LOGO [g45502img001.jpg]    Exhibit 10.55

 

FIRST AMENDED AND RESTATED LOAN AGREEMENT

 

   

Between

    

U.S. HOME SYSTEMS, INC.

      

THE FROST NATIONAL BANK

750 State Highway 121 Bypass, Suite 170

 

and

  

100 W. Houston Street

Lewisville, Texas 75067

      

San Antonio, Texas 78205

 

February 9, 2006, to be effective for all purposes as of February 10, 2006

 

THIS FIRST AMENDED AND RESTATED LOAN AGREEMENT (the “Loan Agreement”) will serve
to set forth the terms of the financing transactions by and between U.S. HOME
SYSTEMS, Inc., a Delaware corporation (“Borrower”), and THE FROST NATIONAL BANK,
a national banking association (“Lender”):

 

1. Credit Facilities. Subject to the terms and conditions set forth in this Loan
Agreement and the other agreements, instruments and documents evidencing,
securing, governing, guaranteeing and/or pertaining to the Loans, as hereinafter
defined (collectively, together with the Loan Agreement, referred to hereinafter
as the “Loan Documents”), Lender hereby agrees to provide to Borrower the credit
facility or facilities hereinbelow (whether one or more, the “Credit
Facilities”):

 

(a) Revolving Line of Credit. Subject to the terms and conditions set forth
herein, Lender agrees to lend to Borrower, on a revolving basis from time to
time during the period commencing on the date hereof and continuing through the
maturity date of the promissory note evidencing this Credit Facility from time
to time, such amounts as Borrower may request hereunder; provided, however, the
total principal amount outstanding at any time shall not exceed the lesser of
(i) the Collateral Value of the Eligible Installment Contracts (as defined
below) or (ii) $3,000,000 (the “Revolving Line of Credit”). Subject to the terms
and conditions hereof, Borrower may borrow, repay and reborrow hereunder. If at
any time the aggregate principal amount outstanding under the Revolving Line of
Credit shall exceed the Collateral Value of the Eligible Installment Contracts,
Borrower agrees to immediately repay to Lender such excess amount, plus all
accrued unpaid interest thereon. The initial advance under the Revolving Line of
Credit shall be used to refinance a portion of the sums outstanding on the date
hereof under the revolving line of credit under the Existing Loan Agreement (as
defined below) and all subsequent advances under the Revolving Line of Credit
shall be used to acquire Installment Contracts, for working capital of FCC (as
defined below) and other general corporate purposes.

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Borrower shall immediately pay or cause to be paid to Lender the proceeds of any
Installment Contract sold or otherwise transferred, and with respect to any
Eligible Installment Contract sold or otherwise transferred for less than its
Collateral Value, Borrower shall immediately pay Lender the difference between
the Collateral Value of such Eligible Installment Contract and the proceeds
received from the sale or other transfer of such Eligible Installment Contract.
In the event Borrower desires to substitute any Eligible Installment Contract
(the “Replacement Contract”) for an Installment Contract previously delivered
and purchased or contributed pursuant to the Securitization, Borrower shall
provide notice of its intention to Lender and pay Lender the Collateral Value of
the Replacement Contract. Upon receipt of the Collateral Value of the
Replacement Contract, Lender shall execute such documents evidencing Lender’s
release of its lien on the Replacement Contract as Borrower may reasonably
request. Upon notice from U.S. Bank (as defined below) that any Eligible
Installment Contract delivered to U.S. Bank is not eligible for purchase under
the Securitization (as defined below), Borrower and FCC shall deliver written
notice to Lender of the documentation deficiencies noted by U.S. Bank. If Lender
determines in its reasonable discretion that such deficiencies materially impair
such Eligible Installment Contract’s Collateral Value, Borrower will pay Lender
the Collateral Value of such Eligible Installment Contract or cure such
deficiency within fifteen days after notice by Lender to Borrower.

 

With respect to any sale by FCC of an Installment Contract other than pursuant
to the Securitization, prior to the occurrence of an Event of Default, upon
delivery by Borrower of a transmittal request substantially in the form attached
hereto as Exhibit 1 (a “Transmittal Request”), Lender will execute and deliver a
transmittal to the purchaser identified in the Transmittal Request in
substantially the form of Exhibit 2 (a “Bailee Letter”) and direct U.S. Bank to
deliver such Installment Contracts to the purchaser named in such Bailee Letter.
All Installment Contracts delivered to any purchaser (other than a purchaser
under the Securitization) shall be delivered under cover of a Bailee Letter,
along with a copy of the applicable Transmittal Request. Borrower and FCC shall
cause all purchasers to pay all amounts payable (other than any such amount
being loaned or contributed as capital by FCC to FCC Acceptance Corp. in
connection with the Securitization) on account of the sale of Installment
Contracts directly to Lender. Borrower will not be credited for any amount due
from any purchaser (including any purchase under the Securitization) until
Lender has actually received immediately available funds.

 

FCC, Lender, U.S. Bank, FCC Acceptance Corp. and DZ Bank AG Deutsche Zentral -
Genossenschaftsbank, Frankfurt Am Main (“DZ Bank”) have entered into a Letter
Agreement dated as of May 30, 2003 (as from time to time amended, modified or
restated, the “Letter Agreement”), regarding the delivery and sale of
Installment Contracts by FCC pursuant to the Securitization. Borrower shall, and
shall cause FCC to, deliver to Lender (a) simultaneously with each delivery of
Installment Contracts to U.S. Bank, a list of each Installment Contract so
delivered, and (b) upon FCC’s receipt thereof, a copy of each notice from U.S.
Bank as to which delivered Installment Contracts will be eligible for purchase
under the Securitization.

 

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(b) Borrowing Base Line of Credit. Subject to the terms and conditions set forth
herein, Lender agrees to lend to Borrower, on a revolving basis from time to
time during the period commencing on the date hereof and continuing through the
maturity date of the promissory note evidencing this Credit Facility from time
to time, such amounts as Borrower may request hereunder; provided, however, the
total principal amount outstanding at any time shall not exceed the lesser of
(i) an amount equal to the Borrowing Base (as defined below), or (ii) $4,000,000
(the “Borrowing Base Line of Credit”). If at any time the aggregate principal
amount outstanding under the Borrowing Base Line of Credit shall exceed an
amount equal to the Borrowing Base, Borrower agrees to immediately repay to
Lender such excess amount, plus all accrued but unpaid interest thereon. Subject
to the terms and conditions hereof, Borrower may borrow, repay and reborrow
hereunder. The initial advance under the Borrowing Base Line of Credit shall be
used to refinance the sums outstanding on the date hereof under the borrowing
base line of credit under the Existing Loan Agreement and all subsequent
advances under the Borrowing Base Line of Credit shall be used for working
capital and other general business purposes of Borrower and its operating
subsidiaries. Borrower understands and agrees that for a period of not less than
30 consecutive days during the term of the promissory note evidencing this
Credit Facility the outstanding principal amount of the Revolving Line of Credit
must be below $1,800,000.

 

(c) Equipment Advances. Subject to the terms and conditions set forth herein,
Lender agrees to make advances (each an “Equipment Advance”) to Borrower. The
aggregate amount of Equipment Advances shall not exceed $875,000. Each Equipment
Advance shall not exceed 80% of the invoice amount of equipment approved by
Lender from any time to time (including any such equipment acquired by Borrower
after February 9, 2005 and prior to February 11, 2007), excluding taxes,
shipping, warranty charges, freight discounts and installation expense.
Equipment Advances, once repaid, may not be reborrowed.

 

(d) Term Loan. Subject to the terms and conditions set forth herein, Lender
agrees to lend to Borrower, and Borrower agrees to borrower from Lender, the
amount of $1,200,000 (the “Term Loan”) in a single advance on the date hereof.
The sums advanced under the Term Loan shall be used to (i) refinance U.S.
Remodeler’s indebtedness that is secured by U.S. Remodeler’s real property in
Charles City County, Virginia, (ii) reduce the outstanding principal amount
under the borrowing base line of credit under the Existing Credit Agreement, and
(iii) refinance a portion of the revolving line of credit outstanding under the
Existing Credit Agreement.

 

(e) Existing Term Loan. Lender has heretofore made a term loan to Borrower in
the original principal amount of $775,000, as evidenced by that certain
Promissory Note dated as of May 30, 2003, executed by Borrower payable to the
order of Lender.

 

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2. Defined Terms. As used in this Loan Agreement, the following terms have the
meanings given below:

 

(a) “Borrowing Base” means an amount equal to 80% of the Eligible Accounts, plus
50% of the Eligible Inventory.

 

(b) “Change of Control” means that at any time (i) Borrower shall fail to own,
directly or indirectly, at least 51% of all of the outstanding Capital Stock of
any Guarantor or shall cease to have the right or ability by voting power,
contract or otherwise, to elect or designate for election a majority of the
Board of Directors of any Guarantor, (ii) there are not at least two of the
following individuals, Murray H. Gross, James D. Borschow, Robert A. DeFronzo or
Peter Bulger, who are employed in senior management positions at Borrower and
its subsidiaries, involved in the day-to-day operations of Borrower and its
subsidiaries and able to perform substantially all of the material business
decisions of Borrower and its subsidiaries as employees of Borrower or (iii) any
“person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended), shall become or obtain rights
(whether by means of warrants, options or otherwise) to become, the “beneficial
owner” (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of
1934, as amended), directly or indirectly, of more than 50% of the outstanding
Capital Stock of Borrower. For purposes of this definition, the following terms
have the following meaning:

 

“Board of Directors” means, with respect to any Person, such Person’s Board of
Directors or any committee thereof duly authorized to act on behalf of such
Board of Directors.

 

“Capital Stock” of any Person means any and all shares, interests, rights to
purchase, warrants, options, contingent share issuances, participations or other
equivalents of or interest in equity (however designated) of such Person.

 

(c) “Collateral Value” means with respect to each Eligible Installment Contract,
as of the date of determination, 90% of the outstanding principal balance of
such Installment Contract.

 

(d) “DZ Bank” means DZ Bank AG Deutshe Zentral - Genossenschaftsbank, Frankfurt
Am Main.

 

(e) “Eligible Accounts” means at any time, an amount equal to the aggregate net
invoice or ledger amount owing on all trade accounts receivable of any of
Borrower or U.S. Remodelers, for goods sold or leased or services rendered in
the ordinary course of business, in which the Lender has a perfected, first
priority lien, after deducting (without duplication): (i) each such account that
is unpaid sixty (60) days or more after the original invoice date thereof,
(ii) the amount of all discounts, allowances, rebates, credits and adjustments
to such accounts (iii) the amount of all contra accounts, setoffs, defenses or
counterclaims asserted by or available to the account debtors, (iv) all accounts
with respect to which goods are placed on consignment or subject to a guaranteed
sale or other terms by reason of which payment by the account debtor may be

 

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conditional, (v) all accounts with respect to which any of Borrower or U.S.
Remodelers has furnished a payment and/or performance bond and that portion of
any account for or representing retainage, if any, until all prerequisites to
the immediate payment of retainage have been satisfied, (vi) all accounts owing
by account debtors for which there has been instituted a proceeding in
bankruptcy or reorganization under the United States Bankruptcy Code or other
law, whether state or federal, now or hereafter existing for relief of debtors,
(vii) all accounts owing by any affiliates of Borrower, (viii) all accounts in
which the account debtor is the United States or any department, agency or
instrumentality of the United States, except to the extent an acknowledgment of
assignment to Lender of such account in compliance with the Federal Assignment
of Claims Act and other applicable laws has been received by Lender, (ix) all
accounts due any of Borrower or U.S. Remodelers by any account debtor whose
principal place of business is located outside the United States of America and
its territories, (x) all accounts subject to any provision prohibiting
assignment or requiring notice of or consent to such assignment, and (xii) any
other accounts deemed unacceptable by Lender in its sole and absolute
discretion.

 

(f) “Eligible Installment Contract” means an Installment Contract with respect
to which each of the following statements is accurate and complete (and FCC and
Borrower by including such Installment Contract in any computation of the
Collateral Value shall be deemed to so represent to Lender):

 

(i) such Installment Contract is a binding and valid obligation of the debtor or
obligor named therein to FCC, as holder of the Installment Contract, in full
force and effect and enforceable in accordance with its terms;

 

(ii) such Installment Contract is genuine in all respects as appearing on its
face and as represented in the books and records of FCC, and all information set
forth therein is true and correct;

 

(iii) to the best knowledge of FCC, such Installment Contract is free of any
default of any party thereto, offsets and defenses, including the defense of
usury, and from any rescission, cancellation or avoidance;

 

(iv) such Installment Contract is free and clear of all security interests and
liens, except in favor of Lender;

 

(v) such Installment Contract complies in all respects with all requirements of
law applicable thereto, and any notice or act required by law or regulation to
be given or performed, in connection with such Installment Contract has been
given and performed in full;

 

(vi) no payment under such Installment Contract is more than thirty (30) days
past due the payment due date set forth therein;

 

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(vii) FCC acquired such Installment Contract no more than ninety (90) days prior
to the date of determination;

 

(viii) such Installment Contract is payable in monthly installments of principal
and interest, and requires a monthly payment which is sufficient to amortize the
original principal balance over the original term and to pay interest at the
related interest rate; provided that such Installment Contract may provide that
the first monthly installment shall not be due and payable for a period of time
not to exceed ninety (90) days from the date of FCC’s acquisition of such
Installment Contract;

 

provided, however, that with respect to any Installment Contract in the event
U.S. Bank notifies Lender that each item listed in the definition of Individual
Receivable File with respect to such Installment Contract is not delivered to
U.S. Bank within seven (7) business days of the date such Installment Contract
is first included as an Eligible Installment Contract and such document
deficiency is not cured by Borrower and FCC or waived by Lender within fifteen
(15) days of notice of such deficiency by U.S. Bank, such Installment Contract
shall no longer constitute an Eligible Installment Contract.

 

(g) “Eligible Inventory” means as of any date, the aggregate value of all
inventory of raw materials and finished goods (excluding work in progress and
packaging materials, supplies and any advertising costs capitalized into
inventory) then owned by Borrower or U.S. Remodelers and held for sale, lease or
other disposition in the ordinary course of its business, in which Lender has a
first priority lien, excluding (i) inventory which is damaged, defective,
obsolete or otherwise unsaleable in the ordinary course of business of Borrower
or U.S. Remodelers, as applicable, (ii) inventory which has been returned or
rejected, and (iii) inventory subject to any consignment arrangement between
Borrower or U.S. Remodelers, as applicable, and any other person or entity. For
purposes of this definition, Eligible Inventory shall be valued at the lower of
cost (excluding the cost of labor) or market value.

 

(h) “Existing Loan Agreement” means the Loan Agreement dated May 30, 2003,
between Borrower and Lender, as amended or modified prior to the date hereof.

 

(i) “Individual Receivables File” means with respect to each Eligible
Installment Contract, a file containing each of the following items:

 

(i) if such Installment Contract is not secured by a mortgage or deed of trust
or other instrument creating a lien on real property:

 

(1) the sole original, executed copy of the related Installment Contract
(including any amendments, extensions, modifications or waivers with respect
thereto) with original assignments of such Installment Contract showing a
complete chain of assignments from the applicable contractor to FCC;

 

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(2) an executed copy of a certificate executed by the obligor under such
Installment Contract and the applicable contractor certifying that the related
home improvements have been fully completed; and

 

(3) a copy of the original credit application of the obligor related to such
Installment Contract.

 

(ii) if such Installment Contract is secured by a mortgage or deed of trust or
other instrument creating a lien on real property:

 

(1) the sole original, executed copy of the related Installment Contract
(including any amendments, extensions, modifications or waivers with respect
thereto) with original assignments of such Installment Contract showing a
complete chain of assignments from the applicable contractor to FCC;

 

(2) a copy of the mortgage, deed of trust or other similar instrument (a
“Mortgage”) related to such Installment Contract (together with evidence of
transmittal of such Mortgage to the appropriate recording office) and original
assignments of such Mortgage showing a complete chain of assignments of such
Mortgage from origination to FCC (in each case, together with evidence of
transmittal of such assignments of mortgage to the appropriate recording
office);

 

(3) a copy of the title report related to the underlying collateral related to
such Installment Contract; and

 

(4) a copy of the original credit application of the obligor related to such
Installment Contract.

 

(j) “Installment Contract” means a consumer home improvement contract or loan
which is evidenced by an installment contract or similar agreement, and which is
owned by FCC, together with the rights and obligations of a holder thereof and
payments thereon and proceeds therefrom.

 

(k) “Loans” means all advances under the Credit Facilities.

 

(l) “Person” means an individual, corporation, partnership, limited liability
company, association, joint stock company, trust or trustee thereof, estate or
executor thereof, unincorporated organization or joint venture, or any other
legally recognizable entity.

 

(m) “Purchase Agreement” means the Purchase and Contribution Agreement dated as
of February 11, 2003, by and between FCC and FCC Acceptance Corp.

 

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(n) “Receivables Agreement” means the Receivables Loan and Security Agreement
dated as of February 11, 2003, among FCC Acceptance Corp., FCC, as servicer,
Autobahn Funding Company LLC, DZ Bank, as Agent, U.S. Bank, as Custodian, and
Compu-Link Corporation, as back-up servicer.

 

(o) “Securitization” means the sale or contribution from time to time by FCC of
Installment Contracts to FCC Acceptance Corp, pursuant to the Purchase
Agreement.

 

(p) “U.S. Bank” means U.S. Bank National Association.

 

3. Promissory Notes. The Loans shall be evidenced by one or more promissory
notes (whether one or more, together with any renewals, extensions and increases
thereof, the “Notes”) duly executed by Borrower and payable to the order of
Lender, in form and substance acceptable to Lender. Interest on the Notes shall
accrue at the rate set forth therein. The principal of and interest on the Notes
shall be due and payable in accordance with the terms and conditions set forth
in the Notes and in this Loan Agreement.

 

4. Requesting Advances.

 

(a) All Advances. In Lender’s discretion, Lender may require Borrower to give
Lender not less than one (1) business day prior notice of each requested advance
under the Credit Facilities specifying (i) the aggregate amount of such
requested advance, (ii) the requested date of such advance, and (iii) the
purpose for such advance, with such advances to be requested in a form
satisfactory to Lender.

 

(b) Advances under the Revolving Line of Credit. In addition to the notice
described in the immediately preceding clause (a) (if such notice is required by
Lender), Borrower shall give to Lender not less than one (1) business day prior
to each advance under the Revolving Line of Credit, (i) an Installment Contract
Certificate in the form attached hereto as Exhibit A as of the date of
Borrower’s request for such advance, (ii) a listing of all Installment Contracts
purchased by FCC since the date of the last report delivered to Lender pursuant
to Section 12(e), (iii) a listing of all Installment Contracts sold by FCC since
the date of the last report delivered to Lender pursuant to Section 12(e), and
(iv) an Installment Contract aging report dated as of the date of Borrower’s
request for such advance.

 

Within seven (7) business days of each advance under the Revolving Line of
Credit, Borrower shall cause FCC to deliver to U.S. Bank all Eligible
Installment Contracts with respect to which such advance was made, together with
the complete Individual Receivable File relating to each such Eligible
Installment Contract.

 

(c) Equipment Advances. In addition to the notice described in clause (a) above
(if such notice is required by Lender), Borrower shall give to Lender not less
than one (1) business day prior to each Equipment Advance, a copy of the invoice
for the equipment to be financed with such Equipment Advance.

 

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5. Collateral. As collateral and security for the indebtedness evidenced by the
Notes and any and all other indebtedness or obligations from time to time owing
by Borrower to Lender, Borrower shall grant, and hereby grants, to Lender, its
successors and assigns, a first and prior lien and security interest in and to
the property described hereinbelow, together with any and all PRODUCTS AND
PROCEEDS thereof (the “Collateral”):

 

(a) All present and future accounts, chattel paper, documents, instruments,
deposit accounts and general intangibles (including any right to payment for
goods sold or services rendered arising out of the sale or delivery of personal
property or work done or labor performed by Borrower), now or hereafter owned,
held, or acquired by Borrower, together with any and all books of account,
customer lists and other records relating in any way to the foregoing.

 

(b) All present and hereafter acquired inventory (including without limitation,
all raw materials, work in process and finished goods) held, possessed, owned,
held on consignment, or held for sale, lease, return or to be furnished under
contracts of service, in whole or in part, by Borrower wherever located.

 

(c) All equipment and fixtures of whatsoever kind and character now or hereafter
possessed, held, acquired, leased or owned by Borrower and used or usable in
Borrower’s business, together with all replacements, accessories, additions,
substitutions and accessions to all of the foregoing.

 

(d) That certain real property located at 125 Roxbury Industrial Court, Charles
City County, Virginia, together with all improvements, fixtures, equipment and
other appurtenances attached thereto.

 

The term “Collateral” shall also include all records and data relating to any of
the foregoing (including, without limitation, any computer software on which
such records and data may be located). Borrower agrees to execute such security
agreements, assignments, deeds of trust and other agreements and documents as
Lender shall deem appropriate and otherwise require from time to time to more
fully create and perfect Lender’s lien and security interests in the Collateral;
provided that, “Collateral” shall not include the real property owned by
Borrower or any of its subsidiaries that is located in Woodbridge, Virginia.

 

6. Guarantors. As a condition precedent to the Lender’s obligation to make the
Loans to Borrower, Borrower agrees to cause U.S. Remodelers, Inc. (“U.S.
Remodelers”) and First Consumer Credit, Inc. (“FCC”) (U.S. Remodelers and FCC
are sometimes collectively referred to herein as the “Guarantors”) to each
execute and deliver to Lender contemporaneously herewith a guaranty agreement
(collectively, the “Guaranties”), in form and substance satisfactory to Lender.

 

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7. Representations and Warranties. Borrower hereby represents and warrants, and
upon each request for an advance under the Credit Facilities further represents
and warrants, to Lender as follows:

 

(a) Existence. Borrower and each of the Guarantors is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its incorporation and all other states where it is doing business unless failure
to be so qualified would not have a material adverse effect on the Borrower, and
has all requisite power and authority to execute and deliver the Loan Documents.

 

(b) Binding Obligations. The execution, delivery, and performance of this Loan
Agreement and all of the other Loan Documents by Borrower and the Guarantors
have been duly authorized by all necessary action by Borrower and the
Guarantors, and constitute legal, valid and binding obligations of Borrower and
the Guarantors (to the extent each is a party thereto) enforceable in accordance
with their respective terms, except as limited by bankruptcy, insolvency or
similar laws of general application relating to the enforcement of creditors’
rights and except to the extent specific remedies may generally be limited by
equitable principles.

 

(c) No Consent. The execution, delivery and performance of this Loan Agreement
and the other Loan Documents, and the consummation of the transactions
contemplated hereby and thereby, do not (i) conflict with, result in a violation
of, or constitute a default under (A) any provision of Borrower’s or any
Guarantor’s articles or certificate of incorporation or bylaws, or any agreement
or other instrument binding upon Borrower or any Guarantor, or (B) any law,
governmental regulation, court decree or order applicable to Borrower or any
Guarantor, or (ii) require the consent, approval or authorization of any third
party.

 

(d) Financial Condition. Each financial statement of Borrower supplied to the
Lender truly discloses and fairly presents Borrower’s consolidated financial
condition as of the date of each such statement. There has been no material
adverse change in such financial condition or results of operations of Borrower
subsequent to the date of the most recent financial statement supplied to
Lender.

 

(e) Litigation. There are no actions, suits or proceedings, pending or, to the
knowledge of Borrower or any Guarantor, threatened against or affecting Borrower
or any Guarantor or the properties of Borrower or any Guarantor, before any
court or governmental department, commission or board, which, if determined
adversely to Borrower or any Guarantor, could reasonably be expected to result
in either a money judgment of $50,000 per action, suit or proceeding or an
aggregate amount of $100,000 for all such actions, suits and proceedings.

 

(f) Taxes; Governmental Charges. Borrower and each Guarantor has filed all
federal, state and local tax reports and returns required by any law or
regulation to be filed by it and has either duly paid all taxes, duties and
charges indicated due on the basis of such returns and reports, or made adequate
provision for the payment thereof, and the assessment of any material amount of
additional taxes in excess of those paid and reported is not reasonably
expected.

 

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8. Conditions Precedent to Advances. Lender’s obligation to make the first
advance hereunder shall be subject to, in addition to the conditions specified
below, delivery to Lender of the following, in form and substance satisfactory
to Lender:

 

(a) a counterpart of this Agreement;

 

(b) the Notes;

 

(c) Deed of Trust, Security Agreement - Assignment of Rents covering the real
property of U.S. Remodelers located at 128 Roxbury Industrial Court, Charles
City County, Virginia, of even date herewith executed by U.S. Remodelers in
favor of Lender;

 

(d) the First Amended and Restated Security Agreement of even date herewith
between Borrower and Lender;

 

(e) the Guaranties;

 

(f) the First Amended and Restated Security Agreements of even date herewith
between each Guarantor and Lender;

 

(g) a Certificate of Corporate Resolutions of Borrower and each Guarantor;

 

(h) a copy of the charter documents of Borrower and each Guarantor certified by
the appropriate official of such Person’s state of organization;

 

(i) an Arbitration and Notice of Final Agreement among Borrower, Guarantors and
Lender;

 

(j) a certificate (or certificates) of the due incorporation, valid existence
and good standing of Borrower and each Guarantor in their respective states of
incorporation, issued by the appropriate authorities of such jurisdiction, and
certificates of Borrower’s and each Guarantor’s good standing and due
qualification to do business, issued by appropriate officials in any state in
which the character of the properties owned or held by such Person or the nature
of the business transacted by it makes such qualification necessary;

 

(k) an appraisal of the real property of U.S. Remodelers located at 125 Roxbury
Industrial Court, Charles City County, Virginia;

 

(l) a title policy; and

 

(m) such other documents as Lender may reasonably request.

 

Lender’s obligation to make any advance (including the first) under this Loan
Agreement and the other Loan Documents shall be subject to the conditions
precedent that, as of the date of

 

FIRST AMENDED AND RESTATED LOAN AGREEMENT   11    

Rev. June ‘97

       

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such advance and after giving effect thereto (a) all representations and
warranties made to Lender in this Loan Agreement and the other Loan Documents
shall be true and correct, as of and as if made on such date, (b) no material
adverse change in the consolidated financial condition of Borrower or the
financial condition of any Guarantors since the effective date of the most
recent financial statements furnished to Lender by Borrower shall have occurred
and be continuing, and (c) no event has occurred and is continuing, or would
result from the requested advance, which with notice or lapse of time, or both,
would constitute an Event of Default (as such term is defined hereinbelow).

 

9. Affirmative Covenants. Until (i) the Notes and all other obligations and
liabilities of Borrower under this Loan Agreement and the other Loan Documents
are fully paid and satisfied, and (ii) the Lender has no further commitment to
lend hereunder, Borrower agrees and covenants that it will, and will cause each
Guarantor to, unless Lender shall otherwise consent in writing:

 

(a) Accounts and Records. Maintain its books and records in accordance with
generally accepted accounting principles.

 

(b) Right of Inspection. Permit Lender to visit its properties and installations
and to examine, audit and make and take away copies or reproductions of
Borrower’s or any Guarantor’s books and records, at all reasonable times;
provided that, so long as no Event of Default is continuing, (i) Lender shall
give Borrower three (3) days’ prior notice of the date and time of such visit
and (ii) each such visit shall be at Lender’s expenses.

 

(c) Right to Additional Information. Furnish Lender with such additional
information and statements, lists of assets and liabilities, tax returns, and
other reports with respect to Borrower’s and each Guarantor’s financial
condition and business operations as Lender may request from time to time.

 

(d) Compliance with Laws. Conduct its business in an orderly and efficient
manner consistent with good business practices, and perform and comply with all
statutes, rules, regulations and/or ordinances imposed by any governmental unit
upon Borrower, each Guarantor and their businesses, operations and properties
(including without limitation, all applicable environmental statutes, rules,
regulations and ordinances).

 

(e) Taxes. Pay and discharge when due all of its indebtedness and obligations,
including without limitation, all assessments, taxes, governmental charges,
levies and liens, of every kind and nature, imposed upon Borrower, any Guarantor
or their properties, income, or profits, prior to the date on which penalties
would attach, and all lawful claims that, if unpaid, might become a lien or
charge upon any of Borrower’s or any Guarantor’s properties, income, or profits;
provided, however, neither Borrower nor any Guarantor will be required to pay
and discharge any such assessment, tax, charge, levy, lien or claim so long as
(i) the legality of the same shall be contested in good faith by appropriate
judicial, administrative or other legal proceedings, and (ii) Borrower or such
Guarantor shall have established on its books adequate reserves with respect to
such

 

FIRST AMENDED AND RESTATED LOAN AGREEMENT   12    

Rev. June ‘97

       

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contested assessment, tax, charge, levy, lien or claim in accordance with
generally accepted accounting principles, consistently applied.

 

(f) Insurance. Maintain insurance, including but not limited to, fire insurance,
comprehensive property damage, public liability and worker’s compensation.

 

(g) Notice of Indebtedness. Promptly inform Lender of the creation, incurrence
or assumption by Borrower or any Guarantor of any indebtedness for borrowed
money in excess of $50,000, other than obligations relative to the leasing of
office space or other real property in connection with Borrower’s business
operations, the purchase or lease of office equipment, or employment contracts
entered into in the ordinary course of its business.

 

(h) Notice of Litigation. Promptly after the commencement thereof, notify Lender
of all actions, suits and proceedings before any court or any governmental
department, commission or board affecting Borrower, any Guarantor or any of
their properties and, if adversely determined, could result in a money judgment
in excess of $50,000, or when aggregated with all such other actions, suits and
proceedings result in an aggregate money judgment in excess of $100,000.

 

(i) Notice of Material Adverse Change. Promptly inform Lender of (i) any and all
material adverse changes in any Guarantor’s financial condition or Borrower’s
consolidated financial condition, (ii) all claims made against Borrower or any
Guarantor which could materially affect the consolidated financial condition of
Borrower or the financial condition of such Guarantor, and (iii) the
acceleration of the maturity of any indebtedness or of any default by Guarantor,
Borrower or FCC Acceptance Corp. under any indenture, mortgage, agreement,
contract or other instrument to which any of them is a party or by which any of
them or any of their properties is bound, if such acceleration or default could
cause a material adverse change in such Person’s financial condition.

 

(j) Additional Documentation. Execute and deliver, or cause to be executed and
delivered, any and all other agreements, instruments or documents which Lender
may reasonably request in order to give effect to the transactions contemplated
under this Loan Agreement and the other Loan Documents.

 

10. Negative Covenants. Until (i) the Notes and all other obligations and
liabilities of Borrower under this Loan Agreement and the other Loan Documents
are fully paid and satisfied, and (ii) the Lender has no further commitment to
lend hereunder, Borrower will not, and will not permit any Guarantor to, without
the prior written consent of Lender:

 

(a) Nature of Business. Make any material change in the nature of its business
as carried on as of the date hereof, provided that the Securitization shall not
be deemed to constitute a material change in the nature of FCC’s business.

 

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Rev. June ‘97

       

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(b) Liquidations, Mergers, Consolidations. Liquidate, merge or consolidate with
or into any other entity, provided that any Guarantor may merge into or
consolidate with Borrower so long as Borrower is the surviving entity.

 

(c) Acquisitions. Acquire by purchase or otherwise all or substantially all of
the assets of or capital stock of any Person if (i) after giving effect to such
acquisition, either the aggregate cash consideration paid by Borrower and
Guarantors in the fiscal year in which such acquisition occurs exceeds
$1,000,000 or the aggregate cash and non-cash consideration paid to Borrower and
Guarantors in the fiscal year in which such acquisition occurs exceeds
$2,000,000, or (ii) immediately before or after giving effect to such
acquisition an Event of Default shall exist; provided that with respect to any
acquisition for which Lender’s consent is required, such consent shall not be
unreasonably withheld.

 

(d) Sale of Assets. Sell, transfer or otherwise dispose of any of its assets or
properties, other than in the ordinary course of business and sales of
Installment Contracts and related assets by FCC in respect of the
Securitization.

 

(e) Liens. Create or incur any lien or encumbrance on any of its assets, other
than (i) liens and security interests securing indebtedness owing to Lender,
(ii) liens for taxes, assessments or similar charges that are (1) not yet due or
(2) being contested in good faith by appropriate proceedings and for which
Borrower or such Guarantor has established adequate reserves, (iii) liens and
security interests existing as of the date hereof and set forth in Schedule 1
attached hereto, (iv) liens on office equipment and furniture acquired,
purchased or leased by Borrower and Guarantors in the ordinary course of their
business operations, to the extent that such liens relate to indebtedness that
does not exceed $500,000 in the aggregate and such liens extend only to the
equipment and furniture so acquired, purchased or leased, and (v) liens on
Installment Contracts and related assets sold or contributed by FCC in the
Securitization.

 

(f) Indebtedness. Create, incur or assume any indebtedness for borrowed money or
issue or assume any other note, debenture, bond or other evidences of
indebtedness, or guarantee any such indebtedness or such evidences of
indebtedness of others other than (i) borrowings from Lender, (ii) borrowings
outstanding on the date hereof and described on Schedule 1 attached hereto,
(iii) borrowings relative to operating leases, (iv) subject to the limitations
set forth in Paragraph 10(e) above, the purchase or leasing of office equipment
or furniture in the ordinary course of its business, (v) employment contracts in
the ordinary course of its business, (vi) obligations of FCC incurred in respect
of the Securitizations, (vii) indebtedness that has been subordinated to all
obligations of Borrower and Guarantors owing to Lender on terms and conditions
satisfactory to Lender, and (viii) borrowings, with respect to Borrower, from
any Guarantor and, with respect to any Guarantor, from Borrower or another
Guarantor.

 

(g) Loans. Make any loans to any person or entity except for (i) loans made in
the ordinary course of FCC’s business, (ii) loans made to employees of Borrower
and

 

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Rev. June ‘97

       

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Guarantor that do not exceed $100,000 in the aggregate outstanding at any time,
(iii) loans made by FCC to FCC Acceptance Corp. for the purpose of (1) funding
up to ten percent (10%) of the purchase price of each Installment Contract of
FCC purchased by FCC Acceptance Corp. under the Securitization, or (2) funding
any fees or expenses incurred by FCC Acceptance Corp. in connection with the
Securitization, and (iv) loans made by any Guarantor to Borrower or any other
Guarantor and loans made by Borrower to any Guarantor.

 

(h) Transactions with Affiliates. Enter into any transaction, including, without
limitation, the purchase, sale or exchange of property or the rendering of any
service, with any Affiliate (as hereinafter defined) of Borrower, except in the
ordinary course of and pursuant to the reasonable requirements of Borrower’s
business and upon fair and reasonable terms no less favorable to Borrower than
would be obtained in a comparable arm’s-length transaction with a person or
entity not an Affiliate of Borrower. As used herein, the term “Affiliate” means
any individual or entity directly or indirectly controlling, controlled by, or
under common control with, another individual or entity.

 

(i) Redemptions; Transfer of Assets. Declare or make any payment on account of
the purchase, redemption, or other acquisition or retirement of any shares of
Borrower’s or any Guarantor’s capital stock, or make any other distribution,
sale, transfer or lease of any of Borrower’s or any Guarantor’s assets other
than in the ordinary course of business, unless any such amounts are directly
utilized for the payment of principal or interest on indebtedness and
obligations owing from time to time by Borrower to Lender.

 

(j) Investment in FCC Acceptance Corp. Permit the aggregate investment in FCC
Acceptance Corp. made by Borrower, FCC and the other Guarantors by virtue of
capital contribution to exceed the amount required for start-up costs incurred
by FCC Acceptance Corp. in connection with the Securitization, working capital
and the ten percent (10%) of the purchase price of each Installment Contract
purchased by FCC Acceptance Corp. under the Securitization.

 

11. Financial Covenants. Until (i) the Notes and all other obligations and
liabilities of Borrower under this Loan Agreement and the other Loan Documents
are fully paid and satisfied, and (ii) the Lender has no further commitment to
lend hereunder, Borrower will maintain the following financial covenants:

 

(a) Tangible Net Worth. Borrower will maintain, at all times, its Tangible Net
Worth at not less than $11,500,000.

 

(b) Debt to Adjusted Tangible Net Worth Ratio. Borrower will maintain, at the
end of each fiscal quarter, a ratio of (a) total liabilities (excluding any
Subordinated Debt and all indebtedness of FCC Acceptance Corp. under the
Receivables Agreement), to (b) Adjusted Tangible Net Worth of not greater than
3.0 to 1.0.

 

FIRST AMENDED AND RESTATED LOAN AGREEMENT   15    

Rev. June ‘97

       

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(c) Fixed Charge Coverage Ratio. Borrower will maintain, as of the end of each
fiscal quarter, a ratio calculated on an annualized basis during the period
beginning September 30, 2005 and ending June 30, 2006, and beginning on
September 30, 2006, and at all times thereafter, calculated on a trailing
twelve-month period of (i) net income before taxes for the period ending with
such fiscal quarter plus depreciation, amortization and interest expense
deducted in the calculation of such net income plus the increase in the Loan
Loss Reserve for the twelve month period ending with such fiscal quarter, to
(ii) taxes plus interest expense plus current maturities of long-term debt
(excluding, without duplication, any current maturities of debt under the
Revolving Line of Credit and the Borrowing Base Line of Credit, all amounts
outstanding under the Securitization and all indebtedness of FCC Acceptance
Corp. under the Receivables Agreement) plus current maturities of long-term
capital leases plus Distributions plus capital expenditures (excluding any
capital expenditures for which Borrower or any of its consolidated subsidiaries
has incurred indebtedness) of not less than 1.1 to 1 for each fiscal quarter of
Borrower through and including the fiscal quarter ending September 30, 2006, and
1.25 to 1 for Borrower’s fiscal year ending December 31, 2006, and each fiscal
quarter of Borrower thereafter.

 

As used herein, the term “Tangible Net Worth” means, as of any date, Borrower’s
total assets excluding all intangible assets, less total liabilities excluding
any Subordinated Debt. As used herein, the term “Subordinated Debt” means any
indebtedness owing by Borrower or any Guarantor which has been subordinated by
written agreement to all indebtedness now or hereafter owing by Borrower or such
Guarantor to Lender, such agreement to be in form and substance acceptable to
Lender. As used herein, “Distributions” shall mean all dividends and other
distributions made by Borrower to its shareholders or partners, as the case may
be, other than salary, bonuses and other compensation for services. Unless
otherwise specified, all accounting and financial terms and covenants set forth
above are to be determined according to generally accepted accounting
principles, consistently applied. As used herein, the term “Adjusted Tangible
Net Worth” means, as of any date, Borrower’s Tangible Net Worth minus FCC’s
ownership interest in FCC Acceptance Corp.

 

12. Reporting Requirements. Until (i) the Notes and all other obligations and
liabilities of Borrower under this Loan Agreement and the other Loan Documents
are fully paid and satisfied, and (ii) the Lender has no further commitment to
lend hereunder, Borrower will, unless Lender shall otherwise consent in writing,
furnish to Lender:

 

(a) Interim Financial Statements. As soon as available, and in any event within
sixty (60) days after the end of each fiscal quarter of each fiscal year of
Borrower, a balance sheet and income statement of Borrower as of the end of such
fiscal quarter, all in form and substance and in reasonable detail satisfactory
to Lender and duly certified (subject to year-end review adjustments) by the
President and/or Chief Financial Officer of Borrower (i) as being true and
correct in all material aspects to the best of his or her knowledge and (ii) as
having been prepared in accordance with generally accepted accounting
principles, consistently applied.

 

FIRST AMENDED AND RESTATED LOAN AGREEMENT   16    

Rev. June ‘97

       

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(b) Annual Financial Statements. As soon as available and in any event within
one hundred twenty (120) days after the end of each fiscal year of Borrower, a
consolidated and consolidating balance sheet and income statement of Borrower as
of the end of such fiscal year, in each case the consolidated balance sheet and
income statement audited by independent public accountants of recognized
standing acceptable to Lender.

 

(c) Compliance Certificate. A certificate signed by the chief financial officer
of Borrower, within sixty (60) days after the end of each quarter of each fiscal
year, stating that Borrower is in full compliance with all of its obligations
under this Loan Agreement and all other Loan Documents and is not in default of
any term or provisions hereof or thereof, and demonstrating compliance with all
financial ratios and covenants set forth in this Loan Agreement.

 

(d) Installment Contract Certificate. An Installment Contract Certificate
substantially in the form attached hereto as Exhibit A, signed by an authorized
officer of each of Borrower and FCC, within thirty (30) days after the end of
each calendar month.

 

(e) Installment Contract Aging. An Installment Contract aging report within
thirty (30) days after the end of each calendar month, together with a list of
all Installment Contracts then owned by FCC, each in form and detail
satisfactory to Lender.

 

(f) Borrowing Base Report. At any time any amount is outstanding under the
Borrowing Base Line of Credit, a borrowing base report signed by an authorized
officer of each of Borrower or U.S. Remodelers substantially in the form
attached as Exhibit B, within thirty (30) days after the end of each calendar
month of each fiscal year, in form and detail satisfactory to Lender.

 

(g) Accounts Aging. At any time any amount is outstanding under the Borrowing
Base Line of Credit, an accounts receivable aging report of Borrower or U.S.
Remodelers within thirty (30) days after the end of each calendar month of each
fiscal year, in form and detail satisfactory to Lender.

 

(h) SEC Filings. Promptly upon their becoming available, copies of all
registration statements, periodic reports and other statements and schedules
filed by Borrower or any Guarantor with any securities exchange, the Securities
and Exchange Commission or any similar governmental authority.

 

13. Events of Default. Each of the following shall constitute an “Event of
Default” under this Loan Agreement:

 

(a) The failure, refusal or neglect of Borrower or any Guarantor to pay when due
any part of the principal of, or interest on, the Notes or any other
indebtedness or obligations owing to Lender by Borrower or any Guarantor from
time to time within five (5) days after the same become due.

 

FIRST AMENDED AND RESTATED LOAN AGREEMENT   17    

Rev. June ‘97

       

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(b) The failure of Borrower or any Guarantor to timely and properly observe,
keep or perform any covenant, agreement, warranty or condition under
subparagraph 8(i) or paragraph 9.

 

(c) The occurrence of an event of default under any of the other Loan Documents
or under any other agreement now existing or hereafter arising between Lender
and Borrower or any Guarantor, and the same is not remedied within the
applicable period of grace (if any) provided in such Loan Documents.

 

(d) The failure (other than as referred to in subparagraphs (a), (b) or
(c) above) of Borrower or any Guarantor to timely and properly observe, keep or
perform any covenant, agreement, warranty or condition required herein or in any
of the other Loan Documents, and such failure remains unremedied for a period of
thirty (30) days after notice of such failure is given by Lender to Borrower.

 

(e) Any representation contained herein or in any of the other Loan Documents
made by Borrower or any Guarantor is false or misleading in any material
respect.

 

(f) The occurrence of any event which permits the acceleration of the maturity
of any indebtedness in excess of $100,000 owing by Borrower or any Guarantor to
any third party under any agreement or understanding.

 

(g) If Borrower or any Guarantor: (i) becomes insolvent, or makes a transfer in
fraud of creditors, or makes an assignment for the benefit of creditors, or
admits in writing its inability to pay its debts as they become due;
(ii) generally is not paying its debts as such debts become due; (iii) has a
receiver, trustee or custodian appointed for, or take possession of, all or
substantially all of the assets of such party, either in a proceeding brought by
such party or in a proceeding brought against such party and such appointment is
not discharged or such possession is not terminated within sixty (60) days after
the effective date thereof or such party consents to or acquiesces in such
appointment or possession; (iv) files a petition for relief under the United
States Bankruptcy Code or any other present or future federal or state
insolvency, bankruptcy or similar laws (all of the foregoing hereinafter
collectively called “Applicable Bankruptcy Law”) or an involuntary petition for
relief is filed against such party under any Applicable Bankruptcy Law and such
involuntary petition is not dismissed within sixty (60) days after the filing
thereof, or an order for relief naming such party is entered under any
Applicable Bankruptcy Law, or any composition, rearrangement, extension,
reorganization or other relief of debtors now or hereafter existing is requested
or consented to by such party; (v) fails to have discharged within a period of
thirty (30) days any attachment, sequestration or similar writ levied upon any
property of such party; or (vi) fails to pay within thirty (30) days any final
money judgment against such party.

 

(h) Except as expressly permitted herein, the liquidation, dissolution, merger
or consolidation of any of Borrower or any Guarantor.

 

FIRST AMENDED AND RESTATED LOAN AGREEMENT   18    

Rev. June ‘97

       

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(i) The entry of any judgment against Borrower or any Guarantor or the issuance
or entry of any attachment or other lien against any of the property of Borrower
or any Guarantor for an amount in excess of $100,000, if undischarged, unbonded
or undismissed within thirty (30) days after such entry.

 

(j) The occurrence of an “Event of Default” under the Receivables Agreement (as
such term is defined therein) which permits DZ Bank to declare that an Early
Amortization Commencement Date (as such term is defined in the Receivables
Agreement) has occurred.

 

(k) If on any day Lender is authorized by the terms of Direction Letter to
withdraw funds from a deposit account of FCC or Borrower with Lender, the
collected funds in such deposit account are less than the amount Lender is
authorized to withdraw.

 

(l) The occurrence of a Change of Control.

 

Nothing contained in this Loan Agreement shall be construed to limit the events
of default enumerated in any of the other Loan Documents and all such events of
default shall be cumulative.

 

14. Remedies. Upon the occurrence of any one or more of the foregoing Events of
Default, (a) the entire unpaid balance of principal of the Notes, together with
all accrued but unpaid interest thereon, and all other indebtedness owing to
Lender by Borrower at such time shall, at the option of Lender, become
immediately due and payable without further notice, demand, presentation, notice
of dishonor, notice of intent to accelerate, notice of acceleration, protest or
notice of protest of any kind, all of which are expressly waived by Borrower,
and (b) Lender may, at its option, cease further advances under any of the
Notes. All rights and remedies of Lender set forth in this Loan Agreement and in
any of the other Loan Documents may also be exercised by Lender, at its option
to be exercised in its sole discretion, upon the occurrence of an Event of
Default.

 

If an Event of Default shall occur and be continuing, Lender by notice given in
writing to Borrower and FCC (a “Termination Notice”) may terminate all servicing
rights and obligations of FCC with respect to the Eligible Installment
Contracts. Upon receipt by Borrower and FCC of such Termination Notice, all
servicing rights and obligations with respect to the Eligible Installment
Contracts automatically shall pass to Compu-Link (the “Successor Servicer”),
provided that Successor Servicer shall have no liability with respect to any
claim based on any alleged action or inaction of FCC. Borrower agrees to cause
FCC to cooperate with the Successor Servicer in effecting the termination of the
responsibilities and rights of FCC with respect to the servicing, including
without limitation, the transfer to Successor Servicer of all files, collection
records and a computer tape in a readable form containing all information
necessary to enable Successor Servicer to service the Eligible Installment
Contracts. Borrower shall reimburse Lender and Successor Servicer for all costs
incurred by them in connection with a transfer of servicing from FCC to
Successor Servicer, and Borrower shall reimburse Lender for

 

FIRST AMENDED AND RESTATED LOAN AGREEMENT   19    

Rev. June ‘97

       

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all servicing costs charged by Successor Servicer for the servicing of the
Eligible Installment Contracts.

 

15. Rights Cumulative. All rights of Lender under the terms of this Loan
Agreement shall be cumulative of, and in addition to, the rights of Lender under
any and all other agreements between Borrower, Guarantors and Lender (including,
but not limited to, the other Loan Documents), and not in substitution or
diminution of any rights now or hereafter held by Lender under the terms of any
other agreement.

 

16. Waiver and Agreement. Neither the failure nor any delay on the part of
Lender to exercise any right, power or privilege herein or under any of the
other Loan Documents shall operate as a waiver thereof, nor shall any single or
partial exercise of such right, power or privilege preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. No
waiver of any provision in this Loan Agreement or in any of the other Loan
Documents and no departure by Borrower or any Guarantor therefrom shall be
effective unless the same shall be in writing and signed by Lender, and then
shall be effective only in the specific instance and for the purpose for which
given and to the extent specified in such writing. No modification or amendment
to this Loan Agreement or to any of the other Loan Documents shall be valid or
effective unless the same is signed by the party against whom it is sought to be
enforced.

 

17. Benefits. This Loan Agreement shall be binding upon and inure to the benefit
of Lender and Borrower, and their respective successors and assigns, provided,
however, that Borrower may not, without the prior written consent of Lender,
assign any rights, powers, duties or obligations under this Loan Agreement or
any of the other Loan Documents.

 

18. Notices. All notices, requests, demands or other communications required or
permitted to be given pursuant to this Agreement shall be in writing and given
by (i) personal delivery, (ii) expedited delivery service with proof of
delivery, or (iii) United States mail, postage prepaid, registered or certified
mail, return receipt requested, sent to the intended addressee at the address
set forth on the first page hereof and shall be deemed to have been received
either, in the case of personal delivery, as of the time of personal delivery,
in the case of expedited delivery service, as of the date of first attempted
delivery at the address and in the manner provided herein, or in the case of
mail, upon deposit in a depository receptacle under the care and custody of the
United States Postal Service. Either party shall have the right to change its
address for notice hereunder to any other location within the continental United
States by notice to the other party of such new address at least thirty
(30) days prior to the effective date of such new address.

 

19. Construction. This Loan Agreement and the other Loan Documents have been
executed and delivered in the State of Texas, shall be governed by and construed
in accordance with the laws of the State of Texas, and shall be performable by
the parties hereto in the county in Texas where the Lender’s address set forth
on the first page hereof is located.

 

FIRST AMENDED AND RESTATED LOAN AGREEMENT   20    

Rev. June ‘97

       

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20. Invalid Provisions. If any provision of this Loan Agreement or any of the
other Loan Documents is held to be illegal, invalid or unenforceable under
present or future laws, such provision shall be fully severable and the
remaining provisions of this Loan Agreement or any of the other Loan Documents
shall remain in full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision or by its severance.

 

21. Expenses. Borrower shall pay all costs and expenses (including, without
limitation, reasonable attorneys’ fees) in connection with (i) any action
required in the course of administration of the indebtedness and obligations
evidenced by the Loan Documents, and (ii) any action in the enforcement of
Lender’s rights upon the occurrence of Event of Default.

 

22. Participation of the Loans. Borrower agrees that Lender may, at its option,
sell interests in the Loans and its rights under this Loan Agreement to a
financial institution or institutions and, in connection with each such sale,
Lender may disclose any financial and other information available to Lender
concerning Borrower to each prospective purchaser.

 

23. Conflicts. In the event any term or provision hereof is inconsistent with or
conflicts with any provision of the other Loan Documents, the terms and
provisions contained in this Loan Agreement shall be controlling.

 

24. Counterparts. This Loan Agreement may be separately executed in any number
of counterparts, each of which shall be an original, but all of which, taken
together, shall be deemed to constitute one and the same instrument.

 

25. Facsimile Documents and Signatures. For purposes of negotiating and
finalizing this Loan Agreement, if this document or any document executed in
connection with it is transmitted by facsimile machine (“fax”), it shall be
treated for all purposes as an original document. Additionally, the signature of
any party on this document transmitted by way of a facsimile machine shall be
considered for all purposes as an original signature. Any such faxed document
shall be considered to have the same binding legal effect as an original
document. At the request of any party, any faxed document shall be re-executed
by each signatory party in an original form.

 

If the foregoing correctly sets forth our mutual agreement, please so
acknowledge by signing and returning this Loan Agreement to the undersigned.

 

FIRST AMENDED AND RESTATED LOAN AGREEMENT   21    

Rev. June ‘97

       

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NOTICE TO COMPLY WITH STATE LAW

 

For the purpose of this Notice, the term “WRITTEN AGREEMENT” shall include the
document set forth above, together with each and every other document relating
to and/or securing the same loan transaction, regardless of the date of
execution.

 

THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES.

 

THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

 

BORROWER       LENDER: U.S. HOME SYSTEMS, INC.       THE FROST NATIONAL BANK,
a national banking association By:           By:     Name:           Name:    
Title:           Title:    

 

FIRST AMENDED AND RESTATED LOAN AGREEMENT   22    

Rev. June ‘97

       

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Exhibit 1

 

Form of Transmittal Request

 

[Date]

 

The Frost National Bank

2727 North Harwood, 10th Floor

Dallas, Texas

 

Attn: ________________

 

  RE: First Amended and Restated Loan Agreement dated as of February 9, 2006, to
be effective for all purposes as of February 10, 2006, between U.S. Home
Systems, Inc. and The Frost National Bank, as from time to time amended,
modified or restated, the “Loan Agreement.” Capitalized terms used and not
otherwise defined herein have meanings given them in the Loan Agreement.

 

This letter is to notify you that we intend to sell the Installment Contracts
set forth on the attached Schedule A to the following purchaser (“Purchaser”):

 

Name: 

   __________________________________     

Address: 

   __________________________________          
__________________________________     

 

We request that you deliver a Bailee Letter to the Purchaser no later than
____________, 200__, because the sale is scheduled to close on or about
______________, 200__.

 

We hereby agree that the Installment Contracts will be delivered to the
Purchaser under a copy of this request and the executed Bailee Letter. We agree
to the terms of the Bailee Letter and instruct the Purchaser to comply with all
instructions set forth therein and acknowledge that such terms cannot be varied
by any instructions given by us.

 

First Consumer Credit, Inc. By:     Name:     Title:    

 

U.S. Home Systems, Inc. By:     Name:     Title:    

 

Exhibit 1        

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Exhibit 2

 

Form of Bailee Letter

 

[On Lender’s Letterhead]

 

[Purchaser’s Name and Address]

 

Ladies and Gentlemen:

 

Enclosed please find ____________ installment contracts (the “Installment
Contracts”) evidencing the home improvement loans described in more detail on
the attached Schedule A, along with other supporting documents that you have
agreed to purchase. Please be advised that a security interest in the
Installment Contracts has been granted to The Frost National Bank (the “Secured
Party”) in connection with a First Amended and Restated Loan Agreement dated as
of February 9, 2006, to be effective for all purposes as of February 10, 2006,
between U.S. Home Systems, Inc. (“Borrower”) and the Secured Party (as from time
to time amended modified or restated, the “Loan Agreement”). Unless otherwise
defined herein, all capitalized terms used herein shall have the meanings given
in the Loan Agreement.

 

The Installment Contracts and all other documents relating thereto are to be
held by you as agent, bailee and custodian for the benefit of Secured Party, and
subject to Secured Party’s direction and control. Notwithstanding the foregoing:

 

  (i) if the Installment Contracts are accepted for purchase, the proceeds of
such purchase are to be wire transferred to the Secured Party at [wiring
instructions]; and

 

  (ii) Installment Contracts which are not accepted for purchase should be
returned within thirty (30) days after the date of delivery of this letter to:

 

First Consumer Credit, Inc.

12740 Hillcrest Plaza Drive, Suite 240

Dallas, Texas 75230

Attn:

 

You are responsible for making certain that Secured Party receives all of the
proceeds from the sale of the Installment Contracts. In no event shall such
proceeds, without the express written consent of Secured Party, be less than
$                    , which is the aggregate Collateral Value assigned by the
Secured Party to such Installment Contracts (the “Minimum Amount”). Upon Secured
Party’s receipt of such proceeds (which in no event shall be less that the
Minimum Amount), the security interest of Secured Party in the Installment
Contracts shall automatically terminate without further action. The Installment
Contracts have not been assigned by Secured Party to any other party.

 

You are not to honor any requests or instructions from Borrower or First
Consumer Credit, Inc. relating to any Installment Contract unless you have
received the written or

 

Exhibit 2   1    

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telephonic consent of Secured Party, or until Secured Party has received the
applicable proceeds of such Installment Contract. If you have any questions,
please call Shannon Jackson, whose phone number is (214) 515-4917.

 

Please indicate your acknowledgment that (a) you are acting as Secured Party’s
agent, bailee and custodian with respect to the Installment Contracts and
(b) you agree to comply with all instructions contained herein, by signing the
acknowledgment below and returning a copy to Secured Party at the following
address:

 

The Frost National Bank

2727 North Harwood, 10th Floor

Dallas, Texas 75201

Attn: __________________

Fax: (214) 515-4990

 

Very truly yours, The Frost National Bank By:     Name:     Title:    

 

Received and agreed to:   By:     Name:     Title:     Date:    

 

Exhibit 2   2    

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EXHIBIT A

 

INSTALLMENT CONTRACT CERTIFICATE

 

[Date]

 

Reference is made to that certain First Amended and Restated Loan Agreement
dated as of February 9, 2006, to be effective for all purposes as of
February 10, 2006 (as from time to time amended, the “Agreement”) by and between
U.S. Home Systems, Inc. (“Borrower”) and The Frost National Bank (“Lender”).
Terms which are defined in the Agreement are used herein with the meanings given
them in the Agreement.

 

This Certificate is being furnished pursuant to Section 11(d) of the Agreement.
Borrower and FCC hereby certify to Lender as follows:

 

  (a) the officer of Borrower signing this instrument is the duly elected,
qualified and acting ________ of Borrower and the officer of FCC signing this
instrument is the duly elected, qualified and acting _________ of FCC and as
such is authorized to submit this Certificate on behalf of such Person;

 

  (b) as of the close of business on __________ (the “Reporting Date”):

 

(i)    Balance of Installment Contracts as of the Reporting Date    $_________
     (ii)    Ineligible Installment Contracts:               

(A)     Installment Contracts more than 30 days past due

   $_________          

(B)     Installment Contracts purchased or originated more than 90 days prior to
Reporting Date

   $_________          

(C)     Other ineligible Installment Contracts

   $_________          

(D)     Total ineligible Installment Contracts (add lines A through C)

   $_________      (iii)   

Total Eligible Installment Contracts

(Line (i) minus line (ii)(D))

        $_________ (iv)    90% of Total Eligible Installment Contracts        
$_________ (v)    Revolving Line of Credit balance per last Installment Contract
Certificate         $_________

 

Exhibit A   1    

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(vi)    Less net payments         $_________ (vii)    Plus advances        
$_________ (viii)   

Total Balance

(Line (v) minus line (vi) plus line (vii))

        $_________ (ix)    Amount available for borrowing (lesser of $3,000,000
and line (iv) minus Total Balance (line viii) subject to the terms of the
Agreement, if positive, or to be repaid, if negative.         $_________

 

(c) Attached hereto is an Installment Contract aging report as of the Reporting
Date and a list of all Installment Contracts owned by FCC as of the Reporting
Date.

 

The officers of Borrower and FCC signing this instrument certify that, to the
best of their knowledge after due inquiry, the above certifications of Borrower
and FCC are true, correct and complete.

 

IN WITNESS WHEREOF, the instrument is executed as of _____________________.

 

U.S. HOME SYSTEMS, INC. By:     Name:     Title:    

 

FIRST CONSUMER CREDIT, INC. By:     Name:     Title:   President

 

Exhibit A   2    

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EXHIBIT B

 

BORROWING BASE CERTIFICATE

 

[Date]

 

Reference is made to that certain First Amended and Restated Loan Agreement
dated as of February 9, 2006, to be effective for all purposes as of
February 10, 2006 (as from time to time amended, the “Agreement”) by and between
U.S. Home Systems, Inc. (“Borrower”) and The Frost National Bank (“Lender”).
Terms which are defined in the Agreement are used herein with the meanings given
them in the Agreement.

 

This Certificate is being furnished pursuant to Section 11(f) of the Agreement.
Borrower and U.S. Remodelers hereby certify to Lender as follows:

 

  (a) the officer of Borrower signing this instrument is the duly elected,
qualified and acting ________ of Borrower and as such is authorized to submit
this Certificate on behalf of Borrower; the officer of U.S. Remodelers signing
this instrument is the duly elected qualified and acting ____________ of U.S.
Remodelers and as such is authorized to submit this Certificate on behalf of
U.S. Remodelers;

 

  (b) as of the close of business on __________ (the “Reporting Date”):

 

          U.S.
Remodelers

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(i)

   Eligible Accounts    $ ________       

(ii)

   80% of aggregate Eligible Account           $ ________

(iii)

   Eligible Inventory    $ ________       

(iv)

   50% of aggregate Eligible Inventory           $ ________

(v)

   Borrower’s determination of Borrowing Base (sum of lines (ii) and (iv), not
to exceed $4,000,000)           $ ________

(vi)

   Borrowing Base Line of Credit Balance per last Borrowing Base Certificate   
       $ ________

(vii)

   Less Net Payments           $ ________

(viii)

   Plus advances           $ ________

(ix)

   Total Balance (line (vi) minus line (vii) plus line (viii))           $
________

(x)

   Amount available for borrowing (line (v) minus line (ix)), subject to the
terms of the Agreement, if positive, or to be repaid, if negative           $
________

 

Exhibit B   1    

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The officers of Borrower and U.S. Remodelers signing this instrument certify
that, to the best of their knowledge after due inquiry, the above certifications
of Borrower and U.S. Remodelers are true, correct and complete.

 

IN WITNESS WHEREOF, the instrument is executed as of _______________.

 

U.S. HOME SYSTEMS, INC. By:     Name:     Title:    

 

U.S. REMODELERS, INC. By:     Name:     Title:    

 

Exhibit B   2