Exhibit 10.4

December 18, 2002

First Amendment to Loan and Security Agreement

     This First Amendment to Loan and Security Agreement (the “LSA”), dated
September 18, 2001, among PRA III, LLC, “Borrower”), WESTSIDE FUNDING
CORPORATION (the “Lender”) and PORTFOLIO RECOVERY ASSOCIATES, L.L.C., PRA
RECEIVABLES MANAGEMENT, LLC (d/b/a ANCHOR RECEIVABLES MANAGEMENT), PRA II, LLC
and PRA HOLDING I, LLC (each a “Guarantor” and collectively, the “Guarantors”)
is entered into this eighteenth day of December 2002.

WITNESSETH:

WHEREAS, the Borrower, Lender and Guarantors have previously entered into the
LSA; and

WHEREAS, the Borrower, Lender and Guarantors desire to amend certain of the
terms and provisions of the LSA;

NOW, THEREFORE, in consideration of the foregoing, other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Borrower, Lender and Guarantors agree as follows:

     Section 1. Definitions and Acknowledgement

(a)     Capitalized terms that are not specifically defined herein shall have
the meanings assigned thereto in the LSA.

(b)     It is hereby acknowledged that Portfolio Recovery Associates, Inc.
(“PRA”) has completed an initial public offering of its equity. In connection
with such offering, Portfolio Recovery Associates, L.L.C. (“LLC”) has entered
into various agreements and arrangements to reorganize its corporate structure.
Accordingly, the members of LLC have transferred all of their membership units,
and warrants to purchase membership units, to PRA, a newly formed Delaware
corporation, in exchange for an equivalent amount of common stock, and warrants
to purchase common stock, of PRA. LLC is now a wholly owned subsidiary of PRA.
Furthermore, in connection with this reorganization, LLC transferred to PRA all
of its membership interests in each of PRA Receivables Management, LLC (d/b/a
Anchor Receivables Management) and PRA Holding I, LLC and PRA II, LLC merged
into LLC and was dissolved.

(c)     It is hereby acknowledged that PRA II, LLC shall be removed as an LSA
Guarantor and that PRA shall be included as an LSA Guarantor.

 

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     Section 2. Amendments

(a)     The definition of the term “Assumed Name” shall be amended by deleting
“PRA II, L.L.C.” therefrom and inserting “Portfolio Recovery Associates, Inc.”
in the place thereof.

(b)     The definition of the term “Backup Service Fee” shall be amended by
deleting “Seven Thousand Five Hundred Dollars ($7,500.00)” therefrom and
inserting “Three Thousand Five Hundred Dollars ($3,500.00)” in the place
thereof.

(c)     The definition of the term “Change in Control” shall be amended to read
as follows:

     “CHANGE IN CONTROL: The term “Change in Control” shall mean any of the
following (I) the acquisition by a third party, other than Angelo, Gordon & Co.,
L.P. or affiliated entities, of a majority of the issued and outstanding shares
of PRA or (II) the failure of PRA to continue to own, directly or indirectly, in
the aggregate, free and clear of all liens except for liens in favor of the
Lender, 100% of the issued and outstanding membership interest of the Borrower.”

  (d)        The definition of the term “Commitment Fee” shall be amended by
deleting “the product of (i) 0.35% and, (ii) the Facility Amount” therefrom, and
inserting, “One Hundred Forty Thousand Dollars ($140,000.00)” in the place
thereof.     (e)        The definition of the term “Facility Amount” shall be
amended by deleting “Forty Million Dollars ($40,000,000.00)” therefrom and
inserting “Twenty Five Million Dollars ($25,000,000.00)” in the place thereof.  
  (f)        The definition of the term “Guarantor” shall be amended by deleting
“PRA II, L.L.C.” therefrom and inserting “Portfolio Recovery Associates, Inc.”
in the place thereof.     (g)        The definition of the term “Management
Agreement” shall be amended by deleting “PRA” therefrom and inserting “LLC” in
the place thereof.     (h)        The definition of the term “PRA” shall be
amended by deleting “Portfolio Recovery Associates, L.L.C.” therefrom and
inserting “Portfolio Recovery Associates, Inc.” in the place thereof.     (i)  
     The definition of the term “PRA Purchase Agreement” shall be amended by
deleting “PRA” therefrom and inserting “LLC” in the place thereof.     (j)  
     The definition of the term “Stated Interest Rate” shall be amended by
deleting “4.35%” therefrom and inserting “3.50%” in the place thereof.     (k)  
     The definition of the term “Unused Facility Fee” shall be amended to read
as follows:

“UNUSED FACILITY FEE: The term “Unused Facility Fee” shall mean for any
Settlement Date, (i) if the average daily principal balance of the Outstanding
Facility Amount for the month immediately preceding such Settlement Date is less
than $10,000,000, an amount equal to 1/12th of 0.75% multiplied by the
difference between the Facility Amount and the average daily principal balance
of the Outstanding Facility Amount for the month immediately preceding such
Settlement Date, or (ii) if the average daily principal balance of the
Outstanding Facility Amount for the month immediately preceding such Settlement
Date is equal to or more than $10,000,000, an amount equal to 1/12th of 0.25%
multiplied by the difference between the Facility Amount and the average daily
principal balance of the Outstanding Facility Amount for the month immediately
preceding such Settlement Date.”

  (l)        Section 1. shall be amended to incorporate the following defined
term in its appropriate alphabetical order:

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     “LLC: The term “LLC” shall mean Portfolio Recovery Associates, L.L.C.”

  (m)   Section 5.1.A. shall be amended to read as follows:

     “Each of Borrower and Guarantor is a limited liability company or a
corporation, duly formed, validly existing and in good standing under the laws
of the state of its formation or incorporation, as applicable, is duly qualified
to do business and is in good standing as a foreign entity in all states where
such qualification is required, has all necessary power and authority to enter
into this Agreement and each of the documents and instruments relating hereto
and to perform all of its obligations hereunder and thereunder.”

  (n)   Section 5.1.D.(II) shall be amended to read as follows:

     “violate any provision of their respective Certificate of Formation,
Operating Agreement, Certificate of Incorporation or By-Laws, as applicable.”

  (o)   Section 5.1. X. shall be amended to read as follows:

     “None of the Capital Stock of any Subsidiary of PRA shall be a certificated
security.”

  (p)   Section 6.1.E. shall be amended to read as follows:

     “Carry on and conduct their business in the same manner and in the same
fields of enterprise as they are presently engaged, and shall preserve their
limited liability company or corporate existence, as applicable, licenses or
qualifications as a domestic entity in the jurisdiction of its organization or
incorporation, as applicable, and as a foreign entity in every jurisdiction in
which the character of its assets or properties or the nature of the business
transacted by it at any time makes qualification as a foreign entity necessary,
and to maintain all other material rights and franchises, provided, however,
nothing herein shall be construed to prevent Borrower from closing any retail
location in the good faith exercise of its business judgment.”

  (q)        Section 6.1.Q. shall be amended by deleting “PRA” therefrom and
inserting “LLC” in the place thereof.     (r)        Section 6.1.R. shall be
amended by deleting “PRA” therefrom and inserting “LLC” in the place thereof.  
  (s)        Section 6.2.D. shall be amended to read as follows:

     “Cause or take any of the following actions with respect to either Borrower
or Guarantor (except for PRA): (i) redeem, retire, purchase or otherwise
acquire, directly or indirectly, any of Borrower’s or Guarantor’s outstanding
Capital Stock; or (ii) purchase or acquire, directly or indirectly, any shares
of Capital Stock, evidences of indebtedness or other securities of any Person or
entity.”

  (t)        Section 6.2.E. shall be amended to read as follows:

     “Amend, supplement or otherwise modify either of Borrower’s or Guarantor’s
Certificate of Formation, Operating Agreement, Certificate of Incorporation or
By-Laws, as applicable, in such a way which would have a Material Adverse Effect
on the condition and operations, prospects or financial condition of the
Borrower or Guarantor (as the case may be).”

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  (u)        Section 6.2.I. shall be amended to read as follows:

     “Allow Borrower or Guarantor (except for PRA) to be owned and controlled
directly or indirectly by any Person or entity other than the shareholders,
members and senior management that own and control Borrower or Guarantor (as the
case may be) as of the date hereof.”

  (v)        Section 6.2.M. shall be amended to read as follows:

     “Permit any equity holder of Borrower or Guarantor (except for PRA) to
pledge or otherwise hypothecate any equity or membership interest in Borrower or
Guarantor (as the case may be).”

  (w)        Section 6.5. shall be amended by deleting “or equivalent duly
appointed member of PRA” therefrom.     (x)        The LSA shall be amended to
add a new Section 9.21 to read in its entirety as follows:

     “In connection with this Agreement, each of the Borrower and Guarantor have
agreed to furnish and make available to Lender certain financial and other
information concerning the Borrower or Guarantor. As a condition to the Borrower
or Guarantor furnishing such information to Lender, Lender agrees to treat the
Confidential Material confidentially in accordance with the terms of this
Section 9.21 and to take or refrain from taking certain actions herein set
forth. As used herein, the term “Confidential Material” shall include (x) any
information, regardless of the form in which it is communicated or maintained
(whether prepared by the Borrower, Guarantor or otherwise) and which is made
available or disclosed to Lender or its affiliates, subsidiaries, directors,
officers, employees, agents and representatives (including attorneys and other
advisors) (collectively, “Lender’s Representatives”) by or on behalf of the
Borrower or Guarantor or which Lender or Lender’s Representatives learn or
obtain orally, through observation, or through analysis of such information, and
(y) all reports, analyses, notes or other information that are based on, contain
or reflect any Confidential Material. As used herein, the term “Confidential
Material” does not include information which (i) is or becomes generally known
to the public, other than as a result of a disclosure by Lender or Lender
Representatives in violation of this Agreement, (ii) becomes available to Lender
on a non-confidential basis from a source other than the Borrower or Guarantor,
provided that such source is not known by Lender to be bound by a
confidentiality agreement with or other obligation of secrecy to the Borrower or
Guarantor, or otherwise known by Lender to be prohibited from transmitting such
information to Lender or Lender’s Representatives by a contractual, legal or
fiduciary obligation or (iii) was disclosed to Lender on a non-confidential
basis prior to its disclosure to Lender or Lender’s Representatives by the
Borrower or Guarantor.

     Lender agrees that the Confidential Material will be used solely for the
purpose described in this Agreement, and that such information will be kept
confidential; provided, however, that any such information may be disclosed (i)
to Lender’s Representatives (it being understood that Lender Representatives
shall be informed by Lender of the confidential nature of such information)
(ii) at the request of a regulatory

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agency or in connection with an examination of Lender, (iii) pursuant to
subpoena or other court process, (iv) at the express direction of any other
authorized government agency, or (v) to Lender’s independent auditors or counsel
provided that each person who receives such information has been made aware of
the confidential nature of such information.

In the event that Lender or any of Lender’s Representatives receive a request or
demand to disclose all or any part of the information contained in the
Confidential Material under the terms of a subpoena or order issued by a court
of competent jurisdiction or otherwise, Lender agrees to (i) promptly notify PRA
(unless such notice is not permitted by law) of the existence, terms and
circumstances surrounding such a request so that PRA may seek, at its sole
expense, a protective order or other appropriate relief or remedy or waive
compliance with the terms of this Agreement; and (ii) should PRA seek such a
protective order, consult with PRA in connection with such action. If, in the
opinion of Lender’s counsel, disclosure by Lender of all or any part of the
information contained in the Confidential Material is required by law, Lender
agrees to (x) promptly notify PRA (unless such notice is not permitted by law)
of the proposed disclosure, (y) disclose only such information which is required
by law, in Lender’s counsel’s reasonable opinion, to be disclosed and (z) mark
as “confidential” any information disclosed by Lender to any of Lender’s
Representatives so as to ensure that confidential treatment will be accorded to
the disclosed information to the maximum extent permissible by law.

     All Confidential Material shall remain the exclusive property of the
Borrower and Guarantor and, promptly upon termination of the LSA Lender shall
return all Confidential Material to PRA and not retain any copies, extracts or
other reproductions in whole or in part of such information, except that Lender
may destroy all or any portion of the Confidential Material that may be found in
analyses, compilations, studies or other documents prepared by Lender or
Lender’s Representatives, except that Lender may retain one or more copies of
such Confidential Material as may be required by any applicable regulations, in
accordance with internal document retention policies and for regulatory purposes
and requirements, subject to the confidentiality obligations set forth herein.
Such destruction shall, upon PRA’s request, be certified in writing to PRA by an
authorized officer supervising such destruction. Notwithstanding the return or
destruction of all of the Confidential Material, Lender and Lender’s
Representatives shall continue to be bound by your obligations under this
Section 9.21.

     It is understood and agreed that money damages would not be a sufficient
remedy for any breach of this Section 9.21 by Lender and that PRA shall be
entitled to specific performance or other equitable relief as a remedy for any
such breach. Such remedy shall not be deemed to be the exclusive remedy for
Lender’s breach of this Section 9.21 but shall be in addition to all other
remedies available at law or equity to Borrower or Guarantor. Lender agrees that
the provisions of this Section 9.21 shall be deemed to apply, with equal force
and effect, to any of Lender’s Representatives, as if such persons were a
signatory hereto and that Lender shall be responsible for any breach of the
provisions of this Section 9.21 by any of Lender’s-Representatives.

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     Notwithstanding anything provided in this Section 9.21 to the contrary,
Lender’s obligations and responsibility with respect to any Confidential
Material shall terminate on the second anniversary of the receipt of such
Confidential Material by Lender or Lender’s Representative from Borrower or
Guarantor.”

     Section 3.     Waiver and Consent

Lender hereby consents to the all actions taken by the Borrower and Guarantor in
connection with PRA’s initial public offering and the reorganization of the
Borrower and Guarantor as described in Section 1(b) hereof. Lender further
waives all Default or Events of Defaults under the LSA or any acts by Borrower
or Guarantor which may be deemed to be a violation of any representation,
warranty or covenant under the LSA and Borrower and Guarantor waive all Defaults
or Events of Default under the LSA or any acts by Lender which may be deemed to
be a violation of any representation, warranty or covenant under the LSA. As of
the date hereof, giving effect to the above waiver and consent, neither Lender,
nor Borrower or Guarantor is aware of any Default or Event of Default under the
LSA or any violation of any representation, warranty or covenant under the LSA.

     Section 4.     Amendment Fee

The Borrower shall pay the Lender on the date hereof an amendment fee in the
amount of Seventy Five Thousand Dollars ($75,000.00).

     Section 5.     Costs and Expenses

The Borrower shall pay the Lender within ten (10) days of the date of any
invoice presented to the Borrower for the legal fees and costs (whether from
internal or external counsel) incurred by the Lender in connection with the
preparation, negotiation and execution of this Amendment.

     Section 6.     Acknowledgement of Guarantors and Ratification of LSA

Each Guarantor hereby acknowledges the amendments to the LSA being made by this
Amendment and except as explicitly amended as provided herein, each of the
Lender, Borrower and each Guarantor hereby ratify and reaffirm the provisions of
the LSA and its obligations under the Guaranty, dated September 18, 2001,
executed by each Guarantor in favor of the Lender.

     Section 7.     Effective Date

This Amendment shall become effective as of the date first above written upon
the execution and delivery thereof by each of the parties hereto.

     Section 8.     Governing Law

THIS AMENDMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK.

     Section 9.     Severability

Each provision of this Amendment shall be severable from every other provision
of this Amendment for the purpose of determining the legal enforceability of any
provision hereof, and the unenforceability of one or more provisions of this
Amendment in one jurisdiction shall not have the effect of rendering such
provision or provisions unenforceable in any other jurisdiction.

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     Section 10.   Counterparts

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

     Section 11.   Legal Opinions

Each Guarantor and the Borrower shall cause to be delivered to Lender on the
date hereof an opinion of counsel to the Guarantors and the Borrowers covering
such matters as the enforceability of this amendment similar in form to the
opinion delivered on the Closing Date.

IN WITNESS WHEREOF, the parties have caused this Amendment to be executed as of
the date and year first written above.

BORROWER:
PRA III, LLC
a Virginia limited liability company

 

        By:   /s/ Kevin P. Stevenson      

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Name: Kevin P. Stevenson
Title:   Member Representative

GUARANTOR:
PORTFOLIO RECOVERY ASSOCIATES, L.L.C.
a Delaware Limited Liability company

 

        By:   /s/ Steven D. Fredrickson      

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Name: Steven D. Fredrickson
Title:   President

PRA RECEIVABLES MANAGEMENT, LLC
a Virginia limited liability company

 

        By:   /s/ Kevin Stevenson      

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Name: Kevin Stevenson
Title:   Member Representative

PRA HOLDING I, LLC
a Virginia limited liability company

 

        By:   /s/ Kevin Stevenson      

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Name: Kevin Stevenson
Title:   Member Representative

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PORTFOLIO RECOVERY ASSOCIATES, INC.
a Delaware corporation

 

        By:   /s/ Steven D. Fredrickson      

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Name: Steven D. Fredrickson
Title:   President

LENDER
 
Westside Funding Corporation
a Delaware Corporation

 

        By:   /s/ Brian Statfeld      

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Name: Brian Statfeld
Title:   Executive Director     By:   /s/ Jeffrey Kramer      

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Name: Jeffrey Kramer
Title:   Executive Director

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