pay their fees and expenses related
to the Trust and, on a subordinate basis, for the benefit of the Servicer as
described in (b)(ii) and (c) below. The Indenture Trustee shall deposit into the
Expense Account:

                           (i) on each Remittance Date from the amounts on
                  deposit in the Note Distribution Account an amount equal to
                  one-twelfth of the Annual Expense Escrow Amount; and


                                      -34-
<PAGE>   41
                           (ii) upon receipt, amounts required to be paid by the
                  Servicer pursuant to Section 5.06(e) in connection with losses
                  on investments of amounts in the Expense Account.

If, at any time the amount then on deposit in the Expense Accounts shall be
insufficient to pay in full the fees and expenses of the Indenture Trustee and
the Owner Trustee then due, the Indenture Trustee and the Owner Trustee shall
make demand on the Servicer to advance the amount of such insufficiency, and the
Servicer shall promptly advance such amount. Thereafter, the Servicer shall be
entitled to reimbursement from the Expense Account for the amount of any such
advance from any excess funds available pursuant to subclause (c)(ii) below.
Without limiting the obligation of the Servicer to advance such insufficiency,
in the event the Servicer does not advance the full amount of such insufficiency
by the Business Day immediately preceding the Determination Date, the amount of
such insufficiency shall be deposited into the Expense Account for payment to
the Indenture Trustee pursuant to Section 5.07(b)(vii), to the extent of
available funds in the Note Distribution Account.

         (b) The Indenture Trustee may invest amounts on deposit in the Expense
Accounts in Permitted Instruments pursuant to Section 5.06 hereof, and the
Indenture Trustee shall withdraw amounts on deposit in the Expense Accounts to:

                           (i) pay the Indenture Trustee's and Owner Trustee's
                  fees and expenses as described in Section 2.08 hereof;

                           (ii) pay on a monthly basis to the Servicer as
                  additional servicing compensation interest paid and earnings
                  realized on Permitted Instruments;

                           (iii) withdraw any amounts not required to be
                  deposited in the Expense Accounts or deposited therein in
                  error; and

                           (iv) clear and terminate the Expense Account upon the
                  termination of this Agreement in accordance with the terms of
                  Section 10.01.

         (c) On the twelfth Remittance Date following the Closing Date, and on
each twelfth Remittance Date thereafter, the Indenture Trustee shall determine
that all payments required to be made during the prior twelve month period
pursuant to subclauses (b)(i), (b)(ii) and (b)(iii) above, have been made, and,
if all such payments have been made, from the amounts remaining in the Expense
Accounts, the Indenture Trustee shall (in the following order of priority):

                           (i) reimburse the Servicer and/or the Seller, for
                  reimbursable advances made pursuant to Section 8.01;

                           (ii) reimburse the Servicer for advances made by it
                  pursuant to the last paragraph of subclause (a) above; and


                                      -35-
<PAGE>   42
                           (iii) remit to the Servicer as additional servicing
                  compensation any amounts remaining in the Expense Account
                  after payments made pursuant to subclauses (b)(i), (b)(ii),
                  (b)(iii), (c)(i) and (c)(ii), above.

         Section 5.04      Pre-Funding Account and Capitalized
                           Interest Account

         (a) No later than the Closing Date, the Indenture Trustee shall
establish and maintain in its trust department a trust account, which shall not
be interest-bearing, titled "FIB Business Loan Pre-Funding Account 1999-A" (the
"Pre-Funding Account"). The Pre-Funding Account shall constitute part of the
Trust Fund and may only be invested in Permitted Investments. The Indenture
Trustee shall, promptly upon receipt, deposit into the Pre-Funding Account and
retain therein the Original Pre-Funded Amount in an amount equal to the sum of
$10,024,756.59 from the proceeds of the sale of the Class A Notes.

         (b) On each Subsequent Transfer Date, the Servicer shall instruct the
Indenture Trustee to withdraw from the Pre-Funding Account an amount equal to
100% of the aggregate Principal Balances of the Subsequent Business Loans sold
to the Trust Fund on such Subsequent Transfer Date and pay such amount to or
upon the order of the Seller with respect to such transfer. In no event shall
the Servicer be permitted to instruct the Indenture Trustee to release from the
Pre-Funding Account in excess of $10,024,756.59.

         (c) If at the end of the Funding Period amounts still remain in the
Pre-Funding Account, the Servicer shall instruct the Indenture Trustee to
withdraw from the Pre-Funding Account on the immediately following Remittance
Date and deposit such amounts in the Note Distribution Account. However, if at
the close of business on the Determination Date in December 1999 amounts still
remain in the Pre-Funding Account, the Servicer shall instruct the Indenture
Trustee to withdraw from the Pre-Funding Account on the Special Remittance Date
and deposit in the Note Distribution Account any Pre-Funded Amount then
remaining in the Pre-Funding Account.

         (d) On the Remittance Dates occurring in October, November and
December, 1999, the Indenture Trustee shall transfer from the Pre-Funding
Account to the Note Distribution Account, the Pre-Funding Earnings, if any,
applicable to each such Remittance Date.

         (e) No later than the Closing Date, the Indenture Trustee shall
establish and maintain in its trust department a trust account which shall not
be interest-bearing, titled "FIB Business Loan Capitalized Interest Account
1999-A" (the "Capitalized Interest Account"). The Capitalized Interest Account
shall constitute part of the Trust Fund and may only be invested in Permitted
Investments. The Indenture Trustee shall, promptly upon receipt, deposit into
the Capitalized Interest Account $73,000.00. If prior to the end of the Funding
Period the funds on deposit in the Pre-Funding Account are invested in a
guaranteed investment contract, repurchase agreement or other arrangement
acceptable to the Rating Agencies, that constitutes a Permitted

                                      -36-
<PAGE>   43
Instrument, the Indenture Trustee shall, within one Business Day of its receipt
of notification of satisfaction of the Rating Agency Condition, withdraw from
the Capitalized Interest Account and pay to the Seller the amount set forth in
such notification.

         (f) On the Remittance Dates occurring in October, November and
December, 1999, the Indenture Trustee shall transfer from the Capitalized
Interest Account to the Note Distribution Account, the Capitalized Interest
Requirement, if any, for such Remittance Dates.

         (g) On the Special Remittance Date, the Indenture Trustee shall
transfer from the Capitalized Interest Account to the Note Distribution Account
the Capitalized Interest Requirement, if any, for such Special Remittance Date.
Any amounts remaining in the Capitalized Interest Account after taking into
account such transfer shall be paid on such Special Remittance Date to the
Certificateholders, and the Capitalized Interest Account shall be closed.

         Section 5.05 [Intentionally Omitted]

         Section 5.06 Investment of Accounts.

         (a) So long as no default or Event of Default shall have occurred and
be continuing, and consistent with any requirements of the Code, all or a
portion of any Account which by the terms of this Agreement shall be invested in
Permitted Instruments by the Indenture Trustee, as directed in writing by the
Servicer, in one or more Permitted Instruments in the name of the Indenture
Trustee, bearing interest or sold at a discount. No such investment in the
Principal and Interest Account, Note Distribution Account, the Pre-Funding
Account, the Capitalized Interest Account and the Spread Account shall mature
later than the Business Day immediately preceding the next Remittance Date and
no such investment in the Expense Account shall mature later than the Business
Day immediately preceding the date such funds will be needed to pay fees or
premiums; provided, however, the Indenture Trustee or any affiliate thereof, may
be the obligor on any investment which otherwise qualifies as a Permitted
Instrument and any investment on which the Indenture Trustee is the obligor may
mature on such Remittance Date or date when needed, as the case may be.

         (b) If any amounts are needed for disbursement from any Account held by
the Indenture Trustee and sufficient uninvested funds are not available to make
such disbursement, the Indenture Trustee shall cause to be sold or otherwise
converted to cash a sufficient amount of the investments in such Account. The
Indenture Trustee shall not be liable for any investment loss or other charge
resulting therefrom.

         (c) The Indenture Trustee shall not in any way be held liable by reason
of any insufficiency in any Account held by the Indenture Trustee resulting from
any investment loss on any Permitted Instrument included therein (except to the
extent that the Indenture Trustee is the obligor thereon).


                                      -37-
<PAGE>   44
         (d) The Indenture Trustee shall invest and reinvest funds in the
Accounts held by the Indenture Trustee to the fullest extent practicable, in
such manner as the Servicer shall from time to time direct in writing, but only
in one or more Permitted Instruments.

         (e) All income or other gain from investments in any Account held by
the Indenture Trustee shall be deposited in such Account, immediately on
receipt, and the Indenture Trustee shall notify the Servicer of any loss
resulting from such investments. The Servicer shall remit the amount of any such
loss from its own funds, without reimbursement therefor, to the Indenture
Trustee for deposit in the Account from which the related funds were withdrawn
for investment by the next Determination Date following receipt by the Servicer
of such notice.

         Section 5.07 Distributions.

         (a) The rights of the Noteholders and Certificateholders to receive
distributions from the proceeds of the Trust Fund, and all ownership interests
of the Certificateholders in such distributions, shall be as set forth in this
Agreement.

         (b) On each Remittance Date the Indenture Trustee shall withdraw from
the Note Distribution Account an amount equal to (A) that portion of the
Available Funds received from the Servicer pursuant to Section 5.01(a)(i), (ii),
(iv) and (v) and (B) the amounts deposited therein pursuant to Section
5.02(b)(i) and make distributions thereof in the following order of priority:

         (i) first, to the Class A Noteholders, in an amount up to the Class A
Interest Distribution Amount;

         (ii) second, to the Class M-1 Noteholders, in an amount up to the Class
M-1 Interest Distribution Amount;

         (iii) third, to the Class M-2 Noteholders, in an amount up to the Class
M-2 Interest Distribution Amount;

         (iv) fourth, to the Class A Noteholders, in an amount up to the sum of
(a) the Class A Principal Distribution Amount for the Class A Notes and (b) the
Class Carry Forward Amount for the Class A Notes;

         (v) fifth, to the Class M-1 Noteholders, in an amount up to the sum of
(a) the Class M-1 Principal Distribution Amount for the Class M-1 Notes and (b)
the Class Carry Forward Amount for the Class M-1 Notes;

         (vi) sixth, to the Class M-2 Noteholders, in an amount up to the sum of
(a) the Class M-2 Principal Distribution Amount for the Class M-2 Notes and (b)
the Class Carry Forward Amount for the Class M-2 Notes;


                                      -38-
<PAGE>   45
         (vii) seventh, to the Expense Account in an amount up to one-twelfth of
the Annual Expense Escrow Amount plus any amount required to be paid to the
Owner Trustee and the Indenture Trustee pursuant to this Agreement;

         (viii) eighth, to the Servicer, certain amounts reimbursable pursuant
to the Sale and Servicing Agreement;

         (ix) ninth, to the Class A, Class M-1 and Class M-2 Noteholders, pro
rata based upon their Class Principal Balance, until the first Remittance Date
on which the Overcollateralization equals the OC Target Amount;

         (x) tenth, to the Spread Account, unless and until the amount therein
equals the Specified Spread Account Requirement;

         (xi) eleventh, to the Class A Noteholders, any Interest Carryover for
the Class A Notes;

         (xii) twelfth, to the Class M-1 Noteholders, any Interest Carryover for
the Class M-1 Notes;

         (xiii) thirteenth, to the Class M-2 Noteholders, any Interest Carryover
for the Class M-2 Notes;

         (xiv) fourteenth, to the Class B Noteholders, in an amount up to the
Class B Interest Distribution Amount, minus the Class Carry Forward Interest
Amount for the Class B Notes;

         (xv) fifteenth, to the Class B Noteholders, in an amount up to the
Class B Principal Distribution Amount for the Class B Notes;

         (xvi) sixteenth, to the Class B Noteholders, the Class Carry Forward
Interest Amount for the Class B Notes;

         (xvii) seventeenth, to the Class B Noteholders, the Class Carry Forward
Amount for the Class B Notes;

         (xviii)eighteenth, to the Class B Noteholders, any Interest Carryover
for the Class B Notes; and

         (xix) nineteenth, to the Owner Trustee, for distribution to the
Certificateholders, any excess.

         Additionally, on the Special Remittance Date, the Indenture Trustee
shall withdraw from the Note Distribution Account the amount, if any, deposited
therein pursuant to

                                      -39-
<PAGE>   46
Section 5.01(a)(v) and make distributions thereof to Noteholders as follows: (i)
from amounts transferred from the Pre-Funding Account, distributions of
principal to the Notes of each Class pro rata based upon the applicable Class A,
Class M-1, Class M-2 and Class B Percentages and (ii) from amounts transferred
from the Capitalized Interest Account, distributions of interest to the Holders
of each Class of Notes equal to the Capitalized Interest Requirement.

                  (c) All distributions made to the Noteholders of a particular
Class will be made on a pro rata basis among the Noteholders of record of the
applicable Class on the next preceding Record Date based on the Percentage
Interest represented by their respective Notes, and shall be made by check or,
upon request by a Noteholders, by wire transfer of immediately available funds
to the account of such Noteholders at a bank or other entity having appropriate
facilities therefor, and, in the case of wire transfers, at the expense of such
Noteholder unless such Noteholder shall own of record Notes which have initial
principal balances aggregating at least $1,000,000.

                  Section 5.08 Determination of LIBOR.

         LIBOR applicable to the calculation of the Remittance Rate on the Notes
for any Interest Accrual Period will be determined on each LIBOR Rate Adjustment
Date.

         On each LIBOR Rate Adjustment Date, LIBOR shall be established by the
Servicer and, as to any Interest Accrual Period, will equal the rate for one
month United States dollar deposits that appears on the Telerate Screen Page
3750 as of 11:00 a.m., London time, on such LIBOR Rate Adjustment Date.
"Telerate Screen Page 3750" means the display designated as page 3750 on the
Bridge Telerate Service (or such other page as may replace page 3750 on that
service) for the purpose of displaying London interbank offered rates of major
banks). If such rate does not appear on such page (or such other page as may
replace that page on that service), or if such service is no longer offered,
LIBOR, shall be so established by use of such other service for displaying LIBOR
or comparable rates as may be selected by the Servicer, the rate will be the
Reference Bank Rate. The "Reference Bank Rate" will be determined on the basis
of the rates at which deposits in U.S. Dollars are offered by the reference
banks (which shall be any three major banks that are engaged in transactions in
the London interbank market, selected by the Servicer) as of 11:00 a.m., London
time, on the LIBOR Rate Adjustment Date to prime banks in the London interbank
market for a period of one month in amounts approximately equal to the Class
Principal Balance of the Notes then outstanding. The Servicer will request the
principal London office of each of the reference banks to provide a quotation of
its rate. If at least two such quotations are provided, the rate will be the
arithmetic mean of the quotations rounded up to the next multiple of 1/16%. If
on such date fewer than two quotations are provided as requested, the rate will
be the arithmetic mean of the rates quoted by one or more major banks in New
York City, selected by the Servicer, as of 11:00 a.m., New York City time, on
such date for loans in U.S. Dollars to leading European banks for a period of
one month in amounts approximately equal to the Class Principal Balance of the
Notes then outstanding. If no such quotations can be obtained, the rate will be
LIBOR for the prior Distribution Date.


                                      -40-
<PAGE>   47
         The establishment of LIBOR by the Servicer on any LIBOR Rate Adjustment
Date and the Servicer's subsequent calculation of the Remittance Rates
applicable to the Notes for the relevant Interest Accrual Period, in the absence
of manifest error, will be final and binding.

         Promptly following each LIBOR Rate Adjustment Date the Servicer shall
supply the Indenture Trustee with the results of its determination of LIBOR on
such date.


                  Section 5.09 Statements.


                  Each month, not later than 12:00 noon New York time on the
Determination Date, the Servicer shall deliver to the Indenture Trustee, by
telecopy, for distribution to the Noteholders, the receipt and legibility of
which shall be confirmed telephonically, with hard copy thereof and the
Servicer's Monthly Computer Tape in the form attached hereto as Exhibit L (both
in hard copy and in computer tape form) to be delivered on the Business Day
following the Determination Date, a certificate signed by a Servicing Officer (a
"Servicer's Certificate") stating the date (day, month and year), the Series
number of the Notes, the date of this Agreement, and, as of the close of
business on the Record Date for such month:

                  (i) Available Funds for the related Remittance Date;

                  (ii) The Aggregate Class A Note Principal Balance, the
Aggregate Class M-1 Note Principal Balance, the Aggregate Class M-2 Note
Principal Balance, and the Aggregate Class B Note Principal Balance as reported
in the prior Servicer's Certificate pursuant to subclause (xi) below, or, in the
case of the first Determination Date, the Original Class A, Class M-1, Class
M-2, and Class B Note Principal Balance;

                  (iii) The number and Principal Balances of all Business Loans
which were the subject of Principal Prepayments during the Due Period and the
number and Principal Balances of all Defaulted Business Loans purchased by the
Servicer during the Due Period;

                  (iv) The amount of all Curtailments which were received during
the Due Period;

                  (v) The amount of all Excess Payments and the amount of all
Monthly Payments in respect of principal received during the Due Period;

                  (vi) The aggregate amount of interest received on Business
Loans;

                  (vii) The amount of the Monthly Advances to be made on the
Determination Date and the Compensating Interest payment to be made on the
Determination Date;

                  (viii) The delinquency and foreclosure information set forth
in the form attached hereto as Exhibit K;


                                      -41-
<PAGE>   48
                  (ix) The Interest Distribution Amounts and Principal
Distribution Amounts for each Class for the Remittance Date with the components
thereof stated separately;

                  (x) The amount available in the Spread Account as of the
related Record Date in cash and from liquidation of Permitted Instruments and
the amount, if any, to be transferred from the Spread Account to the Note
Distribution Account pursuant to Section 5.02(b)(i);

                  (xi) The Aggregate Class A Note Principal Balance, Aggregate
Class M-1 Note Principal Balance, Aggregate Class M-2 Note Principal Balance and
Aggregate Class B Note Principal Balance after giving effect to the distribution
to be made on the Remittance Date;

                  (xii) The weighted average maturity and weighted average
Business Loan Interest Rate;

                  (xiii) The Servicing Fees and amounts to be deposited to the
Expense Account;

                  (xiv) The amount of all payments and reimbursements to the
Servicer;

                  (xv) The Class A, Class M-1, Class M-2 and Class B Remittance
Rates with respect to such Remittance Date;

                  (xvi) During the Funding Period, the aggregate Principal
Balance of the Subsequent Business Loans purchased during the prior Due Period
and the amount on deposit in the Pre-Funding Account as of the end of such Due
Period;

                  (xvii) The Net Interest Cap with respect to the Remittance
Date;

                  (xviii) If the Class Remittance Rate for a Class of Notes for
such Remittance Date is based on the Net Interest Cap, the amount of any
Interest Carryover for such Class of Notes for such Remittance Date;

                  (xix) the amount of the distribution, if any, allocable to
Interest Carryover and the amount of any Interest Carryover for all prior
Remittance Dates after giving effect to such distribution (in each case, stated
separately by Class and in the aggregate); and

                  (xx) Such other information as the Indenture Trustee, the
Noteholders and the Certificateholders or the Rating Agencies may reasonably
require.

                  The Indenture Trustee shall forward such report to the
Noteholders, the Certificateholders, the Owner Trustee and the Rating Agencies
on the Remittance Date, together with a separate report indicating the amount of
funds deposited in each Note Distribution Account pursuant to Section
5.01(a)(iv); and the amounts which are reimbursable to the Servicer or the
Seller pursuant to Sections 5.03(c)(i), 5.03(c)(ii) and 5.07(b)(viii) (all
reports prepared by

                                      -42-
<PAGE>   49
the Indenture Trustee of such withdrawals and deposits will be based in whole or
in part upon the information provided to the Indenture Trustee by the Servicer).

                  To the extent that there are inconsistencies between the
telecopy of the Servicer's Certificate and the hard copy thereof, the Indenture
Trustee shall be entitled to rely upon the telecopy. In the case of information
furnished pursuant to subclauses (ii), (iii), (iv), (v), (ix) and (xi), above,
the amounts shall be expressed in a separate section of the report as a dollar
amount for each Class per $1,000 original dollar amount as of the Cut-Off Date.

                  Additionally, on the Special Remittance Date the Indenture
Trustee shall, based upon information received from the Servicer, forward to the
Noteholders, the Owner Trustee and the Rating Agencies a report setting forth
the amount of principal and interest, if any, being paid to each Class of Notes
on the Special Remittance Date.

                  (a) Within a reasonable period of time after the end of each
calendar year, the Servicer shall furnish to the Indenture Trustee and the Owner
Trustee for distribution to each Person who at any time during the calendar year
was a Noteholder or a Certificateholder such information as is reasonably
necessary to provide to such Person a statement containing the information set
forth in subclauses (vi), (ix), and (xiv), above, aggregated for such calendar
year or applicable portion thereof during which such Person was a Noteholder or
a Certificateholder. Such obligation of the Servicer shall be deemed to have
been satisfied to the extent that substantially comparable information shall be
provided by the Servicer pursuant to any requirements of the Code as from time
to time are in force.

                  (b) Upon reasonable advance notice in writing, the Servicer
will provide to each Noteholder or Certificateholder which is a savings and loan
association, bank or insurance company certain reports and access to information
and documentation regarding the Business Loans sufficient to permit such
Noteholder or Certificateholder to comply with applicable regulations of the
Office of Thrift Supervision or other regulatory authorities with respect to
investment in the Notes or Certificates, as applicable.

                  (c) The Servicer shall furnish to each Noteholder and
Certificateholder, during the term of this Agreement, such periodic, special, or
other reports or information, whether or not provided for herein, as shall be
necessary, reasonable, or appropriate with respect to the Noteholder and
Certificateholder or otherwise with respect to the purposes of this Agreement,
all such reports or information to be provided by and in accordance with such
applicable instructions and directions as the Noteholder and Certificateholder
may reasonably require; provided, that the Servicer shall be entitled to be
reimbursed by such Noteholder or Certificateholder for the Servicer's actual
expenses incurred in providing such reports if such reports are not producable
in the ordinary course of the Servicer's business. The Rating Agencies shall
receive copies of any such reports or information furnished to the Noteholders
and Certificateholders.

                  Section 5.10 Advances by the Servicer.


                                      -43-
<PAGE>   50
                  Not later than the close of business on each Determination
Date, the Servicer shall remit to the Indenture Trustee for deposit in the Note
Distribution Account an amount (as indicated in the Servicer's Certificate
prepared pursuant to Section 5.09), to be distributed on the related Remittance
Date pursuant to Section 5.07, equal to the amount by which (i) 30 days'
interest at a rate equal to the then applicable Adjusted Business Loan
Remittance Rate on the Aggregate Class A, Class M-1, Class M-2 and Class B Note
Principal Balances immediately prior to the related Remittance Date exceeds (ii)
the amount received by the Servicer as of the related Record Date in respect of
interest on the Business Loans (plus, for the Remittance Dates during the
Funding Period, the sum of (i) all funds to be transferred to the Note
Distribution Account from the Capitalized Interest Account for such Remittance
Date pursuant to Section 5.04(g) and (ii) the Pre-Funding Earnings for the
applicable Remittance Date), such excess being defined herein as the "Monthly
Advance." The Servicer may reimburse itself for Monthly Advances made pursuant
to Section 4.04. Notwithstanding the foregoing, the Servicer shall not be
required to make a Monthly Advance with respect to a Business Loan if it
determines, in good faith, that such advance would be nonrecoverable from
amounts received in respect of the Business Loans.

                  Section 5.11 Compensating Interest.


                  Each Class of Notes shall be entitled to a full month's
interest on the principal portion of each Business Loan at the then applicable
Class A, Class M-1, Class M-2 or Class B Remittance Rate for such Class, as the
case may be. Not later than the close of business on each Determination Date,
with respect to each Business Loan for which a Principal Prepayment or
Curtailment was received during the related Due Period, the Servicer shall remit
to the Indenture Trustee for deposit in the Note Distribution Account from
amounts otherwise payable to it as servicing compensation, an amount (such
amount required to be delivered to the Indenture Trustee is referred to herein
as "Compensating Interest") (as indicated in the Servicer's Certificate prepared
pursuant to Section 5.09) equal to the difference between (a) 30 days' interest
at the Adjusted Business Loan Remittance Rate on the Principal Balance of each
related Business Loan as of the beginning of the Due Period applicable to the
Remittance Date on which such amount will be distributed, and (b) the amount of
interest actually received on each such Business Loan for such Due Period net of
the Servicing Fee, and the fees and expenses of the Owner Trsutee and the
Indenture Trustee allocable to such interest.

                  Section 5.12   Reports of Foreclosure and Abandonment of
                                 Mortgaged Property


                  Each year the Servicer shall make the reports of foreclosures
and abandonment of any Mortgaged Property required by Section 6050J of the Code.
Promptly after filing each such report with the Internal Revenue Service, the
Servicer shall provide the Indenture Trustee with an Officer's Certificate
certifying that such report has been filed.


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<PAGE>   51
                                   ARTICLE VI

                           GENERAL SERVICING PROCEDURE

                  Section 6.01      [Intentionally Omitted]

                  Section 6.02      Satisfaction of Mortgages and Collateral
                                    and Release of Business Files

                  The Servicer shall maintain the Fidelity Bond as provided for
in Section 4.09 insuring the Servicer against any loss it may sustain with
respect to any Business Loan not satisfied in accordance with the procedures set
forth herein.

                  Upon the payment in full of any Business Loan, or the receipt
by the Servicer of a notification that payment in full will be escrowed in a
manner customary for such purposes, the Servicer will immediately notify the
Indenture Trustee by a certification in the form of Exhibit I attached hereto
(which certification shall include a statement to the effect that all amounts
received or to be received in connection with such payment which are required to
be deposited in the Principal and Interest Account pursuant to Section 4.03 have
been or will be so deposited) of a Servicing Officer and shall request delivery
to it of the Indenture Trustee's Document File. Upon receipt of such
certification and request, the Indenture Trustee shall release, within 3
Business Days, the related Indenture Trustee's Document File to the Servicer.
Expenses incurred in connection with any instrument of satisfaction or deed of
reconveyance shall be payable only from and to the extent of servicing
compensation and shall not be chargeable to the Principal and Interest Account
or the Note Distribution Account.

                  From time to time and as appropriate for the servicing or
foreclosure of any Business Loan, the Indenture Trustee shall, upon request of
the Servicer and delivery to the Indenture Trustee of a certification in the
form of Exhibit I attached hereto signed by a Servicing Officer, release the
related Indenture Trustee's Document File to the Servicer within 3 Business
Days, and the Indenture Trustee shall execute such documents as shall be
necessary to the prosecution of any such proceedings. Such servicing receipt
shall obligate the Servicer to return the Indenture Trustee's Document File to
the Indenture Trustee when the need therefor by the Servicer no longer exists,
unless the Business Loan has been liquidated and the Liquidation Proceeds
relating to the Business Loan have been deposited in the Principal and Interest
Account and remitted to the Indenture Trustee for deposit in the Note
Distribution Account or the Business File or such document has been delivered to
an attorney, or to a public Indenture Trustee or other public official as
required by law, for purposes of initiating or pursuing legal action or other
proceedings for the foreclosure of the Mortgaged Property or other Collateral
either judicially or non-judicially, and the Servicer has delivered to the
Indenture Trustee a certificate of a Servicing Officer certifying as to the name
and address of the Person to which such Business File or such document was
delivered and the purpose or purposes of such delivery. Upon receipt of a
certificate of a Servicing Officer stating that such Business Loan was
liquidated, the servicing receipt shall be released by the Indenture Trustee to
the Servicer.


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<PAGE>   52
                  The Indenture Trustee shall execute and deliver to the
Servicer any court pleadings, requests for Indenture Trustee's sale or other
documents necessary to the foreclosure or Indenture Trustee's sale in respect of
a Mortgaged Property or other Collateral or to any legal action brought to
obtain judgment against any Obligor on the Business Note or Mortgage or other
agreement securing Collateral or to obtain a deficiency judgment, or to enforce
any other remedies or rights provided by the Business Note or Mortgage or other
agreement securing Collateral or otherwise available at law or in equity.
Together with such documents or pleadings, the Servicer shall deliver to the
Indenture Trustee a certificate of a Servicing Officer requesting that such
pleadings or documents be executed by the Indenture Trustee and certifying as to
the reason such documents or pleadings are required and that the execution and
delivery thereof by the Indenture Trustee will not invalidate or otherwise
affect the lien of the Mortgage or other agreement securing Collateral, except
for the termination of such a lien upon completion of the foreclosure or
Indenture Trustee's sale. The Indenture Trustee shall, upon receipt of a written
request from a Servicing Officer, execute any document provided to the Indenture
Trustee by the Servicer or take any other action requested in such request, that
is, in the opinion of the Servicer as evidenced by such request, required by any
state or other jurisdiction to discharge the lien of a Mortgage or other
agreement securing Collateral upon the satisfaction thereof and the Indenture
Trustee will sign and post, but will not guarantee receipt of, any such
documents to the Servicer, or such other party as the Servicer may direct,
within five Business Days of the Indenture Trustee's receipt of such certificate
or documents. Such certificate or documents shall establish to the Indenture
Trustee's satisfaction that the related Business Loan has been paid in full by
or on behalf of the Obligor and that such payment has been deposited in the
Principal and Interest Account.

                  Section 6.03      Servicing Compensation.

                  As compensation for its services hereunder, the Servicer shall
be entitled to withdraw from the Principal and Interest Account or to retain
from interest payments on the Business Loans the Servicer's Servicing Fee;
provided, however, that the Servicer only may withdraw from the Principal and
Interest Account the Servicer's Servicing Fee related to the Business Loan for
which the Servicing Fee was received. Additional servicing compensation in the
form of assumption and other administrative fees, prepayment penalties, interest
paid on funds on deposit in the Principal and Interest Account, interest paid
and earnings realized on Permitted Instruments and amounts remitted pursuant to
Section 5.03(c)(iii) shall be retained by or remitted to the Servicer to the
extent not required to be remitted to the Indenture Trustee for deposit in the
Note Distribution Account. The Servicer shall be required to pay all expenses
incurred by it in connection with its servicing activities hereunder and shall
not be entitled to reimbursement therefor except as specifically provided for
herein.

                  Section 6.04      Annual Statement as to Compliance.

                  The Servicer will deliver to the Indenture Trustee, the Rating
Agencies and the Owner Trustee on or before March 31 of each year beginning
March 31, 2001, an Officer's

                                      -46-
<PAGE>   53
Certificate stating that (i) the Servicer has fully complied with the provisions
of Articles IV, V, VI and VII, (ii) a review of the activities of the Servicer
during the preceding calendar year and of performance under this Agreement has
been made under such officers' supervision, and (iii) to the best of such
officers' knowledge, based on such review, the Servicer has fulfilled all its
obligations under this Agreement throughout such year, or, if there has been a
default in the fulfillment of any such obligation, specifying each such default
known to such officers and the nature and status thereof including the steps
being taken by the Servicer to remedy such default.

                  Section 6.05      Annual Independent Public
                                    Accountants' Servicing Report

                  On or before March 31 of each year beginning March 31, 2001,
the Servicer, at its expense, shall cause a firm of nationally recognized
independent public accountants reasonably acceptable to the Indenture Trustee to
furnish a letter or letters to the Indenture Trustee, the Owner Trustee and the
Rating Agencies to the effect that such firm has with respect to the Servicer's
overall servicing operations examined such operations in accordance with the
requirements of the Uniform Single Audit Program for Mortgage Bankers, and
stating such firm's conclusions relating thereto.

                  Section 6.06      Indenture Trustee's and Owner Trustee's
                                    Right to Examine Servicer Records and
                                    Audit Operations

                  The Indenture Trustee, the Owner Trustee and the Rating
Agencies shall have the right upon reasonable prior notice, during normal
business hours and as often as reasonably required, to examine and audit any and
all of the books, records or other information of the Servicer, whether held by
the Servicer or by another on behalf of the Servicer, which may be relevant to
the performance or observance by the Servicer of the terms, covenants or
conditions of this Agreement. No amounts payable in respect of the foregoing
shall be paid from the Trust Fund.

                  Section 6.07      Reports to the Indenture Trustee; Principal
                                    and Interest Account Statements.

                  Not later than 20 days after each Record Date, the Servicer
shall forward to the Indenture Trustee a statement, certified by a Servicing
Officer, setting forth the status of the Principal and Interest Account as of
the close of business on the preceding Record Date and showing, for the period
covered by such statement, the aggregate of deposits into the Principal and
Interest Account for each category of deposit specified in Section 4.03, the
aggregate of withdrawals from the Principal and Interest Account for each
category of withdrawal specified in Section 4.04, the aggregate amount of
permitted withdrawals not made in the related Due Period, and the amount of any
Monthly Advances or payments of Compensating Interest, in each case, for the
related Due Period.


                                      -47-
<PAGE>   54
                                   ARTICLE VII

                       REPORTS TO BE PROVIDED BY SERVICER

                  Section 7.01      Financial Statements.

                  The Servicer understands that, in connection with the transfer
of the Notes and the Certificates, Noteholders and Certificateholders may
request that the Servicer make available to prospective Noteholders and
Certificateholders the annual audited financial statements of the Servicer's
parent (First International Bancorp, Inc. and any successor thereto) for one or
more of the most recently completed five fiscal years for which such statements
are publicly available, which request shall not be unreasonably denied. Such
audited financial statements shall also be provided to the Rating Agencies by
the Servicer upon request.

                  The Servicer also agrees to make available on a reasonable
basis to any prospective Noteholder a knowledgeable financial or accounting
officer for the purpose of answering reasonable questions respecting recent
developments affecting the Servicer or the financial statements of the Servicer
and its parent (First International Bancorp, Inc. and any successor thereto) and
to permit any prospective Noteholder to inspect the Servicer's servicing
facilities during normal business hours for the purpose of satisfying such
prospective Noteholder that the Servicer has the ability to service the Business
Loans in accordance with this Agreement.


                                      -48-
<PAGE>   55
                                  ARTICLE VIII

                                  THE SERVICER

                  Section 8.01      Indemnification; Third Party Claims.

                  (a) The Servicer agrees to indemnify and hold the Indenture
Trustee, the Owner Trustee, and each Noteholder and Certificateholder harmless
against any and all claims, losses, penalties, fines, forfeitures, legal fees
and related costs, judgments, and any other costs, fees and expenses that the
Indenture Trustee, the Owner Trustee, and any Noteholder or Certificateholder
may sustain in any way related to the failure of the Servicer to perform its
duties and service the Business Loans in compliance with the terms of this
Agreement. The Servicer shall immediately notify the Indenture Trustee and the
Owner Trustee if a claim is made by any party with respect to this Agreement,
and the Servicer shall assume (with the consent of the Indenture Trustee) the
defense of any such claim and pay all expenses in connection therewith,
including reasonable counsel fees, and promptly pay, discharge and satisfy any
judgment or decree which may be entered against the Servicer, the Indenture
Trustee, the Owner Trustee, and/or a Noteholder or Certificateholder in respect
of such claim. The Indenture Trustee may reimburse the Servicer from the Expense
Account pursuant to Section 5.03(c)(i) for all amounts advanced by it pursuant
to the preceding sentence except when the claim relates directly to the failure
of the Servicer to service and administer the Business Loans in compliance with
the terms of this Agreement.

                  (b) The Seller agrees to indemnify and hold the Indenture
Trustee, the Owner Trustee and each Noteholder and Certificateholder harmless
against any and all claims, losses, penalties, fines, forfeitures, legal fees
and related costs, judgments, and any other costs, fees and expenses that the
Indenture Trustee, the Owner Trustee, and any Noteholder or Certificateholder
may sustain in any way related to the failure of the Seller to perform its
duties in compliance with the terms of this Agreement and in the best interests
of the Noteholders and Certificateholders. The Seller shall immediately notify
the Indenture Trustee and the Owner Trustee, if a claim is made by a third party
with respect to this Agreement, and the Seller shall assume (with the consent of
the Indenture Trustee) the defense of any such claim and pay all expenses in
connection therewith, including reasonable counsel fees, and promptly pay,
discharge and satisfy any judgment or decree which may be entered against the
Servicer, the Seller, the Indenture Trustee, the Owner Trustee and/or a
Noteholder or Certificateholder in respect of such claim. The Indenture Trustee
may reimburse the Seller from the Expense Account pursuant to Section 5.03(c)(i)
for all amounts advanced by it pursuant to the preceding sentence except when
the claim relates directly to the Seller indemnification pursuant to Section
2.05 and Section 3.03 or to the failure of the Servicer, if it is an affiliate
of the Seller, to perform its obligations to service and administer the Business
Loans in compliance with the terms of this Agreement, or the failure of the
Seller to perform its duties in compliance with the terms of this Agreement and
in the best interests of the Noteholders and Certificateholders.


                                      -49-
<PAGE>   56
         Section 8.02      Merger or Consolidation of the Servicer.

                  The Servicer will keep in full effect its existence, rights
and franchises as a corporation, bank or association and if required by
applicable law will obtain and preserve its qualification to do business as a
foreign entity, in each jurisdiction necessary to protect the validity and
enforceability of this Agreement or any of the Business Loans and to perform its
duties under this Agreement.

                  Any Person into which the Servicer may be merged or
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Servicer shall be a party, or any Person succeeding
to the business of the Servicer, shall be an established mortgage loan servicing
institution that has a net worth of at least $15,000,000, and shall be the
successor of the Servicer, hereunder, without the execution or filing of any
paper or any further act on the part of any of the parties hereto, anything
herein to the contrary notwithstanding. The Servicer shall send notice of any
such merger or consolidation to the Indenture Trustee and the Rating Agency.

                  Subject to the satisfaction of the Rating Agency Condition,
the Servicer is permitted to assign its rights and duties hereunder to, and such
rights and duties can be assumed by, an affiliate of the Servicer having a net
worth of at least $15,000,000 (the "Assignee") (in which case all of the
provisions of this Agreement shall, to the same extent as they apply to the
Servicer hereunder, apply to the Assignee rather than the Servicer), without the
execution or filing of any paper or any further act on the part of any parties
hereto, anything herein to the contrary notwithstanding. The Servicer shall send
notice of any such assignment to the Indenture Trustee, the Owner Trustee, and
the Rating Agencies.

                  Section 8.03      Limitation on Liability of the
                                    Servicer and Others.

                  The Servicer and any director, officer, employee or agent of
the Servicer may rely on any document of any kind which it in good faith
reasonably believes to be genuine and to have been adopted or signed by the
proper authorities respecting any matters arising hereunder. Subject to the
terms of Section 8.01 herein, the Servicer shall have no obligation to appear
with respect to, prosecute or defend any legal action which is not incidental to
the Servicer's duty to service the Business Loans in accordance with this
Agreement.

                  Section 8.04      Servicer Not to Resign.

                  The Servicer shall not assign this Agreement nor resign from
the obligations and duties hereby imposed on it except (i) by mutual consent of
the Servicer, the Indenture Trustee, the Owner Trustee and the Majority
Noteholders, or (ii) in connection with a merger, conversion or consolidation
permitted pursuant to Section 8.02 and upon satisfaction of the Rating Agency
Condition (in which case the Person resulting from the merger, conversion or
consolidation shall

                                      -50-
<PAGE>   57
be the successor of the Servicer), or (iii) in connection with an assignment
permitted pursuant to Section 8.02 and upon satisfaction of the Rating Agency
Condition (in which case the Assignee shall be the successor of the Servicer) or
(iv) upon the determination that the Servicer's duties hereunder are no longer
permissible under applicable law or administrative determination and such
incapacity cannot be cured by the Servicer. Any such determination permitting
the resignation of the Servicer shall be evidenced by a written Opinion of
Counsel (who may be counsel for the Servicer) to such effect delivered to the
Indenture Trustee and the Owner Trustee, which Opinion of Counsel shall be in
form and substance acceptable to the Indenture Trustee and the Owner Trustee. No
such resignation shall become effective until a successor has assumed the
Servicer's responsibilities and obligations hereunder in accordance with Section
9.02.


                                      -51-
<PAGE>   58
                                   ARTICLE IX

                              SERVICER TERMINATION

                  Section 9.01      Servicer Termination Events.

                  (a) In case one or more of the following events (each a
"Servicer Termination Event") by the Servicer shall occur and be continuing,
that is to say:

                           (i) (A) the failure by the Servicer to make any
                  required Servicing Advance, to the extent such failure
                  materially and adversely affects the interests of the
                  Noteholders; (B) the failure by the Servicer to make any
                  required Monthly Advance to the extent such failure materially
                  and adversely affects the interests of the Noteholders; (C)
                  the failure by the Servicer to remit any Compensating Interest
                  to the extent such failure materially and adversely affects
                  the interests of the Noteholders; or (D) any failure by the
                  Servicer to remit to Noteholders, or to the Indenture Trustee
                  for the benefit of the Noteholders, or to the Owner Trustee
                  for the benefit of the Certificateholders, any payment
                  required to be made under the terms of this Agreement which
                  continues unremedied after the date upon which written notice
                  of such failure, requiring the same to be remedied, shall have
                  been given to the Servicer by the Indenture Trustee or to the
                  Servicer and the Indenture Trustee by any Noteholder or
                  Certificateholder; or

                           (ii) failure by the Servicer or the Seller duly to
                  observe or perform, in any material respect, any other
                  covenants, obligations or agreements of the Servicer or the
                  Seller as set forth in this Agreement, which failure continues
                  unremedied for a period of 60 days after the date on which
                  written notice of such failure, requiring the same to be
                  remedied, shall have been given to the Servicer or the Seller,
                  as the case may be, by the Indenture Trustee or to the
                  Servicer, or the Seller, as the case may be, and the Indenture
                  Trustee by any Noteholder or Certificateholder; or

                           (iii) a decree or order of a court or agency or
                  supervisory authority having jurisdiction for the appointment
                  of a conservator or receiver or liquidator in any insolvency,
                  readjustment of debt, marshaling of assets and liabilities or
                  similar proceedings, or for the winding-up or liquidation of
                  its affairs, shall have been entered against the Servicer and
                  such decree or order shall have remained in force,
                  undischarged or unstayed for a period of 60 days; or

                           (iv) the Servicer shall consent to the appointment of
                  a conservator or receiver or liquidator in any insolvency,
                  readjustment of debt, marshaling of assets and liabilities or
                  similar proceedings of or relating to the Servicer or of or
                  relating to all or substantially all of the Servicer's
                  property; or


                                      -52-
<PAGE>   59
                           (v) the Servicer shall admit in writing its inability
                  to pay its debts as they become due, file a petition to take
                  advantage of any applicable insolvency or reorganization
                  statute, make an assignment for the benefit of its creditors,
                  or voluntarily suspend payment of its obligations;

                  (b) then, and in each and every such case, so long as a
Servicer Termination Event shall not have been remedied, and in the case of
clause (i) above (except for clause (i)(B)), if such Servicer Termination Event
shall not have been remedied within 30 days after the Servicer has received
notice of such Servicer Termination Event, (x) with respect solely to clause
(i)(B) above, if such Monthly Advance is not made earlier than 4:00 p.m. New
York time on the Determination Date, the Indenture Trustee shall give immediate
telephonic notice of such failure to a Servicing Officer of the Servicer and,
unless such failure is cured, either by receipt of payment or receipt of
evidence (e.g., a wire reference number communicated by the sending bank) that
such funds have been sent, by 12:00 Noon New York time on the following Business
Day, the Indenture Trustee shall immediately assume, pursuant to Section 9.02
hereof, the duties of a successor Servicer; and (y) in the case of clauses
(i)(A), (i)(C), (i)(D), (iii), (iv) and (v), the Majority Noteholders, by notice
in writing to the Servicer (except with respect to (iii), (iv) and (v) for which
no notice is required) may, in addition to whatever rights such Noteholders may
have at law or equity including damages, injunctive relief and specific
performance, in each case immediately terminate all the rights and obligations
of the Servicer under this Agreement and in and to the Business Loans and the
proceeds thereof, as Servicer. Upon such receipt by the Servicer of a second
written notice from the Majority Noteholders stating that they or it intend to
terminate the Servicer as a result of such Servicer Termination Event, all
authority and power of the Servicer under this Agreement, whether with respect
to the Business Loans or otherwise, shall, subject to Section 9.02, pass to and
be vested in the Indenture Trustee and the Indenture Trustee is hereby
authorized and empowered to execute and deliver, on behalf of the Servicer, as
attorney-in-fact or otherwise, any and all documents and other instruments and
do or cause to be done all other acts or things necessary or appropriate to
effect the purposes of such notice of termination, including, but not limited
to, the transfer and endorsement or assignment of the Business Loans and related
documents. The Servicer agrees to cooperate with the Indenture Trustee in
effecting the termination of the Servicer's responsibilities and rights
hereunder, including, without limitation, the transfer to the Indenture Trustee
for administration by it of all amounts which shall at the time be credited by
the Servicer to each Principal and Interest Account or thereafter received with
respect to the Business Loans.

                  Section 9.02      Indenture Trustee to Act; Appointment of
                                    Successor

                  On and after the time of the Servicer's immediate termination,
or the Servicer's receipt of notice if required by Section 9.01, or at any time
if the Indenture Trustee receives the resignation of the Servicer evidenced by
an Opinion of Counsel pursuant to Section 8.04 or the Servicer is removed as
Servicer pursuant to this Article IX, the Indenture Trustee shall be the
successor in all respects to the Servicer in its capacity as Servicer under this
Agreement and the transactions set forth or provided for herein and shall be
subject to all the responsibilities, duties

                                      -53-
<PAGE>   60
and liabilities relating thereto placed on the Servicer by the terms and
provisions hereof; provided, however, that the Indenture Trustee shall not be
liable for any actions of any Servicer prior to it, and that the Indenture
Trustee shall not be obligated to make advances or payments pursuant to Sections
4.03, 4.10, 5.03, 5.10 or 5.11 but only to the extent the Indenture Trustee
determines reasonably and in good faith that such advances would not be
recoverable, such determination to be evidenced with respect to each such
advance by a certification of a Responsible Officer of the Indenture Trustee. As
compensation therefor, the Indenture Trustee shall be entitled to all funds
relating to the Business Loans which the Servicer would have been entitled to
receive from the Principal and Interest Account pursuant to Section 4.04 if the
Servicer had continued to act as Servicer hereunder, together with other
servicing compensation in the form of assumption fees, late payment charges or
otherwise as provided in Sections 5.01 and 5.03.

                  Notwithstanding the above, the Indenture Trustee shall, if it
is unable to so act, appoint, or petition a court of competent jurisdiction to
appoint, any established servicing institution acceptable to the Rating Agencies
that has a net worth of not less than $15,000,000, as the successor to the
Servicer hereunder in the assumption of all or any part of the responsibilities,
duties or liabilities of the Servicer hereunder. Any collections received by the
Servicer after removal or resignation shall be endorsed by it to the Indenture
Trustee and remitted directly to the Indenture Trustee or, at the direction of
the Indenture Trustee, to the successor servicer. The compensation of any
successor servicer (including, without limitation, the Indenture Trustee) so
appointed shall be the aggregate Servicing Fees and other servicing compensation
in the form of assumption fees, late payment charges or otherwise. In the event
the Indenture Trustee is required to solicit bids as provided herein, the
Indenture Trustee shall solicit, by public announcement, bids from banks and
mortgage servicing institutions meeting the qualifications set forth above. Such
public announcement shall specify that the successor servicer shall be entitled
to the full amount of the aggregate Servicing Fees as servicing compensation,
together with the other servicing compensation in the form of assumption fees,
late payment charges or otherwise. Within thirty days after any such public
announcement, the Indenture Trustee shall negotiate and effect the sale,
transfer and assignment of the servicing rights and responsibilities hereunder
to the qualified party submitting the highest qualifying bid. The Indenture
Trustee shall deduct from any sum received by the Indenture Trustee from the
successor to the Servicer in respect of such sale, transfer and assignment all
costs and expenses of any public announcement and of any sale, transfer and
assignment of the servicing rights and responsibilities hereunder and the amount
of any unreimbursed Servicing Advances and Monthly Advances. After such
deductions, the remainder of such sum shall be paid by the Indenture Trustee to
the Servicer at the time of such sale, transfer and assignment to the Servicer's
successor. The Indenture Trustee and such successor shall take such action,
consistent with this Agreement, as shall be necessary to effectuate any such
succession. The Servicer agrees to cooperate with the Indenture Trustee and any
successor servicer in effecting the termination of the Servicer's servicing
responsibilities and rights hereunder and shall promptly provide the Indenture
Trustee or such successor servicer, as applicable, all documents and records
reasonably requested by it to enable it to assume the Servicer's functions
hereunder and shall promptly also transfer to the Indenture Trustee or such
successor servicer, as applicable, all amounts which then have been or should
have been

                                      -54-
<PAGE>   61
deposited in the Principal and Interest Account or Spread Account by the
Servicer or which are thereafter received with respect to the Business Loans.
Neither the Indenture Trustee nor any other successor servicer shall be held
liable by reason of any failure to make, or any delay in making, any
distribution hereunder or any portion thereof caused by (i) the failure of the
Servicer to deliver, or any delay in delivering, cash, documents or records to
it, or (ii) restrictions imposed by any regulatory authority having jurisdiction
over the Servicer hereunder. No appointment of a successor to the Servicer
hereunder shall be effective until written notice of such proposed appointment
shall have been provided by the Indenture Trustee to each Noteholder and
Certificateholder and the Indenture Trustee shall have consented thereto. The
Indenture Trustee shall not resign as servicer until a successor servicer has
been appointed.

                  Pending appointment of a successor to the Servicer hereunder,
the Indenture Trustee shall act in such capacity as hereinabove provided. In
connection with such appointment and assumption, the Indenture Trustee may make
such arrangements for the compensation of such successor out of payments on
Business Loans as it and such successor shall agree; provided, however, that no
such compensation shall be in excess of that permitted the Servicer pursuant to
Section 6.03 or otherwise as provided in this Agreement. The Servicer, the
Indenture Trustee and such successor shall take such action, consistent with
this Agreement, as shall be necessary to effectuate any such succession.

                  Section 9.03      Waiver of Defaults.

                  The Majority Noteholders may, and subject to satisfaction of
the Rating Agency Condition, waive any events permitting removal of the Servicer
pursuant to this Article IX; provided, however, that the Majority Noteholders
may not waive a default in making a required distribution on a Note without the
consent of the holder of such Note. Upon any waiver of a past default, such
default shall cease to exist, and any Event of Default arising therefrom shall
be deemed to have been remedied for every purpose of this Agreement. No such
waiver shall extend to any subsequent or other default or impair any right
consequent thereto except to the extent expressly so waived.

                  Section 9.04.     Control by Majority Noteholders.


                  The Majority Noteholders may direct the time, method and place
of conducting any proceeding relating to the Trust or the Notes or for any
remedy available to the Indenture Trustee or the Owner Trustee with respect to
the Trust or exercising any trust or power conferred on the Indenture Trustee or
the Owner Trustee with respect to the Trust provided that:

                           (i) such direction shall not be in conflict with any
                  rule of law or with this Agreement;

                           (ii) the Indenture Trustee shall have been provided
                  with indemnity satisfactory to it; and


                                      -55-
<PAGE>   62
                           (iii) the Indenture Trustee or the Owner Trustee may
                  take any other action deemed proper by the Indenture Trustee
                  or the Owner Trustee which is not inconsistent with such
                  direction; provided, however, that the Indenture Trustee or
                  the Owner Trustee, as the case may be, need not take any
                  action which it determines might involve it in liability or
                  may be unjustly prejudicial to the Holders not so directing.


                                      -56-
<PAGE>   63
                                    ARTICLE X

                                   TERMINATION

                  Section 10.01     Termination.

                  This Agreement shall terminate upon notice to the Indenture
Trustee of the earlier of the following events: (a) the final payment or other
liquidation of the last Business Loan or the disposition of all property
acquired upon foreclosure or deed in lieu of foreclosure of any Business Loan
and the remittance of all funds due thereunder, or (b) mutual consent of the
Servicer and all Noteholders and Certificateholders in writing; provided,
however, that in no event shall this Agreement terminate later than twenty-one
years after the death of the last surviving lineal descendant of Joseph P.
Kennedy, late Ambassador of the United States to the Court of St. James, alive
as of the date hereof.

                  The Servicer may, at its option, terminate this Agreement on
any date on which the Pool Principal Balance is less than 10% of the sum of (i)
the Original Pool Principal Balance and (ii) the Original Pre-Funded Amount by
purchasing, on the next succeeding Remittance Date, all of the Business Loans
and Foreclosed Properties at a price equal to the sum of (i) 100% of the then
outstanding Aggregate Class A, Aggregate Class M-1, Aggregate Class M-2 and
Aggregate Class B Note Principal Balances, and (ii) 30 days' interest thereon at
the then applicable weighted average Class A, Class M-1, Class M-2 and Class B
Remittance Rates, as the case may be (the "Termination Price"). Notwithstanding
the prior sentence, if at the time the Servicer determines to exercise such
option the unsecured long-term debt obligations of the Servicer are not rated at
least Baa3 by Moody's, if the Rating Agencies are still rating the Notes, the
Servicer shall give the Rating Agencies prior written notice of the Servicer's
determination to exercise such option and shall not exercise such option,
without the consent of the Rating Agencies, prior to furnishing the Rating
Agencies with an Opinion of Counsel, in form and substance reasonably
satisfactory to the Rating Agencies, that the exercise of such option would not
be deemed a fraudulent conveyance by the Servicer.

                  Notice of any termination, specifying the Remittance Date upon
which the Trust Fund will terminate and that the Noteholders shall surrender
their Notes to the Indenture Trustee for payment of the final distribution and
cancellation shall be given promptly by the Servicer by letter to Noteholders
mailed during the month of such final distribution before the Determination Date
in such month, specifying (i) the Remittance Date upon which final payment of
the Notes will be made upon presentation and surrender of Notes at the office of
the Indenture Trustee therein designated, (ii) the amount of any such final
payment and (iii) that the Record Date otherwise applicable to such Remittance
Date is not applicable, payments being made only upon presentation and surrender
of the Notes at the office of the Indenture Trustee therein specified. The
Servicer shall give such notice to the Indenture Trustee therein specified. The
Servicer shall give such notice to the Indenture Trustee and the Rating Agencies
at the time such notice is given to Noteholders. Any obligation of the Servicer
to pay amounts due to the Indenture Trustee shall survive the termination of
this Agreement.


                                      -57-
<PAGE>   64
                  Section 10.02     Accounting Upon Termination of
                                    Servicer

                  Upon termination of the Servicer under Article IX hereof, the
Servicer shall:

                  (a) deliver to its successor or, if none shall yet have been
appointed, to the Indenture Trustee the funds in any Principal and Interest
Account;

                  (b) deliver to its successor or, if none shall yet have been
appointed, to the Indenture Trustee all Business Files and related documents and
statements held by it hereunder and a Business Loan portfolio computer diskette;

                  (c) deliver to its successor or, if none shall yet have been
appointed, to the Indenture Trustee and, upon request, to the Noteholders a full
accounting of all funds, including a statement showing the Monthly Payments
collected by it and a statement of monies held in trust by it for the payments
or charges with respect to the Business Loans; and

                  (d) execute and deliver such instruments and perform all acts
reasonably requested in order to effect the orderly and efficient transfer of
servicing of the Business Loans to its successor and to more fully and
definitively vest in such successor all rights, powers, duties,
responsibilities, obligations and liabilities of the Servicer under this
Agreement.


                                      -58-
<PAGE>   65
                                   ARTICLE XI

                            MISCELLANEOUS PROVISIONS

                  Section 11.01     Acts of Noteholders.

                  Except as otherwise specifically provided herein, whenever
Noteholder action, consent or approval is required under this Agreement, such
action, consent or approval shall be deemed to have been taken or given on
behalf of, and shall be binding upon, all Noteholders if the Majority
Noteholders agree to take such action or give such consent or approval.

                  Section 11.02     Amendment.

                  (a) This Agreement may be amended from time to time by the
Servicer and the Owner Trustee with the consent of the Indenture Trustee (which
consent may not be unreasonably withheld), without notice to or consent of the
Noteholders or Certificateholders, to cure any ambiguity, to correct or
supplement any provisions herein, to comply with any changes in the Code, or to
make any other provisions with respect to matters or questions arising under
this Agreement which shall not be inconsistent with the provisions of this
Agreement; provided, however, that such action shall not, as evidenced by an
Opinion of Counsel delivered to the Indenture Trustee, adversely affect the
interests of any Noteholder or Certificateholder or any other party and further
provided that no such amendment shall reduce in any manner the amount of, or
delay the timing of, any amounts received on Business Loans which are required
to be distributed on any Note Certificate without the consent of the Holder of
such Note or Certificate, or change the rights or obligations of any other party
hereto without the consent of such party.

                  (b) This Agreement may be amended from time to time by the
Servicer and the Owner Trustee with the consent of the Indenture Trustee and the
consent of the Majority Noteholders, for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions of this Agreement
or of modifying in any manner the rights of the Holders such amendment shall
reduce in any manner the amount of, or delay the timing of, any amounts which
are required to be distributed on any Note without the consent of the Holder of
such Note or reduce the percentage of Holders which are required to consent to
any such amendment without the consent of the Holders of 100% of the Notes and
Certificates affected thereby and, provided further, that no amendment affecting
only one or more Classes of Notes shall require the approval of holders of Notes
of the other Classes.

                  (c) It shall not be necessary for the consent of Holders under
this Section to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent shall approve the substance thereof.


                                      -59-
<PAGE>   66
                  Section 11.03     Recordation of Agreement.

                  To the extent permitted by applicable law, this Agreement is
subject to recordation in all appropriate public offices for real property
records in all of the counties or other comparable jurisdictions in which any or
all of the properties subject to the Mortgages are situated, and in any other
appropriate public recording office or elsewhere, such recordation to be
effected by the Servicer at the Noteholders' expense on direction of the
Majority Noteholders, but only when accompanied by an Opinion of Counsel to the
effect that such recordation materially and beneficially affects the interests
of the Noteholders or is necessary for the administration or servicing of the
Business Loans.

                  Section 11.04     Duration of Agreement.

                  This Agreement shall continue in existence and effect until
terminated as herein provided.

                  SECTION 11.05     GOVERNING LAW.

                  THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES
HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS, WITHOUT GIVING
EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.

                  Section 11.06     Notices.

                  All demands, notices and communications hereunder shall be in
writing and shall be deemed to have been duly given if personally delivered at
or mailed by overnight mail, certified mail or registered mail, postage prepaid,
to (i) in the case of the Servicer and the Seller, First International Bank, 280
Trumbull Street, Hartford, Connecticut 06103, Attention: Theodore J. Horan, or
such other addresses as may hereafter be furnished to the Noteholders in writing
by the Seller and the Servicer, (ii) in the case of the Indenture Trustee, HSBC
Bank USA, 140 Broadway, New York, New York 10005, 12th Floor, Attention:
Corporate Trust Department, (iii) in the case of the Owner Trustee, Wilmington
Trust Company, Rodney Square North, 1100 North Market Street, Wilmington,
Delaware 19890, (iv) in the case of the Noteholders, as set forth in the Note
Register, (v) in the case of Moody's, to Moody's Investors Service, ABS
Monitoring Department, 99 Church Street, 4th Floor, New York, New York 10007 and
(vi) in the case of Duff & Phelps, Duff & Phelps Credit Rating Co., 55 East
Monroe Street, Chicago, Illinois 60603, Attention: ABS Monitoring Group. Any
such notices shall be deemed to be effective with respect to any party hereto
upon the receipt of such notice by such party, except that notices to the
Noteholders shall be effective upon mailing or personal delivery.


                                      -60-
<PAGE>   67
                  Section 11.07     Severability of Provisions.

                  If any one or more of the covenants, agreements, provisions or
terms of this Agreement shall be held invalid for any reason whatsoever, then
such covenants, agreements, provisions or terms shall be deemed severable from
the remaining covenants, agreements, provisions or terms of this Agreement and
shall in no way affect the validity or enforceability of the other covenants,
agreements, provisions or terms of this Agreement.

                  Section 11.08     No Partnership.

                  Nothing herein contained shall be deemed or construed to
create a co-partnership or joint venture between the parties hereto and the
services of the Servicer shall be rendered as an independent contractor and not
as agent for the Noteholders.

                  Section 11.09     Counterparts.

                  This Agreement may be executed in one or more counterparts and
by the different parties hereto on separate counterparts, each of which, when so
executed, shall be deemed to be an original; such counterparts, together, shall
constitute one and the same agreement.

                  Section 11.10     Successors and Assigns.

                  This Agreement shall inure to the benefit of and be binding
upon the Seller and the Servicer, the Indenture Trustee and the Noteholders and
their respective successors and assigns.

                  Section 11.11     Headings.

                  The headings of the various sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed to be
part of this Agreement.

                  Section 11.12     Notification to Rating Agencies.

                  The Indenture Trustee shall give prompt notice to the Rating
Agencies of the occurrence of any of the following events of which it has
received notice: (1) any modification or amendment to this Agreement, (2) any
change of the Indenture Trustee, the Servicer or Paying Agent, (3) any Event of
Default, and (4) the final payment of all the Notes. The Servicer shall promptly
deliver to the Rating Agencies a copy of each of the Servicer's Certificates.
Further, the Servicer shall give prompt notice to the Rating Agencies if the
Servicer or any of its affiliates acquire any Notes.


                                      -61-
<PAGE>   68
                  Section 11.13.  Limitation of Liability.

                  It is expressly understood and agreed by the parties hereto
that (a) this Agreement is executed and delivered by Wilmington Trust Company,
not individually or personally but solely as Owner Trustee on behalf of the
Issuer under the Trust Agreement, in the exercise of the powers and authority
conferred and vested in it, (b) each of the representations, undertaking and
agreements herein made on the part of the Issuer is made and intended not as
personal representations, undertakings and agreements by Wilmington Trust
Company but is made and intended for the purpose of binding only the Issuer, (c)
nothing herein contained shall be construed as creating any liability on
Wilmington Trust Company individually or personally, to perform any covenant
either expressed or implied contained herein, all such liability, if any, being
expressly waived by the parties to the Agreement and by any person claiming by,
through or under them and (d) under no circumstances shall Wilmington Trust
Company be personally liable for the payment of any indebtedness or expenses of
the Issuer or be liable for the payment of any indebtedness or expenses of the
Issuer or be liable for the breach or failure of any obligation, representation,
warranty or covenant made or undertaking by the Issuer under this Agreement or
any related documents.

                     [REMAINDER OF PAGE INTENTIONALLY BLANK]



                                      -62-
<PAGE>   69
                  IN WITNESS WHEREOF, the Seller, the Servicer and the Trust
have caused their names to be signed hereto by their respective officers
thereunto duly authorized as of the day and year first above written.

                                     FIRST INTERNATIONAL BANK
                                         as Seller and Servicer


                                     By:  /s/Leslie Galbraith
                                          -------------------------------------
                                          Name:  Leslie Galbraith
                                          Title:    President




                                     FIB BUSINESS LOAN TRUST 1999-A,

                                     By:   Wilmington Trust Company, not in its
                                     individual capacity but solely as Owner
                                     Trustee on behalf of the Trust



                                     By:   /s/Anita E. Dallago
                                          -------------------------------------
                                           Name:  Anita E. Dallago
                                           Title: Administrative Account Manager

                                       65
<PAGE>   70
                                     Accepted and Agreed to:

                                     HSBC BANK USA, not in its individual
                                     capacity, but solely as Indenture Trustee



                                      By:  /s/Susan Barstock
                                          -------------------------------------
                                           Name:  Susan Barstock
                                           Title:    Assistant Vice President

                                       66
<PAGE>   71
STATE OF DELAWARE    )
                   : ss.:
COUNTY OF NEW CASTLE )

                  On this 29th day of September in the year of 1999 before me,
the undersigned, a Notary Public in and for said State, personally appeared
Anita E. Dallago personally known to me or proved to me on the basis of
satisfactory evidence to be the individual(s) whose name(s) is (are) subscribed
to the within instrument and acknowledged to me that he/she/they executed the
same in his/her/their capacity(ies), and that by his/her/their signature(s) on
the instrument, the individual(s), or the person upon behalf of which the
individual(s) acted, executed the instrument.


                  IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.



                                       /s/Janel R. Havrilla
                                       -------------------------------------
                                            Notary Public

                                     My Commission expires 2/2/01
<PAGE>   72
STATE OF CONNECTICUT )
                    : ss.:
COUNTY OF HARTFORD   )



                  On this 24th day of September in the year of 1999 before me,
the undersigned, a Notary Public in and for said State, personally appeared
Leslie Galbraith personally known to me or proved to me on the basis of
satisfactory evidence to be the individual(s) whose name(s) is (are) subscribed
to the within instrument and acknowledged to me that he/she/they executed the
same in his/her/their capacity(ies), and that by his/her/their signature(s) on
the instrument, the individual(s), or the person upon behalf of which the
individual(s) acted, executed the instrument.


                  IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.



                                      /s/Susan Levin
                                      -------------------------------------
                                      Notary Public


                                      My Commission expires 12/31/00


<PAGE>   1
                                                                   Exhibit 10.16

                                                                  EXECUTION COPY

           REVOLVING COMMERCIAL LOAN WAREHOUSE AND SECURITY AGREEMENT

                  REVOLVING COMMERCIAL LOAN WAREHOUSE AND SECURITY AGREEMENT,
dated as of December 1, 1999 (as amended or otherwise modified from time to
time, this "Agreement") between PRUDENTIAL SECURITIES CREDIT CORPORATION, a
Delaware corporation, having an office at One New York Plaza, New York, New York
10292 (the "Lender"), and FIB HOLDINGS, INC., a Delaware corporation, having its
principal office at 280 Trumbull Street, Hartford, Connecticut 06103 (the
"Borrower").

                  WHEREAS, the Lender intends to lend and the Borrower intends
to borrow up to a maximum of $75,000,000 to fund the holding of Commercial Loans
(as defined herein).

                  NOW, THEREFORE, in consideration of the promises and for other
good and valuable consideration, the parties hereto hereby agree as follows:

                  Section 1. The Loan. (a) Subject to the terms of this
Agreement:

                  1. The Lender agrees to lend to the Borrower up to $75,000,000
less any amounts outstanding under any loans from Lender to the Borrower's
parent, First International Bank ("First International"), (such borrowing, the
"Loan"), to be made in one or more advances (each, an "Advance"). The Borrower
agrees that the Loan shall be used to finance fixed or adjustable rate
Commercial Loans underwritten pursuant to the underwriting guidelines of First
International, as such Commercial Loans are identified to the Lender in writing
and in electronic form from time to time. All Commercial Loans financed
hereunder shall be closed loans; i.e., this facility shall not be used for "wet"
or "table" fundings. The Lender may refuse to lend against any Commercial
Loan(s) which the Lender reasonably believes will not be eligible for inclusion
in a securitized pool either (x) due to the characteristics of such Commercial
Loan or (y) due to the expected aggregate characteristics of the Commercial
Loans (an "Ineligible Commercial Loan).

                  2. Each Advance shall be made on a date occurring during the
last two weeks of March, June, September or December (but in no event within one
week prior to the Maturity Date referred to below) (each such date, a "Funding
Date"); provided that:



                                       1
<PAGE>   2
                (i) (a) the conditions precedent to the making of each Advance
set forth in Sections 1(a)4, 1(a)5 and 1(a)6 hereof shall be satisfied and
(b)the Lender shall have received an officer's certificate, dated the date of
such Advance and signed by a duly authorized officer of the Borrower, certifying
that (x) the representations and warranties of the Borrower in Section 4 hereof
shall be true and correct on and as of such Funding Date as if made on and as of
such date, and (y) no Event of Default shall have occurred and be continuing or
would exist after the making of the Advance on such Funding Date;

                (ii) the Lender shall have received (A) in connection with each
Advance, a receipt from the Custodian (as defined below) to the effect that it
has received the original notes relating to the Commercial Loans that are being
pledged in connection with the Advance being made on such Funding Date; and (B)
prior to the initial Advance: (1) legal opinions from counsel to the Borrower,
First International and First International Bancorp, Inc. ("Bancorp."), in the
form of Exhibit B attached hereto; (2) the Secured Note (as defined herein)
executed by the Borrower; (3) the Custody Agreement (as defined herein) executed
by the Borrower and the Custodian; (4) a receipt from the Custodian to the
effect that it has received the assignment of Collateral and power of attorney
referred to in Sections 2(f) and (g) of the Custody Agreement (as defined
below); (5) the Guarantee of Bancorp relating to the Borrower's obligations
under Section 12 hereof and (6) with respect to the first Funding Date on which
Insured Commercial Loans will be pledged, an Insurer Consent (each as defined
below) and an endorsement to each Insurance Policy (as defined below) naming the
Lender as an additional loss payee. Accordingly, the Borrower shall not request
an Advance with respect to, and the Lender shall not fund, Insured Commercial
Loans until the Lender receives the Insurer Consent and such legal opinions and
other documentation as Lender may reasonably request.

                (iii) the Lender has satisfactorily completed its due diligence
investigation of the Commercial Loans being pledged on such Funding Date;

                (iv) if any Commercial Loan to be pledged to the Lender pursuant
to an Advance shall have an outstanding principal balance greater than or equal
to $1,000,000, the Borrower shall have delivered to the Lender, at least three
Business Days prior to the related Funding Date, a credit memorandum, in form
and substance satisfactory to the Lender, containing, among other things, an
environmental report for any real estate pledged as collateral for such
Commercial Loan.




                                       2
<PAGE>   3
                  (v) the Borrower shall have delivered to the Lender and the
Custodian the Commercial Loan Schedule with respect to the Commercial Loans that
are being pledged on such Funding Date; and

                  (vi) no other Advance shall have been made hereunder nor shall
any advance have been made by the Lender to First International under the
Revolving Commercial Loan Warehouse and Security Agreement, dated as of December
4, 1998, as amended, among the Lender, First International and Bancorp (the
"First International Warehouse Agreement"), in each case in the same calendar
week as such Funding Date.

                  3. The Loan shall accrue interest daily on its outstanding
principal amount, with interest calculated on the basis of actual days elapsed
and a 360-day year. The daily interest rate on the outstanding principal amount
of the Loan shall be LIBOR plus 1.20% and shall be reset on each Business Day.
Interest which accrues during each calendar month shall be payable on the first
Business Day of the following month, with any outstanding interest due and
payable in its entirety on the date of termination of this Agreement (including
the Maturity Date).

                  "LIBOR" means the London interbank offered rate for one-month
U.S. dollar deposits on the basis of the offered rates of the Reference Banks
for one-month U.S. Dollar Deposits, as such rates appear on Telerate Page 3750,
as of 11:00 a.m. (New York Time) reset daily, as determined by Lender in its
sole discretion.

                  Any amounts pre-paid or required to be repaid under this
Agreement prior to the Maturity Date may be re-borrowed, subject to the terms
and conditions of this Agreement, until the Maturity Date.

                  4. Not later than 4:00 p.m. New York time three Business Days
prior to the proposed Funding Date for an Advance, the Borrower shall deliver to
the Lender (i) a written notice in the form of Exhibit D hereto (the "Funding
Notice") and (ii) an electronic disk or tape, in a mutually satisfactory form to
be agreed upon by the Lender and the Borrower, detailing certain specified
characteristics of the Commercial Loans previously pledged and those Commercial
Loans proposed to be pledged in connection with such Advance (each such
schedule, a "Commercial Loan Schedule").

                  5. The Borrower shall reimburse the Lender for any of the
Lender's out-of-pocket costs and attorneys' fees and expenses incurred by the
Lender in connection with this Agreement, (plus related attorneys'
disbursements) up to the date hereof. In addition, the Borrower shall reimburse
the Lender for any of the Lender's out-of-pocket costs and expenses incurred in
connection




                                       3
<PAGE>   4
with its due diligence review, such costs not to exceed a total maximum of
$20,000 when aggregated with similar expenses of the Lender incurred under the
First International Warehouse Agreement up to and including the Maturity Date.

                  6. The Commercial Loans will be serviced by First
International. Therefore, the financial condition of First International is
relevant to the interests of Lender. Accordingly, both as a condition to each
Advance and during the term of this facility:

                  (i) First International's Tangible Net Worth (determined in
accordance with GAAP) shall not be less than $47,500,000.

                  (ii) First International's Tangible Net Worth shall not be
less than its Tangible Net Worth as shown on its financial statements as of
September 30, 1999 (as delivered previously to the Lender) plus fifty percent
(50%) of all accumulated positive net income from September 30, 1999 less
$4,000,000. "Tangible Net Worth" means the difference between (x) net worth
determined in accordance with GAAP less (y) the sum of (i) receivables from
stockholders or Affiliates of First International and (ii) intangible assets
determined in accordance with GAAP (which include assets such as copyrights,
patents, trademarks, goodwill, computer programs, capitalized advertising costs,
organization costs, licenses, leases, franchises, exploration permits, and
import and export permits, etc.).

                  (iii) First International's leverage ratio shall not exceed
8:1, such ratio being the ratio of (x) First International's total liabilities
plus an amount equal to all Advances hereunder, less subordinated debt maturing
in more than one year, to (y) First International's Tangible Net Worth
(determined as set forth above).

                  (iv) First International shall be "well capitalized" as
defined in 12 CFR Part 325.

                  (b) The amount of each Advance shall not exceed the excess of
(A) the lesser of (i) the Applicable Percentage of the aggregate outstanding
principal balance of the Commercial Loans proposed to be pledged to the Lender
in connection with such Advance as of the related Cut-Off Date, and (ii) the
product of (x) the Market Value of the Commercial Loans proposed to be pledged
in connection with such Advance and (y) the Applicable Percentage (such lesser
amount, the "Borrowing Base"), minus (B) in the event that a Collateral
Deficiency Situation exists as of the date of such Advance, the Restoration
Amount as of the date of such Advance.





                                       4
<PAGE>   5
                        For purposes of this Agreement:

                        Affiliate means, as to any Person, any other Person
controlling, controlled by or under common control with such Person. "Control"
means the power to direct the management and policies of a Person, directly or
indirectly, whether through ownership of voting securities, by contract or
otherwise. "Controlled" and "Controlling" have meanings correlative to the
foregoing.

                        Applicable Percentage shall mean (i) for Commercial
Loans that are not Insured Commercial Loans, 82% and (ii) for Commercial Loans
that are Insured Commercial Loans, the percentage agreed to among the Borrower,
First International and the Lender pursuant to a separate written agreement.

                        Business Day shall mean any day excluding Saturday,
Sunday and any day which is a legal holiday under the laws of the States of New
York or Connecticut or any day on which a bank located in the State of New York,
City of New York or the State of Connecticut or the New York Stock Exchange is
authorized or permitted to close for business.

                        Collateral Deficiency Situation shall be deemed to be
existing as of any day on which (i) the outstanding principal amount of the Loan
as of such day (including accrued interest but excluding the amount of any
Advance to be made on such day) exceeds the Borrowing Base of the Commercial
Loans then pledged to the Lender (disregarding the Commercial Loans, if any,
proposed to be pledged to the Lender on such day).

                        Commercial Loan has the meaning set forth in Section 2.

                        Commercial Loan Schedule means each schedule of
Commercial Loans listing the Commercial Loans which have been or are to be
pledged by the Borrower in connection with (x) each Advance or (y) a Collateral
Deficiency, such schedule identifying each Commercial Loan by address of and the
name of the underlying obligor and setting forth as to each Commercial Loan at
least the following information: (i)the address and name of the underlying
obligor, (ii) the original principal amount, (iii) the Cut-Off Date, (iv) the
principal outstanding as of the related Cut-Off Date, (v) the account number,
(vi) the amount of any change in the outstanding principal balance of each
Commercial Loan since the date of the last delivered Commercial Loan Schedule,
(vii)the paid-through date, (viii) a description of the related collateral, (ix)
if the primary collateral includes real estate, the related loan-to-value ratio
of such property and the lien status of such real property collateral, (x) the
interest rate,





                                       5
<PAGE>   6
(xi) whether such Commercial Loan bears a fixed or floating rate of interest,
(xii) the original term, (xiii) the remaining term, (xiv) the loan type, (xv) if
the Commercial Loan is an Insured Commercial Loan, the Insured Portion expressed
as a percentage and (xvi) any other information that Lender may reasonably
request.

                           Cut-Off Date means, as of any date, the close of
business on the date set forth in the related Commercial Loan Schedule. In no
event shall the Cut-Off Date precede by more than two weeks the date on which
the related Commercial Loan Schedule is delivered.

                           GAAP means generally accepted accounting principles
applied on a consistent basis.

                           Insurance Policy collectively, means the
Comprehensive Export Credit Insurance Policy #649-8471 issued on April 17, 1998
and renewed on April 17, 1999 and the Domestic Credit Insurance Policy #649-8512
issued on July 28, 1998 and renewed on July 28, 1999, each issued by the Insurer
and relating to each Insured Commercial Loan, as each may be subsequently
renewed, extended, amended, supplemented or modified from time to time.

                           Insured Commercial Loan means a Commercial Loan that
is entitled to the benefits of the Insurance Policy.

                           Insured Portion means that portion of each Insured
Commercial Loan that is covered by the Insurance Policy.

                           Insurer means the National Union Fire Insurance
Company of Pittsburgh, PA and its permitted successors and assigns.

                           Insurer Consent means a letter from the Insurer
consenting to the transfer by First International to the Borrower of any and all
Insured Commercial Loans to be pledged hereunder and the pledge of such Insured
Commercial Loans to the Lender pursuant hereto, and containing such other
provisions that the Lender may request.

                           Loan Documents means this Agreement, as it may be
renewed, extended or continued from time to time the Secured Note, the Custody
Agreement and any other document, instrument or agreement executed by the
Borrower or the Custodian in connection herewith or therewith, as any of the
same may be amended, extended or replaced from time to time. Reference to any
specific Loan Document in this Agreement or any other Loan Document shall





                                       6
<PAGE>   7
be deemed to include any amendment, extension or replacement thereof.

                           Market Value means, as of any date and with respect
to any Commercial Loan, the servicing-released fair market value of such
Commercial Loan as of such date as determined by the Lender (or an Affiliate
thereof) in its sole discretion.

                           Person means any individual, corporation,
partnership, joint venture, association, limited liability company, joint-stock
company, trust (including any beneficiary thereof), unincorporated organization
or government or any agency or political subdivision thereof.

                           Pledged Commercial Loan means, as of any date of
determination, any Commercial Loan for which the related note is then held by
the Custodian as bailee for the Lender for purposes of perfecting the Lender's
security interest.

                           Qualifying Special Purpose Entity means an entity
which qualifies as such under Financial Accounting Standards Board (FASB)
Statement No. 125.

                           Reference Banks means leading banks selected by the
Lender and engaged in transactions in Eurodollar deposits in the international
Eurocurrency market (i) with an established place of business in London, (ii)
whose quotations appear on Telerate Page 3750 on the Funding Date in question,
(iii) which have been designated as such by the Custodian and (iv) not
controlling, controlled by, or be under common control with, the Borrower.

                           Restoration Amount means, as of any date of
determination, the amount, if any, by which (i) the outstanding principal amount
of the Loan as of such date (including accrued interest, but excluding the
amount of any Advance to be made on such date) exceeds (ii) the Borrowing Base
of the Commercial Loans theretofore pledged to the Lender (disregarding any
Commercial Loans proposed to be pledged to the Lender on such date).

                  (c) The Loan shall mature on December 28, 2000, as such date
may be extended by means of a Credit Increase Confirmation and Note Amendment
(the "Maturity Date"), pursuant to the terms of Section 1(f) below.

                  (d) A Pledged Commercial Loan may only be removed from this
facility under the following circumstances: (i) such Pledged Commercial Loan has
been paid in full by the obligor, (ii) such






                                       7
<PAGE>   8
Pledged Commercial Loan breaches one or more of the representations and
warranties listed in Section 4(b) below, (iii) the Lender has advised the
Borrower that the Lender reasonably believes that any such Pledged Commercial
Loan is an Ineligible Commercial Loan or (iv) such Pledged Commercial Loan is
being sold in connection with the Lender exercising the Put Option pursuant to
Section 20.

                  (e) If the Loan is not repaid in whole on or prior to the
Maturity Date, the Loan, if continued by the Lender as provided in paragraph (f)
below, shall, commencing on the Maturity Date, bear interest at a rate per annum
equal to LIBOR plus 5.00% until repaid.

                  (f) In the event the Loan is not repaid in whole on or prior
to the Maturity Date, the Lender shall have the option, in its sole discretion,
to continue the Loan on the Maturity Date through the last day of the month
following the Maturity Date and, thereafter, on a month-to-month basis through
the last day of each succeeding month. If the Lender elects to continue the Loan
as aforesaid, it shall deliver notice of such election to the Borrower by means
of a Credit Increase Confirmation and Note Amendment in the form of Exhibit C no
later than 3:00 p.m. on the Business Day preceding the then scheduled date of
maturity of the Loan (any such preceding date, an "Election Date"). If no such
notice is delivered, the Loan shall immediately and automatically become due and
payable without any further action by the Lender on the day following such
Election Date, and in such event the Lender may exercise all rights and remedies
available to it as the holder of a first perfected security interest under the
Uniform Commercial Code of the State of New York (the "New York UCC").

                  (g) The Loan shall be evidenced by the secured promissory note
of the Borrower in the form attached hereto as Exhibit A (the "Secured Note").

                  (h) If any Pledged Commercial Loan is removed from the
facility in violation of subsection (d) above, except if the Lender does not
continue the Maturity Date until the Termination Date (as such term is defined
in the Engagement Letter dated as of December 4, 1998, as amended, among
Prudential Securities Incorporated, First International and Bancorp), then an
amount equal to 1.0% of the average outstanding principal balance of such
Commercial Loan during the time it was a Pledged Commercial Loan shall be paid
by Borrower to the Lender on the date such Commercial Loan is removed from this
facility.

                  Section 2. Purpose of Loan. The Borrower agrees that the Loan
shall be used to finance the following types of






                                       8
<PAGE>   9
commercial loans: equipment loans, working capital term loans, loans secured by
mortgages on commercial real estate and Insured Commercial Loans (such loans
being the "Commercial Loans", it being understood that Commercial Loans shall
not include loans originated under Section 7(a) of the Small Business Act). In
calculating the Market Value, Borrowing Base, principal balance of Pledged
Commercial Loans or the Restoration Amount, only the Insured Portion of Insured
Commercial Loans shall be included. Each of the Commercial Loans shall be loans
made to small business concerns either (a) originated by First International
pursuant to its published underwriting criteria existing at the time the
Commercial Loans were originated if such Commercial Loans were originated prior
to the date hereof and if such criteria was different than the criteria
heretofore supplied to the Lender, (b) originated by First International
pursuant to its published underwriting criteria heretofore supplied to the
Lender (or if such criteria have been changed, the terms of such new
underwriting criteria shall have been supplied to Lender and are acceptable to
Lender) or (c) originated by third parties and re-underwritten by First
International on terms consistent with its published underwriting criteria (or
pursuant to underwriting criteria presented to and acceptable to Lender) and in
each case transferred by First International to the Borrower; provided, however,
that the Lender shall have the right to conduct such review of any such
Commercial Loans as the Lender may, in its sole discretion, decide to conduct.
The Lender may decline to include in the facility any Commercial Loan.

                  Section 3. Custody of Original Notes and Loan Documents. (a)
Prior to the time that the Borrower requests any Advance by the Lender with
respect to any Commercial Loan, the Borrower shall cause to be delivered to the
Custodian, at the offices of the Custodian located in New York, New York, or at
any such other place as the parties hereto may select from time to time, the
originals of all notes evidencing any Commercial Loan in which the Lender is to
be granted a security interest pursuant to this Agreement. Upon delivery to the
Custodian by the Borrower (or by the title company as directed by the Borrower)
of any note evidencing a Commercial Loan, the Custodian will immediately execute
and deliver to the Lender and Borrower the Initial Trust Receipt and
Certification, in the form attached as Exhibit A to the Custody Agreement, as
provided in Section 3(a) of the Custody Agreement. Delivery of the note or notes
to the Custodian and the Custodian's continuous possession of such note or notes
shall be a condition precedent to any such Commercial Loan being considered as
Collateral (as defined in (b) below) for the purposes of the computation of the
amount of any Advance or the Loan under this Agreement.




                                       9
<PAGE>   10
                  (b) Within 30 days after Borrower delivers to the Custodian a
note evidencing a Commercial Loan, Borrower shall deliver to HSBC Bank USA, as
custodian (the "Custodian") on behalf of the Lender, the documents and
instruments listed in Section 2(c)-(e) of that certain Commercial Loan Custody
Agreement dated as of December 1, 1999 (the "Custody Agreement") among First
International, the Borrower, the Custodian and the Lender. (Such documents and
instruments, including without limitation all mortgages relating thereto (with
respect to each Pledged Commercial Loan, the related "Loan File"), and the
original note or notes evidencing and relating to the Commercial Loans, together
with any proceeds thereof, are hereinafter referred to as the "Collateral.")
Within three Business Days of delivery to the Custodian by the Borrower (or by
the title company as directed by the Borrower) of the Loan File relating to a
Commercial Loan, the Custodian will execute and deliver to the Lender, with a
copy to the Borrower, the Final Trust Receipt and Certification, in the form
attached as Exhibit B to the Custody Agreement, as provided in Section 3(b) of
the Custody Agreement.

                  The Borrower hereby pledges all of its right, title and
interest in and to the Collateral to the Lender to secure the repayment of
principal of and interest on the Loan and all other amounts owing to the Lender
hereunder (collectively, the "Secured Obligations").

                  (c) Whenever any Pledged Commercial Loan is removed from this
facility, as permitted hereunder, all files held by the Custodian relating to
such removed Pledged Commercial Loan shall be returned to the Borrower in the
manner set forth in the Custody Agreement.

                           Section 4. Representations, Warranties and Covenants.
(a) The Borrower represents and warrants to the Lender that:

                  (i) The Borrower has been duly organized and is validly
         existing as a corporation in good standing under the laws of the State
         of Delaware. It is a Qualifying Special Purpose Entity.

                  (ii) It is duly licensed as a "Licensee" or is otherwise
         qualified in each state in which it transacts business where the
         ownership or leasing of its properties or the conduct of its business
         requires such license or qualification and is not in default of such
         state's applicable law, rules and regulations. It has the requisite
         power and authority and legal right to own and grant a lien on all of
         its right, title and interest in and to the Collateral, and to execute
         and deliver, engage in the






                                       10
<PAGE>   11
         transactions contemplated by, and perform and observe the terms and
         conditions of, this Agreement, the Custody Agreement and the other Loan
         Documents.

                  (iii) At all times after the Custodian has received from the
         Borrower an original note and Loan File relating to a Commercial Loan
         and until payment in full of the Loan, the Borrower will not commit any
         act in violation of applicable laws, or regulations promulgated with
         respect thereto.

                  (iv) The Borrower is solvent and is not in default under any
         mortgage, borrowing agreement or other instrument or agreement
         pertaining to indebtedness for borrowed money, and the execution,
         delivery and performance by the Borrower of this Agreement and the
         other Loan Documents and the execution by the Borrower of the Secured
         Note do not conflict with any term or provision of its certificate of
         incorporation or by-laws or any law, rule, regulation, order, judgment,
         writ, injunction or decree applicable to it of any court, regulatory
         body, administrative agency or governmental body having jurisdiction
         over it and will not result in any violation of any mortgage,
         instrument or agreement pertaining to indebtedness for borrowed money.

                  (v) Any financial statements of the Borrower furnished to the
         Lender do not omit to disclose any material liabilities or other facts
         relevant to the Borrower's condition. All certificates of the Borrower
         or any of its officers furnished to the Lender are true and complete.
         Any such financial statements shall have been prepared in accordance
         with GAAP.

                  (vi) Except as have been previously obtained, no consent,
         approval, authorization or order of, registration or filing with, or
         notice to any governmental authority or court is required under
         applicable law in connection with the execution, delivery and
         performance by it of this Agreement and the other Loan Documents.

                  (vii) There is no action, proceeding or investigation pending
         or, to its best knowledge, threatened against Borrower or any of its
         Affiliates before any court, administrative agency or other tribunal
         (A) asserting the invalidity of this Agreement or the other Loan
         Documents, (B) seeking to prevent the consummation of any of the
         transactions contemplated by this Agreement or the other Loan Documents
         or (C) which might materially and adversely affect the validity of the
         Commercial Loans or the performance by it of its obligations under, or
         the validity





                                       11
<PAGE>   12
         or enforceability of, this Agreement or the other Loan Documents.

                  (viii) There has been no adverse change in the business,
         operations, financial condition, properties or prospects of the
         Borrower, First International and Bancorp taken as a whole since the
         date set forth in Bancorp's most recent 10-K or 10-Q filing under the
         Securities Exchange Act of 1934, as amended, which would have a
         material adverse effect on the ability of the Borrower to perform its
         obligations under this Agreement or the other Loan Documents.

                  (ix) This Agreement and the other Loan Documents have been
         duly authorized, executed and delivered by the Borrower, all requisite
         corporate action having been taken, and each is valid, binding and
         enforceable against the Borrower in accordance with its terms.

                  (x) When a note and the related Loan File evidencing a
         Commercial Loan and the other Loan Documents are delivered to the
         Custodian, the security interest granted pursuant to this Agreement
         will constitute a fully-perfected first priority security interest in
         the Collateral in favor of the Lender.

                  (xi) The Board of Directors of the Borrower has approved the
         transactions contemplated by this Agreement and the other Loan
         Documents.

                  (xii) At the time of origination of a Commercial Loan, in all
         instances where commercial real property serves as the primary
         collateral for such Commercial Loan, the related mortgaged property was
         free of contamination from toxic substances or hazardous wastes
         requiring action under applicable laws or is subject to ongoing
         environmental rehabilitation, and the Borrower has no knowledge of any
         such contamination from toxic substances or hazardous waste material on
         any mortgaged property unless such items are below action levels or
         such mortgaged property is subject to ongoing environmental
         rehabilitation.

                  (b) With respect to every Commercial Loan and related note and
Loan File delivered to the Custodian and pledged to the Lender to secure the
Loan, the Borrower represents and warrants to the Lender that:

                  (i) Such note evidencing a Commercial Loan and the related
         Loan File are complete and authentic and all signatures thereon are
         genuine.




                                       12
<PAGE>   13
                  (ii) Such Commercial Loan was (a) originated by First
         International pursuant to its published underwriting criteria existing
         at the time the Commercial Loans were originated if such Commercial
         Loans were originated prior to the date hereof and if such criteria
         were different than the criteria heretofore supplied to the Lender, (b)
         originated by First International pursuant to its published
         underwriting criteria heretofore supplied to the Lender (or if such
         criteria have been changed, the terms of such new underwriting criteria
         shall have been supplied to Lender) or (c) originated by third parties
         and re-underwritten by First International on terms consistent with its
         published underwriting criteria (or pursuant to other underwriting
         criteria previously supplied to Lender), and such Commercial Loan arose
         from a bona fide loan, complying with all applicable state and Federal
         laws and regulations, to Persons having legal capacity to contract and
         is not subject to any defense, set-off or counterclaim.

                  (iii) All amounts represented to be payable on such Commercial
         Loan are, in fact, payable in accordance with the provisions of such
         Commercial Loan.

                  (iv) No payment default or material non-payment default has
         occurred in any provisions of such Commercial Loan.

                  (v) Any real property subject to any security interest granted
         by an obligor in connection with any Commercial Loan is not subject to
         any other encumbrances other than (i) a stated prior mortgage or
         mortgages, (ii) liens for taxes not yet due and payable or similar
         governmental charges not yet due and payable or still subject to
         payment without interest or penalty or (iii) zoning restrictions,
         utility easements, covenants or conditions and restrictions of record
         and other encumbrances, which will neither defeat nor render invalid
         such security interest or the priority thereof nor materially impair
         the marketability or value of such real property nor be violated by the
         existing improvements or the intended use thereof.

                  (vi) The Borrower holds good and indefeasible title to, and is
         the sole owner of, such Commercial Loan, or in the case of the Insured
         Commercial Loans, the Insured Portion, subject to no liens, charges,
         mortgages, participations, encumbrances or rights of any Person.

                  (vii) Each Commercial Loan conforms to the description thereof
         as set forth on the related Commercial Loan Schedule delivered to the
         Custodian and the Lender.




                                       13
<PAGE>   14
                  (viii) The Commercial Loans do not have characteristics which
         are materially worse than those of other loans made to small business
         concerns financed by First International during the twelve-month period
         preceding the related Funding Date.

                  (ix) No Commercial Loan shall have been originated in, or be
         subject to the laws of, any jurisdiction under which the sale, transfer
         and assignment of such Commercial Loan under this Agreement shall be
         unlawful, void or voidable.

                  (x) With respect to each Insured Commercial Loan, the related
         Insurance Policy is in full force and effect and the holder of such
         Insured Commercial Loan is entitled to the full benefits of the
         Insurance Policy.

                  (xi) Except for Insured Commercial Loans, the obligor on such
         Commercial Loan is a United States entity.

                  (xii) Such Commercial Loan is payable in U.S. Dollars.

                  (xiii) The first payment due on such Commercial Loan was not,
         or will not be, 30 or more days delinquent in payments.

                  (c) The Borrower covenants with the Lender that, during the
term of this facility:

                  (i) The Borrower will continue to be a wholly-owned subsidiary
         of First International.

                  (ii) The Borrower shall not incur any other indebtedness,
other than trade payables in the ordinary course of business.

                  (iii) The Borrower shall make available to Lender and its
agents and employees, upon reasonable prior notice and during normal business
hours, the books and records of the Borrower relating to the Pledged Commercial
Loans and the transactions contemplated hereby.

                  Section 5. Mandatory Prepayment of Loan. (a) Upon discovery by
the Borrower, the Custodian or the Lender of any breach of any of the
representations and warranties listed in Section 4 preceding, the party
discovering such breach shall promptly give notice of such discovery to the
others.

                  The Lender has the right to require, in its unreviewable
discretion, the Borrower to repay the Loan in part





                                       14
<PAGE>   15
with respect to (i) any Commercial Loan which breaches one or more of the
representations and warranties listed in Section 4(b) preceding or (ii) any
Commercial Loan which the Lender reasonably believes to be an Ineligible
Commercial Loan; provided, however, that the Borrower may, in lieu of repaying
the Loan in part, substitute one or more other Commercial Loans, in replacement
for any Commercial Loan described in (i) or (ii) above.

                  (b) If any Commercial Loan, as indicated on any Commercial
Loan Schedule delivered pursuant to Section 9 hereof, becomes thirty (30) or
more days delinquent in payment, the Lender may require the Borrower to prepay
the Loan in part with respect to such Commercial Loan; provided, however, that
the Borrower may, in lieu of repaying the Loan in part, substitute one or more
other Commercial Loans, in replacement for any Commercial Loan that has become
thirty (30) or more days delinquent in payment.

                  (c) If, on any date other than a Funding Date, the Lender
determines that a Collateral Deficiency Situation exists, the Lender shall so
notify the Borrower, and the Borrower, within three (3) Business Days, shall
either (i) pay to the Lender the Restoration Amount or (ii) deliver to the
Custodian on behalf of the Lender additional Commercial Loans with an aggregate
Market Value at least equal to the product of (x) the Restoration Amount and (y)
a fraction, the numerator of which is 100% and the denominator of which is the
Applicable Percentage. The provisions of Section l shall govern with regard to a
Collateral Deficiency Situation as of a Funding Date; provided, however, that if
the Collateral Deficiency Situation results from a release by the Lender of its
lien, such Collateral Deficiency Situation shall be remedied as aforesaid on the
business day on which such Collateral Deficiency Situation arises.

                  Section 6. Additional Documents. The Borrower will execute and
deliver, or cause to be executed and delivered, to the Lender from time to time,
such confirmatory or supplementary security agreements, financing statements,
reaffirmations and consents and such other documents, instruments or agreements
as the Lender may reasonably request, which are in the Lender's judgment
necessary or desirable to obtain for the Lender the benefit of the Collateral.

                  Section 7. Servicing. First International shall service the
Commercial Loans with the degree of skill and care consistent with that which
First International customarily exercises with respect to similar loans owned,
managed or serviced by it and all applicable industry standards. First
International shall comply with all applicable state and federal laws and
regulations; shall maintain all state and federal licenses and





                                       15
<PAGE>   16
franchises necessary for it to perform its servicing responsibilities hereunder
and shall not impair the rights of the Lender in any Commercial Loans or for
payment thereunder. As compensation for its services hereunder, the Borrower
shall pay First International a monthly servicing fee equal to 0.40% per annum
of the aggregate principal balance of the Pledged Commercial Loans as of the
first day of such month. The servicing fee shall be paid no later than 15 days
after each calendar month.

                  Section 8. No Oral Modifications; Successors and Assigns. No
provisions of this Agreement shall be waived or modified except by a writing
duly signed by the authorized agents of the Lender and the Borrower. This
Agreement shall be binding upon the successors and assigns of the parties
hereto.

                  Section 9. Reports. (a) The Borrower shall provide or cause
First International to provide the Lender with an electronic disk or tape (each,
a "Supplemental Commercial Loan Schedule") (i) three Business Days prior to each
Funding Date, (ii) within 10 Business Days after the end of each month, and
(iii) within two Business Days following any request made by the Lender or any
Affiliate thereof for such a report, setting forth, on a loan-by-loan basis, all
the information contained in the definition of "Commercial Loan Schedule"
herein, plus the current principal balance outstanding of each Commercial Loan
as of the end of the prior calendar month and the change in the current
principal balance outstanding of each Commercial Loan since the date of the last
delivered Commercial Loan Schedule or Supplemental Commercial Loan Schedule, as
the case may be. Such Supplemental Commercial Loan Schedule will also contain
delinquency information concerning (x) all Commercial Loans then held in this
warehouse facility and (y) any Commercial Loans proposed to be delivered to this
facility on the next Funding Date. The Supplemental Commercial Loan Schedule
shall be in a format as may be agreed upon by the Borrower and the Lender from
time to time.

                  (b) The Borrower shall provide or cause First International to
provide the Lender and the Custodian with a "hard-copy" Commercial Loan Schedule
or Supplemental Commercial Loan Schedule meeting the requirements of the Custody
Agreement on each date on which an electronic disk or tape is delivered to the
Lender (or a designated Affiliate thereof); the electronic disk or tape and the
Commercial Loan Schedule shall each relate to the same Cut-Off Date.

                  (c) The Borrower shall furnish or cause First International to
furnish to Lender (i) promptly, copies of any material and adverse notices
(including, without limitation, notices of defaults, breaches, potential
defaults or potential breaches) given to or received from its or its Affiliates
other





                                       16
<PAGE>   17
lenders, (ii) immediately, notice of the occurrence of any "Event of Default"
hereunder or of any situation which the Borrower reasonably expects to develop
into an "Event of Default" hereunder, (iii) copies of Bancorp's annual and
quarterly financial statements reflecting any public filings made to the
Securities and Exchange Commission, provided that any annual Form 10-K filing
shall be furnished no later than 90 days after each year-end and any quarterly
Form 10-Q filing shall be furnished no later than 45 days after each quarter
end, (iv) annual audited financial statements 90 days after each year-end, (v)
three (3) days prior to the date of each Advance (the date of which Advance
shall be no later than two (2) weeks after the receipt of the Supplemental
Commercial Loan Schedule delivered pursuant to Section 9 (a) (ii) above),
portfolio performance data with respect to the Commercial Loans, (vi) First
International's quarterly Call Report no later than 45 days after each quarter,
(vii) any other financial information reasonably requested by the Lender and
(viii) an officer's certificate within ten (10) Business Days after the end of
each quarter to the effect that the covenants set forth in Section 4(c) and the
conditions set forth in Section 1(a)6 are true and satisfied, respectively, on
such date and containing therein the mathematical calculations used to determine
Tangible Net Worth and all required ratios. All required financial statements,
information and reports shall be prepared in accordance with GAAP, or, if
applicable to SEC filings, SEC accounting regulations.

                  Section 10. Events of Default. Each of the following shall
constitute an "Event of Default" hereunder:

                  (a) Failure of the Borrower or an Affiliate to (i) make any
payment of interest or principal or any other sum which has become due, whether
by acceleration or otherwise, under the terms of the Secured Note, this
Agreement or any other Loan Document evidencing or securing indebtedness of the
Borrower to the Lender or (ii) pay the Restoration Amount or deliver Commercial
Loans in the amount required by Section 5(c);

                  (b) Assignment or attempted assignment by the Borrower of this
Agreement or any rights hereunder, without first obtaining the specific written
consent of the Lender, or the granting by the Borrower of any security interest,
lien or other encumbrance on any Collateral to other than the Lender;

                  (c) The filing by or against the Borrower or any Affiliate
thereof of a petition for liquidation, reorganization, arrangement or
adjudication as a bankrupt or similar relief under the bankruptcy, insolvency or
similar laws of the United States or any state or territory thereof or of any
foreign jurisdiction; the failure of the Borrower or such Affiliate to secure
dismissal






                                       17
<PAGE>   18
of any such petition filed against it within thirty (30) days of such filing;
the making of any general assignment by the Borrower or any Affiliate for the
benefit of creditors; the appointment of a receiver or trustee for the Borrower
or any such Affiliate, or for any part of the Borrower's or such Affiliate's
assets; the institution by the Borrower or any Affiliate of any other type of
insolvency proceeding (under the Bankruptcy Code or otherwise) or of any formal
or informal proceeding, for the dissolution or liquidation of, settlement of
claims against, or winding up of the affairs of, the Borrower or any Affiliate;
the institution of any such proceeding against the Borrower or any Affiliate if
the Borrower or such Affiliate shall fail to secure dismissal thereof within
thirty (30) days thereafter; the consent by the Borrower or any Affiliate to any
type of insolvency proceeding against the Borrower or such Affiliate (under the
Bankruptcy Code or otherwise); the occurrence of any event or existence of any
condition which could be the ground, basis or cause for any proceeding or
petition described in this Section;

                  (d) Any materially adverse change in the financial condition
of the Borrower, First International or Bancorp or the existence of any other
condition which, in the Lender's sole determination, constitutes an impairment
of the Borrower's ability to perform its obligations under this Agreement or the
Secured Note;

                  (e) Failure of First International to service the Commercial
Loans in substantial compliance with the servicing requirements set forth in
Section 7 hereof;

                  (f) A breach of (i) any representation or warranty set forth
in Section 4(a) hereof, (ii) any of the covenants set forth in Sections 4(c) and
9 hereof, (iii) any of the conditions set forth in Section 1(a)6 hereof shall
cease to be satisfied or (iv) a use of the proceeds of the Loan for a purpose
other than as set forth in Section 2 hereof;

                  (g) The Borrower or any of its Affiliates shall default in (i)
any payment of principal or interest of any indebtedness (other than the Loan)
or guarantee obligation beyond the grace period, if any, provided therefor in
the instruments or agreements pursuant to which such indebtedness was created
(not to exceed 14 days), or in (ii) the observance or performance of any other
provision of such indebtedness or guarantee, and the lender or beneficiary
thereunder shall have the ability to declare an "event of default" under such
instrument or agreement, which would result in either an acceleration of the
indebtedness created thereunder or the termination of future funding commitments
to the Borrower or an Affiliate.





                                       18
<PAGE>   19
                  Section 11. Remedies Upon Default. (a) Upon the happening of
one or more Events of Default, the Lender may (x) refuse to make further
Advances hereunder and (y) immediately declare the principal of the Secured Note
then outstanding to be immediately due and payable, together with all interest
thereon and fees and expenses accruing under this Agreement and exercise all
rights and remedies available to it as the holder of a first perfected security
interest under the New York UCC; provided that, upon the occurrence of the Event
of Default referred to in Section 10(c), such amounts shall immediately and
automatically become due and payable without any further action by any Person or
entity. Upon such declaration or such automatic acceleration, the balance then
outstanding on the Secured Note shall become immediately due and payable without
presentation, demand or further notice of any kind to the Borrower.

                  (b) Upon the occurrence of an Event of Default, the Lender may
assume all collection and servicing functions (including, without limitation,
the establishment of new addresses and accounts to receive all payments on the
Pledged Commercial Loans) or may appoint a successor servicer designated by the
Lender to assume those functions. At all times following such events, for so
long as the Loan or any portion thereof is outstanding, the Lender shall have
the right to collect and receive all further payments made on the Collateral,
and if any such payments are received by the Borrower, the Borrower shall not
commingle the amounts received with other funds of the Borrower and shall
promptly remit all such payments received over to the Lender.

                  (c) Following the occurrence and during the continuance of an
Event of Default, interest shall accrue on the Loan at a default interest rate
of LIBOR plus 5.00%.

                  Section 12. Indemnification. The Borrower agrees to hold the
Lender (which term shall include all Affiliates, officers, directors, employees
and agents of Lender and its Affiliates) harmless from and indemnifies the
Lender against all liabilities, losses, damages, judgments, costs and expenses
of any kind which may be imposed on, incurred by, or asserted against the Lender
relating to or arising out of this Agreement, the other Loan Documents or any
transaction contemplated hereby or thereby resulting from anything other than
the Lender's gross negligence or willful misconduct. The Borrower also agrees to
reimburse the Lender for all reasonable expenses in connection with the
enforcement of this Agreement and the other Loan Documents including without
limitation the reasonable fees and disbursements of counsel. The Borrower's
agreements in this Section shall survive the payment in full of the Secured Note
and the expiration or termination of this Agreement. The Borrower






                                       19
<PAGE>   20
hereby acknowledges that, notwithstanding the fact that the Secured Note is
secured by the Collateral, the obligations of the Borrower under the Secured
Note are recourse obligations of the Borrower.

                  Section 13. Power of Attorney. The Borrower hereby authorizes
the Lender, at the Borrower's expense, to file such financing statement or
statements relating to the Collateral without the Borrower's signature thereon
as the Lender at its option may deem appropriate, and appoints the Lender as the
Borrower's attorney-in-fact to execute any such financing statement or
statements in the Borrower's name and to perform all other acts which the Lender
deems appropriate to perfect and continue the security interest granted hereby
and to protect, preserve and realize upon the Collateral, including, but not
limited to, the right to endorse notes, complete blanks in documents and sign
assignments on behalf of the Borrower as its attorney-in-fact. This Power of
Attorney is coupled with an interest and is irrevocable without the Lender's
consent. Notwithstanding the foregoing, the power of attorney hereby granted may
be exercised only during the occurrence and continuance of any Event of Default
hereunder.

                  SECTION 14. GOVERNING LAW; AGREEMENT CONSTITUTES SECURITY
AGREEMENT. THIS AGREEMENT IS INTENDED BY THE PARTIES HERETO TO BE GOVERNED BY
NEW YORK LAW, WITHOUT GIVING EFFECT TO PRINCIPALS OF CONFLICTS OF LAW, AND TO
CONSTITUTE A SECURITY AGREEMENT WITHIN THE MEANING OF THE NEW YORK UCC.

                  Section 15. Lender May Act Through Affiliates. The Lender may,
from time to time, designate one or more Affiliates for the purpose of
performing any action hereunder.

                  Section 16. Notices. All demands, notices and communications
relating to this Agreement shall be in writing and shall be deemed to have been
duly given if mailed, by registered or certified mail, return receipt requested,
or by overnight courier, or, if by other means, when received by the other party
or parties at the address shown below, or such other address as may hereafter be
furnished to the other party or parties by like notice. Any such demand, notice
or communication hereunder shall be deemed to have been received on the date
delivered to or received at the premises of the addressee (as evidenced, in the
case of registered or certified mail, by the date noted on the return receipt).


If to the Borrower:

                           FIB HOLDINGS, INC.




                                       20
<PAGE>   21
                           280 Trumbull Street
                           Hartford, CT  06103
                           Attention:    Theodore J. Horan
                           Telephone:    860-241-2595
                           Fax Number:   860-241-4726

With a copy to:

                           Bruce C. Silvers, Esq.
                           Bingham Dana LLP
                           One State Street
                           Hartford, CT  06103
                           Telephone:    860-240-2943
                           Fax Number:   860-240-2800


If to the Lender:

                           Prudential Securities Credit
                               Corporation
                           One New York Plaza
                           Credit Analysis Department
                           New York, New York 10292
                           Attention:    Jeff French/Jim Maitland
                           Telephone:    (212) 778-1540
                           Fax Number:   (212) 778-2239

With copies to:

                           Prudential Securities Incorporated
                           One New York Plaza
                           Investment Banking Group
                           New York, New York 10292
                           Attention:    Andrew Yuder
                           Phone Number: (212) 778-2581
                           Fax Number:   (212) 778-7403

                           Richard L. Fried, Esq.
                           Stroock & Stroock & Lavan LLP
                           180 Maiden Lane
                           New York, New York  10038
                           Phone Number: (212) 806-6047
                           Fax Number:   (212) 806-6006

                  Section 17. Severability. Any provision of this Agreement
which is prohibited, unenforceable or not authorized in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such prohibition,
unenforceability or non-authorization, without invalidating the remaining
provisions





                                       21
<PAGE>   22
hereof or affecting the validity, enforceability or legality of such provision
in any other jurisdiction.

                  Section 18. Counterparts. This Agreement may be executed by
the parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute one and the same instrument.

                  Section 19. Headings. The section headings contained herein
are for convenience of reference only and shall not define or limit any of the
terms and provisions hereof.

                  Section 20. Put Option. (a) The Borrower hereby grants the
Lender the option (the "Put Option") to require the Borrower to repay some or
all of the Loan, at any time following the date hereof, but subject to the
provisions set forth in this Section 20, for an amount equal to the sum of (i)
100% of the principal amount of the portion of the Loan being repaid (ii) all
accrued interest thereon, and (iii) any amounts owed, to the Lender under this
Agreement (the "Put Option Price"). If the Lender desires to exercise the Put
Option, it shall provide the Borrower and the Custodian with written notice to
that effect. Such notice shall specify the portion of the Loan for which the Put
Option is being exercised and shall set for closing a date (the "Put Option
Purchase Date") which is not less than 15 nor more than 90 days after the date
such notice is sent. The Lender may rescind such notice, without liability of
any kind, any time prior to the Put Option Purchase Date by giving written
notice thereof to the Borrower and the Custodian.

                  (b) Notwithstanding anything to the contrary in Section 20(a),
the Put Option may only be exercised if the Borrower obtains the Put Option
Price by transferring the Pledged Commercial Loans in connection with the
settlement of a commercial transaction conducted in the capital markets. If less
than all of the Pledged Commercial Loans are to be so transferred, the Borrower
shall transfer those Pledged Commercial Loans as are designated in writing by
the Lender.

                  (c) If the Lender exercises the Put Option, on the Put Option
Purchase Date the Borrower shall pay the Lender the Put Option Price.

                  (d) If in connection with a transaction described in paragraph
(b) above, the Lender exercises the Put Option, on the closing date of such
transaction the Borrower shall sell to the party designated by the Lender those
Pledged Commercial Loans that are designated in writing by the Lender pursuant
to paragraph (b) above.








                                       22
<PAGE>   23
                  [Rest of Page Intentionally Left Blank]











                                       23
<PAGE>   24
                  IN WITNESS WHEREOF, the parties have executed this Agreement
the date and year first above written.


                                          FIB HOLDINGS, INC.

                                          By:/s/Theodore J. Horan
                                                Name:  Theodore J. Horan
                                                Title: Vice President


                                          PRUDENTIAL SECURITIES CREDIT
                                                   CORPORATION


                                          By:/s/Jeffrey K. French
                                                Name:  Jeffrey K. French
                                                Title: Senior Vice President


Accepted and Agreed as to
  Section 7

FIRST INTERNATIONAL BANK


By:/s/ Theodore J. Horan
       Name:  Theodore J. Horan
       Title  Senior Vice President







                                       24

<PAGE>   1
                                                                   Exhibit 10.17

                                                                  EXECUTION COPY






                         COMMERCIAL LOAN SALE AGREEMENT

                                     between

                            FIRST INTERNATIONAL BANK,
                                    as Seller


                                       and

                               FIB HOLDINGS, INC.
                                  as Purchaser


                          Dated as of December, 1, 1999
<PAGE>   2
         COMMERCIAL LOAN SALE AGREEMENT (this "Agreement"), dated as of December
1, 1999, by and between First International Bank, a Connecticut bank and trust
company (the "Seller"), and its successors and permitted assigns and FIB
Holdings, Inc., a Delaware corporation (the "Purchaser"), and its successors and
assigns.

                              W I T N E S S E T H:

         WHEREAS, the Purchaser has been formed as a qualifying special purpose
entity for the purpose of acquiring Commercial Loans from the Seller; and

         WHEREAS, from time to time, the Seller intends to sell or contribute
Commercial Loans to the Purchaser, and the Purchaser intends to purchase and/or
accept Commercial Loans from the Seller.

         NOW, THEREFORE, in consideration of the mutual covenants set forth
herein, and for other valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto covenant and agree as follows:

         SECTION 1. Definitions; Interpretation. Capitalized terms shall have
the meanings ascribed to them in this Agreement and the following terms shall
have the following meanings:

         "Adverse Claim" shall mean any claim of ownership or any lien, security
interest, title retention, trust or other charge or encumbrance, or other type
of preferential arrangement having the effect or purpose of creating a lien or
security interest, other than the interests created under the Warehouse and
Security Agreement in favor of the Lender.

         "Applicable Percentage" shall mean (i) for Eligible Commercial Loans
that are not Insured Commercial Loans, 82% and (ii) for Eligible Commercial
Loans that are Insured Commercial Loans, the percentage agreed to among the
Seller, the Purchaser and the Lender pursuant to a separate written agreement.

         "Business Day" shall mean any day other than a Saturday, a Sunday or a
day on which banking institutions in New York, New York or Hartford, Connecticut
are authorized or obligated by law, executive order or governmental decree to be
closed.

         "Collateral" shall have the meaning set forth in the Warehouse and
Security Agreement.

         "Commercial Loan" shall mean a commercial loan made by the Seller to
Obligors in connection with financing the following: equipment loans, working
capital term loans, and loans secured by mortgages on commercial real estate.

         "Commercial Loan Acquisition Price" shall mean the lesser of (i) the
Applicable Percentage of the Unpaid Principal Balance for Eligible Commercial
Loans as of the date of purchase, and (ii) the Applicable Percentage of the
aggregate market value of such Eligible Commercial Loans.

                                       -2-
<PAGE>   3
         "Commercial Loan Documents" shall have the meaning set forth in Section
2 of the Custody Agreement.

         "Commercial Loan Files" shall have the meaning set forth in Section 2
of the Custody Agreement.

         "Custody Agreement" shall mean the Commercial Loan Custody Agreement,
dated as of December 1, 1999, among the Purchaser, the Lender and the Custodian

         "Custodian" shall be HSBC Bank USA.

         "Cut-off Date" shall mean with respect to each Commercial Loan, the
applicable Funding Date, unless otherwise mutually agreed upon by the Seller,
the Purchaser and the Lender.

         "Eligible Commercial Loan" shall mean, for any date of determination,
any Commercial Loan as to which the representations and warranties set forth in
Section 4(b) of the Warehouse and Security Agreement are true and correct as of
the related Funding Date (for purposes hereof substituting the word "Seller" for
"Borrower" therein), and as to which the Custodian has delivered a Trust Receipt
pursuant to the Custody Agreement.

         "Event of Default" shall have the meaning assigned thereto in Section
10 of the Warehouse and Security Agreement.

         "Expiration Date" shall mean December 28, 2000, which is the last
permissible Sale Date.

         "Funding Date" shall have the meaning set forth in Section 1.2 of the
Warehouse and Security Agreement.

         "Governmental Authority" shall mean any nation or government, any state
or other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.

         "Insurance Policy" collectively, shall mean those certain Comprehensive
Export Credit Insurance Policy #649-8471 issued on April 17, 1998 and renewed on
April 17, 1999 and the Domestic Credit Insurance Policy #649-8512 issued on July
28, 1998 and renewed on July 28, 1999, each issued by the Insurer and relating
to each Insured Commercial Loan, as each may be subsequently renewed, extended,
amended, supplemented or modified from time to time.

         "Insured Commercial Loan" shall mean a Commercial Loan that is entitled
to the benefits of the Insurance Policy.

         "Insurer" shall mean the National Union Fire Insurance Company of
Pittsburgh, PA and its permitted successors and assigns.

                                      -3-
<PAGE>   4
         "Insurer Consent" shall mean a letter from the Insurer consenting to
the transfer by the Seller to the Purchaser of any and all Insured Commercial
Loans hereunder and the pledge of such Insured Commercial Loans to the Lender
pursuant to the Warehouse and Security Agreement and containing such other
provisions that the Lender may request.

         "Lender" shall mean Prudential Securities Credit Corporation, its
successors and permitted assigns.

         "Obligor" means the obligor on a Commercial Loan.

         "Parent" shall mean First International Bancorp, Inc., its successors
and permitted assigns.

         "Person" shall mean any individual, corporation, partnership, limited
liability company, joint venture, association, joint stock company, trust,
estate, unincorporated organization or government (or any agency or political
subsection thereof).

         "Repurchase Price" shall mean as to any Commercial Loan, the then
current Commercial Loan Acquisition Price.

         "Sale Assignment" each assignment, substantially in the form of Exhibit
A to this Agreement, executed by the Seller in favor of the Purchaser from time
to time conveying Commercial Loans to the Purchaser.

         "Sale Date" shall mean, with respect to any Commercial Loan, the date
on which such Commercial Loan is sold or contributed pursuant to Section 2 of
this Agreement.

         "Trust Receipt" shall be defined in the Custody Agreement.

         "Unpaid Principal Balance" means, as of any date of determination, the
unpaid principal amount for a Commercial Loan.

         "Warehouse and Security Agreement" shall mean the Warehouse and
Security Agreement, dated as of December 1, 1999, between the Purchaser and the
Lender.

         Capitalized terms used but not defined herein shall have the meanings
given to them in the Warehouse and Security Agreement.

         SECTION 2. Sale and Disposition of Commercial Loans.

                  (a) From time to time, but no later than the Expiration Date,
the Seller may sell or contribute (and by execution of a Sale Assignment will
thereby sell or contribute) to the Purchaser, subject to the terms and
conditions of this Agreement, all right, title and interest of the Seller in and
to:

                                      -4-
<PAGE>   5
                  (i) the Commercial Loans listed in the related Sale
         Assignment, all payments paid in respect thereof and all monies due, to
         become due or paid in respect thereof after the related Cut-off Date
         and all liquidation proceeds and recoveries thereon, in each case as
         they arise after the related Cut-off Date or other date specified in
         the Sale Assignment;

                  (ii) all security interests and liens and property subject
         thereto from time to time purporting to secure payment by Obligors
         under such Commercial Loans;

                  (iii) all guaranties, indemnities and warranties, and other
         agreements or arrangements of whatever character from time to time
         supporting or securing payment of such Commercial Loans, including
         without limitation, proceeds received under each Insurance Policy
         relating to each Insured Commercial Loan;

                  (iv) all collections and records (including computer records)
         with respect to the foregoing;

                  (v) all documents relating to such Commercial Loans, including
         those contained in the Commercial Loan Files and all Commercial Loan
         Documents; and

                  (vi) all income, payments, proceeds and other benefits of any
         and all of the foregoing.

Subject to the terms and conditions of this Agreement, the Purchaser agrees to
purchase or accept the foregoing from the Seller. To the extent that the
Commercial Loan Acquisition Price paid to the Seller for any Commercial Loans is
less than the fair market value of such Commercial Loans, the difference between
such fair market value and the Commercial Loan Acquisition Price shall be deemed
to be a capital contribution made by the Seller to Purchaser on the relevant
Sale Date.

         (b)      In order to offer a Commercial Loan for sale by the Seller to
the Purchaser, the Seller shall deliver to the Custodian, on behalf of the
Purchaser, each of the Commercial Loan Documents and the originally executed
Sale Assignment therefor prior to the Sale Date. Upon receipt by the Custodian
of the complete Commercial Loan Documents and the duly executed original Sale
Assignment, the acceptance and approval by the Lender of a duly executed Trust
Receipt from the Custodian, and subject to the terms of this Agreement, the
Purchaser will transfer or cause to be transferred to the Seller, an amount
equal to the Commercial Loan Acquisition Price with respect to such the
Commercial Loans identified on the Trust Receipt by the close of business on or
before the second Business Day following the receipt by the Custodian of such
Commercial Loan Documents and Sale Assignment.

         (c)      Upon payment of the Commercial Loan Acquisition Price and
execution of the Sale Assignment with respect to a Commercial Loan, the
ownership of each such Commercial Loan and all collections allocable to
principal thereon since the related Cut-off Date and all other property
interests or rights conveyed pursuant to and referenced in Section 2(a) hereof,
shall be

                                      -5-
<PAGE>   6
vested in the Purchaser, and the Seller shall not take any action inconsistent
with such ownership nor claim any ownership interest in any such Commercial Loan
for any purpose whatsoever other than consolidated financial and federal and
state income tax reporting.

         (d) On or prior to the related Sale Date, the Seller shall indicate in
its computer files and other records that each Commercial Loan has been sold to
the Purchaser and transferred and, if applicable, pledged to the Lender. In
addition, on or prior to the Sale Date, the Seller shall deliver to the
Purchaser (or to the Lender, if the Purchaser has pledged such Commercial Loans
to the Lender), UCC-1 financing statements in favor of the Purchaser and, if
applicable, the Lender with respect to the Commercial Loans meeting the
requirements of applicable state law in such manner and in such jurisdictions as
are necessary or appropriate to perfect the acquisition of the Commercial Loans
by the Purchaser from the Seller. In addition, the Seller and the Purchaser each
shall respond to any inquiries with respect to ownership of a Commercial Loan by
stating that such Commercial Loan has been sold to the Purchaser and that the
Purchaser is the owner of such Commercial Loan and, if applicable, that such
Commercial Loan has been assigned to the Lender.

         (e) The Seller, at any time and from time to time shall, at its sole
cost and expense, afford the Purchaser and the Custodian, as the case may be,
and their respective authorized agents and representatives upon reasonable
notice, reasonable access during regular business hours to its records relating
to its performance under and compliance with this Agreement and will cause its
personnel to assist in any examination of such records to enable such party to
determine the Seller's compliance with the terms of this Agreement. The
examination referred to in the immediately preceding sentence will be conducted
in a manner that does not unreasonably interfere with the Seller's normal
operations or customer or employee relations.

         (f) The Seller agrees that, from time to time, at its expense, it will
promptly execute and deliver all further instruments, notices and documents, and
take all further action, that may be necessary or appropriate, as reasonably
determined by the Purchaser, or that the Purchaser may reasonably request, in
order to perfect, protect or more fully evidence the transfer of ownership of
the Commercial Loans to the Purchaser or to enable the Purchaser or the Lender
to exercise or enforce any of its respective rights hereunder or under any Sale
Assignment, as the case may be.

         (g) Any action required or permitted to be taken by the Purchaser in
furtherance of its agreement to purchase Commercial Loans hereunder, including
enforcement of its rights and receipt of documents, may be delegated by it to
one or more agents, or assigned to the Lender pursuant to the Warehouse and
Security Agreement.

         (h) Except as specifically provided for herein, the sale and the
purchase of the Commercial Loans under this Agreement is without recourse to the
Seller; provided that the Seller shall be liable to the Purchaser for all
representations, warranties, covenants and indemnities made by it under this
Agreement.

                                      -6-
<PAGE>   7
         (i) Neither the Purchaser nor any assignee shall have any obligation or
liability with respect to any Commercial Loan, nor shall the Purchaser or any
assignee have any liability to any Obligor in respect of any Commercial Loan. No
such obligation or liability is intended to be assumed by the Purchaser or any
assignee herewith, and any such liability hereby is expressly disclaimed.

         SECTION 3. Intended Characterization; Grant of Security Interest.

         It is the intention of the parties hereto that each transfer of
Commercial Loans to be made pursuant to the terms hereof shall constitute a sale
or, to the extent set forth in Section 2(a) hereof, a capital contribution by
the Seller to the Purchaser and not a loan. In the event, however, that a court
of competent jurisdiction were to hold that any such transfer constitutes a loan
and not a sale or capital contribution, it is the intention of the parties
hereto that the Seller shall be deemed to have granted to the Purchaser as of
the date hereof a first priority perfected security interest in all of Seller's
right, title and interest in, to and under each Commercial Loan, and the related
property as described in Section 2(a) hereof. In the event of the
characterization of any such transfer as a loan, the amount of interest payable
or paid with respect to such loan under the terms of this Agreement shall be
limited to an amount which shall not exceed the maximum nonusurious rate of
interest allowed by the applicable state law or any applicable law of the United
States permitting a higher maximum nonusurious rate that preempts such
applicable state law, which could lawfully be contracted for, charged or
received (the "Highest Lawful Rate"). In the event any payment of interest on
any such loan exceeds the Highest Lawful Rate, the parties hereto stipulate that
(a) to the extent possible given the term of such loan, such excess amount
previously paid or to be paid with respect to such loan be applied to reduce the
principal balance of such loan, and the provisions thereof immediately be deemed
reformed and the amounts thereafter collectible thereunder reduced, without the
necessity of the execution of any new document, so as to comply with the then
applicable law, but so as to permit the recovery of the fullest amount otherwise
called for thereunder and (b) to the extent that the reduction of the principal
balance of, and the amounts collectible under, such loan and the reformation of
the provisions thereof described in the immediately preceding clause (a) is not
possible given the term of such loan, such excess amount will be deemed to have
been paid with respect to such loan as a result of an error and upon discovery
of such error or upon notice thereof by any party hereto such amount shall be
refunded by the recipient thereof.

         SECTION 4. Conditions Precedent to Purchase.

         The agreement of the Purchaser to purchase Commercial Loans pursuant to
Section 2 of this Agreement on each Sale Date is subject to the following:

         (i)      each Commercial Loan shall be an Eligible Commercial Loan;

         (ii) the representations and warranties of the Seller contained in
Sections 5(a) and 5(b) of this Agreement shall be true and correct on and as of
such Sale Date and no violations of the covenants contained in Section 5(c) of
this Agreement shall be existing;

                                      -7-
<PAGE>   8
         (iii) the fulfillment and satisfaction of the conditions required in
Section 1 of the Warehouse and Security Agreement; and

         (iv) with respect to the first Sale Date on which Insured Commercial
Loans are being transferred, an Insurer Consent shall have been executed and
delivered to the Purchaser and the Lender; and

         SECTION 5. Representations, Warranties and Covenants of Seller.

         (a) The Seller represents and warrants to the Purchaser, as of the date
hereof (which representations and warranties may be relied upon by the Lender,
as if made directly to the Lender, and such representations and warranties shall
be deemed reaffirmed on each Sale Date as though made on such Sale Date) with
respect to the Seller as follows:


                  (i) The Seller has been duly organized and is validly existing
         as a bank and trust company under the laws of the State of Connecticut.

                  (ii) The Seller is duly licensed as a "Licensee" or are
         otherwise qualified in each state in which it transacts business where
         the ownership or leasing of its properties or the conduct of its
         business requires such license or qualification and are not in default
         of such state's applicable law, rules and regulations. It has the
         requisite power and authority and legal right to own, transfer
         ownership and/or grant a lien on all of their right, title and interest
         in and to the Commercial Loans, and to execute and deliver, engage in
         the transactions contemplated by, and perform and observe the terms and
         conditions of, this Agreement and the Custody, as applicable.

                  (iii) At all times after the Custodian has received an
         original note and Commercial Loan File relating to a Commercial Loan
         from the Seller and until payment in full of the Loan made by the
         Lender to the Purchaser pursuant to the Warehouse and Security
         Agreement, the Seller will not commit any act in violation of
         applicable laws, or regulations promulgated with respect thereto.

                  (iv) The Seller is solvent and is not in default under any
         mortgage, borrowing agreement or other instrument or agreement
         pertaining to indebtedness for borrowed money, and the execution,
         delivery and performance by the Seller of this Agreement and the
         Custody Agreement, as applicable, and the execution by the Seller of
         this Agreement and the Custody Agreement does not conflict with any
         term or provision of the charter, certificate of incorporation or
         by-laws of any of them or any law, rule, regulation, order, judgment,
         writ, injunction or decree applicable to it of any court, regulatory
         body, administrative agency or governmental body having jurisdiction
         over any of them and will not result in any violation of any mortgage,
         instrument or agreement pertaining to indebtedness for borrowed money.


                                      -8-
<PAGE>   9
                  (v) All financial statements of the Seller furnished to the
         Purchaser and the Lender do not omit to disclose any material
         liabilities or other facts relevant to the Seller's condition. All
         certificates of the Seller or any of its officers furnished to the
         Holdings or the Lender are true and complete. All such financial
         statements have been prepared in accordance with GAAP. No financial
         statement or other financial information as of a date later than the
         date set forth in the Parent's most recent 10-K or 10-Q filing under
         the Securities Exchange Act of 1934, as amended, has been furnished by
         the Seller to another lender of the Seller that has not been furnished
         to the Purchaser and the Lender.

                  (vi) Except as have been previously obtained, no consent,
         approval, authorization or order of, registration or filing with, or
         notice to any governmental authority or court is required under
         applicable law in connection with the execution, delivery and
         performance by it of this Agreement and the Custody Agreement, as
         applicable.

                  (vii) There is no action, proceeding or investigation pending
         or, to the best knowledge of the Seller, threatened against the Seller
         before any court, administrative agency or other tribunal (A) asserting
         the invalidity of this Agreement, as applicable, or the Custody
         Agreement, as applicable, (B) seeking to prevent the consummation of
         any of the transactions contemplated by this Agreement or the Custody
         Agreement, as applicable, or (C) which might materially and adversely
         affect the validity of the Commercial Loans or the performance by any
         of them of their obligations under, or the validity or enforceability
         of, this Agreement or the Custody Agreement, as applicable.

                  (viii) There has been no adverse change in the business,
         operations, financial condition, properties or prospects of the Seller
         and the Parent taken as a whole since the date set forth in the
         Parent's most recent 10-K or 10-Q filing under the Securities Exchange
         Act of 1934, as amended, which would have a material adverse affect on
         the Seller's ability to perform their respective obligations under this
         Agreement or the Custody Agreement, as applicable.

                  (ix) This Agreement and the Custody Agreement, as applicable,
         have been duly authorized, executed and delivered by the Seller, all
         requisite corporate action having been taken, and each is valid,
         binding and enforceable against the Seller in accordance with its
         terms.

                  (x) When a note and the related Commercial Loan File
         evidencing a Commercial Loan and the other Commercial Loan Documents
         are delivered to the Custodian, the security interest granted pursuant
         to the Warehouse and Security Agreement will constitute a
         fully-perfected first priority security interest in the Collateral in
         favor of the Lender.

                  (xi) The Boards of Directors of the Seller has approved the
         formation of the Borrower for the purposes set forth in the Borrower's
         certificate of incorporation and the

                                      -9-
<PAGE>   10
         transactions contemplated by this Agreement and the Custody Agreement,
         such approvals have been duly noted in the minutes of the Board of
         Directors of the Seller and, from the time of execution of this
         Agreement and the Custody Agreement, will be continuously an official
         record (as such term is used in Section 13(e)(1)(D) of the Federal
         Deposit Insurance Act, as amended by the Financial Institution Reform,
         Recovery and Enforcement Act and as in effect on the date hereof) of
         the Seller.

                  (xii) At the time of origination of a Commercial Loan, in all
         instances where commercial real property serves as the primary
         collateral for such Commercial Loan, the related mortgaged property was
         free of contamination from toxic substances or hazardous wastes
         requiring action under applicable laws or is subject to ongoing
         environmental rehabilitation, and the Seller has no knowledge of any
         such contamination from toxic substances or hazardous waste material on
         any mortgaged property unless such items are below action levels or
         such mortgaged property is subject to ongoing environmental
         rehabilitation.

         (b)      With respect to every Commercial Loan and related note and
Commercial Loan File sold to the Purchaser and delivered to the Custodian, the
Seller represents and warrants to the Purchaser (which representations and
warranties may be relied upon by the Lender, as if made directly to the Lender)
that:

                  (i) Such note evidencing a Commercial Loan and the related
         Commercial Loan File are complete and authentic and all signatures
         thereon are genuine.

                  (ii) Such Commercial Loan was (a) originated by the Seller
         pursuant to its published underwriting criteria existing at the time
         the Commercial Loans were originated if such Commercial Loans were
         originated prior to the date hereof and if such criteria was different
         than the criteria heretofore supplied to the Purchaser and the Lender,
         (b) originated by the Seller pursuant to its published underwriting
         criteria heretofore supplied to the Purchaser and the Lender (or if
         such criteria have been changed, the terms of such new underwriting
         criteria shall have been supplied to the Purchaser and the Lender) or
         (c) originated by third parties and re-underwritten by the Seller on
         terms consistent with its published underwriting criteria (or pursuant
         to other underwriting criteria previously supplied to the Purchaser and
         the Lender), and such Commercial Loan arose from a bona fide loan,
         complying with all applicable state and Federal laws and regulations,
         to Persons having legal capacity to contract and is not subject to any
         defense, set-off or counterclaim.

                  (iii) All amounts represented to be payable on such Commercial
         Loan are, in fact, payable in accordance with the provisions of such
         Commercial Loan.

                  (iv) No payment default or material non-payment default has
         occurred in any provisions of such Commercial Loan.

                                      -10-
<PAGE>   11
                  (v) Any real property subject to any security interest granted
         by an obligor in connection with any Commercial Loan is not subject to
         any other encumbrances other than (i) a stated prior mortgage or
         mortgages, (ii) liens for taxes not yet due and payable or similar
         governmental charges not yet due and payable or still subject to
         payment without interest or penalty or (iii) zoning restrictions,
         utility easements, covenants or conditions and restrictions of record
         and other encumbrances, which will neither defeat nor render invalid
         such security interest or the priority thereof nor materially impair
         the marketability or value of such real property nor be violated by the
         existing improvements or the intended use thereof.

                  (vi) The Seller holds good and indefeasible title to, and is
         the sole owner of, such Commercial Loan, subject to no liens, charges,
         mortgages, participations, encumbrances or rights of any Person.

                  (vii) Each Commercial Loan conforms to the description thereof
         as set forth on the related Commercial Loan Schedule delivered to the
         Custodian, the Purchaser and the Lender.

                  (viii) The Commercial Loans do not have characteristics which
         are materially worse than those of other loans made to small business
         concerns financed by the Seller during the twelve-month period
         preceding the related Sale Date.

                  (ix) No Commercial Loan shall have been originated in, or be
         subject to the laws of, any jurisdiction under which the sale, transfer
         and assignment of such Commercial Loan under this Agreement shall be
         unlawful, void or voidable.

                  (x) With respect to each Insured Commercial Loan, the related
         Insurance Policy is in full force and effect and the holder of such
         Insured Commercial Loan is entitled to the full benefits of such
         Insurance Policy.

                  (xi) Except for Insured Commercial Loans, the obligor on such
         Commercial Loan is a United States entity.

                  (xii) Such Commercial Loan is payable on U.S. Dollars.

                  (xiii) The first payment due on such Commercial Loan was not,
         or will not be, 30 or more days delinquent in payment.

         (c) The Seller covenants with the Purchaser and the Lender, that until
the Expiration Date of this Agreement:

                  1.       The Seller's Tangible Net Worth (determined in
         accordance with GAAP) shall not be less than $47,500,000.

                                      -11-
<PAGE>   12
                  2.       The Seller's Tangible Net Worth shall not be less
         than its Tangible Net Worth as shown on the Seller's financial
         statements as of September 30, 1999 (as delivered previously to the
         Lender) plus fifty percent (50%) of all accumulated positive net income
         from September 30, 1999 less $4,000,000. "Tangible Net Worth" means the
         difference between (x) net worth determined in accordance with GAAP
         less (y) the sum of (i) receivables from stockholders or affiliates of
         the Seller and (ii) intangible assets determined in accordance with
         GAAP (which include assets such as copyrights, patents, trademarks,
         goodwill, computer programs, capitalized advertising costs,
         organization costs, licenses, leases, franchises, exploration permits,
         and import and export permits, etc.).

                  3.       The Seller's leverage ratio shall not exceed 8:1,
         such ratio being the ratio of (x) the Seller's total liabilities plus
         an amount equal to all Advances under the Warehouse and Security
         Agreement, less subordinated debt maturing in more than one year, to
         (y) the Seller's Tangible Net Worth (determined as set forth above).

                  4.       The Seller shall be "well capitalized" as defined in
         12 CFR Part.

                  5.       The Seller will continue to be a wholly-owned
         subsidiary of the Parent and the Purchaser will continue to be a
         wholly-owned subsidiary of the Seller.

                  6.       The Seller will continue to maintain for itself and
         its subsidiaries insurance coverage with respect to employee
         dishonesty, forgery or alteration, theft, disappearance and
         destruction, robbery and safe burglary, property (other than money and
         securities) and computer fraud in an aggregate amount of at least
         $4,000,000, and shall name Lender as a loss payee.

                  7.       Notwithstanding anything to the contrary contained
         herein, with the prior written consent of the Purchaser and the Lender
         (not to be unreasonably withheld) Seller is permitted to assign its
         rights and obligations hereunder to another wholly-owned subsidiary of
         the Parent (the "Assignee") (in which case all of the provisions of
         this Agreement shall, to the same extent as they apply to the Seller
         hereunder, apply to the Assignee rather than to the Seller) on the
         condition that (a) the Assignee acquires substantially all of the
         Seller's assets relating to its commercial lending business, (b) the
         Assignee assumes substantially all of the Seller's liabilities relating
         to its commercial lending business, (c) the Purchaser and the Lender
         receive such documents evidencing (a) and (b) above as the Purchaser of
         the Lender shall reasonably request, and (d) Seller and Assignee
         execute and deliver to the Purchaser and the Lender such amendments to
         this Agreement and the Custody Agreement and such opinions of counsel
         as Lender shall reasonably request in order to evidence that the
         Assignee has assumed all of the Seller's rights and obligations, and is
         bound by all of the Seller's agreements, set forth herein.

                                      -12-
<PAGE>   13
                  8.       The Seller shall make available to the Purchaser and
         the Lender and its agents and employees, upon reasonable prior notice
         and during normal business hours, the books and records of the Seller
         relating to the Commercial Loans and the transactions contemplated
         hereby.

         (d)      It is understood and agreed that the representations and
warranties and covenants set forth in this Section 5 shall survive the sale or
contribution of a Commercial Loan to the Purchaser and any pledge of such
Commercial Loan by the Purchaser to the Lender and shall continue so long as any
such Commercial Loan shall remain outstanding until such time as such Commercial
Loan is repurchased pursuant to Section 5(e). The Seller acknowledges that it
has been advised that the Purchaser may assign all or part of its right, title
and interest in and to each Commercial Loan and its right to exercise the
remedies created by this Section 5 to the Lender. The Seller agrees that, upon
any such assignment, the Lender may enforce directly, without joinder of the
Purchaser (but subject to any defense that the Seller may have under this
Agreement), the purchase obligations of the Seller set forth in Section 5(e)
with respect to breaches of the representations and warranties set forth in
Section 5(a) and Section 5(b) or breaches of the covenants contained in Section
5(c).

         (e)      Upon discovery by the Purchaser, the Lender, any subsequent
assignee or the Seller of a breach of any of the representations and warranties
in Section 5(a) or Section 5(b) or breaches of the covenants contained in
Section 5(c), which materially and adversely affects the value of a Commercial
Loan or the interests of the Purchaser or a subsequent assignee therein, the
party discovering such breach or failure to deliver shall give prompt written
notice to the other parties. If, at the time of such discovery, (i) no loss has
yet occurred with respect to such Commercial Loan, (ii) such breach or failure
to deliver is curable and (iii) Seller shall have failed to cure such breach
within 30 days after the earlier of (A) the Seller's discovery of such breach
and (B) the Seller's receipt of written notice of such breach, then if requested
in writing by notice from the Purchaser or any subsequent assignee, the Seller
shall immediately repurchase such Commercial Loan by remitting an amount equal
to the Repurchase Price in the manner specified in such notice. Any such
repurchase shall be made without recourse against, or warranty, express or
implied, of the Purchaser or any such assignee. Notwithstanding the immediately
preceding sentence, in connection with any such repurchase, the Purchaser shall
in writing represent to the Seller (i) the amount of the remaining balance of
the relevant Commercial Loan and (ii) that the Purchaser has not violated in any
material way any laws applicable to the collectibility of such Commercial Loan.
The Purchaser or any subsequent assignee shall execute and deliver an assignment
substantially in the form of Exhibit B attached hereto and made a part hereof to
vest ownership of such Commercial Loan in the Seller. If, at the time of the
discovery of such breach, a loss has occurred with respect to such Commercial
Loan, then the Seller shall pay to the Purchaser or any subsequent assignee an
amount equal to the amount, if any, by which the Repurchase Price exceeds the
net proceeds from such Commercial Loan. It is understood and agreed that the
obligation of the Seller to repurchase any Commercial Loan pursuant to this
Section 5(e) or to make the payment described in the immediately preceding
sentence (the "Repurchase Requirement") shall constitute the sole remedy for the
breach of any representation

                                      -13-
<PAGE>   14
or warranty set forth in Section 5(b); provided, that the foregoing limitation
shall not be construed to limit in any manner the Purchaser's rights to (a)
declare the Termination Date to have occurred to the extent that such breaches
also constitute, or contribute to the determination of, an Event of Purchase
Termination, or (b) offset the amount of the Repurchase Price from the
Commercial Loan Acquisition Price in connection with any other Commercial Loans.
It is also understood and agreed that upon the repurchase by Seller of a
Commercial Loan in accordance with this Section 5(e) and the payment by Seller
of all monies required to be paid by it under this Section 5(e) it is the
intention of the parties hereto and the Purchaser warrants that, if the seller
of such Commercial Loan is the Purchaser, Seller shall own all right, title and
interest of the Purchaser in and to such Commercial Loan.

         (f)      With respect to any representations and warranties contained
in Section 5(b) which are made to the best of the Seller's knowledge, if it is
discovered that any representation and warranty is inaccurate and such
inaccuracy materially and adversely affects the value of a Commercial Loan or
the interests of the Purchaser or any assignee thereof, then notwithstanding the
Seller's lack of knowledge of the accuracy of such representation and warranty
at the time such representation or warranty was made, such inaccuracy shall be
deemed a breach of such representation or warranty for purposes of the
Repurchase Requirement described in Section 5(e).

         (g)      It is understood and agreed that the Repurchase Requirement
shall survive any assignment of a Commercial Loan by the Purchaser to any
subsequent assignee and shall continue so long as any such Commercial Loan shall
remain outstanding notwithstanding any termination of this Agreement.

         SECTION 6. Additional Covenants of Seller. Seller shall, unless the
Purchaser shall otherwise consent in writing:

         (a)      comply in all material respects with all applicable laws,
rules, regulations and orders with respect to itself, its business and
properties; and

         (b)      preserve and maintain its corporate existence, rights,
franchises and privileges in the jurisdiction of its organization.

         SECTION 7. Events of Purchase Termination. If any of the following
events (each, an "Event of Purchase Termination") shall occur and be continuing:

         (a)      the Seller shall fail to perform or observe any material term,
covenant or agreement contained in this Agreement and such failure shall remain
unremedied for 30 days after written notice thereof shall have been given by the
Purchaser to the Seller; or

         (b)      an Event of Default under the Warehouse and Security Agreement
which default results in the acceleration of the Loan (as defined in the
Warehouse and Security Agreement); or

                                      -14-
<PAGE>   15
         (c)      there is a material breach of any of the representations and
warranties of the Seller set forth in Section 5(a) or a breach of any covenant
set forth in Section 5(c); or

         (d)      this Agreement and each Sale Assignment shall for any reason
cease to evidence the transfer to the Purchaser of the legal, equitable and
marketable title to, and ownership of, the Commercial Loans; or

         (e)      the Purchaser becomes obligated to cease purchasing Commercial
Loans from the Seller in accordance with the Warehouse and Security Agreement;

then and in any such event, the Purchaser may, by notice to the Seller declare
an Event of Purchase Termination to have occurred, in which case the date of
termination of this Agreement (the "Termination Date") shall be the date such
notice is given without demand, protest or further notice of any kind, all of
which are hereby expressly waived by the Seller; provided, that in the event
that any of the Events of Purchase Termination described in subsections (d) or
(e) of this Section 7 shall have occurred, an Event of Purchase Termination
shall be deemed to have been declared in which case the Termination Date shall
be on the date on which such Event of Purchase Termination shall have occurred,
without demand, protest or any notice of any kind, all of which are hereby
expressly waived by the Seller. Upon any such actual declaration or deemed
declaration, (i) all of the Seller's rights under this Agreement (except its
rights by virtue of the Purchaser not having performed its obligations and
agreements hereunder) shall terminate and (ii) the Purchaser shall have, in
addition to all other rights and remedies under this Agreement, all other rights
and remedies provided under the UCC and other applicable law, which rights shall
be cumulative.

         SECTION 8. No Proceedings. The Seller hereby agrees that it will not,
directly or indirectly, institute, or cause to be instituted, or join any Person
in instituting, against the Purchaser any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings, or other proceedings under
any federal or state bankruptcy or similar law so long as there shall not have
elapsed one year plus one day since the Maturity Date of the Loan (each as
defined in and) made pursuant to the Warehouse and Security Agreement.

         SECTION 9. Notices, Etc. All notices and other communications provided
for hereunder shall, unless otherwise stated herein, be in writing and mailed or
telecommunicated, or delivered as to each party hereto, at its address set forth
under its name on the signature page hereof or at such other address as shall be
designated by such party in a written notice to the other parties hereto. All
such notices and communications shall not be effective until received by the
party to whom such notice or communication is addressed.

         SECTION 10. No Waiver; Remedies. No failure on the part of the Seller,
the Purchaser or any assignee thereof to exercise, and no delay in exercising,
any right hereunder or under any Sale Assignment shall operate as a waiver
thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right.


                                      -15-
<PAGE>   16
The remedies herein provided are cumulative and not exclusive of any other
remedies provided by law.

         SECTION 11. Binding Effect; Assignability. This Agreement shall be
binding upon and inure to the benefit of the Seller, the Purchaser and their
respective successors and permitted assigns. Any assignee shall be an express
third party beneficiary of this Agreement, entitled to directly enforce this
Agreement. The Seller may not assign any of its rights and obligations hereunder
or any interest herein without the prior written consent of the Purchaser and
any assignee. The Purchaser may, and intends to, assign all of its rights
hereunder and the Seller consents to any such assignment. This Agreement shall
create and constitute the continuing obligations of the parties hereto in
accordance with its terms, and shall remain in full force and effect until its
termination; provided, that the rights and remedies with respect to any breach
of any representation, warranty or covenant made by the Seller pursuant to
Section 5 and the Repurchase Requirement shall be continuing and shall survive
any termination of this Agreement.

         SECTION 12. Amendments; Consents and Waivers. No modification,
amendment or waiver of, or with respect to, any provision of this Agreement, and
all other agreements, instruments and documents delivered thereto, nor consent
to any departure by the Seller from any of the terms or conditions thereof shall
be effective unless it shall be in writing and signed by each of the parties
hereto and the written consent of the Lender is given. Any waiver or consent
shall be effective only in the specific instance and for the purpose for which
given. No consent to or demand by the Seller in any case shall, in itself,
entitle it to any other consent or further notice or demand in similar or other
circumstances. The Seller acknowledges that in connection with the intended
assignment by the Purchaser of all of the Seller's right, title and interest in
and to each Commercial Loan to the Lender, the Purchaser intends to enter into
certain financing and security arrangements with the Lender, and the Lender,
subject to the terms of such arrangements, shall provide funds to the Purchaser
to purchase Commercial Loans hereunder and pursuant to which the ability of the
Purchaser to perform hereunder (including its ability to purchase Commercial
Loans and to render consents hereunder) shall be subject to the consent of the
Lender. Notwithstanding the above, the obligation of the Purchaser to perform
hereunder shall not be diminished by the existence of such arrangements.

         SECTION 13. Severability. In case any provision in or obligation under
this Agreement shall be invalid, illegal or unenforceable in any jurisdiction,
the validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation, shall not in any way be
affected or impaired thereby in any other jurisdiction. Without limiting the
generality of the foregoing, in the event that a Governmental Authority
determines that the Purchaser may not purchase or acquire Commercial Loans, the
transactions evidenced hereby shall constitute a loan and not a purchase and
sale, notwithstanding the otherwise applicable intent of the parties hereto and
the Seller shall be deemed to have granted to the Purchaser as of the date of
each Sale a first priority perfected security interest in all of the Seller's
right, title and interest in, to and under the Commercial Loans, and all
proceeds thereof.

                                      -16-
<PAGE>   17
         SECTION 14. GOVERNING LAW; CONSENT TO JURISDICTION.

         (A)      THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ITS
PRINCIPLES OF CONFLICTS OF LAW.

         (B)      THE SELLER AND THE PURCHASER HEREBY SUBMIT TO THE
NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE UNITED
STATES DISTRICT COURT LOCATED IN THE BOROUGH OF MANHATTAN IN NEW YORK CITY AND
EACH WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT
ALL SUCH SERVICE OF PROCESS BE MADE BY REGISTERED MAIL DIRECTED TO THE ADDRESS
SET FORTH ON THE SIGNATURE PAGE HEREOF AND SERVICE SO MADE SHALL BE DEEMED TO BE
COMPLETED FIVE DAYS AFTER THE SAME SHALL HAVE BEEN DEPOSITED IN THE U.S. MAILS,
POSTAGE PREPAID. THE SELLER AND THE PURCHASER EACH HEREBY WAIVES ANY OBJECTION
BASED ON FORUM NON CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY ACTION
INSTITUTED HEREUNDER AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE
RELIEF AS IS DEEMED APPROPRIATE BY THE COURT. NOTHING IN THIS SECTION SHALL
AFFECT THE RIGHT OF THE SELLER OR THE PURCHASER TO SERVE LEGAL PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF ANY OF THEM TO BRING ANY
ACTION OR PROCEEDING IN THE COURTS OF ANY OTHER JURISDICTION.

         SECTION 15. Headings. The headings herein are for purposes of reference
only and shall not otherwise affect the meaning or interpretation of any
provision hereof.

         SECTION 16. Execution in Counterparts. This Agreement may be executed
by the parties hereto in separate counterparts, each of which when so executed
shall be deemed to be an original and both of which when taken together shall
constitute one and the same agreement.

         SECTION 17. Intended Third Party Beneficiary. The Seller and the
Purchaser hereby agree that the Lender is an intended third party beneficiary of
this Agreement and all representations, warranties and covenants made by the
Seller herein may be relied upon and shall also be for the benefit of the
Lender.

                     [REST OF PAGE INTENTIONALLY LEFT BLANK]


                                      -17-
<PAGE>   18
                  IN WITNESS WHEREOF, the parties have caused this Commercial
Loan Sale Agreement to be executed by their respective officers thereunto duly
authorized, as of the date first above written.

                                FIRST INTERNATIONAL BANK,
                                  as Seller


                                By: /s/Theodore J. Horan
                                   ----------------------------
                                    Name:    Theodore J. Horan
                                    Title:   Senior Vice President
                                    Address: 280 Trumbull Street
                                             Hartford, Connecticut  06103
                                    Telephone:        (860) 241-2595
                                    Telecopier:       (860) 241-4726


                                FIB HOLDINGS, INC.
                                  as Purchaser


                                By:    /s/Theodore J. Horan
                                   ----------------------------
                                    Name:     Theodore J. Horan
                                    Title:    Vice President
                                    Address: 280 Trumbull Street
                                             Hartford, Connecticut  06103
                                    Telephone:        (860) 241-2595
                                    Telecopier:       (860) 241-4726


                                      -18-

<PAGE>   1
                                                                   Exhibit 10.18

                                    GUARANTY


         This GUARANTY (the "Guaranty"), dated as of December 1, 1999, made by
First International Bancorp, Inc., a Delaware corporation, (the "Guarantor"), in
favor of Prudential Securities Credit Corporation ("Lender").

         WHEREAS, the Lender and FIB Holdings, Inc. ("Holdings") have entered
into a Revolving Commercial Loan Warehouse and Security Agreement, dated as of
December 1, 1999 (the "Warehouse Agreement") pursuant to which the Lender
intends to lend and Holdings intends to borrow up to a maximum of $75,000,000 to
fund the holding of Commercial Loans; and

         WHEREAS, pursuant to the Warehouse Agreement, Holdings has agreed to
reimburse and indemnify the Lender as contemplated in Section 12 of the
Warehouse Agreement;

         WHEREAS, the execution and delivery of this Guaranty by the Guarantor
is a condition to the Loan contemplated by the Warehouse Agreement;

         WHEREAS, the Guarantor will derive substantial benefit from the
transactions contemplated by the Warehouse Agreement; and

         WHEREAS, capitalized terms used herein and not otherwise defined herein
shall have the meanings ascribed to such terms in the Warehouse Agreement.

         NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Guarantor hereby
unconditionally agrees as follows:

         SECTION 1. The Guaranty.

         (a)      The Guarantor hereby unconditionally and absolutely guarantees
the full and timely payment to the applicable party of all obligations and
amounts due by Holdings pursuant to Section 12 of the Warehouse Agreement;
provided, however, that the Guarantor shall not guarantee (i) the repayment of
the Secured Note or any Pledged Commercial Loan or the value or collectibility
of any Collateral therefor (or any indemnification obligation in respect
thereof), or (ii) any loss or expense incurred by the Lender as a result of any
non-payment of the Secured Note or any Pledged Commercial Loan or any action
taken to seek to collect the Secured Note or any Pledged Commercial Loan (or any
indemnification obligation in respect thereof).

         (b)      The obligations of the Guarantor under this Guaranty shall not
terminate upon or otherwise be reduced by an Event of Default pursuant to the
Warehouse Agreement, by any amendment entered into with or without the written
consent of the Guarantor to the
<PAGE>   2
Warehouse Agreement or by any breach by any party to any such agreements of its
obligations thereunder.

         (c)      No failure on the part of the Lender to exercise, no delay in
exercising, and no course of dealing with respect to, any right or remedy
hereunder will operate as waiver thereof, nor will any single or partial
exercise or any right or remedy hereunder preclude any other further exercise
thereof or the exercise of any other rights or remedy. This Guaranty may not be
amended or modified except by written agreement of the Guarantor and the Lender
and no consent or waiver hereunder shall be valid unless in writing and signed
by the Lender.

         (d)      This Guaranty is a continuing guarantee and (i) shall apply to
all amounts guaranteed under Section 1(a) above, whenever arising, (ii) shall
remain in full force and effect until payment in full or discharge of the
amounts due under Sections 12 of the Warehouse Agreement and/or enforcing any
rights hereunder, (iii) shall be binding upon the Guarantor and its successors
and assigns and (iv) shall inure to the benefit of, and be enforceable by, the
Lender and its successors, transferees and assigns.

         SECTION 2. Representations and Warranties.

         In making this Guaranty the Guarantor represents and warrants to the
Lender that:

         (a)      Organization and Good Standing. The Guarantor is a Delaware
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the corporate power to own its assets and to
transact the business in which it is currently engaged.

         (b)      Authorization; Binding Obligations. The Guarantor has the
power and authority to make, execute, deliver and perform this Guaranty and all
of the transactions contemplated under this Guaranty, and has taken all
necessary corporate action to authorize the execution, delivery and performance
of this Guaranty. When executed and delivered, this Guaranty will constitute the
legal, valid and binding obligation of the Guarantor enforceable in accordance
with its terms, except as enforcement of such terms may be limited by
bankruptcy, insolvency or other similar laws relating to or affecting the
enforcement of creditors' rights generally and by the availability of equitable
remedies.

         (c)      No Consent Required. The Guarantor is not required to obtain
the consent of any other party or any consent, license, approval or
authorization from, or registration or declaration with, any governmental
authority, bureau or agency in connection with the execution, delivery,
performance, validity or enforceability of this Guaranty the failure of which so
to obtain would have a material adverse effect on the business, properties,
assets or condition (financial or otherwise) of the Guarantor.

         (d)      No Violations. The execution, delivery and performance of this
Guaranty by the Guarantor will not violate any provision of any existing law or
regulation or any order or decree of any court or the Certificate of
Incorporation or Amended and Restated Bylaws of the


                                      -2-
<PAGE>   3
Guarantor, or constitute a material breach of any mortgage, indenture, contract
or other material agreement to which the Guarantor is a party or by which the
Guarantor may be bound.

         (e)      Litigation. No litigation or administrative proceeding of or
before any court, tribunal or governmental body is currently pending, or to the
knowledge of the Guarantor threatened, against the Guarantor or any of its
properties or with respect to this Guaranty which, if adversely determined,
would in the opinion of the Guarantor have a material adverse effect on the
transactions contemplated by this Guaranty.

         SECTION 3. Miscellaneous.

         THIS GUARANTY SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE
PERFORMED THEREIN WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES.


                                      -3-
<PAGE>   4
         IN WITNESS WHEREOF, First International Bancorp, Inc. has duly executed
this Guaranty as of the day and year first written above.


                                             FIRST INTERNATIONAL BANCORP, INC.



                                             By: /s/Leslie Galbraith
                                                --------------------------------
                                             Name:  Leslie Galbraith
                                             Title: Executive Vice President


                                      -4-

<PAGE>   1
                                                                   Exhibit 10.19



                                                                  EXECUTION COPY






                          SALE AND SERVICING AGREEMENT
                           Dated as of October 1, 1999

                                     Between

                                FIB FUNDING TRUST
                                     (Trust)

                                       and

                            FIRST INTERNATIONAL BANK
                              (Seller and Servicer)

                             FIB FUNDING TRUST NOTES
<PAGE>   2
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
Section                                                                                                     Page
<S>                                                                                                         <C>

                                    ARTICLE I


                                   DEFINITIONS

Section 1.01        Definitions...................................................................................2
Section 1.02        Use of Words and Phrases......................................................................2
Section 1.03        Captions; Table of Contents...................................................................2

                                   ARTICLE II


                      SALE AND CONVEYANCE OF THE TRUST FUND

Section 2.01        Sale and Conveyance of Trust Fund.............................................................3
Section 2.02        Possession of Business Files..................................................................3
Section 2.03        Books and Records.............................................................................3
Section 2.04        Delivery of SBA Loan Documents................................................................4
Section 2.05        Acceptance by Trustee of the Trust Fund; Certain Substitutions; Certification by
                    Indenture Trustee.............................................................................6
Section 2.06        [Reserved]....................................................................................7
Section 2.07        [Reserved]....................................................................................7
Section 2.08        Fees and Expenses of the Owner Trustee and the Indenture Trustee..............................8
Section 2.09        Transfer and Conveyance of the SBA Loans......................................................8
Section 2.10        Optional Repurchase or Substitution of SBA Loans..............................................9
Section 2.11        Securitizations..............................................................................10

                                   ARTICLE III


                         REPRESENTATIONS AND WARRANTIES

Section 3.01        Representations of the Seller................................................................11
Section 3.02        Individual SBA Loans.........................................................................13
Section 3.03        Purchase and Substitution of Defective SBA Loans.............................................18

                                   ARTICLE IV


                    ADMINISTRATION AND SERVICING OF SBA LOANS
</TABLE>


(i)
<PAGE>   3
<TABLE>
<S>                                                                                                             <C>
Section 4.01        Duties of the Servicer.......................................................................20
Section 4.02        Liquidation of SBA Loans.....................................................................23
Section 4.03        Establishment of Principal and Interest Accounts; Deposits in Principal and Interest
                    Accounts.....................................................................................24
Section 4.04        Permitted Withdrawals From the Principal and Interest Account................................25
Section 4.05        [Intentionally Omitted]......................................................................27
Section 4.06        Transfer of Accounts.........................................................................27
Section 4.07        Maintenance of Hazard Insurance..............................................................27
Section 4.08        [Intentionally Omitted]......................................................................27
Section 4.09        Fidelity Bond................................................................................27
Section 4.10        Title, Management and Disposition of Foreclosed Property.....................................28
Section 4.11        [Intentionally Omitted]......................................................................29
Section 4.12        Collection of Certain SBA Loan Payments......................................................29
Section 4.13        Access to Certain Documentation and Information Regarding the SBA Loans......................29

                                    ARTICLE V


                           PAYMENTS TO THE NOTEHOLDERS

Section 5.01        Establishment of Note Distribution Account; Deposits in Note Distribution Account;
                    Permitted Withdrawals from Note Distribution Account.........................................30
Section 5.02        Establishment of Spread Account; Deposits in Spread Account; Permitted Withdrawals
                    from Spread Account..........................................................................31
Section 5.03        Establishment of Expense Account; Deposits in Expense Account; Permitted Withdrawals
                    from Expense Account.........................................................................32
Section 5.04        Funding Account..............................................................................33
Section 5.05        [Intentionally Omitted]......................................................................33
Section 5.06        Investment of Accounts.......................................................................33
Section 5.07        Distributions................................................................................34
Section 5.08        [Intentionally Omitted]......................................................................35
                                          -
Section 5.09        Statements...................................................................................35
Section 5.10        Reports of Foreclosure and Abandonment.......................................................38

                                   ARTICLE VI


                           GENERAL SERVICING PROCEDURE

Section 6.01        [Intentionally Omitted]......................................................................39
Section 6.02        Satisfaction of Mortgages and Collateral and Release of SBA Files............................39
Section 6.03        Servicing Compensation.......................................................................40
Section 6.04        Annual Statement as to Compliance............................................................41
Section 6.05        Annual Independent Public Accountants' Servicing Report......................................41
</TABLE>


                                      (ii)
<PAGE>   4
<TABLE>
<S>                                                                                                             <C>
Section 6.06        SBA's and Indenture Trustee's Right to Examine Servicer Records and Audit Operations.........41
Section 6.07        Reports to the Indenture Trustee; Principal and Interest Account Statements..................41
Section 6.08.       Premium Protection Fee and Servicing Fee.....................................................42

                                   ARTICLE VII


                       REPORTS TO BE PROVIDED BY SERVICER

Section 7.01        Financial Statements.........................................................................43

                                  ARTICLE VIII


                                  THE SERVICER

Section 8.01        Indemnification; Third Party Claims..........................................................44
Section 8.02        Merger or Consolidation of the Servicer......................................................45
Section 8.03        Limitation on Liability of the Servicer and Others...........................................45
Section 8.04        Servicer Not to Resign.......................................................................46

                                   ARTICLE IX


                              SERVICER TERMINATION

Section 9.01        Servicer Termination Events..................................................................47
Section 9.02        Trustee to Act; Appointment of Successor.....................................................49
Section 9.03        Waiver of Defaults...........................................................................50
Section 9.04.       Control by Majority Noteholders..............................................................51

                                    ARTICLE X


                                   TERMINATION

Section 10.01       Termination..................................................................................52
Section 10.02       Accounting Upon Termination of Servicer......................................................52

                                   ARTICLE XI


                            MISCELLANEOUS PROVISIONS

Section 11.01       Acts of Noteholders..........................................................................54
Section 11.02       Amendment....................................................................................54
</TABLE>


                                     (iii)
<PAGE>   5
<TABLE>
<S>                                                                                                              <C>
Section 11.03       Recordation of Agreement.....................................................................54
Section 11.04       Duration of Agreement........................................................................55
Section 11.05       Governing Law................................................................................55
Section 11.06       Notices......................................................................................55
Section 11.07       Severability of Provisions...................................................................55
Section 11.08       No Partnership...............................................................................56
Section 11.09       Counterparts.................................................................................56
Section 11.10       Successors and Assigns.......................................................................56
Section 11.11       Headings.....................................................................................56
Section 11.12       Notification to Administrative Agent.........................................................56
Section 11.13       Inconsistencies..............................................................................56
Section 11.14       Limitation of Liability......................................................................56
</TABLE>


                                      (iv)
<PAGE>   6
APPENDIX A                          Definitions and Usage

                                  EXHIBIT INDEX

EXHIBIT A                         Contents of SBA File
EXHIBIT B                         [Intentionally Omitted]
EXHIBIT C                         Principal and Interest Account
                                    Letter Agreement
EXHIBIT D                         [Intentionally Omitted]
EXHIBIT E                         [Intentionally Omitted]
EXHIBIT F                         Initial Certification
EXHIBIT F-1                       Final Certification
EXHIBIT G                         [Intentionally Omitted]
EXHIBIT H                         SBA Loan Schedule
EXHIBIT I                         Request for Release of Documents
EXHIBIT J                         [Intentionally Omitted]
EXHIBIT K                         Form of Delinquency Report
EXHIBIT L                         Servicer's Monthly Computer Tape Format
EXHIBIT M                         Multi-Party Agreement


                                      (v)
<PAGE>   7
         Sale and Servicing Agreement dated as of October 1, 1999, between FIB
Funding Trust (the "Trust"), and First International Bank, as Seller (the
"Seller") and as Servicer (the "Servicer").

                              PRELIMINARY STATEMENT

         The Trust was formed for the purpose of issuing asset backed notes and
asset backed certificates secured by the Unguaranteed Interests in the SBA
Loans. The Issuer has entered into a trust indenture, dated as of October 1,
1999 (the "Indenture"), between the Trust and the Indenture Trustee, pursuant to
which the Trust intends to issue from time to time its FIB Funding Trust Notes
in an aggregate principal amount not to exceed $60,000,000 (the "Notes").
Pursuant to the Indenture, as security for the indebtedness represented by the
Notes and any Hedging Agreements, the Issuer is and will be pledging to the
Indenture Trustee, and granting the Indenture Trustee a security interest in,
among other things, the Unguaranteed Interests in the SBA Loans and its rights
under this Agreement.

         The parties desire to enter into this Agreement to provide, among other
things, for the servicing of the SBA Loans by the Servicer. The Servicer
acknowledges that, in order further to secure the Notes and any Hedging
Agreements, the Trust is and will be granting to the Indenture Trustee a
security interest in, among other things, its rights under this Agreement, and
the Servicer agrees that all covenants and agreements made by the Servicer
herein with respect to the SBA Loans shall also be for the benefit and security
of the Indenture Trustee and the Secured Parties. For its services hereunder,
the Servicer will receive a Servicing Fee (as defined herein) with respect to
each SBA Loan serviced hereunder.
<PAGE>   8
                                    ARTICLE I

                                   DEFINITIONS

         Section 1.01 Definitions. For all purposes of this Agreement,
capitalized terms used herein shall have the meanings set forth in Appendix A,
unless the context clearly indicates otherwise.

         Section 1.02 Use of Words and Phrases. "Herein", "hereby", "hereunder",
"hereof", "hereinbefore", "hereinafter" and other equivalent words refer to this
Agreement as a whole and not solely to the particular section of this Agreement
in which any such word is used.

         Section 1.03 Captions; Table of Contents. The captions or headings in
this Agreement and the Table of Contents are for convenience only and in no way
define, limit or describe the scope and intent of any provisions of this
Agreement.


                                       2
<PAGE>   9
                                   ARTICLE II

                      SALE AND CONVEYANCE OF THE TRUST FUND

                  Section 2.01      Sale and Conveyance of Trust Fund.

                  (a) On the terms and conditions hereinafter set forth, from
time to time prior to the Termination Date, the Seller may, at its option,
transfer to the Trust, without recourse, and for the benefit of the SBA, the
Noteholders, the Certificateholders and the Hedge Counterparties, subject to the
terms of the Basic Documents, all of the right, title and interest of the Seller
in and to the Unguaranteed Interests in the SBA Loans and all other assets
included or to be included in the Trust Fund. In consideration for its transfer
of such Unguaranteed Interests in the SBA Loans, on each Transfer Date the
Seller shall receive from amounts deposited into the Funding Account the amount
determined pursuant to Section 2.09(a)(ii).

                  (b) The rights of the Noteholders, Certificateholders and the
Hedge Counterparties to receive payments with respect to the SBA Loans in
respect of the Notes, the Certificates and the Hedging Agreement, and all
interests of the Noteholders and Certificateholders in such payments, shall be
as set forth in the Basic Documents. The Servicing Fee and the Premium
Protection Fee shall not constitute part of the Trust Fund and the Noteholders,
Certificateholders and the Hedge Counterparties shall have no interest in, and
are not entitled to receive any portion of, the Servicing Fee or the Premium
Protection Fee.

                  Section 2.02      Possession of Business Files.

                  (a) Upon the transfer of the Unguaranteed Interest in each SBA
Loan, the ownership of each SBA Note, the Mortgage, if applicable, and the
contents of the related SBA File will be vested in the Trust for the benefit of
itself and the SBA, as their interests may appear.

                  (b) Pursuant to Section 2.04, on each Transfer Date, the
Seller will deliver or cause to be delivered, each SBA Note relating to an SBA
Loan to the FTA.

                  Section 2.03      Books and Records.

                  The transfer of the Unguaranteed Interest of each SBA Loan
shall be reflected on the Seller's balance sheet and other financial statements
as a sale of assets by the Seller and the Seller shall respond to any
third-party inquiry that such transfer is so reflected as a sale. The Seller
shall be responsible for maintaining, and shall maintain, a complete set of
books and records for each SBA Loan which shall be clearly marked to reflect the
ownership of the Unguaranteed Interest of each SBA Loan by the Trust for the
benefit of the SBA, the Noteholders, the Certificateholders and the Hedge
Counterparties, as their interests may appear.


                                       3
<PAGE>   10
                  Section 2.04      Delivery of SBA Loan Documents.

                  Two days prior to each Transfer Date the Seller will deliver
or cause to be delivered to the Indenture Trustee, or with respect to the SBA
Notes relating to the SBA Section 7(a) Loans being delivered pursuant to
paragraph (a) below, to the FTA, each of the following documents for each SBA
Loan:

                  (a) The original SBA Note, endorsed by means of an allonge as
follows: "Pay to the order of First Union Trust Company, National Association,
and its successors and assigns, not in its individual capacity but solely as
Owner Trustee under that certain Trust Agreement dated as of October 1, 1999 for
the benefit of the Certificateholders and the United States Small Business
Administration, as their respective interests may appear, without recourse" and
signed, by facsimile or manual signature, in the name of the Seller by a
Responsible Officer, with all prior and intervening endorsements showing a
complete chain of endorsement from the originator to the Seller, if the Seller
was not the originator (such allonge shall bear a legend stating "HSBC Bank USA,
as Indenture Trustee, has a security interest in the Unguaranteed Interest in
this Note");

                  (b) With respect to those SBA Loans secured by Mortgaged
Properties, either: (i) the original Mortgage, with evidence of recording
thereon, (ii) a copy of the Mortgage certified as a true copy by a Responsible
Officer of the Seller where the original has been transmitted for recording
until such time as the original is returned by the public recording office or
duly licensed title or escrow officer or (iii) a copy of the Mortgage certified
by the public recording office in those instances where the original recorded
Mortgage has been lost.

                  (c) With respect to those SBA Loans secured by Mortgaged
Properties, either: (i) the original Assignment of Mortgage from the Seller
endorsed as follows: "HSBC Bank USA, ("Assignee") its successors and assigns, as
indenture trustee under the Indenture dated as of October 1, 1999 subject to the
Multi-Party Agreement dated as of October 1, 1999" with evidence of recording
thereon (provided, however, that where permitted under the laws of the
jurisdiction wherein the Mortgaged Property is located, the Assignment of
Mortgage may be effected by one or more blanket assignments for SBA Loans
secured by Mortgaged Properties located in the same county), or (ii) a copy of
such Assignment of Mortgage certified as a true copy by a Responsible Officer of
the Seller where the original has been transmitted for recording (provided,
however, that where the original Assignment of Mortgage is not being delivered
to the Indenture Trustee, such Responsible Officer may complete one or more
blanket certificates attaching copies of one or more Assignments of Mortgage
relating to the Mortgages originated by the Seller);

                  (d) With respect to those SBA Loans secured by Mortgaged
Properties, either: (i) originals of all intervening assignments, if any,
showing a complete chain of title from the originator to the Seller, including
warehousing assignments, with evidence of recording thereon if such assignments
were recorded, (ii) copies of any assignments certified as true copies by a
Responsible Officer of the Seller where the originals have been submitted for
recording until such time as the originals are returned by the public recording
officer, or (iii) copies of any assignments


                                       4
<PAGE>   11
certified by the public recording office in any instances where the original
recorded assignments have been lost;

                  (e) With respect to those SBA Loans secured by Mortgaged
Properties, either: (i) originals of all title insurance policies relating to
the Mortgaged Properties to the extent the Seller obtained such policies or (ii)
copies of any title insurance policies or other evidence of lien position,
including but not limited to Policy Insurance Record of Title ("PIRT") policies,
limited liability reports and lot book reports, to the extent the Seller obtains
such policies or other evidence of lien position, certified as true by the
Seller;

                  (f) With respect to those SBA Loans secured by other items of
Collateral, the original or a certified copy of all filed UCC financing
statements securing such Collateral naming the Seller as "Secured Party;"

                  (g) For all SBA Loans, blanket assignment of all Collateral
securing the SBA Loan, including without limitation, all rights under applicable
guarantees and insurance policies, such assignment shall be in the name of HSBC
Bank USA, its successors and assigns, as indenture trustee under the Indenture
dated as of October 1, 1999, subject to the Multi-Party Agreement dated as of
October 1, 1999;

                  (h) For all SBA Loans, irrevocable powers of attorney of the
Seller and the Issuer to the Indenture Trustee to execute, deliver, file or
record and otherwise deal with the Collateral for the SBA Loans in accordance
with this Agreement. The powers of attorney will be delegable by the Indenture
Trustee to the Servicer and any successor servicer and will permit the Indenture
Trustee or its delegate to prepare, execute and file or record UCC financing
statements and notices to insurers; and

                  (i) For all SBA Loans, blanket UCC-1 financing statements
identifying by type all Collateral for the SBA Loans in the SBA Loan Pool and
naming the Indenture Trustee, as assignee of the Trust, as "Secured Party" and
the Seller as the "Debtor". The UCC-1 financing statements will be filed
promptly following the Closing Date in Connecticut and will be in the nature of
protective notice filings rather than true financing statements.

                  The Seller shall, within ten Business Days after the receipt
thereof, and in any event, within one year of the related Transfer Date, deliver
or cause to be delivered to the Indenture Trustee: (i) the original recorded
Mortgage in those instances where a copy thereof certified by the Seller was
delivered to the Indenture Trustee; (ii) the original recorded Assignment of
Mortgage from the Seller to the Indenture Trustee, which, together with any
intervening assignments of Mortgage, evidences a complete chain of title from
the originator to the Indenture Trustee in those instances where copies thereof
certified by the Seller were delivered to the Indenture Trustee; and (iii) any
intervening assignments of Mortgage in those instances where copies thereof
certified by the Seller were delivered to the Indenture Trustee. Notwithstanding
anything to the contrary contained in this Section 2.04, in those instances
where the public recording office retains the original Mortgage, Assignment of
Mortgage or the intervening assignments of the Mortgage after it has been
recorded, the Seller shall be deemed to


                                       5
<PAGE>   12
have satisfied its obligations hereunder upon delivery to the Indenture Trustee
of a copy of such Mortgage, Assignment of Mortgage or assignments of Mortgage
certified by the public recording office to be a true copy of the recorded
original thereof. All SBA Loan documents held by the Indenture Trustee or the
FTA, as the case may be, as to each SBA Loan are referred to herein as the
"Indenture Trustee's Document File."

                  Although it is the intent of the parties to this Agreement
that the conveyance of the Seller's right, title and interest in and to the
Unguaranteed Interests in the SBA Loans and other assets in the Trust Fund
pursuant to this Agreement shall constitute a purchase and sale and not a loan,
in the event that such conveyance is deemed to be a loan, it is the intent of
the parties to this Agreement that the Seller shall be deemed to have granted,
and hereby does grant, to the Trust Fund a first priority perfected security
interest in all of the Seller's right, title and interest in, to and under the
Unguaranteed Interests in the SBA Loans and other assets in the Trust Fund, and
that this Agreement shall constitute a security agreement under applicable law.

                  All recording required pursuant to this Section 2.04 shall be
accomplished by and at the expense of the Servicer.

                  Section 2.05      Acceptance by Indenture Trustee of the
                                    Trust Fund; Certain Substitutions;
                                    Certification by Indenture Trustee.

                  (a) The Multi-Party Agreement provides for the FTA to deliver
an acknowledgement of receipt for each SBA Note in accordance with the terms and
conditions of the Multi-Party Agreement. The Indenture Trustee agrees, for the
benefit of the SBA, the Noteholders, the Certificateholders and the Hedge
Counterparties, to review each Indenture Trustee's Document File (with the
exception of the SBA Notes held by the FTA), on or prior to the applicable
Transfer Date (or, with respect to any Qualified Substitute SBA Loan, on or
prior to the assignment thereof), and to deliver to the Seller and the Servicer
a certification in the form attached hereto as Exhibit F on or prior to such
Transfer Date (or, with respect to any Qualified Substitute SBA Loan, on or
prior to the assignment thereof). Within 360 days after each Transfer Date (or,
with respect to any Qualified Substitute SBA Loan, within 360 days after the
assignment thereof), the Indenture Trustee shall deliver to the Servicer, the
Seller, the SBA, and any Noteholder who requests a copy from the Indenture
Trustee a final certification in the form attached hereto as Exhibit F-1
evidencing the completeness of the Indenture Trustee's Document Files with
respect to the SBA Loans being transferred on such Transfer Date.

                  (b) If the Indenture Trustee during the process of reviewing
the Indenture Trustee's Document Files finds any document constituting a part of
an Indenture Trustee's Document File which is not properly executed, has not
been received, is unrelated to an SBA Loan identified in the SBA Loan Schedule,
or does not conform in a material respect to the requirements of Section 2.04 or
the description thereof as set forth in the SBA Loan Schedule, the Indenture
Trustee shall promptly so notify the Seller and the Servicer. In performing any
such review, the Indenture Trustee may conclusively rely on the Seller as to the
purported genuineness of any such document and any signature thereon. It is
understood that the scope of the Indenture Trustee's


                                       6
<PAGE>   13
review of the SBA Files is limited solely to confirming that the documents
listed in Section 2.04 have been executed and received and relate to the SBA
Loans identified in the SBA Loan Schedule. The Seller agrees to use reasonable
efforts to remedy a material defect in a document constituting part of an SBA
File of which it is so notified by the Indenture Trustee. If, however, within 60
days after the Indenture Trustee's notice to it respecting such material defect
the Seller has not remedied the defect and such defect materially and adversely
affects the value of the related SBA Loan, the Seller will (i) substitute in
lieu of such SBA Loan a Qualified Substitute SBA Loan in the manner and subject
to the conditions set forth in Section 3.03 or (ii) purchase the Unguaranteed
Interest of such SBA Loan at a purchase price equal to the Principal Balance of
such Unguaranteed Interest as of the date of purchase, plus 30 days' interest on
such Principal Balance, computed at the sum of the applicable Interest Rate and
the Program Fee as of the next succeeding Determination Date, plus any accrued
unpaid Servicing Fees and Servicing Advances reimbursable to the Servicer, which
purchase price shall be deposited in the Principal and Interest Account on the
next succeeding Determination Date.

                  (c) Upon receipt by the Indenture Trustee of a certification
of a Servicing Officer of the Servicer of such purchase and the deposit of the
amounts described above in the Principal and Interest Account (which
certification shall be in the form of Exhibit I hereto), the Indenture Trustee
shall release to the Servicer for release to the Seller the related Indenture
Trustee's Document File and the Indenture Trustee and the Trust shall execute,
without recourse, and deliver such instruments of transfer necessary to transfer
such SBA Loan to the Seller. All costs of any such transfer shall be borne by
the Servicer.

                  (d) If in connection with taking any action the Servicer
requires any item constituting part of the Indenture Trustee's Document File, or
the release from the lien of the related SBA Loan of all or part of any
Mortgaged Property or other Collateral, the Servicer shall deliver to the
Indenture Trustee a certificate to such effect in the form attached as Exhibit I
hereto. The Servicer shall comply with the SBA Rules and Regulations in
connection with such action, including the giving of any necessary notice. Upon
receipt of such certification, the Indenture Trustee, shall deliver to the
Servicer the requested documentation and the Indenture Trustee shall execute,
without recourse, and deliver such instruments of transfer necessary to release
all or the requested part of the Mortgaged Property or other Collateral from the
lien of the related SBA Loan.

                  On the Remittance Date in March of each year, the Indenture
Trustee shall deliver to the Seller, and the Servicer a certification detailing
all transactions with respect to the SBA Loans for which the Indenture Trustee
holds an Indenture Trustee's Document File pursuant to this Agreement during the
prior calendar year. Such certification shall list all Indenture Trustee's
Document Files which were released by or returned to the Indenture Trustee or
the FTA during the prior calendar year, the date of such release or return and
the reason for such release or return.

                  Section 2.06      [Reserved].

                  Section 2.07      [Reserved].


                                       7
<PAGE>   14
                  Section 2.08      Fees and Expenses of the Owner Trustee
                                    and the Indenture Trustee.

                  The fees and expenses of the Owner Trustee in its individual
capacity and the Indenture Trustee including (i) the annual fees of the Owner
Trustee in its individual capacity and the Indenture Trustee and (ii) any other
fees and expenses to which the Owner Trustee in its individual capacity and the
Indenture Trustee are entitled shall be paid from the Expense Account in the
manner set forth in Section 5.03 hereof; provided, however, that the Seller
shall be liable for any expenses of the Trust Fund incurred prior to the Closing
Date. The Servicer, the Indenture Trustee and the Trust hereby covenant with the
Noteholders, the Certificateholders and the Hedge Counterparties that every
material contract or other material agreement entered into by the Trust, the
Indenture Trustee, or the Servicer, acting as attorney-in-fact for the Indenture
Trustee or the Trust, on behalf of the Trust Fund shall expressly state therein
that no Noteholder, Certificateholder or Hedge Counterparty shall be personally
liable in connection with such contract or agreement.

                  Section 2.09      Transfer and Conveyance of the SBA Loans.

                  (a) (i) Subject to the conditions set forth in paragraph (b)
below, in consideration of the Indenture Trustee's delivery on the related
Transfer Date to or upon the order of the Seller of the amount in the Funding
Account determined pursuant to Section 2.09(a)(ii) below, the Seller shall on
any Transfer Date contribute, transfer, assign, set over and otherwise convey
without recourse, to the Trust all right, title and interest of the Seller in
and to the Unguaranteed Interest in each SBA Loan listed on the SBA Loan
Schedule delivered by the Seller on such Transfer Date, all its right, title and
interest in and to principal collected and interest accruing on the Unguaranteed
Interest in each such SBA Loan on and after the related Transfer Date and all
its right, title and interest in and to the Unguaranteed Interest in all
insurance policies; provided, however, that the Seller reserves and retains all
its right, title and interest in and to principal (including Principal
Prepayments) collected and interest accruing on the Unguaranteed Interest in
each such SBA Loan prior to the related Transfer Date. The transfer by the
Seller of the Unguaranteed Interest in each of the SBA Loans set forth on the
SBA Loan Schedule to the Trust shall be absolute and shall be intended by all
parties hereto to be treated as a contribution by the Seller.

                      (ii) The amount released from the Funding Account shall
be the lesser of (i) the product of (A) 100% minus the Minimum Subordination
Percentage and (B) the aggregate Principal Balances as of the related Transfer
Date of the Unguaranteed Interest in each of the SBA Loans so transferred, or
(ii) the amount such that immediately after such release the Subordination
Percentage equals the Minimum Subordination Percentage.

                  (b) The Seller shall transfer to the Trust the Unguaranteed
Interest in each of the SBA Loans and the other property and rights related
thereto described in paragraph (a) above only upon the satisfaction of each of
the following conditions on or prior to the related Transfer Date:


                                       8
<PAGE>   15
                           (i) the Seller shall have provided the Indenture
                  Trustee and the Administrative Agent with a timely Addition
                  Notice and shall have provided any information reasonably
                  requested by them with respect to the SBA Loans;

                           (ii) the Seller shall have delivered to the Indenture
                  Trustee a duly executed written assignment (including an
                  acceptance by the Indenture Trustee) that shall include an SBA
                  Loan Schedule, listing the SBA Loans being transferred and any
                  other exhibits listed thereon;

                           (iii) as of each Transfer Date, neither the Seller
                  nor the Servicer was insolvent nor will either of them have
                  been made insolvent by such transfer nor is either of them
                  aware of any pending insolvency;

                           (iv) such addition will not result in a material
                  adverse tax consequence to the Trust Fund or the Holders of
                  the Notes and the Certificates;

                           (v) the Termination Date shall not have occurred;

                           (vi) the Seller shall have delivered to the Indenture
                  Trustee an Officer's Certificate confirming the satisfaction
                  of each condition precedent specified in this paragraph (b)
                  and in Sections 3.1 and 3.2 of the Note Purchase Agreement;
                  and

                           (vii) the FTA shall have delivered to the Indenture
                  Trustee, pursuant to the Multi-Party Agreement, an
                  acknowledgment of receipt of the SBA Note relating to such SBA
                  Section 7(a) Loan in the form attached as Exhibit 1 to the
                  Multi-Party Agreement.

                  (c) In connection with the transfer and assignment of the
Unguaranteed Interests in the SBA Loans, the Seller agrees to satisfy the
conditions set forth in Sections 2.02, 2.03, 2.04 and 2.05.

                  Section 2.10      Optional Purchase or Substitution of SBA
                                    Loans.

                  The Seller shall have the right, but not the obligation, to
purchase, or substitute for, any Defaulted Unguaranteed Interest or Charged-Off
Unguaranteed Interest. In the case of a purchase, the Seller shall deposit in
the Principal and Interest Account, on the next succeeding Determination Date,
an amount equal to the Principal Balance of the related Unguaranteed Interest as
of the date of such purchase plus accrued interest thereon at the applicable SBA
Loan Interest Rate. In the case of a substitution, the Seller shall deliver to
the Trust one or more Qualified Substitute SBA Loans and any required
Substitution Adjustment. Any such substitution shall be made in accordance with
the provisions of Section 3.03. On the date of such substitution, the Seller
shall deliver to the Deal Agent a certificate stating that such SBA Loan is a
Qualified Substitute SBA Loan. In no event, however, may the aggregate Principal
Balance of


                                       9
<PAGE>   16
the Unguaranteed Interests of all SBA Loans purchased or substituted for
pursuant to this Section 2.10 exceed, in any one year, 15% of the Facility
Limit.

                  Section 2.11      Securitizations.

                  If in connection with a Securitization the Noteholders
exercise the Put Option, on the closing date of such Securitization the Trust
shall sell to the party designated by the Administrative Agent the Unguaranteed
Interests in those SBA Loans then held by the Trust that are designated in
writing by the Administrative Agent pursuant to Section 4.09(b) of the
Indenture. Concurrently with such sale, the Servicer shall cause an amount equal
to the Put Option Price to be deposited into the Note Distribution Account.


                                       10
<PAGE>   17
                                   ARTICLE III

                         REPRESENTATIONS AND WARRANTIES

         Section 3.01.     Representations of the Seller.

                  The Seller hereby represents and warrants to the Indenture
Trustee, the Owner Trustee, the Certificateholders, the Noteholders and each
Hedge Counterparty as of each Transfer Date:

                  (a) The Seller is a Connecticut chartered bank and trust
company duly organized and validly existing under the laws of the State of
Connecticut and has all licenses necessary to carry on its business as now being
conducted and is licensed and qualified in each state where the laws of such
state require licensing or qualification in order to conduct business of the
type conducted by the Seller and perform its obligations hereunder; the Seller
has all requisite power and authority to execute and deliver this Agreement and
each other Basic Document to which it is a party and to perform in accordance
herewith and therewith; the execution, delivery and performance of this
Agreement and each other Basic Document to which it is a party (including all
instruments of transfer to be delivered pursuant to this Agreement) by the
Seller and the consummation of the transactions contemplated hereby and thereby
have been duly and validly authorized by all necessary corporate action; this
Agreement and each other Basic Document to which it is a party evidence the
valid, binding and enforceable obligations of the Seller; and all requisite
corporate action has been taken by the Seller to make this Agreement and each
other Basic Document to which it is a party valid, binding and enforceable upon
the Seller in accordance with its respective terms, subject to the effect of
bankruptcy, insolvency, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally or the application of
equitable principles in any proceeding, whether at law or in equity, none of
which will affect the ownership of the Unguaranteed Interests in the SBA Loans
by the Trust.

                  (b) All actions, approvals, consents, waivers, exemptions,
variances, franchises, orders, permits, authorizations, rights and licenses
required to be taken, given or obtained, as the case may be, by or from any
federal, state or other governmental authority or agency (other than any such
actions, approvals, etc., under any state securities laws, real estate
syndication or "Blue Sky" statutes, as to which the Seller makes no such
representation or warranty), that are necessary or advisable in connection with
the purchase and sale of the Notes and the execution and delivery by the Seller
of the documents to which it is a party, have been duly taken, given or
obtained, as the case may be, are in full force and effect on the date hereof,
are not subject to any pending proceedings or appeals (administrative, judicial
or otherwise) and either the time within which any appeal therefrom may be taken
or review thereof may be obtained has expired or no review thereof may be
obtained or appeal therefrom taken, and are adequate to authorize the
consummation of the transactions contemplated by this Agreement and each other
Basic Document to which it is a party and the other documents on the part of the
Seller and the performance by the Seller of its obligations under this Agreement
and the other Basic Documents to which it is a party;


                                       11
<PAGE>   18
                  (c) The consummation of the transactions contemplated by this
Agreement and the other Basic Documents to which the Seller is a party will not
result in the breach of any terms or provisions of the articles of association
or by-laws of the Seller or result in the breach of any term or provision of, or
conflict with or constitute a default under or result in the acceleration of any
obligation under, any material agreement, indenture or loan or credit agreement
or other material instrument to which the Seller or its property is subject, or
result in the violation of any law, rule, regulation, order, judgment or decree
to which the Seller or its property is subject;

                  (d) Neither this Agreement or any other Basic Document to
which the Seller is a party nor any statement, report or other document
furnished or to be furnished pursuant to this Agreement or any other Basic
Document to which the Seller is a party or in connection with the transactions
contemplated hereby and thereby contains any untrue statement of material fact
or omits to state a material fact necessary to make the statements contained
herein or therein not misleading in light of the circumstances under which they
were made;

                  (e) The Seller does not believe, nor does it have any reason
or cause to believe, that it cannot perform each and every covenant contained in
this Agreement or any other Basic Document to which the Seller is a party;

                  (f) There is no action, suit, proceeding or investigation
pending or, to the best of the Seller's knowledge, threatened against the Seller
which, either in any one instance or in the aggregate, may (i) result in any
material adverse change in the business, operations, financial condition,
properties or assets of the Seller or in any material impairment of the right or
ability of the Seller to carry on its business substantially as now conducted,
or in any material liability on the part of the Seller or of any action taken or
to be taken in connection with the obligations of the Seller contemplated
herein, or which would be likely to impair materially the ability of the Seller
to perform under the terms of this Agreement or any other Basic Document to
which the Seller is a party or (ii) which would draw into question the validity
of this Agreement or any other Basic Document to which the Seller is a party or
the SBA Loans;

                  (g) The Trust will not constitute an "investment company"
within the meaning of the Investment Company Act of 1940, as amended;

                  (h) The Seller is not in default with respect to any order or
decree of any court or any order, regulation or demand of any federal, state,
municipal or governmental agency, which default might have consequences that
would materially and adversely affect the condition (financial or other) or
operations of the Seller or its properties or might have consequences that would
materially and adversely affect its performance hereunder;

                  (i) The Seller is "well capitalized" as defined in 12 CFR Part
325;

                  (j) No Noteholder or Certificateholder is subject to
Connecticut state licensing requirements solely by virtue of holding the Notes
or the Certificates;


                                       12
<PAGE>   19
                  (k) The transfer, assignment and conveyance of the SBA Notes
and the Mortgages by the Seller pursuant to this Agreement are not subject to
the bulk transfer laws or any similar statutory provisions in effect in any
applicable jurisdiction and do not violate the SBA Rules and Regulations;

                  (l) The origination and collection practices used by the
Seller with respect to each SBA Note and Mortgage have been in all material
respects legal, proper, prudent and customary in the SBA loan origination and
servicing business and comply with the Credit and Collection Policy;

                  (m) Each SBA Loan was selected from among the existing SBA
loans in the Seller's portfolio at the related Transfer Date, in a manner not
designed to adversely affect the Noteholders or the Certificateholders;

                  (n) The Seller received fair consideration and reasonably
equivalent value in exchange for the sale of the Unguaranteed Interests in the
SBA Loans;

                  (o) Neither the Seller nor any of its affiliates sold any
interest in any SBA Loan with any intent to hinder, delay or defraud any of
their respective creditors;

                  (p) The Seller is solvent, and the Seller will not be rendered
insolvent as a result of the transfer of the Unguaranteed Interest in the SBA
Loans to the Trust or the sale of the Notes; and

                  (q) The chief executive office and legal name of the Seller is
as set forth on the respective UCC-1 financing statement filed on behalf of the
Seller pursuant to Section 2.04, such office is the place where the Seller is
"located" for the purposes of Section 9-103(3)(d) of the Uniform Commercial Code
as in effect in the State of New York, and neither the location of such office
nor the legal name of the Seller has changed in the past four months.

                  Section 3.02      Individual SBA Loans.

                  The Seller hereby represents and warrants to the Indenture
Trustee, the Noteholders, the Owner Trustee, the Certificateholders and each
Hedge Counterparty, with respect to each SBA Loan as of the related Transfer
Date:

                  (a) The information with respect to each SBA Loan set forth in
the SBA Loan Schedule is true and correct;

                  (b) All of the original or certified documentation set forth
in Section 2.04 (including all material documents related thereto) has been or
will be delivered to the Indenture Trustee on the Transfer Date or as otherwise
provided in Section 2.04;


                                       13
<PAGE>   20
                  (c) Each Mortgaged Property serving as the primary Collateral
for an SBA Loan is improved by a Commercial Property or a Residential Property
and does not constitute other than real property under state law;

                  (d) Each SBA Loan was originated and underwritten, or
purchased and re-underwritten, by the Seller and each SBA Loan is being serviced
by the Seller, in each case in accordance with the Credit and Collection Policy;

                  (e) Each SBA Loan is an SBA Section 7(a) Loan;

                  (f) The SBA Loan Interest Rate for each SBA Loan is either a
fixed rate or adjusts monthly to equal the then applicable prime rate plus the
margin (if applicable) set forth in the related SBA Note. Each SBA Note will
provide for a schedule of Monthly Payments (which, for adjustable rate SBA
Loans, will adjust monthly) payable in United States dollars which are, if
timely paid, sufficient to fully amortize the principal balance of such SBA Loan
on its respective maturity date;

                  (g) With respect to those SBA Loans secured by a Mortgaged
Property, each Mortgage is a valid and subsisting lien of record on the
Mortgaged Property subject only to any applicable Prior Liens on such Mortgaged
Property and subject in all cases to such exceptions that are generally
acceptable to banking institutions in connection with their regular commercial
lending activities, and such other exceptions to which similar properties are
commonly subject and which do not individually, or in the aggregate, materially
and adversely affect the benefits of the security intended to be provided by
such Mortgage;

                  (h) Immediately prior to the transfer and assignment herein
contemplated, the Seller held good and indefeasible title to, and was the sole
owner of, the Unguaranteed Interest of each SBA Loan conveyed by the Seller
subject to no liens, charges, mortgages, encumbrances or rights of others except
liens which will be released simultaneously with such transfer and assignment;
and immediately upon the transfer and assignment herein contemplated, the Trust
will hold good and indefeasible title, to, and be the sole owner of, each SBA
Loan subject to no liens, charges, mortgages, encumbrances or rights of others
except the interests of the SBA or liens which will be released simultaneously
with such transfer and assignment;

                  (i) No SBA Loan is more than 30 days delinquent in payment;

                  (j) To the best of the Seller's knowledge, there is no
delinquent tax or assessment lien on any Mortgaged Property which is the primary
Collateral for the related SBA Loan, and each Mortgaged Property is free of
material damage and is in good repair;

                  (k) No SBA Loan is subject to any right of rescission,
set-off, counterclaim or defense, including the defense of usury, nor will the
operation of any of the terms of the SBA Note or any related Mortgage, or the
exercise of any right thereunder, render either the SBA Note or any related
Mortgage unenforceable in whole or in part, or subject to any right of
rescission,


                                       14
<PAGE>   21
set-off, counterclaim or defense, including the defense of usury, and no such
right of rescission, set-off, counterclaim or defense has been asserted with
respect thereto;

                  (l) Each SBA Loan at the time it was made complied, and as of
its Transfer Date complies, in all material respects with applicable state and
federal laws and regulations, including, without limitation, usury, equal credit
opportunity, disclosure and recording laws and the SBA Rules and Regulations;

                  (m) There is only one originally signed SBA Note for each SBA
Loan, which SBA Note has been delivered to the FTA;

                  (n) Pursuant to the SBA - Rules and Regulations, the Seller
requires that the improvements upon each Mortgaged Property are covered by a
valid and existing hazard insurance policy with a generally acceptable carrier
that provides for fire and extended coverage representing coverage described in
Section 4.07;

                  (o) Pursuant to the SBA Rules and Regulations, the Seller
requires that if a Mortgaged Property is in an area identified in the Federal
Register by the Federal Emergency Management Agency as having special flood
hazards, a flood insurance policy is in effect with respect to such Mortgaged
Property with a generally acceptable carrier in an amount representing coverage
described in Section 4.07;

                  (p) Each SBA Note, any related Mortgage and any other
agreement pursuant to which Collateral is pledged to the Indenture Trustee is
the legal, valid and binding obligation of the maker thereof and is enforceable
in accordance with its terms, except only as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and by general
principles of equity (whether considered in a proceeding or action in equity or
at law), none of which will prevent the ultimate realization of the security
provided by the Collateral or other agreement, and all parties to each SBA Loan
had full legal capacity to execute all SBA Loan documents and convey the estate
therein purported to be conveyed;

                  (q) The Seller has caused and will cause to be performed any
and all acts reasonably required to be performed to preserve the rights and
remedies of the Indenture Trustee and the Owner Trustee in any insurance
policies applicable to the SBA Loans including, without limitation, in each
case, any necessary notifications of insurers, assignments of policies or
interests therein, and establishments of co-insured, joint loss payee and
mortgagee rights in favor of the Indenture Trustee or the Seller, respectively;

                  (r) Each original Mortgage was recorded, and all subsequent
assignments of the original Mortgage have been recorded in the appropriate
jurisdictions wherein such recordation is necessary to perfect the lien thereof
as against creditors of the Seller (or, subject to Section 2.04 hereof, are in
the process of being recorded);

                  (s) No SBA Loan has an original term to maturity exceeding 300
months;


                                       15
<PAGE>   22
                  (t) The terms of the SBA Note and the related Mortgage or
other security agreement pursuant to which Collateral was pledged have not been
impaired, altered or modified in any respect, except by a written instrument
which has been recorded, if necessary, to protect the interest of the SBA, the
Noteholders, the Certificateholders and each Hedge Counterparty and which has
been delivered to the Indenture Trustee;

                  (u) There are no material defaults in complying with the terms
of any applicable Mortgage, and all taxes, governmental assessments, insurance
premiums, water, sewer and municipal charges, leasehold payments or ground rents
which previously became due and owing have been paid, or an escrow of funds has
been established in an amount sufficient to pay for every such item which
remains unpaid and which has been assessed but is not yet due and payable;

                  (v) There is no proceeding pending or threatened for the total
or partial condemnation of any Mortgaged Property, nor is such a proceeding
currently occurring, and such property is undamaged by waste, fire, earthquake
or earth movement, windstorm, flood, tornado or other casualty, so as to affect
adversely the value of the Mortgaged Property as security for the SBA Loan or
the use for which the premises were intended;

                  (w) At the time of origination of an SBA Loan, in all
instances where commercial real property serves as the primary Collateral for
such SBA Loan, the related Mortgaged Property was free of contamination from
toxic substances or hazardous wastes requiring action under applicable laws or
is subject to ongoing environmental rehabilitation approved by the SBA, and as
of the related Transfer Date, the Seller has no knowledge of any such
contamination from toxic substances or hazardous waste material on any Mortgaged
Property unless such items are below action levels or such Mortgaged Property is
subject to ongoing environmental rehabilitation approved by the SBA;

                  (x) The proceeds of the SBA Loan have been fully disbursed,
and there is no obligation on the part of the Seller to make future advances
thereunder and the Guaranteed Portion of the SBA Loan has been sold in the
Secondary Market pursuant to SBA Form 1086. Any and all requirements as to
disbursements of any escrow funds therefor have been complied with. All costs,
fees and expenses incurred in making or closing or recording the SBA Loans were
paid;

                  (y) There is no obligation on the part of the Seller or any
other party (except for any guarantor of an SBA Loan) to make Monthly Payments
in addition to those made by the Obligor;

                  (z) No statement, report or other document signed by the
Seller constituting a part of the SBA File contains any untrue statement of a
material fact or omits to state a material fact necessary to make the statements
contained therein not misleading in light of the circumstances under which they
were made;


                                       16
<PAGE>   23
                  (aa) With respect to each Mortgage constituting a deed of
trust, a trustee, duly qualified under applicable law to serve as such, has been
properly designated and currently so serves and is named in such Mortgage, and
no fees or expenses are or will become payable by the Noteholders, the
Certificateholders and/or any Hedge Counterparties to the trustee under the deed
of trust, except in connection with a trustee's sale after default by the
Obligor;

                  (bb) No SBA Loan has a shared appreciation feature, or other
contingent interest feature;

                  (cc) With respect to each SBA Loan secured by a Mortgaged
Property or other Collateral and that is not a first priority lien, either (i)
no consent for the SBA Loan is required by the holder of any related Prior Lien
or (ii) such consent has been obtained;

                  (dd) Each SBA Loan was originated to a business located in the
State identified in the SBA Loan Schedule and the collateral securing each SBA
Loan is located in the United States;

                  (ee) All parties which have had any interest in the SBA Loan,
whether as mortgagee, assignee, pledgee or otherwise, are (or, during the period
in which they held and disposed of such interest, were) (1) in compliance with
any and all applicable licensing requirements of the laws of the state wherein
any Mortgaged Property is located, and (2)(A) organized under the laws of such
state, or (B) qualified to do business in such state, or (C) federal savings and
loan associations or national banks having principal offices in such state, or
(D) not doing business in such state;

                  (ff) Any related Mortgage contains customary and enforceable
provisions in accordance with the SBA Rules and Regulations which render the
rights and remedies of the holder thereof adequate for the realization against
the Mortgaged Property of the benefits of the security, including, (i) in the
case of a Mortgage designated as a deed of trust, by trustee's sale, and (ii)
otherwise by judicial foreclosure. There is no homestead or other exemption
available to the Mortgagor which would materially interfere with the right to
sell the Mortgaged Property at a trustee's sale or the right to foreclose the
Mortgage;

                  (gg) There is no default, breach, violation or event of
acceleration existing under the SBA Note and no event which, with the passage of
time or with notice and the expiration of any grace or cure period, would
constitute a default, breach, violation or event of acceleration; and the
Seller, in its capacity as either Servicer or Seller, has not waived any
default, breach, violation or event of acceleration;

                  (hh) All parties to the SBA Note and any related Mortgage or
other document pursuant to which Collateral was pledged had legal capacity to
execute the SBA Note and any such Mortgage or other document and each SBA Note
and Mortgage or other document have been duly and properly executed by such
parties;

                  (ii) The SBA Loan is risk rated "3W" or better by the Seller;


                                       17
<PAGE>   24
                  (jj) Including the Unguaranteed Interest in such SBA Loan in
the Trust will not cause the Concentration and Mix Criteria to be violated; and

                  (kk) With respect to those SBA Loans secured by Collateral
other than a Mortgaged Property, the related SBA Note, security agreements, if
any, and UCC-1 filed with respect to such Collateral creates a valid and
subsisting lien of record on such Collateral subject only to any Prior Liens, if
any, on such Collateral and subject in all cases to such exceptions that are
generally acceptable to lending institutions in connection with their regular
commercial lending activities, and such other exceptions to which similar
Collateral is commonly subject and which do not individually, or in the
aggregate, materially and adversely affect the benefits of the security intended
to be provided by such SBA Note, security agreement and UCC-1.

                  Section 3.03      Purchase and Substitution of Defective
                                    SBA Loans.

                  It is understood and agreed that the representations and
warranties set forth in Sections 3.01 and 3.02 shall survive delivery of the
Notes to the Noteholders and the Certificates to the Certificateholders. Upon
discovery by the Servicer, any Subservicer, a Responsible Officer of the Owner
Trustee or the Indenture Trustee of a breach of any of such representations and
warranties which materially and adversely affects the value of the SBA Loans or
the interest of the Noteholders, the Certificateholders, the SBA or any Hedge
Counterparty therein or which materially and adversely affects the interests of
the Noteholders, the Certificateholders, the SBA or any Hedge Counterparty in
the related SBA Loan in the case of a representation and warranty relating to a
particular SBA Loan (notwithstanding that such representation and warranty was
made to the Seller's best knowledge), the party discovering such breach shall
give prompt written notice to the others. Within 60 days of the earlier of its
discovery or its receipt of notice of any breach of a representation or
warranty, the Seller shall (a) promptly cure such breach in all material
respects, (b) purchase the Unguaranteed Interest in such SBA Loan by depositing
in the Principal and Interest Account, on the next succeeding Determination
Date, an amount in the manner specified in Section 2.05(b), or (c) remove such
SBA Loan from the Trust Fund (in which case it shall become a Deleted SBA Loan)
and substitute one or more Qualified Substitute SBA Loans. Any such substitution
shall be accompanied by payment by the Seller of the Substitution Adjustment, if
any.

                  As to any Deleted SBA Loan for which the Seller substitutes a
Qualified Substitute SBA Loan or Loans, the Servicer shall effect such
substitution by delivering to the Indenture Trustee a certification in the form
attached hereto as Exhibit I, executed by a Servicing Officer, and shall also
deliver to the Indenture Trustee, the documents constituting the Indenture
Trustee's Document File for such Qualified Substitute SBA Loan or Loans.

                  The Servicer shall deposit in the Principal and Interest
Account the Unguaranteed Percentage of all payments of principal received in
connection with such Qualified Substitute SBA Loan or Loans after the date of
such substitution together with all interest (net of the portion thereof
required to be paid to the related Registered Holder, the FTA's Fee, the Premium


                                       18
<PAGE>   25
Protection Fee and the Servicing Fee with respect to each SBA Loan and the
Additional Fee with respect to each Additional Fee SBA Loan). Monthly Payments
received with respect to Qualified Substitute SBA Loans on or before the date of
substitution will be retained by the Seller. The Trust Fund will own all
payments received with respect to the Unguaranteed Interest on the Deleted SBA
Loan on or before the date of substitution, and the Seller shall thereafter be
entitled to retain all amounts subsequently received in respect of such Deleted
SBA Loan. The Servicer shall give written notice to the Indenture Trustee that
such substitution has taken place and shall amend the SBA Loan Schedule to
reflect the removal of such Deleted SBA Loan from the terms of this Agreement
and the substitution of the Qualified Substitute SBA Loan or Loans. Upon such
substitution, such Qualified Substitute SBA Loan or Loans shall be subject to
the terms of this Agreement in all respects, including Sections 2.04 and 2.05,
and the Seller shall be deemed to have made with respect to such Qualified
Substitute SBA Loan or Loans, as of the date of substitution, the covenants,
representations and warranties set forth in Sections 3.01 and 3.02. On the date
of such substitution, the Seller will remit to the Servicer, and the Servicer
will deposit into the Principal and Interest Account, an amount equal to the
Substitution Adjustment.

                  In addition to the cure, purchase and substitution obligation
in Sections 2.04, 2.05 and 3.03, the Seller shall indemnify and hold harmless
the Trust, the Indenture Trustee, the Noteholders, the Certificateholders and
any Hedge Counterparty against any loss, damages, penalties, fines, forfeitures,
reasonable legal fees and related costs, judgments and other costs and expenses
resulting from any claim, demand, defense or assertion based on or grounded
upon, or resulting from, a breach of the Seller's representations and warranties
contained in this Agreement. It is understood and agreed that the obligations of
the Seller set forth in Sections 2.04, 2.05 and 3.03 to cure, purchase or
substitute for a defective SBA Loan and to indemnify the Noteholders, the
Certificateholders, the Indenture Trustee, the Owner Trustee and any Hedge
Counterparty as provided in Sections 2.04, 2.05 and 3.03 constitute the sole
remedies of the Indenture Trustee, the Noteholders, the Certificateholders, the
Owner Trustee and any Hedge Counterparty, respecting a breach of the foregoing
representations and warranties.

                  Any cause of action against the Servicer or the Seller
relating to or arising out of the breach of any representations and warranties
made in Sections 2.05, 3.01 or 3.02 shall accrue as to any SBA Loan upon (i)
discovery of such breach by any party and notice thereof to the Seller and or
notice thereof by the Seller to the Indenture Trustee, (ii) failure by the
Seller to cure such breach or purchase or substitute such SBA Loan as specified
above, and (iii) demand upon the Seller by the Indenture Trustee for all amounts
payable hereunder in respect of such SBA Loan.


                                       19
<PAGE>   26
                                   ARTICLE IV

                    ADMINISTRATION AND SERVICING OF SBA LOANS

                  Section 4.01      Duties of the Servicer.

                  (a) The Servicer, as independent contract servicer, shall
service and administer the SBA Loans and shall have full power and authority,
acting alone, to do any and all things in connection with such servicing and
administration which the Servicer may deem necessary or desirable and consistent
with the terms of this Agreement, the Credit and Collection Policy, the
Multi-Party Agreement and the SBA Rules and Regulations. The Servicer may enter
into Subservicing Agreements for any servicing and administration of SBA Section
7(a) Loans with any entity approved with prior written consent by the SBA and
the Administrative Agent. Any such Subservicing Agreement must be approved by
the SBA and shall be consistent with and not violate the provisions of this
Agreement and the Multi-Party Agreement. The Servicer shall be entitled to
terminate any Subservicing Agreement in accordance with the terms and conditions
of such Subservicing Agreement and to either itself directly service the related
SBA Section 7(a) Loans or enter into a Subservicing Agreement with a successor
Subservicer which qualifies hereunder.

                  (b) Notwithstanding any Subservicing Agreement, any of the
provisions of this Agreement relating to agreements or arrangements between the
Servicer and a Subservicer or reference to actions taken through a Subservicer
or otherwise, the Servicer shall remain obligated and primarily liable to the
Indenture Trustee, for itself and on behalf of the Noteholders, the SBA, the
Certificateholders and any Hedge Counterparty for the servicing and
administering of the SBA Loans in accordance with the provisions of this
Agreement and the Multi-Party Agreement and the SBA Rules and Regulations,
without diminution of such obligation or liability by virtue of such
Subservicing Agreements or arrangements or by virtue of indemnification from the
Subservicer and to the same extent and under the same terms and conditions as if
the Servicer alone were servicing and administering the SBA Loans. For purposes
of this Agreement, the Servicer shall be deemed to have received payments on SBA
Loans when any Subservicer has received such payments. The Servicer shall be
entitled to enter into any agreement with a Subservicer for indemnification of
the Servicer by such Subservicer, and nothing contained in this Agreement shall
be deemed to limit or modify such indemnification.

                  (c) Any Subservicing Agreement that may be entered into and
any transactions or services relating to the SBA Loans involving a Subservicer
in its capacity as such and not as an originator shall be deemed to be between
the Subservicer and the Servicer alone, and the Indenture Trustee, the SBA, the
Noteholders and any Hedge Counterparty shall not be deemed parties thereto and
shall have no claims, rights, obligations, duties or liabilities with respect to
the Subservicer except as set forth in Section 4.01(d). Notwithstanding the
foregoing, the Servicer shall (i) at its expense and without reimbursement,
deliver to the Indenture Trustee and the SBA a copy of each Subservicing
Agreement and (ii) provide notice of the termination of any Subservicer within a
reasonable time after such Subservicer's termination to the Indenture Trustee
and the SBA.


                                       20
<PAGE>   27
                  (d) In the event the Servicer shall for any reason no longer
be the Servicer, the Servicer at its expense and without right of reimbursement
therefor, shall, upon request of the Indenture Trustee, deliver to the successor
servicer all documents and records relating to each Subservicing Agreement and
the SBA Loans then being serviced and an accounting of amounts collected and
held by it and otherwise use its best efforts to effect the orderly and
efficient transfer of the Subservicing Agreements to the assuming party.

                  (e) So long as it is consistent with the terms of this
Agreement and the Multi-Party Agreement, the SBA Agreement (as defined in the
Multi-Party Agreement) and the SBA Rules and Regulations, the Servicer may
waive, modify or vary any term of any SBA Loan or consent to the postponement of
strict compliance with any such term or in any manner grant indulgence to any
Obligor if in the Servicer's determination such waiver, modification,
postponement or indulgence is not materially adverse to the interests of the
SBA, the Noteholders and any Hedge Counterparty, provided, however, that (unless
(x) the Obligor is in default with respect to the SBA Loan, or such default is,
in the judgment of the Servicer, imminent and (y) the Servicer determines that
any modification would not be considered a new loan for federal income tax
purposes) the Servicer may not permit any modification with respect to any SBA
Loan that would change the SBA Loan Interest Rate, defer (subject to Section
4.12), or forgive the payment of any principal or interest (unless in connection
with the liquidation of the related SBA Loan), or extend the final maturity date
on such SBA Loan without the consent of the SBA, if such consent is then
required by the SBA Rules and Regulations. The Servicer may exercise all
unilateral servicing actions permitted by participating lenders in accordance
with the SBA Rules and Regulations. No costs incurred by the Servicer or any
Subservicer in respect of Servicing Advances shall for the purposes of
distributions to Noteholders be added to the amount owing under the related SBA
Loan. Without limiting the generality of the foregoing, so long as it is
consistent with the SBA Rules and Regulations, the Servicer shall continue, and
is hereby authorized and empowered to execute and deliver on behalf of the
Indenture Trustee, the Owner Trustee, the SBA, each Noteholder, each
Certificateholder and each Hedge Counterparty, all instruments of satisfaction
or cancellation, or of partial or full release, discharge and all other
comparable instruments, with respect to the SBA Loans and with respect to any
Mortgaged Properties or other Collateral. If reasonably required by the
Servicer, the Indenture Trustee, on behalf of the Trust, shall furnish the
Servicer, within 5 Business Days of receipt of the Servicer's request, with any
powers of attorney and other documents necessary or appropriate to enable the
Servicer to carry out its servicing and administrative duties under this
Agreement. Any such request to the Indenture Trustee, on behalf of the Trust,
shall be accompanied by a certification in the form of Exhibit I attached hereto
signed by a Servicing Officer.

                  The Servicer, in servicing and administering the SBA Loans,
shall employ or cause to be employed procedures (including collection,
foreclosure and Foreclosed Property and Repossessed Collateral management
procedures) and exercise the same care that it customarily employs and exercises
in servicing and administering SBA Loans for its own account and prudent lending
standards, and in accordance with the SBA Rules and Regulations, giving due
consideration to the Noteholders' and the SBA's reliance on the Servicer.


                                       21
<PAGE>   28
                  (f) The Servicer shall, upon request of the Indenture Trustee
but at the expense of the Servicer, deliver to any successor servicer all
documents and records (including computer tapes and diskettes) relating to the
SBA Loans and an accounting of amounts collected and held by the Servicer and
otherwise use its best efforts to effect the orderly and efficient transfer of
servicing rights and obligations to the assuming party.

                  (g) The Servicer shall perform the duties of the Issuer and
the Owner Trustee under the Basic Documents. In furtherance of the foregoing,
the Servicer shall consult with the Owner Trustee as the Servicer deems
appropriate regarding the duties of the Issuer and the Owner Trustee under the
Basic Documents. The Servicer shall monitor the performance of the Issuer and
the Owner Trustee and shall advise the Owner Trustee when action is necessary to
comply with the Issuer's or the Owner Trustee's duties under the Basic
Documents. The Servicer shall prepare for execution by the Owner Trustee or
shall cause the preparation by other appropriate Persons of all such documents,
reports, filings, instruments, certificates and opinions as it shall be the duty
of the Issuer or the Owner Trustee to prepare, file or deliver pursuant to the
Basic Documents.

                  (h) In addition to the duties of the Servicer set forth in
this Agreement or any of the Basic Documents, the Servicer shall perform such
calculations and shall prepare for execution by the Issuer or the Owner Trustee
or shall cause the preparation by other appropriate Persons of all such
documents, reports, filings, instruments, certificates and opinions as it shall
be the duty of the Issuer to prepare, file or deliver pursuant to state and
federal tax and securities laws. In accordance with the directions of the Issuer
or the Owner Trustee, the Servicer shall administer, perform or supervise the
performance of such other activities in connection with the Issuer as are not
covered by any of the foregoing provisions and as are expressly requested by the
Issuer or the Owner Trustee and are reasonably within the capability of the
Servicer.

                  (i) Notwithstanding anything in this Agreement or any of the
Basic Documents to the contrary, the Servicer shall be responsible for promptly
notifying the Owner Trustee and the Paying Agent in the event that any
withholding tax is imposed on the Issuer's payments (or allocations of income)
to a Noteholder, a Certificateholder or Hedge Counterparty. Any such notice
shall be in writing and specify the amount of any withholding tax required to be
withheld by the Owner Trustee or the Paying Agent pursuant to such provision.

                  (j) The Servicer shall prepare and file, on behalf of the
Issuer, all tax returns tax elections, financial statements and such annual or
other reports of the Issuer as are necessary for the preparation of tax reports
as provided in the Trust Agreement or required by applicable law. All tax
returns will be signed by the Servicer on behalf of the Issuer.

                  (k) The Servicer shall maintain appropriate books of account
and records relating to services performed under this Agreement, which books of
account and records shall be accessible for inspection by the Owner Trustee at
any time during normal business hours.


                                       22
<PAGE>   29
                  (l) The Servicer shall furnish to the Administrative Agent
from time to time such additional information regarding the Issuer or the Basic
Documents as the Administrative Agent shall reasonably request.

                  (m) Without the prior written consent of the Administrative
Agent, the Servicer shall not agree or consent to, or otherwise permit to occur,
any amendment, modification, change, supplement or recission of or to the Credit
and Collection Policy, in whole or in part, in any manner that could have a
material adverse effect on the SBA Loans; provided that the consent of the
Administrative Agent shall not be required if any such amendment, modification,
change, supplement or recission was mandated by the Servicer's regulators
including, but not limited to, the SBA.

                  (n) The Servicer shall furnish to the Administrative Agent
written notice of any change to (i) the Credit and Collection Policy within
three (3) Business Days of such change and (ii) any change to its accounting
policy within three (3) Business Days of such change.

                  Section 4.02      Liquidation of SBA Loans.

                  In the event that any payment due under any SBA Loan and not
postponed pursuant to Section 4.01 is not paid when the same becomes due and
payable, or in the event the Obligor fails to perform any other covenant or
obligation under the SBA Loan, the Servicer in accordance with the SBA Rules and
Regulations shall take such action as it shall deem to be in the best interests
of the Noteholders and the SBA. With respect to any such SBA Section 7(a) Loan
for which the SBA has expressed to the Servicer the SBA's desire to assume
servicing of such SBA Loan consistent with the SBA Rules and Regulations, the
Indenture Trustee shall, upon written direction of the Servicer, deliver to the
SBA or its designee all or any portion of the Indenture Trustee's Document File
relating to such SBA Section 7(a) Loan and the Indenture Trustee shall execute
such documents as the Servicer or the SBA shall request. Expenses incurred in
connection with any such action shall be the responsibility of the Servicer and
shall not be chargeable to the Principal and Interest Account or the Note
Distribution Account. Subject to the SBA Rules and Regulations and with the
prior written consent of the SBA (if required by the SBA Rules and Regulations),
the Servicer shall foreclose upon or otherwise comparably effect the ownership
of Mortgaged Properties or other Collateral relating to defaulted SBA Section
7(a) Loans for which the related SBA Section 7(a) Loan is still outstanding, as
to which no satisfactory arrangements can be made for collection of delinquent
payments in accordance with the provisions of Section 4.10. In connection with
such foreclosure or other conversion and any other liquidation action, the
Servicer shall exercise collection and foreclosure procedures with the same
degree of care and skill in its exercise or use as it would exercise with
respect to its own affairs, in accordance with prudent servicing standards, and
in accordance with the applicable SBA Rules and Regulations. Prior to
undertaking foreclosure of any Mortgaged Property, the Servicer must investigate
environmental conditions, including the performance of a Phase I and/or Phase II
environmental site assessment, to ascertain the actual or potential presence of
any hazardous material on or under such property. For purposes of this
Agreement, the term hazardous material includes (1) any hazardous substance, as
defined by the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended by the Superfund


                                       23
<PAGE>   30
Amendments and Reauthorization Act of 1986, 42 U.S.C. 9601-9675, and (2)
petroleum (as that term is defined at 42 U.S.C. Section 6991) including any
derivative, fraction, by-product, constituent or breakdown product thereof, or
additive thereto. In the event that the environmental investigation determines
the existence of any hazardous material on or under the Mortgaged Property in
excess of minimum action levels established by relevant regulatory agencies,
title to such property shall not be taken without prior written approval from
the SBA.

                  Section 4.03      Establishment of Principal and
                                    Interest Accounts; Deposits in
                                    Principal and Interest Accounts.

                  (a) The Servicer shall cause to be established and maintained
one or more Principal and Interest Accounts, in one or more Eligible Deposit
Accounts, in the form of time deposit or demand accounts, which may be
interest-bearing or such accounts may be trust accounts wherein the moneys
therein are invested in Permitted Instruments, titled "First International Bank,
as Servicer, in trust for the registered holders of FIB Funding Trust Notes."
All funds in such Principal and Interest Accounts shall be insured by the BIF or
SAIF administered by the FDIC to the maximum extent provided by law. The
creation of any Principal and Interest Account shall be evidenced by a letter
agreement in the form of Exhibit C hereto.

                  A copy of such letter agreement shall be furnished to the
Indenture Trustee, the Owner Trustee and, upon request, the SBA, any Noteholder,
Certificateholder or Hedge Counterparty.

                  (b) The Servicer and each Subservicer shall deposit without
duplication (within two Business Days of receipt thereof) in the applicable
Principal and Interest Account and retain therein:

                           (i) the Unguaranteed Percentage of all payments
                  received on or after the applicable Transfer Date on account
                  of principal on the SBA Loans, including all Principal
                  Prepayments and Curtailments;

                           (ii) all payments received after the Transfer Date on
                  account of interest on the SBA Loans (net of the portion
                  thereof required to be paid to the related Registered Holders,
                  the Premium Protection Fee, the FTA's Fee and the Servicing
                  Fee with respect to each SBA Loan, the Additional Fee with
                  respect to each Additional Fee SBA Loan, and other servicing
                  compensation payable to the Servicer as permitted herein);

                           (iii) the Unguaranteed Percentage of all Net
                  Liquidation Proceeds;

                           (iv) the Unguaranteed Percentage of all Insurance
                  Proceeds (other than amounts to be applied to restoration or
                  repair of any related Mortgaged Property, or to be released to
                  the Obligor in accordance with the Credit and Collection
                  Policy);


                                       24
<PAGE>   31
                           (v) the Unguaranteed Percentage of all Released
                  Mortgaged Property Proceeds and any other proceeds from any
                  other Collateral securing the SBA Loans;

                           (vi) any amounts paid in connection with the purchase
                  or repurchase of the Unguaranteed Interest of any SBA Loan and
                  the amount of any Substitution Adjustment received pursuant to
                  any provision of this Agreement;

                           (vii) any amount required to be deposited in the
                  Principal and Interest Account pursuant to Section 4.04 or
                  4.10; and

                           (viii) the amount of any losses incurred in
                  connection with investments in Permitted Instruments.

                  (c) The foregoing requirements for deposit in the Principal
and Interest Account shall be exclusive, it being understood and agreed that,
without limiting the generality of the foregoing, payments with respect to the
Guaranteed Interest to be paid to the Registered Holders, the Premium Protection
Fee, the FTA's Fee and the Servicing Fee, with respect to each SBA Loan, and
additionally the Additional Fee with respect to each Additional Fee SBA Loan,
together with the difference between any Liquidation Proceeds and the related
Net Liquidation Proceeds, may not be deposited by the Servicer in the Principal
and Interest Account.

                  (d) Any interest earnings on funds held in the Principal and
Interest Account paid by a Designated Depository Institution shall be for the
account of the Servicer and may only be withdrawn from the Principal and
Interest Account by the Servicer immediately following its monthly remittance to
the Indenture Trustee pursuant to Section 4.04(a). Any reference herein to
amounts on deposit in the Principal and Interest Account shall refer to amounts
net of such investment earnings.

                  Section 4.04      Permitted Withdrawals From the
                                    Principal and Interest Account.

                  The Servicer shall withdraw funds from the Principal and
Interest Account for the following purposes:

                  (a) to effect the remittance to the Indenture Trustee on each
Determination Date for deposit into the Note Distribution Account of the
Available Funds for the related Remittance Date (net of amounts then on deposit
in the Spread Account);

                  (b) to reimburse itself for any accrued unpaid Servicing Fees
and Premium Protection Fees allocable to the SBA Loans and for unreimbursed
Servicing Advances to the extent deposited in the Principal and Interest Account
(and not netted from Monthly Payments received). The Servicer's right to
reimbursement for unpaid Servicing Fees and Premium Protection Fees and, except
as provided in the following, Servicing Advances shall be limited to


                                       25
<PAGE>   32
Liquidation Proceeds, Released Mortgaged Property Proceeds, Insurance Proceeds
and such other amounts as may be collected by the Servicer from the Obligor or
otherwise relating to the SBA Loan in respect of which such unreimbursed amounts
are owed. The Servicer's right to reimbursement for Servicing Advances in excess
of such amounts shall be limited to any late collections of interest received on
the SBA Loans generally, including Liquidation Proceeds, Released Mortgaged
Property Proceeds, Insurance Proceeds and any other amounts; provided, however,
that the Servicer's right to such reimbursement pursuant hereto shall be
subordinate to the rights of the Noteholders;

                  (c) to withdraw any amount received from an Obligor that is
recoverable and sought to be recovered as a voidable preference by a trustee in
bankruptcy pursuant to the United States Bankruptcy Code in accordance with a
final, nonappealable order of a court having competent jurisdiction;

                  (d) (i) to make investments in Permitted Instruments and (ii)
to pay to itself, as permitted by Section 4.03(d), interest paid in respect of
Permitted Instruments or by an Eligible Deposit Account on funds deposited in
the Principal and Interest Account;

                  (e) to withdraw any funds deposited in the Principal and
Interest Account that were not permitted or required to be deposited therein or
were deposited therein in error;

                  (f) to pay itself servicing compensation pursuant to Section
6.03 hereof; and

                  (g) to clear and terminate the Principal and Interest Account
upon the termination of this Agreement in accordance with Section 10.01.

                  So long as no default or Servicer Termination Event shall have
occurred and be continuing, and consistent with any requirements of the Code,
the Principal and Interest Accounts shall either be maintained with an Eligible
Deposit Account as an interest-bearing account meeting the requirements set
forth in Section 4.03(a), or the funds held therein may be invested by the
Servicer (to the extent practicable) in Permitted Instruments, as directed in
writing by the Servicer. In either case, funds in the Principal and Interest
Account must be available for withdrawal without penalty, and any Permitted
Instruments must mature not later than the Business Day immediately preceding
the Determination Date next following the date of such investment (except that
if such Permitted Instrument is an obligation of the institution that maintains
such account, then such Permitted Instrument shall mature not later than such
Determination Date) and shall not be sold or disposed of prior to its maturity.
All Permitted Instruments must be held by or registered in the name of "First
International Bank, as Servicer, in trust for the registered holders of FIB
Funding Trust Notes." All interest or other earnings from funds on deposit in
the Principal and Interest Account (or any Permitted Instruments thereof) shall
be the exclusive property of the Servicer, and may be withdrawn from the
Principal and Interest Account pursuant to clause (d) above. The amount of any
losses incurred in connection with the investment of funds in the Principal and
Interest Account in Permitted Instruments shall be deposited in the Principal
and Interest Account by the Servicer from its own funds immediately as realized
without reimbursement therefor.


                                       26
<PAGE>   33
                  Section 4.05      [Intentionally Omitted]

                  Section 4.06      Transfer of Accounts.

                  The Servicer may, upon written notice to the Indenture
Trustee, the SBA and the Administrative Agent, transfer any Principal and
Interest Account to a different Eligible Deposit Account.

                  Section 4.07      Maintenance of Hazard Insurance.

                  The Servicer shall comply with the SBA Rules and Regulations
concerning the issuance and maintenance of fire and hazard insurance with
extended coverage customary in the area where the Mortgaged Property is located.
If at origination of an SBA Loan, to the best of the Servicer's knowledge after
reasonable investigation, the related Mortgaged Property is in an area
identified in the Federal Register by the Flood Emergency Management Agency as
having special flood hazards (and such flood insurance has been made available)
consistent with the SBA Rules and Regulations, the Servicer will require the
related Obligor to purchase a flood insurance policy with a generally acceptable
insurance carrier, in an amount representing coverage not less than the least of
(i) the full insurable value of the Mortgaged Property, or (ii) the maximum
amount of insurance available under the National Flood Insurance Act of 1968, as
amended. The Servicer shall also maintain, to the extent such insurance is
available, and required by the SBA Rules and Regulations and the Credit and
Collection Policy, on Foreclosed Property constituting real property, fire and
hazard insurance in the amounts described above and liability insurance. The
Unguaranteed Percentage of any amounts collected by the Servicer under any such
policies (other than amounts to be applied to the restoration or repair of the
Mortgaged Property, or to be released to the Obligor in accordance with the SBA
Rules and Regulations) shall be deposited in the Principal and Interest Account,
subject to withdrawal pursuant to Section 4.04. It is understood and agreed that
no earthquake or other additional insurance need be required by the Servicer of
any Obligor or maintained on Foreclosed Property, other than pursuant to such
applicable laws and regulations as shall at any time be in force and as shall
require such additional insurance. All policies required hereunder shall be
endorsed with standard mortgagee clauses with losses payable to the Servicer or
its affiliates.

                  Section 4.08      [Intentionally Omitted].

                  Section 4.09      Fidelity Bond.

                  The Servicer shall maintain with a responsible company, and at
its own expense, a blanket fidelity bond and an errors and omissions insurance
policy, in a minimum amount equal to $1,500,000, and a maximum deductible of
$100,000, if commercially available, with coverage on all employees acting in
any capacity requiring such persons to handle funds, money, documents or papers
relating to the SBA Loans ("Servicer Employees"). The fidelity bond shall insure
the Indenture Trustee and the Owner Trustee, their respective officers and
employees against losses resulting from forgery, theft, embezzlement or fraud by
such Servicer Employees.


                                       27
<PAGE>   34
The errors and omissions policy shall insure against losses resulting from the
errors, omissions and negligent acts of such Servicer employees. No provision of
this Section 4.09 requiring such fidelity bond and errors and omissions
insurance shall relieve the Servicer from its duties as set forth in this
Agreement. Upon the request of the Indenture Trustee, the Owner Trustee, the SBA
or any Noteholder, Certificateholder or Hedge Counterparty, the Servicer shall
cause to be delivered to the Indenture Trustee, Owner Trustee, the SBA or such
Noteholder or such Certificateholder a certified true copy of such fidelity bond
and insurance policy. The current issuer of such fidelity bond and insurance
policy is The Hartford Underwriters Insurance Company.

                  Section 4.10      Title, Management and Disposition
                                    of Foreclosed Property.

                  In the event that title to a Mortgaged Property or other
Collateral is acquired in foreclosure or by deed in lieu of foreclosure or by
other legal process (a "Foreclosed Property"), the deed or certificate of sale,
or the repossessed Collateral shall be taken in the name of the Trust for the
benefit of the Noteholders, the Certificateholders, the SBA and the Hedge
Counterparties, as their interests may appear under the Multi-Party Agreement
dated the date of this Agreement (or such other name as the SBA may direct).

                  Unless the servicing of a Foreclosed Property or item of
Repossessed Collateral relating to an SBA Loan is assumed by the SBA pursuant to
the SBA Rules and Regulations, the Servicer, subject to Sections 4.01 and 4.02
hereof, shall manage, conserve, protect and operate each Foreclosed Property or
other Repossessed Collateral for the SBA, the Noteholders, the
Certificateholders and any Hedge Counterparty solely for the purpose of its
prudent and prompt disposition and sale. The Servicer shall, either itself or
through an agent selected by the Servicer, manage, conserve, protect and operate
the Foreclosed Property or other Repossessed Collateral in the same manner that
it manages, conserves, protects and operates other foreclosed or repossessed
property for its own account, and in the same manner that similar property in
the same locality as the Foreclosed Property or other Repossessed Collateral is
managed. The Servicer shall attempt to sell the same (and may temporarily rent
the same) on such terms and conditions as the Servicer deems to be in the best
interest of the SBA, the Noteholders, the Certificateholders and any Hedge
Counterparty.

                  The Servicer shall cause to be deposited in the Principal and
Interest Account, no later than five Business Days after the receipt thereof,
the Unguaranteed Percentage of all revenues received with respect to the
conservation and disposition of the related Foreclosed Property or other
Repossessed Collateral net of Servicing Advances.

                  The disposition of Foreclosed Property or other Repossessed
Collateral shall be carried out by the Servicer at such price, and upon such
terms and conditions, as the Servicer, with SBA concurrence (if required by the
SBA Rules and Regulations), deems to be in the best interest of the SBA, the
Noteholders, the Certificateholders and any Hedge Counterparty. The Unguaranteed
Percentage of the proceeds of sale of the Foreclosed Property or other
Repossessed Collateral shall promptly, but in no event later than two Business
Days after receipt, be deposited


                                       28
<PAGE>   35
in the Principal and Interest Account as received from time to time and, as soon
as practicable thereafter, the expenses of such sale shall be paid. The Servicer
shall, subject to Section 4.04, reimburse itself for any related unreimbursed
Servicing Advances and unpaid Servicing Fees, and the Servicer shall deposit in
the Principal and Interest Account the net cash proceeds of such sale to be
distributed to the Noteholders in accordance with Section 5.07 hereof.

                  Section 4.11      [Intentionally Omitted].

                  Section 4.12      Collection of Certain SBA
                                    Loan Payments.

                  The Servicer shall make reasonable efforts to collect all
payments called for under the terms and provisions of the SBA Loans, and shall
cause the Obligor under the SBA Loan, to the extent such procedures shall be
consistent with this Agreement, to comply with the terms and provisions of any
applicable hazard insurance policy. Consistent with the foregoing and the SBA
Rules and Regulations, the Servicer may in its discretion waive or permit to be
waived any fee or charge (other than the Servicing Fee or the Premium Protection
Fee, without the written consent of the SBA) which the Servicer would be
entitled to retain hereunder as servicing compensation and extend the due date
for payments due on an SBA Note for a period (with respect to each payment as to
which the due date is extended) not greater than 180 days after the initially
scheduled due date for such payment.

                  Section 4.13      Access to Certain Documentation and
                                    Information Regarding the SBA Loans.

                  The Servicer shall provide to the Owner Trustee, the Indenture
Trustee, the SBA, the FDIC, the OCC, the Federal Reserve, the Office of Thrift
Supervision and the supervisory agents and examiners of the foregoing, access to
the documentation regarding the SBA Loans required by applicable local, state
and federal regulations, such access being afforded without charge but only upon
reasonable request and during normal business hours at the offices of the
Servicer designated by it.


                                       29
<PAGE>   36
                                    ARTICLE V

                           PAYMENTS TO THE NOTEHOLDERS

                  Section 5.01      Establishment of Note Distribution
                                    Account; Deposits in Note Distribution
                                    Account; Permitted Withdrawals from Note
                                    Distribution Account.

                  (a) No later than the Closing Date, the Indenture Trustee will
establish and maintain with itself in its trust department a trust account,
which shall not be interest-bearing, titled "Note Distribution Account, HSBC
Bank USA, as Indenture Trustee for the registered holders of FIB Funding Trust
Notes" (the " Note Distribution Account"). The Indenture Trustee shall, promptly
upon receipt, deposit in the Note Distribution Account and retain therein:

                           (i) the Available Funds (net of the amount then on
                  deposit in the Spread Account);

                           (ii) the proceeds received upon the sale of the
                  Unguaranteed Interests in connection with a Securitization
                  pursuant to Section 2.11;

                           (iii) amounts transferred from the Spread Account
                  pursuant to Section 5.02(b)(i);

                           (iv) amounts required to be paid by the Servicer
                  pursuant to Section 5.06(e) in connection with losses on
                  investments of amounts in the Accounts; and

                           (v) any payments received from any Hedge Counterparty
                  pursuant to any Hedge Transaction or Hedging Agreements.

                  (b) Amounts on deposit in the Note Distribution Account shall
be withdrawn on each Remittance Date by the Indenture Trustee, or the Paying
Agent, on its behalf, to effect the distribution described in Section 5.07(b)
and thereafter by the following parties in no particular order of priority:

                           (i) by the Indenture Trustee, to invest amounts on
                  deposit in the Note Distribution Account in Permitted
                  Instruments pursuant to Section 5.06;

                           (ii) by the Indenture Trustee, to pay on a monthly
                  basis to the Servicer as additional servicing compensation
                  interest paid and earnings realized on Permitted Instruments;

                           (iii) by the Indenture Trustee, to withdraw any
                  amount not required to be deposited in the Note Distribution
                  Account or deposited therein in error; and


                                       30
<PAGE>   37
                           (iv) by the Indenture Trustee, to clear and terminate
                  the Note Distribution Account upon the termination of this
                  Agreement in accordance with the terms of Section 10.01
                  hereof;

                  Section 5.02      Establishment of Spread Account;
                                    Deposits in Spread Account; Permitted
                                    Withdrawals from Spread Account.

                  (a) No later than the Closing Date, the Indenture Trustee will
establish and maintain with itself in its trust department a trust account,
which shall not be interest bearing, titled "Spread Account, HSBC Bank USA, as
Indenture Trustee for the registered holders of FIB Funding Trust Notes" (the
"Spread Account"). If on any Determination Date the Subordination Percentage is
less than the Minimum Subordination Percentage, the Indenture Trustee shall,
promptly upon receipt, deposit in the Spread Account the amounts transferred
from the Note Distribution Account pursuant to Section 5.07(b)(vi).

                  (b) Amounts on deposit in the Spread Account shall be
withdrawn by the Indenture Trustee for distribution on each Remittance Date in
the following order of priority:

                           (i) to deposit in the Note Distribution Account for a
                  principal payment on the Notes in the amount, if any, needed
                  to increase the Subordination Percentage to the Minimum
                  Subordination Percentage; and

                           (ii) During the Revolving Period, to the extent that
                  the Subordination Percentage equals or exceeds the Minimum
                  Subordination Percentage after giving effect to all required
                  transfers from the Spread Account to the Note Distribution
                  Account on such Remittance Date, the remainder of the amounts
                  on deposit in the Spread Account shall be, by Issuer Request
                  (x) transferred to the Funding Account, (y) transferred to the
                  Note Distribution Account or (z) transferred to the
                  Certificate Account;

and also, in no particular order of priority:

                           (iii) to invest amounts on deposit in the Spread
                  Account in Permitted Instruments pursuant to Section 5.06;

                           (iv) to withdraw any amount not required to be
                  deposited in the Spread Account or deposited therein in error;
                  and

                           (v) to clear and terminate the Spread Account upon
                  the termination of this Agreement in accordance with the terms
                  of Section 10.01.


                                       31
<PAGE>   38
                  Section 5.03      Establishment of Expense Account;
                                    Deposits in Expense Account; Permitted
                                    Withdrawals from Expense Account

                  (a) No later than the Closing Date, the Indenture Trustee will
establish with itself an account (the "Expense Account"). The Expense Account
shall not constitute part of the Trust Fund and is for the benefit of the
Indenture Trustee and the Owner Trustee in its individual capacity to pay their
fees and expenses related to the Trust. The Indenture Trustee shall deposit into
the Expense Account:

                           (i) on each Remittance Date from the amounts on
                  deposit in the Note Distribution Account an amount equal to
                  the fees and expenses of the Indenture Trustee and the Owner
                  Trustee in its individual capacity then due and owing;
                  provided, however, that such amounts shall not exceed $15,000
                  per annum without the prior written consent of the
                  Administrative Agent; and

                           (ii) upon receipt, amounts required to be paid by the
                  Servicer pursuant to Section 5.06(e) in connection with losses
                  on investments of amounts in the Expense Account.

If, at any time the amount then on deposit in the Expense Accounts shall be
insufficient to pay in full the fees and expenses of the Indenture Trustee and
the Owner Trustee in its individual capacity then due, the Indenture Trustee and
the Owner Trustee in its individual capacity shall make demand on the Seller to
pay the amount of such insufficiency, and the Seller shall promptly pay such
amount.

                  (b) The Indenture Trustee may invest amounts on deposit in the
Expense Accounts in Permitted Instruments pursuant to Section 5.06 hereof, and
the Indenture Trustee shall withdraw amounts on deposit in the Expense Accounts
to:

                           (i) pay the Indenture Trustee's and Owner Trustee's
                  fees (in its individual capacity) and expenses as described in
                  Section 2.08 hereof;

                           (ii) pay on a monthly basis to the Servicer as
                  additional servicing compensation interest paid and earnings
                  realized on Permitted Instruments;

                           (iii) withdraw any amounts not required to be
                  deposited in the Expense Accounts or deposited therein in
                  error; and

                           (iv) clear and terminate the Expense Account upon the
                  termination of this Agreement in accordance with the terms of
                  Section 10.01.

                  (c) On the twelfth Remittance Date following the Closing Date,
and on each twelfth Remittance Date thereafter, the Indenture Trustee shall
determine that all payments required to be made during the prior twelve month
period pursuant to subclauses (b)(i), (b)(ii)


                                       32
<PAGE>   39
and (b)(iii) above, have been made, and, if all such payments have been made,
from the amounts remaining in the Expense Accounts, the Indenture Trustee shall
remit to the Servicer as additional servicing compensation any amounts remaining
in the Expense Account.

                  Section 5.04      Funding Account

                  (a) No later than the Closing Date, the Indenture Trustee
shall establish and maintain in its trust department a trust account, which
shall not be interest-bearing, titled "FIB Funding Trust Account" (the "Funding
Account"). The Funding Account shall constitute part of the Trust Fund and may
only be invested in Permitted Investments. The Indenture Trustee shall, promptly
upon receipt, deposit in the Funding Account and retain therein:

                           (i) all amounts paid by a Purchaser in connection
                  with a Purchase made pursuant to Section 2.2 of the Note
                  Purchase Agreement; and

                           (ii) amounts transferred from the Note Distribution
                  Account pursuant to Section 5.07(b)(iv).

                  (b) On each Transfer Date, the Servicer shall instruct the
Indenture Trustee to withdraw from the Funding Account the amount determined
pursuant to Section 2.09(a)(ii) and pay such amount to or upon the order of the
Seller with respect to such transfer.

                  (c) If on the Termination Date amounts still remain in the
Funding Account, the Servicer shall instruct the Indenture Trustee to withdraw
from the Funding Account on the immediately following Remittance Date and
deposit such amounts in the Note Distribution Account.

                  Section 5.05      [Intentionally Omitted]

                  Section 5.06      Investment of Accounts.

                  (a) So long as no default or Event of Default shall have
occurred and be continuing, and consistent with any requirements of the Code,
all or a portion of any Account held by the Indenture Trustee shall be invested
by the Indenture Trustee, as directed in writing by the Servicer, in one or more
Permitted Instruments in the name of the Indenture Trustee, bearing interest or
sold at a discount. No such investment in any Account shall mature later than
the Business Day immediately preceding the next Remittance Date; provided,
however, the Indenture Trustee or any affiliate thereof, may be the obligor on
any investment which otherwise qualifies as a Permitted Instrument and any
investment on which the Indenture Trustee is the obligor may mature on such
Remittance Date or date when needed, as the case may be.

                  (b) If any amounts are needed for disbursement from any
Account held by the Indenture Trustee and sufficient uninvested funds are not
available to make such disbursement, the Indenture Trustee shall cause to be
sold or otherwise converted to cash a sufficient amount of


                                       33
<PAGE>   40
the investments in such Account. The Indenture Trustee shall not be liable for
any investment loss or other charge resulting therefrom.

                  (c) The Indenture Trustee shall not in any way be held liable
by reason of any insufficiency in any Account held by the Indenture Trustee
resulting from any investment loss on any Permitted Instrument included therein
(except to the extent that the Indenture Trustee is the obligor thereon).

                  (d) The Indenture Trustee shall invest and reinvest funds in
the Accounts held by the Indenture Trustee to the fullest extent practicable, in
such manner as the Servicer shall from time to time direct in writing, but only
in one or more Permitted Instruments.

                  (e) All income or other gain from investments in any Account
held by the Indenture Trustee shall be deposited in such Account, immediately on
receipt, and the Indenture Trustee shall notify the Servicer of any loss
resulting from such investments. The Servicer shall remit the amount of any such
loss from its own funds, without reimbursement therefor, to the Indenture
Trustee for deposit in the Account from which the related funds were withdrawn
for investment by the next Determination Date following receipt by the Servicer
of such notice.

                  Section 5.07      Distributions.

                  (a) The rights of the Noteholders, Certificateholders and
Hedge Counterparties to receive distributions from the proceeds of the Trust
Fund, and all ownership interests of the Certificateholders in such
distributions, shall be as set forth in this Agreement.

                  (b) By 11:00 A.M. New York Time, on each Remittance Date the
Indenture Trustee shall withdraw from the Note Distribution Account an amount
equal to (A) that portion of the Available Funds received from the Servicer
pursuant to Section 5.01(a)(i), (ii) and (iv), and (B) the amounts deposited
therein pursuant to Section 5.02(b)(i), and make distributions thereof in the
following order of priority:

                   (i) first, to any Hedge Counterparty under any Hedging
Agreement or Hedge Transaction, all amounts due other than Hedge Breakage Costs;

                   (ii) second, to the Expense Account, the amount of unpaid
fees and expenses required to be paid to the Indenture Trustee and the Owner
Trustee in its individual capacity;

                  (iii) third, to the Noteholders, the aggregate Interest
Distribution Amount, Program Fee, Facility Fee and Breakage Costs due for such
Remittance Date;

                   (iv) fourth, (A) during the Revolving Period, to the Funding
Account, the amount, if any, set forth in an Issuer Request and to the
Noteholders, as a payment of principal on the Notes, the amount, if any, set
forth in an Issuer Request and (B) during the Amortization Period, to the
Noteholders, as a payment of principal on the Notes until the Outstanding Amount
of the Notes is reduced to zero;


                                       34
<PAGE>   41
                   (v) fifth, to any Hedge Counterparty under any Hedging
Agreement or Hedge Transaction, all amounts due, if any, as Hedge Breakage
Costs;

                   (vi) sixth, if the Subordination Percentage is less than the
Minimum Subordination Percentage, to the Spread Account until the Subordination
Percentage equals the Minimum Subordination Percentage;

                   (vii) seventh, to the Paying Agent under the Trust Agreement,
for distribution to the Certificateholders, any excess.

                   (c) Notwithstanding the foregoing, on the Put Option Purchase
Date, the Indenture Trustee shall withdraw from the Note Distribution Account
the amount received pursuant to Section 2.11 and distribute such amount to the
Noteholders.

                   (d) All distributions made to the Noteholders will be made on
a pro rata basis among the Noteholders of record on the next preceding Record
Date based on the Percentage Interest represented by their respective Notes, and
shall be made by check or, upon request by a Noteholders, by wire transfer of
immediately available funds to the account of such Noteholders at a bank or
other entity having appropriate facilities therefor, and, in the case of wire
transfers, at the expense of such Noteholder unless such Noteholder shall own of
record Notes which have initial principal balances aggregating at least
$1,000,000.

                  Section 5.08      [Intentionally Omitted].

                  Section 5.09      Statements.

                  Each month, not later than 12:00 noon New York time on the
Determination Date, the Servicer shall deliver to the Administrative Agent and
the Indenture Trustee, by telecopy, for distribution to the Noteholders, the
receipt and legibility of which shall be confirmed telephonically, with hard
copy thereof and the Servicer's Monthly Computer Tape in the form attached
hereto as Exhibit L (both in hard copy and in computer tape form) to be
delivered on the Business Day following the Determination Date, a certificate
signed by a Servicing Officer (a "Servicer's Certificate") stating the date
(day, month and year), and, as of the close of business on the Record Date for
such month:

                  (i) Available Funds for the related Remittance Date;

                  (ii) The Aggregate Note Principal Balance as reported in the
prior Servicer's Certificate pursuant to subclause (xi) below, or, in the case
of the first Determination Date, the original Aggregate Note Principal Balance;

                  (iii) The number and Principal Balances of all SBA Loans which
were the subject of Principal Prepayments during the Due Period and the number
and Principal Balances


                                       35
<PAGE>   42
of all Defaulted Unguaranteed Interests or Charged-Off Unguaranteed Interests
purchased or substituted for during the Due Period;

                  (iv) The product of the Unguaranteed Percentage multiplied by
all Curtailments which were received during the Due Period;

                  (v) The product of the Unguaranteed Percentage multiplied by
all Monthly Payments in respect of principal received during the Due Period;

                  (vi) The aggregate amount of interest received on the
Unguaranteed Interest of each SBA Loan net of the FTA's Fee, the Additional Fee
and the Servicing Fee attributable to the Unguaranteed Interest;

                  (vii) The delinquency and foreclosure information set forth in
the form attached hereto as Exhibit K;

                  (viii) The Interest Distribution Amount, Program Fee and
Facility Fee for the Remittance Date;

                  (ix) The amount available in the Spread Account as of the
related Record Date and the amount, if any, to be transferred from the Spread
Account to the Note Distribution Account pursuant to Section 5.02(b)(i);

                  (x) The amount, if any, of principal to be distributed to the
Notes on the Remittance Date;

                  (xi) The Aggregate Note Principal Balance after giving effect
to the distribution to be made on the Remittance Date;

                  (xii) The weighted average maturity and weighted average SBA
Loan Interest Rate;

                  (xiii) The Servicing Fees and amounts to be deposited to the
Expense Account;

                  (xiv) The amount of all payments and reimbursements to the
Servicer;

                  (xv) During the Revolving Period, the aggregate Principal
Balance of the Unguaranteed Interests in the SBA Loans purchased during the
prior Due Period and the amount on deposit in the Funding Account as of the end
of such Due Period;

                  (xvi) The aggregate Principal Balance of the Unguaranteed
Interests in the SBA Loans removed from the Trust during the prior Due Period;


                                       36
<PAGE>   43
                  (xvii) The following information for such Determination Date
(a) the Portfolio Yield, (b) the Default Ratio and the Average Default Ratio,
(c) Net Loss Ratio and the Average Net Loss Ratio, (d) the Portfolio Net Loss
Ratio and the Average Portfolio Net Loss Ratio;

                  (xviii) The aggregate Principal Balance of all Eligible Loans
and all Ineligible Loans;

                  (xix) The following information for such Determination Date
(a) the Minimum Subordination Percentage, (b) the Subordination Percentage, (c)
the amount in the Spread Account over or under the Minimum Subordination
Percentage and (d) the amount in the Note Distribution Account over or under the
Minimum Subordination Percentage; and

                  (xx) Such other information as the Indenture Trustee, the
Noteholders and the Certificateholders or the Administrative Agent may
reasonably require.

                  The Indenture Trustee shall forward such report to the
Noteholders, the Certificateholders, the Owner Trustee and any Hedge
Counterparty on the Remittance Date, together with a separate report indicating
the amount of funds deposited in the Note Distribution Account pursuant to
Section 5.01(a)(iv); and the amounts which are reimbursable to the Servicer or
the Seller (all reports prepared by the Indenture Trustee of such withdrawals
and deposits will be based in whole or in part upon the information provided to
the Indenture Trustee by the Servicer).

                  To the extent that there are inconsistencies between the
telecopy of the Servicer's Certificate and the hard copy thereof, the Indenture
Trustee shall be entitled to rely upon the telecopy.

                  (a) Upon reasonable advance notice in writing, the Servicer
will provide to each Noteholder which is a savings and loan association, bank or
insurance company certain reports and access to information and documentation
regarding the SBA Loans sufficient to permit such Noteholder to comply with
applicable regulations of the Office of Thrift Supervision or other regulatory
authorities with respect to investment in the Notes.

                  (b) The Servicer, at its expense, shall furnish to each
Noteholder, during the term of this Agreement, such periodic, special, or other
reports or information, whether or not provided for herein, as shall be
necessary, reasonable, or appropriate with respect to the Noteholder or
otherwise with respect to the purposes of this Agreement, all such reports or
information to be provided by and in accordance with such applicable
instructions and directions as the Noteholder may reasonably require. The
Administrative Agent shall receive copies of any such reports or information
furnished to the Noteholders.


                                       37
<PAGE>   44
                  Section 5.10      Reports of Foreclosure and Abandonment
                                    of Mortgaged Property


                  Each year the Servicer shall make the reports of foreclosures
and abandonment of any Mortgaged Property required by Section 6050J of the Code.
Promptly after filing each such report with the Internal Revenue Service, the
Servicer shall provide the Indenture Trustee with an Officer's Certificate
certifying that such report has been filed.


                                       38
<PAGE>   45
                                   ARTICLE VI

                           GENERAL SERVICING PROCEDURE

                  Section 6.01  [Intentionally Omitted].

                  Section 6.02      Satisfaction of Mortgages and
                                    Collateral and Release of SBA Files.

                  The Servicer shall maintain the Fidelity Bond as provided for
in Section 4.09 insuring the Servicer against any loss it may sustain with
respect to any SBA Loan not satisfied in accordance with the procedures set
forth herein.

                  Upon the payment in full of any SBA Loan, the receipt by the
Servicer of a notification that payment in full will be escrowed in a manner
customary for such purposes or the deposit into the Principal and Interest
Account of the purchase price of any SBA Loan acquired by the Seller, the
Servicer or another Person pursuant to this Agreement, or any other Basic
Document, the Servicer will immediately notify the FTA and the Indenture Trustee
by a certification in the form of Exhibit I attached hereto (which certification
shall include a statement to the effect that all amounts received or to be
received in connection with such payment which are required to be deposited in
the Principal and Interest Account pursuant to Section 4.03 or the Note
Distribution Account pursuant to Section 5.01 have been or will be so deposited)
of a Servicing Officer and shall request delivery to it of the Indenture
Trustee's Document File. The Multi-Party Agreement provides for release by FTA
of the related SBA Note in accordance with the terms of the Multi-Party
Agreement. Upon receipt of such certification and request, the FTA and the
Indenture Trustee shall release, within 3 Business Days, the related Indenture
Trustee's Document File to the Servicer. Expenses incurred in connection with
any instrument of satisfaction or deed of reconveyance shall be payable by the
Servicer and shall not be chargeable to the Principal and Interest Account or
the Note Distribution Account.

                  Subject to the Multi-Party Agreement, from time to time and as
appropriate for the servicing or foreclosure of any SBA Loan, the Indenture
Trustee shall, upon request of the Servicer and delivery to the Indenture
Trustee of a certification in the form of Exhibit I attached hereto signed by a
Servicing Officer, release the related Indenture Trustee's Document File to the
Servicer within 3 Business Days, and the Indenture Trustee shall execute such
documents as shall be necessary to the prosecution of any such proceedings. The
Multi-Party Agreement provides for release by FTA of the related SBA Note in
accordance with the terms of the Multi-Party Agreement. The Servicer shall
return the Indenture Trustee's Document File to the FTA and the Indenture
Trustee when the need therefor by the Servicer no longer exists, unless the SBA
Loan has been liquidated and the Unguaranteed Percentage of the Liquidation
Proceeds relating to the SBA Loan has been deposited in the Principal and
Interest Account and remitted to the Indenture Trustee for deposit in the Note
Distribution Account or the SBA File or such document has been delivered to an
attorney, or to a public trustee or other public official as required by law,
for purposes of initiating or pursuing legal action or other proceedings for the
foreclosure of the Mortgaged Property or repossession of other Collateral either
judicially or non-judicially, and


                                       39
<PAGE>   46
the Servicer has delivered to the Indenture Trustee a certificate of a Servicing
Officer certifying as to the name and address of the Person to whom such SBA
File or such document was delivered and the purpose or purposes of such
delivery. Upon receipt of a certificate of a Servicing Officer stating that such
SBA Loan was liquidated, the servicing receipt relating to such SBA Loan shall
be released by the Indenture Trustee to the Servicer.

                  The Indenture Trustee shall execute and deliver to the
Servicer any court pleadings, requests for trustee's sale or other documents
provided to it necessary to the foreclosure or trustee's sale in respect of a
Mortgaged Property or other Collateral or to any legal action brought to obtain
judgment against any Obligor on the SBA Note or Mortgage or other agreement
securing Collateral or to obtain a deficiency judgment, or to enforce any other
remedies or rights provided by the SBA Note or Mortgage or other agreement
securing Collateral or otherwise available at law or in equity. Together with
such documents or pleadings, the Servicer shall deliver to the Indenture Trustee
a certificate of a Servicing Officer requesting that such pleadings or documents
be executed by the Indenture Trustee and certifying as to the reason such
documents or pleadings are required and that the execution and delivery thereof
by the Indenture Trustee will not invalidate or otherwise affect the lien of the
Mortgage or other agreement securing Collateral, except for the termination of
such a lien upon completion of the foreclosure or trustee's sale. The Indenture
Trustee shall, upon receipt of a written request from a Servicing Officer,
execute any document provided to the Indenture Trustee by the Servicer or take
any other action requested in such request, that is, in the opinion of the
Servicer as evidenced by such request, required by any state or other
jurisdiction to discharge the lien of a Mortgage or other agreement securing
Collateral upon the satisfaction thereof and the Indenture Trustee will sign and
post, but will not guarantee receipt of, any such documents to the Servicer, or
such other party as the Servicer may direct, within five Business Days of the
Indenture Trustee's receipt of such certificate or documents. Such certificate
or documents shall establish to the Indenture Trustee's satisfaction that the
related SBA Loan has been paid in full by or on behalf of the Obligor and that
such payment has been deposited in the Principal and Interest Account.

                  Section 6.03      Servicing Compensation.

                  As compensation for its services hereunder, the Servicer shall
be entitled to retain from interest payments on the SBA Loans or withdraw from
the Principal and Interest Account (to the extent deposited therein) the
Servicer's Servicing Fee and the Premium Protection Fee and, in accordance with
Section 4.04(b), any accrued but unreimbursed Premium Protection Fees and
Servicing Fees. Additional servicing compensation in the form of assumption and
other administrative fees, interest paid on funds on deposit in the Principal
and Interest Account, interest paid and earnings realized on Permitted
Instruments, amounts remitted pursuant to Section 5.03(c) and late payment
charges shall be retained by or remitted to the Servicer to the extent not
required to be remitted to the Indenture Trustee for deposit in the Note
Distribution Account. The Servicer shall be required to pay all expenses
incurred by it in connection with its servicing activities hereunder and shall
not be entitled to reimbursement therefor except as specifically provided for
herein.


                                       40
<PAGE>   47
                  Section 6.04      Annual Statement as to Compliance.

         The Servicer will deliver to the Indenture Trustee, the SBA and the
Administrative Agent on or before March 31 of each year beginning March 31,
2001, an Officer's Certificate stating that (i) the Servicer has fully complied
with the provisions of Articles IV, V, VI and VII, (ii) a review of the
activities of the Servicer during the preceding calendar year and of performance
under this Agreement has been made under such officer's supervision, and (iii)
to the best of such officer's knowledge, based on such review, the Servicer has
fulfilled all its obligations under this Agreement throughout such year, or, if
there has been a default in the fulfillment of any such obligation, specifying
each such default known to such officers and the nature and status thereof and
the action being taken by the Servicer to cure such default.

                  Section 6.05      Annual Independent Public Accountants'
                                    Servicing Report.

                  On or before March 31 of each year beginning March 31, 2001,
the Servicer, at its expense, shall cause one of the "big five" accounting firms
to furnish a letter or letters to the Indenture Trustee and the Administrative
Agent to the effect that such firm has with respect to the Servicer's overall
servicing operations examined such operations in accordance with the
requirements of the Uniform Single Audit Program for Mortgage Bankers, and
stating such firm's conclusions relating thereto.

                  Section 6.06      SBA's and Indenture Trustee's Right to
                                    Examine Servicer Records and Audit
                                    Operations.

                  The SBA, the Indenture Trustee and the Administrative Agent
shall have the right upon reasonable prior notice, during normal business hours
and as often as reasonably required, to examine and audit any and all of the
books, records or other information of the Servicer, whether held by the
Servicer or by another on behalf of the Servicer, which may be relevant to the
performance or observance by the Servicer of the terms, covenants or conditions
of this Agreement. No amounts payable in respect of the foregoing shall be paid
from the Trust Fund.

                  Section 6.07      Reports to the Indenture Trustee; Principal
                                    and Interest Account Statements.

                  Not later than 20 days after each Record Date, the Servicer
shall forward to the Indenture Trustee, the Administrative Agent and the SBA a
statement, certified by a Servicing Officer, setting forth the status of the
Principal and Interest Account as of the close of business on the preceding
Record Date and showing, for the period covered by such statement, the aggregate
of deposits into the Principal and Interest Account for each category of deposit
specified in Section 4.03, the aggregate of withdrawals from the Principal and
Interest Account for each category of withdrawal specified in Section 4.04 and
the aggregate amount of permitted withdrawals not made in the related Due
Period.


                                       41
<PAGE>   48
                  Section 6.08.     Premium Protection Fee and Servicing Fee.

                  Pursuant to and in accordance with the policies of the SBA and
SBA Form 1086, the Servicer shall retain the Premium Protection Fee and the
Servicing Fee for each SBA Loan. Neither the Premium Protection Fee nor the
Servicing Fee shall constitute part of the Trust Fund and Noteholders and
Certificateholders shall have no interest in, and are not entitled to receive
any portion of, either the Premium Protection Fee or the Servicing Fee. If the
Seller is replaced as servicer pursuant to any provision of this Agreement, it
shall no longer be entitled to the Premium Protection Fee and the Servicing Fee
but, instead, the successor servicer shall be entitled thereto.


                                       42
<PAGE>   49
                                   ARTICLE VII

                       REPORTS TO BE PROVIDED BY SERVICER

                  Section 7.01      Financial Statements.

                  (a) The Servicer shall furnish to the Administrative Agent (i)
promptly, copies of any material and adverse notices (including, without
limitation, notices of defaults, breaches, potential defaults or potential
breaches) given to or received from its other lenders, (ii) immediately, notice
of the occurrence of any Event of Default or Servicer Termination Event or of
any situation which the Servicer reasonably expects to develop into an Event of
Default or Servicer Termination Event, (iii) copies of the Servicer's parent's
annual and quarterly financial statements reflecting any public filings made to
the Securities and Exchange Commission, provided that any annual Form 10-K
filing shall be furnished no later than 90 days after each year-end and any
quarterly Form 10-Q filing shall be furnished no later than 45 days after each
quarter end, and (iv) annual audited financial statements 90 days after each
year-end.

                  (b) The Servicer also agrees to make available on a reasonable
basis to any Noteholder and the Administrative Agent a knowledgeable financial
or accounting officer for the purpose of answering reasonable questions
respecting recent developments affecting the Servicer or the financial
statements of the Servicer and its parent (First International Bancorp, Inc. and
any successor thereto) and to permit any Noteholder and the Administrative Agent
to inspect the Servicer's servicing facilities during normal business hours for
the purpose of satisfying such Noteholder and the Administrative Agent that the
Servicer has the ability to service the SBA Loans in accordance with this
Agreement.


                                       43
<PAGE>   50
                                  ARTICLE VIII

                                  THE SERVICER

                  Section 8.01      Indemnification; Third Party Claims.

                  (a) The Servicer agrees to indemnify, defend, and hold the
Indenture Trustee (as such and in its individual capacity), the Owner Trustee
(as such and in its individual capacity), the SBA and each Noteholder,
Certificateholder and any Hedge Counterparty harmless from and against any and
all claims, losses, penalties, fines, forfeitures, legal fees and related costs,
judgments, and any other costs, fees and expenses that the Indenture Trustee (as
such or in its individual capacity), the Owner Trustee (as such or in its
individual capacity), the SBA, and any Noteholder, Certificateholder or Hedge
Counterparty may sustain in any way related to the failure of the Servicer to
perform its duties and service the SBA Loans in compliance with the terms of
this Agreement. The Servicer shall immediately notify the Indenture Trustee, the
Owner Trustee and the SBA if a claim is made by any party with respect to this
Agreement, and the Servicer shall assume (with the consent of the indemnified
party) the defense of any such claim and pay all expenses in connection
therewith, including reasonable counsel fees, and promptly pay, discharge and
satisfy any judgment or decree which may be entered against the Servicer, the
Indenture Trustee (as such or in its individual capacity), the Owner Trustee (as
such or in its individual capacity), the SBA, and/or a Noteholder,
Certificateholder or Hedge Counterparty in respect of such claim.

                  (b) The Seller agrees to indemnify, defend, and hold the
Indenture Trustee (as such and in its individual capacity), the Owner Trustee
(as such and in its individual capacity), the SBA and each Noteholder,
Certificateholder and any Hedge Counterparty harmless from and against any and
all claims, losses, penalties, fines, forfeitures, legal fees and related costs,
judgments, and any other costs, fees and expenses that the Indenture Trustee (as
such or in its individual capacity), the Owner Trustee (as such or in its
individual capacity), the SBA and any Noteholder, Certificateholder or Hedge
Counterparty may sustain in any way related to the failure of the Seller to
perform its duties in compliance with the terms of this Agreement and in the
best interests of the SBA, the Noteholders, the Certificateholders and any Hedge
Counterparty. The Seller shall immediately notify the Indenture Trustee, the
Owner Trustee and the SBA, if a claim is made by a third party with respect to
this Agreement, and the Seller shall assume (with the consent of the indemnified
party) the defense of any such claim and pay all expenses in connection
therewith, including reasonable counsel fees, and promptly pay, discharge and
satisfy any judgment or decree which may be entered against the Servicer, the
Seller, the Indenture Trustee (as such or in its individual capacity), the Owner
Trustee (as such or in its individual capacity), the SBA and/or a Noteholder,
Certificateholder or Hedge Counterparty in respect of such claim.


                                       44
<PAGE>   51
                  Section 8.02      Merger or Consolidation of the Servicer.

                  The Servicer will keep in full effect its existence, rights
and franchises as a corporation, bank or association and if required by
applicable law will obtain and preserve its qualification to do business as a
foreign entity, in each jurisdiction necessary to protect the validity and
enforceability of this Agreement or any of the SBA Loans and to perform its
duties under this Agreement.

                  Any Person into which the Servicer may be merged or
consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Servicer shall be a party, or any Person succeeding
to all or substantially all of the business of the Servicer, shall be an
established mortgage loan servicing institution that has a net worth of at least
$15,000,000 and shall be an approved SBA guaranteed lender in good standing,
operating pursuant to an effective Loan Guaranty Agreement, and shall be the
successor of the Servicer, hereunder, without the execution or filing of any
paper or any further act on the part of any of the parties hereto, anything
herein to the contrary notwithstanding except as may be otherwise required by
the SBA Rules and Regulations and the Multi-Party Agreement. The Servicer shall
send notice of any such merger, consolidation, conversion, or succession to the
Indenture Trustee, the Owner Trustee, the Administrative Agent and the SBA.

                  Subject to the receipt of written approval from the SBA and
the Administrative Agent, the Servicer is permitted to assign its rights and
duties hereunder to, and such rights and duties can be assumed by, an affiliate
of the Servicer (the "Assignee") (i) having a net worth of at least $50,000,000,
(ii) which is an approved SBA guaranteed lender in good standing operating
pursuant to an effective Loan Guaranty Agreement (iii) that acquires
substantially all of the Servicer's assets relating to its commercial lending
business, (iv) that assumes substantially all of the Servicer's liabilities
relating to its commercial lending business, but expressly excluding the
Servicer's deposits, and (v) that executes and delivers to the Administrative
Agent and the Indenture Trustee such amendments to this Agreement and such
opinions of counsel as the Administrative Agent may deem necessary including,
but not limited to opinions to evidence that the Assignee has assumed all of the
Servicer's rights and obligations, and is bound by all of the Servicer's
agreements, set forth herein (in which case all of the provisions of this
Agreement and the Multi-Party Agreement shall, to the same extent as they apply
to the Servicer hereunder, apply to the Assignee rather than the Servicer),
without the execution or filing of any paper or any further act on the part of
any of the parties hereto, anything herein to the contrary notwithstanding
except as may be otherwise required by the SBA Rules and Regulations and the
Multi-Party Agreement. The Servicer shall send notice of any such assignment to
the Indenture Trustee, the Owner Trustee, the Administrative Agent and the SBA.

                  Section 8.03.     Limitation on Liability of the Servicer and
                                    Others.

                  The Servicer and any director, officer, employee or agent of
the Servicer may rely on any document of any kind which it in good faith
reasonably believes to be genuine and to have been adopted or signed by the
proper authorities or persons respecting any matters arising hereunder. Subject
to the terms of Section 8.01 herein, the Servicer shall have no obligation to


                                       45
<PAGE>   52
appear with respect to, prosecute or defend any legal action which is not
incidental to the Servicer's duty to service the SBA Loans in accordance with
this Agreement.

                  Section 8.04.  Servicer Not to Resign.

                  The Servicer shall not assign this Agreement nor resign from
the obligations and duties hereby imposed on it except (i) by mutual consent of
the Servicer, the SBA, the Indenture Trustee and the Majority Noteholders and
the Administrative Agent, or (ii) in connection with a merger, conversion or
consolidation permitted pursuant to Section 8.02 and with the prior written
consent of the SBA and the Administrative Agent (in which case the Person
resulting from the merger, conversion or consolidation shall be the successor of
the Servicer), or (iii) in connection with an assignment permitted pursuant to
Section 8.02 and with the consent of the SBA and the Administrative Agent (in
which case the Assignee shall be the successor of the Servicer), or (iv) upon
the determination that the Servicer's duties hereunder are no longer permissible
under applicable law or administrative determination and such incapacity cannot
be cured by the Servicer. Any such determination permitting the resignation of
the Servicer shall be evidenced by a written Opinion of Counsel (who may be
counsel for the Servicer) to such effect delivered to the Indenture Trustee, the
SBA and the Administrative Agent, which Opinion of Counsel shall be in form and
substance acceptable to the Indenture Trustee, the Administrative Agent and the
SBA. No such resignation shall become effective until a successor approved in
writing by the SBA has assumed the Servicer's responsibilities and obligations
hereunder in accordance with Section 9.02.


                                       46
<PAGE>   53
                                   ARTICLE IX

                              SERVICER TERMINATION

                  Section 9.01      Servicer Termination Events.

                  (a) In case one or more of the following events (each a
"Servicer Termination Event") by the Servicer shall occur and be continuing,
that is to say:

                           (i) (A) the failure by the Servicer to make any
                  required Servicing Advance, to the extent such failure
                  materially and adversely affects the interests of the
                  Noteholders; or (B) any failure by the Servicer to remit to
                  Noteholders, or to the Indenture Trustee for the benefit of
                  the Noteholders and Hedge Counterparties, or to the Owner
                  Trustee for the benefit of the Certificateholders, any payment
                  required to be made under the terms of the Basic Documents
                  which continues unremedied for one Business Day after such
                  payment was required to be made; or

                           (ii) failure by the Servicer or the Seller duly to
                  observe or perform, in any material respect, any other
                  covenants, obligations or agreements of the Servicer or the
                  Seller as set forth in the Basic Documents, which failure
                  continues unremedied for a period of 30 days (if such failure
                  can be remedied) after the earlier to occur of (A) the date on
                  which written notice of such failure, requiring the same to be
                  remedied, shall have been given to the Servicer or the Seller,
                  as the case may be, by the Indenture Trustee or to the
                  Servicer, or the Seller, as the case may be, and the Indenture
                  Trustee by any Noteholder, Certificateholder or Hedge
                  Counterparty or (B) the date a Responsible Officer of the
                  Servicer receives actual knowledge of such failure; or

                           (iii) a decree or order of a court or agency or
                  supervisory authority having jurisdiction for the appointment
                  of a conservator or receiver or liquidator in any insolvency,
                  readjustment of debt, marshaling of assets and liabilities or
                  similar proceedings, or for the winding-up or liquidation of
                  its affairs, shall have been entered against the Servicer and
                  such decree or order shall have remained in force,
                  undischarged or unstayed for a period of 60 days; or

                           (iv) the Servicer shall consent to the appointment of
                  a conservator or receiver or liquidator in any insolvency,
                  readjustment of debt, marshaling of assets and liabilities or
                  similar proceedings of or relating to the Servicer or of or
                  relating to all or substantially all of the Servicer's
                  property; or

                           (v) the Servicer shall admit in writing its inability
                  to pay its debts as they become due, file a petition to take
                  advantage of any applicable insolvency or reorganization
                  statute, make an assignment for the benefit of its creditors,
                  or voluntarily suspend payment of its obligations; or


                                       47
<PAGE>   54
                           (vi) without the prior written consent of the
                  Administrative Agent, the Servicer agrees or consents to, or
                  otherwise permits to occur, any amendment, modification,
                  change, supplement or recision of or to the Servicer or the
                  Credit and Collection Policy, in whole or in part, in any
                  manner that could have a material adverse effect on the SBA
                  Loans; provided that the consent of the Administrative Agent
                  shall not be required if any such amendment, modification,
                  change, supplement or recision was mandated by the Servicer's
                  regulators including, but not limited to, the SBA; or

                           (vii) without the prior written consent of the
                  Administrative Agent, a Change in Control occurs with respect
                  to the Servicer; or

                           (viii) the Servicer fails to maintain an active Loan
                  Guaranty Agreement with the SBA; or

                           (ix) the Servicer fails to provide an estimate of the
                  unrecoverable portion of any SBA Loan that is 180 days or
                  greater past due and charge-off that estimated portion of the
                  SBA Loan consistent with the Servicer's historical recovery
                  rate and/or the Credit and Collection Policy;

                  (b) then, and in each and every such case, so long as a
Servicer Termination Event shall not have been remedied, the Majority
Noteholders, by notice in writing to the Servicer (except with respect to (iii),
(iv) and (v) for which no notice is required) may, in addition to whatever
rights such Noteholders may have at law or equity including damages, injunctive
relief and specific performance, in each case, with the consent of the SBA
(which may be withheld in its sole discretion) terminate all the rights and
obligations of the Servicer under this Agreement and in and to the SBA Loans and
the proceeds thereof, as Servicer. Upon such receipt by the Servicer of a
written notice from the Majority Noteholders (accompanied by the consent of the
SBA) stating that they or it intend to terminate the Servicer as a result of
such Servicer Termination Event, all authority and power of the Servicer under
this Agreement, whether with respect to the SBA Loans or otherwise, shall,
subject to Section 9.02 and the Multi-Party Agreement, pass to and be vested in
the Indenture Trustee and the Indenture Trustee is hereby authorized and
empowered to execute and deliver, on behalf of the Servicer, as attorney-in-fact
or otherwise, any and all documents and other instruments and do or cause to be
done all other acts or things necessary or appropriate to effect the purposes of
such notice of termination, including, but not limited to, the transfer and
endorsement or assignment of the SBA Loans and related documents. The Servicer
agrees to cooperate with the Indenture Trustee in effecting the termination of
the Servicer's responsibilities and rights hereunder, including, without
limitation, the transfer to the Indenture Trustee for administration by it of
all amounts which shall at the time be credited by the Servicer to each
Principal and Interest Account or thereafter received with respect to the SBA
Loans. The Indenture Trustee shall provide written notice to the SBA of any
Servicer Termination Event of which a Responsible Officer of the Indenture
Trustee has knowledge and any actual termination of the Servicer hereunder.


                                       48
<PAGE>   55
                  Section 9.02      Indenture Trustee to Act; Appointment of
                                    Successor

                  On and after the time of the Servicer's termination, or the
Servicer's receipt of notice if required by Section 9.01, or at any time if the
Indenture Trustee receives the resignation of the Servicer evidenced by an
Opinion of Counsel pursuant to Section 8.04 or the Servicer is removed as
Servicer pursuant to this Article IX, the Indenture Trustee shall be the
successor in all respects to the Servicer in its capacity as Servicer under this
Agreement and the transactions set forth or provided for herein and shall be
subject to all the responsibilities, duties and liabilities relating thereto
placed on the Servicer by the terms and provisions hereof; provided, however,
that the Indenture Trustee shall not be liable for any actions of any Servicer
prior to it, and that the Indenture Trustee shall not be obligated to make
advances or payments pursuant to Sections 4.03, 4.10 or 5.03 but only to the
extent the Indenture Trustee determines reasonably and in good faith that such
advances would not be recoverable, such determination to be evidenced with
respect to each such advance by a certification of a Responsible Officer of the
Indenture Trustee. As compensation therefor, the Indenture Trustee shall be
entitled to all funds relating to the SBA Loans which the Servicer would have
been entitled to receive from the Principal and Interest Account pursuant to
Section 4.04 if the Servicer had continued to act as Servicer hereunder,
together with other servicing compensation in the form of assumption fees, late
payment charges or otherwise as provided in Sections 5.01 and 5.03 and shall be
shall be entitled to the Servicing Fee and the Premium Protection Fee.

                  Notwithstanding the above, the Indenture Trustee shall, if it
is unable to so act or if the SBA requests in writing to the Indenture Trustee,
appoint, or petition a court of competent jurisdiction to appoint, any
established servicing institution acceptable to the SBA including but not
limited to the SBA and, except for the SBA, satisfactory to the Administrative
Agent, that has a net worth of not less than $50,000,000, and which is an
approved SBA guaranteed lender in good standing, operating pursuant to an
effective Loan Guaranty Agreement, as the successor to the Servicer hereunder in
the assumption of all or any part of the responsibilities, duties or liabilities
of the Servicer hereunder. Any collections received by the Servicer after
removal or resignation shall be endorsed by it to the Indenture Trustee and
remitted directly to the Indenture Trustee or, at the direction of the Indenture
Trustee, to the successor servicer. As compensation, any successor servicer
(including, without limitation, the Indenture Trustee) so appointed shall be
entitled to receive all funds relating to the SBA Loans which the Servicer would
have been entitled to receive from the Principal and Interest Account pursuant
to Section 4.04 if the Servicer had continued to act as Servicer hereunder,
together with any other servicing compensation in the form of assumption fees,
late payment charges or otherwise as provided in Section 6.03 and shall be
entitled to the Servicing Fee and the Premium Protection Fee. In the event the
Indenture Trustee is required to solicit bids as provided herein, the Indenture
Trustee shall solicit, by public announcement, bids from banks and mortgage
servicing institutions meeting the qualifications set forth above. Such public
announcement shall specify that the successor servicer shall be entitled to the
full amount of the aggregate Servicing Fees and Premium Protection Fees as
servicing compensation, together with the other servicing compensation in the
form of assumption fees, late payment charges or otherwise. Within thirty days
after any such public announcement, the Indenture Trustee shall negotiate and
effect the


                                       49
<PAGE>   56
sale, transfer and assignment of the servicing rights and responsibilities
hereunder to the qualified party submitting the highest qualifying bid. The
Indenture Trustee shall deduct from any sum received by the Indenture Trustee
from the successor to the Servicer in respect of such sale, transfer and
assignment all costs and expenses of any public announcement and of any sale,
transfer and assignment of the servicing rights and responsibilities hereunder
and the amount of any unreimbursed Servicing Advances. After such deductions,
the remainder of such sum shall be paid by the Indenture Trustee as a Servicing
Fee to the SBA at the time of such sale, transfer and assignment to the
Servicer's successor. The Indenture Trustee and such successor shall take such
action, consistent with this Agreement, as shall be necessary to effectuate any
such succession. The Servicer agrees to cooperate with the Indenture Trustee and
any successor servicer in effecting the termination of the Servicer's servicing
responsibilities and rights hereunder and shall promptly provide the Indenture
Trustee or such successor servicer, as applicable, all documents and records
reasonably requested by it to enable it to assume the Servicer's functions
hereunder and shall promptly also transfer to the Indenture Trustee or such
successor servicer, as applicable, all amounts which then have been or should
have been deposited in the Principal and Interest Account or Spread Account by
the Servicer or which are thereafter received with respect to the SBA Loans.
Neither the Indenture Trustee nor any other successor servicer shall be held
liable by reason of any failure to make, or any delay in making, any
distribution hereunder or any portion thereof caused by (i) the failure of the
Servicer to deliver, or any delay in delivering, cash, documents or records to
it, or (ii) restrictions imposed by any regulatory authority having jurisdiction
over the Servicer hereunder. No appointment of a successor to the Servicer
hereunder shall be effective until written notice of such proposed appointment
shall have been provided by the Indenture Trustee to the SBA and each Noteholder
and Certificateholder and the Indenture Trustee, the SBA and the Administrative
Agent shall have consented thereto. The Indenture Trustee shall not resign as
servicer until a successor servicer acceptable to the SBA and the Administrative
Agent has been appointed.

                  Pending appointment of a successor to the Servicer hereunder,
the Indenture Trustee shall act in such capacity as hereinabove provided. In
connection with such appointment and assumption, the Indenture Trustee may make
such arrangements for the compensation of such successor out of payments on SBA
Loans as it and such successor shall agree; provided, however, that no such
compensation shall be in excess of that permitted the Servicer pursuant to
Section 6.03 or otherwise as provided in this Agreement. The Servicer, the
Indenture Trustee and such successor shall take such action, consistent with
this Agreement, as shall be necessary to effectuate any such succession.

                  Section 9.03.     Waiver of Defaults.

                  The SBA may, or the Majority Noteholders may, on behalf of all
the Noteholders, Certificateholders and any Hedge Counterparty and subject to
the consent of the SBA, which consent may not be unreasonably withheld, waive
any events permitting removal of the Servicer pursuant to this Article IX;
provided, however, that the Majority Noteholders or the SBA may not waive a
default in making a required distribution on a Note without the consent of the
holder of such Note. Upon any waiver of a past default, such default shall cease
to exist, and any Event of Default arising therefrom shall be deemed to have
been remedied for every purpose of this


                                       50
<PAGE>   57
Agreement. No such waiver shall extend to any subsequent or other default or
impair any right consequent thereto except to the extent expressly so waived.

                  Section 9.04.     Control by Majority Noteholders.


                  The SBA may, or the Majority Noteholders with the consent of
the SBA may, direct the time, method and place of conducting any proceeding
relating to the Trust or the Notes or for any remedy available to the Indenture
Trustee or the Owner Trustee with respect to the Trust or exercising any trust
or power conferred on the Indenture Trustee or the Owner Trustee with respect to
the Trust provided that:

                           (i) such direction shall not be in conflict with any
                  rule of law or with this Agreement;

                           (ii) the Indenture Trustee shall have been provided
                  with indemnity satisfactory to it; and

                           (iii) the Indenture Trustee or the Owner Trustee may
                  take any other action deemed proper by the Indenture Trustee
                  or the Owner Trustee which is not inconsistent with such
                  direction; provided, however, that the Indenture Trustee or
                  the Owner Trustee, as the case may be, need not take any
                  action which it determines might be unlawful, violate the
                  Trust Agreement, or involve it in personal liability or may be
                  unjustly prejudicial to the Holders not so directing.


                                       51
<PAGE>   58
                                    ARTICLE X

                                   TERMINATION

                  Section 10.01.    Termination.

                  This Agreement shall terminate upon notice to the Indenture
Trustee of the earlier of the following events: (a) the final payment on or the
disposition or other liquidation by the Trust of the last SBA Loan or the
disposition of all property acquired upon foreclosure or deed in lieu of
foreclosure of any SBA Loan and the remittance of all funds due thereunder, or
(b) mutual written consent of the Servicer and the Administrative Agent.

                  The Servicer may, at its option, terminate this Agreement on
any date (the "Optional Termination Date") on which the aggregate Principal
Balance of the Unguaranteed Interests is less than 5% of the Facility Limit by
purchasing, on the next succeeding Remittance Date, all of the Unguaranteed
Interests in the SBA Loans and Foreclosed Properties at a price equal to the sum
of (i) 100% of the then outstanding and Aggregate Note Principal Balance, (ii)
the Interest Distribution Amount, (iii) the Program Fee, (iv) any Breakage Costs
and (v) any amounts owed to any Hedge Counterparty under any Hedging Agreement
or Hedge Transaction (including Hedge Breakage Costs) (the "Termination Price").

                  Notice of any termination, specifying the Remittance Date upon
which the Trust Fund will terminate and that the Noteholders shall surrender
their Notes to the Indenture Trustee for payment of the final distribution and
cancellation shall be given promptly by the Servicer by letter to Noteholders
and the Administrative Agent mailed during the month of such final distribution
before the Determination Date in such month, specifying (i) the Remittance Date
upon which final payment of the Notes will be made upon presentation and
surrender of Notes at the office of the Indenture Trustee therein designated,
(ii) the amount of any such final payment and (iii) that the Record Date
otherwise applicable to such Remittance Date is not applicable, payments being
made only upon presentation and surrender of the Notes at the office of the
Indenture Trustee therein specified. The Servicer shall give such notice to the
Indenture Trustee and the SBA at the time such notice is given to Noteholders.
Any obligation of the Servicer to pay amounts due to the Indenture Trustee shall
survive the termination of this Agreement.

                  Section 10.02.    Accounting Upon Termination of
                                    Servicer

                  Upon termination of the Servicer under Article IX hereof, the
Servicer shall:

                  (a) deliver to its successor or, if none shall yet have been
appointed, to the Indenture Trustee the funds in any Principal and Interest
Account;

                  (b) deliver to its successor or, if none shall yet have been
appointed, to the Indenture Trustee all SBA Files and related documents and
statements held by it hereunder and an SBA Loan portfolio computer diskette;


                                       52
<PAGE>   59
                  (c) deliver to its successor or, if none shall yet have been
appointed, to the Indenture Trustee and to the Administrative Agent a full
accounting of all funds, including a statement showing the Monthly Payments
collected by it and a statement of monies held in trust by it for the payments
or charges with respect to the SBA Loans; and

                  (d) execute and deliver such instruments and perform all acts
reasonably requested in order to effect the orderly and efficient transfer of
servicing of the SBA Loans to its successor and to more fully and definitively
vest in such successor all rights, powers, duties, responsibilities, obligations
and liabilities of the Servicer under this Agreement.


                                       53
<PAGE>   60
                                   ARTICLE XI

                            MISCELLANEOUS PROVISIONS

                  Section 11.01     Acts of Noteholders.

                  Except as otherwise specifically provided herein, whenever
Noteholder action, consent or approval is required under this Agreement, such
action, consent or approval shall be deemed to have been taken or given on
behalf of, and shall be binding upon, all Noteholders if the Majority
Noteholders agree to take such action or give such consent or approval.

                  Section 11.02     Amendment.

                  (a) This Agreement may be amended from time to time by the
Servicer and the Trust with the consent of the Indenture Trustee, the SBA and
the Administrative Agent, without notice to or consent of the Noteholders, the
Certificateholders or any Hedge Counterparty, to cure any ambiguity, to correct
or supplement any provisions herein, to comply with any changes in the Code, or
to make any other provisions with respect to matters or questions arising under
this Agreement which shall not be inconsistent with the provisions of this
Agreement; provided, however, that such action shall not, as evidenced by an
Opinion of Counsel delivered to the Indenture Trustee and the SBA, adversely
affect the interests of any Noteholder, Certificateholder or any Hedge
Counterparty or any other party and further provided that no such amendment
shall reduce in any manner the amount of, or delay the timing of, any amounts
received on SBA Loans which are required to be distributed on any Note or
Certificate without the consent of the Holder of such Note or Certificate, or
change the rights or obligations of any other party hereto or any Hedge
Counterparty without the consent of such party.

                  (b) This Agreement may be amended from time to time by the
Servicer and the Trust with the consent of the Indenture Trustee, the SBA and
the Administrative Agent, and the consent of the Majority Noteholders, for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Agreement or of modifying in any manner the rights of
the Holders; provided, however, that no such amendment shall reduce in any
manner the amount of, or delay the timing of, any amounts which are required to
be distributed on any Note without the consent of the Holder of such Note or
reduce the percentage of Holders which are required to consent to any such
amendment without the consent of the Holders of 100% of the Notes and
Certificates affected thereby.

                  Section 11.03.    Recordation of Agreement.

                  To the extent permitted by applicable law, this Agreement is
subject to recordation in all appropriate public offices for real property
records in all of the counties or other comparable jurisdictions in which any or
all of the properties subject to the Mortgages are situated, and in any other
appropriate public recording office or elsewhere, such recordation to be
effected by the Servicer at the Noteholders' expense on direction of the
Majority Noteholders, but only when accompanied by an Opinion of Counsel to the
effect that such recordation materially


                                       54
<PAGE>   61
and beneficially affects the interests of the Noteholders or is necessary for
the administration or servicing of the SBA Loans.

                  Section 11.04.    Duration of Agreement.

                  This Agreement shall continue in existence and effect until
terminated as herein provided.

                  SECTION 11.05.    GOVERNING LAW.

                  EXCEPT TO THE EXTENT INCONSISTENT WITH FEDERAL LAW, IN WHICH
CASE FEDERAL LAW WILL GOVERN, THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND REMEDIES
OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS,
WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.

                  Section 11.06.    Notices.

                  All demands, notices and communications hereunder shall be in
writing and shall be deemed to have been duly given if personally delivered at
or mailed by overnight mail, certified mail or registered mail, postage prepaid,
to (i) in the case of the Servicer and the Seller, First International Bank, 280
Trumbull Street, Hartford, Connecticut 06103, Attention: Theodore J. Horan, or
such other addresses as may hereafter be furnished to the Noteholders in writing
by the Seller and the Servicer, (ii) in the case of the Indenture Trustee, HSBC
Bank USA, 140 Broadway, New York, New York 10005, 12th Floor, Attention:
Corporate Trust Department, (iii) in the case of the Owner Trustee, First Union
Trust Company, National Association, One Rodney Square, 920 King Street,
Wilmington, Delaware 19801, Attention: Corporate Trust Administration, (iv) in
the case of the Noteholders, as set forth in the Note Register, (v) in the case
of the SBA, the United States Small Business Administration, 409 Third Street,
S.W., Washington, D.C. 20416, Attention: Associate Administrator for Financial
Assistance and (vi) in the case of the Administrative Agent, to First Union
Securities Inc., One First Union Center, TW9, Charlotte, North Carolina 28288,
Attention: Conduit Administration. Any such notices shall be deemed to be
effective with respect to any party hereto upon the receipt of such notice by
such party, except that notices to the Noteholders shall be effective upon
mailing or personal delivery.

                  Section 11.07.    Severability of Provisions.

                  If any one or more of the covenants, agreements, provisions or
terms of this Agreement shall be held invalid for any reason whatsoever, then
such covenants, agreements, provisions or terms shall be deemed severable from
the remaining covenants, agreements, provisions or terms of this Agreement and
shall in no way affect the validity or enforceability of the other covenants,
agreements, provisions or terms of this Agreement.


                                       55
<PAGE>   62
                  Section 11.08.    No Partnership.

                  Nothing herein contained shall be deemed or construed to
create a co-partnership or joint venture between the parties hereto and the
services of the Servicer shall be rendered as an independent contractor and not
as agent for the Noteholders.

                  Section 11.09.    Counterparts.

                  This Agreement may be executed in one or more counterparts and
by the different parties hereto on separate counterparts, each of which, when so
executed, shall be deemed to be an original; such counterparts, together, shall
constitute one and the same agreement.

                  Section 11.10.    Successors and Assigns.

                  This Agreement shall inure to the benefit of and be binding
upon the Seller and the Servicer, the Indenture Trustee and the Noteholders and
their respective successors and assigns.

                  Section 11.11.    Headings.

                  The headings of the various sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed to be
part of this Agreement.

                  Section 11.12.    Notification to Administrative Agent.

                  The Indenture Trustee shall give prompt notice to the
Administrative Agent of the occurrence of any of the following events of which
it has received notice: (1) any modification or amendment to this Agreement, (2)
any change of the Indenture Trustee, the Servicer or Paying Agent, (3) any Event
of Default or Servicer Termination Event, and (4) the final payment of all the
Notes. The Servicer shall promptly deliver to the Administrative Agent a copy of
each of the Servicer's Certificates.

                  Section 11.13  Inconsistencies.

                  If any provision of this Agreement is inconsistent with any
provision in the Multi-Party Agreement, the provision of the Multi-Party
Agreement shall control.

                  Section 11.14.  Limitation of Liability.

                  Notwithstanding any other provision herein or elsewhere, this
Agreement has been executed and delivered by First Union Trust Company, National
Association (the "Trust Company"), not in its individual capacity, but solely in
its capacity as Owner Trustee of the Trust, in no event shall the Trust Company
or the Owner Trustee have any liability in respect of the representations,
warranties, or obligations of the Trust hereunder or under any other Basic
Document, as to all of which recourse shall be had solely to the assets of the
Trust, and for all


                                       56
<PAGE>   63
purposes of this Agreement and each other Basic Document, the Owner Trustee and
the Trust Company shall be entitled to the benefits of the Trust Agreement.


                                       57
<PAGE>   64
                  IN WITNESS WHEREOF, the Seller, the Servicer and the Trust
have caused their names to be signed hereto by their respective officers
thereunto duly authorized as of the day and year first above written.

                             FIRST INTERNATIONAL BANK
                                 as Seller and Servicer


                             By:   /s/Theodore J. Horan
                                   --------------------------------------------
                             Name:  Theodore J. Horan
                             Title: Senior Vice President




                             FIB FUNDING TRUST,

                             By:   First Union Trust Company, National
                             Association, not in its individual capacity
                             but solely as Owner Trustee on behalf of the Trust



                             By:   /s/Edward L. Truitt, Jr.
                                   --------------------------------------------
                                   Name:  Edward L. Truitt, Jr.
                                   Title: Vice President


                                       58
<PAGE>   65
                             Accepted and Agreed to:

                             HSBC BANK USA, not in its individual
                             capacity, but solely as Indenture Trustee



                             By:  /s/Susan Barstock
                                   --------------------------------------------
                                  Name:  Susan Barstock
                                  Title: Assistant Vice President


                                       59
<PAGE>   66
STATE OF Delaware   )
      : ss.:
COUNTY OF New Castle )

                  On the 3rd day of November 1999 before me, a Notary Public in
and for said State, personally appeared Edward L. Truitt, Jr. known to me to be
an officer of First Union Trust Company, National Association, the trust company
that executed the within instrument, and also known to me to be the person who
executed it on behalf of said banking corporation, and acknowledged to me that
such banking corporation executed the within instrument.

                  IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.



                                   /s/Rita Marie Ritrovato Lawless
                                   --------------------------------------------
                                        Notary Public

                                   My Commission expires November 21, 1999

<PAGE>   67
STATE OF Connecticut )
      : ss.:
COUNTY OF Hartford )



                  On the 29th day of October 1999 before me, a Notary Public in
and for the State of Connecticut, personally appeared Theodore J. Horan known to
me to be the Senior Vice President of First International Bank, one of the
corporations that executed the within instrument and also known to me to be the
person who executed it on behalf of said corporation, and acknowledged to me
that such corporation executed the within instrument.

                  IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.



                                  /s/Maureen D. Coppola
                                   --------------------------------------------
                                  Notary Public


                                  My Commission expires December 31, 2003



<PAGE>   1
                                                                       Ex. 10.20

                                                                  Execution Copy
================================================================================

                             NOTE PURCHASE AGREEMENT

                           Dated as of October 1, 1999

                                      Among

                                FIB FUNDING TRUST

                                    as Issuer

                            FIRST INTERNATIONAL BANK

                                   as Servicer

                            the LIQUIDITY PURCHASERS

                                  named herein

                      VARIABLE FUNDING CAPITAL CORPORATION

                                as a CP Purchaser

                          FIRST UNION SECURITIES, INC.,

                 as VFCC Deal Agent and as Administrative Agent

                            FIRST UNION NATIONAL BANK

                             as VFCC Liquidity Agent

================================================================================
<PAGE>   2
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                               Page
<S>           <C>                                                              <C>
                                   ARTICLE I.

                                   DEFINITIONS

Section 1.1   Certain Defined Terms..........................................    1
Section 1.2   Other Terms....................................................    7
Section 1.3   Computation of Time Periods....................................    7

                                   ARTICLE II

                              THE PURCHASE FACILITY

Section 2.1   Sale and Delivery of the Note..................................    7
Section 2.2   The Purchases..................................................    9
Section 2.3   Reduction of the Purchase Limit................................    9
Section 2.4   Increased Costs; Capital Adequacy; Illegality..................   10
Section 2.5   Taxes..........................................................   11

                                   ARTICLE III

                             CONDITIONS OF PURCHASES

Section 3.1   Conditions Precedent to Initial Purchase.......................   13
Section 3.2   Conditions Precedent to Each Purchase..........................   13

                                   ARTICLE IV

                         REPRESENTATIONS AND WARRANTIES

Section 4.1   Representations and Warranties of the Issuer and the Servicer..   15
Section 4.2   Representations, Warranties and Agreements of the Purchasers...   18

                                    ARTICLE V

                                GENERAL COVENANTS

Section 5.1   General Covenants of the Issuer................................   19
Section 5.2   General Covenants of the Servicer..............................   19
</TABLE>


                                      -i-
<PAGE>   3
<TABLE>
<S>           <C>                                                              <C>
                                   ARTICLE VI

                                 INDEMNIFICATION

Section 6.1   Indemnities by the Issuer......................................   20
Section 6.2   Indemnities by the Servicer....................................   20

                                   ARTICLE VII

       THE ADMINISTRATIVE AGENT, THE DEAL AGENTS AND THE LIQUIDITY AGENTS

Section 7.1   Authorization and Action.......................................   21
Section 7.2   Delegation of Duties...........................................   22
Section 7.3   Exculpatory Provisions.........................................   22
Section 7.4   Reliance.......................................................   23
Section 7.5   Non-Reliance on Deal Agents, Administrative Agents,
              Liquidity Agents and Other Purchasers..........................   24
Section 7.6   Reimbursement and Indemnification..............................   24
Section 7.7   Deal Agents, Administrative Agent and Liquidity Agents
              in their Individual Capacities.................................   25
Section 7.8   Successor Deal Agents, Administrative Agent or Liquidity Agents   25

                                  ARTICLE VIII

                           ASSIGNMENTS; PARTICIPATIONS

Section 8.1   Assignments and Participations.................................   26

                                   ARTICLE IX

                                  MISCELLANEOUS

Section 9.1   Amendments and Waivers.........................................   32
Section 9.2   Notices, Etc...................................................   33
Section 9.3   Ratable Payments...............................................   33
Section 9.4   No Waiver; Remedies............................................   33
Section 9.5   Binding Effect.................................................   33
Section 9.6   Term of this Agreement.........................................   34
Section 9.7   Governing Law..................................................   34
Section 9.8   Waiver of Jury Trial...........................................   34
Section 9.9   Costs and Expenses.............................................   34
Section 9.10  No Proceedings.................................................   35
Section 9.11  Recourse Against Certain Parties...............................   35
Section 9.12  Confidentiality................................................   36
Section 9.13  Counterparts...................................................   37
Section 9.14  Limitation of Liability........................................   37
Section 9.15  Inconsistencies................................................   37
</TABLE>


                                      -ii-
<PAGE>   4
LIST OF SCHEDULES AND EXHIBITS

<TABLE>
<S>          <C>
SCHEDULES
- ---------

SCHEDULE I   Conditions Precedent to Initial Purchase

EXHIBITS
- --------

EXHIBIT A    Form of Compliance Certificate and Funding Notice
EXHIBIT B    Form of Related Group Addition Notice
EXHIBIT C    Form of Assignment and Acceptance
EXHIBIT D    Form of CP Assignment and Acceptance
</TABLE>


                                     -iii-
<PAGE>   5
         NOTE PURCHASE AGREEMENT (the "Agreement"), dated as of October 1, 1999,
by and among:

                  (1)      FIB FUNDING TRUST (the "Issuer");

                  (2)      FIRST INTERNATIONAL BANK, as Servicer (the
                           "Servicer");

                  (3)      the financial institutions listed on the signature
                           pages of this Agreement under the heading "Liquidity
                           Purchasers" and their respective successors and
                           permitted assigns (the "Liquidity Purchasers");

                  (4)      VARIABLE FUNDING CAPITAL CORPORATION, a Delaware
                           corporation (together with its successors and
                           permitted assigns, "VFCC"), as purchaser (a "CP
                           Purchaser");

                  (5)      FIRST UNION SECURITIES, INC., ("FUSI"), as agent for
                           VFCC (a "Deal Agent" and the "VFCC Deal Agent"), and
                           as administrative agent (the "Administrative Agent");
                           and

                  (6)      FIRST UNION NATIONAL BANK, a national banking
                           association ("First Union"), as liquidity agent for
                           the VFCC Deal Agent (a "Liquidity Agent" and the
                           "VFCC Liquidity Agent")

         IT IS AGREED as follows:


                                    ARTICLE I

                                   DEFINITIONS

         Section 1.1 Certain Defined Terms.

                  (a) Certain capitalized terms used throughout this Agreement
are defined above or in this Section 1.1. In addition, capitalized terms used
but not defined herein have the meanings given to such terms in Appendix A to
the Sale and Servicing Agreement (the "Sale and Servicing Agreement"), dated as
of October 1, 1999, by and among the Issuer, the Servicer and the Indenture
Trustee.

                  (b) As used in this Agreement and its exhibits, the following
terms shall have the following meanings (such meanings to be equally applicable
to both the singular and plural forms of the terms defined).

Act: The Securities Act of 1933, as amended.
<PAGE>   6
Advance: Any and all advances made by a Purchaser pursuant to Section 2.2 of
this Agreement.

Affected Party:  As defined in Section 2.4(a).

Affiliate: With respect to a Person means any other Person controlling,
controlled by or under common control with such Person. For purposes of this
definition, "control" when used with respect to any specified Person means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" or "controlled" have meanings correlative
to the foregoing.

Basic Documents: This Agreement, the Indenture, the Sale and Servicing
Agreement, the Multi-Party Agreement, the Trust Agreement and each other
document entered into in connection with the foregoing, as the same may be
amended, supplemented, restated, replaced or otherwise modified from time to
time.

Borrowing Base: means, for any date of determination, the sum of (i) the product
of (A) 100% minus the Minimum Subordination Percentage and (B) the aggregate
Principal Balance of all Eligible Loans plus (ii) all amounts on deposit in the
Principal and Interest Account representing collections of principal on the
Unguaranteed Interests in the SBA Loans.

Closing Date: December 13, 1999.

Collection Date: The date following the Termination Date on which the principal
amount of the Note has been reduced to zero, the Purchasers have received all
amounts of interest due in respect of the Note and other amounts due to the
Purchasers in connection with this Agreement and the Indenture and each party to
this Agreement has received all amounts due to it in connection with this
Agreement.

Commercial Paper: On any day, any commercial paper note issued by a CP Purchaser
for the purpose of financing or maintaining its investment in the Note.

Commitment: For each Liquidity Purchaser, the commitment of such Liquidity
Purchaser to fund Advances in an amount not to exceed the amount set forth
opposite such Liquidity Purchaser's name on the signature pages of this
Agreement, as such amount may be modified in accordance with the terms hereof.

Commitment Termination Date: December 12, 2002 or such other date to which the
Commitment Termination Date may be modified in accordance with the terms of
Section 2.1(c) or (e).

Compliance Certificate: As defined in Section 3.2(c).

Concentration and Mix Criteria: On any day, each of the concentration
limitations set forth below, which concentrations shall be measured on the basis
of a percentage of the Outstanding Amount:


                                      -2-
<PAGE>   7
                  (a) the sum of the Principal Balances of the Obligors of
Eligible Loans located in any one state is limited to 35% (or 40% for
Connecticut);

                  (b) the sum of the Principal Balances of Eligible Loans from a
particular industry (as defined by the four digit SIC) is limited to 25%;

                  (c) the largest Principal Balance for an individual Eligible
Loan is limited to (i) $1,000,000 during the first six months following the
Closing Date and during the first six months following any Securitization and
(ii) thereafter, the greater of $1,000,000 and 2.0%;

                  (d) the aggregate Principal Balance of the five largest
Eligible Loans is limited to (i) $5,000,000 during the first six months
following the Closing Date and during the first six months following any
Securitization and (ii) thereafter, the greater of $5,000,000 or 7.5%; and

                  (e) the aggregate Principal Balance of all Eligible Loans risk
rated "3W" is limited to 20%.

CP Purchaser: Variable Funding Capital Corporation, and any other Person
approved by the SBA that has the option to fund Advances pursuant to this
Agreement or a properly completed Related Group Addition Notice in the form of
Exhibit B hereto or a properly completed CP Assignment and Acceptance in the
form of Exhibit D hereto.

Deal Agent: With respect to VFCC, the VFCC Deal Agent. With respect to any other
CP Purchaser, the Person acting as agent for such CP Purchaser pursuant to a
properly completed Related Group Addition Notice in the form of Exhibit B
hereto.

Eligible Assignee: (a) A Person whose short-term rating is at least "A-1" from
S&P and "P-1" from Moody's, or whose obligations under this Agreement are
unconditionally guaranteed by a Person whose short-term rating is at least "A-1"
from S&P and "P-1" from Moody's, or (b) such other Person satisfactory to the CP
Purchasers, the Deal Agents and each of the Rating Agencies rating the
Commercial Paper and approved, in writing, by the Issuer and the SBA; provided,
however, that no such approval by the Issuer shall be required in the event any
Liquidity Purchaser is required by any Rating Agency rating the CP Purchasers'
commercial paper notes or by any regulatory agency to make an assignment.

Eligible Loan: An SBA Loan that satisfies the requirements set forth in Section
3.02 of the Sale and Servicing Agreement.

Facility: The agreements and obligations of the parties hereto, as evidenced by
the terms and provisions of this Agreement.

Facility Termination Date: December 12, 2002 or such other date to which the
Facility Termination Date may be modified in accordance with the terms of
Section 2.1(d) or (e).


                                      -3-
<PAGE>   8
Fee Letter: The letter agreement, dated as of October 1, 1999, between the
Issuer and the VFCC Deal Agent, as amended from time to time, and any other
similar agreement entered into from time to time between the Issuer and a CP
Purchaser or its Deal Agent.

First Union: First Union National Bank, in its individual capacity, and its
successors or assigns.

FTA: Colson Services Corp., in its capacity as agent of the SBA under the
Multi-Party Agreement, or any successor thereto appointed by the SBA.

Funding Account: As defined in the Sale and Servicing Agreement.

Funding Notice: As defined in Section 2.1(b).

GAAP: Generally accepted accounting principles as in effect from time to time in
the United States.

Increased Costs: Any amounts required to be paid by the Issuer to an Affected
Party pursuant to Section 2.4.

Indemnified Amounts: As defined in Section 6.1.

Indemnified Party: As defined in Section 6.1.

Indenture Trustee: HSBC Bank USA, or its successor in interest, or any successor
trustee appointed as provided in the Indenture.

Ineligible Loan: An SBA Loan that breaches a representation or warranty
contained in Section 3.02 of the Sale and Servicing Agreement.

Initial Purchase Date: The date on which the initial Purchaser initially
purchases the Note from the Issuer.

Liquidity Agent: With respect to VFCC, the VFCC Liquidity Agent. With respect to
any other CP Purchaser, the Person acting as agent for its related Liquidity
Purchasers pursuant to a properly completed Related Group Addition Notice in the
form of Exhibit B hereto.

Liquidity Purchaser: First Union, and each other liquidity bank that agrees to
fund Advances pursuant to a properly completed Related Group Addition Notice in
the form of Exhibit B hereto or a properly completed Assignment and Acceptance
in the form of Exhibit C hereto.

Loss Rate: As defined in the Multi-Party Agreement.

Minimum Subordination Percentage: Means, for any date of determination, the
greater of (i) 7.0% and (ii) twice the Seller's then applicable Loss Rate.


                                      -4-
<PAGE>   9
Moody's: Moody's Investors Service, Inc., and any successor thereto.

Note: The Note issued by the Issuer to the Administrative Agent, on behalf of
the Purchasers, hereunder pursuant to the terms of this Agreement and the
Indenture.

Outstanding Amount: The aggregate principal amount of the Note outstanding on
the date of determination.

Person: An individual, partnership, corporation (including a business trust),
joint stock company, limited liability company, limited partnership, limited
liability partnership, trust, association, joint venture, any governmental
authority or any other entity of any nature.

Principal Balance: The meaning set forth in Appendix A to the Sale and Servicing
Agreement.

Purchase: The initial purchase by a Purchaser of the Note from the Issuer and
the payment of any additional Advance by a Purchaser.

Purchase Date: Any day on which a Purchaser makes a Purchase.

Purchase Limit: (i) $60,000,000; or (ii) such other amount as may be agreed to
in writing among the Issuer, the Liquidity Agents and the Deal Agents (with the
prior written consent of the SBA); provided, however, that at all times, on or
after the Termination Date, the "Purchase Limit" shall mean the then outstanding
principal amount of the Note and, provided, further, that the "Purchase Limit"
may be reduced in accordance with the provisions of Section 2.3. No CP Purchaser
shall be obligated to fund any Advance.

Purchasers: Collectively, the CP Purchasers and the Liquidity Purchasers and any
other Person that may agree from time, pursuant to the pertinent Assignment and
Acceptance, to fund an Advance hereunder and their successors and assigns.
ratable: With respect to each Related Group shall mean the fraction, expressed
as a percentage, the numerator of which is the Commitment applicable to all
Liquidity Purchasers in such Related Group and the denominator of which is the
aggregate Commitment applicable to all Liquidity Purchasers in all Related
Groups.

Rating Agency: Each of S&P, Moody's and any other rating agency that has been
requested to issue a rating with respect to the commercial paper notes issued by
a CP Purchaser.

Register: As defined in Section 8.1(c).

Related: VFCC, the VFCC Deal Agent, the VFCC Liquidity Agent and First Union are
deemed to be "related" as one group, and for any other CP Purchaser, such CP
Purchaser and its Deal Agent, Liquidity Agent and Liquidity Purchasers shall be
deemed to be "related" as another group.


                                      -5-
<PAGE>   10
Related Group: For each CP Purchaser, (i) such CP Purchaser and its related Deal
Agent, Liquidity Agent and Liquidity Purchasers and (ii) any other CP Purchaser
having the same related Deal Agent, Liquidity Agent and Liquidity Purchasers.

Required Purchasers: At a particular time, all (or 100%) of the Liquidity
Purchasers.

Required Rating: A rating of at least "A" by S&P and "A2" by Moody's (pertaining
to a party's long-term unsecured debt obligations), and at least "A-1" by S&P
and "P-1" by Moody's (pertaining to a party's short-term unsecured debt
obligations).

SBA: The United States Small Business Administration, an agency of the United
States Government.

Securitization: A transaction pursuant to which the Unguaranteed Interests in
the SBA Loans are transferred by the Issuer to another trust or special purpose
entity and securities backed by or representing a beneficial ownership interest
in such Unguaranteed Interests are sold to third-party investors.

Seller: First International Bank, a Connecticut bank and trust company, and its
permitted successors and assigns.

Servicer Indemnified Amounts: As defined in Section 6.2.

Servicer Indemnified Party: As defined in Section 6.2.

S&P: Standard & Poor's Ratings Services, a division of The McGraw-Hill
Companies, Inc., and any successor thereto.

Subordination Percentage: Means a fraction, expressed as a percentage,
calculated as 1.0 minus a fraction, the numerator of which is the Outstanding
Amount less all amounts on deposit in the Principal and Interest Account
representing payments of principal on the Unguaranteed Interests in the SBA
Loans and all amounts on deposit in the Spread Account, and the denominator of
which is the aggregate Principal Balance of all Eligible Loans.

Taxes: Any present or future taxes, levies, imposts, duties, charges,
assessments or fees of any nature (including interest, penalties, and additions
thereto other than those arising out of an Affected Party's negligence) that are
imposed by any government or other taxing authority.

Termination Date: The earliest of (a) the Business Day designated as the
Termination Date by the Trust upon at least 2 Business Days' prior written
notice to each Deal Agent, (b) the second Business Day preceding the Facility
Termination Date, (c) the second Business Day preceding the Commitment
Termination Date or (d) the occurrence of an Event of Default.

UCC: The Uniform Commercial Code as in effect in the applicable jurisdiction.


                                      -6-
<PAGE>   11
United States: The United States of America.

VFCC Agent's Account: For amounts payable to VFCC or any VFCC-related entity, a
special account (account number 22341) in the name of the VFCC Deal Agent, or in
the name of VFCC, as the case may be, maintained at Bankers Trust Company, or
such other account as the VFCC Deal Agent may advise the Issuer.

         Section 1.2 Other Terms.

         All accounting terms not specifically defined herein shall be construed
in accordance with GAAP. All terms used in Article 9 of the UCC in the State of
New York, as applicable, and not specifically defined herein, are used herein as
defined in such Article 9.

         Section 1.3 Computation of Time Periods.

         Unless otherwise stated in this Agreement, in the computation of a
period of time from a specified date to a later specified date, the word "from"
means "from and including" and the words "to" and "until" each mean "to but
excluding."

                                   ARTICLE II

                              THE PURCHASE FACILITY

         Section 2.1 Sale and Delivery of the Note.

                  (a) On the basis of the representations and warranties and
subject to the terms and conditions herein set forth, the Issuer agrees to
deliver to the Administrative Agent, on or before the Initial Purchase Date, the
Note, which Note shall be duly executed by the Issuer, duly authenticated by the
Indenture Trustee and registered in the name of the Administrative Agent or its
nominee.

                  (b) On the terms and conditions hereinafter set forth, the
Issuer may request the Purchasers to increase the principal outstanding on the
Note (each such request, a "Funding Notice"), each such Funding Notice to be on
the terms and conditions set forth herein and in the Indenture and substantially
in the form of Exhibit A hereto. On each day prior to the Termination Date and
subject to the satisfaction of the terms and conditions hereinafter set forth
(including, without limitation, Section 2.2(b)), each CP Purchaser may, in its
sole discretion, make a Purchase, or if any CP Purchaser shall decline to
Purchase, the related Liquidity Purchaser shall make a Purchase, of its ratable
share of the amount requested under a Funding Notice from time to time during
the period from the date hereof to but not including the Termination Date.
Notwithstanding anything to the contrary herein contained, no Liquidity
Purchaser shall have any obligation to make any Purchase if, after giving effect
to such Purchase, the aggregate amount of outstanding Purchases made by such
Liquidity Purchaser would exceed the lesser of (X) such Liquidity Purchaser's
ratable share of the lesser of (i) the Purchase Limit or


                                      -7-
<PAGE>   12
(ii) the Borrowing Base or (Y) such Liquidity Purchaser's Commitment. Prior to
executing a Related Group Addition Notice, each CP Purchaser and each Liquidity
Purchaser that is part of a new Related Group shall purchase from the CP
Purchasers and Liquidity Purchasers of each existing Related Group, its ratable
share of all outstanding CP Advances and Liquidity Advances, respectively.

                  (c) The Issuer may, within 60 days, but no later than 45 days,
prior to the then Commitment Termination Date, by written notice to each Deal
Agent, with a copy to the Indenture Trustee and the SBA, request the CP
Purchasers and the Liquidity Purchasers to extend the Commitment Termination
Date for an additional period of up to 364 days from the date on which the
renewal is approved. Each of the CP Purchasers and each Liquidity Purchaser
shall make a determination, in its sole discretion and after a full credit
review, within 15 days of the Commitment Termination Date, as to whether or not
it will agree to extend the Commitment Termination Date; provided, however, that
the failure of the CP Purchasers or any Liquidity Purchaser to make a timely
response to the Issuer's request for extension of the Commitment Termination
Date shall be deemed to constitute a refusal by the CP Purchasers or the
Liquidity Purchaser, as the case may be, to extend the Commitment Termination
Date. The Commitment Termination Date shall only be extended upon the consent of
(i) the CP Purchasers, (ii) 100% of the Liquidity Purchasers and (iii) the SBA.
Any such renewal shall become effective only upon written confirmation to the
Issuer by each Deal Agent on behalf of its related CP Purchaser and Liquidity
Purchaser of its agreement to so renew and upon receipt by each Deal Agent of
any fees required to be paid in connection with such renewal and any such
renewal shall be binding upon the related CP Purchaser and Liquidity Purchaser.

                  (d) The Issuer may, within 60 days, but no later than 45 days,
prior to the then Facility Termination Date, by written notice to each Deal
Agent, with a copy to the Indenture Trustee and the SBA, request the CP
Purchasers and the Liquidity Purchasers to extend the Facility Termination Date.
Each of the CP Purchasers and each Liquidity Purchaser shall make a
determination, in its sole discretion and after a full credit review, within 15
days of the Facility Termination Date, as to whether or not it will agree to
extend the Facility Termination Date; provided, however, that the failure of the
CP Purchasers or any Liquidity Purchaser to make a timely response to the
Issuer's request for extension of the Facility Termination Date shall be deemed
to constitute a refusal by the CP Purchasers or the Liquidity Purchaser, as the
case may be, to extend the Facility Termination Date. The Facility Termination
Date shall only be extended upon the consent of (i) the CP Purchasers, (ii) 100%
of the Liquidity Purchasers and (iii) the SBA. Any such renewal shall become
effective only upon written confirmation to the issuer by each Deal Agent on
behalf of its related CP Purchaser and Liquidity Purchaser of its agreement to
so renew and upon receipt by each Deal Agent of any fees required to be paid in
connection with such renewal and any such renewal shall be binding upon the
related CP Purchaser and Liquidity Purchaser.

                  (e) Notwithstanding the foregoing Sections 2.1(c) and (d),
upon any conversion of the Servicer from a regulated bank to a commercial
finance company (the "Conversion"), which is otherwise subject to the provisions
of the Sale and Servicing Agreement, the Commitment Termination Date and the
Facility Termination Date shall be the date that is the earlier of (i) the


                                      -8-
<PAGE>   13
date that is 364 days after the date of the Conversion, or (ii) the then
Commitment Termination Date, unless the CP Purchases, 100% of the Liquidity
Purchasers and the SBA, upon appropriate due diligence and credit approvals
agree that the then Commitment Termination Date and Facility Termination Date
should not be accelerated.

         Section 2.2 The Purchases.

                  (a) Subject to the conditions described in Section 2.1, the
initial Purchase shall be made in accordance with the procedures described in
Section 2.2(b). After the date of the initial Purchase, until the occurrence of
the Termination Date, the CP Purchasers and the Liquidity Purchasers shall make
subsequent Purchases in accordance with the provisions of the Indenture, but
subject to the provisions of Section 2.1 (b) and Section 2.2 hereof.

                  (b) Each Purchase shall be made at least two Business Days
after receipt by the Purchaser of a written Funding Notice substantially in the
form of Exhibit A hereto delivered by the Issuer to each Deal Agent. Each
Funding Notice must be received by the Deal Agents no later than 3:00 p.m. on a
Business Day. If any Funding Notice is received by a Deal Agent after 3:00 p.m.
on a Business Day or on a day that is not a Business Day, such Funding Notice
shall be deemed to be received by such Deal Agent at 9:00 a.m. on the next
following Business Day. Each such notice shall specify the amount by which the
principal of the Note is to increase on such Purchase Date. The Issuer shall
deliver no more than one such notice to each Deal Agent in any calendar month,
and each amount specified in any such notice must be in an aggregate amount for
all Purchasers at least equal to (i) $5,000,000 in the case of the initial
Purchase and (ii) $500,000 in the case of any subsequent Purchase, and integral
multiples of $1,000 in excess thereof provided, however, that such Advance shall
not (x) exceed the product of (A) 100% minus the Minimum Subordination
Percentage and (B) the aggregate Principal Balance of the Eligible Loans being
transferred to the Issuer in connection with such Advance and (y) cause the
Outstanding Amount of the Notes to exceed the lesser of (i) the Borrowing Base
or (ii) the Purchase Limit. Following receipt of such notice, each Deal Agent
shall determine whether or not its related CP Purchaser shall make the Purchase.
If a CP Purchaser declines to make the Purchase, such Purchase will be made by
the related Liquidity Purchaser. On the date of such Purchase, each CP Purchaser
or each Liquidity Purchaser shall, upon satisfaction of the applicable
conditions set forth in Article III, make available to the Issuer, in same day
funds, in the Funding Account, an amount equal to such CP Purchaser's or such
Liquidity Purchaser's ratable share of the Purchase.

         Section 2.3 Reduction of the Purchase Limit.

         The Issuer may, upon at least 30 days' written notice to the Deal
Agents, with a copy to the Indenture Trustee and the SBA, terminate in whole or
reduce in part the unused Purchase Limit; provided, however, that each partial
reduction of the Purchase Limit shall be in amounts equal to $1,000,000 or an
integral multiple thereof. Each notice of reduction or termination pursuant to
this Section 2.3 shall be irrevocable.


                                      -9-
<PAGE>   14
         Section 2.4 Increased Costs; Capital Adequacy; Illegality.

                  (a) If either (i) the introduction of or any change
(including, without limitation, any change by way of imposition or increase of
reserve requirements) in or in the interpretation of any law or regulation or
(ii) the compliance by a Purchaser or any Affiliate thereof (each of which, an
"Affected Party") with any new guideline or request from any central bank or
other governmental agency or authority having authority over the Affected Party
(whether or not having the force of law), (A) shall subject an Affected Party to
any Tax (except for Taxes on the overall net income of such Affected Party),
duty or other charge with respect to a Purchase, or any right to make Purchases
hereunder, or on any payment made hereunder or (B) shall impose, modify or deem
applicable any reserve requirement (including, without limitation, any reserve
requirement imposed by the Board of Governors of the Federal Reserve System, but
excluding any reserve requirement, if any, included in the determination of the
interest rate on the Notes), special deposit or similar requirement against
assets of, deposits with or for the amount of, or credit extended by, any
Affected Party or (C) shall impose any other condition affecting a Purchase or a
Purchaser's rights hereunder, the result of which is to increase the cost to any
Affected Party or to reduce the amount of any sum received or receivable by an
Affected Party under this Agreement, then within ten days after demand by such
Affected Party (which demand shall be reasonable and accompanied by a statement
setting forth in reasonable detail the basis and calculations supporting such
demand), the Issuer shall pay directly to such Affected Party such additional
amount or amounts as will compensate such Affected Party for such additional or
increased cost incurred or such reduction suffered. The Issuer shall also have
the right to give a notice of termination and terminate the Agreement; provided,
however, the Issuer shall immediately pay to the CP Purchasers an amount equal
to the sum of all amounts due under the Note on such date, together with all of
the CP Purchasers' fees and costs occasioned by such early termination. The
Issuer shall remain liable for any and all amounts due under this Section 2.4(a)
which accrued prior to the effective date of such termination.

                  (b) If either (i) the introduction of or any change in or in
the interpretation of any law, guideline, rule, regulation, directive or request
or (ii) compliance by any Affected Party with any new law, guideline, rule,
regulation, directive or request from any central bank or other governmental
authority or agency having authority over the Affected Party (whether or not
having the force of law), regarding capital adequacy, has or will have the
effect of reducing the rate of return on the capital of any Affected Party
(including, without limitation, any capital requirement imposed by the Board of
Governors of the Federal Reserve System, but excluding any capital requirement,
if any, included in the determination of the interest rate on the Note) as a
consequence of its obligations hereunder or arising in connection herewith to a
level below that which any such Affected Party could have achieved but for such
introduction, change or compliance (taking into consideration the policies of
such Affected Party with respect to capital adequacy) by an amount deemed by
such Affected Party to be material, then from time to time, within ten days
after demand by such Affected Party after the Affected Party has accrued,
expensed or realized such reduced rate of return (which demand shall be
accompanied by a statement setting forth the basis for such demand), the Issuer
shall pay directly to such Affected Party such additional amount or amounts as
will compensate such Affected Party for such reduction.


                                      -10-
<PAGE>   15
                  (c) If as a result of any event or circumstance similar to
those described in clauses (a) or (b) of this section, any Affected Party is
required to compensate a bank or other financial institution providing liquidity
support, credit enhancement or other similar support to such Affected Party in
connection with this Agreement or the funding or maintenance of Purchases
hereunder, then within ten days after demand by such Affected Party, the Issuer
shall pay to such Affected Party such additional amount or amounts as may be
necessary to reimburse such Affected Party for any amounts paid by it.

                  (d) In determining any amount provided for in this section,
the Affected Party may use any reasonable averaging and attribution methods. Any
Affected Party making a claim under this section shall submit to the Issuer a
certificate as to such additional or increased cost or reduction, which
certificate shall be conclusive absent demonstrable error.

         Section 2.5 Taxes.

                  (a) All payments made by the Issuer or the Servicer under this
Agreement or the other Basic Documents will be made free and clear of and
without deduction or withholding for or on account of any Taxes, unless such
withholding or deduction is required by law. In such event, the Issuer or
Servicer, (as the case may be) shall pay to the appropriate taxing authority any
such Taxes required to be deducted or withheld and the amount payable to each
Purchaser will be increased (such increase, the "Additional Amount") such that
every net payment made under this Agreement after deduction or withholding for
or on account of any Taxes (including, without limitation, any Taxes on such
increase) is not less than the amount that would have been paid had no such
deduction or withholding been deducted or withheld. The foregoing obligation to
pay Additional Amounts, however, will not apply with respect to net income or
franchise taxes imposed on a Purchaser with respect to payments required to be
made by the Issuer or Servicer under this Agreement, by a taxing jurisdiction in
which such Purchaser is organized or conducts business (as the case may be). If
a Purchaser pays any Taxes in respect of which the Issuer is obligated to pay
Additional Amounts under this Section 2.5(a), to the extent such Purchaser has
not been reimbursed previously the Issuer shall promptly reimburse such
Purchaser in full. If the Issuer or Servicer pays any Additional Amount that
ultimately is determined not to be properly payable as an Additional Amount
under this Section 2.5(a), the applicable Purchaser shall reimburse the Issuer
or Servicer, as the case may be, for such amount upon receipt of evidence
satisfactory to such Purchaser that such amount was not properly payable.

         At the time any Tax in respect of which the Issuer or the Servicer has
paid an Additional Amount becomes due, then unless the Issuer would have been
responsible for the payment of such Tax under Section 2.4(a)(ii)(A), each
Purchaser shall rebate to the Issuer or the Servicer, as the case may be, the
amount of such Tax owed by such Purchaser which was paid as an Additional
Amount.

                  (b) To the extent not otherwise paid pursuant to Section 2.4,
the Issuer will indemnify each Purchaser and the each Deal Agent for the full
amount of Taxes in respect of which the Issuer is required to pay Additional
Amounts (including, without limitation, any Taxes imposed by any jurisdiction on
such Additional Amounts) paid by such Purchaser or Deal Agent


                                      -11-
<PAGE>   16
(as the case may be) and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto; provided, however, that
such Purchaser or Deal Agent, as appropriate, making a demand for indemnity
payment shall provide the Issuer, at its address set forth under its name on the
signature pages hereof, with a certificate from the relevant taxing authority or
from a responsible officer of such Purchaser or Deal Agent stating or otherwise
evidencing that such Purchaser or Deal Agent has made payment of such Taxes and
will provide a copy of or extract from documentation, if available, furnished by
such taxing authority evidencing assertion or payment of such Taxes. This
indemnification shall be made within ten days from the date the Purchaser or the
Deal Agent (as the case may be) makes written demand therefor.

                  (c) Within 30 days after the date of any payment by the Issuer
of any Taxes, the Issuer will furnish to the appropriate Deal Agent, at its
address set forth under its name on the signature pages hereof, appropriate
evidence of payment thereof.

                  (d) If a Purchaser is not created or organized under the laws
of the United States or a political subdivision thereof, such Purchaser shall,
to the extent that it may then do so under applicable laws and regulations,
deliver to the Issuer with a copy to each Deal Agent (i) within 15 days after
the date hereof, or, if later, the date on which such Purchaser becomes a
Purchaser hereunder two (or such other number as may from time to time be
prescribed by applicable laws or regulations) duly completed copies of IRS Form
4224 or Form 1001 (or any successor forms or other certificates or statements
which may be required from time to time by the relevant United States taxing
authorities or applicable laws or regulations), as appropriate, to permit the
Issuer to make payments hereunder for the account of such Purchaser, as the case
may be, without deduction or withholding of United States federal income or
similar Taxes and (ii) upon the obsolescence of or after the occurrence of any
event requiring a change in, any form or certificate previously delivered
pursuant to this Section 2.5(d), copies (in such numbers as may from time to
time be prescribed by applicable laws or regulations) of such additional,
amended or successor forms, certificates or statements as may be required under
applicable laws or regulations to permit the Issuer to make payments hereunder
for the account of such Purchaser, without deduction or withholding of United
States federal income or similar Taxes.

                  (e) For any period with respect to which a Purchaser or a Deal
Agent has failed to provide the Issuer with the appropriate form, certificate or
statement described in clause (d) of this section (other than if such failure is
due to a change in law occurring after the date of this Agreement), such Deal
Agent or such Purchaser, as the case may be, shall not be entitled to the
protections of clauses (a) or (b) of this Section or Section 2.4 with respect to
any Taxes or Additional Amounts.

                  (f) The Issuer shall be entitled to receive solely from the
applicable Governmental Authority, any refunds payable by such Governmental
Authority in respect of Taxes paid by the Issuer. Within 30 days of the written
request of the Issuer therefor, the Deal Agent and the Purchaser, as
appropriate, shall execute and deliver to the Issuer such certificates, forms or
other documents which can be furnished consistent with the facts and which are
reasonably necessary to assist the Issuer in applying for refunds of Taxes
remitted hereunder; provided, however, that the Deal Agent and the Purchaser
shall not be required to deliver such


                                      -12-
<PAGE>   17
certificates, forms or other documents if they reasonably determine that the
delivery of such certificate, form or other document would have a material
adverse affect on the Deal Agent or Purchaser; and, provided, further, that the
Issuer shall reimburse the Deal Agent or Purchaser for any reasonable expenses
incurred in the delivery of such certificate, form or other document.

                  (g) If, in connection with an agreement or other document
providing liquidity support, credit enhancement or other similar support to the
Purchasers in connection with this Agreement or the funding or maintenance of
Purchases hereunder, the Purchasers are required to compensate a bank or other
financial institution in respect of Taxes under circumstances similar to those
described in this section then within ten days after demand by the Purchasers,
the Issuer shall pay to the Purchasers such additional amount or amounts as may
be necessary to reimburse the Purchasers for any amounts paid by them.

                  (h) Without prejudice to the survival of any other agreement
of the Issuer hereunder, the agreements and obligations of the Issuer contained
in this section shall survive the termination of this Agreement.

                                   ARTICLE III

                             CONDITIONS OF PURCHASES

         Section 3.1 Conditions Precedent to Initial Purchase.

         The initial Purchase hereunder is subject to the satisfaction, on or
before the date of such purchase, as determined by the Deal Agents, of each
condition precedent listed in Schedule I.

         Section 3.2 Conditions Precedent to Each Purchase.

         Each Purchase (including the initial Purchase) from the Issuer shall be
subject to the further conditions precedent: (a) the Deal Agents shall have
received a Funding Notice no later than 3:00 p.m. on the second Business Day
immediately prior to the date of such Purchase, (b) on the date of such Purchase
the following statements shall be true and the Issuer by accepting the amount of
such Purchase shall be deemed to have certified that:

                  (i) The representations and warranties contained in Section
         4.1 are true and correct on and as of such day as though made on and as
         of such date,

                  (ii) No event has occurred and is continuing, or would result
         from such Purchase which constitutes an Event of Default, or a material
         event which with notice or the passage of time or both would constitute
         an Event of Default,

                  (iii) On and as of such day, after giving effect to such
         Purchase, the principal amount of the Note does not exceed the lesser
         of (x) the Purchase Limit, or (y) the Borrowing Base,


                                      -13-
<PAGE>   18
                  (iv) On and as of such day, without giving effect to such
         Purchase, the Subordination Percentage is equal to or greater than the
         Minimum Subordination Percentage,

                  (v) On and as of such day, each of the Issuer, the Seller and
         the Servicer has performed in all material respects all of the
         agreements contained in this Agreement, the Indenture, the Sale and
         Servicing Agreement and the other Basic Documents to be performed by
         such Person at or prior to such day,

                  (vi) On and as of such date, the Seller is "well capitalized"
         as defined in 12 CFR Part 325,

                  (vii) The Servicer shall have received from the Indenture
         Trustee a receipt in the form of Exhibit F to the Sale and Servicing
         Agreement acknowledging that the Indenture Trustee has received the
         documents required to be delivered to it pursuant to Section 2.04 of
         the Sale and Servicing Agreement,

                  (viii) On and as of such date, after giving effect to such
         Purchase, the Concentration and Mix Criteria shall be satisfied in all
         respects,

                  (ix) The proceeds of such Purchase will be used to fund SBA
         Loans, and

                  (x) No law or regulation shall prohibit, and no order,
         judgment or decree of any federal, state or local court or governmental
         body, agency or instrumentality shall prohibit or enjoin, the making of
         such Purchase by the Purchaser in accordance with the provisions
         hereof; and

no later than 3:00 p.m. on the second Business Day preceding the date of each
such Purchase the Deal Agents shall have received a certificate, substantially
in the form of Exhibit A hereto, of the President, a Senior Vice President, a
Vice President, the Controller, the Treasurer or any Assistant Treasurer of the
Servicer and of the Issuer (i) setting forth all information required under
Section 2.2(b) hereof, and (ii) certifying that each of the conditions set forth
in (i) through (v) of Section 3.2(b) has been satisfied in full on or before
such day and, with respect to all determinations of each element of each
calculation necessary to satisfy the conditions in Section 3.2(b)(iii), that
such calculations and determinations shall be based upon amounts and percentages
as of the date thereof (such certificate being referred to herein as a
"Compliance Certificate") and dated as of the date of such request; and, (d) the
Deal Agents shall have received, for their own account and for the accounts of
the Purchasers, all fees and expenses required by the Agreement to be paid on or
before the date of such Purchase.


                                      -14-
<PAGE>   19
                                   ARTICLE IV

                         REPRESENTATIONS AND WARRANTIES

         Section 4.1 Representations and Warranties of the Issuer and the
                     Servicer.

         Each of the Issuer and the Servicer represents and warrants as to
itself as follows:

                  (a) Organization. It is duly organized and validly existing in
good standing under the laws of the state of its organization, is duly qualified
and in good standing as a foreign entity and authorized to do business in all
other jurisdictions wherein the nature of its business or property makes such
qualification materially necessary, and has full power and authority to own its
properties and to conduct its business as presently conducted.

                  (b) Licenses and Approvals. It has obtained all necessary
licenses and approvals in all states in which the ownership or lease of property
or the conduct of its business requires such licenses and approvals except where
the failure to have such licenses and approvals does not have a material adverse
affect on its financial condition or on its ability to perform its obligations
under the Basic Documents.

                  (c) Authority. It has full power and authority to execute and
deliver, and perform each of its obligations under, each of the Basic Documents
to which it is a party, including the Issuer's use of the proceeds of Purchases,
and it has duly authorized the execution, delivery and performance of each of
the foregoing and, in the case of the Issuer, the sale of the Note to the
Purchasers by all necessary action.

                  (d) Enforceability. Each of the Basic Documents to which it is
a party constitutes its legal, valid and binding obligations, enforceable
against it in accordance with their respective terms, except as limited by
bankruptcy, reorganization, insolvency, fraudulent conveyance, moratorium and
other similar laws and equitable principles affecting creditors' rights and
remedies.

                  (e) No Conflicts. The consummation of the transactions
contemplated by and the fulfillment of the terms of the Basic Documents to which
it is a party will not conflict with, result in any breach of any of the terms
and provisions of, or constitute (with or without notice, lapse of time or both)
a default under its articles of organization or operating agreement or any
material indenture, agreement, mortgage, deed of trust or other material
instrument to which it is a party or by which it is bound, or result in the
creation or imposition of any Lien (other than as contemplated by this Agreement
or the Indenture) upon any of its properties pursuant to the terms of such
indenture, agreement, mortgage, deed of trust or other such instrument, other
than the Basic Documents, or violate any law, rule, regulation or any order
applicable to it of any court or of any federal or state regulatory body,
administrative agency or other governmental instrumentality having jurisdiction
over it or any of its properties.


                                      -15-
<PAGE>   20
                  (f) Legal Proceedings. There are no proceedings or
investigations to which it is a party pending, or, to its best knowledge,
threatened, before any court, regulatory body, administrative agency or other
tribunal or governmental instrumentality (a) asserting the invalidity of the
Basic Documents, (b) seeking to prevent the consummation of any of the
transactions contemplated by the Basic Documents, (c) seeking any determination
or ruling that would materially and adversely affect the performance by it of
its obligations under, or the validity or enforceability of, the Basic Documents
or (d) which would have a material adverse effect on its ability to perform its
obligations under the Basic Documents.

                  (g) Consents and Approvals. All approvals, authorizations,
consents, orders or other actions of any Person, corporation or other
organization, or of any court, governmental agency or body or official, required
in connection with the execution, delivery and performance of the Basic
Documents, have been received or taken, as the case may be.

                  (h) Information. No information, exhibit, financial statement,
document, book, record or report furnished or to be furnished by it to a Deal
Agent or a Purchaser, (i) is or will be inaccurate in any material respect as of
the date it is or shall be dated or (except as otherwise disclosed to the
recipient thereof at the time of delivery or thereafter) as of the date so
furnished, and (ii) no such document contains or will contain any material
misstatement of fact or omits or shall omit to state a material fact necessary
to make the statements contained therein not misleading in light of the
statements made therein and in other information furnished to a Deal Agent,
Administrative Agent, Liquidity Agent or Purchaser.

                  (i) Bulk Sales. The execution, delivery and performance of
this Agreement do not require compliance with any "bulk sales" law by Issuer.

                  (j) Solvency. The Issuer is solvent and the transactions under
this Agreement, the Basic Documents do not and will not impair such solvent
state of the Issuer.

                  (k) Selection Procedures. No procedures believed by the Issuer
to be materially adverse to the interests of the Purchasers were utilized by the
Issuer in identifying and/or selecting the SBA Loans.

                  (l) Taxes. The Issuer has filed or caused to be filed all Tax
returns which, to its knowledge, are required to be filed. The Issuer has paid
all Taxes and all assessments made against it or any of its property which have
become due (other than any amount of Tax the validity of which is currently
being contested in good faith by appropriate proceedings and with respect to
which reserves in accordance with generally accepted accounting principles have
been provided on the books of the Issuer), and no Tax lien has been filed
against it or the Issuer's property and, to the Issuer's knowledge, no claim is
being asserted, with respect to any such Tax, fee or other charge.

                  (m) Exchange Act Compliance. No proceeds of any Purchase will
be used by the Issuer to acquire any security in any transaction which is
subject to Section 13 or 14 of the Securities Exchange Act of 1934, as amended.


                                      -16-
<PAGE>   21
                  (n) SBA Compliance. The Servicer is party to a current Small
Business Administration Loan Guaranty Agreement (Deferred Participation) (SBA
Form 750), which agreement is in full force and effect, and the Servicer has not
been notified of the SBA's revocation of the Servicer's Preferred Lender or
Certified Lender status where such status then exists to originate SBA Loans
pursuant to the Small Business Administration Section 7(a) Guaranteed Program.

                  (o) Value Given. The Issuer shall have given reasonably
equivalent value in consideration for the transfer to the Issuer of the
Unguaranteed Interests in the SBA Loans under the Sale and Servicing Agreement,
no such transfer shall have been made for or on account of an antecedent debt,
and no such transfer is or may be voidable or subject to avoidance under any
section of the Bankruptcy Code or similar law.

                  (p) Accounting. The Issuer accounts for the transfers to it of
the Unguaranteed Interests in the SBA Loans under the Sale and Servicing
Agreement, as sales of such Unguaranteed Interests consistent with GAAP and with
the requirements set forth herein.

                  (q) Separate Entity. The Issuer is operated as an entity with
assets and liabilities distinct from those of the Servicer and any Affiliates
thereof (other than the Issuer), and the Issuer hereby acknowledges that the
Deal Agents and the Purchasers are entering into the transactions contemplated
by this Agreement in reliance upon the Issuer's identity as a separate legal
entity from the Servicer and from each such other Affiliate of the Servicer.

                  (r) Security Interest. The Issuer has granted a security
interest (as defined in the UCC) to the Indenture Trustee in the Unguaranteed
Interests in the SBA Loans and the other assets being pledged under the
Indenture, which is enforceable as a first priority security interest in
accordance with applicable law upon execution and delivery of the Indenture, the
Issuer acquiring an interest in such assets and the Issuer delivering the SBA
Notes to the FTA. All filings (including, without limitation, such UCC filings)
as are necessary in any jurisdiction to perfect the interest of the Indenture
Trustee in the Unguaranteed Interests in the SBA Loans and the other assets
being pledged under the Indenture have been (or prior to the applicable Purchase
will be) made.

                  (s) Investments. The Issuer does not own or hold directly or
indirectly, any capital stock or equity security of, or any equity interest in,
any Person.

                  (t) Investment Company Act. The Issuer is not an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.

                  (u) Offer and Sale. Neither the Issuer nor the Servicer nor
any person acting on behalf of either of them has offered to sell the Note by
any form of general solicitation or general advertising. Neither the Issuer nor
the Servicer has offered or sold the Note or other similar security in any
manner that would render the issuance and sale of the Note a violation of


                                      -17-
<PAGE>   22
the Act, or require registration pursuant thereto, nor has it authorized nor
will it authorize any person to act in such manner.

                  (v) Representations and Warranties. The representations and
warranties made by the Issuer, the Seller or the Servicer in the Indenture, this
Agreement and the Sale and Servicing Agreement and made in any officer's
certificate of the Issuer, the Seller or the Servicer delivered pursuant to the
Indenture, this Agreement and the Sale and Servicing Agreement will be true and
correct in all material respects at the time made and on and as of the
applicable Purchase Date (except as otherwise disclosed to the recipient
thereof).

                  (w) Ownership Interest. Immediately prior to the transfer of
the Unguaranteed Interests in the SBA Loans to the Issuer, the Seller held good
and indefeasible title to, and was the sole owner of, such Unguaranteed
Interests subject to no liens, charges, mortgages, encumbrances or rights of
others; and immediately upon the transfer and assignment contemplated by the
Sale and Servicing Agreement, the Issuer will hold good and indefeasible title
to, and will be the sole owner of, such Unguaranteed Interests subject to no
liens, charges, mortgages, encumbrances or rights of others except as
contemplated by the Basic Documents.

                  (x) Eligibility. Each SBA Loan on the applicable Transfer Date
is an Eligible Loan.

         The representations and warranties set forth in this section shall
survive the initial Purchase of the Note and any future Purchases. Upon
discovery by the Issuer, the Servicer, any Purchaser, any Liquidity Agent or any
Deal Agent of a breach of any of the foregoing representations and warranties,
the party discovering such breach shall give prompt written notice to the
others.

         Section 4.2 Representations, Warranties and Agreements of the
                     Purchasers.

         Each Purchaser hereby represents and warrants to, and agrees with, the
Issuer that:

                  (a) The Purchaser understands that the Note purchased by it
has not been registered under the Act or the securities laws of any State and,
if the Note is not then registered under applicable federal and State securities
law (which registration the Issuer is not obligated to effect), it will not
offer to sell, transfer or otherwise dispose of the Note or any portion thereof
except in a transaction which is exempt from such registration.

                  (b) The Purchaser is acquiring the Note for its own account,
and not as a nominee for any other person, and the Purchaser is not acquiring
the Note with a view to or for sale or transfer in connection with any
distribution of the Note under the Act, but subject, nevertheless, to any
requirement of law that the disposition of its property shall at all times be
within its control.

                  (c) The Purchaser will not dispose of the Note or any portion
thereof purchased by it in violation of any applicable securities laws.


                                      -18-
<PAGE>   23
                  (d) The Purchaser is an "accredited investor" as defined in
Regulation D under the Act, that is experienced in making investments such as
the Advances and is able to evaluate the merits and risks involved in financing
SBA Loans.

                  (e) The Purchaser is not, and is not purchasing for, or on
behalf of, a "benefit plan investor" as such term is defined in 29 C.F.R.
Section 2510.3-101, unless the transfer to, or holding of the Notes by, such
Person will either: (i) not result in any prohibited transaction under Title I
of the Employee Retirement Income Security Act of 1974, as amended, or excise
taxes under Section 4975 of the Internal Revenue Code of 1986, as amended, or
(ii) result in a prohibited transaction, but any such transaction will be
eligible for exemptive relief under Prohibited Transaction Class Exemption 91-38
(regarding investments by bank collective trust funds), Prohibited Transaction
Class Exemption 90-1 (relating to investments by insurance company separate
accounts), Prohibited Transaction Class Exemption 95-60 (relating to investments
by insurance company general accounts), Prohibited Transaction Class Exemption
84-14 (relating to investments by qualified professional asset managers) or
Prohibited Transaction Class Exemption 96-23 (relating to investments by
in-house asset managers).

                  (f) Neither the Purchaser nor any person acting on its behalf
has offered to sell the Note by any form of general solicitation or general
advertising. The Purchaser has not offered the Note in any manner that would
render the issuance and sale of the Note a violation of the Securities Act, or
require registration pursuant thereto, nor has it authorized nor will it
authorize any person to act in such manner.

                                    ARTICLE V

                                GENERAL COVENANTS

         Section 5.1 General Covenants of the Issuer.

                  (a) The Issuer hereby agrees to notify the Deal Agents, as
soon as possible, and in any event within five (5) days after notice to the
Issuer, of (a) the occurrence of any Event of Default, (b) any fact, condition
or event which, with the giving of notice or the passage of time or both, could
become an Event of Default, (c) the failure of the Issuer to observe any of its
material undertakings under the Basic Documents, or (d) any change in the status
or condition of the Issuer or the SBA Loans in the aggregate that would
reasonably be expected to adversely affect the Issuer's ability to perform its
obligations under the Basic Documents.

                  (b) The Issuer agrees not to sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
the Act) that would be integrated with the sale of the Note in a manner that
would require the registration under the Act of the sale to the Purchasers of
the Note.

         Section 5.2 General Covenants of the Servicer.


                                      -19-
<PAGE>   24
                  (a) The Servicer hereby agrees to notify the Deal Agents, as
soon as possible, and in any event within five (5) days after notice to the
Servicer, of (a) the occurrence of any Event of Default, (b) any fact, condition
or event which, with the giving of notice or the passage of time or both, could
become an Event of Default, (c) the failure of the Servicer to observe any of
its material undertakings under the Basic Documents, (d) the commencement of any
lawsuit, proceeding or investigation that, if determined adversely against the
Servicer, could reasonably be expected to have a material adverse effect on the
Note Purchaser, the Servicer's ability to perform its obligations under the
Basic Documents or in the financial condition, results of operations or business
or property of the Servicer and its affiliates, or (e) any change in the status
or condition of the Servicer or the SBA Loans in the aggregate that would
reasonably be expected to adversely affect the Servicer's ability to perform its
obligations under the Basic Documents.

                  (b) The Servicer agrees not to sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
the Act) that would be integrated with the sale of the Note in a manner that
would require the registration under the Act of the sale to the Purchasers of
the Note.

                                   ARTICLE VI

                                 INDEMNIFICATION

         Section 6.1 Indemnities by the Issuer.

         Without limiting any other rights which the Deal Agents, the
Administrative Agent, the Liquidity Agents, the Purchasers or any of their
respective Affiliates may have, hereunder or under applicable law, the Issuer
hereby agrees to indemnify each of the Deal Agents, the Administrative Agent,
the Liquidity Agents, the Purchasers and each of their respective Affiliates,
together with their respective successors and permitted assigns (each of the
foregoing Persons being individually called an "Indemnified Party") from and
against any and all damages, losses, claims, liabilities and related costs and
expenses, including reasonable attorneys' fees and disbursements (all of the
foregoing being collectively referred to as "Indemnified Amounts") awarded
against or incurred by any of them arising out of, or resulting from the breach
by the Issuer of any representation, warranty, covenant or obligation of the
Issuer of, this Agreement, any Basic Document or the Note, excluding, however,
Indemnified Amounts to the extent resulting from gross negligence or willful
misconduct on the part of any related Indemnified Party or any Affiliate
thereof.

         Any amounts subject to the indemnification provisions of this Section
6.1 shall be paid by the Issuer to the Indemnified Party within ten (10)
Business Days following the Indemnified Party's demand therefor, setting forth
in reasonable detail the basis therefor.

         Section 6.2 Indemnities by the Servicer.


                                      -20-
<PAGE>   25
         Without limiting any other rights which the Deal Agents, the
Administrative Agent, the Liquidity Agents, the Purchasers or any of their
respective Affiliates may have hereunder or under applicable law (but subject to
such limitations as may be included in the Basic Documents concerning the
Servicer's obligations to repurchase Unguaranteed Interests in SBA Loans), the
Servicer hereby agrees to indemnify each of the Deal Agents, the Administrative
Agent, the Liquidity Agents, the Purchasers and each of their respective
Affiliates, together with their respective successors and permitted assigns
(each of the foregoing Persons being individually called a "Servicer Indemnified
Party") from and against any and all damages, losses, claims, liabilities and
related costs and expenses, including reasonable attorneys' fees and
disbursements (all of the foregoing being collectively referred to as "Servicer
Indemnified Amounts") awarded against or incurred by any of them arising out of,
or resulting from the breach by the Servicer of any representation, warranty,
covenant or obligation of the Servicer of, this Agreement, any Basic Document or
the Note, excluding, however (i) Servicer Indemnified Amounts to the extent
resulting from gross negligence or willful misconduct on the part of any related
Servicer Indemnified Party or any Affiliate thereof and (ii) losses resulting
from the credit risk of the Obligors of the SBA Loans.

         Any amounts subject to the indemnification provisions of this Section
6.2 shall be paid by the Servicer to the Indemnified Party within ten (10)
Business Days following the Indemnified Party's demand therefor, setting forth
in reasonable detail the basis therefor.

                                   ARTICLE VII

       THE ADMINISTRATIVE AGENT, THE DEAL AGENTS AND THE LIQUIDITY AGENTS

         Section 7.1 Authorization and Action.

                  (a) Each Purchaser hereby designates and appoints its related
Deal Agent as a Deal Agent hereunder, and authorizes its related Deal Agent to
take such actions as agent on its behalf and to exercise such powers as are
delegated to the Deal Agents by the terms of this Agreement together with such
powers as are reasonably incidental thereto. Each Purchaser also hereby
designates and appoints the Administrative Agent as the Administrative Agent
hereunder, and authorizes the Administrative Agent to take such actions as agent
on its behalf and to exercise such powers as are delegated to the Administrative
Agent by the terms of this Agreement together with such powers as are reasonably
incidental thereto. Each Purchaser, each Deal Agent and the Administrative Agent
shall not have any duties or responsibilities, except those expressly set forth
herein, or any fiduciary relationship with any Purchaser or any other Deal
Agent, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities on the part of a Deal Agent or the Administrative
Agent shall be read into this Agreement or otherwise exist for each Deal Agent
or the Administrative Agent. In performing its functions and duties hereunder,
the Deal Agents and Administrative Agent shall act solely as agent for the
Purchasers and do not assume nor shall be deemed to have assumed any obligation
or relationship of trust or agency with or for the Issuer or any of its
successors or assigns. The Deal


                                      -21-
<PAGE>   26
Agents and Administrative Agent shall not be required to take any action which
exposes the Deal Agents and Administrative Agent to personal liability or which
is contrary to this Agreement or applicable law. The appointment and authority
of the Deal Agents and Administrative Agent hereunder shall terminate at the
indefeasible payment in full of all amounts due under the Note or under any Fee
Letter.

                  (b) Each Liquidity Purchaser hereby designates and appoints
its related Liquidity Agent as its Liquidity Agent hereunder, and authorizes
such Liquidity Agent to take such actions as agent on its behalf and to exercise
such powers as are delegated to such Liquidity Agent by the terms of this
Agreement together with such powers as are reasonably incidental thereto. Such
Liquidity Agent shall not have any duties or responsibilities, except those
expressly set forth herein, or any fiduciary relationship with any Liquidity
Purchaser, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities on the part of such Liquidity Agent shall be read
into this Agreement or otherwise exist for such Liquidity Agent. In performing
its functions and duties hereunder, such Liquidity Agent shall act solely as
agent for its related Liquidity Purchaser and does not assume nor shall be
deemed to have assumed any obligation or relationship of trust or agency with or
for the Seller or any of its successors or assigns. Such Liquidity Agent shall
not be required to take any action which exposes such Liquidity Agent to
personal liability or which is contrary to this Agreement or applicable law. The
appointment and authority of such Liquidity Agents hereunder shall terminate at
the indefeasible payment in full of all amounts due under the Note or under any
Fee Letter.

         Section 7.2 Delegation of Duties.

                  (a) The Deal Agents and Administrative Agent may execute any
of their duties under this Agreement by or through agents or attorneys-in-fact
and shall be entitled to advice of counsel concerning all matters pertaining to
such duties. The Deal Agents and Administrative Agent shall not be responsible
for the negligence or misconduct of any agents or attorneys-in-fact selected by
them with reasonable care.

                  (b) The Liquidity Agents may execute any of their duties under
this Agreement by or through agents or attorneys-in-fact and shall be entitled
to advice of counsel concerning all matters pertaining to such duties. The
Liquidity Agents shall not be responsible for the negligence or misconduct of
any agents or attorneys-in-fact selected by them with reasonable care.

                  (c) At least four Business Days prior to each Remittance Date,
each Deal Agent shall provide the Issuer with written notice of the amount of
interest and other fees that will be owing to such Deal Agent's Related Group on
such Remittance Date. Each Deal Agent shall, upon request of the Issuer,
cooperate with the Issuer in explaining how such interest amount was calculated.

         Section 7.3 Exculpatory Provisions.


                                      -22-
<PAGE>   27
                  (a) The Deal Agents and Administrative Agent, and any of their
directors, officers, agents or employees, shall not be (i) liable for any action
lawfully taken or omitted to be taken by it or them under or in connection with
this Agreement (except for its, their or such Person's own gross negligence or
willful misconduct or, in the case of the Deal Agents and Administrative Agent,
the breach of their obligations expressly set forth in this Agreement) or (ii)
responsible in any manner to any of the Purchasers for any recitals, statements,
representations or warranties made by the Issuer contained in this Agreement or
in any certificate, report, statement or other document referred to or provided
for in, or received under or in connection with, this Agreement or for the
value, validity, effectiveness, genuineness, enforceability or sufficiency of
this Agreement or any other document furnished in connection herewith, or for
any failure of the Issuer to perform its obligations hereunder, or for the
satisfaction of any condition specified in Article III. The Deal Agents and
Administrative Agent shall not be under any obligation to any Purchaser to
ascertain or to inquire as to the observance or performance of any of the
agreements or covenants contained in, or conditions of, this Agreement, or to
inspect the properties, books or records of the Issuer. The Deal Agents and
Administrative Agent shall not be deemed to have knowledge of any Event of
Default unless the Deal Agents and Administrative Agent have received notice
from the Issuer or a Purchaser.

                  (b) Neither of the Liquidity Agents nor any of their
directors, officers, agents or employees shall be (i) liable for any action
lawfully taken or omitted to be taken by it or them under or in connection with
this Agreement (except for its, their or such Person's own gross negligence or
willful misconduct or, in the case of the Liquidity Agents, the breach of their
obligations expressly set forth in this Agreement) or (ii) responsible in any
manner to the Deal Agents or any of the Purchasers for any recitals, statements,
representations or warranties made by the Issuer contained in this Agreement or
in any certificate, report, statement or other document referred to or provided
for in, or received under or in connection with, this Agreement or for the
value, validity, effectiveness, genuineness, enforceability or sufficiency of
this Agreement or any other document furnished in connection herewith, or for
any failure of the Issuer to perform its obligations hereunder, or for the
satisfaction of any condition specified in Article III. The Liquidity Agents
shall not be under any obligation to the Deal Agents or any Purchaser to
ascertain or to inquire as to the observance or performance of any of the
agreements or covenants contained in, or conditions of, this Agreement, or to
inspect the properties, books or records of the Issuer. The Liquidity Agents
shall not be deemed to have knowledge of any Event of Default unless the
Liquidity Agents have received notice from the Issuer, the Deal Agents or a
Purchaser.

         Section 7.4 Reliance.

                  (a) The Deal Agents and Administrative Agent shall in all
cases be entitled to rely, and shall be fully protected in relying, upon any
document or conversation believed by them 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
Issuer), independent accountants and other experts selected by the Deal Agents
and Administrative Agent. The Deal Agents and Administrative Agent shall in all
cases be fully justified in failing or refusing to take any action under this
Agreement or any other document


                                      -23-
<PAGE>   28
furnished in connection herewith unless they shall first receive such advice or
concurrence of the Purchasers or the Required Purchasers, as applicable, as it
deems appropriate or it shall first be indemnified to its satisfaction by the
Purchasers, provided, that unless and until the Deal Agents and Administrative
Agent shall have received such advice, the Deal Agents and Administrative Agent
may take or refrain from taking any action, as the Deal Agents and
Administrative Agent shall deem advisable and in the best interests of the
Purchasers. The Deal Agents and Administrative Agent shall in all cases be fully
protected in acting, or in refraining from acting, in accordance with a request
of the Purchasers or the Required Purchasers, as applicable, and such request
and any action taken or failure to act pursuant thereto shall be binding upon
all the Purchasers.

                  (b) The Liquidity Agents shall in all cases be entitled to
rely, and shall be fully protected in relying, upon any 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 Issuer), independent accountants
and other experts selected by the Liquidity Agents. The Liquidity Agents shall
in all cases be fully justified in failing or refusing to take any action under
this Agreement or any other document furnished in connection herewith unless it
shall first receive such advice or concurrence of Required Purchasers as it
deems appropriate or it shall first be indemnified to its satisfaction by the
Purchasers, provided, that unless and until the Liquidity Agents shall have
received such advice, the Liquidity Agents may take or refrain from taking any
action, as the Liquidity Agents shall deem advisable and in the best interests
of the Purchasers. The Liquidity Agents shall in all cases be fully protected in
acting, or in refraining from acting, in accordance with a request of the
Required Purchasers and such request and any action taken or failure to act
pursuant thereto shall be binding upon all the Purchasers.

         Section 7.5 Non-Reliance on Deal Agents, Administrative Agents,
                     Liquidity Agents and Other Purchasers.

         Each Purchaser expressly acknowledges that none of the Deal Agents, the
Administrative Agent, the Liquidity Agents, nor any of their officers,
directors, employees, agents, attorneys-in-fact or affiliates, has made any
representations or warranties to it and that no act by the Deal Agents and
Administrative Agent hereafter taken, including, without limitation, any review
of the affairs of the Issuer, shall be deemed to constitute any representation
or warranty by the Deal Agents or the Liquidity Agents. Each Purchaser
represents and warrants to the Deal Agents, the Administrative Agent, and to the
Liquidity Agents that it has and will, independently and without reliance upon
the Deal Agents, the Liquidity Agent or any other Purchaser and based on such
documents and information as it has deemed appropriate, made its own appraisal
of and investigation into the business, operations, property, prospects,
financial and other conditions and creditworthiness of the Issuer and made its
own decision to enter into this Agreement.

         Section 7.6 Reimbursement and Indemnification.

         The Liquidity Purchasers agree to reimburse and indemnify their related
CP Purchaser, their related Deal Agent, their related Liquidity Agent, the
Administrative Agent, and each of


                                      -24-
<PAGE>   29
their respective officers, directors, employees, representatives and agents
ratably according to their pro rata shares, to the extent not paid or reimbursed
by the Issuer or the Servicer (i) for any amounts for which their related CP
Purchaser, their related Liquidity Agent, acting in its capacity as Liquidity
Agent, or their related Deal Agent, acting in its capacity as Deal Agent, the
Administrative Agent, acting in its capacity as Administrative Agent, is
entitled to reimbursement by the Issuer or the Servicer hereunder and (ii) for
any other expenses incurred by their related CP Purchaser, their related
Liquidity Agent, acting in its capacity as Liquidity Agent, their related Deal
Agent, acting in its capacity as Deal Agent and acting on behalf of the
Purchasers, in connection with the administration and enforcement of this
Agreement.

         Section 7.7 Deal Agents, Administrative Agent and Liquidity Agents in
                     their Individual Capacities.

         The Deal Agents, the Administrative Agent, the Liquidity Agents and
each of their respective Affiliates may make loans to, accept deposits from and
generally engage in any kind of business with the Servicer or any Affiliate of
the Servicer as though the Deal Agents, the Administrative Agent or the
Liquidity Agents, as the case may be, were not the Deal Agents, the
Administrative Agent or the Liquidity Agents, as the case may be, hereunder.
With respect to the acquisition of the Note pursuant to this Agreement, the Deal
Agents, the Administrative Agent, the Liquidity Agents and each of their
respective Affiliates shall have the same rights and powers under this Agreement
as any Purchaser and may exercise the same as though it were not the Deal
Agents, the Administrative Agent, or the Liquidity Agents, as the case may be,
and the terms "Liquidity Purchaser," "Purchaser," "Liquidity Purchasers" and
"Purchasers" shall include the Deal Agents or the Liquidity Agents, as the case
may be, in their individual capacity.

         Section 7.8 Successor Deal Agents, Administrative Agent or Liquidity
                     Agents.

                  (a) Each Deal Agent may, upon 5 days' notice to the Issuer,
the SBA and the related Purchasers, and each Deal Agent will, upon the direction
of all its related Purchasers (other than such Deal Agent, in its individual
capacity) resign as a Deal Agent. The Administrative Agent may, upon 5 days'
notice to the Issuer, the SBA and the Purchasers, and the Administrative Agent
will, upon the direction of all the Required Purchasers, resign as
Administrative Agent. If such Deal Agent or Administrative Agent shall resign,
then the Purchasers related to such Deal Agent (with respect to a resigning Deal
Agent) or the Required Purchasers (with respect to the resigning Administrative
Agent) during such 5-day period shall appoint from among the applicable
Purchasers a successor agent. If for any reason no successor Deal Agent is
appointed during such 5-day period, then effective upon the expiration of such
five-day period, the Purchasers related to such Deal Agent shall perform all of
the duties of its related Deal Agent hereunder and the Issuer shall make all
payments in respect of the Note or under any Fee Letter directly to the
applicable Purchaser(s) and for all purposes shall deal directly with such
Purchasers. No resignation of the Administrative Agent shall be effective until
its successor shall have been appointed and accepted such appointment. After the
retiring Deal Agent's or Administrative Agent's resignation hereunder as Deal
Agent or Administrative Agent, the provisions of this Agreement shall inure to
its benefit and be binding upon it as to any actions


                                      -25-
<PAGE>   30
taken or omitted to be taken by it while it was Deal Agent or Administrative
Agent under this Agreement.

                  (b) Each Liquidity Agent may, upon 5 days' notice to the
Issuer, the SBA, the Deal Agents and the related Liquidity Purchasers, and each
Liquidity Agent will, upon the direction of all its related Liquidity Purchasers
(other than such Liquidity Agent, in its individual capacity) resign as
Liquidity Agent. If such Liquidity Agent shall resign, then its related
Purchasers during such 5-day period shall appoint from among the related
Liquidity Purchasers a successor Liquidity Agent. If for any reason no successor
Liquidity Agent is appointed by the applicable Purchasers during such 5-day
period, then effective upon the expiration of such 5-day period, the related
Liquidity Purchasers shall perform all of the duties of its related Liquidity
Agent hereunder and all payments in respect of the Note and any amount due at
any time hereunder or under any Fee Letter directly to the applicable Liquidity
Purchaser and for all purposes shall deal directly with the Liquidity
Purchasers. After any retiring Liquidity Agent's resignation hereunder as
Liquidity Agent, the provisions of this Agreement shall inure to its benefit and
be binding upon it as to any actions taken or omitted to be taken by it while it
was Liquidity Agent under this Agreement.

                                  ARTICLE VIII

                           ASSIGNMENTS; PARTICIPATIONS

         Section 8.1 Assignments and Participations.

                  (a) Each Liquidity Purchaser may upon at least 30 days notice
to its related CP Purchasers, the related Deal Agent, the related Liquidity
Agent, the Issuer, the Servicer, the SBA and S&P and Moody's, assign to one or
more banks or other entities satisfactory to the SBA and the Administrative
Agent all or a portion of its rights and obligations under this Agreement;
provided, however, that (i) each such assignment shall be of a constant, and not
a varying percentage of all of the assigning Liquidity Purchaser's rights and
obligations under this Agreement, (ii) the amount of the Commitment of the
assigning Liquidity Purchaser being assigned pursuant to each such assignment
(determined as of the date of the Assignment and Acceptance with respect to such
assignment) shall in no event be less than the lesser of (A) $15,000,000 or an
integral multiple of $1,000,000 in excess of that amount and (B) the full amount
of the assigning Liquidity Purchaser's Commitment, (iii) each such assignment
shall be to an Eligible Assignee, (iv) the parties to each such assignment shall
execute and deliver to the related Deal Agent, for their acceptance and
recording in the Register, an Assignment and Acceptance in the form of Exhibit C
hereto, together with a processing and recordation fee of $3,500 or such lesser
amount as shall be approved by the related Deal Agent, (v) such assignment shall
not require the Issuer to register as an "investment company" under the
Investment Company Act and (vi) the parties to each such assignment shall have
agreed to reimburse the related Deal Agent, Liquidity Agent and CP Purchasers
for all fees, costs and expenses (including, without limitation, the reasonable
fees and out-of-pocket expenses of counsel for the related Deal Agent, Liquidity
Agent and CP Purchasers) incurred by the related Deal Agent, Liquidity Agent and
CP Purchasers, respectively, in connection with such assignment, and,


                                      -26-
<PAGE>   31
provided, further, that upon the effective date of such assignment all of the
related CP Purchasers' internal control conditions shall be satisfied. Except
with respect to assignments to First Union or any of its banking Affiliates
which do not result in increased costs to Issuer or the Servicer, no such
assignment shall become effective unless the Issuer shall have consented in
writing thereto, which consent will not be unreasonably withheld. Upon such
execution, delivery and acceptance by the related Deal Agent and Liquidity Agent
and the recording by the related Deal Agent, from and after the effective date
specified in each Assignment and Acceptance, which effective date shall be the
date of acceptance thereof by the related Deal Agent and Liquidity Agent, unless
a later date is specified therein, (i) the assignee thereunder shall be a party
hereto and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such Assignment and Acceptance, have the rights and
obligations of a Liquidity Purchaser hereunder and (ii) the Liquidity Purchaser
assignor thereunder shall, to the extent that rights and obligations hereunder
have been assigned by it pursuant to such Assignment and Acceptance, relinquish
its rights and be released from its obligations under this Agreement except with
respect to actions theretofore taken (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Liquidity
Purchaser's rights and obligations under this Agreement, such Liquidity
Purchaser shall cease to be a party hereto).

                  (b) By executing and delivering an Assignment and Acceptance,
the Liquidity Purchaser assignor thereunder and the assignee thereunder confirm
to and agree with each other and the other parties hereto as follows: (i) other
than as provided in such Assignment and Acceptance, such assigning Liquidity
Purchaser makes no representation or warranty and assumes no responsibility with
respect to any statements, warranties or representations made in or in
connection with this Agreement or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or any other
instrument or document furnished pursuant hereto; (ii) such assigning Liquidity
Purchaser makes no representation or warranty and assumes no responsibility with
respect to the financial condition of the related CP Purchasers or the
performance or observance by the related CP Purchasers of any of its obligations
under this Agreement or any other instrument or document furnished pursuant
hereto; (iii) such assignee confirms that it has received a copy of this
Agreement, together with copies of such financial statements and other documents
and information as it has deemed appropriate to make its own credit analysis and
decision to enter into such Assignment and Acceptance; (iv) such assignee will,
independently and without reliance upon the related Deal Agent or Liquidity
Agent, such assigning Liquidity Purchaser or any other Liquidity Purchaser and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under this Agreement; (v) such assigning Liquidity Purchaser and such assignee
confirm that such assignee is an Eligible Assignee; (vi) such assignee appoints
and authorizes each of the related Deal Agent and Liquidity Agent to take such
action as agent on its behalf and to exercise such powers under this Agreement
as are delegated to such agent by the terms hereof, together with such powers as
are reasonably incidental thereto; (vii) such assignee agrees that it will
perform in accordance with their terms all of the obligations which by the terms
of this Agreement are required to be performed by it as a Liquidity Purchaser
and (viii) such assignee makes each of the representations and warranties
contained in Section 4.2.


                                      -27-
<PAGE>   32
                  (c) Each Deal Agent shall maintain at its address referred to
herein a copy of each Assignment and Acceptance delivered to and accepted by it
and a register for the recordation of the names and addresses of the related
Liquidity Purchasers and the Commitment of, and the interest in the Note owned
by each related investor from time to time (the "Register"). The entries in the
Register shall be conclusive and binding for all purposes, absent manifest
error, and the CP Purchasers, the Issuer, the Servicer and the Liquidity
Purchasers may treat each Person whose name is recorded in the Register as a
Liquidity Purchaser hereunder for all purposes of this Agreement. The Register
shall be available for inspection by the CP Purchasers, the Liquidity Agents,
the Issuer, the Servicer or any Liquidity Purchaser at any reasonable time and
from time to time upon reasonable prior notice.

                  (d) Subject to the provisions of Section 8.1(a), upon its
receipt of an Assignment and Acceptance executed by an assigning Liquidity
Purchaser and an assignee, the related Deal Agent and Liquidity Agent shall
each, if such Assignment and Acceptance has been completed and is in
substantially the form of Exhibit C hereto, accept such Assignment and
Acceptance, and the related Deal Agent shall then (i) record the information
contained therein in the Register and (ii) give prompt notice thereof to the
related CP Purchasers.

                  (e) With the prior consent of the SBA and the Administrative
Agent, each Liquidity Purchaser may sell participations to banks or other
entities which qualify as "institutional" accredited investors within the
meaning of Rule 501(a)(1)-(3) or (7) under the Act in or to all or a portion of
its rights and obligations under this Agreement (including, without limitation,
all or a portion of its Commitment and each interest in the Note owned by it);
provided, however, that (i) such Liquidity Purchaser's obligations under this
Agreement (including, without limitation, its Commitment hereunder) shall remain
unchanged, (ii) such Liquidity Purchaser shall remain solely responsible to the
other parties hereto for the performance of such obligations, (iii) such
participation shall not require the Issuer to register as an "investment
company" under the Investment Company Act and (iv) the Deal Agents and the other
Liquidity Purchasers shall continue to deal solely and directly with such
Liquidity Purchaser in connection with such Liquidity Purchaser's rights and
obligations under this Agreement. Notwithstanding anything herein to the
contrary, each participant shall have the rights of a Liquidity Purchaser
(including any right to receive payment) under Sections 2.4 and 2.5; provided,
however, that no participant shall be entitled to receive payment under such
Sections in excess of the amount that would have been payable under such
Sections by the Issuer to the Liquidity Purchaser granting its participation had
such participation not been granted, and no Liquidity Purchaser granting a
participation shall be entitled to receive payment under such Sections in an
amount which exceeds the sum of (i) the amount to which such Liquidity Purchaser
is entitled under such Sections with respect to any portion of any interest in
the Note owned by such Liquidity Purchaser which is not subject to any
participation, plus (ii) the aggregate amount to which its participants are
entitled under such Sections with respect to the amounts of their respective
participations. With respect to any participation described in this Section 8.1,
the participant's rights as set forth in the agreement between such participant
and the applicable Liquidity Purchaser to agree to or to restrict such Liquidity
Purchaser's ability to agree to any modification, waiver or release of any of
the terms of this Agreement or to exercise or refrain from exercising any powers
or rights which such Liquidity Purchaser may have under or


                                      -28-
<PAGE>   33
in respect of this Agreement shall be limited to the right to consent to any of
the matters set forth in Section 9.1 of this Agreement.

                  (f) Each Liquidity Purchaser may, in connection with any
assignment or participation or proposed assignment or participation pursuant to
this Section 8.1, disclose to the assignee or participant or proposed assignee
or participant any information relating to the Issuer or the CP Purchasers
furnished to such Liquidity Purchaser by or on behalf of the Issuer or the CP
Purchasers; provided that such assignee or participant or proposed assignee or
participant executes an agreement for the benefit of the Issuer, in form and
substance satisfactory to the Issuer, agreeing to maintain the confidentiality
of such information.

                  (g) In the event (i) a Liquidity Purchaser ceases to qualify
as an Eligible Assignee or (ii) a Liquidity Purchaser makes demand for
compensation pursuant to Sections 2.4 or 2.5, the related CP Purchasers may,
and, upon the direction of the Issuer and prior to the occurrence of an Event of
Default, shall, in any such case, notwithstanding any provision to the contrary
herein, replace such Liquidity Purchaser with an Eligible Assignee approved by
the Issuer (which approval shall not be unreasonably withheld) and the SBA by
giving three Business Days' prior written notice to such Liquidity Purchaser. In
the event of the replacement of a Liquidity Purchaser, such Liquidity Purchaser
agrees (i) to assign all of its rights and obligations hereunder to an Eligible
Assignee selected by the related CP Purchasers and approved by the Issuer (which
approval shall not be unreasonably withheld) upon payment to such Liquidity
Purchaser of all amounts due such Liquidity Purchaser under the Note, together
with any accrued and unpaid interest thereon, all accrued and unpaid fees owing
to such Liquidity Purchaser and all other amounts owing to such Liquidity
Purchaser hereunder and (ii) to execute and deliver an Assignment and Acceptance
and such other documents evidencing such assignment as shall be necessary or
reasonably requested by the related CP Purchasers, the Issuer or the related
Deal Agent. In the event that any Liquidity Purchaser ceases to qualify as an
Eligible Assignee, such affected Liquidity Purchaser agrees (1) to give the
related Deal Agent, the Issuer and the related CP Purchasers prompt written
notice thereof and (2) subject to the following proviso, to reimburse the
related Deal Agent, the related Liquidity Agent, the Issuer, the Servicer, the
related CP Purchasers and the relevant assignee for all fees, costs and expenses
(including, without limitation, the reasonable fees and out-of-pocket expenses
of counsel for each of the related Deal Agent, the related Liquidity Agent, the
Issuer, the Servicer and the related CP Purchasers and such assignee) incurred
by the related Deal Agent, the related Liquidity Agent, the Issuer, the
Servicer, the related CP Purchasers and such assignee, respectively, in
connection with any assignment made pursuant to this Section 8.1(g) by such
affected Liquidity Purchaser; provided, however, that such affected Liquidity
Purchaser's liability for such costs, fees and expenses shall be limited to the
amount of any up-front fees paid to such affected Liquidity Purchaser at the
time that it became a party to this Agreement pursuant to the related Fee
Letter.

                  (h) Nothing herein shall prohibit any Liquidity Purchaser from
pledging or assigning as collateral any of its rights under this Agreement to
any Federal Reserve Bank in accordance with applicable law and any such pledge
or collateral assignment may be made without compliance with Section 8.1(a) or
Section 8.1(b).


                                      -29-
<PAGE>   34
                  (i) With the prior consent of the SBA and the Administrative
Agent, each CP Purchaser may upon at least 30 days notice to its related Deal
Agent, the related Liquidity Agent, the Issuer, the SBA and the Servicer, assign
to one or more entities that issues commercial paper for which the VFCC Deal
Agent acts as Deal Agent all or a portion of its rights and obligations under
this Agreement; provided, however, that (i) each such assignment shall be of a
constant, and not a varying percentage of all of the assigning CP Purchaser's
rights and obligations under this Agreement, (ii) the parties to each such
assignment shall execute and deliver to the related Deal Agent, for their
acceptance and recording in the Register, a CP Assignment and Acceptance in the
form of Exhibit D hereto, together with a processing and recordation fee of
$3,500 or such lesser amount as shall be approved by the related Deal Agent and
(iii) the parties to each such assignment shall have agreed to reimburse the
related Deal Agent, Liquidity Agent and CP Purchasers for all fees, costs and
expenses (including, without limitation, the reasonable fees and out-of-pocket
expenses of counsel for the related Deal Agent, Liquidity Agent and CP
Purchasers) incurred by the related Deal Agent, Liquidity Agent and CP
Purchasers, respectively, in connection with such assignment, and, provided,
further, that upon the effective date of such assignment all of the related CP
Purchasers' internal control conditions shall be satisfied. No such assignment
shall require the consent of the Issuer. Upon such execution, delivery and
acceptance by the related Deal Agent and Liquidity Agent and the recording by
the related Deal Agent, from and after the effective date specified in each CP
Assignment and Acceptance, which effective date shall be the date of acceptance
thereof by the related Deal Agent and Liquidity Agent, unless a later date is
specified therein, (i) the assignee thereunder shall be a party hereto and, to
the extent that rights and obligations hereunder have been assigned to it
pursuant to such CP Assignment and Acceptance, have the rights and obligations
of a CP Purchaser hereunder and (ii) the CP Purchaser assignor thereunder shall,
to the extent that rights and obligations hereunder have been assigned by it
pursuant to such CP Assignment and Acceptance, relinquish its rights and be
released from its obligations under this Agreement except with respect to
actions theretofore taken (and, in the case of a CP Assignment and Acceptance
covering all or the remaining portion of an assigning CP Purchaser's rights and
obligations under this Agreement, such CP Purchaser shall cease to be a party
hereto).

                  (j) By executing and delivering a CP Assignment and
Acceptance, the CP Purchaser assignor thereunder and the assignee thereunder
confirm to and agree with each other and the other parties hereto as follows:
(i) other than as provided in such CP Assignment and Acceptance, such assigning
CP Purchaser makes no representation or warranty and assumes no responsibility
with respect to any statements, warranties or representations made in or in
connection with this Agreement or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or any other
instrument or document furnished pursuant hereto; (ii) such assigning CP
Purchaser makes no representation or warranty and assumes no responsibility with
respect to the financial condition of the related Liquidity Purchasers or the
performance or observance by the related Liquidity Purchasers of any of its
obligations under this Agreement or any other instrument or document furnished
pursuant hereto; (iii) such assignee confirms that it has received a copy of
this Agreement, together with copies of such financial statements and other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into such Assignment and Acceptance; (iv) such
assignee will, independently and without reliance upon the related Deal Agent or
Liquidity Agent, such


                                      -30-
<PAGE>   35
assigning CP Purchaser or any other CP Purchaser and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement; (v) such
assignee appoints and authorizes each of the related Deal Agent and Liquidity
Agent to take such action as agent on its behalf and to exercise such powers
under this Agreement as are delegated to such agent by the terms hereof,
together with such powers as are reasonably incidental thereto; (vi) such
assignee agrees that it will perform in accordance with their terms all of the
obligations which by the terms of this Agreement are required to be performed by
it as a CP Purchaser and (vii) such assignee makes each of the representations
and warranties contained in Section 4.2.

                  (k) Each Deal Agent shall maintain at its address referred to
herein a copy of each CP Assignment and Acceptance delivered to and accepted by
it and a register for the recordation of the names and addresses of the related
CP Purchasers and the interest in the Note owned by each related investor from
time to time (the "CP Register"). The entries in the CP Register shall be
conclusive and binding for all purposes, absent manifest error, and the CP
Purchasers, the Issuer, the Servicer and the Liquidity Purchasers may treat each
Person whose name is recorded in the CP Register as a CP Purchaser hereunder for
all purposes of this Agreement. The CP Register shall be available for
inspection by the CP Purchasers, the Liquidity Agents, the Issuer, the Servicer
or any Liquidity Purchaser at any reasonable time and from time to time upon
reasonable prior notice.

                  (l) Subject to the provisions of Section 8.1(i), upon its
receipt of a CP Assignment and Acceptance executed by an assigning CP Purchaser
and an assignee, the related Deal Agent and Liquidity Agent shall each, if such
CP Assignment and Acceptance has been completed and is in substantially the form
of Exhibit D hereto, accept such a CP Assignment and Acceptance, and the related
Deal Agent shall then (i) record the information contained therein in the CP
Register and (ii) give prompt notice thereof to the related Liquidity
Purchasers.

                  (m) Each CP Purchaser may, in connection with any assignment
or participation or proposed assignment or participation pursuant to this
Section 8.1, disclose to the assignee or participant or proposed assignee or
participant any information relating to the Issuer or the Liquidity Purchasers
furnished to such CP Purchaser by or on behalf of the Issuer or the Liquidity
Purchasers; provided that such assignee or participant or proposed assignee or
participant executes an agreement for the benefit of the Issuer, in form and
substance satisfactory to the Issuer, agreeing to maintain the confidentiality
of such information.

                  (n) At any time and from time to time, without the consent of
the Issuer, the Servicer or any other party hereto, a CP Purchaser or a
Liquidity Purchaser may assign all or any portion of its interests in Advances
hereunder to its related Liquidity Purchasers or CP Purchasers, respectively.
The CP Purchaser or Liquidity Purchaser making such assignment shall provide
written notice to the Issuer of any such assignment. Upon any such assignment
from a CP Purchaser to its related Liquidity Purchasers, the portion of the
interest in the Advance so assigned shall be deemed for all purposes (including
but not limited to determining the Program Fee) to be a Liquidity Advance. Upon
any such assignment from a Liquidity Purchaser to its


                                      -31-
<PAGE>   36
related CP Purchasers, the portion of the interest in the Advance so assigned
shall be deemed for all purposes (including but not limited to determining the
Program Fee) to be a CP Advance.

                  (o) Notwithstanding anything contained herein to the contrary,
except for exercising the Put Option, no Purchaser may sell, transfer, assign,
pledge, participate or otherwise convey any interest in its interest in any
Advances or its rights or obligations under this Agreement without the prior
written consent of the SBA, which may be withheld in its sole discretion.

                                   ARTICLE IX

                                  MISCELLANEOUS

         Section 9.1 Amendments and Waivers.

         (a) Except as provided in Section 9.1(b), no amendment or modification
of any provision of this Agreement shall be effective without the written
agreement of the Issuer, the Servicer, the SBA, the Deal Agents and the Required
Purchasers. Any waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given. The Servicer shall
provide the Indenture Trustee and the Owner Trustee with a copy of any
amendment, modification or waiver of the Agreement.

                  (b) No amendment, waiver or other modification of this
Agreement shall:

                           (i) without the consent of the Issuer, the SBA and
         each affected Purchaser, (A) extend the Commitment Termination Date,
         (B) reduce the rate or extend the time of payment of interest on the
         Note, (C) reduce any fee payable to the Deal Agents for the benefit of
         the Purchasers, (D) except pursuant to Article VIII hereof, change the
         amount of a Liquidity Purchaser's pro rata share or an a Liquidity
         Purchaser's Commitment, (E) amend, modify or waive any provision of the
         definition of Required Purchasers or this Section 9.1(b), (F) consent
         to or permit the assignment or transfer by the Issuer of any of its
         rights and obligations under this Agreement or (G) amend or modify any
         defined term (or any defined term used directly or indirectly in such
         defined term) used in clauses (A) through (E) above in a manner which
         would circumvent the intention of the restrictions set forth in such
         clauses; or

                           (ii) without the written consent of the Issuer, the
         SBA and the Deal Agents, amend, modify or waive any provision of this
         Agreement if the effect thereof is to affect the rights or duties of
         such Deal Agent.

                  (c) Notwithstanding the foregoing provisions of this Section
9.1, without the consent of the Liquidity Purchasers the Deal Agents may, with
the consent of the Issuer, which consent will not be unreasonably withheld, and
the consent of the SBA enter into a Related Group Addition Notice in the form of
Exhibit B solely to add additional Persons as Purchasers hereunder.


                                      -32-
<PAGE>   37
         Section 9.2 Notices, Etc.

         All notices and other communications provided for hereunder shall,
unless otherwise stated herein, be in writing (including telex communication and
communication by facsimile copy) and mailed, telexed, transmitted or delivered,
as to each party hereto, at its address set forth under its name on the
signature pages hereof or as otherwise set forth in the Basic Documents or at
such other address as shall be designated by such party in a written notice to
the other parties hereto. All such notices and communications shall be
effective, upon receipt, or in the case of (a) notice by mail, five days after
being deposited in the United States mails, first class postage prepaid, (b)
notice by telex, when telexed against receipt of answerback, or (c) notice by
facsimile copy, when verbal communication of receipt is obtained, except that
notices and communications pursuant to Article II shall not be effective until
received with respect to any notice sent by mail or telex.

         Section 9.3 Ratable Payments.

         If any Purchaser, whether by setoff or otherwise, has payment made to
it with respect to any portion of the Note owing to such Purchaser in a greater
proportion than that received by any other Purchaser, such Purchaser agrees,
promptly upon demand, to purchase for cash without recourse or warranty a
portion of the Note held by the other Purchasers so that after such purchase
each Purchaser will hold its ratable proportion of the Note; provided that if
all or any portion of such excess amount is thereafter recovered from such
Purchaser, such purchase shall be rescinded and the purchase price restored to
the extent of such recovery, but without interest.

         Section 9.4 No Waiver; Remedies.

         No failure on the part of any party to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right hereunder preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.

         Section 9.5 Binding Effect.

         This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns.


                                      -33-
<PAGE>   38
         Section 9.6 Term of this Agreement.

         This Agreement, including, without limitation, the Issuer's and the
Servicer's obligations to observe their covenants set forth in Article V, shall
remain in full force and effect until the Collection Date; provided, however,
that the obligations of the Issuer under Section 2.4, the indemnification and
payment provisions of Article VI and the provisions of Section 9.10 and Section
9.11 and the agreements of the parties contained in Sections 9.7, 9.8, 9.9 and
9.12 shall be continuing and shall survive any termination of this Agreement.

         SECTION 9.7 GOVERNING LAW.

         THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF
CONFLICTS OF LAW. EACH OF THE PARTIES HERETO HEREBY AGREES TO THE NON-EXCLUSIVE
JURISDICTION OF ANY FEDERAL COURT LOCATED WITHIN THE STATE OF NEW YORK. EACH OF
THE PARTIES HERETO HEREBY WAIVES ANY OBJECTION BASED ON FORUM NON CONVENIENS,
AND ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED HEREUNDER IN ANY OF THE
AFOREMENTIONED COURTS AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE
RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT.

         SECTION 9.8 WAIVER OF JURY TRIAL.

         TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE PARTIES HERETO
WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER
SOUNDING IN CONTRACT, TORT, OR OTHERWISE BETWEEN THE PARTIES HERETO ARISING OUT
OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP BETWEEN ANY OF
THEM IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
INSTEAD, ANY SUCH DISPUTE RESOLVED IN COURT WILL BE RESOLVED IN A BENCH TRIAL
WITHOUT A JURY.

         Section 9.9 Costs and Expenses.

                  (a) The Issuer shall pay all fees and expenses as provided for
in each Fee Letter on the day each such fee or expense is stated to be due in
such Fee Letter.

                  (b) The Issuer or Servicer shall pay all reasonable costs and
expenses (including reasonable fees and disbursements of one counsel retained by
and acting on the collective behalf of the Deal Agents, the Administrative
Agent, the Liquidity Agents and the Purchasers) subsequent to the Closing Date
in connection with the preparation, execution and delivery of any waiver,
amendment or consent relating to this Agreement or any of the Basic Documents.


                                      -34-
<PAGE>   39
                  (c) The Issuer and the Servicer shall pay the costs and
expenses of the Deal Agents, the Administrative Agent, the Liquidity Agents, and
the Purchasers, including, without limitation, the costs and expenses of
consulting with one or more persons such as appraisers, accountants and
attorneys, concerning or related to the nature, scope or value of any right or
remedy of the Deal Agents, the Administrative Agent, the Liquidity Agents and
the Purchasers hereunder or under any of the other Basic Documents, including
any review of factual matters in connection therewith, which expenses shall
include all reasonable fees and disbursements of one set of each of such types
of Persons, retained by and acting on the collective behalf of the Deal Agents,
the Administrative Agent, the Liquidity Agents and the Purchasers. The Issuer or
Servicer shall pay all costs and expenses of the Deal Agents, the Administrative
Agent, the Liquidity Agents and the Purchasers in connection with prosecuting or
defending any claim in any way arising out of, related to, connected with, or
enforcing any provision of, this Agreement or any of the other Basic Documents
relating to, arising out of or in connection with any breach or alleged breach
by the Issuer or the Servicer of its representations, warranties, obligators or
covenants hereunder or under any other Basic Document, which expenses shall
include the reasonable fees and disbursements of one counsel and one set of
experts and other consultants retained by and acting on the collective behalf of
the Deal Agents, the Administrative Agent, the Liquidity Agents and the
Purchasers.

         Section 9.10 No Proceedings.

         Each of the Issuer, the Deal Agents, the Administrative Agent, the CP
Purchasers, the Liquidity Agent and the Servicer hereby agrees that it will not
institute against, or join any other Person in instituting against any CP
Purchaser any bankruptcy, insolvency, winding up, dissolution, receivership,
conservatorship or other similar proceeding or action so long as any commercial
paper issued by the CP Purchasers shall be outstanding or there shall not have
elapsed one year and one day since the last day on which any such commercial
paper shall have been outstanding.

         Section 9.11 Recourse Against Certain Parties.

                  (a) No recourse under or with respect to any obligation,
covenant or agreement (including, without limitation, the payment of any fees or
any other obligations) of any party as contained in this Agreement or any other
agreement, instrument or document entered into by it pursuant hereto or in
connection herewith shall be had against any administrator of such party or any
incorporator, affiliate, stockholder, officer, employee, manager or director of
such party or of any such administrator, as such, by the enforcement of any
assessment or by any legal or equitable proceeding, by virtue of any statute or
otherwise; it being expressly agreed and understood that the agreements of such
party contained in this Agreement and all of the other agreements, instruments
and documents entered into by it pursuant hereto or in connection herewith are,
in each case, solely the corporate obligations of such party, and that no
personal liability whatsoever shall attach to or be incurred by any
administrator of such party or any incorporator, stockholder, affiliate,
officer, employee, manager or director of such party or of any such
administrator, as such, or any other of them, under or by reason of any of the
obligations, covenants or agreements of such party contained in this Agreement
or in any other such


                                      -35-
<PAGE>   40
instruments, documents or agreements, or which are implied therefrom, and that
any and all personal liability of every such administrator of such party and
each incorporator, stockholder, affiliate, officer, employee, manager or
director of such party or of any such administrator, as such, or any of them,
for breaches by such party of any such obligations, covenants or agreements,
which liability may arise either at common law or at equity, by statute or
constitution, or otherwise, is hereby expressly waived as a condition of and in
consideration for the execution of this Agreement. The provisions of this
Section 9.11 shall survive the termination of this Agreement.

                  (b) Notwithstanding anything contained in this Agreement, no
CP Purchaser shall have any obligation to pay any amount required to be paid by
it hereunder to any Liquidity Agent, the Administrative Agent or any Deal Agent,
in excess of any amount available to such CP Purchaser after paying or making
provision for the payment of its Commercial Paper. All payment obligations of a
CP Purchaser hereunder are contingent upon the availability of funds in excess
of the amounts necessary to pay Commercial Paper; and each of the Liquidity
Agent, the Administrative Agent, each Deal Agent and each Liquidity Purchaser
agrees that they shall not have a claim under Section 101(5) of the United State
Bankruptcy Code if and to the extent that any such payment obligation exceeds
the amount available to a CP Purchaser to pay such amounts after paying or
making provision for the payment of its Commercial Paper.

         Section 9.12 Confidentiality.

                  (a) Each of the Deal Purchaser Agents, the Administration
Agent, the Purchasers, the Liquidity Agents, the Servicer and the Issuer shall
maintain and shall cause each of its employees and officers to maintain the
confidentiality of the Agreement and the other confidential proprietary
information with respect to the other parties hereto and their respective
businesses obtained by it or them in connection with the structuring,
negotiating and execution of the transactions contemplated herein, except that
each such party and its officers, members and employees may (i) disclose such
information to its external accountants, attorneys, and the agents of such
Persons ("Excepted Persons"), and as required by an applicable law or order of
any judicial or administrative proceeding, (ii) disclose the Agreement and such
information in any suit, action, proceeding or investigation (whether in Law or
in equity or pursuant to arbitration) involving this Agreement for the purpose
of defending itself, reducing its liability, or protecting or exercising any of
its claims, rights, remedies or interests under or in connection with this
Agreement, (iii) disclose the existence of the Agreement, but not the financial
terms thereof and (iv) disclose the amount of each Liquidity Purchaser's
Commitment, the conditions precedent to each Purchase set forth in Section 2.2
and the provisions concerning prepayment of the Note and the removal of
Unguaranteed Interests in the SBA Loans from the lien of the Indenture.

                  (b) Anything herein to the contrary notwithstanding, the
Issuer and the Servicer hereby consent to the disclosure of any nonpublic
information with respect to it (i) to the Deal Agents, the Liquidity Agents or
the Purchasers by each other, or (ii) by the Co-Purchaser Agents, the Liquidity
Agents or a Purchaser to any Rating Agency, Commercial Paper dealer or provider
of a surety, guaranty or credit or liquidity enhancement to a Purchaser and to
any officers, directors, employees, outside accountants and attorneys of any of
the foregoing,


                                      -36-
<PAGE>   41
provided that such disclosure will not cause the offering of the Notes to be
required to be registered under the Act and each such Person is informed of the
confidential nature of such information. In addition, the Purchasers, the
Liquidity Agents and the Deal Agents may disclose any such nonpublic information
pursuant to any law, rule, regulation, direction, request or order of any
judicial, administrative or regulatory authority or proceedings.

         Section 9.13 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 shall be deemed to be an original and all of which when taken together
shall constitute one and the same agreement. In case any provision in or
obligation under this Agreement shall be invalid, illegal or unenforceable in
any jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby. This
Agreement contains the final and complete integration of all prior expressions
by the parties hereto with respect to the subject matter hereof and shall
constitute the entire agreement among the parties hereto with respect to the
subject matter hereof, superseding all prior oral or written understandings
other than any Fee Letter.

         Section 9.14 Limitation of Liability.

         Notwithstanding any other provision herein or elsewhere, in no event
shall First Union Trust Company, National Association (the "Trust Company") or
the Owner Trustee have any liability in respect of the representations,
warranties, or obligations of the Issuer hereunder or under any other Basic
Document, as to all of which recourse shall be had solely to the assets of the
Issuer, and for all purposes of this Agreement and each other Basic Document,
the Owner Trustee and the Trust Company shall be entitled to the benefits of the
Trust Agreement.

         Section 9.15 Inconsistencies.

         If any provision of this Agreement is inconsistent with any provision
of the Multi-Party Agreement, the provision of the Multi-Party Agreement shall
control.

                             [Signatures to Follow]


                                      -37-
<PAGE>   42
         IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.

THE ISSUER:                            FIB FUNDING TRUST

                                       By:  FIRST INTERNATIONAL BANK

                                              By /s/Theodore J. Horan
                                                 -------------------------------
                                                 Name:  Theodore J. Horan
                                                 Title: Senior Vice President

THE SERVICER:                          FIRST INTERNATIONAL BANK

                                              By /s/Theodore J. Horan
                                                 -------------------------------
                                                 Name:  Theodore J. Horan
                                                 Title: Senior Vice President


                                      -38-
<PAGE>   43
THE LIQUIDITY PURCHASERS:              FIRST UNION NATIONAL BANK, a national
                                       banking corporation

                                       Commitment:

                                       By:    /s/C. Brand Hosford
                                              ----------------------------------
                                       Name:  C. Brand Hosford
                                              ----------------------------------
                                       Title: Vice President
                                              ----------------------------------

                                       First Union National Bank
                                       One First Union Center, TW9
                                       Charlotte, North Carolina 28288
                                       Attention:  Bill A. Shirley
                                       Facsimile Number: (704) 374-3254
                                       Telephone Number: (704) 383-6913


THE CP PURCHASERS:                     VARIABLE FUNDING CAPITAL CORPORATION,
                                       a Delaware corporation

                                       By:    First Union Securities, Inc., as
                                              attorney-in-fact

                                              By:    /s/Paul S. Zajac
                                                     ---------------------------
                                              Name:  Paul S. Zajac
                                                     ---------------------------
                                              Title: Vice President
                                                     ---------------------------

                                       Variable Funding Capital Corporation
                                       c/o First Union Securities, Inc.
                                       One First Union Center, TW9
                                       Attention:  Conduit Administration
                                       Facsimile Number: (704) 374-2520
                                       Telephone Number: (704) 383-6036

                                       39
<PAGE>   44
THE DEAL AGENTS                        FIRST UNION SECURITIES, INC.
("VFCC  Deal Agent") and THE
ADMINISTRATIVE AGENT:

                                       By:    /s/James L. Sigman
                                              ----------------------------------
                                       Name:  James L. Sigman
                                              ----------------------------------
                                       Title: Director
                                              ----------------------------------

                                       First Union Securities, Inc.
                                       One First Union Center, TW9
                                       Charlotte, North Carolina 28288
                                       Attention:  Conduit Administration
                                       Facsimile Number: (704) 374-2520
                                       Telephone Number: (704) 383-6036

THE LIQUIDITY AGENTS                   FIRST UNION NATIONAL BANK,
("First Union"):                       a national banking association

                                       By:    /s/C. Brand Hosford
                                              ----------------------------------
                                       Name:  C. Brand Hosford
                                              ----------------------------------
                                       Title: Vice President
                                              ----------------------------------

                                       First Union National Bank
                                       One First Union Center, TW9
                                       Charlotte, North Carolina 28288
                                       Attention: Bill A. Shirley
                                       Facsimile Number: (704) 374-3254
                                       Telephone Number: (704) 383-6913


                                       40

<PAGE>   1
                                                                   EXHIBIT 10.21

                                    GUARANTY


                  This GUARANTY (the "Guaranty"), dated as of October 1, 1999,
made by First International Bank, a Connecticut bank and trust company, (the
"Guarantor"), in favor of First Union Securities, Inc. ("FUSI").

                  WHEREAS, FIB Funding Trust (the "Issuer"), the Guarantor,
FUSI, Variable Funding Capital Corporation, First Union National Bank and the
Liquidity Purchasers have entered into a Note Purchase Agreement, dated as of
October 1, 1999 (the "Note Purchase Agreement") pursuant to which the Purchasers
named therein will acquire interests in a note to be issued by the Issuer
pursuant to an Indenture of the Trust, dated as of October 1, 1999 (the
"Indenture") between the Issuer and HSBC Bank USA, as Indenture Trustee; and

                  WHEREAS, pursuant to the Note Purchase Agreement, the Issuer
has agreed to pay certain increased costs, expenses and taxes as contemplated in
Sections 2.4 and 2.5 of the Note Purchase Agreement;

                  WHEREAS, the execution and delivery of this Guaranty by the
Guarantor is a condition to the initial Purchase contemplated by the Note
Purchase Agreement;

                  WHEREAS, the Guarantor will derive substantial benefit from
the transactions contemplated by the Note Purchase Agreement and the Indenture;
and

                  WHEREAS, capitalized terms used herein and not otherwise
defined herein shall have the meanings ascribed to such terms in the Note
Purchase Agreement and the Indenture.

                  NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Guarantor hereby
unconditionally agrees as follows:

                  SECTION 1.        The Guaranty.

                  (a) The Guarantor hereby unconditionally and absolutely
guarantees the full and timely payment to the applicable party of all
obligations and amounts due by the Issuer pursuant to Section 2.4 and 2.5 of the
Note Purchase Agreement.

                  (b) The obligations of the Guarantor under this Guaranty shall
not terminate upon or otherwise be reduced by an Event of Default pursuant to
the Indenture, by any amendment entered into with the written consent of the
Guarantor to the Note Purchase Agreement or the Indenture or by any breach by
any party to any such agreements of its obligations thereunder.




<PAGE>   2

                  (c) No failure on the part of FUSI to exercise, no delay in
exercising, and no course of dealing with respect to, any right or remedy
hereunder will operate as waiver thereof, nor will any single or partial
exercise or any right or remedy hereunder preclude any other further exercise
thereof or the exercise of any other rights or remedy. This Guaranty may not be
amended or modified except by written agreement of the Guarantor and FUSI and no
consent or waiver hereunder shall be valid unless in writing and signed by FUSI.

                  (d) This Guaranty is a continuing guarantee and (i) shall
apply to all amounts due under Section 2.4 and 2.5 of the Note Purchase
Agreement whenever arising, (ii) shall remain in full force and effect until
payment in full or discharge of the amounts due under Sections 2.4 and 2.5 of
the Note Purchase Agreement and/or enforcing any rights hereunder, (iii) shall
be binding upon the Guarantor and its successors and assigns and (iv) shall
inure to the benefit of, and be enforceable by, FUSI and its successors,
transferees and assigns.

                  SECTION 2.        Representations and Warranties.

                  In making this Guaranty the Guarantor represents and warrants
to FUSI that:

                  (a) Organization and Good Standing. The Guarantor is a
Connecticut chartered bank and trust company duly organized, validly existing
and in good standing under the laws of the State of Connecticut and has the
corporate power to own its assets and to transact the business in which it is
currently engaged.

                  (b) Authorization; Binding Obligations. The Guarantor has the
power and authority to make, execute, deliver and perform this Guaranty and all
of the transactions contemplated under this Guaranty, and has taken all
necessary corporate action to authorize the execution, delivery and performance
of this Guaranty. When executed and delivered, this Guaranty will constitute the
legal, valid and binding obligation of the Guarantor enforceable in accordance
with its terms, except as enforcement of such terms may be limited by
bankruptcy, insolvency or other similar laws relating to or affecting the
enforcement of creditors' rights generally and by the availability of equitable
remedies.

                  (c) No Consent Required. The Guarantor is not required to
obtain the consent of any other party or any consent, license, approval or
authorization from, or registration or declaration with, any governmental
authority, bureau or agency in connection with the execution, delivery,
performance, validity or enforceability of this Guaranty the failure of which so
to obtain would have a material adverse effect on the business, properties,
assets or condition (financial or otherwise) of the Guarantor.

                  (d) No Violations. The execution, delivery and performance of
this Guaranty by the Guarantor will not violate any provision of any existing
law or regulation or any order or decree of any court or the Certificate of
Incorporation or Amended and Restated Bylaws of the Guarantor, or constitute a
material breach of any mortgage, indenture, contract or other material agreement
to which the Guarantor is a party or by which the Guarantor may be bound.


                                      -2-
<PAGE>   3

                  (e) Litigation. No litigation or administrative proceeding of
or before any court, tribunal or governmental body is currently pending, or to
the knowledge of the Guarantor threatened, against the Guarantor or any of its
properties or with respect to this Guaranty which, if adversely determined,
would in the opinion of the Guarantor have a material adverse effect on the
transactions contemplated by this Guaranty.

                  SECTION 3.        Miscellaneous.

                  THIS GUARANTY SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS
MADE AND TO BE PERFORMED THEREIN WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES.


                                      -3-
<PAGE>   4




                  IN WITNESS WHEREOF, First International Bank has duly executed
this Guaranty as of the day and year first written above.


                                                     FIRST INTERNATIONAL BANK



                                                     By: /s/ Leslie Galbraith
                                                         ---------------------
                                                     Name:   Leslie Galbraith
                                                     Title:  President


                                      -4-

<PAGE>   1
                                                              1999 ANNUAL REPORT

[MAP GRAPHIC]

FINANCING MANUFACTURERS WORLDWIDE(R)

                                              [FIRST INTERNATIONAL BANCORP LOGO]

                                                 [FIRST INTERNATIONAL BANK LOGO]
<PAGE>   2
CORPORATE PROFILE

First International Bancorp, Inc. and First International Bank, both
headquartered in Hartford, Connecticut, specialize in providing innovative
credit, trade and financial solutions to small and medium size industrial
companies located in the United States and international emerging markets. The
Company offers flexible and attractive terms to borrowers and is a national
leader in the use of commercial loan guarantee programs made available by the
U.S. Small Business Administration, the U. S. Department of Agriculture and the
Export-Import Bank of the U. S. The Company maintains preferred or certified
status under these programs in several jurisdictions and has received Ex-Im
Bank's "Small Business Bank of the Year" award.



                                              [FIRST INTERNATIONAL BANCORP LOGO]

                                                 [FIRST INTERNATIONAL BANK LOGO]

                                            Financing Manufacturers Worldwide(R)

                                                          www.firstinterbank.com
<PAGE>   3
FIRST INTERNATIONAL BANCORP, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

2        Letter to Shareholders and Clients

4        Summary Financial Highlights

5        Management's Discussion and
         Analysis of Financial Condition
         and Results of Operations

23       Report of Independent Accountants

24       Consolidated Balance Sheets as of
         December 31, 1999 and 1998

25       Consolidated Statements of Income
         for the years ended December 31,
         1999, 1998 and 1997

26       Consolidated Statements of
         Changes in Stockholders' Equity
         for the years ended December 31,
         1999, 1998 and 1997

27       Consolidated Statements of Cash
         Flows for the years ended
         December 31, 1999, 1998 and 1997

28       Notes to Consolidated Financial
         Statements

48       Directors and Officers and
         General Information

                                                                               1
<PAGE>   4
TO OUR SHAREHOLDERS AND CLIENTS

         The 20th century's final year was a decisive point in First
International Bank and First International Bancorp, Inc.'s transition from a
traditional bricks-and-mortar branch bank founded five decades ago in rural
Connecticut to a global financial institution with clients on five continents.
Total loans managed by our Company as of December 31, 1999 reached $1.076
billion, marking a 38% increase over 1998 and the first time in our history that
the managed loan portfolio has exceeded one billion dollars. Loan originations
during 1999 were $551 million, 41% above last year and also a record
performance. First International Bank was once again the nation's most active
combined user of government-guaranteed loan programs, finishing #1 in
Export-Import Bank transactions for the third year in a row, #1 in USDA business
and industry loans measured by dollar volume, and #10 in SBA 7(a) loans measured
by dollar volume. Our client base grew 30% during 1999 to 1,238 companies, most
of them within our family-owned industrial niche and 23% of them located outside
the U.S. in 17 countries.

                                 [MAP GRAPHIC]
                     REPRESENTATIVES THROUGHOUT THE WORLD.


    The Company incurred significant expenses during 1999 related to
geographical expansion, product development in the areas of trade, barter and
energy financing, and legal costs associated with our mid-year bank charter
conversion and other regulatory matters. We also began investing in
Internet-based technology required to supplement First International Bank's
traditional marketing channels with the capability to finance
business-to-business electronic commerce involving industrial companies. These
investments, along with some softness in capital markets, contributed to a
decrease in net income to $6.0 million in 1999 from $7.0 million in 1998. To
ensure the proper ongoing balance between a healthy bottom line and continuing
investment in our business, Management began an important initiative in late
1999, "Operation First Priority", to identify and implement productivity
enhancements throughout the organization.

    Our U.S. expansion continued in 1999 with the opening of a representative
office in St. Louis, Missouri, bringing our domestic network to 12 offices. On
the international side, we established master agency relationships with firms in
Egypt and Tunisia, both new markets for the Company. We now have an active
presence in 14 international markets covering Latin America, Asia, Africa, the
Middle East and Central Europe. A global alliance was established during 1999
with a major barter company, Active International, which is headquartered in
Pearl River, New York and has 12 offices in the U.S. and abroad. First
International Bank and Active International co-developed a program to finance
industrial companies utilizing Active's corporate trading services. In 1999 and
early 2000, we also established strategic partnerships with the Association for
Manufacturing Technology, based in McLean, Virginia, to support their
membership's capital goods exports,


[REPORTS GRAPHIC]

FIRST INTERNATIONAL BANK RANKED NATIONALLY #1 IN BOTH EXPORT-IMPORT BANK
TRANSACTIONS AND #1 IN USDA BUSINESS AND INDUSTRY LOANS MEASURED BY DOLLAR
VOLUME, AND #10 IN SBA 7(a) LOANS MEASURED BY DOLLAR VOLUME.


2
<PAGE>   5
and with the Philadelphia/Delaware Valley Chapter of the National Tooling &
Machining Association to offer creative equipment financing to members.


    2000 will be a growth year for our Company worldwide. Additional U.S.
offices are scheduled to open in Miami, Richmond and Los Angeles (where we
already have SBA preferred lender status) during the first half of the year. The
new offices in Los Angeles and Miami, especially, will be a strategic
opportunity to leverage our international trade expertise. Global Management and
Business Resources, Inc., our master agent for Korea, has an active presence in
California as a facilitator of trade with Asia. Likewise, there are significant
opportunities for us in Miami, where our Brazilian master agent, NetPlan
Corporate Finance, Ltd. and our international freight logistics strategic
partner, Panalpina, have an established base. The Company is continuing to
analyze other U.S. markets in the Midwest, West and South, as well as
international markets such as Thailand and China, for expansion.

    Among our most important strategic projects is the establishment of
partnerships with industrial B2B e-commerce marketplaces to offer the Company's
global financing capabilities to settle online transactions. Over the past
decade, we have developed a unique "matrix" of core competencies which we
believe makes us a financial partner of choice for these new marketplaces,
including: an e-CreditMenu(SM) comprised of a wide range of domestic and
international credit products; Riscope(SM), our proprietary commercial credit
scoring system; and representatives and alliances that provide the Company with
a presence in many countries. The Company's Information Technology Business Unit
is developing a branded technological solution known as ThruCredit(SM) to
automate financing for e-business marketplaces. First International Bank's
strategy is to "plug-in" to e-business marketplaces, utilizing this new
Internet-based medium as a low cost distribution system for originating higher
volumes of quality loans.

    "Despatch is the soul of business," the Earl of Chesterfield observed back
in 1750. His words were never more true than today. I look forward to working
with and on behalf of our Company's constituents to realize the many
opportunities presented by the new global economy.



/s/ Brett N. Silvers

Brett N. Silvers
Chairman and Chief Executive Officer
March 2000


[PICTURE OF BRETT N. SILVERS]


- -------------------------------------------------------------------------------
THE CHAIRMAN IS SUPPORTED BY THE OPERATING COMMITTEE'S DEEP MANAGEMENT TEAM:

- -------------------------------------------------------------------------------


[PICTURE OF LESLIE A. GALBRAITH]
LESLIE A. GALBRAITH, President, 38: Chief Operating Officer responsible for
managing the Company's daily operations. Galbraith, a CPA, is a director of
First International Bank and joined the Company in 1990.

[PICTURE OF RICHARD W. BRADSHAW]
RICHARD W. BRADSHAW, Executive Vice President, 38: Commercial Banking Division
Executive responsible for managing Midwestern and Western U.S. lending business
units. Bradshaw is a five-year veteran of First International.

[PICTURE OF PAUL J. FALVEY]
PAUL J. FALVEY, Executive Vice President, 35: Commercial Banking Division
Executive with primary responsibility for the Eastern and Southern U.S. lending
business units. Falvey has been with the Company since 1992.

[PICTURE OF JAMES G. FORTSCH]
JAMES G. FORTSCH, Executive Vice President, 38: International Banking Division
Executive. Fortsch, a 5-year veteran of First International, oversees
international lending and the Bank's representative relationships in 14 foreign
markets.

[PICTURE OF DAVID J. ETTER]
DAVID J. ETTER, Executive Vice President, 39: Chief Credit Officer since 1997.
Etter oversees the Company's credit risk management and loan servicing
functions.

[PICTURE OF FRANK P. LA MONACA]
FRANK P. LA MONACA, Executive Vice President, 42: Chief Administrative Officer
with primary responsibility for technology, communications and the Company's
e-business initiatives. La Monaca is in his second year with the Company.

[PICTURE OF SHAUN P. WILLIAMS]
SHAUN P. WILLIAMS, Executive Vice President, 40: Chief Financial Officer since
September 1999. Williams is a CPA and has also managed lending and risk
management areas during his seven-year tenure.


                                                                               3
<PAGE>   6
SUMMARY FINANCIAL HIGHLIGHTS

(Dollars in Thousands)


<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Year Ended December 31                           1999           1998           1997           1996            1995
- ----------------------------------------------------------------------------------------------------------------------
<S>                                          <C>              <C>            <C>            <C>            <C>
Total Loans Originated                       $  550,860       $391,677       $306,960       $172,920       Unavailable
Total Loans Managed at Year End              $1,076,092       $779,055       $573,545       $380,432       $260,842
Non-Interest Income to Net Revenue                 83.8%          68.2%          64.7%          50.6%          38.2%

Return on Average Equity                           11.6%          15.9%          20.5%          25.5%          19.3%
Return on Average Assets                            2.1%           2.9%           2.5%           2.1%           1.5%

Interest Income                              $   18,372       $ 18,192       $ 14,625       $ 13,305       $ 11,601
Interest Expense                             $   11,581       $  7,924       $  6,371       $  5,741       $  4,869

Net Interest Income                          $    6,791       $ 10,268       $  8,254       $  7,564       $  6,732
Gain on Loan Sales                           $   19,187       $ 16,959       $ 11,810       $  5,844       $  2,859
Loan Servicing Income and Other Fees         $    6,359       $  5,016       $  3,300       $  1,899       $  1,294
Gain on Sale of Securities                   $      416       $     33       $     --       $     --       $     --
Income from Unconsolidated Subsidiaries      $      335       $     --       $     --       $     --       $     --
Gain on Sale of Branch                       $    8,915       $     --       $     --       $  2,202       $     --
Total Net Revenues                           $   42,003       $ 32,276       $ 23,364       $ 17,509       $ 10,885
Operating Expenses                           $   28,283       $ 17,700       $ 13,801       $  8,425       $  6,128
Provision for Possible Loan Losses           $    3,019       $  3,071       $  2,239       $  3,487       $  1,237
Net Income                                   $    6,009       $  7,033       $  4,429       $  3,244       $  2,026

Basic Earnings Per Share                     $     0.74       $   0.89       $   0.70       $   0.56       $   0.35
Diluted Earnings Per Share                   $     0.72       $   0.86       $   0.67       $   0.56       $   0.35
Dividend Payout Ratio                              16.3%          13.5%          16.5%          20.3%           8.1%
Average Equity to Average Assets                   17.3%          18.8%          12.2%           8.1%           7.8%
Total Capital to Risk Weighted Assets              11.3%          16.4%          17.6%          11.6%          10.7%

Total Assets                                 $  328,044       $273,726       $218,851       $161,642       $141,223
Total Loans                                  $  149,340       $122,523       $135,398       $114,627       $106,992
Total Stockholders' Equity                   $   54,987       $ 49,071       $ 42,148       $ 14,216       $ 11,602

Non-performing Loans                         $    4,958       $  3,104       $  2,364       $  2,252       $  1,258
Allowance for Loan Losses                    $    4,550       $  4,000       $  3,100       $  3,000       $  2,000
Allowance for Loan Losses to
     Non-performing Loans                            92%           129%           131%           133%           159%
Allowance to Total Loans                            3.0%           3.3%           2.3%           2.6%           1.9%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>


                               LOAN ORIGINATIONS

<TABLE>
<CAPTION>
                                    Millions
              1996              1997        1998          1999
<S>                             <C>         <C>           <C>
              $173              $307        $392          $551
</TABLE>

                              TOTAL LOANS MANAGED

<TABLE>
<CAPTION>
                                    Millions
              1995              1996        1997           1998          1999
<S>                             <C>         <C>            <C>          <C>
              $261              $380        $574           $779         $1,076
</TABLE>


4
<PAGE>   7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS



    The following discussion and analysis of the consolidated financial
condition and results of operations of First International Bancorp, Inc. (the
"Company") should be read in conjunction with the Company's consolidated
financial statements, including the related notes thereto, and other
information.

GENERAL

    First International Bancorp, Inc., a Delaware corporation, is a one-bank
holding company incorporated in 1985 and regulated by the Board of Governors of
the Federal Reserve System. Its principal asset and subsidiary is First
International Bank (the "Bank"), a Connecticut state chartered bank and trust
company which is regulated by the State of Connecticut Banking Department and
the Federal Deposit Insurance Corporation ("FDIC"). The Bank was established in
1955 as a national bank and changed its name from First National Bank of New
England on February 1, 1999 to more closely reflect the markets it serves. The
Bank converted from a national bank to its state charter effective July 1, 1999.

    In September 1997, the Company completed an underwritten public offering
whereby 1,955,000 shares of its common stock were issued for net proceeds of
$23.8 million.

    On December 31, 1998 the Company entered into an agreement with Hudson
United Bank to sell the Bank's last retail branch, including all checking,
savings and money market deposits associated with the branch, which transaction
was consummated effective March 31, 1999. The Bank retained its certificates of
deposit and continues to offer certificates of deposit to retail and brokered
depositors. (See "Changes in Funding Sources" for further discussion of the
funding sources used by the Company.)

    The Company specializes in providing credit, trade and financial solutions
to small and medium size industrial companies located in the United States and
international emerging markets. The Company serves its target market by offering
flexible and attractive terms to borrowers and manages its credit risk through
the combined utilization of commercial loan guarantee programs made available by
three U. S. federal agencies, the U. S. Small Business Administration (the
"SBA"), the U. S. Department of Agriculture (the "USDA") and the Export-Import
Bank of the U. S. ("Ex-Im Bank"), as well as through the use of private credit
insurance policies.

    For the federal fiscal year ending September 30, 1999, the Company was the
country's largest Ex-Im Bank lender measured by number of transactions; the
largest USDA Business and Industry lender measured by dollar volume; and the
tenth largest SBA 7(a) lender measured by dollar volume (and the largest
headquartered in New England). The Company maintains preferred and certified
status for government guaranteed lending programs in several jurisdictions.

    Except for historical information contained herein, certain matters
discussed in this annual report are "forward-looking statements" as defined in
the Private Securities Litigation Reform Act ("PSLRA") of 1995, which involve
risk and uncertainties that exist in the Company's operations and business
environment, and are subject to change based on various factors. The Company
wishes to take advantage of the "safe harbor" provisions of the PSLRA by
cautioning readers that numerous important factors discussed below, among
others, in some cases have caused and in the future could cause the Company's
actual results to differ materially from those expressed in any forward-looking
statements made by, or on behalf of, the Company. In addition to the risks and
uncertainties of ordinary business operations, the following include some other,
but not all, of the factors or uncertainties that could cause actual results to
differ from projections:

- -   A general economic slowdown.

- -   Inability of the Company to continue to manage its growth strategy either
    domestically or internationally.

- -   Disruption in the U. S. capital markets, delaying or preventing the Company
    from receiving funding under warehouse lines of credit or completing loan
    sales or securitizations, or inability of the Company to continue to accept
    brokered certificates of deposit since the Company depends on a mix of these
    fundings for its operations.

- -   Unpredictable delays or difficulties in the development and introduction of
    new products and programs.

- -   Inability of the Company to realize the recorded values of retained
    interests associated with securitization assets.

- -   Regulatory, accounting and legislative changes that may occur in the future
    that impact the Company's marketplace through changing banking regulations
    or changes in the interpretation and application of these regulations or
    accounting pronouncements or other matters, including the ability of the
    Company to continue to meet risk based capital requirements, based on
    pending regulatory amendments relative to retained interests in securitiza-
    tions and loan sales.


                                                                               5
<PAGE>   8
- -   Fluctuations in the quarterly operating results due to a number of factors,
    including among others, variations in the volume of loans originated and
    changes in the capital markets expectations on yields on loan sales and
    securitizations which may cause variations in the effective interest rates
    yielded on loans and retained interests.

- -   Risks associated with government guarantee loan programs, since a
    substantial portion of the Company's business still depends upon the
    continuation of the various government guarantee loan programs as discussed
    below.

    The Company believes that it has the product offerings, facilities,
personnel and financial resources for continued business success in competitive
markets. However, future revenues, costs, margins and profits, and the timing of
these, are all influenced by a number of factors, some of which may be beyond
our control, including those discussed above.

RECENT GROWTH

    In contrast to many other banks, the Company derives a majority of its
revenues from non-interest income, principally gains on the sale of commercial
and international loans and related loan servicing income. During the past three
years of operations, the Company has achieved significant revenue growth
primarily as a result of the liquidity provided by increases in the sale and the
securitization of government guaranteed and other commercial loans, net interest
income, which is the difference between interest earned on interest-earning
assets (principally loans) and interest paid on interest-bearing liabilities
(principally deposits), and fee income on loans managed for others. The Company
has expanded its domestic loan origination activities into the Northeast,
Mid-atlantic and Midwest regions of the United States and its international
presence in emerging markets. The Company plans to continue its U. S. expansion
in 2000 by opening additional representative offices. The Company's growth is
evidenced by the 41% increase in its loan originations to $551 million in 1999
from $392 million in 1998. The mix of loans originated continues to reflect the
reliance on government guaranteed loans as well as the new commercial products
developed by the Company. The following chart illustrates the growth in loans
originated by the Company since 1996:

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
Summary of
Loan Originations               1999           1998          1997           1996
- -----------------------------------------------------------------------------------
                                              (dollars in thousands)

<S>                           <C>            <C>            <C>            <C>
Guaranteed loans .......      $295,293       $252,864       $221,985       $134,920
Unguaranteed loans .....       255,567        138,813         84,975         38,000
                              --------       --------       --------       --------

  Total loans originated      $550,860       $391,677       $306,960       $172,920
                              ========       ========       ========       ========

Annual Increase ........            41%            28%            78%            --
                              ========       ========       ========       ========
</TABLE>


CHANGES IN FUNDING SOURCES

    During 1999 and 1998, the Company completed transactions that effected
changes in the manner in which the Company obtains funding for its lending
business. Such transactions included:

- -   the sale of the Company's last branch in March 1999, including checking,
    savings and money market accounts, which requires the Company to obtain
    funding by alternative sources;

- -   establishment of two warehouse loan and sale facilities, pursuant to which
    up to an aggregate of $75 million is available to the Company (based upon
    the contractual advance rates against the qualifying principal balance of
    the loans pledged to collateralize the facility);

- -   establishment of a commercial paper conduit facility pursuant to which up to
    $60 million is available to the Company (based upon the contractual advance
    rates against the qualifying principal balance of the loans pledged to
    collateralize the facility; the pledged loans consist of the unguaranteed
    portion of loans guaranteed by the SBA);

- -   the increase from $65 million to $95 million of the availability of a second
    commercial paper conduit facility, pursuant to which the Company has the
    right to sell up to $95 million in commercial revolving lines of credit and
    other qualifying loans during the term of the facility;

- -   loan securitization and sales transactions pursuant to which the Company
    securitized and sold in the aggregate approximately $140 million of asset
    backed loans, including $49 million of the unguaranteed portions of loans
    originated by the Company that were guaranteed in part by the SBA (See
    "Securitization and Sale of Loans;") and

- -   establishment of agreements with five national brokers which provide a
    source for brokered certificates of deposits used for fundings of one year
    or less.

    The Company expects to continue to obtain funding for its operations from
retail and brokered certificates of deposit, warehouse lines of credit, the sale
of individual loans by private placement securitizations and from the sale of
loans to commercial paper conduits and sale facilities. See "Quantitative and
Qualitative Disclosures about Market Risk and Asset/Liability Management" for
further discussion of certain risks associated with such funding sources.

ACCOUNTING FOR LOAN SALES

    Gains from loan sales, securitizations and servicing income represented
approximately 60% of the total net interest income and non-interest income for
the year ended December 31, 1999. Detailed below is a discussion of the relevant
accounting principles governing loan sales and securitizations and the Company's
servicing activities.

SBA AND USDA LOAN SALES

    The majority of the Company's SBA and USDA guaranteed loans are variable
rate, indexed to the Prime Rate as quoted in The Wall Street Journal ("Prime").
The Company


6
<PAGE>   9
generally sells the guaranteed portions of these loans shortly after origination
at a cash premium. For example, if the Company sells a 20-year SBA or USDA
guaranteed mortgage loan with an interest rate of Prime plus 1.50%, the Company
receives a premium because the market demands a yield of less than Prime plus
1.50% for a like tenor government instrument. Investors in the guaranteed
portions demand yields between U.S. Treasury bills and commercial loans due to
prepayment risks and other factors inherent in the guaranteed loans. After the
loan sale, an investor will receive the pro rata principal and pro rata interest
at the note rate less any ongoing guarantee and Company servicing fees. When the
Company sells an SBA loan for a premium, it will generally retain the minimum
required servicing fee of 1%. The Company does elect from time to time to retain
a higher servicing fee and sell a loan for a lesser premium or at par.

    The Company may sell the unguaranteed portions of the SBA and USDA loans on
a loan-by-loan basis at or above par. In accordance with SBA and USDA
regulations, the Company is required to retain a 5% interest in the unguaranteed
portion of the loan when some of the unguaranteed portion is sold on a
loan-by-loan basis.

    When the Company sells part of a loan, the gain recognized is based on the
relative fair values of the loan sold, the portion of the loan retained and any
other assets created in the transaction. The Company creates a servicing asset
when it sells loans on a servicing-retained basis with a servicing fee in excess
of "adequate compensation." This servicing asset is equal to the net present
value of the estimated cash flows in excess of such compensation. The original
principal balance of a loan must be allocated between the guaranteed portion
sold, the unguaranteed portion retained and the servicing asset, resulting in a
discount being recognized on the unguaranteed retained portion of the loan.

    In connection with calculating gain on sale, the Company must make certain
assumptions which include (i) the amount of adequate compensation used to
determine the amount of the servicing asset that the Company will recognize at
the date of the sale, (ii) the estimated life of the underlying loan used in
projecting the time period over which the Company will receive the servicing fee
(the "constant prepayment rate" or CPR), and (iii) the discount rate used in the
present value calculation of the servicing asset.

    Prior to January 1, 1998, management defined adequate compensation as 40
basis points because there was no efficient market to determine market price.
Effective January 1, 1998, based on estimates from potential sub-servicers,
adequate compensation was defined as 20 basis points. Furthermore, the Company
estimates its cost to service loans plus a normal profit to be less than 20
basis points. The constant prepayment rates utilized by the Company in
estimating the lives of the loans depend on the original term of the loan,
industry and Company historical data. Such constant prepayment rates have ranged
from 6% to 12% per annum and are currently estimated at 8% for most asset
classes. The discount rate utilized in the net present value calculation for
1999 ranged from approximately 9%-10.04% which is equal to 400 basis points
above the then current two year U. S. treasury rate.

    Actual prepayment rates may be affected by a variety of economic and other
factors, including prevailing interest rates and the availability of alternative
financing. The effect of these factors varies depending on the types of loans.
Estimated prepayment rates are based on management's expectations of future
prepayments, and, while management believes that the term of amortization and
market interest rate on the variable rate loans somewhat reduce the prepayment
risk, there can be no assurance that management's prepayment estimates are
accurate. If the actual prepayment rate or actual losses for loans sold is
higher than projected at the time such loans were sold, the carrying value of
the servicing asset may be considered impaired and be reduced by a charge to
earnings if an impairment is considered "other than temporary." Because the
Company also recognizes a discount on any retained loan, an adjustment to the
discount would be made which would partially offset the effect of the negative
servicing adjustment. If the actual prepayment rate for loans sold is lower than
estimated, the carrying value of the servicing asset is not increased, although
the total future cash flow income would exceed previously estimated amounts.

    The servicing asset is amortized against the servicing fee income received
monthly, on an effective interest method, and the discount on the retained loan
is accreted to interest income on an effective interest method. The servicing
asset is carried at the lower of amortized cost or net realizable value.

EX-IM BANK AND OTHER COMMERCIAL LOAN SALES

    Sales of 100% of Ex-Im Bank guaranteed medium term loans are generally made
at the carrying value, although the Company receives a servicing fee above the
20 basis points defined as adequate compensation resulting in the recognition of
a gain at the time of the sale equal to the calculated servicing asset and any
net loan origination fees. The Company uses a discount factor on the estimated
cash flows equal to 400 basis points above the then current two-year U. S.
treasury rate. Since January 1, 1999, the Company has included an annual
prepayment factor assumption of 6% on loans sold. For loans sold prior to
January 1, 1999 the Company adjusts the servicing asset for prepayments on these
3-5 year term loans as they occur.

    The Company also sells 100% of certain other unguaranteed commercial loans
on a loan-by-loan basis where no portion of the loan is retained on the
Company's balance sheet.

SECURITIZATION AND SALE OF LOANS

    Since mid 1998, the Company has either securitized or sold certain whole
loans and the unguaranteed portions of certain government guaranteed loans that
it originated. In such transactions the Company sells a pool of loans to a
trust, which in turn issues certificates representing beneficial ownership
interests in the trust or which issues notes and


                                                                               7
<PAGE>   10
sells such securities through private placement transactions. For all
securitizations, the Company is the servicer of the underlying loans. The
Company will generally retain one or more of the following "retained interests"
in the securitized assets: interest-only strips, subordinated certificates and
interests, servicing assets and cash reserve accounts. The Company has
established special purpose subsidiaries to facilitate the individual
securitizations and sale transactions. Generally, the Company retains risks in
the form of default, prepayment and, in the case of revolving lines of credit
and other loans sold into the commercial paper conduit, interest rate risk.

    The estimates of gain on loan sales and securitizations and the value of
retained interests are based on assumed lives, loss rates and discount rates.
Accordingly, the ultimate realization of such assets involves risks. Management
analyzes each pool sold/securitized at the time of sale/securitization and as of
each quarterly reporting period. Original assumptions are based on past
performance of similar loan types originated by the Company and, to the extent
available, data on performance of similar loans originated by others, as well as
other market data as available. For each quarter subsequent to
sale/securitization, management compares the original assumptions to actual pool
performance.

    As contrasted to the secondary markets for residential mortgage loans and
certain other consumer loans, the Company has observed that commercial loans
have been securitized for a shorter time period and generally in strong economic
cycles. Accordingly, market data on the performance of commercial loans sold is
much less detailed and is more disaggregrated than that available for consumer
loans. Management believes that certain market data available on SBA commercial
loan performance reflects a lower quality borrower than the typical Company
borrower since the Company generally lends to industrial companies which are
required to be better capitalized than service companies or start-ups.
Generally, the Company's securitized pools carry a lower average rate/coupon and
are expected to have lower prepayment and loss ratios than SBA commercial pools
sold by other issuers.

    The loss and prepayment assumptions used by the Company (as detailed below)
indicate lower expected loss and prepayment rates than indicated by certain
published data for SBA loan pools originated by others. Management believes that
such assumptions are warranted given management's assessment of the Company's
loan pool characteristics, the nature of the collateral supporting the loans,
the quality of the individual borrowers and the Company's experience in lending
to its customers, including actual historical performance.

    Given the relative immaturity of the broader commercial loan secondary
market, it is possible that actual performance on the unguaranteed SBA loan or
commercial loan-backed transactions could vary from that assumed due to
unforeseen changes in customer behavior and economic conditions.

    The interest-only strips retained by the Company are recorded at estimated
fair value and classified as investments available-for-sale. Since there is no
active secondary market for these assets, the fair value of an interest-only
strip is determined by computing the present value of the estimated cash flows
to the Company as servicer, after providing for estimated losses and prepayments
and, in certain transactions, estimated interest rate risk.

    The Company as servicer, by contract, generally receives annual servicing
fees ranging from 40-100 basis points of the outstanding principal balance of
the loans and the rights to any additional cash flows arising after the
investors in the securitization trust have received the contracted return. The
investors and the securitization trust have no recourse to the Company's other
assets. The Company's retained interests are subordinate to the investor's
interests. SBA regulations require that the Company hold a subordinated note in
the unguaranteed portion of securitized loans equal to a minimum of 2% of the
aggregate amount of the transaction.


    Key economic assumptions used in calculating a gain on the transaction and
in calculating the interest-only strips resulting from the securitizations and
sales to commercial paper conduit facilities completed in 1999 and 1998 are as
follows:


<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
1999                                                 Securitizations               Commercial Paper and Sale Facilities
- --------------------------------------------------------------------------------------------------------------------------
                                            Unguaranteed                       Revolving and                  Unguaranteed
                                             Portions of          Term          Short Term         Term        Portions of
                                            of SBA Loans       Commercial       Commercial      Commercial      SBA Loans
                                            ------------       ----------       ----------      ----------      ---------
<S>                                         <C>                <C>              <C>             <C>            <C>
Prepayment speed                                 8.0%              8.0%             6-8%            8.0%            8.0%
Aggregate expected credit losses                6.82%             4.12%            1.44%           3.44%           5.14%
Discount rate for servicing cash flows          9.54%             9.74%            9.31%          10.04%          10.04%


- --------------------------------------------------------------------------------------------------------------------------
1998                                                Securitizations              Commercial Paper and Sale Facilities
- --------------------------------------------------------------------------------------------------------------------------
                                            Unguaranteed                                                      Unguaranteed
                                             Portions of          Term           Revolving         Term        Portions of
                                              SBA Loans        Commercial       Commercial      Commercial      SBA Loans
                                              ---------        ----------       ----------      ----------      --------
<S>                                         <C>                <C>              <C>             <C>            <C>
Prepayment speed                                 8.0%              8.0%            7.5%               --              --
Aggregate expected credit losses                7.08%             3.93%            1.25%              --              --
Discount rate for servicing cash flows          9.48%             8.43%            8.47%              --              --
</TABLE>


8
<PAGE>   11
    The following discussions make reference to average balances of certain
assets and liabilities as well as volume and rate changes. For further
information with respect to these matters see the tables set forth on pages 13
and 14.

RESULTS OF OPERATIONS

COMPARISON OF THE YEARS ENDED
DECEMBER 31, 1999, 1998 AND 1997

    Net Income. Net income totaled $6.0 million in 1999 a decrease of $1.0
million or 15% from 1998 net income of $7.0 million, which had increased $2.6
million or 59% from 1997 net income of $4.4 million.

    The 1999 net income reflects a $2.2 million or 13% increase in the gain on
loan sales to $19.2 million for 1999 including gains of $6.3 million on the
securitization of loans, an increase of 54%. Gain on the sale of guaranteed
loans was level with the prior year at $12.3 million. Loan servicing income
increased $1.9 million or 45% relating to the continued growth in loans sold and
managed for investors. Included in income is a $8.9 million gain from the sale
of the Company's last remaining branch and related checking, savings and money
market deposit accounts. These increases were offset by a reduction in net
interest income of $3.5 million or 34% due in part to higher funding costs after
the sale of the branch. Operating expenses increased $10.6 million or 60% in
1999, reflecting marketing cost increases, additions to lending personnel,
domestic and international expansion, as well as certain non-recurring expenses
incurred in connection with the branch sale and conversion to a state charter,
as well as other regulatory matters and the expense associated with the repair
of a government guaranteed loan. The expenses include $1.7 million related to a
bonus paid to the Chief Executive Officer in connection with the re-negotiation
of his employment agreement. This bonus was used by the Chief Executive Officer
to retire a $980,000 note receivable held by the Company and to pay income taxes
associated with the bonus. Also included in expenses is $940,000 related to cash
bonuses paid to seven members of senior management in conjunction with the
completion of the sale of the Company's last retail branch. The Company's
effective tax rate, excluding the effect of taxes on unconsolidated
subsidiaries, increased to 43.9% for the year ended December 31, 1999 from 38.9%
for the year ended December 31, 1998 due to the non-deductibility of the portion
of the Chief Executive Officer's compensation over $1 million.

    The increase in 1998 net income reflects a $5.1 million or 43% increase in
the gain on loan sales to $17.0 million for 1998. Included in the gains for 1998
are $4.1 million of gains recognized on the securitization of certain loans.
Gains from the sale of guaranteed loans increased $2.7 million or 29%. Operating
expenses increased $3.9 million in 1998 reflecting additions to lending and
credit administration personnel and the related office expense associated with
increased employees.

    Income from unconsolidated subsidiaries of $335,000 net of taxes, reflects
the net earnings from these subsidiaries recorded on the equity method. No
amounts were recorded in prior years as 1999 was the first year of activity for
these entities.

    Net Interest Income. Net interest income decreased $3.5 million or 34% to
$6.8 million in 1999 due to a $26.1 million or 12% increase in average
interest-earning assets offset by an 84 basis point decrease in the yield on
earning assets. The increase in investment securities income relates to yields
on I/O and investment securities associated with Company sponsored
securitizations. The average yield on loans decreased 63 basis points reflecting
the Prime rate reductions in the last four months of 1998. Average
interest-bearing liabilities increased $52.4 million or 33.7% while the cost of
funds increased 48 basis points as greater reliance was placed on brokered
certificates of deposits after the sale of the branch. The brokered certificates
of deposits have a higher cost than the average cost of branch checking, savings
and money-market deposits they replaced.

    Net interest income increased $2.0 million or 24% to $10.3 million in 1998
due to a $52 million or 32% increase in average interest-earning assets offset
by a 52 basis point decrease in the yield on earning assets. The decrease in the
earnings yield was a result of Prime rate decreases totaling 75 basis points
over the last four months of the year and a reflection of the increase in assets
held in liquid investment securities. The reduced yield on assets was somewhat
mitigated by a relatively flat cost of funds. Average interest-bearing
liabilities increased $30.8 million or 25% while the cost of funds decreased 2
basis points.

    Interest Income. Interest income of $18.4 million reported for 1999 was
relatively unchanged from the $18.2 million for 1998, due to the increase in
average investments of $32.1 million, less of a $6.1 million reduction in
average loans on hand. The average yield on loans decreased 63 basis points,
reflecting the 1998 Prime rate reductions which began to be reversed in the last
quarter of 1999. The average yield on investments decreased by 11 basis points
due to lower yields on federal funds sold.

    Interest income increased $3.6 million or 25% to $18.2 million in 1998 from
$14.6 million in 1997 due to a $38.2 million or 29% increase in average loans
outstanding and a $13.9 million or 43% increase in average investments. The
yield on loans and investments decreased by 57 basis points and 22 basis points,
respectively, reflecting the 75 basis point decrease in the Prime rate during
1998.

    Interest Expense. Interest expense increased $3.7 million or 47% to $11.6
million from $7.9 million in 1998 with the $49 million or 32% increase in
interest bearing deposits including replacement of $21 million of non-interest
bearing accounts that were transferred with the sale of the branch in March
1999. The overall 48 basis points higher cost of funds resulted primarily from
the shift to the use of newer sources of funding including warehouse lines of
credit and brokered certificates of deposit which accounted for 71 basis points
increase in interest costs.

    Interest expense increased $1.5 million or 23% to $7.9 million from $6.4
million in 1998 due to a $31 million or 25% increase in interest bearing
deposits. The increase in


                                                                               9
<PAGE>   12
average balances was mitigated by a relatively flat cost of funds for interest
bearing liabilities, which decreased by 2 basis points. The premier money market
accounts average balance increased $20 million or 27% during 1998. Interest
expense increased $1.0 million on these deposits to $4.9 million in 1998 from
$3.9 million in 1997, although the cost of funds remained flat. A $5.1 million
or 17% increase in non-interest bearing demand deposits contributed to keeping
the overall cost of liabilities to 5.09% for 1998 or a total decrease of 2 basis
points from 1997.

    Provision for Possible Loan Losses. The provision for possible loan losses
totaled $3.0 million in 1999, $3.1 million in 1998 and $2.2 million in 1997. The
provision is affected by net loan charge-offs, changes in the level and mix of
loans, changes in asset quality and general economic conditions.

    Non-Interest Income. The components of non-interest income are detailed
below:

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
                                       YEARS ENDED DECEMBER 31,
                                      1999        1998         1997
- ---------------------------------------------------------------------
                                         (dollars in thousands)
<S>                                 <C>          <C>          <C>
NON-INTEREST INCOME:
Gain on loan sales:
   SBA sales .................      $ 5,813      $ 6,101      $ 5,056
   USDA sales ................        4,292        3,390        1,901
   Ex-Im working capital sales          531          474          251
   Ex-Im medium term sales ...        1,716        2,274        2,305
   Unguaranteed portions of
        SBA and USDA sales ...           --          436        1,522
   Other commercial sales ....          521          190          775
   Loan-backed securitizations        6,314        4,094           --
                                    -------      -------      -------

        Gain on loan sales ...       19,187       16,959       11,810

Loan servicing income and fees        6,161        4,249        2,618
Other non-interest income ....           75          703          438
Income on stockholder note
   receivable ................          123           64          244
Gain on securities sales .....          416           33           --
Income from unconsolidated
   subsidiaries ..............          335           --           --
Gain on branch sale ..........        8,915           --           --
                                    -------      -------      -------

   TOTAL NON-INTEREST INCOME..      $35,212      $22,008      $15,110
                                    =======      =======      =======
</TABLE>

    Non-interest income increased $13.2 million or 60% to $35.2 million in 1999
from $22 million in 1998 due to a $2.2 million increase in gain on loan sales
and securitizations, a $1.9 million increase in loan servicing income and the
$8.9 million gain on the sale of the branch and related checking, savings and
money market deposit accounts.

    Gains on the guaranteed portions of SBA and USDA loan sales increased
$614,000 or 6% in 1999 on a 28% increase in the volume of SBA and USDA loans
sold which totaled $149.4 million for the year ended December 31, 1999. This
reflects the continuing contribution of the Company's representative offices
opened for over one year, including offices opened in 1998. The Company opened
representative offices in 1999 and 1998. The decline in the average rate of
return on SBA and USDA loans sold or securitized to 6.8% in 1999 from 8.1% in
1998 reflects a softness in the secondary market (see discussion below) which
the Company believes is attributable to general market concerns with increasing
prepayment rates and Year 2000 liquidity planning. Gains on the sale of Ex-Im
Bank medium term loans decreased 25% or $558,000 in 1999 as compared to 1998 as
the Company's international lenders also originated loans under the privately-
insured short and medium term loan program which provides an alternative
to the Ex-Im Bank guaranteed loans to foreign buyers of U.S. made goods.
The volume of Ex-Im Bank term loans sold decreased 39% while the average
rate of return increased to 4.7% from 3.8% in 1998 due to improved pricing on
these loans. The private insurance, which covers up to 95% of the commercial
risk, is provided by a major AAA rated private company. Certain of these loans
were sold to the commercial paper conduit in 1999.

    During late 1998 and continuing into 1999, the capital markets experienced
rapid and extreme changes evidenced by a decline of investor demand for certain
asset-backed securities that carried a credit agency rating less than the
highest ratings available and a widening of the spreads between the interest
rates on treasury securities and interest rates on asset-backed securities. The
uncertainties were exacerbated in late 1999 with concerns over Year 2000 market
preparedness. The "flight to quality" by asset-backed investors requires issuers
like the Company to provide a greater level of credit enhancement to attain
higher credit ratings for a larger percentage of the securitization in order to
make the transaction marketable. The widening of spreads in the asset-backed
capital markets reduces the earnings on a securitization and, if such events
were to occur in the future, could limit the amount of borrowings available to
the Company under its warehouse lines of credit and may make future
securitizations economically unfeasible.

    In 1999, the Company completed two securitizations and several sales to the
commercial paper conduit and other facilities; gains on these transactions
totaled $6.3 million on loans sold totaling $163.7 million. (See "Loan
Securitizations")

    In March 1999, the Company also sold its last branch facility and related
checking, savings and money market deposit accounts totaling $151 million for a
net gain of $8.9 million. The Company sold the branch as part of its overall
shift in focus to core commercial lending operations and the development of its
strategic plan for further commercial lending growth nationally and
internationally. The Company is cognizant that its funding costs are higher than
without core deposits but believes that the costs can be off-set by utilizing
more efficient funding sources without the associated cost of a branch
operation.

    During 1999 the Company recognized an impairment equal to $265,000 in the
carrying value of the servicing asset related to certain Ex-Im Bank medium term
loans following payment defaults on the underlying loans. $239,000 relates to
loans made to borrowers in Brazil, a country suffering from macroeconomic
pressures. Ex-Im Bank has paid the claims in full to the investors under the
Ex-Im Bank guarantee.


10
<PAGE>   13
    In 1998 non-interest income increased $7.0 million or 46% to $22.1 million
from $15.1 million in 1997 due to a $5.1 million increase in gain on loan sales
and securitizations and a $1.6 million increase in loan servicing income.

    Gains on the guaranteed portions of SBA and USDA loan sales increased $2.5
million in 1998 or 36% above 1997 on a 22% volume increase which reflects a
greater percentage of higher yielding USDA loans sold in 1998 and a 40 basis
point improvement in the yield on SBA guaranteed loans sold in 1998 over the
average 1997 return.

    In 1998, the majority of the unguaranteed portions of SBA loans were
included in the June 1998 SBA Loan-backed securitization, however, the Company
did complete sales of the unguaranteed portions of SBA and USDA loans on a
non-recourse, servicing-retained loan-by-loan basis. Aggregate gains in 1998 on
sales of $8.2 million of these loans were $436,000. In 1997, gains from the sale
of $29.2 million of unguaranteed portions of SBA and USDA loans totaled $1.5
million.

    Loan servicing income comprises the servicing fees received on loans sold on
a servicing retained basis, net of amortization of the servicing asset. Loan
servicing income continues to grow as the loans under management continue to
increase.

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
                                                  Years Ended December 31,
                                            1999            1998          1997
- --------------------------------------------------------------------------------
                                                  (dollars in thousands)
<S>                                      <C>             <C>           <C>
LOAN SERVICING INCOME AND FEES
Loan servicing income:
   SBA guaranteed loans ...........      $   2,801       $  1,612      $  1,203
   USDA guaranteed loans ..........          1,102            348           278
   Ex-Im working capital loans ....            218            225           186
   Ex-Im medium term loans ........            193            448           264
   Other commercial loans .........            359            176           123
   Securitized loans ..............            527             53            --
   Residential and consumer loans .              8             51            64
                                         ---------       --------      --------
     Loan servicing income ........          5,208          2,913         2,118
Serving asset reduction ...........           (265)            --            --
                                         ---------       --------      --------
     Net loan servicing income ....          4,943          2,913         2,118
Other loan fees ...................          1,218          1,336           500
                                         ---------       --------      --------
        Total loan servicing income
           and fees ...............      $   6,161       $  4,249      $  2,618
                                         =========       ========      ========

LOANS SERVICED FOR OTHERS
   (AT PERIOD END)
   Outstanding balance ............      $ 926,752       $656,532      $429,077
                                         =========       ========      ========
</TABLE>


    The increases in total loan servicing income reflect the continuing growth
of the servicing portfolios. The $2 million or 69% increase in loan servicing
income to $5.2 million in 1999 reflects the $248.8 million or 62% increase in
the average balance of commercial loans serviced for others to $791.6 million in
1999 from $542.8 million in 1998 and the fact that actual cash flows were
greater than those assumed for certain of the loans serviced. The 38% increase
in loan servicing income to $2.9 million in 1998 from $2.1 million in 1997
reflects the $185 million or 62% increase in the average balance of loans
managed for others over the period and is partially offset by compressed spreads
on certain loans serviced.

    Other loan fees are comprised of fees earned on letters of credit, fees
forfeited by borrowers choosing not to complete a transaction and late fees
collected on loans under management. Letters of credit fees increased $90,000 or
20% in 1999 to $552,000 from $461,000 in 1998. Such letter of credit fees in
1998 increased $116,000 or 34% from $345,000 in 1997. The continued increase in
fees relates to greater demand from the Company's exporting borrowers who have
the need for letters of credit to support their trade activities. Late fees on
loans increased $125,000 or 54% to $359,000 in 1999 over 1998, reflecting growth
in the loan portfolio managed, including loans securitized or sold to the sale
facilities. Included in other loan fees in 1998 is a $97,000 gain on the sale of
residential mortgage servicing rights to 168 residential mortgage loans as the
Company divested operational functions not directly related to its primary
commercial loan servicing business.

    Non-Interest Expense. Increases in non-interest expense reflect the
Company's growth over the periods as indicated below:


<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
                                         Years Ended December 31,
                                   1999           1998           1997
- --------------------------------------------------------------------------------
                                         (dollars in thousands)
<S>                             <C>             <C>           <C>
NON-INTEREST EXPENSE:
Salaries and benefits ....      $   18,124      $ 11,235      $  9,537
Occupancy ................           1,787         1,523           985
Furniture and equipment ..           1,252         1,007           692
Outside services .........           2,598           773           556
Office expenses ..........             989           834           556
Marketing ................           1,991         1,453           847
Other ....................           1,542           875           628
                                ----------      --------      --------
Total non-interest expense      $   28,283      $ 17,700      $ 13,801
                                ==========      ========      ========

SELECTED DATA
Total servicing portfolio       $1,076,092      $779,055      $573,545
                                ==========      ========      ========
Number of loans serviced .           2,859         2,050         1,938
                                ==========      ========      ========
Number of total personnel              190           182           131
                                ==========      ========      ========
Number of loan officers ..              79            69            46
                                ==========      ========      ========
</TABLE>

    Non-interest expenses increased $10.5 million or 59% in 1999 from 1998
primarily attributable to a $6.9 million or 61% increase in salaries and
benefits. In connection with the re-negotiation of the employment agreement
between the Company and its Chief Executive Officer and in consideration of his
overall contributions to the Company, a $1.7 million bonus was paid in March
1999. This bonus was used by the Chief Executive Officer to retire the $980,000
note receivable held by the Company and to pay the income taxes associated with
the bonus. In conjunction with the completion of the sale of the Company's last
retail branch and deposits, seven members of senior management received cash
bonuses totaling $940,000 in the aggregate. The remainder of the increase in
expenses is due to an average 6-7% increase in salaries effective January 1999
and headcount increases of 13 people bringing the 1999 year-end total to 190
from 182 as of the end of the previous year, net of five branch personnel who
were hired by the bank which purchased the branch. The staffing increases were
primari-


                                                                              11
<PAGE>   14
ly in the international lending areas, but also in the support areas of loan
servicing, credit, capital markets, and finance due to the added complexity
associated with the Company's business model.

    Marketing expense increased $538,000 or 37% in 1999 primarily reflecting
increased expenses associated with the marketing and referral activities of the
Company's International Master Agents, as well as $183,000 associated with
advertising related to a retail certificate of deposit solicitation in early
1999 and a loan origination campaign in September of 1999. Domestic and
international travel expenses also increased $133,000, reflecting the Company's
continued geographic expansion. The $1.8 million increase in outside services in
1999 reflects the increase in legal fees associated with various regulatory
matters, establishment of agent relationships and/or representative office
status in several of the Company's international markets, the Company's name
change and conversion from a national bank to a Connecticut bank, required legal
diligence in conjunction with this conversion and the establishment of strategic
alliance agreements for barter financing, energy financing and investments.

    Other expenses increased $667,000 in 1999, primarily made up of a $340,000
expense incurred in March 1999 for the loss of a government guarantee on a
single SBA loan managed for investors. Excluding this claim, historically the
Company has made repairs on government guaranteed loans totaling less than
$100,000 since 1991. At December 31, 1999 the Company services guaranteed loans
totaling $641 million.

    Non-interest expenses increased $3.9 million or 28% in 1998 from 1997 due to
a 39% increase in personnel. The number of loan officers increased by 50% to 69
in 1998 as two new domestic representative offices were opened and the existing
offices and international business units were further staffed. The remaining
additions to personnel were primarily in the credit administration and loan
servicing business units. Geographic expansion and personnel additions resulted
in an increase in occupancy and related expenses as new offices were leased and
additional office space in the Company's Hartford, Connecticut headquarters was
occupied.

    Marketing expense increased $606,000 or 72% in 1998 reflecting increased
expenses associated with the marketing and referral activities of the Company's
International Master Agents. These expenses increased $281,000 to $412,000 in
1998. Domestic and international travel expenses also increased reflecting the
Company's continued geographic expansion. The $217,000 or 39% increase in
outside services reflects the increase in accounting and legal fees associated
with the increased reporting requirements of an SEC registrant and compliance
with banking laws in each of the new states and countries where domestic and
international representative offices were opened in 1998.

    The Company's efficiency ratios, calculated as the ratio of non-interest
expenses to the sum of net interest income and non-interest income, were 67%,
55% and 59% for the years ended December 31, 1999, 1998, and 1997, respectively.

    Income Taxes. The effective income tax rates, excluding the impact of
unconsolidated subsidiaries, for the years ended December 31, 1999, 1998, and
1997 were 43.9%, 38.9%, and 39.5%, respectively. The increase in 1999 reflects
the non-deductibility of the portion of the Chief Executive Officer's
compensation over $1 million. The reduction from 1997 to 1998 reflects a 1%
decrease in the State of Connecticut statutory tax rate in 1998 and a $34,000
State of Connecticut tax refund received in September 1998 that resulted from a
statutory change relating to the 1991 through 1995 tax years.


12
<PAGE>   15
    The following table sets forth the components of the Company's net interest
income and yield on average interest earning assets and rate on interest bearing
liabilities.



<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
                                                                           FOR THE YEARS ENDED

                                                         DECEMBER 31, 1999                      DECEMBER 31, 1998
- ---------------------------------------------------------------------------------------------------------------------------------

                                                             Interest        Average                 Interest       Average
                                                Average       Earned/         Yield/     Average      Earned/        Yield/
                                                Balance        Paid            Rate      Balance       Paid           Rate
                                                ------------------------------------    -----------------------------------
                                                                           dollars in thousands)
<S>                                             <C>          <C>             <C>        <C>          <C>             <C>
ASSETS:
   Loans (1)
     Commercial ..........................      $159,911      $13,704           8.57%   $162,776      $15,016          9.22%
     Residential .........................         2,257          171           7.58%      4,847          392          8.09%
     Other consumer ......................           652           58           8.90%      1,247          114          9.15%
                                                --------      -------         ------    --------      -------        ------

   Total loans ...........................       162,820       13,933           8.56%    168,870       15,522          9.19%

   Investment securities (2) .............        42,127        2,398           5.69%     18,609        1,154          6.20%
   Interest-only strips (2) ..............         5,699          555           9.74%      1,183          104          8.78%
   Federal funds sold ....................        30,388        1,486           4.89%     26,310        1,412          5.37%
                                                --------      -------         ------    --------      -------        ------

   Total investment securities and
       federal funds sold ................        78,214        4,439           5.68%     46,102        2,670          5.79%
                                                --------      -------         ------    --------      -------        ------

Total earning assets .....................       241,034       18,372           7.62%    214,972       18,192          8.46%
                                                              -------         ------                  -------        ------
Total non-earning assets .................        35,521                                  25,019
                                                --------                                --------

Total assets .............................      $276,555                                $235,991
                                                ========                                ========


LIABILITIES AND STOCKHOLDERS' EQUITY:
   Deposits
     Interest bearing demand deposits ....      $  3,807           86           2.26%   $  8,964          212          2.37%
     Premier money market ................        24,989        1,203           4.81%     92,591        4,928          5.32%
     Other savings .......................         2,565           98           3.82%      9,889          295          2.98%
     Retail certificates of deposit ......        32,762        1,624           4.96%     19,728        1,141          5.78%
     Brokered certificates of deposit ....       133,552        7,325           5.48%     14,456          793          5.49%
     IRA certificates of deposit .........         6,623          403           6.08%      9,310          527          5.66%
                                                --------      -------         ------    --------      -------        ------

   Total deposits ........................       204,298       10,739           5.26%    154,938        7,896          5.10%
   Other borrowings ......................         3,602          842          23.38%        605           28          4.63%
                                                --------      -------         ------    --------      -------        ------

   Total interest bearing liabilities ....       207,900       11,581           5.57%    155,543        7,924          5.09%
                                                --------      -------         ------    --------      -------        ------

   Non-interest bearing liabilities
     Demand deposits .....................        13,069                                  34,136
Other liabilities ........................         3,836                                   2,042
                                                --------                                --------

Total non-interest bearing liabilities ...        16,905                                  36,178

Stockholders' equity .....................        51,750                                  44,270
                                                --------                                --------


Total liabilities and stockholders' equity      $276,555                                $235,991
                                                ========                                ========




Net interest income/net interest spread ..                    $ 6,791           2.05%                 $10,268          3.37%
                                                              =======          =====                  =======        ======

Net interest margin ......................                                      2.82%                                  4.78%
                                                                              ======                                 ======

Average interest earning assets/average
   interest bearing liabilities ..........                                    115.94%                                138.21%
                                                                              ======                                 ======
</TABLE>


<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
                                                           FOR THE YEARS ENDED

                                                          DECEMBER 31, 1997
- -------------------------------------------------------------------------------------
                                                        dollars in thousands)
                                                               Interest       Average
                                                 Average        Earned/       Yield/
                                                 Balance         Paid          Rate
                                                 -----------------------------------

<S>                                              <C>           <C>            <C>
ASSETS:
   Loans (1)
     Commercial ..........................       $120,913       $12,002         9.93%
     Residential .........................          8,129           595         7.32%
     Other consumer ......................          1,668           156         9.35%
                                                 --------       -------       ------

   Total loans ...........................        130,710        12,753         9.76%

   Investment securities (2) .............         19,085         1,156         6.06%
   Interest-only strips (2) ..............             --            --           --%
   Federal funds sold ....................         13,139           716         5.45%
                                                 --------       -------       ------

   Total investment securities and
       federal funds sold ................         32,224         1,872         5.81%
                                                 --------       -------       ------

Total earning assets .....................        162,934        14,625         8.98%
                                                                -------       ------
Total non-earning assets .................         14,957
                                                 --------

Total assets .............................       $177,891
                                                 ========


LIABILITIES AND STOCKHOLDERS' EQUITY:
   Deposits
     Interest bearing demand deposits ....       $  7,406           183         2.47%
     Premier money market ................         72,965         3,869         5.30%
     Other savings .......................          6,268           135         2.15%
     Retail certificates of deposit ......         30,825         1,786         5.79%
     Brokered certificates of deposit ....             --            --           --%
     IRA certificates of deposit .........          6,552           364         5.56%
                                                 --------       -------       ------

   Total deposits ........................        124,016         6,337         5.11%
   Other borrowings ......................            702            34         4.84%
                                                 --------       -------       ------

   Total interest bearing liabilities ....        124,718         6,371         5.11%
                                                 --------       -------       ------

   Non-interest bearing liabilities
     Demand deposits .....................         29,066
Other liabilities ........................          2,458
                                                 --------

Total non-interest bearing liabilities ...         31,524

Stockholders' equity .....................         21,649
                                                 --------


Total liabilities and stockholders' equity       $177,891
                                                 ========




Net interest income/net interest spread ..                      $ 8,254         3.87%
                                                                =======       ======

Net interest margin ......................                                      5.07%
                                                                              ======

Average interest earning assets/average
   interest bearing liabilities ..........                                    130.64%
                                                                              ======
</TABLE>


(1) For purposes of these computations, non-accruing loans are included in the
    average balances.

(2) The yield does not give effect to changes in fair value that are reflected
    as a component of stockholders' equity.


                                                                              13
<PAGE>   16
    The following rate/volume analysis shows the portions of the net change in
interest income due to changes in volume or rate. The changes in net interest
income due to both volume and rate have been allocated proportionally to changes
due to volume and changes due to rate.



<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
                                                            Year Ended December 31,                Year Ended December 31,
                                                            1999 Compared to 1998                   1998 Compared to 1997
                                                                Changes due to:                          Changes due to:
                                                     -----------------------------------       ---------------------------------
                                                      Volume          Rate        Total        Volume        Rate         Total
                                                     -----------------------------------       ---------------------------------
                                                                                (dollars in thousands)
<S>                                                  <C>           <C>            <C>          <C>           <C>         <C>
ASSETS:
Loans
  Commercial ..................................      $  (246)      $(1,066)      $(1,312)      $ 3,862       $(848)      $ 3,014
     Residential ..............................         (196)          (25)         (221)         (265)         62          (203)
  Other consumer ..............................          (53)           (3)          (56)          (39)         (3)          (42)
                                                     -------       -------       -------       -------       -----       -------

       Total loans ............................         (495)       (1,094)       (1,589)        3,558        (789)        2,769

Investment securities .........................        1,339           (95)        1,244           (29)         27            (2)
Interest-only strips ..........................          440            11           451           105          --           105
Federal funds sold ............................          199          (125)           74           707         (11)          696
                                                     -------       -------       -------       -------       -----       -------
       Total investments and federal funds sold        1,978          (209)        1,769           783          16           799
                                                     -------       -------       -------       -------       -----       -------
       Total interest earning assets ..........        1,483        (1,303)          180         4,341        (773)        3,568
                                                     -------       -------       -------       -------       -----       -------

LIABILITIES:
Deposits
  Interest-bearing demand deposits ............      $  (116)      $   (10)      $  (126)      $    37       $  (8)      $    29
  Premier money market savings ................       (3,254)         (471)       (3,725)        1,043          16         1,059
  Other savings ...............................         (280)           83          (197)          108          52           160
  Retail certificates of deposits .............          646          (163)          483          (643)         (2)         (645)
  Brokered certificates of deposit ............        6,532            --         6,532           792          --           792
  IRA certificates of deposit .................         (164)           40          (124)          156           7           163
                                                     -------       -------       -------       -------       -----       -------

       Total deposits .........................        3,364          (521)        2,843         1,493          65         1,558
Other borrowings ..............................          701           113           814            (5)         (1)           (6)
                                                     -------       -------       -------       -------       -----       -------

       Total interest-bearing liabilities .....        4,065          (408)        3,657         1,488          64         1,552
                                                     -------       -------       -------       -------       -----       -------

       Change in net interest income ..........      $(2,582)      $  (895)      $(3,477)      $ 2,853       $(837)      $ 2,016
                                                     =======       =======       =======       =======       =====       =======
</TABLE>

FINANCIAL CONDITION

    General. Total assets increased $54.3 million or 20% to $328 million at
December 31, 1999 from $273.7 million at December 31, 1998 and $54.8 million or
26% from the December 31, 1997 balance of $218.9 million. These increases
reflect increases in the receivables from loans sold and retained interests
following the securitization or sale of loans originated. In 1999 the Company
originated loans totaling $550.9 million and completed sales and securitizations
of loans totaling $426.0 million. In 1998 loans originated and loans sold or
securitized totaled $391.7 million and $351.2 million, respectively. The growth
in the balance sheet has generally been funded by increases in deposits and
retained earnings.

    Cash and Cash Equivalents. Cash and cash equivalents decreased by $9.6
million or 16% to $48.8 million at December 31, 1999, reflecting the use of cash
to fund loan originations. The balance also includes an increase to $11.6
million in the balance of cash reserve ("spread") accounts required by the terms
of respective securitizations.

    The cash balances increased to $58.3 million at December 31, 1998 from $17.4
million at December 31, 1997 following the receipt of proceeds from a commercial
loan securitization completed in December 1998.

    Investment Securities. The investment securities portfolio was stable at
$32.8 million at December 1999 compared to $32.3 million at December 31, 1998
which was an increase of $10 million or 45% from $22.3 million as of December
31, 1997. The portfolios had historically been comprised of U.S. Treasury and
other U.S. government mortgage-backed securities and collateralized mortgage
obligations with average lives of less than five years. As a result of the
Company's securitizations, the portfolio in 1999 includes $9.3 million at face
value of rated and unrated subordinate interests in securities and $10.3 million
of interest-only strips, with comparable amounts for 1998 of $11.5 million and
$4.1 million. Refer to Note 2 of the Company's consolidated financial statements
for additional information.

    Investment in Unconsolidated Subsidiaries. The investment in unconsolidated
subsidiaries has increased $12 million over the 1998 balance due to increased
levels of sales activity to these entities. See Note 3 of the Company's
consolidated financial statements for additional information.

    Loans. Loans increased by $23.9 million or 20% to $141.4 million at December
31, 1999 from $117.5 million at December 31, 1998 due to the timing of loan
closings in the last quarter of 1999. The balance as of December 31, 1998


14
<PAGE>   17
reflected a decrease of $22.1 million or 16% from $139.7 million at December 31,
1997. The increase in the loan portfolios is due to the continued growth of loan
originations and is also affected by the timing of loan sales and
securitizations.

    Loan Securitizations. During 1999 the Company completed two commercial loan
securitization transactions and several sales to commercial paper conduits
involving the issuance of $201 million of senior and subordinated securities.

    In connection with the "SBA Loan Backed Series 1999-1", completed in June
1999, a $33.7 million Class A certificate rated Aaa by Moody's Investor
Services, Inc. was sold in a private placement. A $3.0 million Class B
certificate rated A2 by Moody's Investor Services, Inc. initially held by the
Company, was sold during the year and a gain was recorded on the sale of
$265,000. A $750,000 Class B unrated security was held by the Company at the end
of the year. Related to "Business Loan Trust 1999-A" backed by commercial term
loans and completed in September 1999, a $56.6 million senior note rated AAA by
Duff and Phelps Credit Rating Co. and Aaa by Moody's Investor Services, Inc. as
well as a $2.6 million A2 rated note and a $2.6 million BBB rated note were sold
in a private placement. A $3.2 million unrated note is held by the Company from
this securitization as of December 31, 1999.

    In 1999, the Company sold loans to its commercial paper facility and sales
conduits totaling $98.4 million for which $11.4 million are retained interests
recorded on the books of the unconsolidated subsidiaries.

    During 1998 the Company completed two commercial loan securitization
transactions and a sale to a commercial paper conduit involving the issuance of
$113.3 million of senior and subordinated securities. In connection with the
"SBA Loan Backed Series 1998-1", completed in June 1998, a $24.2 million Class A
certificate rated Aa3 by Moody's Investor Services, Inc. was sold in a private
placement. A $2.7 million Class B certificate rated Baa3 by Moody's Investor
Services, Inc. is held by the Company as of December 31, 1999. Related to
"Business Loan Trust 1998-A" backed by commercial term loans and completed in
December 1998, a $55 million senior note rated AAA by Duff and Phelps Credit
Rating Co. and Aaa by Moody's Investor Services, Inc. was sold in a private
placement. A $3.2 million A2 rated note and a $3.2 million Baa3 rated note held
by the Company as of December 31, 1998 were sold during 1999 for a combined gain
on the sale of $151,000. A $3.1 million unrated note from this securitization is
held by the Company as of December 31, 1999. A $21.4 million sale to an
asset-backed commercial paper conduit facility also occurred in December 1998.

         In 1999 and 1998, cash proceeds from the securitization of commercial
loans totaled $181 million and $85.3 million, respectively, net of subordinated
certificates and notes and the required initial deposits to the cash reserves
held by the Company.

         Certain data for 1999 and 1998 or as of December 31, 1999 presents
data on sales assumptions, retained interests and credit enhancements
as follows:

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
                                                            Securitization Transactions
                                                       Unguaranteed
                                                        Portions of                   Term
                                                         SBA Loans                    Loans
                                                    ------------------         ----------------------
(dollars in thousands)                              1999          1998         1999          1998
- -----------------------------------------------------------------------------------------------------
<S>                                               <C>           <C>           <C>           <C>
Total loans securitized or sold ............      $26,902       $37,420       $65,000       $65,000
Gain recognized ............................      $ 2,794       $ 3,155       $   906       $ 1,310
Gain as a percentage of loans securitized ..         10.4%          8.4%          1.4%          2.0%
Average coupon (spread over prime) .........         1.59%         1.40%         0.73%         1.00%
Assumed prepayment speed ...................            8%            8%            8%            8%
Weighted average contractual lives (years) .        13.75         13.21         10.65         11.73
Aggregate expected credit losses ...........         7.08%         6.82%         3.93%         4.12%
Investment in subordinated notes and
   certificates at December 31, 1999 .......      $ 2,138       $   725       $ 3,139       $ 3,250
Subordinated interest retained held by
  unconsolidated subsidiaries at
    December 31, 1999 ......................           --            --            --            --
Balance of I/O Strip at December 31, 1999 ..      $ 1,353       $ 1,696       $ 1,245       $ 1,946
Maximum cash reserve/collateral requirements      $ 2,156       $ 1,085       $ 6,112       $ 5,730
Cash reserve/collateral balance at
  December 31, 1999 ........................      $ 1,828       $ 1,085       $ 5,941       $ 3,933
</TABLE>

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
                                                              Sales to Facilities
                                                                               Unguaranteed
                                             Commercial              Term     Portions of SBA
(dollars in thousands)                          Paper                Loans         Loans
- ----------------------------------------------------------------------------------------------
<S>                                          <C>                 <C>          <C>
Total loans securitized or sold ............     $84,560            $27,122       $11,908
Gain recognized ............................     $    16            $   721       $ 1,113
Gain as a percentage of loans securitized ..         --%                2.7%          9.3%
Average coupon (spread over prime) .........  0.19%-1.0%               1.08%         1.34%
Assumed prepayment speed ...................        6-8%                  8%            8%
Weighted average contractual lives (years) .         1-3                 11         15.44
Aggregate expected credit losses ...........        1.44%              3.44%         5.14%
Investment in subordinated notes and
   certificates at December 31, 1999 .......          --                 --            --
Subordinated interest retained held by
  unconsolidated subsidiaries at
    December 31, 1999 ......................     $ 9,724            $ 4,710       $   791
Balance of I/O Strip at December 31, 1999 ..     $ 1,121            $ 1,578       $   845
Maximum cash reserve/collateral requirements     $ 2,000                 --            --
Cash reserve/collateral balance at
  December 31, 1999 ........................     $ 2,000                 --            --
</TABLE>

    The significantly higher gain, stated as a percentage of loans securitized,
for the unguaranteed portions of SBA loans reflects the fact that such loans are
carried at a discount following the sale of the guaranteed portions. The
discount is included in the calculation of the gain on the securitization.


                                                                              15
<PAGE>   18
    Allowance for Loan Losses. The Company reviews the adequacy of the allowance
for loan losses quarterly. The allowance totaled $4.55 million at December 31,
1999, an increase of $550,000 or 13.8% from the $4.0 million balance at
December 31, 1998, which was increased $900,000 from the $3.1 million balance at
December 31, 1997.

ACTIVITY IN THE ALLOWANCE FOR LOAN LOSSES

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
                                                                               For the Year Ended December 31,
                                                                            1999           1998           1997
- ----------------------------------------------------------------------------------------------------------------
                                                                                 (dollars in thousands)
<S>                                                                      <C>            <C>            <C>
Balance of allowance for loan losses at the beginning of the period      $  4,000       $  3,100       $  3,000
Charge-offs:
  Commercial ......................................................         1,199            876            279
  SBA .............................................................           166            775            262
  Privately insured inventory buyer ...............................           529             --             --
  Import loans ....................................................           264             --             --
  Ex-Im working capital ...........................................           260             --             --
  USDA ............................................................           126             --             68
  Investor mortgage ...............................................             3            582          1,395
  Private .........................................................            --             83             46
  Residential and other consumer ..................................             2              8            195
                                                                         --------       --------       --------
  Total charge-offs ...............................................         2,549          2,324          2,245
Recoveries:
  Commercial ......................................................            75             30             77
  SBA .............................................................             3             --             13
  Investor mortgage ...............................................             2            123              6
  Private .........................................................            --             --             10
                                                                         --------       --------       --------
  Total recoveries ................................................            80            153            106
                                                                         --------       --------       --------
Net charge-offs ...................................................         2,469          2,171          2,139
Provision for loan losses .........................................         3,019          3,071          2,239
                                                                         --------       --------       --------
Balance of allowance for loan losses at end of period .............      $  4,550       $  4,000       $  3,100
                                                                         ========       ========       ========
Total loans .......................................................      $149,340       $122,523       $135,398
                                                                         ========       ========       ========
Allowance to total loans ..........................................           3.0%           3.3%          2.3%
                                                                         ========       ========       ========
</TABLE>

    Included in charge-offs are charge-offs on the unguaranteed portions of SBA,
USDA and Ex-Im Bank loans which represent losses realized on the retained loans
after deduction of the Company's share of proceeds from collection and
liquidation of collateral. The charge-offs incurred on the privately-insured
inventory buyer loans represent the deductible and co-payment expense under the
insurance policy. See Note 4 to the Company's consolidated financial statements.

    The import loans charged-off did not carry private insurance. Shortly after
introducing the import loan product, which are loans to U. S. importers, the
Company did obtain a separate credit insurance policy for this line of business
and has only $43,000 in uninsured loans outstanding at December 31, 1999.

    The Company believes that the increase in charge-offs emanating from the SBA
and commercial portfolios reflects the normal seasoning of these portfolios. As
the Company generally extends both SBA and commercial loans to the same
borrowers, it is expected that there will be a high degree of correlation as to
the changes in credit losses from these two portfolios.

       The Company monitors the performance of the portfolios by use of
Static Loss Pool Analysis. For purposes of this analysis, seasoned portfolios
are defined as having been originated at least 8 quarters prior to the analysis.
Using a 26-quarter time period, the SBA portfolio has generated an average
annual loss of 57 basis points. During the same time period, the commercial loan
portfolio has generated an average annual loss of 67 basis points.

     Investor mortgage lending, which was comprised of multi-family urban
residential loans on properties located in various Connecticut inner cities, is
no longer conducted.

    The following table sets forth the breakdown of the allowance for loan
losses by loan category at the dates indicated. Management believes that the
allowance can be allocated by category only on an approximate basis, and
therefore allocation of the allowance to each category is not necessarily
indicative of future losses and does not restrict use of the allowance to absorb
losses in any category. The unallocated portion of the allowance represents an
amount that is not specifically allocated to one of the loan portfolios.


16
<PAGE>   19
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
                                                                                  December 31,
                                                        1999          1998          1997           1996          1995
- -------------------------------------------------------------------------------------------------------------------------
                                                                             (dollars in thousands)
<S>                                                   <C>            <C>          <C>            <C>            <C>
ALLOCATION OF THE ALLOWANCE BY CATEGORY OF LOANS
Unguaranteed portions of:
   SBA and USDA loans ..........................      $    820       $1,050       $    853       $    491       $    563
   Ex-Im Bank working capital loans ............           202          245            145             44              2
Other international loans ......................           763          483             --             --             --
Commercial mortgage loans ......................           139          128            250            271            483
Other commercial loans .........................         1,759        1,367          1,052            475            316
Investor mortgage loans ........................            26           63            269          1,061            399
Residential and other consumer loans ...........            35           43             67            113             72
Loans held for sale ............................           223           43             --             --             --
Unallocated ....................................           583          578            464            545            165
                                                      --------       ------       --------       --------       --------
Total allowance for loan losses ................      $  4,550       $4,000       $  3,100       $  3,000       $  2,000
                                                      ========       ======       ========       ========       ========

PERCENT OF LOANS IN EACH CATEGORY TO TOTAL LOANS
Unguaranteed portions of:
   SBA and USDA loans ..........................          11.0%        30.0%          26.9%          30.5%          38.5%
   Ex-Im Bank working capital loans ............           5.9          3.9            2.8            3.0            0.2
Other international loans ......................          20.1         15.4             --             --             --
Ex-Im Bank medium term loans ...................           0.1           --            0.5            1.8            0.1
Commercial mortgage loans ......................           5.4          8.5           14.7           16.4           14.5
Other commercial loans .........................          25.1         29.7           44.8           29.4           26.9
Investor mortgage loans ........................           0.9          2.6            4.1            6.6            7.2
Residential and other consumer loans ...........          29.9          2.9            6.2           12.3           12.6
Loans held for sale ............................           1.6          7.0             --             --             --
                                                      --------       ------       --------       --------       --------
   Total .......................................         100.0%       100.0%         100.0%         100.0%         100.0%
                                                      ========       ======       ========       ========       ========
</TABLE>

The following table sets forth information regarding the Company's
non-performing loans at the dates indicated:

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
                                                                        December 31,
                                                 1999         1998          1997          1996         1995
- -------------------------------------------------------------------------------------------------------------
                                                                    (dollars in thousands)
<S>                                             <C>          <C>          <C>            <C>          <C>
NON-PERFORMING LOANS
Commercial:
 Unguaranteed portions:
   SBA and USDA loans ....................      $1,264       $1,533       $1,226         $  188       $  419
   Ex-Im Bank working capital loans ......         397          418           --             --           --
Other international loans ................       1,759(1)       112           --             --           --
Commercial mortgage loans ................          49            6           39             --           --
Other commercial loans ...................       1,358          890          535            132           --
Investor mortgage loans ..................          --           --          415          1,853          839
Consumer .................................         131          145          149             79           --
                                                ------       ------       ------         ------       ------
Total non-performing loans ...............      $4,958       $3,104       $2,364         $2,252       $1,258
                                                ======       ======       ======         ======       ======
 Total non-performing loans to total loans        3.32%        2.53%        1.75%          1.96%        1.18%
                                                ======       ======       ======         ======       ======
Total non-performing loans to total assets        1.51%        1.13%        1.08%          1.39%        0.89%
                                                ======       ======       ======         ======       ======
Allowance to total non-performing loans ..          92%         129%         131%           133%         159%
                                                ======       ======       ======         ======       ======
</TABLE>

(1) Includes an international loan for which the insured amount is $1,576,000.

                                                                              17
<PAGE>   20
    The combined balance of non-performing SBA/USDA and commercial loans
increased in 1999 which reflects the seasoning of the portfolio. The Company
manages the non-performing assets actively, including a quarterly review of the
net realizable value of collateral securing these loans. Any deterioration in
the relationship between the loan amount and the net realizable value of the
collateral will be considered in the evaluation of the allocation of the
allowance attributed to the subject loan and/or a partial charge-off.

The Company had one loan past due 90 days and accruing interest at the end of
1999 but not for any other period end presented in the above table. The past due
loan is collateralized by a first mortgage on commercial real estate and it
is expected that the Bank will realize in full its carrying value and accrued
interest.


Other Real Estate Owned. It is the Company's policy, whenever possible, not to
take title to real property collateralizing loans, thereby avoiding management
time and any environmental liabilities associated with holding such properties.
From the year end 1997 to 1999 reporting periods discussed herein, the highest
balance of other real estate owned totaled $265,000.

    Receivable From Loans Sold. Receivable from loans sold represents the
balance of loans sold for which funding has not yet been received. Government
guaranteed loans are generally sold within 30 days of origination, usually at a
time when a group of loans are aggregated to attract interested bidders. The
sales are generally settled within 30 days of the trade date. During this thirty
day period, the Company reviews and delivers closing documents to the investor.
The receivable balance fluctuates with the month's loan sale activity and tends
to be higher at any quarter end due to increased loan closing activity. The
annual average balance of this receivable has ranged from $8-10 million. The
Company actively monitors the settlement of loans to ensure that this source of
liquidity is effectively managed.

    Servicing Assets. (See "Accounting for Loan Sales and Non Interest Income").
The servicing asset for loans sold is as follows:

<TABLE>
<CAPTION>
- ----------------------------------------------------------------
                                       At December 31,
                                1999        1998         1997
- ----------------------------------------------------------------
                                   (dollars in thousands)
<S>                           <C>          <C>          <C>
SERVICING ASSET
SBA ....................      $13,630      $ 7,836      $3,155
USDA ...................        6,835        2,271         375
Ex-Im medium term ......        2,955        2,749       2,025
Other commercial .......          984          867         124
                              -------      -------      ------
   Total servicing asset      $24,404      $13,723      $5,679
                              =======      =======      ======
</TABLE>

    Prepaid Expenses and Other Assets. At December 31, 1999 prepaid expenses
and other assets includes $1.2 million of accrued servicing fees and $3.2
million from other loan-related items, including interest and costs advanced on
behalf of investors.

    Deposits. Deposits have historically been the Company's primary funding
source and have increased to sustain the Company's balance sheet growth. See
"Liquidity and Capital Resources."

    Federal Home Loan Bank of Boston Advances. Periodically, the Company
utilizes Federal Home Loan Bank ("FHLB") advances to provide short term
liquidity. As of December 31, 1999, the Bank had a $7.7 million unused line of
credit from the FHLB.

    Funding and Warehouse Lines Available. As detailed in Note 7 to the
Company's consolidated financial statements, the Company has available warehouse
and sales facilities totaling $230 million of which $95.7 million was utilized
as of December 31, 1999 by the unconsolidated subsidiaries.

    Stockholders' Equity. Stockholders' equity increased $5.9 million to $55.0
million at December 31, 1999 from $49.1 million at December 31, 1998 and
increased $6.9 million in 1998 from $42.1 million at December 31, 1997 primarily
due to the retention of earnings. The Company has paid quarterly dividends of
$.03 per share since the fourth quarter of 1995. As explained in Note 8 to the
Company's consolidated financial statements, a note receivable from the
Company's Chief Executive Officer was repaid with proceeds from a bonus award by
the Company, as part of an amended employment contract. Additionally, the
Company holds a note receivable from the Company's Chief Executive Officer
related to the sale of 200,000 shares of common stock in March 1999, which is
reflected as a separate component of stockholders' equity.


LIQUIDITY AND CAPITAL RESOURCES

    Management considers scheduled cash flows from existing borrowers, projected
deposit levels, estimated liquidity needs from maturing and disintermediating
deposits, approved extensions of credit, and unadvanced commitments to existing
borrowers in determining the level and maturity of funding necessary to support
operations. Historically, the Company has increased the level of deposits to
support its planned loan growth. The Company also has supported its growth by
regularly selling loans on a servicing retained basis. During 1999 the Company
entered into the following transactions which have significantly changed the
manner in which the Company funds its operations and plans to support its future
growth:

- -   the sale of the Company's last branch in March 1999, including checking,
    savings and money market accounts which requires the Company to provide
    funding by alternative sources;

- -   establishment of two warehouse loan and sale facilities, pursuant to which
    up to an aggregate of $75 million is


18
<PAGE>   21
available to the Company (based upon the contractual advance rates against the
qualifying principal balance of the loans pledged to collateralize the
facility). The Company sold loans totaling approximately $27.1 million during
1999 under this facility;

- -   establishment of a commercial paper conduit facility pursuant to which up to
    $60 million is available to the Company (based upon the contractual advance
    rates against the qualifying principal balance of the loans pledged to
    collateralize the facility; the pledged loans consist of the unguaranteed
    portion of loans guaranteed by the SBA). The Company sold loans totaling
    approximately $11.9 million during 1999 under this facility;

- -   increasing from $65 million to $95 million the availability of a second
    commercial paper conduit facility, pursuant to which the Company has the
    right to sell up to $95 million in commercial revolving lines of credit and
    other qualifying loans during the term of the facility. The Company sold
    loans totaling approximately $59.4 million during 1999 under this facility;

- -   loan securitization and sales transactions pursuant to which the Company
    securitized and sold in aggregate approximately $140 million of asset backed
    loans, including $49 million of the unguaranteed portions of loans
    originated by the Company that were guaranteed in part by the SBA; (See
    "Securitization and Sale of Loans.")

- -   establishment of agreements with five national brokers which provide a
    source for brokered certificates of deposits used for fundings of one year
    or less.

    The funding provided and made available by the foregoing transactions has
been sufficient to fund the sale by the Company of its retail branch and to fund
loan originations through December 31, 1999. Management of the Company believes
that the funding provided by the access to the capital markets, including
availability under the warehouse borrowing and sale facility and commercial
paper conduits, will also be sufficient when combined with the amounts available
to the Company from issuance of brokered and retail certificates of deposit and
other sources of revenues, for the Company's on-going liquidity requirements.

    The Bank is subject to various regulatory capital requirements administered
by federal banking agencies. Failure to meet minimum capital requirements can
result in certain mandatory and discretionary actions by regulators that, if
undertaken, could have a direct material effect on the Company's financial
condition. The regulations require that the Bank meet specific capital adequacy
guidelines as calculated under regulatory accounting practices. The Bank's
capital classification is also subject to qualitative judgments by the
regulators about interest rate risk, concentration of credit risk and other
factors.

    Quantitative measures established by regulations to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios of Tier I capital to
total average assets (as defined), and minimum ratios of Tier I and total
capital to risk weighted assets. As of December 31, 1999 the Bank's capital
ratios are in excess of regulatory minimum requirements. See Note 8 to the
consolidated financial statements for a table of minimum required and actual
capital ratios. There are currently proposed regulatory amendments which may
require banks to set aside additional risk based capital for retained interests
associated with loans sold or securitized. These proposed regulations may
require the Company to structure certain loan sales or securitization
transactions in a manner which may be less favorable to the Company and may
reduce future reported earnings. These regulations are currently open for
comment and management will monitor the impact on the Company as the regulations
become more definitive.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK AND ASSET/LIABILITY
MANAGEMENT

    The Company, in 1999, securitized and sold to sale facilities $201 million
of loans which is 36% of the dollar volume of loans originated in 1999.
Approximately 33% of the Company's $19.2 million gain on loan sales in 1999 were
attributable to securitizations and sales to facilities. The above noted volume
reflects the Company's increasing reliance on securitizations, as it was an
increase over the 1998 volume of $117 million of loans securitized and sold to
sales facilities, which was 29% of the $391.7 million of loans originated in
1998. In 1998, approximately 24% of the Company's $16.9 million gain on loan
sales were attributed to securitizations of commercial loans and the sale of
loans to a commercial paper conduit.

    The Company expects to continue to sell loans to the commercial paper
conduits and complete asset-backed loan private placements in the capital
markets to securitize and sell the unguaranteed portions of SBA and USDA loans,
commercial loans and privately-insured international loans. The Company expects
to continue to sell the guaranteed portions of SBA, USDA and Ex-Im Bank loans on
a loan-by-loan basis. Such government guaranteed loans represented approximately
55% of the total loans originated in 1999. These guaranteed loans are generally
sold shortly after origination on a loan-by-loan basis.

    Although reliance on the capital markets for the sale of such loans presents
the Company with risks related to liquidity and earnings volatility, the Company
believes that its diversified sales and funding strategy provides it with the
ability to manage such risks. The Company believes that its overall strategy of
blending whole loan sales of government guaranteed loans with the securitization
of commercial loans and its on-going ability to sell loans to the commercial
paper conduit provide a diversified array of loan sales alternatives. As far as
sources of funds, after the sale of the March 1999 branch discussed earlier, the
Company has continued to receive funding from retail and brokered certificates
of deposit and from the warehouse lines provided by the investment banking firm
that lead-managed the Company's initial public offering in September 1997, as
well as commercial paper conduit facilities from a second financial institution
and its capital markets group.


                                                                              19
<PAGE>   22
    The Company currently originates, sells and securitizes SBA guaranteed
loans. The Company's ability to continue to securitize SBA loans is based on the
approval of the SBA for each SBA securitization transaction. The approval of the
SBA is dependent on certain minimum regulatory capital, the retention by the
Company of a subordinated tranche of the securitization and the maintenance of a
minimal currency rate (i.e. loans paying in accordance with terms). The ability
of the Company to manage these factors, including regulatory changes, could
impact its ability to execute future SBA securitizations and require the Company
to seek alternative sources of funding.

       Several factors will affect the Company's ability to access its warehouse
lines of credit, commercial paper facilities and complete securitizations in the
future, including conditions in the securities markets generally, and in the
asset-backed securities market specifically, the credit quality of the Company's
loan portfolio, compliance of the Company's loans with the eligibility
requirements established in connection with the facilities and securitizations,
the Company's ability to provide third-party credit enhancement and adequately
service its loan portfolio, and the absence of any material downgrading or
withdrawal of ratings given to securities previously issued in the Company's
securitizations. Further, the Company must ensure that securitizations are not
dilutive to risk based capital.

    During late 1998 and continuing into 1999, the capital markets experienced
rapid and extreme changes evidenced by a decline of investor demand for certain
asset-backed securities that carried a credit agency rating less than the
highest ratings available and a widening of the spreads between the interest
rates on treasury securities and interest rates on asset-backed securities. The
uncertainties were exacerbated in late 1999 with concerns over Year 2000 market
preparedness. The "flight to quality" by asset-backed investors requires issuers
like the Company to provide a greater level of credit enhancement to attain
higher credit ratings for a larger percentage of the securitization in order to
make the transaction marketable. The widening of spreads in the asset-backed
capital markets reduces the earnings on a securitization and, if such events
were to occur in the future, could limit the amount of borrowings available to
the Company under its warehouse lines of credit and may make future
securitizations economically unfeasible.


    Any substantial reduction in the accessibility of the warehouse lines of
credit, commercial paper conduit facilities or the securitization market for the
Company's loans or any adverse change in the terms of such securitizations could
have an adverse effect on the Company's financial condition or results of
operations.

    An earnings at risk model is one tool utilized by the Company to measure
interest rate risk. Such a model computes the estimated effect on net income
from changes in interest earned on assets and expenses paid on liabilities, as
well as the impact of off-balance sheet items in the event of a range of assumed
changes in market interest rates. This analysis estimates the risk of loss in
market risk sensitive instruments in the event of a sudden and sustained one
hundred to two hundred basis point increase or decrease in the market interest
rates. The Company's Board of Directors has adopted an interest rate risk
policy, which establishes maximum decreases in net income and capital in the
event of a sudden and sustained change in market interest rates. The estimated
changes in the Company's net income based on the Company's fourth quarter
calculation of the hypothetical changes in interest rates were within the limits
established by the Board of Directors.

    Such an earnings at risk calculation is based on the estimated change in
interest income and interest expense utilizing numerous assumptions, including
historical relationships between various indices utilized by the Company in
setting interest rates and management's judgment as to the expected relationship
of such rates in the current environment. This calculation utilizes such
relative levels of market interest rates as well as assumptions regarding loan
prepayments and deposit decays and should not be relied upon as indicative of
actual results. Importantly, the computations do not contemplate any actions the
Company could undertake in response to changes in interest rates.

    Certain shortcomings are inherent in the method of analysis presented in the
computation of earnings at risk. Actual results may differ from those presented
should market conditions vary from assumptions used in the calculation. In the
event of a change in interest rates, prepayment and early withdrawal levels
could deviate significantly from those assumed in the earnings at risk
calculation. Finally, the ability of many borrowers to repay their adjustable
rate loans and the value of the underlying collateral may decrease in the event
of interest rate decreases.

    The Company seeks to manage its assets and liabilities to reduce the
potential adverse impact on net interest income that might result from changes
in interest rates. Control of interest rate risk is conducted through systematic
monitoring of maturity mismatches. The Company's investment decision-making
takes into account not only the rates of return and their underlying degree of
risk, but also liquidity requirements, including minimum cash reserves,
withdrawal and maturity of deposits and additional demand for funds. For any
given period, the pricing structure is matched when an equal amount of assets
and liabilities reprice. An excess of assets or liabilities over these matched
items results in a gap or mismatch, as shown in the table presented on the
following page. A negative gap denotes liability sensitivity and normally means
that a decline in interest rates would have a positive effect on net interest
income, while an increase in interest rates would have a negative effect on net
interest income. However, significant variations may exist in the degree of
interest rate sensitivity between individual asset and liability types within
the repricing periods presented due to differences in their repricing elasticity
relative to the change in the general level of interest rates. All of the
Company's assets and liabilities are U.S. dollar-denominated and, therefore, the
Company bears no direct foreign exchange risk.


20
<PAGE>   23
    The majority of the Company's assets reprice according to contractual
arrangements although the Company had historically fairly broad discretion over
the frequency and magnitude of interest rate changes on its liabilities which
enabled the Company to minimize the impact of any general changes in the
interest rate environment. The discretion is now limited due to the sources of
funds utilized as discussed above and in "Liquidity and Capital Resources."

    The Company utilizes the analysis detailed below to generally monitor the
composition of assets and liabilities and focuses on the one-year mismatch. The
Company believes the negative one year cumulative gap of $63.4 million or 29%
reflects a relatively balanced position given the other assets on the balance
sheet which are not characterized as interest bearing, including accounts
receivable from loans sold of $50.1 million and investments in unconsolidated
subsidiaries of $15.3 million, both of which assets are supported by underlying
loans which will be collected or reprice within the next twelve months.

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
                                                                              December 31, 1999
                                                 0 to 90     91 to 180    181 to 365      1 to 5         Over 5
                                                   Days         Days          Days         Years          Years         Total
- -------------------------------------------------------------------------------------------------------------------------------
                                                                              (dollars in thousands)
<S>                                             <C>          <C>           <C>           <C>           <C>           <C>
Commercial loans ...........................    $125,882     $  8,235      $  4,988      $  1,315      $  6,464      $ 146,884
Other loans ................................         629          829           266           307           425          2,456
Investment(1)...............................      13,250           --         6,621         1,130        11,784         32,785
Federal funds sold .........................      35,780           --            --            --            --         35,780
                                                --------     --------      --------      --------      --------      ---------
        Total interest earning assets ......     175,541        9,064        11,875         2,752        18,673        217,905
                                                ========     ========      ========      ========      ========      =========
Checking ...................................       2,125        2,125         3,188         3,189            --         10,627
Savings ....................................         668          668         1,002         1,002            --          3,340
Time deposits ..............................     101,210       85,805        63,128         2,190            --        252,333
                                                --------     --------      --------      --------      --------      ---------
        Total interest bearing liabilities..     104,003       88,598        67,318         6,381            --        266,300
                                                ========     ========      ========      ========      ========      =========
Interest sensitivity gap ...................      71,538      (79,534)      (55,443)       (3,629)       18,673        (48,395)
                                                ========     ========      ========      ========      ========      =========
Cumulative gap .............................    $ 71,538     $ (7,996)     $(63,439)     $(67,068)     $(48,395)
                                                ========     ========      ========      ========      ========
Cumulative gap as a percentage of
     total interest earning assets .........          33%          (4)%         (29)%         (31)%         (22)%
                                                ========     ========      ========      ========      ========
</TABLE>

SEASONALITY

    The Company's business is seasonal, as the level of domestic loan
originations tends to be lower during the first quarter when many U.S. companies
have not yet produced their fiscal financial statements and during the third
quarter when many U.S. manufacturers shut down for a limited time for summer
vacation. Further, as the Company relies more on securitizations for the sale of
loans, the Company's earnings may also be lower in the quarters when loans
originated are held in portfolio for a future securitization or the timing of
loan closings may be impacted such that it does not afford a loan buyer
appropriate time to make the decision to purchase the loans. The seasonality and
timing factors have been somewhat mitigated by the conduits and sales facilities
put in place in late 1998 and in 1999.

IMPACT OF INFLATION

    The consolidated financial statements and related data presented elsewhere
have been prepared in accordance with generally accepted accounting principles
which require the measurement of financial position and operating results in
terms of historical dollars without considering changes in the relative
purchasing power of money over time due to inflation. The primary impact of
inflation on the operations of the Company is reflected in increased operating
costs. Interest rates have a significant impact on the Company's performance.
Increases in interest rates affect the ability of the Company's borrowers to
service their variable rate debt. Furthermore, inflation can directly affect the
value of loan collateral in general, and real estate collateral in particular.
These factors are taken into account in the initial underwriting process and
over the life of the loans. The Company believes that it has the systems in
place to continue to manage the rates, liquidity and interest rate sensitivity
of the Company's assets and liabilities.


                                                                              21
<PAGE>   24
YEAR 2000 COMPLIANCE

    A critical business issue emerged regarding how existing application
software programs and operating systems can accommodate the year 2000 dates. The
Company, utilizing the guidance provided by the Federal Financial Institutions
Examination Council ("FFIEC") as a framework, developed and executed a Year 2000
Compliance Program which included the review, renovation and testing of mission
critical systems, and development of business resumption contingency plans.

    The Company has executed its Compliance Program and, to date, has not
experienced any processing issues. To date the Company has spent approximately
$110,000 on Year 2000 compliance issues, including products and processes. As
required by its regulators, the Company will continue to monitor processing
during future key trigger dates.

RECENT ACCOUNTING PRONOUNCEMENT

SFAS No. 133

   In June 1998, the FASB issued No. 133 "Accounting
for Derivative Instruments and Hedging Activities," for which the implementation
date was extended by SFAS No. 137 and is effective for all of the Company's
financial statements for all fiscal quarters of all fiscal years beginning after
June 15, 2000. These statements establish accounting and reporting standards for
derivative instruments and for hedging activities, and require that all
derivatives be recognized as either assets or liabilities in the entity's
balance sheet and be measured at fair value. Changes in the fair value of the
derivative instruments are to be recognized depending on the intended use of the
derivative and whether or not it has been designated as a hedge. The future
implementation is not expected to have a significant impact upon the Company's
financial position, results of operations or cash flows.


22
<PAGE>   25
REPORT OF INDEPENDENT ACCOUNTANTS





THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
FIRST INTERNATIONAL BANCORP, INC.


In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, changes in stockholders' equity and cash
flows present fairly, in all material respects, the financial position of First
International Bancorp, Inc. and its Subsidiary (the "Company") at December 31,
1999 and 1998 and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1999, in conformity
with accounting principles generally accepted in the United States. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.


/s/ PricewaterhouseCooper, LLP

January 24, 2000


                                                                              23
<PAGE>   26


FIRST INTERNATIONAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS

December 31, 1999 and 1998
(dollars in thousands)


<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
                                                                                  1999              1998
- --------------------------------------------------------------------------------------------------------
<S>                                                                          <C>               <C>
ASSETS
Cash and due from banks .............................................        $  12,977         $  13,405
Federal funds sold ..................................................           35,780            44,930
                                                                             ---------         ---------
        Cash and cash equivalents ...................................           48,757            58,335
Investment securities (Note 2):
     Available for sale at fair value ...............................           29,811            28,156
     Held to maturity at amortized cost
        (fair value $1,161 and $1,989) ..............................            1,165             1,986
     U.S. Agency stocks at cost .....................................            1,809             2,177
Loans, net (Note 4) .................................................          141,435           117,535
Receivable from loans sold (Note 1) .................................           50,980            38,902
Investment in unconsolidated subsidiaries (Note 3) ..................           15,277             3,300
Accrued interest receivable .........................................            2,278             1,383
Premises and equipment, net (Note 5) ................................            4,326             3,815
Servicing asset .....................................................           24,404            13,723
Prepaid expenses and other assets ...................................            7,802             4,414
                                                                             ---------         ---------
        TOTAL ASSETS ................................................        $ 328,044         $ 273,726
                                                                             =========         =========

LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits (Note 6) ...................................................        $ 266,300         $ 219,874
U.S. Treasury demand note ...........................................             --               1,047
Accrued interest payable ............................................            3,341               768
Other liabilities ...................................................            3,416             2,966
                                                                             ---------         ---------
        Total liabilities ...........................................          273,057           224,655

Commitments and Contingencies (Notes 4 and 5)

Stockholders' equity (Notes 1, 8, 9 and 15):
     Common stock, $.10 par value, 12,000,000 shares authorized;
        8,259,818 and 7,952,637 shares issued and outstanding .......              826               795
     Preferred stock, $.10 par value, 2,000,000 shares authorized;
        no shares issued and outstanding ............................             --                --
     Paid-in capital in excess of par value .........................           34,788            32,561
     Stockholder note receivable ....................................           (1,980)             (941)
     Unrealized holding gain on investments available-for-sale, net .               94               428
     Retained earnings ..............................................           21,259            16,228
                                                                             ---------         ---------
        Total stockholders' equity ..................................           54,987            49,071
                                                                             ---------         ---------
        TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ..................        $ 328,044         $ 273,726
                                                                             =========         =========
</TABLE>


The accompanying notes are an integral part of the consolidated financial
statements


24
<PAGE>   27

FIRST INTERNATIONAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME

Years Ended December 31, 1999, 1998 and 1997
(dollars in thousands, except per share amounts)

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
                                                               1999           1998           1997
- -------------------------------------------------------------------------------------------------
<S>                                                         <C>            <C>            <C>
INTEREST INCOME:
     Loans, including net fees .....................        $13,933        $15,522        $12,753
     Investment securities .........................          2,953          1,258          1,156
     Federal funds sold ............................          1,486          1,412            716
                                                            -------        -------        -------
        Total interest income ......................         18,372         18,192         14,625
                                                            -------        -------        -------

INTEREST EXPENSE:
     Deposits ......................................         10,739          7,896          6,337
     Warehouse lines and short term advances .......            842             28             34
                                                            -------        -------        -------
        Total interest expense .....................         11,581          7,924          6,371
                                                            -------        -------        -------
        Net interest income ........................          6,791         10,268          8,254

PROVISION FOR POSSIBLE LOAN LOSSES .................          3,019          3,071          2,239
                                                            -------        -------        -------
        Net interest income after
            provision for possible loan losses .....          3,772          7,197          6,015

NON-INTEREST INCOME:
     Gain on sale of guaranteed commercial loans ...         12,352         12,239          9,513
     Loan servicing income and fees ................          6,161          4,249          2,618
     Gain on securitizations and sales to facilities          6,314          4,094           --
     Gain on sale of commercial loans ..............            521            626          2,297
     Gain on sale of securities ....................            416             33           --
     Other income ..................................            123            267            244
     Income from unconsolidated subsidiaries .......            335           --             --
     Service charges and other deposit fees ........             75            500            438
     Gain on branch sale ...........................          8,915           --             --
                                                            -------        -------        -------
        Total non-interest income ..................         35,212         22,008         15,110
                                                            -------        -------        -------
        Total operating income .....................         38,984         29,205         21,125
                                                            -------        -------        -------
NON-INTEREST EXPENSE:
     Salaries and benefits .........................         18,124         11,235          9,537
     Occupancy .....................................          1,787          1,523            985
     Furniture and equipment .......................          1,252          1,007            692
     Outside services ..............................          2,598            773            556
     Office expenses ...............................            989            834            556
     Marketing .....................................          1,991          1,453            847
     Other .........................................          1,542            875            628
                                                            -------        -------        -------
        Total non-interest expense .................         28,283         17,700         13,801
                                                            -------        -------        -------
        Income before income taxes .................         10,701         11,505          7,324

PROVISION FOR INCOME TAXES .........................          4,692          4,472          2,895
                                                            -------        -------        -------
        NET INCOME .................................        $ 6,009        $ 7,033        $ 4,429
                                                            =======        =======        =======
BASIC EARNINGS PER SHARE  (NOTES 1 AND 8) ..........        $   .74        $   .89        $   .70
                                                            =======        =======        =======
DILUTED EARNINGS PER SHARE (NOTES 1 AND 8) .........        $   .72        $   .86        $   .67
                                                            =======        =======        =======
</TABLE>


The accompanying notes are an integral part of the consolidated financial
statements


                                                                              25
<PAGE>   28

FIRST INTERNATIONAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

Years Ended December 31, 1999, 1998 and 1997
(dollars in thousands)

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
                                                                                                         Accumulated Other
                                                                                                           Comprehensive
                                                                                                               Income
                                                                                                          -------------------
                                                                               Paid-in                        Unrealized
                                                                             Capital in      Stockholder  Holding Gain (Loss)
                                                                 Common       Excess of           Note      on Investments
                                                                 Stock        Par Value       Receivable   Available-for-Sale
- -----------------------------------------------------------------------------------------------------------------------------
<S>                                                           <C>             <C>             <C>              <C>
        BALANCE AT JANUARY 1, 1997 ...................        $    577        $  8,222        $   (954)        $    (74)

Issuance of 145,350 shares of common stock
     for options exercised (Note 9) ..................              14             249            --               --
Issuance of 1,955,000 shares of common stock
     at public offering (Note 1) .....................             196          23,612            --               --
Dividend on common stock ($.12/share) ................            --              --              --               --
Discount on stockholder note receivable (Note 8) .....            --              --                92             --
Accretion on stockholder note receivable (Note 8) ....            --              --               (15)            --
Comprehensive income:
     Decrease in unrealized holding loss, net of taxes            --              --              --                 86
     Net income ......................................            --              --              --               --
     Comprehensive income ............................            --              --              --               --
                                                              --------        --------        --------         --------
        BALANCE AT DECEMBER 31, 1997 .................             787          32,083            (877)              12

Issuance of 85,902 shares of common stock
     for options exercised (Note 9 ) .................               8             478            --               --
Dividends on common stock ($.12/share) ...............            --              --              --               --
Accretion on stockholder note receivable (Note 8) ....            --              --               (64)            --
Comprehensive income:
     Increase in unrealized holding gain, net of taxes            --              --              --                416
     Net income ......................................            --              --              --               --
     Comprehensive income ............................            --              --              --               --
                                                              --------        --------        --------         --------
        BALANCE AT DECEMBER 31, 1998 .................             795          32,561            (941)             428

Issuance of 107,181 shares of common stock
     for options exercised (Note 9)...................              11             247            --               --
Dividends on common stock ($.12/share) ...............            --              --              --               --
Repayment of stockholder note receivable (Note 8) ....            --              --               941             --
Sale of common stock (Note 8) ........................              20           1,980          (1,980)            --
Comprehensive income:
     Decrease in unrealized holding gain, net of taxes            --              --              --               (334)
     Net income ......................................            --              --              --               --
     Comprehensive income ............................            --              --              --               --
                                                              ========        ========        ========         ========
        BALANCE AT DECEMBER 31, 1999 .................        $    826        $ 34,788        $ (1,980)        $     94
                                                              ========        ========        ========         ========
</TABLE>

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
                                                              Retained
                                                               Earnings          Total
- ---------------------------------------------------------------------------------------
<S>                                                           <C>              <C>
        BALANCE AT JANUARY 1, 1997 ...................        $  6,445         $ 14,216

Issuance of 145,350 shares of common stock
     for options exercised (Note 9) ..................            --                263
Issuance of 1,955,000 shares of common stock
     at public offering (Note 1) .....................            --             23,808
Dividend on common stock ($.12/share) ................            (731)            (731)
Discount on stockholder note receivable (Note 8) .....            --                 92
Accretion on stockholder note receivable (Note 8) ....            --                (15)
Comprehensive income:
     Decrease in unrealized holding loss, net of taxes            --                 86
     Net income ......................................           4,429            4,429
                                                                               --------
     Comprehensive income ............................            --              4,515
                                                              --------         --------
        BALANCE AT DECEMBER 31, 1997 .................          10,143           42,148

Issuance of 85,902 shares of common stock
     for options exercised (Note 9 ) .................            --                486
Dividends on common stock ($.12/share) ...............            (948)            (948)
Accretion on stockholder note receivable (Note 8) ....            --                (64)
Comprehensive income:
     Increase in unrealized holding gain, net of taxes            --                416
     Net income ......................................           7,033            7,033
                                                                               --------
     Comprehensive income ............................            --              7,449
                                                              --------         --------
        BALANCE AT DECEMBER 31, 1998 .................          16,228           49,071

Issuance of 107,181 shares of common stock
     for options exercised (Note 9 ) .................            --                258
Dividends on common stock ($.12/share) ...............            (978)            (978)
Repayment of stockholder note receivable (Note 8) ....            --                941
Sale of common stock (Note 8) ........................            --                 20
Comprehensive income:
     Decrease in unrealized holding gain, net of taxes            --               (334)
     Net income ......................................           6,009            6,009
                                                                               --------
     Comprehensive income ............................            --              5,675
                                                              ========         ========
        BALANCE AT DECEMBER 31, 1999 .................        $ 21,259         $ 54,987
                                                              ========         ========
</TABLE>


The accompanying notes are an integral part of the consolidated financial
statements


26
<PAGE>   29

FIRST INTERNATIONAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended December 31, 1999, 1998 and 1997
(dollars in thousands)

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
                                                                                           1999           1998           1997
- -----------------------------------------------------------------------------------------------------------------------------
<S>                                                                                   <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:

     Net income .................................................................     $   6,009      $   7,033      $   4,429
                                                                                      ---------      ---------      ---------
Adjustments to reconcile net income to net cash provided by operating activities:
     Depreciation and amortization ..............................................           996            678            644
     Amortization of investment premiums, net ...................................            60             16              7
     Accretion of loan discount, net ............................................           187          1,930          1,161
     Provision for possible loan losses .........................................         3,019          3,071          2,239
     Income from unconsolidated subsidiaries ....................................          (335)          --             --
     Gain on sale of bank branch ................................................        (8,915)          --             --
     Provision for loss on other real estate owned ..............................          --               35           --
     Increase in other liabilities ..............................................           450            399          1,004
     (Increase) decrease in deferred loan costs .................................           416           (322)           (42)
     Increase in accrued interest receivable ....................................          (895)          (183)          (377)
     Increase in accrued interest payable .......................................         2,573             22            123
     Deferred income tax provision ..............................................           318            173            121
     Gain on sale of investment securities ......................................          (416)           (33)          --
     Gain on sale of loans ......................................................       (19,187)       (16,959)       (11,810)
     Loss on sale of other real estate owned ....................................            17              3           --
     Increase in receivable from loans sold .....................................       (12,078)       (10,128)       (18,434)
     Increase in prepaid expenses and other assets ..............................       (14,069)       (11,494)        (2,113)
     Discount on stockholder note receivable ....................................          --             --               92
     Accretion on stockholder note receivable ...................................           (16)           (64)           (15)
Loans originated for sale .......................................................      (429,149)      (322,065)      (223,830)
Proceeds from sale of loans originated for sale .................................       445,160        342,399        244,516
                                                                                      ---------      ---------      ---------
        Total adjustments .......................................................       (31,864)       (12,522)        (6,714)
                                                                                      ---------      ---------      ---------
        Net cash used in operating activities ...................................       (25,855)        (5,489)        (2,285)

CASH FLOWS FROM INVESTING ACTIVITIES:
     Net decrease (increase) in loans ...........................................       (23,900)        14,009        (42,476)
     Increase in investments in unconsolidated subsidiaries .....................       (12,312)        (3,300)          --
     Purchase of investment securities available for sale .......................       (72,310)       (31,186)       (13,587)
     Purchase of investment securities held to maturity .........................          --             --           (8,496)
     Purchase of equity securities ..............................................          (566)          (709)          (782)
     Proceeds from sales of investment securities available for sale ............        58,680          4,537           --
     Proceeds from maturities and principal repayments of
        investment securities available for sale ................................        11,767         11,876         11,998
     Proceeds from maturities of mortgage-backed securities available for sale ..            41             60            486
     Proceeds from maturities and principal repayments of
        investment securities held to maturity ..................................          --            4,525          4,000
     Proceeds from maturities of mortgage-backed securities held to maturity ....           820            925            123
     Proceeds from sale of equity securities ....................................           934            602           --
     Proceeds from sale of other real estate owned ..............................            80             51           --
     Capital expenditures, net ..................................................        (1,507)        (1,799)        (1,823)
                                                                                      ---------      ---------      ---------
        Net cash used in investing activities ...................................       (38,273)          (409)       (50,557)
                                                                                      ---------      ---------      ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Net increase in deposits ...................................................        55,341         47,553         28,005
     Net increase (decrease) in other borrowings ................................        (1,048)           (37)            24
     Proceeds from sale of common stock at public offering, net .................          --             --           23,808
     Proceeds from issuance of common stock .....................................           278            271            263
     Principal repayment of stockholder note receivable .........................           957           --             --
     Dividends paid .............................................................          (978)          (948)          (731)
                                                                                      ---------      ---------      ---------
        Net cash provided by financing activities ...............................        54,550         46,839         51,369
                                                                                      ---------      ---------      ---------
        Net increase (decrease) in cash and equivalents .........................        (9,578)        40,941         (1,473)
     Cash and cash equivalents at beginning of year .............................        58,335         17,394         18,867
                                                                                      ---------      ---------      ---------
     Cash and cash equivalents at end of year ...................................     $  48,757      $  58,335      $  17,394
                                                                                      =========      =========      =========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
     Interest ...................................................................     $   9,008      $   7,902      $   6,248
     Income taxes ...............................................................     $   5,719      $   3,182      $   2,791
Non-cash items:
     Real estate acquired in settlement of loans ................................     $     265      $     186           --
</TABLE>


The accompanying notes are an integral part of the consolidated financial
statements


                                                                              27
<PAGE>   30

FIRST INTERNATIONAL BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

BASIS OF PRESENTATION

         The consolidated financial statements include the accounts of First
International Bancorp, Inc. (the "Company") and the consolidated accounts of its
wholly-owned subsidiary, First International Bank (the "Bank"), formerly known
as First National Bank of New England. The Bank converted from a national bank
to a Connecticut state chartered bank and trust company in July 1999. During
1998 and 1999, the Bank established six special purpose wholly-owned
subsidiaries to facilitate loan securitizations and sales to commercial paper
conduits. Three of these subsidiaries are not consolidated but are accounted for
under the equity method of accounting (Note 3). Accordingly, the Company's share
of the earnings of these affiliates is included in net income. The Bank has also
established a wholly-owned subsidiary, First International Capital Corp. of New
Jersey, through which all loan solicitation activities to borrowers located in
New Jersey are conducted. Intercompany accounts and transactions relating to the
consolidated subsidiaries have been eliminated in consolidation.

         The Company operates from its headquarters in Hartford, Connecticut and
representative offices, which are responsible for marketing and regional loan
origination efforts, in Boston and Springfield, Massachusetts; Providence, Rhode
Island; Rochester, New York; Morristown, New Jersey; Philadelphia and
Pittsburgh, Pennsylvania; St. Louis, Missouri; Washington D.C.; Cleveland, Ohio;
and Detroit, Michigan. The Company also has contractual international
representatives in Argentina, Brazil, Central America, Egypt, India, Indonesia,
Korea, Mexico, North Africa, the Philippines, Poland, South Africa, Turkey and
West Africa.

         The Company operated a full service branch and its only branch at its
headquarters in Hartford until March 31, 1999 at which time the Company
consummated the sale of its main branch premises and all of its checking,
savings and money market accounts. The Company currently obtains funding from
retail and brokered certificate of deposit accounts, warehouse credit lines,
commercial paper conduits and loan securitizations and sales. The Company's
primary revenues are derived from net interest income and the origination and
sale, on a servicing retained basis, of commercial loans. The Company began
securitizing and selling commercial loans and portions thereof in 1998.

         The Company completed an underwritten public stock offering of
1,955,000 shares in the Fall of 1997. The offering resulted in net proceeds to
the Company of $23.8 million.

         The Bank is a national leader in the use of loan guarantee programs
offered by the U.S. Small Business Administration ("SBA"), the U.S. Department
of Agriculture ("USDA") and the Export-Import Bank of the United States ("Ex-Im
Bank"). Continued availability of such loan guarantees are dependent upon timely
and adequate federal budget appropriations. Each of these federal programs is
funded through September 2000, but there can be no assurance of sufficient
budgetary allocations to allow a continuation of such programs in substantially
their current form.

         In preparing the consolidated financial statements, management makes
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the balance sheet and the results of operations
for the period. Notwithstanding this diligence, such estimates are particularly
sensitive to the economic environment and can be significantly affected by
changing economic conditions affecting the value of the collateral, interest
rates, borrowers' financial position and other factors. Material estimates in
these consolidated financial statements relate to the estimated lives and
expected losses of loans sold or securitized where servicing has been retained
and, in certain cases, interest rate mismatches, as well as the allowance and
provision for possible loan losses and the valuation of other real estate owned
("OREO"). Assumptions utilized in accounting for the loan sales and
securitizations are periodically compared to actual and projected results and
adjustments made as appropriate. Market conditions are evaluated and independent
appraisals of collateral are obtained by management as needed in the process of
setting the estimates. Accordingly, actual results could differ significantly
from the estimates of loan losses and OREO valuation.

INVESTMENT SECURITIES

         Securities that may be sold as part of the Company's asset/liability or
liquidity management, or in response to or in anticipation of changes in
interest rates and resulting prepayment risk, or for other similar factors, are
classified as available-for-sale and carried at fair market value. Unrealized
holding gains and losses on such securities are reported net of related taxes as
a separate component of


28
<PAGE>   31

stockholders' equity. Debt securities that the Company has the ability and
positive intent to hold to maturity are classified as held-to-maturity and
carried at amortized cost. Realized gains and losses on the sales of all
investment securities are reported in earnings and computed using the specific
identification cost basis. Declines in the market value of investment securities
that are deemed to be other than temporary are charged to income. See also
Securitizations and Loan Sales.

INVESTMENT IN UNCONSOLIDATED SUBSIDIARIES

         The Company is the sole investor in three "Special Purpose Entities"
("SPE's") that meet certain specific criteria under Statement of Financial
Accounting Standards No. 125 and therefore are not consolidated with the
Company's financial statements. A qualifying special purpose entity is a
corporation whose activities are permanently restricted to holding title to the
assets transferred, issuing beneficial interests in the assets transferred and
collecting and distributing proceeds from the transferred assets to the
beneficial interest holders. It also must have a standing at law distinct from
the transferor. The Company has accounted for these entities under the equity
method. See Note 3. The Company has sold loans to these SPE's in 1999 and 1998,
which sales qualified for gain treatment under the accounting literature. The
Company is carrying as investments, Interest-Only ("I/O") securities arising
from the sale of loans to these entities. The values of I/O securities included
in investments are $3.5 million and $1.2 million as of December 31, 1999 and
1998, respectively.

LOANS

         Loans are stated at their principal amount outstanding. Interest income
on loans is recognized on the simple interest method based upon the principal
amount outstanding.

         Receivable from loans sold and gain on commercial loan sales are
attributable to the sale of commercial loans which have been at least partially
guaranteed by the SBA, the USDA or Ex-Im Bank as well as the sale of
unguaranteed commercial loans. Transactions are generally settled within 30 days
of the sale. The gain on the sale of a portion of a loan is based on the
relative fair market values of the loan sold and the loan retained.

         The discount on retained loans, which relates to the retained portion
of the unguaranteed portion of SBA and USDA loans, is reflected as a reduction
of loans in the consolidated balance sheet. The discount is amortized into
interest income over the estimated life of the retained loan on an effective
interest method.

LOANS HELD FOR SALE

         The Company classifies loans for which it intends to sell as loans held
for sale and carries them at the lower of cost or market based on the aggregate
value of the portfolio.

LOAN ORIGINATION FEES (COSTS)

         Fees received for loan originations and commitments, and related
origination costs, are deferred and recognized as a yield adjustment utilizing
the effective interest method over the contractual life of the related loan,
adjusted for prepayment and sales.

PROVISION/ALLOWANCE FOR POSSIBLE LOAN LOSSES

         The Company evaluates the collectibility of impaired loans, as defined
below, based on the present value of expected future cash flows discounted at
the historical effective interest rate, except that all collateral-dependent
loans are measured for collectibility of contractual principal and interest
based on the estimated net realizable value of the collateral. Smaller-balance
homogeneous loans consisting of residential mortgages and consumer loans are
evaluated for collectibility by the Company based on historical loss experience
rather than on an individual loan-by-loan basis. The Company evaluates all other
impaired loans on an individual loan-by-loan basis; it does not aggregate
impaired loans into major risk classifications. The Company considers a loan to
be impaired when, based on current information and events, it is probable that
it will be unable to collect all amounts of contractual interest and principal
as scheduled in the loan agreement. An insignificant delay of under 60 days or a
10% shortfall in the amount of the payment is not an event that, when considered
in isolation, would automatically cause the Company to consider a loan to be
impaired. The Company places a loan on nonaccrual status when it is 90 days or
more past due or when, in management's assessment, the full collectibility of
principal and interest is uncertain. Except for certain restructured loans,
impaired loans are loans that are on nonaccrual status.

         When an impaired loan or a portion of an impaired loan is deemed
uncollectible, the portion deemed uncollectible is charged against the allowance
for loan losses and subsequent recoveries, if any, are credited to the
allowance. The Company either recognizes interest income on impaired loans on a
cash basis or reflects a recapture of principal for all payments received. The
Company reverses any accrued interest income at the date of determination.

         Management determines the adequacy of its allowance for possible loan
losses primarily through periodic reviews of the loan portfolio, loan
delinquencies, collateral on loans and past payment history adjusted for such
factors as known changes in the character of the loan portfolio and current
economic conditions. Consideration is also given to anticipated economic
conditions, as well as other relevant factors in establishing the allowance. The
allowance is increased by provisions for loan losses charged to income and
decreased by charge-offs, net of recoveries.

SECURITIZATIONS AND LOAN SALES

         The Company securitizes and sells certain unguaranteed commercial loans
and the unguaranteed portion of certain guaranteed commercial loans. In
connection with these transactions, the Company records a gain which is based on
the fair market value of the assets securitized, including retained interests.
The Company will generally retain one or more of the following "retained
interests" in the securitized assets: interest-only strips, subordinated
certificates and interests, servicing assets and cash reserve accounts. Initial
estimates of fair values of such retained interests are derived from cash flow
models, using assumptions such as expected losses, prepayment speeds, discount
rates and the servicing spread, all based on the cash-out method. A portion of
the


                                                                              29
<PAGE>   32

gain on loans securitized and commercial loan sales is due to a servicing asset
which represents the present value of the differential between the contractual
servicing fee received by the Company and adequate compensation, defined as the
fee a sub-servicer would require to assume the role of servicer, after
considering the estimated effects of prepayments. Compensation received which
reflects excess of the contractual servicing fee is classified as an
"Interest-Only (I/O) security." The discount rate utilized in calculating the
servicing asset and the I/O approximates the market rate an investor would
demand on a risk-adjusted basis. The servicing asset and I/O are amortized as a
charge to non-interest income over the estimated lives of the underlying loans
on an effective interest method. Subsequent to the securitization, the retained
interests are carried at fair value. To obtain fair values, quoted market prices
are used if available. If fair value quotes are unavailable, the Company
estimates fair value based on the present value of future cash flows expected
based on key assumptions (i.e., credit loss, prepayment speed, discount rate)
and compares actual performance to the expected performance of the related loan
securitization pool. Subordinated certificates and interest-only strips are
classified as investments available-for-sale.

         Actual prepayment rates may be affected by a variety of economic and
other factors, including prevailing interest rates and the availability of
alternative financing. The effect of these factors varies depending on the types
of loans. Estimated prepayment rates are based on management's expectations of
future prepayments, and, while management believes that the term of amortization
and market interest rate on the variable rate loans somewhat reduce the
prepayment risk, there can be no assurance that management's prepayment
estimates are accurate. If the actual prepayment rate or actual losses for loans
sold is higher than projected at the time such loans were sold, the carrying
value of the servicing asset may be considered impaired and be reduced by a
charge to earnings if an impairment is considered "other than temporary."
Because the Company also recognizes a discount on the retained loan, an
adjustment to the discount would be made which would partially offset the effect
of the negative servicing adjustment. If the actual prepayment rate for loans
sold is lower than estimated, the carrying value of the servicing asset is not
increased, although the total future cash flow income would exceed previously
estimated amounts.

OTHER REAL ESTATE OWNED

         Other real estate owned ("OREO"), representing property acquired by
foreclosure or acceptance of a deed in lieu of foreclosure, is carried at the
lower of the unpaid loan balance at the date of acquisition or fair value less
estimated disposal costs. Improvements are capitalized to the extent realizable.
Holding and selling costs are expensed as incurred.

PREMISES AND EQUIPMENT

         Premises and equipment are stated at cost less accumulated depreciation
and amortization. Depreciation and amortization are computed on the
straight-line method over the estimated useful lives of the assets. Leasehold
improvements are amortized over the period of the related lease and renewal
options as deemed appropriate. Costs of maintenance and repairs are expensed,
while major improvements are capitalized.

INCOME TAXES

         Income taxes are provided based on the asset/liability method of
accounting. Deferred income taxes and tax benefits are recognized for the future
income tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. A valuation
allowance is established when it is more likely than not that some portion of
the deferred tax asset will not be realized.

EARNINGS PER SHARE

         Earnings per share for all periods presented have been calculated in
accordance with SFAS No. 128, "Earnings Per Share" which requires the
presentation of basic and diluted earnings per share. Basic earnings per share
is determined based on the weighted average shares outstanding, while diluted
earnings per share reflects the potential dilution that could occur if options
to issue common stock were exercised.

STOCK OPTION PLANS

         The Company has chosen not to adopt fair value accounting for stock
based compensation and continues to employ intrinsic value accounting for its
option plans as detailed in Note 9. Certain disclosures as if fair value
accounting had been adopted, including pro forma net income and earnings per
share, have been made in these financial statements.

COMMON STOCK SPLIT

         On June 26, 1997, the Company's stockholders approved a 3.5-for-1 stock
split to stockholders of record on July 14, 1997, effective August 7, 1997.
Stockholders' equity has been restated to give retroactive recognition to the
stock split in prior periods by reclassifying from paid-in capital in excess of
par value to common stock an amount equal to the par value of the additional
shares arising from the split. In addition, all references to the number of
shares, per share amounts and stock option data have been restated.

CASH AND CASH EQUIVALENTS

         For purposes of reporting cash flows, cash and cash equivalents include
cash on hand, balances in spread accounts which are invested with a trustee in
money market funds, amounts due from banks and federal funds sold. Generally,
federal funds are sold for one day periods or terms of less than 30 days.

         Included in cash are certain restricted deposit "spread accounts" which
are required by the terms of loan securitization agreements. Such deposits
totaled $11.6 million and $6.0 million at December 31, 1999 and 1998,
respectively.


30
<PAGE>   33

COMPREHENSIVE INCOME

         The Company has adopted SFAS No. 130, "Reporting Comprehensive Income"
which established standards for reporting comprehensive income, defined as the
change in equity of a business enterprise during a period from nonowner sources.
The Company's comprehensive income is comprised of net income and the unrealized
holding gain (loss) on investments classified as available-for-sale (see Note
14).

SEGMENT INFORMATION

         The Company has adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." SFAS No. 131 supersedes SFAS No. 14
"Financial Reporting for Segments of a Business Enterprise," replacing the
"industry segment" approach with the "management" approach. The management
approach designates the internal organization that is used by management for
making operating decisions and assessing performance as the source of the
Company's reportable segments. SFAS No. 131 also requires disclosures about
products and services, geographic areas, and major customers. The adoption of
SFAS No. 131 did not affect results of operations or financial position. (See
Note 13.)

RECLASSIFICATIONS

         Certain amounts from 1998 and 1997 have been reclassified to conform to
the 1999 presentation.

RECENT ACCOUNTING PRONOUNCEMENT
SFAS No. 133

         In June 1998, the FASB issued No. 133 "Accounting for Derivative
Instruments and Hedging Activities," which implementation date was extended by
SFAS No. 137 and is effective for all of the Company's financial statements for
all fiscal quarters of all fiscal years beginning after June 15, 2000. These
statements establish accounting and reporting standards for derivative
instruments and for hedging activities, and require that all derivatives be
recognized as either assets or liabilities in the entity's balance sheet and be
measured at fair value. Changes in the fair value of the derivative instruments
are to be recognized depending on the intended use of the derivative and whether
or not it has been designated as a hedge. The future implementation is not
expected to have a significant impact upon the Company's financial position,
results of operations or cash flows.

================================================================================
2. INVESTMENT SECURITIES:

Securities classified as available-for-sale (carried at fair value) and as held
to maturity (carried at amortized cost) as of December 31, 1999 and 1998 are as
follows:

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
                                                                  Gross             Gross          Estimated
                                                  Amortized     Unrealized        Unrealized         Fair
                                                     Cost          Gains            Losses           Value
- ------------------------------------------------------------------------------------------------------------
                                                                   (dollars in thousands)
<S>                                               <C>             <C>              <C>              <C>
DECEMBER 31, 1999
AVAILABLE FOR SALE

U.S. Treasury and agency obligations .....        $ 10,453        $   --           $    (79)        $ 10,374
State and municipal obligations ..........             237            --                (25)             212
Mutual funds .............................              29            --               --                 29
Commercial loan-backed securities ........           8,515             737             (371)           8,881
Interest-only strips .....................          10,387            --                (72)          10,315
                                                  --------        -------          --------         --------
                                                  $ 29,621        $    737         $   (547)        $ 29,811
                                                  ========        ========         ========         ========
HELD TO MATURITY
U.S. Government mortgage-backed securities        $    540        $   --           $     (4)        $    536
Debt securities of foreign governments ...             625            --               --                625
                                                  --------        -------          --------         --------
                                                  $  1,165        $   --           $     (4)        $  1,161
                                                  ========        =======          ========         ========
DECEMBER 31, 1998
AVAILABLE FOR SALE
U.S. Treasury and agency obligations .....        $ 11,579        $     15         $     (1)        $ 11,593
U.S. Government mortgage-backed securities              88               3             --                 91
Mutual funds .............................              19            --               --                 19
Commercial loan-backed securities ........          11,630             696             --             12,326
Interest-only strips .....................           4,127            --               --              4,127
                                                  --------        -------          --------         --------
                                                  $ 27,443        $    714         $     (1)        $ 28,156
                                                  ========        ========         ========         ========
HELD TO MATURITY
U.S. Government mortgage-backed securities        $  1,361        $      4         $     (1)        $  1,364
Debt securities of foreign governments ...             625            --               --                625
                                                  --------        -------          --------         --------
                                                  $  1,986        $      4         $     (1)        $  1,989
                                                  ========        ========         ========         ========
</TABLE>


                                                                              31
<PAGE>   34
- --------------------------------------------------------------------------------
STOCK SECURITIES

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
                                                                                        December 31,
                                                                                      1999          1998
                                                                                    (dollars in thousands)
                                                                                    ----------------------
<S>                                                                                 <C>           <C>
Federal Reserve Bank, at cost ...................................................   $ --          $  933
Federal Home Loan Bank of Boston (FHLBB), at cost ...............................      822           645
Private Export Funding Corporation, at cost .....................................      987           599
                                                                                    ------        ------
                                                                                    $1,809        $2,177
                                                                                    ======        ======
</TABLE>

         The Company is required to hold a common stock investment in the FHLBB
based on borrowings from the FHLBB (Note 7). Following the Company's bank
charter conversion, the Federal Reserve Bank stock was redeemed at par. The
Company sells Ex-Im Bank guaranteed loans to PEFCO on a servicing-retained basis
and holds common stock in PEFCO, a portion of which is pledged to PEFCO to
support the Company's servicing duties.

         At December 31, 1999 and 1998, investments with a carrying value of
$11.8 million and $13.3 million, respectively, were pledged to collateralize
public and government deposits, as required by law, and certain of the Bank's
lines of credit. In 1999 the Bank sold three debt securities with a par value of
$8.3 million recording gains aggregating $416,000. During 1998 the Bank sold two
debt securities with a par value of $4.5 million recording gains of $32,600.
There were no sales of securities in 1997.

The contractual maturities of debt securities at December 31, 1999 and 1998 are
as follows:

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
                                                              Weighted
                                 Amortized        Fair         Average
                                    Cost          Value         Yield
- ----------------------------------------------------------------------
                                         (dollars in thousands)
<S>                               <C>            <C>             <C>
DECEMBER 31, 1999
AVAILABLE FOR SALE
Due in one year or less ..        $ 6,529        $ 6,516         5.64%
Due after one year
     through five years ..           --             --             --%
Due after 10 years .......          8,752          9,092         8.69%
Interest only strips .....         10,387         10,315         9.74%
Mortgage-backed securities          3,953          3,888         5.13%
                                  -------        -------         ----
                                  $29,621        $29,811         7.91%
                                  =======        =======         ====

HELD TO MATURITY
Due after one year
     through five years ..        $   100        $   100         7.00%
Due after five years
     through ten years ...            525            525         7.45%
Mortgage-backed securities            540            536         6.43%
                                  -------        -------         ----
                                  $ 1,165        $ 1,161         6.94%
                                  =======        =======         ====
</TABLE>


<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
                                                               Weighted
                                 Amortized        Fair          Average
                                    Cost          Value          Yield
- -----------------------------------------------------------------------
                                         (dollars in thousands)
<S>                               <C>            <C>             <C>
DECEMBER 31, 1998
AVAILABLE FOR SALE
Due in one year or less ..        $11,599        $11,613         6.18%
Due after one year
     through five years ..           --             --             --%
Due after 10 years .......         11,629         12,325         7.62%
Interest only strips .....          4,127          4,127         8.78%
Mortgage-backed securities             88             91         8.11%
                                  -------        -------         ----
                                  $27,443        $28,156         7.19%
                                  =======        =======         ====

HELD TO MATURITY
Due after one year
     through five years ..        $   100        $   100         7.75%
Due after five years
     through ten years ...            525            525         7.46%
Mortgage-backed securities          1,361          1,364         6.48%
                                  -------        -------         ----
                                  $ 1,986        $ 1,989         6.80%
                                  =======        =======         ====
</TABLE>


32
<PAGE>   35
===============================================================================
3. INVESTMENTS IN UNCONSOLIDATED SUBSIDIARIES:

The Company has accounted for its investments in special purpose entities
established to facilitate certain loan securitizations and commercial paper
conduit sales under the equity method. Summarized combined balance sheets for
these entities as of December 31, 1999 and 1998 and a statement of operations
for the year ended December 31, 1999 is presented below. There was no operating
activity in these subsidiaries for 1998 and 1997 since the initial sale to these
facilities was consummated in late December 1998.

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
CONDENSED BALANCE SHEETS                                    December 31,
 (dollars in thousands)                                 1999            1998
- -----------------------------------------------------------------------------
<S>                                                  <C>             <C>
ASSETS
Cash ........................................        $  2,011        $   --
Loans, net ..................................         109,178          24,725
Accrued interest receivable .................             503            --
                                                     --------        --------
   Total assets .............................        $111,692        $ 24,725
                                                     ========        ========

LIABILITIES AND STOCKHOLDER'S EQUITY

Borrowings ..................................        $ 95,754        $ 21,425
Accrued interest payable ....................             661            --
                                                     --------        --------
   Total liabilities ........................          96,415          21,425

STOCKHOLDER'S EQUITY
Common stock and paid in capital ............          14,942           3,300
Retained earnings ...........................             335            --
                                                     --------        --------
   Total stockholder's equity ...............          15,277           3,300
                                                     --------        --------
   Total liabilities and stockholder's equity        $111,692        $ 24,725
                                                     ========        ========
</TABLE>

- --------------------------------------------------
CONDENSED STATEMENT OF OPERATIONS
For the Year Ended December 31, 1999
(dollars in thousands)
- --------------------------------------------------

<TABLE>
<CAPTION>
- --------------------------------------------------
<S>                                         <C>
INTEREST INCOME:
Loans including net fees ...........        $2,741

INTEREST EXPENSE:
Interest on borrowings .............         2,094
Expense from interest rate swap, net            40
                                            ------
      Total interest expense .......         2,134
                                            ------
      Net interest income ..........           607
Non interest operating expense .....            48
                                            ------
         Income before taxes .......           559
      Provision for income taxes ...           224
                                            ------
   Net income ......................        $  335
                                            ======
</TABLE>

===============================================================================
4. LOANS:

         The outstanding balances of loans originated and held by the Company
are as follows:


<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
                                                                                  December 31,
                                                                             1999              1998
- ----------------------------------------------------------------------------------------------------
                                                                             (dollars in thousands)
<S>                                                                      <C>               <C>
PORTFOLIO LOANS
Commercial and industrial .......................................        $  27,205         $  55,000
Commercial real estate ..........................................           35,998            31,650
Ex-Im Bank ......................................................           15,558             4,859
Privately insured and import ....................................           23,537            18,891
Residential real estate .........................................            1,827             3,013
Consumer loans and lines of credit ..............................              629               533
                                                                         ---------         ---------
        Total portfolio loans ...................................        $ 104,754         $ 113,946
                                                                         ---------         ---------
LOANS HELD FOR SALE
Commercial and industrial .......................................        $  37,813         $   6,526
Commercial real estate ..........................................            6,068             2,051
Privately insured and import ....................................              393              --
Consumer loans and lines of credit ..............................              312              --
                                                                         ---------         ---------
        Total held for sale loans ...............................        $  44,586         $   8,577
                                                                         ---------         ---------
Less:   Allowance for possible losses                                        4,550             4,000
        Discount on retained loans ..............................            3,371             1,419
        Net deferred loan origination costs .....................              (16)             (431)
                                                                         ---------         ---------
            Loans, net ..........................................        $ 141,435         $ 117,535
                                                                         =========         =========
</TABLE>

At December 31, 1999, the Company had fixed and variable rate loans with
maturities greater than one year totaling $6,264,000 and $72,338,000
respectively.

         The scheduled maturities of the Company's loan portfolio as of December
31, 1999 are as follows:

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
                                            After One
                             Within One    Year Through     After Five
                                 Year       Five Years          Years           Total
- -------------------------------------------------------------------------------------
                                           (dollars in thousands)
<S>                           <C>             <C>             <C>             <C>
Commercial and
   industrial ........        $ 70,362        $  5,695        $ 28,761        $104,818
Commercial real estate             161             539          41,054          41,754
Residential loans ....             133             274           1,420           1,827
Consumer loans and
   lines of credit ...              82              73             786             941
                              --------        --------        --------        --------
                              $ 70,738        $  6,581        $ 72,021        $149,340
                              ========        ========        ========        ========
</TABLE>


                                                                              33
<PAGE>   36

    The outstanding balances of loans originated by the Company and sold to
others on a servicing retained basis are as follows:

<TABLE>
<CAPTION>
- -------------------------------------------------------------------
                                                  December 31,
                                              1999            1998
- -------------------------------------------------------------------
                                             (dollars in thousands)
<S>                                       <C>             <C>
GUARANTEED LOANS:
SBA ..............................        $292,204        $245,073
USDA .............................         114,775          75,526
Ex-Im Bank .......................         129,518         117,726
FHLMC ............................             443             455
                                          --------        --------
                                           536,940         438,780
                                          --------        --------

UNGUARANTEED PORTIONS
AND UNGUARANTEED LOANS:
SBA ..............................          38,024          48,323
USDA .............................           5,310           6,173
Securitized commercial ...........         210,764          80,443
Commercial paper conduit
 facilities.......................          70,374          23,690
Other commercial .................          63,836          56,957
Home equity lines ................           1,504           2,166
                                          --------        --------
                                           389,812         217,752
                                          --------        --------
Total loans serviced for others ..        $926,752        $656,532
                                          ========        ========
</TABLE>


         The Bank has completed two commercial loan securitization transactions
and sales to commercial paper conduits and to other sales facilities between
1998 and 1999. In 1999 these transactions resulted in the issuance of $181.5
million of senior and subordinated securities and included $200.8 million of
loans. In 1998 securitization and sales transactions resulted in the issuance of
$113.3 million of senior and subordinated securities and included $117.1 million
of loans. Certain data for 1999 and 1998 or as of December 31, 1999 presents
data on sales assumptions, retained interests and credit enhancements as
follows:

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
                                                               Securitization Transactions
                                                         Unguaranteed
                                                          Portions of                        Term
                                                           SBA Loans                         Loans
                                                   -----------------------           ------------------------
 (dollars in thousands)                               1999            1998            1999            1998
- -------------------------------------------------------------------------------------------------------------
<S>                                                 <C>             <C>             <C>             <C>
Total loans securitized or sold ............        $26,902         $37,420         $65,000         $65,000
Gain recognized ............................        $ 2,794         $ 3,155         $   906         $ 1,310
Gain as a percentage of loans securitized ..           10.4%            8.4%            1.4%            2.0%
Average coupon (spread over prime) .........           1.59%           1.40%           0.73%           1.00%
Assumed prepayment speed ...................              8%              8%              8%              8%
Weighted average contractual lives (years) .          13.75           13.21           10.65           11.73
Aggregate expected credit losses ...........           7.08%           6.82%           3.93%           4.12%
Investment in subordinated notes and
    certificates at December 31, 1999 ......        $ 2,138         $   725         $ 3,139         $ 3,250
Subordinated interest retained held by
    unconsolidated subsidiaries at
    December 31, 1999 ......................           --              --              --              --
Balance of I/O Strip at December 31, 1999 ..        $ 1,353         $ 1,696         $ 1,245         $ 1,946
Maximum cash reserve/collateral requirements        $ 2,156         $ 1,085         $ 6,112         $ 5,730
Cash reserve/collateral balance at
    December 31, 1999 ......................        $ 1,828         $ 1,085         $ 5,941         $ 3,933
</TABLE>

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
                                                             Sales to Facilities
                                                                                 Unguaranteed
                                                   Commercial        Term       Portions of SBA
 (dollars in thousands)                              Paper           Loans            Loans
- -----------------------------------------------------------------------------------------------
<S>                                                 <C>             <C>             <C>
Total loans securitized or sold ............        $84,560         $27,122         $11,908
Gain recognized ............................        $    16         $   721         $ 1,113
Gain as a percentage of loans securitized ..           --               2.7%            9.3%
Average coupon (spread over prime) .........        0.19%-1.0%         1.08%           1.34%
Assumed prepayment speed ...................           6-8%               8%              8%
Weighted average contractual lives (years) .            1-3              11           15.44
Aggregate expected credit losses ...........           1.44%           3.44%           5.14%
Investment in subordinated notes and
    certificates at December 31, 1999 ......           --              --              --
Subordinated interest retained held by
    unconsolidated subsidiaries at
    December 31, 1999 ......................        $ 9,724         $ 4,710         $   791
Balance of I/O Strip at December 31, 1999 ..        $ 1,121         $ 1,578         $   845
Maximum cash reserve/collateral requirements        $ 2,000            --              --
Cash reserve/collateral balance at
    December 31, 1999 ......................        $ 2,000            --              --
</TABLE>


34
<PAGE>   37

    Performance to date on all such sales and securitizations has been favorable
as compared to initial cash flow projections. The Company regularly performs
stress tests on each transaction pool. Based on actual performance and results
of stress tests, no impairment of the carrying values has resulted.


    In connection with the sales of revolving commercial loans, a subsidiary of
the Bank entered into an interest rate swap with notional balances of
$23,000,000 as of December 31, 1999 and $19,000,000 as of December 31, 1998 to
mitigate the interest rate risk inherent in the transaction. The swap provides
for net settlement on a monthly basis, which is recorded as an adjustment to
interest income. The net cost of the swap for the year ended December 31, 1999
was $40,000 and is included in the expenses of the related unconsolidated
subsidiary.

    Changes in the Allowance for possible loan losses were as follows:

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
                                                                                       December 31,
                                                                          1999              1998            1997
- ----------------------------------------------------------------------------------------------------------------
                                                                                  (dollars in thousands)
<S>                                                                    <C>               <C>             <C>
Balance at beginning of period ...................................     $ 4,000           $ 3,100         $ 3,000
Provision charged to income ......................................       3,019             3,071           2,239
Recoveries on loans
        previously charged off ...................................          80               153             106
Loans charged off ................................................      (2,549)           (2,324)         (2,245)
                                                                       -------           -------         -------
        Balance at end of year ...................................     $ 4,550           $ 4,000         $ 3,100
                                                                       =======           =======         =======
</TABLE>

    Certain information with regard to impaired loans is detailed below:

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
                                                                              December 31,
                                                                           1999          1998
- -----------------------------------------------------------------------------------------------
                                                                         (dollars in thousands)
<S>                                                                      <C>           <C>
Impaired loans ..................................................        $3,168        $2,959
Allocated allowance .............................................        $  658        $  731
Average recorded investment .....................................        $3,064        $2,587
Interest income recognized ......................................        $  228        $  152
</TABLE>

         The carrying value of the impaired loans has been calculated based on
the estimated fair value of the underlying collateral.

         Nonaccrual loans totaled $4,958,000 and $3,104,000 at December 31, 1999
and 1998, respectively. The $4,958,000 includes an international loan which is
insured in the amount of $1,576,000. The gross interest income that would have
been recorded if the non-accrual loans had been current in accordance with their
original terms would have been $312,000 and $176,000 for the years ended
December 31, 1999 and 1998, respectively. The actual amount of interest income
recognized on those loans was $243,000 and $160,000 for the years ended December
31, 1999 and 1998, respectively. There was one loan over 90 days and still
accruing interest at the end of December, 1999 for which there was no allowance
provided.

         Loans to principal stockholders, directors, companies of which
directors are principal owners, individuals directly related to or affiliated
with directors, and executive officers aggregated $194,000 and $662,000 at
December 31, 1999 and 1998, respectively. During 1999, repayments and sales
amounted to $292,000 while advances under new or existing loans totaled
$285,000.

         In the normal course of business, the Bank enters into agreements to
extend credit which are not reflected in the accompanying consolidated financial
statements.

         Outstanding credit commitments are detailed below:

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
                                                                                 December 31,
                                                                             1999            1998
- --------------------------------------------------------------------------------------------------
                                                                            (dollars in thousands)
<S>                                                                       <C>             <C>
Commercial lines of credit .......................................        $100,788        $ 61,652
Consumer lines of credit .........................................           1,007             373
Performance letters of credit ....................................           9,615           8,284
Financial letters of credit ......................................          13,453          14,593
Commercial letters of credit .....................................          16,199           8,433
                                                                          --------        --------
     Total commitments ...........................................        $141,062        $ 93,335
                                                                          ========        ========
</TABLE>

         At December 31, 1999 and 1998, letters of credit totaling $26,951,000
and $18,801,000, respectively, carry the guarantee of Ex-Im Bank.

         Commitments to extend such credit are agreements to lend to a client as
long as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require the payment of a fee. Since some of the agreements may expire
without being drawn upon or may be terminated by the Bank, these amounts do not
necessarily represent a future cash requirement of the Bank. Prior to entering
into any agreement to extend credit, the Bank evaluates the client's
creditworthiness in accordance with loan underwriting standards as approved by
the Board of Directors. The amount of collateral obtained, if deemed necessary,
is based on management's credit evaluation of the client. Collateral for
commercial loan commitments varies but may include accounts receivable,
inventory, property, plant and equipment and commercial real estate.

         Although the Bank's maximum exposure to credit loss is the total
contract amount of the commitments and letters of credit noted above, management
does not anticipate any material losses as a result of these agreements and does
not consider them to represent an undue level of credit, interest or liquidity
risk for the Bank.

         The Bank specializes in lending to small and medium size industrial
enterprises and professional firms throughout the Northeast, the Mid-atlantic
and Midwest regions of the U. S. Approximately 28% of the loans outstanding have
been made to borrowers located in Connecticut. Such loans and loan commitments
are generally collateralized by real estate or other assets.

         The Bank also lends to companies in various international emerging
markets. Such U. S. dollar denominated loans are either (i) fully guaranteed by
Ex-Im Bank and are sold at origination to various investors on a non-recourse,
servicing retained basis or, (ii) insured by a privately issued credit insurance
policy which provides coverage of up to 95% of the commercial risk of the
transaction.


                                                                              35
<PAGE>   38

         Gains on the sale of these loans and the related servicing income in
aggregate and by significant country is detailed below.

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
                                               For the Years Ended December 31,
                            1999          1998          1997          1999          1998         1997
                                  Gains from loan sales                      Servicing income
- -----------------------------------------------------------------------------------------------------
                                                     (dollars in thousands)
<S>                       <C>           <C>           <C>           <C>           <C>           <C>
All international         $1,716        $2,274        $2,229        $  165        $  430        $  264
Argentina ........           277          --            --              11          --            --
Brazil ...........           324           873         1,326            80           284            95
Ghana ............           314          --            --               3          --            --
Dominican Republic          --             320            15          --               9          --
Mexico ...........           208          --            --              21          --            --
Philippines ......          --             275          --            --               7          --
Turkey ...........           224          --            --              11          --            --
</TABLE>

         No other countries account for a significant portion of gain on loan
sales or servicing income.

         Loans held by the Bank to borrowers located outside the U. S. totaled
$30,649,000 at December 31, 1999 and $14,272,000 at December 31, 1998.

         The Company reported total revenues from the gain on loan sales,
interest income and loan servicing income from loans made to companies located
outside the U. S. in the aggregate amounts of $4,439,000, $4,242,000 and
$3,199,000 for the years ended December 31, 1999, 1998, and 1997 respectively.
The Company does not have any assets located outside of the U. S.

5. PREMISES, EQUIPMENT AND LEASES:

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
                                                                              December 31,
                                                                           1999          1998
- -----------------------------------------------------------------------------------------------
                                                                         (dollars in thousands)
<S>                                                                      <C>           <C>
Buildings and leasehold improvements ............................        $2,824        $2,252
Furniture, fixtures, and equipment ..............................         5,480         4,544
                                                                         ------        ------
                                                                          8,304         6,796
Less:   Accumulated depreciation
        and amortization ........................................         3,978         2,981
                                                                         ------        ------
     Premises and equipment, net ................................        $4,326        $3,815
                                                                         ======        ======
</TABLE>

         The Company leases its corporate offices in Hartford, Connecticut and
other facilities for its U.S. representative offices. Each of the leases provide
for minimum and contingent rentals and include renewal options. Total rental
expense for the years ended December 31, 1999, 1998 and 1997 was $1,494,000
$1,279,000 and $833,000 and respectively. Minimum future obligations for
premises under noncancelable leases are as follows:

<TABLE>
<CAPTION>
- ----------------------------------------------------
             Year End            Operating Leases
                              (dollars in thousands)
- ----------------------------------------------------
<S>                            <C>
               2000                   $1,441
               2001                    1,711
               2002                    1,767
               2003                    1,972
               2004                    1,986
            Thereafter                 1,924
                                     -------
                                     $10,801
                                     =======
</TABLE>

6. DEPOSITS:

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
                                                   1999                         1998
                                                        Weighted                      Weighted
                                                         Average                      Average
                                            Amount        Rate          Amount         Rate
- ----------------------------------------------------------------------------------------------
                                                         (dollars in thousands)
<S>                                       <C>             <C>          <C>             <C>
Transaction Accounts:
     Non-interest bearing checking        $ 10,627        --- %        $ 44,599        --- %
     Interest bearing checking ...            --          --- %          11,329        2.51%
                                          --------        ----         --------        ----
        Total checking accounts ..          10,627        --- %          55,928        0.51%
Savings accounts .................           3,340        2.30%         117,816        4.86%
Time deposits under $100,000 .....          21,751        4.97%          19,034        5.56%
Time deposits $100,000 or more ...          17,380        5.28%           7,096        5.49%
Brokered certificates of deposit .         213,202        6.04%          20,000        5.49%
                                          --------        ----         --------        ----
        Total deposits ...........        $266,300        5.62%        $219,874        3.89%
                                          ========        ====         ========        ====
</TABLE>


36
<PAGE>   39

<TABLE>
<CAPTION>
- -----------------------------------------------------------
                                          December 31,
TIME DEPOSIT MATURITIES                1999           1998
- -----------------------------------------------------------
                                     (dollars in thousands)
<S>                                 <C>              <C>
Time deposits maturing within:

1 year ..........................   $250,143         $43,872
2 years .........................      1,189           1,390
3 years .........................        297             294
4 years .........................        278             115
5 years .........................        426             459
                                    --------         -------
Total time deposits .............   $252,333         $46,130
                                    ========         =======
</TABLE>

<TABLE>
<CAPTION>
- ---------------------------------------------------------
MATURITY PERIOD OF TIME                December 31,
DEPOSITS OVER $100,000                     1999
- ---------------------------------------------------------
                                  (dollars in thousands)
<S>                                      <C>
Three months or less ...............     $93,519
Over three through six months ......      76,810
Over six through twelve months .....      59,590
Over one year ......................         663
                                        --------
Total time deposits over $100,000 ..    $230,582
                                        ========
</TABLE>


7. FUNDING SOURCES:

WAREHOUSE CREDIT LINE AND SALE FACILITY:

         The Bank has a combined $75 million warehouse line of credit and sale
facility with Prudential Securities Credit Corporation ("Prudential") to fund or
purchase commercial (non-government guaranteed) loan originations. Advances
under the borrowing facility are at an interest rate of one month LIBOR plus 120
basis points and the advance rates are between 80% and 85% of the principal
balance outstanding on the loans pledged to collateralize the facility. The
Company also has the ability to sell loans to a qualified special purpose entity
which may then pledge them under this collateralized borrowing facility. In such
case, the Company will receive sale treatment under SFAS No. 125 for such loans.
The facility matures on December 28, 2000. At December 31, 1999 an aggregate
$22.2 million was outstanding under this facility, all of which related to sales
made to an unconsolidated SPE.

         The warehouse and sale facility agreements require that the Bank adhere
to certain financial covenants with regard to leverage, tangible net worth and a
"well-capitalized" status under federal banking regulations, among other items,
all of which the Company was in compliance with as of December 31, 1999. (See
Note 8)

         Furthermore, if, in the sole discretion of Prudential, there has been a
material adverse change in the financial condition of the Bank or the Company,
that impairs the ability of either to perform under the agreements, Prudential
may declare an "event of default" under the agreements and the debt may be
called.

COMMERCIAL LOAN CONDUITS:

         The Company, through an SPE, has a $95 million commercial paper conduit
facility with First Union Securities, Inc. to fund the purchase of revolving
lines of credit and certain other international and commercial loans. During
1999, $59.4 million was sold under this facility. Advances under the facility
are at an interest rate of one month LIBOR plus 75 basis points and the advance
rates are 85% of the principal balance outstanding on the loans pledged to
collateralize the facility. The facility is a three year committed facility that
is renewable annually, the current facility matures on December 23, 2002. At
December 31, 1999 an aggregate $62.5 million was outstanding under this facility
and is reflected on the books of the unconsolidated SPE.

         The Bank has a $60 million commercial loan conduit facility with First
Union Securities, Inc. to fund the purchase of the unguaranteed portion of SBA
loans. Advances under the facility are at an interest rate of one month LIBOR
plus 75 basis points and the advance rates are 93% of the principal balance
outstanding on the loans pledged to collateralize the facility. The facility
matures on December 12, 2002. At December 31, 1999 $11.1 million was outstanding
under the facility and is reflected on the books of the unconsolidated SPE.

         There are certain loan performance parameters relative to individual
loans that must be met to avoid an early amortization event under the
facilities. These were complied with at December 31, 1999.

BROKERED CERTIFICATES OF DEPOSIT:

         The Bank has the ability to solicit wholesale certificates of deposit
through established brokers. At December 31, 1999, the Bank had written
agreements with five national brokers for the issuance of such deposits. As a
well-capitalized institution (see Note 8) the Bank may utilize brokered
certificates of deposit to the extent deemed appropriate by the Company. At
December 31, 1999, the Bank had $213.2 million of such deposits outstanding
which mature over the next twelve months.

FEDERAL HOME LOAN BANK OF BOSTON ADVANCES:

         The Bank has the ability to borrow from the FHLBB under a line of
credit. Any outstanding advances from the FHLBB are collateralized by certain
U.S. Treasury and Agency-issued securities and mortgage loans on residential
properties. As of December 31, 1999, approximately $7.7 million was available to
the Bank.

OTHER BORROWINGS:

         The Bank also maintains lines of credit at various correspondent banks
which are primarily used for the issuance or confirmation of letters of credit.
At December 31, 1999, these lines aggregated $45 million of which $33 million is
required to be collateralized upon usage. Letters of credit totaling $19.5
million were outstanding for the Bank's clients at December 31, 1999 under such
lines.


                                                                              37
<PAGE>   40

8. STOCKHOLDERS' EQUITY:

EARNINGS PER SHARE CALCULATION:

         The table detailed below reconciles the number of shares used in the
basic earnings per share ("EPS") calculation to the number of shares used in the
diluted EPS calculation in accordance with SFAS No. 128 (see Note 1). There were
no changes to net income available to common stockholders between the basic and
diluted EPS calculations.

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
                                                                            Years Ended December 31,
                                                                          1999         1998         1997
- --------------------------------------------------------------------------------------------------------
                                                                              (shares in thousands)
<S>                                                                      <C>          <C>          <C>
Common shares outstanding
     for basic EPS ..............................................        8,151        7,909        6,330
 Dilutive securities from
     stock option plans .........................................          171          291          237
                                                                         -----        -----        -----
Common shares outstanding
     for diluted EPS ............................................        8,322        8,200        6,567
                                                                         =====        =====        =====
</TABLE>

         Options to purchase 411,134 shares of common stock at a weighted
average price of $12.46 per share were outstanding at the end of 1999, but were
not included in the computation of diluted EPS because the exercise price of the
options exceeded the average market price of the common shares.

STOCKHOLDER NOTE RECEIVABLE:

         In June 1994 the Board of Directors approved the sale of 614,600 shares
of the Company's common stock to the Company's Chief Executive Officer at a
price of $1.69 per share. The terms of the transaction provided for a cash down
payment of $17,560 and a promissory note in the amount of $1,020,000 for the
balance. The note was collateralized by the stock issued with principal due at
maturity on December 31, 2000. Interest was to accrue at the rate of 7% and was
due at maturity; however, upon completion of the public offering in September
1997, the accrued interest was forgiven and the indebtedness was converted to a
non-interest bearing note. On January 27, 1999, the Company agreed to forgive
the remaining principal balance of the stockholder note receivable and agreed to
pay a bonus to the Company's Chief Executive Officer equal to the amount of his
resulting tax liability. This transaction was reflected in the results for the
quarter ended March 31, 1999 through an increase in salaries expense of $1.7
million.

         On January 27, 1999, the Company agreed to sell 200,000 shares of the
Company's common stock to the Company's Chief Executive Officer at a price of
$10.00 per share. This per share price represented the closing price of the
common stock on the Nasdaq National Market on January 27, 1999, the date on
which the Company's Board approved the terms of the sale although the sale of
the shares did not actually occur until March 31, 1999, at which time the
closing price of the common stock was $9.50 per share. No adjustment was made to
the purchase price of the shares. As payment of the aggregate purchase price for
the shares the Company received $20,000 in cash and a promissory note for the
balance of the purchase price. The promissory note was further collateralized by
a recourse pledge of these shares. While interest is accrued under the note and
$120,515 was included in income in 1999, no principal or interest is payable
under the promissory note prior to April 1, 2002 and the interest and principal
may be forgiven in certain circumstances involving a "change in control" of the
Company. In addition to any possible future forgiveness, the Company agreed to
provide a reimbursement for the tax liabilities associated with such
forgiveness. The Company has determined that it is appropriate to obtain
shareholder ratification of this sale transaction to ensure full compliance with
the requirements of the Nasdaq National Market. Accordingly, the Chief Executive
Officer has agreed that until the shareholders of the Company ratify the sale of
the common stock to him, he will not vote or transfer the shares. Therefore, at
the Annual Meeting scheduled for May 2000, the shares will not be voted on this
proposal. If the shareholders of the Company ratify the sale of the shares,
these restrictions will terminate. In the event that the shareholders of the
Company fail to ratify the sale of the shares, the sale of the shares and
issuance of the promissory note described above, will be rescinded.

REPURCHASE AND RETIREMENT OF COMMON STOCK:

         The Board of Directors has authorized the Company's repurchase of up to
400,000 shares of common stock, subject to market conditions at any time through
March 31, 2000. No shares have been repurchased since 1996.

PREFERRED STOCK:

         The Company has established a class of 2,000,000 shares of preferred
stock. The Board of Directors was granted the power to establish and designate
the different series and voting powers, designations, preferences and other
rights, qualifications, limitations or restrictions to be placed upon any shares
of preferred stock to be issued by the Company.

DIVIDENDS:

         Dividends payable by First International Bancorp, Inc. are generally
unrestricted, although the ability of the Company to pay dividends may, from
time to time, be dependent upon the dividends paid to it by the Bank. A
Connecticut state chartered bank and trust company must obtain the approval of
the State Banking Commissioner if the total of all dividends declared in any
calendar year exceeds the bank's net profits, as defined, for that year combined
with its retained net profits for the preceding two calendar years.

REGULATORY CAPITAL REQUIREMENTS:

         Quantitative measures established by regulation to ensure capital
adequacy require the Bank to maintain minimum amounts and ratios of total and
Tier I capital to risk-weighted assets (as defined in regulations). Management
believes that, as of December 31, 1999 and 1998, the Bank meets all capital
adequacy requirements to which it is subject.


38
<PAGE>   41

         As of December 31, 1999 and 1998, the most recent notifications from
the Federal Deposit Insurance Corporation and the State of Connecticut
Department of Banking categorized the Bank as well-capitalized under the
regulatory framework for prompt corrective action. To be categorized as
well-capitalized, the Bank must maintain minimum total and Tier I risk-based and
Tier I leverage ratios as set forth in the table below. There are no conditions
or events since the notification that management believes have changed the
Bank's category. There are however, recently proposed regulations issued for
comment by regulatory bodies, including the FDIC, which may require the Company
to set aside additional risk-based capital for loans securitized or sold that
meet certain criteria. The Company is currently evaluating the implications of
such proposal.

         Current risk-based capital regulations require the Company to treat the
loans securitized or sold to a commercial paper conduit as a financing for
risk-based purposes unless the total retained interests for a particular
transaction represent less than 8% of the outstanding principal balance of the
loans securitized or sold. The Company is currently evaluating these regulations
and available structures to maintain its well-capitalized classification.


<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
                                                                                  Regulatory
                                                                                  Minimum For            Regulatory
                                                                               Capital Adequacy         Minimum to be
                                                       Actual Capital              Purposes            Well Capitalized
                                                    --------------------      ------------------       ------------------
                                                     Dollar                   Dollar                   Dollar
                                                     Amount        Ratio      Amount       Ratio       Amount        Ratio
- --------------------------------------------------------------------------------------------------------------------------
                                                                       (dollars in thousands)
<S>                                                 <C>           <C>         <C>          <C>         <C>          <C>
AS OF DECEMBER 31, 1999:
Total Capital (to risk weighted assets)             $58,020       11.32%      $41,003      8.00%       $51,251      10.00%
Tier I Capital (to risk weighted assets)            $53,470       10.43%      $20,506      4.00%       $30,750       6.00%
Tier I Capital (to average assets)                  $53,470       19.37%      $11,042      4.00%       $13,802       5.00%

AS OF DECEMBER 31, 1998 (RECALCULATED):
Total Capital (to risk weighted assets)             $37,511       16.36%      $18,343      8.00%       $22,929      10.00%
Tier I Capital (to risk weighted assets)            $34,643       15.11%       $9,171      4.00%       $13,757       6.00%
Tier I Capital (to average assets)                  $47,181       18.59%      $10,151      4.00%       $12,689       5.00%

AS OF DECEMBER 31, 1997:
Total Capital (to risk weighted assets)             $31,415       17.57%      $14,348      8.00%       $17,935      10.00%
Tier I Capital (to risk weighted assets)            $29,170       16.32%       $7,174      4.00%       $10,761       6.00%
Tier I Capital (to average assets)                  $29,170       14.74%       $8,258      4.00%       $10,322       5.00%
</TABLE>

9. STOCK OPTION PLANS

         The Company's 1994 Incentive Stock Option Plan allows for the award of
options to officers which vest immediately. As of December 31, 1999, 45,064
shares were available for issuance under this plan out of the 309,402 options
authorized under the plan.

         The Company's Amended and Restated 1996 Stock Option Plan provides for
the issuance of options that may be granted to full time officers and directors.
These options generally vest ratably over a four-year period beginning one year
after the grant date. A total of 970,106 shares has been authorized for issuance
under this plan. At December 31, 1999 there were 186,426 shares available for
issuance under the plan.

         Both plans provide that the options may be granted to purchase common
stock at a price not less than the fair market price of the Company's stock at
the date for the granting of such options, and unless otherwise provided, the
options have a ten year term. The plans also provide that options granted and
the related option price are adjusted to reflect changes in the shares
outstanding due to stock splits and dividends, or other adjustments.

         The following tables detail the activity under the 1994 Incentive Stock
Option Plan and 1996 Stock Option Plan:

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
                                                                                         Average
                                                          Option                         Option
1994 INCENTIVE STOCK OPTION PLAN                          Shares                         Price
- ------------------------------------------------------------------------------------------------
<S>                                                     <C>                             <C>
Outstanding at January 1, 1997                           329,615                        $1.832
     Exercised                                          (144,325)                        1.765
     Canceled                                             (5,513)                        2.191
                                                          ------                        ------
Outstanding at December 31, 1997                         179,777                         1.875
     Exercised                                           (57,013)                        1.758
     Canceled                                               (263)                        2.191
                                                          ------                        ------
Outstanding at December 31, 1998                         122,501                         1.929
     Exercised                                           (36,425)                        1.960
                                                          ------                        ------
Outstanding at December 31, 1999                          86,076                        $1.917
                                                          ======                        ======
</TABLE>


                                                                              39
<PAGE>   42

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
                                                                               Average
                                                              Option            Option
1996 STOCK OPTION PLAN                                        Shares            Price
- --------------------------------------------------------------------------------------
<S>                                                          <C>               <C>
Outstanding at January 1, 1997 ...........................     45,095          $2.191
     Granted .............................................    453,025           5.356
     Exercised ...........................................     (1,025)          2.191
     Canceled ............................................    (44,240)          2.642
                                                              -------          ------
Outstanding at December 31, 1997 .........................    452,855           5.313
     Granted .............................................    225,500          14.969
     Exercised ...........................................    (13,889)          3.121
     Canceled ............................................    (37,783)          5.704
                                                              -------          ------
Outstanding at December 31, 1998 .........................    626,683           8.813
     Granted .............................................    219,406           9.924
     Exercised ...........................................    (70,756)          2.630
     Canceled ............................................    (76,323)         10.433
                                                              -------          ------
Outstanding at December 31, 1999 .........................    699,010          $9.610
                                                              =======          ======
</TABLE>

         In July 1997, the Company's Board of Directors approved the grant of
options to purchase 5,000 shares of common stock to each non-employee director
at the price of $8.50 per share. A total of 40,000 options, which vested 180
days from the date of grant were awarded at that date. There are 25,000 options
outstanding from these director grants with a remaining contractual life of 7.70
years at December 31, 1999. In April 1999, the Company's Board of Directors
approved the grant of options to purchase 2,000 shares of common stock to two
non-employee directors which vested ratably over four years, had a contractual
life of ten years and an exercise price of $8.313.

Certain information as of December 31, 1999 with regard to options outstanding,
exclusive of directors' stock options not issued under any plan, is detailed
below:

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
                                                  Weighted-         Average        Weighted-                      Weighted-
                                                 Number of        Remaining         Average                        Average
                                Range of          Options      Contractual Life    Exercise          Options      Exercise
                             Exercise Price      Outstanding       (years)          Price          Exercisable      Price
- ---------------------------------------------------------------------------------------------------------------------------
<S>                       <C>                    <C>           <C>                  <C>            <C>            <C>
1994 INCENTIVE STOCK
           OPTION PLAN:     $1.689 to $2.191        86,076           5.30           $1.917            86,076       $1.917
1996 STOCK OPTION PLAN:     $2.191 to $2.631       142,849           7.00           $2.571           130,912        $2.574
                                  $6.88              1,000           8.80           $6.875               250        $6.875
                             $8.312 to $8.50       144,027           7.70           $8.488           129,756         $8.50
                            $9.875 to $10.00       207,634           9.10           $9.997           132,300        $10.00
                           $13.50 to $14.375        79,000           8.40          $14.209            76,000       $14.202
                          $15.375 to $16.3125      124,500           8.10          $15.432           100,500       $15.396
                                                   -------                         -------           -------       -------
    Total, Both Plans:                             785,086                         $ 8.766           655,794       $ 8.472
                                                   =======                         =======           =======       =======
</TABLE>

         There is no compensation expense for any options granted prior to July
15, 1997, the date of the Company's initial filing with the Securities and
Exchange Commission indicating its intent to complete a public stock offering
(Note 1), based on the minimum value methodology assuming a four year expected
life and annual dividends ranging from 4.6% to 6.2% of the exercise prices.

         In estimating the compensation which would be attributable to each
option grant since July 15, 1997 if fair value accounting were to be utilized,
the Company has used the Black Scholes option pricing model with the following
weighted average assumptions for options granted in 1999, 1998 and 1997:
dividend yield of 1.2%, 1.0% and 1.4%; expected volatility of 64.8%, 37.5% and
30%; risk free interest rate of 5.50%, 5.08% and 6.14%; and an expected life of
5 years. Had compensation been determined in accordance with the fair value
provisions of SFAS No. 123, the Company's net income, basic earnings per share
and diluted earnings per share would have been reduced to the pro forma amounts
indicated below:

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
                                                   December 31,
                                       1999             1998             1997
- -----------------------------------------------------------------------------
<S>                               <C>              <C>              <C>
Net income (in thousands)
   As reported ...........        $   6,009        $   7,033        $   4,429
   Pro forma .............        $   4,769        $   6,577        $   4,336

Basic earnings per share
   As reported ...........        $    0.74        $    0.89        $    0.70
   Pro forma .............        $    0.59        $    0.83        $    0.69

Diluted earnings per share
   As reported ...........        $    0.72        $    0.86        $    0.67
   Pro forma .............        $    0.57        $    0.80        $    0.66
</TABLE>


40
<PAGE>   43

10. INCOME TAXES:

The components of the income tax provision for the years ended December 31 are
as follows:

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
                                                                                      1999          1998          1997
- ----------------------------------------------------------------------------------------------------------------------
                                                                                           (dollars in thousands)
<S>                                                                                 <C>           <C>           <C>
Current Provision:
     Federal ...................................................................    $3,441        $3,346        $2,047
     State .....................................................................       933           953           727
                                                                                    ------        ------        ------
                                                                                     4,374         4,299         2,774
                                                                                    ------        ------        ------
Deferred Provision:
     Federal ...................................................................       258           135            87
     State .....................................................................        60            38            34
                                                                                    ------        ------        ------
                                                                                       318           173           121
                                                                                    ------        ------        ------
        Total provision for income taxes .......................................    $4,692        $4,472        $2,895
                                                                                    ======        ======        ======
</TABLE>

         The effective tax rates differ from the federal statutory rate
primarily due to state taxes, net of the federal benefit, non-deductible
compensation and a dividend received deduction. In 1999 compensation expense of
$1.4 million associated with total salary and bonus paid to the Company's Chief
Executive Officer was deemed non-deductible for tax purposes which accounted for
4.43% of the tax rate increase over statutory rates. In 1998 the Company
received a $34,000 State of Connecticut tax refund resulting from a statutory
change relating to prior years. The State of Connecticut statutory tax rate has
decreased in each of the last three years.

         The components of the net deferred tax asset (liability) at December 31
are as follows:

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
                                                                                1999                          1998
                                                                       Federal        State          Federal         State
- --------------------------------------------------------------------------------------------------------------------------
                                                                                           (dollars in thousands)
<S>                                                                    <C>            <C>               <C>           <C>
Deferred tax assets:
     Allowance for possible loan losses                                  $819         $195              $499          $136
     Investments mark-to-market                                           146           36                --            --
     Other                                                                 --           --                92            25
                                                                        -----          ---               ---           ---
        Total deferred tax assets                                         965          231               591           161
                                                                        -----          ---               ---           ---
Deferred tax liabilities:
     Investments mark-to-market                                            74           20               222            61
     Depreciation                                                          53           13                74            20
     Deferred loan costs                                                    4            1               167            46
     Deferred gain on sale of loans                                     1,222          291               404           109
     Other                                                                  4            1                 6             1
                                                                        -----          ---               ---           ---
        Total deferred tax liabilities                                  1,357          326               873           237
                                                                        -----          ---               ---           ---
        Net deferred tax liabilities                                    $ 392          $95              $282           $76
                                                                        =====          ===              ====           ===
</TABLE>

The allocation of the deferred tax provision involving items charged to current
year income and items charged directly to stockholders' equity for the years
ended December 31, are as follows:

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
                                                                                1999                          1998
                                                                       Federal        State          Federal         State
- --------------------------------------------------------------------------------------------------------------------------
                                                                                     (dollars in thousands)
<S>                                                                    <C>          <C>                <C>            <C>
Deferred tax (benefit) provision allocated to shareholders' equity      $(148)        $(41)             $215          $59
Deferred tax provision allocated to income                                258           60               135           38
                                                                         ----          ---              ----          ---
     Total deferred tax provision                                        $110          $19              $350          $97
                                                                         ====          ===              ====          ===
</TABLE>


                                                                              41
<PAGE>   44
- --------------------------------------------------------------------------------
11. EMPLOYEE BENEFIT PLAN:

    The Company maintains a contributory savings plan which qualifies under
Section 401(k) of the Internal Revenue Code for employees meeting certain
service requirements. Eligible employees may make contributions to the Plan
based on specified percentages of their compensation. Beginning July 1, 1998,
the Company matched 100% of employees' contribution, up to 6% of compensation.
The matching contribution was 85% in prior periods. The Company's matching
contributions totaled $475,000, $290,000 and $139,000 for the years ended
December 31, 1999, 1998, and 1997, respectively.

- --------------------------------------------------------------------------------
12. ESTIMATED FAIR VALUES OF FINANCIAL INSTRUMENTS:

    Statement of Financial Accounting Standards No. 107 "Disclosures About Fair
Value of Financial Instruments" (SFAS 107) requires the Company to disclose fair
value information for certain of its financial instruments, including loans,
securities, deposits, borrowings and other such instruments. Quoted market
prices are not available for a significant portion of the Company's financial
instruments and, as a result, the fair values presented may not be indicative of
net realizable or liquidation values. Fair values are estimates derived using
present value or other valuation techniques and are based on judgments regarding
future expected loss experience, current economic conditions, risk
characteristics and other factors. In addition, fair value estimates are based
on market conditions and information about the financial instrument at a
specific point in time. Fair value estimates are based on existing on- and
off-balance sheet financial instruments without attempting to estimate the value
of anticipated future business and the value of assets and liabilities that are
not considered financial instruments. Such items include loan servicing, core
deposit intangibles and other customer relationships, premises and equipment,
foreclosed real estate and income taxes. In addition, the tax ramifications
relating to the realization of the unrealized gains and losses may have a
significant effect on fair value estimates, and have not been considered in the
estimates.

    The following is a summary of the methodologies and assumptions used to
estimate the fair value of the Company's financial instruments pursuant to SFAS
No. 107:

CASH, CASH EQUIVALENTS AND OTHER: The fair value of cash and due from banks,
federal funds sold, accrued interest receivable and accrued interest payable, is
considered to approximate the book value due to their short-term nature and
negligible credit losses.


SECURITIES: Securities classified as available-for-sale are carried at fair
value and include I/O strips associated with securitizations and sales of loans.
Fair value for securities available for sale and held to maturity was determined
by secondary market and independent broker quotations where available, or by the
Company's estimate of market value.

LOANS: The fair values for loans are estimated using discounted cash flow
analyses, and interest rates currently being offered for loans with similar
terms to borrowers of similar credit quality.

LOANS HELD FOR SALE: The fair values for loans held for sale are based on
estimated sales prices derived from the current market conditions.

DEPOSIT LIABILITIES: The fair value for demand and savings deposits is equal to
the amount payable on demand at the balance sheet date which is equal to the
carrying value. The fair value of certificates of deposit was estimated by
discounting cash flows using rates currently offered by the Bank for consumer
deposits of similar remaining maturities or rates currently offered by brokers
for brokered certificates of deposit of similar remaining maturities, as
applicable.


       The fair value information of the Company's financial instruments
required to be valued by SFAS No. 107 are as follows:

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
                                       December 31, 1999             December 31, 1998
- --------------------------------------------------------------------------------------
                                    Carrying     Estimated      Carrying     Estimated
                                    Value        Fair Value     Value        Fair Value
                                   ----------------------------------------------------
                                                  (dollars in thousands)
<S>                                <C>           <C>           <C>           <C>
FINANCIAL ASSETS
Cash and due from banks .....      $ 12,977      $ 12,977      $ 13,405      $ 13,405
Federal funds sold ..........        35,780        35,780        44,930        44,930
Securities available for sale        19,496        19,496        24,029        24,029
Securities held to maturity .         1,165         1,161         1,986         1,989
Stock securities ............         1,809         1,809         2,177         2,177
Interest only strips ........        10,315        10,315         4,127         4,127
Loans .......................       141,435       141,625       117,535       118,600
Receivable from loans sold ..        50,980        50,980        38,902        38,902
Accrued interest receivable .         2,278         2,278         1,383         1,383

FINANCIAL LIABILITIES
Deposits
     Checking ...............      $ 10,627      $ 10,627      $ 55,928        55,928
     Savings ................         3,340         3,340       117,816       117,816
     Time deposits ..........       252,333       250,079        46,130        46,349
U.S. Treasury demand note ...            --            --         1,047         1,047
Accrued interest payable ....         3,341         3,341           768           768
</TABLE>

42

<PAGE>   45

- --------------------------------------------------------------------------------
13. Segment Information:

    The Company has determined that its reportable segments are its domestic
Commercial Banking divisions, its International Banking division and its Loan
Servicing business unit. The domestic Commercial Banking divisions are an
aggregation of the Commercial Banking-East and Commercial Banking-West
divisions, which included 7 and 8 business units, respectively, at December 31,
1999. The Commercial Banking divisions offer SBA, USDA and other commercial
loans to small and medium size industrial companies in the U.S. Each Commercial
division is headed by an Executive Vice President and the divisions offer the
same products and services and have the same marketing approach. The
International Banking division is comprised of four business units, two of which
market Ex-Im Bank guaranteed and insured loans and privately insured loans to
small and medium size industrial companies located in international emerging
markets, the Trade Finance business unit, which provides Ex-Im Bank guaranteed
export working capital lines of credit and SBA loans to U.S. companies and the
Import Finance business unit which provides privately-insured import financing
and SBA loans to U. S. companies.

    The Loan Servicing business unit is responsible for all loan operations
functions, which include the preparation of loan documents, the maintenance of
loans and the servicing of loans managed for others.

    The segment information prepared internally and utilized for decision-making
includes only revenues from gain on loan sales and certain fees and only certain
expenses. Gains on the sale of loans and loan related fee income are allocated
to business units and aggregated for each division. As detailed in the
reconciliation below, the gain on securitizations was not fully allocated to the
business units in 1999. Direct expenses, principally personnel costs, and a
limited amount of certain other expenses, such as supplies and indirect
marketing are allocated to the business units. Interest income but not interest
expense is allocated to business units. There is no allocation of the loan loss
provision, corporate overhead expense or income taxes. Likewise, assets are
generally not allocated among business units and, therefore, are not disclosed
below. The Company periodically evaluates the costs and benefits of making
certain additional income, expense and asset allocations.


    The accounting policies of the segments are the same as those described in
Note 1. There are no intersegment revenues.


Financial information for the Company's business segments is as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
                                                For the Years Ended December 31,
COMMERCIAL BANKING DIVISIONS                     1999         1998        1997
- --------------------------------------------------------------------------------
                                                      (dollars in thousands)
<S>                                            <C>          <C>          <C>
Gains on the sale of loans ..............      $16,688      $11,560      $ 7,384
Other loan-related income ...............          218          198           76
                                               -------      -------      -------
     Total allocated revenues ...........       16,906       11,758        7,460
Allocated non-interest expense ..........        8,817        5,800        3,998
                                               -------      -------      -------
     Direct net contribution ............      $ 8,089      $ 5,958      $ 3,462
                                              =======       =======      =======
Number of business units at year end ....           16           14           10
                                              =======       =======      =======
Number of lending officers ..............           58           53           35
                                              =======       =======      =======
</TABLE>

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
                                             For the Years Ended December 31,
INTERNATIONAL BANKING DIVISION                1999          1998          1997
- --------------------------------------------------------------------------------
                                                 (dollars in thousands)
<S>                                           <C>           <C>          <C>
Gains on the sale of loans .............      $ 2,524       $ 2,814      $ 2,555
Other loan-related income ..............          645           603          258
                                               -------      -------      -------
     Total allocated revenues ..........        3,169         3,417        2,813
Allocated non-interest expense .........        3,218         2,239        1,633
                                               -------      -------      -------
     Direct net contribution ...........      $   (49)      $ 1,178      $ 1,180
                                              =======       =======      =======
Number of business units at year end ...            4             3            3
                                              =======       =======      =======
Number of lending officers .............           21            16           11
                                              =======       =======      =======
</TABLE>

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
                                            For the Years Ended December 31,
LOAN SERVICING BUSINESS UNIT                1999            1998           1997
- ----------------------------------------------------------------------------------
                                                  (dollars in thousands)
<S>                                     <C>             <C>             <C>
Loan servicing income ............      $    4,943      $    2,913      $    2,119
Allocated non-interest expense ...           1,802           1,265           1,442
                                        ----------      ----------      ----------
     Direct net contribution .....      $    3,141      $    1,648      $      677
                                        ==========      ==========      ==========
Loans under management at year end      $1,076,092      $  779,055      $  573,545
                                        ==========      ==========      ==========
</TABLE>

                                                                              43
<PAGE>   46
Detailed below are reconciliations of the amounts reported for each business
segment to the amounts reported in the consolidated income statement:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
                                        Commercial    International    Loan       Unallocated   Consolidated
FOR THE YEAR ENDED DECEMBER 31, 1999    Banking         Banking      Servicing      Amounts        Totals
- ------------------------------------------------------------------------------------------------------------
                                                          (dollars in thousands)
<S>                                      <C>           <C>           <C>           <C>            <C>
Total allocated revenues ..........      $ 16,906      $  3,169      $  4,943      $    127       $ 25,145
Interest income ...................        10,803         3,606            --         3,963         18,372
Gain on sale of the branch ........            --            --            --         8,915          8,915
Other fees and income .............            --            --            --         1,152          1,152
                                         --------      --------      --------      --------       --------
     Total revenues ...............        27,709         6,775         4,943        14,157         53,584
                                         --------      --------      --------      --------       --------
Non-interest expense ..............         8,817         3,218         1,802        14,446         28,283
Interest expense ..................            --            --            --        11,581         11,581
Provision for possible loan losses             --            --            --         3,019          3,019
                                         --------      --------      --------      --------       --------
     Total expenses ...............         8,817         3,218         1,802        29,046         42,883
                                         --------      --------      --------      --------       --------
         Income before income taxes      $ 18,892      $  3,557      $  3,141      $(14,889)      $ 10,701
                                         ========      ========      ========      ========       ========
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
                                                      Commercial  International      Loan      Unallocated   Consolidated
FOR THE YEAR ENDED DECEMBER 31, 1998                   Banking      Banking       Servicing     Amounts         Totals
- -------------------------------------------------------------------------------------------------------------------------
                                                                             (dollars in thousands)
<S>                                                   <C>           <C>           <C>               <C>        <C>
Total allocated revenues .......................      $ 11,758      $  3,417      $  2,913      $   --         $ 18,088
Interest income ................................        13,341         1,675            --         3,176         18,192
Unallocated gain on the sale of commercial loan-
     backed securitizations ....................            --            --            --         2,598          2,598
Other fees and income ..........................            --            --            --         1,322          1,322
                                                      --------      --------      --------      --------       --------
     Total revenues ............................        25,099         5,092         2,913         7,096         40,200
                                                      --------      --------      --------      --------       --------
Non-interest expense ...........................         5,800         2,239         1,265         8,396         17,700
Interest expense ...............................            --            --            --         7,924          7,924
Provision for possible loan losses .............            --            --            --         3,071          3,071
                                                      --------      --------      --------      --------       --------
     Total expenses ............................         5,800         2,239         1,265        19,391         28,695
                                                      --------      --------      --------      --------       --------
         Income before income taxes ............      $ 19,299      $  2,853      $  1,648      $(12,295)      $ 11,505
                                                      ========      ========      ========      ========       ========
</TABLE>

<TABLE>
<CAPTION>

- -------------------------------------------------------------------------------------------------------------------------
                                                     Commercial   International     Loan       Unallocated   Consolidated
FOR THE YEAR ENDED DECEMBER 31, 1997                  Banking      Banking        Servicing      Amounts        Totals
- -------------------------------------------------------------------------------------------------------------------------
                                                                             (dollars in thousands)
<S>                                                   <C>           <C>           <C>           <C>            <C>
Total allocated revenues .......................      $  7,460      $  2,813      $  2,119      $     --       $ 12,392
Interest income ................................        12,082           671            --         1,872         14,625
Unallocated gain on the sale of commercial loan-
     backed securitizations ....................            --            --            --         1,871          1,871
Other fees and income ..........................            --            --            --           847            847
                                                      --------      --------      --------      --------       --------
     Total revenues ............................        19,542         3,484         2,119         4,590         29,735
                                                      --------      --------      --------      --------       --------
Non-interest expense ...........................         3,998         1,633         1,442         6,728         13,801
Interest expense ...............................            --            --            --         6,371          6,371
Provision for possible loan losses .............            --            --            --         2,239          2,239
                                                      --------      --------      --------      --------       --------
     Total expenses ............................         3,998         1,633         1,442        15,338         22,411
                                                      --------      --------      --------      --------       --------
         Income before income taxes ............      $ 15,544      $  1,851      $    677      $(10,748)      $  7,324
                                                      ========      ========      ========      ========       ========
</TABLE>


44
<PAGE>   47
- --------------------------------------------------------------------------------
14. OTHER COMPREHENSIVE INCOME:
<TABLE>
<CAPTION>

- --------------------------------------------------------------------------------------------------------
                                                                        For the Years Ended December 31,
                                                                        1999        1998         1997
- --------------------------------------------------------------------------------------------------------
                                                                            (dollars in thousands)
<S>                                                                     <C>         <C>         <C>
Unrealized net holding gains (losses) on investments
     available- for-sale arising during period ...................      $(107)      $ 723       $ 148
Less: Reclassification adjustment for gains included in net income        416          33          --
      Tax expense (benefit) ......................................       (189)        274          62
                                                                        -----       -----       -----
Other comprehensive income (loss) net of tax .....................      $(334)      $ 416       $  86
                                                                        =====       =====       =====
</TABLE>

- --------------------------------------------------------------------------------
15. PARENT COMPANY FINANCIAL INFORMATION:

First International Bancorp, Inc. is the parent company of First International
Bank. There have been no loans extended from the Bank to First International
Bancorp, Inc. since inception of the holding company.

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
FIRST INTERNATIONAL BANCORP, INC.               For the Years Ended December 31,
CONDENSED BALANCE SHEETS                              1999        1998
- --------------------------------------------------------------------------------
                                                   (dollars in thousands)
<S>                                                  <C>          <C>
ASSETS
Cash on deposit with Bank subsidiary ..........      $    59      $   267
Investment securities:
     Available for sale, at fair value ........           20           19
     Investment in the Bank ...................       54,477       48,503
Other assets ..................................          431          282
                                                     -------      -------
     Total assets .............................      $54,987      $49,071
                                                     =======      =======

LIABILITIES AND STOCKHOLDERS' EQUITY
Stockholders' equity ..........................      $54,987      $49,071
                                                     -------      -------
     Total liabilities and stockholders' equity      $54,987      $49,071
                                                     =======      =======
</TABLE>


<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
FIRST INTERNATIONAL BANCORP, INC.                    For the Years Ended December 31,
CONDENSED STATEMENTS OF INCOME                        1999          1998         1997
- ---------------------------------------------------------------------------------------
                                                         (dollars in thousands)
<S>                                                 <C>           <C>           <C>
Dividends from Bank subsidiary ...............      $   650       $   650       $   731
Net interest income from investments .........          122           116           102
Equity in undistributed net income of the Bank        6,309         6,366         3,796
Non-interest expense, net ....................       (1,813)          (87)         (284)
                                                    -------       -------       -------
     Income before income taxes ..............        5,268         7,045         4,345
        Provision (benefit) for income taxes .         (741)           12           (84)
                                                    -------       -------       -------
     Net income ..............................      $ 6,009       $ 7,033       $ 4,429
                                                    =======       =======       =======
</TABLE>


                                                                              45
<PAGE>   48
<TABLE>
<CAPTION>

- -----------------------------------------------------------------------------------------------------------------
FIRST INTERNATIONAL BANCORP, INC.                                               For the Years Ended December 31,
CONDENSED STATEMENTS OF CASH FLOWS                                           1999            1998          1997
- -----------------------------------------------------------------------------------------------------------------
                                                                                  (dollars in thousands)
<S>                                                                        <C>            <C>            <C>
Cash flow from operating activities
Net income ..........................................................      $  6,009       $  7,033       $  4,429
Adjustments to reconcile net income to net cash provided by operating
activities:
     Equity in undistributed net income of subsidiary ...............        (6,309)        (6,366)        (3,796)
     Increase in other assets .......................................          (149)          (175)          (107)
     Stockholder note receivable discount ...........................            --             --             92
     Stockholder note receivable accretion ..........................            --            (64)           (15)
                                                                           --------       --------       --------
        Net cash provided by operations .............................          (449)           428            603
                                                                           --------       --------       --------
Cash flows from investing activities:
     Purchase of investment securities available for sale, net ......            --         (4,068)        (4,085)
     Proceeds from maturities of securities held to maturity ........            --          8,135             --
     Additional investment in Bank subsidiary .......................            --        (11,100)       (12,545)
                                                                           --------       --------       --------
        Net cash used in investing activities .......................            --         (7,033)       (16,630)
                                                                           --------       --------       --------
Cash flows from financing activities:
     Proceeds from issuance of common stock .........................           278            486            263
     Payment of stockholder note receivable .........................           941             --             --
     Proceeds from sale of common stock at public offering, net .....            --             --         23,808
     Dividends paid .................................................          (978)          (948)          (731)
                                                                           --------       --------       --------
        Net cash provided by (used in) financing activities .........           241           (462)        23,340
                                                                           --------       --------       --------
        Net increase (decrease) in cash and cash equivalents ........          (208)        (7,067)         7,313
Cash and cash equivalents beginning of year .........................           267          7,334             21
                                                                           --------       --------       --------
Cash and cash equivalents end of year ...............................      $     59       $    267       $  7,334
                                                                           ========       ========       ========
</TABLE>


- --------------------------------------------------------------------------------
16. SELECTED QUARTERLY CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED):

<TABLE>
<CAPTION>

- ----------------------------------------------------------------------------------------------------
1999 Quarter Ended                                March 31     June 30   September 30    December 31
- ----------------------------------------------------------------------------------------------------
                                                            (dollars in thousands)
<S>                                               <C>          <C>          <C>          <C>
Net interest income ........................      $ 1,554      $ 1,681      $ 1,965      $ 1,591
Provision for possible loan losses .........        1,539          449          413          618
                                                  -------      -------      -------      -------
     Net interest income after provision for
        possible loan losses ...............           15        1,232        1,552          973
Gain on sale of loans ......................        3,050        6,189        3,531        6,417
Other non-interest income ..................       10,110        1,567        1,520        2,828
                                                  -------      -------      -------      -------
     Total operating income ................       13,175        8,988        6,603       10,218
     Non-interest expense ..................        9,352        5,531        6,357        7,043
                                                  -------      -------      -------      -------
     Income before income taxes ............        3,823        3,457          246        3,175
Provision for income taxes .................        1,606        1,400          103        1,583
                                                  -------      -------      -------      -------
     Net income ............................      $ 2,217      $ 2,057      $   143      $ 1,592
                                                  =======      =======      =======      =======
Basic earnings per share ...................      $  0.28      $  0.25      $  0.02      $  0.19
                                                  =======      =======      =======      =======
Diluted earnings per share .................      $  0.27      $  0.24      $  0.02      $  0.19
                                                  =======      =======      =======      =======
</TABLE>

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
1998 Quarter Ended                                  March 31     June 30   September 30    December 31
- -----------------------------------------------------------------------------------------------------
                                                             (dollars in thousands)
<S>                                                  <C>          <C>        <C>            <C>
Net interest income ........................         $2,792       $2,481     $2,720         $2,275
Provision for possible loan losses .........            781        1,125        659            506
                                                     ------       ------     ------         ------
     Net interest income after provision for
          possible loan losses .............          2,011        1,356      2,061          1,769
Gain on sale of loans ......................          2,822        5,537      2,543          6,057
Other non-interest income ..................          1,087        1,425      1,078          1,460
                                                     ------       ------     ------         ------
     Total operating income ................          5,920        8,318      5,682          9,286
     Non-interest expense ..................          3,541        4,290      4,323          5,546
                                                     ------       ------     ------         ------
     Income before income taxes ............          2,379        4,028      1,359          3,740
Provision for income taxes .................            976        1,587        474          1,436
                                                     ------       ------     ------         ------
     Net income ............................         $1,403       $2,441     $  885         $2,304
                                                     ======       ======     ======         ======
Basic earnings per share ...................         $ 0.18       $ 0.31     $ 0.11         $ 0.29
                                                     ======       ======     ======         ======
Diluted earnings per share .................         $ 0.17       $ 0.30     $ 0.11         $ 0.28
                                                     ======       ======     ======         ======
</TABLE>


46
<PAGE>   49
- --------------------------------------------------------------------------------
Notes




                                                                              47
<PAGE>   50
DIRECTORS AND OFFICERS

- ------------------------------------------
FIRST INTERNATIONAL BANK
BOARD OF DIRECTORS


  William J. Anderson

* Michael R. Carter
  Carter Morse & Company

* Arnold Chase
  Chase Enterprises

* Cheryl Chase
  Chase Enterprises

  Craig M. Cooper
  Fairbank Mortgage Company

  Leslie A. Galbraith
  President and Chief Operating Officer

  Dean Goodermote
  Process Software Corporation

* Frank P. Longobardi, CPA
  Haggett, Longobardi & Company

  David G. Sandberg
  Cornerstone Capital Advisors, Inc.

* Brett N. Silvers
  Chairman and Chief Executive Officer

  Kenneth R. Sonenclar
  Classics Interactive, Inc.

  Douglas K. Woods
  Liberty Precision Industries, Ltd.

* MEMBER OF FIRST INTERNATIONAL
  BANCORP, INC. BOARD OF DIRECTORS

- -------------------------------------------
FIRST INTERNATIONAL BANCORP, INC. OFFICERS


Brett N. Silvers
Chairman, Chief Executive Officer and President

Leslie A. Galbraith
Executive Vice President and Secretary

Shaun P. Williams
Executive Vice President, Chief Financial Officer and Treasurer

- -------------------------------------------
FIRST INTERNATIONAL BANK

OFFICERS


CHAIRMAN AND CHIEF EXECUTIVE OFFICER

Brett N. Silvers


PRESIDENT AND CHIEF OPERATING OFFICER

Leslie A. Galbraith


EXECUTIVE VICE PRESIDENTS

Richard W. Bradshaw

David J. Etter

Paul J. Falvey

James G. Fortsch

Keith D. Kelly

Frank P. La Monaca

Shaun P. Williams



SENIOR VICE PRESIDENTS

Charles E. Baker

David M. Baroody

Bradley C. Berryman

Cynthia D. Bradley

Dennis E. Cesen

David B. Cook

John A. Garner

Ira J. Gottlieb

Stephen M. Greene

Thomas G. Hollinger

Theodore J. Horan

Matthew J. Ide

Timothy  Jones

Patrick W. Kenney

Todd D. Maugans

John S. Mello

Constance E. Perrine

Robert J. Pettinicchi

Charles E. Poehnert

Richard M. Rabideau

Leona M. Rapelye

Michael J. Rister

Matthew J. Roach

Mary E. Shancey

Gerald R. Tavernier, Jr.




48
<PAGE>   51
GENERAL INFORMATION

- --------------------------------------
CORPORATE HEADQUARTERS

280 Trumbull Street
Hartford, CT  06103
(860) 727-0700
www.firstinterbank.com
NASDAQ:  FNCE


CORPORATE COUNSEL

Bingham Dana LLP
One State Street
Hartford, CT  06103

TRANSACTION COUNSEL

Updike, Kelly & Spellacy
One State Street
Hartford, CT  06103


INDEPENDENT ACCOUNTANTS

PricewaterhouseCoopers LLP
100 Pearl Street
Hartford, CT  06103


TRANSFER AGENT

Requests for changes in the registration of stock certificates, replacement of
lost or destroyed certificates, or undeliverable dividend checks should be
referred to the Company's Transfer Agent:


ChaseMellon Shareholder Services
Securities Transfer Services
111 Founders Plaza, Suite 1100
East Hartford, CT  06108
1-800-288-9541
TDDLine 1-800-231-5469
From Outside U.S. 201-329-8668
TDD Foreign Line 201-329-8354
www.chasemellon.com


ANNUAL MEETING

Tuesday, May 2, 2000, 4:00 p.m.
The Hilton Hartford Hotel
315 Trumbull Street
Hartford, CT  06103


FORM 10-K

A copy of First International Bancorp, Inc.'s annual report and Form 10-K as
filed with the Securities and Exchange Commission is available upon request to
the Company's Chief Financial Officer:


Shaun P. Williams
First International Bancorp, Inc.
280 Trumbull Street
Hartford, CT 06103
860-241-2540
[email protected]


INVESTOR RELATIONS

Media representatives, analysts and investors seeking information are invited to
contact the Chief Administrative Officer:


Frank P. La Monaca
First International Bancorp, Inc.
280 Trumbull Street
Hartford, CT 06103
860-241-4704
[email protected]

- -------------------------------------------------------------------------------
MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS


    The Company's common stock was listed on The Nasdaq Stock Market(SM) under
the symbol FNCE on September 23, 1997. The following table sets forth the range
of the high and low closing sales prices for the Company's common stock on the
Nasdaq:

<TABLE>
<CAPTION>

1999                                      HIGH               LOW
- ------------------------------------------------------------------
<S>                                     <C>               <C>
Fourth Quarter .............            $10-7/16            $6-3/4
Third Quarter ..............            $14                 $8-1/8
Second Quarter .............            $14-1/8             $7-5/8
First Quarter ..............            $11-7/8             $8-3/4
</TABLE>

<TABLE>
<CAPTION>


1998                                     HIGH             LOW
- -------------------------------------------------------------------
<S>                                     <C>                <C>
Fourth Quarter .............            $12                $6-7/8
Third Quarter ..............            $14-3/4            $9-1/2
Second Quarter .............            $17-3/8            $14-3/8
First Quarter ..............            $17-3/4            $12-1/2
</TABLE>

       On March 15, 2000, the Company had approximately 171 stockholders of
record. This number does not include beneficial owners holding shares through
nominee or "street" names. The Company believes the number of beneficial
stockholders is in excess of 1400.

       Holders of the common stock are entitled to receive dividends when, as,
and if declared by the Board of Directors, out of funds legally available for
such purpose. The Company has paid quarterly cash dividends to its stockholders
since October 1995 equal to $.03 per share.

       The Company currently plans to continue to declare and pay quarterly cash
dividends on approximately the same basis to the holders of the common stock.
However, there can be no assurance that dividends will be declared and paid in
the future. In determining whether and to what extent the Company should declare
and pay dividends, the Company's Board of Directors will consider, among other
factors, the Company's consolidated financial condition and results of
operations, tax considerations, general economic conditions and capital
requirements. Additionally, the Company's ability to declare and pay dividends
may depend upon the receipt of dividends from its wholly owned subsidiary, First
International Bank, which is restricted by the requirements of federal and state
banking laws. See Note 8 of the Consolidated Financial Statements.


<PAGE>   52
[FIRST INTERNATIONAL BANK LOGO]


CORPORATE HEADQUARTERS


Hartford
280 Trumbull Street
Hartford, CT  06103
(860) 727-0700
(860) 241-2501 (fax)
www.firstinterbank.com


U. S. REPRESENTATIVE OFFICES

Boston, MA

Cleveland, OH

Detroit, MI

Morristown, NJ

Philadelphia, PA

Pittsburgh, PA

Providence, RI

Rochester, NY

Springfield, MA

St. Louis, MO

Washington, DC


INTERNATIONAL REPRESENTATIVES


Argentina

Brazil

Central America

Egypt

India

Indonesia

Korea

Mexico

North Africa

Philippines

Poland

South Africa

Turkey

West Africa


[LOGO]

Member FDIC
Equal Housing Lender

<PAGE>   1
EXHIBIT 21.1


                              SUBSIDIARIES OF THE REGISTRANT

The Registrant has the following subsidiaries:

       First International Bank, a Connecticut state bank and trust company


First International Bank has the following subsidiaries:

       FNBNE SBA Holdings, Inc., a Delaware corporation
       FNBNE Business Loans Holdings, Inc., a Delaware corporation
       FNBNE Funding Corp., a Delaware corporation
       FIB Business Loans Holdings, Inc., a Delaware corporation
       FIB Funding Corp., a Delaware corporation
       FIB Holdings, Inc., a Delaware corporation
       First International Capital Corp. of New Jersey, a New Jersey corporation






<PAGE>   1
EXHIBIT 23.1



CONSENT OF INDEPENDENT ACCOUNTANTS


We hereby consent to the incorporation by reference in the registration
statements of First International Bancorp, Inc. on Form S-8 (File Nos. 333-46149
and 333-46151) of our report dated January 24, 2000, relating to the
consolidated financial statements of First International Bancorp, Inc. which
appears in this Form 10-K.

PricewaterhouseCoopers LLP



Hartford, Connecticut
March 30, 2000

<TABLE> <S> <C>

<ARTICLE> 9

<S>                             <C>                     <C>
<PERIOD-TYPE>                   3-MOS                   12-MOS
<FISCAL-YEAR-END>                          DEC-31-1999             DEC-31-1999
<PERIOD-START>                             OCT-01-1999             JAN-01-1999
<PERIOD-END>                               DEC-31-1999             DEC-31-1999
<CASH>                                          12,977                  12,977
<INT-BEARING-DEPOSITS>                               0                       0
<FED-FUNDS-SOLD>                                35,780                  35,780
<TRADING-ASSETS>                                     0                       0
<INVESTMENTS-HELD-FOR-SALE>                     29,811                  29,811
<INVESTMENTS-CARRYING>                           2,974                   2,974
<INVESTMENTS-MARKET>                             2,970                   2,970
<LOANS>                                        145,985                 145,985
<ALLOWANCE>                                      4,550                   4,550
<TOTAL-ASSETS>                                 328,044                 328,044
<DEPOSITS>                                     266,300                 266,300
<SHORT-TERM>                                         0                       0
<LIABILITIES-OTHER>                              6,757                   6,757
<LONG-TERM>                                          0                       0
                                0                       0
                                          0                       0
<COMMON>                                           826                     826
<OTHER-SE>                                      54,161                  54,161
<TOTAL-LIABILITIES-AND-EQUITY>                 328,044                 328,044
<INTEREST-LOAN>                                  3,851                  13,933
<INTEREST-INVEST>                                  804                   2,953
<INTEREST-OTHER>                                   355                   1,486
<INTEREST-TOTAL>                                 5,010                  18,372
<INTEREST-DEPOSIT>                               2,877                  10,739
<INTEREST-EXPENSE>                                 186                     842
<INTEREST-INCOME-NET>                            1,947                   6,791
<LOAN-LOSSES>                                      618                   3,019
<SECURITIES-GAINS>                                 416                     416
<EXPENSE-OTHER>                                  7,044                  28,283
<INCOME-PRETAX>                                  3,325                  10,701
<INCOME-PRE-EXTRAORDINARY>                       3,325                  10,701
<EXTRAORDINARY>                                      0                       0
<CHANGES>                                            0                       0
<NET-INCOME>                                     1,592                   6,009
<EPS-BASIC>                                       0.19                    0.74
<EPS-DILUTED>                                     0.19                    0.72
<YIELD-ACTUAL>                                    3.74                    2.82
<LOANS-NON>                                      3,299                   3,299
<LOANS-PAST>                                         0                       0
<LOANS-TROUBLED>                                     0                       0
<LOANS-PROBLEM>                                      0                       0
<ALLOWANCE-OPEN>                                 4,550                   4,000
<CHARGE-OFFS>                                      646                   2,549
<RECOVERIES>                                        28                      80
<ALLOWANCE-CLOSE>                                4,550                   4,550
<ALLOWANCE-DOMESTIC>                             3,204                   3,204
<ALLOWANCE-FOREIGN>                                763                     763
<ALLOWANCE-UNALLOCATED>                            583                     583


</TABLE>


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