exv10w18



 





Exhibit 10.18



Customer No.

Loan No.




	 	 	 
	RBC Centura
	 	LOAN AND SECURITY AGREEMENT
	
	 	(SD-L&S)







     This LOAN AND SECURITY AGREEMENT (“Agreement”) is entered into as of the
28th day of November, 2003, by and between RBC CENTURA BANK (“Bank”) and
PORTFOLIO RECOVERY ASSOCIATES, INC., a Delaware corporation (“Borrower”).



RECITALS



     Borrower wishes to obtain credit from time to time from Bank, and Bank
desires to extend credit to Borrower for use by Borrower in its business. This
Agreement sets forth the terms and conditions on which Bank will advance credit
to Borrower.



AGREEMENT



     The parties agree as follows:



     1. DEFINITIONS AND INTERPRETATION.



          1.1 Definitions. Capitalized terms used herein and not defined in the
specific section in which they are used shall have the meanings assigned to
such terms in Exhibit A. Terms not defined in a specific section or in Exhibit A which are defined in the Code shall have the meanings assigned to such terms
in the Code.



          1.2 Accounting Terms. All accounting terms not specifically defined in
Exhibit A shall be construed in accordance with GAAP and all calculations shall
be made in accordance with GAAP. The term “financial statements” shall include
the accompanying notes and schedules.



          1.3 Use and Application of Terms. To the end of achieving the full
realization by Bank of its rights and remedies under this Agreement, including
payment in full of the Obligations, in using and applying the various terms,
provisions and conditions in this Agreement, the following shall apply: (i)
the terms “hereby”, “hereof”, “herein”, “hereunder” and any similar words refer
to this Agreement; (ii) words in the masculine gender mean and include
correlative words of the feminine and neuter genders and words importing the
singular numbered meaning include the plural number, and vice versa; (iii)
words importing persons include firms, companies, associations, general
partnerships, limited partnerships, limited liability partnerships, limited
liability limited partnerships, limited liability companies, trusts, business
trusts, corporations and other registered or legal organizations, including
public and quasi-public bodies, as well as individuals; (iv) the use of the
terms “including” or “included in”, or the use of examples generally, are not
intended to be limiting, but shall mean, without limitation, the examples
provided and others that are not listed, whether similar or dissimilar; (v)
the phrase “costs and expenses”, or variations thereof, shall include, without
limitation, the reasonable fees of the following persons: attorneys, legal
assistants, accountants, engineers, surveyors, appraisers and other
professionals and service providers; (vi) as the context requires, the word
“and” may have a joint meaning or a several meaning and the word “or” may have
an inclusive meaning or an exclusive meaning; (vii) this Agreement shall not be
applied, interpreted and construed more strictly against a person because that
person or that person’s attorney drafted this Agreement; and (viii) wherever
possible each provision of this Agreement and the other Loan Documents shall be
interpreted and applied in such manner as to be effective and valid under
applicable Requirements of Law, but if any provision of this Agreement or any
of the other Loan Documents shall be prohibited or invalid under such law, or
the application thereof shall be prohibited or invalid under such law, such
provision shall be ineffective to the extent of such



 









 




prohibition or invalidity without invalidating the remainder of such
provision or the remaining provisions, or the application thereof shall be in a
manner and to an extent permissible under applicable Requirements of Law.




     2. CREDIT EXTENSIONS.



          2.1 Credit Extensions. Subject to and upon the terms and conditions of
this Agreement and provided that no Event of Default has occurred and is
continuing, Bank shall make available to Borrower the Revolving Facility and
Credit Extensions thereunder generally described as follows: a revolving line
of credit in an amount equal to the lesser of: (i) Twenty-five Million dollars
($25,000,000); or (ii) twenty percent (20%) of Borrower’s and Portfolio
Recovery Associates, LLC’s Estimated Remaining Collections of all Eligible
Asset Pools (the “Revolving Facility”). The Revolving Facility and related
Credit Extensions which are to be made available to Borrower are more fully
described below in this Section 2.1 and unless otherwise provided in this
Agreement, the Revolving Facility and related Credit Extensions shall be
evidenced by one or more Promissory Notes from Borrower to Bank and the Credit
Extensions shall bear interest, and the Credit Extensions, the interest and the
fees, charges, premiums and costs and expenses associated therewith, shall be
repayable in accordance with the terms of such Promissory Notes and this
Agreement.



               (a) Revolving Facility. At any time from the date hereof through the
Revolving Maturity Date, Borrower may request and Bank agrees to make advances
(“Advance” or “Advances”) to Borrower to finance working capital needs for its
business and to finance acquisitions permitted by Section 7.3 – and not for any
other purpose. The aggregate amount of outstanding Advances shall not exceed
at any time the Committed Revolving Line. If no Event of Default has occurred
and is continuing, amounts borrowed under the Revolving Facility may be repaid
and reborrowed at any time prior to the Revolving Maturity Date.



          2.2 Credit Extensions – Disbursements. Whenever Borrower desires an
Advance, Borrower shall notify Bank by facsimile transmission or telephone no
later than 10:00 a.m. eastern time, on the Business Day on which Borrower
desires the Advance to be made. Each notification by facsimile transmission
shall include the information requested on the form attached as Exhibit B,
shall be submitted substantially in the form of Exhibit B and shall be signed
by a Responsible Officer or a designee thereof. Each notification by telephone
shall include the information requested on the form attached as Exhibit B and
each notification by telephone shall be followed within one Business Day by a
facsimile transmission which meets the criteria regarding a facsimile
transmission. Bank shall be entitled to rely on any telephonic notice given by
a person who Bank reasonably believes to be a Responsible Officer or a designee
thereof. Bank shall not have any liability to Borrower or any other person for
its failure to make an Advance on the date requested by Borrower, unless such
failure is the result of willful misconduct or gross negligence of Bank; and if
Bank’s failure is a result of willful misconduct or gross negligence, its
liability shall be limited to actual damages only – Bank shall not be liable
for indirect, speculative, consequential or punitive damages and losses. If
Borrower maintains its operating deposit account with Bank, Bank will credit
the amount of the Advances to such account.



          2.3 Overadvances. If, at any time, the aggregate amount of the
outstanding principal under any Credit Extension exceeds the maximum amount
that is permitted to be outstanding at any one time, as provided in this
Section 2, the Borrower shall immediately pay to Bank, in cash, the amount of
such excess.



          2.4 Charging of Payments. Bank may, after the occurrence of an Event of
Default at its option, set-off and apply to the Obligations and otherwise
exercise its rights of recoupment as to any and all (i) balances and deposits
of Borrower held by Bank, (ii) indebtedness and other obligations at any time
owing to or for the credit or the account of Borrower by Bank and by any of
Bank’s Affiliates. Bank may, after notice to Borrower at its option, also
charge all payments required to be made on any of the Obligations against the
Committed Revolving Line. If Bank charges the aforementioned payments against
the Committed Revolving Line, the same shall be deemed an Advance thereunder
and the amount of the Advance shall thereafter accrue interest at the interest
rate applicable from time to time to Advances; and if Bank charges payments as
aforesaid, Bank may, in its discretion, limit, declare a moratorium on and
terminate Borrower’s right under this Agreement to receive additional Advances,
after notice to Borrower and Bank’s decision to do one of the foregoing does
not prevent it from later doing any one or more of the others.



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          2.5 Fees. In addition to the other fees, charges, costs and expenses
required to be paid by Borrower under this Agreement and the other Loan
Documents, Borrower shall pay to Bank the fees, charges, costs and expenses set
forth in this Section 2.5.



               (a) Unused Facility Fee. Borrower shall pay to Bank an annualized one
half of one percent (0.50%) Unused Facility Fee, which shall be payable
monthly, and which shall be based upon the average amount of the Unused
Revolving Facility.



               (b) Bank Expenses. On the Closing Date, Borrower shall pay to Bank all
reasonable Bank Expenses incurred through the Closing Date and shall pay, as
and when demand is so made by Bank to Borrower, all reasonable Bank Expenses
incurred relating to completion, after the Closing Date, of matters related to
closing of this Agreement. Borrower shall be responsible for its own fees and
expenses, including its legal fees.



               (c) Annual Commitment Fee. Beginning on the Closing Date and on the same
date each year hereafter throughout the term of the Revolving Facility,
Borrower shall pay to Bank an annual Commitment Fee of Ten Thousand Dollars
($10,000) for the commitment made in Section 2.1, which fee shall be
nonrefundable.



          2.6 Documentary and Intangible Taxes; Additional Costs. To the extent not
prohibited by law and notwithstanding who is liable for payment of the taxes
and fees, Borrower shall pay, on Bank’s demand, all intangible personal
property taxes, documentary stamp taxes, excise taxes and other similar taxes
assessed, charged and required to be paid in connection with the Credit
Extensions and any extension, renewal and modification thereof, or assessed,
charged and required to be paid in connection with this Agreement, any of the
other Loan Documents and any extension, renewal and modification of any of the
foregoing. If, with respect to this Agreement or the transactions hereunder,
any Requirement of Law (i) subjects Bank to any tax (except federal, state and
local income taxes on the overall net income of Bank), (ii) imposes, modifies
and deems applicable any deposit insurance, reserve, special deposit or similar
requirement against assets held by, or deposits in, or loans by Bank, or (iii)
imposes upon Bank any other condition, and the result of any of the foregoing
is to increase the cost to Bank, reduce the income receivable by Bank or impose
any expense upon Bank with respect to the Obligations, Borrower agrees to pay
to Bank the amount of such increase in cost, reduction in income or additional
expense within thirty (30) days following presentation by Bank of a statement
of the amount and setting forth Bank’s calculation thereof, all in reasonable
detail, which statement shall be deemed true and correct absent manifest error.



          2.7 Term of Agreement. This Agreement shall become effective on the
Closing Date and shall continue in full force and effect until the last to
occur of (i) payment in full of all of the Obligations or (ii) termination of
Bank’s obligation to make Credit Extensions under this Agreement.
Notwithstanding the foregoing, Bank shall have the right to limit, declare a
moratorium on and terminate its obligation to make Credit Extensions under this
Agreement immediately and without notice upon the occurrence and during the
continuance of an Event of Default; and such action by Bank shall not
constitute a termination of this Agreement, shall not constitute a termination
of Borrower’s obligations under this Agreement and the other Loan Documents and
shall not adversely affect or impair Bank’s security interests in the
Collateral. Bank’s decision to do any one of the foregoing (i.e., limit,
declare a moratorium and terminate its obligations to make Credit Extensions)
shall not prevent it from exercising any one or more of the other options
available to it at any other time. Bank shall review the Revolving Maturity
Date annually, and shall notify Borrower not less than sixty (60) days before
each anniversary of this Agreement only if it intends to extend the Revolving
Maturity Date to a date which is one year beyond the then current Revolving
Maturity Date.



     3. CONDITIONS OF CREDIT EXTENSIONS.



          3.1 Conditions Precedent to Initial Credit Extension. The obligation of
Bank to make the initial Credit Extension is subject to the condition precedent
that all of the conditions and requirements set forth in this Section 3.1 and
Section 3.2 have been satisfied and completed, or the satisfaction and
completion thereof waived by Bank. If all of the conditions are not met to
Bank’s satisfaction, or the completion thereof waived by Bank, Bank may, at its
option, (i) withhold disbursement until the same are met, (ii) close and
require that any unsatisfied conditions be satisfied as a condition subsequent
to closing within such period of time as may be designated by the Bank or (iii)
terminate its obligation to make any Credit Extension and recover from Borrower
all Bank Expenses



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incurred by Bank in connection with its preparations for making the Credit
Extensions, together with the fees and other costs and expenses required to be
paid by Borrower under the Commitment. A waiver by Bank of a condition must be
in writing to be effective and a waiver as to one or more conditions shall not
constitute a waiver as to other conditions and shall not establish a “course of
dealing or practice” that would require a waiver of the same or a similar
condition at some later time.




               (a) Loan Documents, etc. Bank shall have received an original of this
Agreement, duly executed by Borrower and any other persons who are parties
hereto, and all of the information, certifications, certificates,
authorizations, consents, approvals, title and other insurance policies and
commitments, financial statements, financing statements, agreements, documents
and records as Bank and its counsel may deem reasonably necessary or
appropriate.



               (b) Payment of Fees. Bank shall have received payment of the fees and
Bank Expenses then due, as specified in Section 2.



               (c) No Event of Default. No Event of Default shall have occurred and be
continuing as of the Closing Date, or after giving effect to the initial Credit
Extension to be made at or immediately after closing.



               (d) Additional Matters. All other legal and non-legal matters as Bank or
its counsel deem reasonably necessary or appropriate to be satisfied, completed
and received prior to the initial Credit Extension shall be satisfied,
completed and received in form and substance satisfactory to the Bank and its
counsel; and Bank’s counsel shall have received duly executed counterpart
originals, or certified or other such copies of all records as such counsel may
reasonably request.



          3.2 Conditions Precedent to All Credit Extensions. The obligation of Bank
to make each Credit Extension, including the initial Credit Extension, is
further subject to all of the conditions and requirements set forth in this
Section 3.2 being satisfied and completed, or the satisfaction and completion
thereof waived by Bank.



               (a) Loan Payment/Advance Request Form. Bank shall have received, as and
when required, a completed Loan Payment/Advance Request Form in the form of
Exhibit B attached hereto.



               (b) Representations and Warranties; No Event of Default. The
representations and warranties referenced in Section 5 and in the other Loan
Documents shall be true and correct on and as of the date of such Loan
Payment/Advance Request Form and on the effective date of each Credit Extension
as though made at and as of each such date, and no Event of Default shall have
occurred and be continuing, or would exist after giving effect to such Credit
Extension (provided, however, that those representations and warranties
expressly referring to another date shall be true, correct and complete as of
such date). The making of each Credit Extension shall be deemed to be a
representation and warranty by Borrower on the date of such Credit Extension as
to the accuracy of the facts referred to in this subsection.



               (c) Audit of Collateral. At Bank’s election, the Bank shall have received
from Borrower an internally prepared report of the Collateral (including,
without limitation, Borrower’s Accounts), in a format consistent with the form
attached as Exhibit 3.2(c), the results of which have been approved by
Borrower’s accountants. In the event Borrower’s accountants make material
corrections or modifications to the report presented to them for review,
Borrower shall immediately inform the Bank of such corrections or
modifications.



     4. CREATION OF SECURITY INTEREST.



          4.1 Grant of Security Interest. Borrower grants and pledges to Bank a
continuing security interest in all presently existing and hereafter acquired
or arising Collateral to secure the prompt repayment of any and all Obligations
and to secure the prompt performance by Borrower of each of its covenants,
duties and obligations under the Loan Documents. Except as set forth in the
Schedule, such security interest constitutes a valid, first priority security
interest in the presently existing Collateral, and will constitute a valid,
first priority security interest in Collateral acquired or arising after the
date hereof. Notwithstanding any limitation of, moratorium on or



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termination of Bank’s obligation to make Credit Extensions under this
Agreement, Bank’s security interest on the Collateral shall remain in full
force and effect for so long as any Obligations are outstanding.




          4.2 Delivery of Additional Documentation Required. To the extent that
such documentation is physically available to Borrower; Borrower shall from
time to time execute and deliver to Bank, at the request of Bank, all
Negotiable Collateral, all Financing Statements and other documents and records
that Bank may request, in form and substance satisfactory to Bank and its
counsel, to perfect and continue perfected Bank’s security interests in the
Collateral and in order to fully consummate all of the transactions
contemplated under the Loan Documents. Borrower hereby consents to the filing
by Bank of Financing Statements and such other instruments and documents in any
jurisdictions or locations deemed advisable or necessary in Bank’s discretion
to preserve, protect and perfect Bank’s security interest and rights in the
Collateral. Borrower further consents to and ratifies the filing of such
Financing Statements and other instruments and documents prior to the Closing
Date. If Borrower has executed and delivered to Bank a separate security
agreement or agreements in connection with any or all of the Obligations, that
security agreement or those security agreements and the security interests
created therein shall be in addition to and not in substitution of this
Agreement and the security interests created hereby, and this Agreement shall
be in addition to and not in substitution of the other security agreement or
agreements and the security interests created thereby. In all cases this
Agreement and the aforesaid security agreement or agreements, as well as all
other evidences or records of any and all of the Obligations and agreements of
Borrower, Bank and other persons who may be obligated on any of the
Obligations, shall be applied and enforced in harmony with and in conjunction
with each other to the end that Bank realizes fully upon its rights and
remedies in each and the Liens created by each; and, to the extent conflicts
exist between this Agreement and the other security agreements and records,
they shall be resolved in favor of Bank for the purpose of achieving the full
realization of Bank’s rights and remedies thereunder and the Liens as
aforesaid.



               (a) All computer records representing or evidencing an Account shall
contain (by way of stamp or other method satisfactory to Bank) the following
language: “Pledged to RBC Centura Bank as Collateral”. Upon an Event of
Default, if requested by Bank, all contracts, documents, instruments and
chattel paper evidencing an Account shall contain (by way of stamp or other
method satisfactory to Bank) the above quoted language. Failure to deliver
physical possession of any instruments, documents, or writings in respect of
any Account to Bank shall not invalidate Bank’s security interest therein. To
the extent that possession may be required by applicable law for perfection of
Bank’s security interest, the original chattel paper and instruments
representing the Accounts shall be deemed to be held by Bank, although kept by
Borrower or Guarantor as the custodial agent of Bank. Borrower or Guarantor
(as case may be) shall, at any reasonable time and at Borrower’s or Guarantor’s
own expense, upon Bank’s reasonable request, be physically delivered to Bank on
computer disk or other electronic data storage means which shall be machine
readable in Microsoft Access or such other form as mutually agreed upon by the
parties hereto, copies of all Accounts (including any instruments, documents or
writings in respect of any Account together with all other instruments,
documents or writings in respect of any collateral securing each Account, then
in Borrower’s or Guarantor’s control) assigned to Bank to any reasonable place
or places designated by Bank. All Accounts shall, regardless of their
location, be deemed to be under Bank’s dominion and control (with both paper
and computer files so labeled) and deemed to be in Bank’s possession.)



          4.3 Power of Attorney. Borrower does hereby irrevocably constitute and
appoint Bank its true and lawful attorney with full power of substitution, for
it and in its name, place and stead, to execute, deliver and file such
agreements, documents, notices, statements and records, to include, without
limitation, Financing Statements, and to do or undertake such other acts as
Bank, after notice to Borrower, and after providing a copy of any such item to
Borrower in its sole discretion, deems necessary or advisable to effect the
terms and conditions of this Agreement, the other Loan Documents and to
otherwise preserve, protect and perfect the security of the security interest
in the Collateral. The foregoing appointment is and the same shall be coupled
with an interest in favor of Bank. Notwithstanding the foregoing present grant
of a power of attorney by Borrower to Bank, except as otherwise provided in
this Agreement and except with respect to filing of Financing Statements and
other actions Bank deems necessary or appropriate to preserve, protect, and
perfect or continue the perfection of its security interests in the Collateral,
Bank shall not exercise the rights granted to it under this Section 4.3 until
after the occurrence of an Event of Default, or the occurrence of an event
which, upon the giving of any required notice or the lapse of any required
period of time, would be an Event of Default.



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          4.4 Right to Inspect and Audit. Bank (through any of its officers,
employees, agents or other persons designated by Bank) shall have the right, at
its own expense (except after the occurrence of an Event of Default at
Borrower’s expense and without notice) upon reasonable prior notice, from time
to time during Borrower’s usual business hours, to inspect Borrower’s Books and
to make copies thereof and to inspect, check, test, audit and appraise the
Collateral and Borrower’s business affairs in order to verify Borrower’s
financial condition or the amount, condition of, or any other matter relating
to the Collateral and Borrower’s compliance with the terms and conditions of
this Agreement and the other Loan Documents. Bank shall make reasonable
efforts to minimize disruption of Borrower’s operations when conducting such
work. Borrower shall permit representatives of Bank to discuss the business,
operations, properties and financial and other conditions of Borrower with its
officers, board members, executives, managers, members, partners, employees,
agents, independent certified public accountants and others, as applicable.
The representatives of Bank will maintain the confidentiality of non-public
information obtained from such discussions or otherwise and will not trade the
Borrower’s stock based upon material, non-public information concerning the
Company that the representatives of the Bank may obtain. Notwithstanding the
foregoing provisions of this Section 4.4, Bank shall not be required to give
prior notice or limit its inspections to normal business hours if it deems an
emergency or other extraordinary situation to exist with respect to the
Collateral, Borrower’s Books and its other rights hereunder.



          4.5 Collection of Accounts. In addition to its other rights and remedies
in this Agreement, Bank shall have the rights and remedies set forth in this
Section 4.5 , all of which may be exercised by Bank upon the occurrence of an
Event of Default, or the occurrence of an event which, upon the giving of any
required notice or the lapse of any required period of time, would be an Event
of Default.



               (a) After the occurrence of an Event of Default, or the occurrence of an
event or condition which, after the giving of any required notice and the lapse
of any required period of time, would be an Event of Default, Bank is
authorized and empowered at any time in its sole discretion (i) to demand,
collect, settle, compromise for, recover payment of, to hold as additional
security for the Obligations and to apply against the Obligations any and all
sums which are now owing and which may hereafter arise and become due and owing
upon any of said Accounts and upon any other obligation to Borrower (to include
making, settling, adjusting, collecting and recovering payment of all claims
under and decisions with respect to Borrower’s policies of insurance), (ii) to
enforce payment of any Account and any other obligation of any person to
Borrower either in its own name or in the name of Borrower, (iii) to endorse
in the name of Borrower and to collect any instrument or other medium of
payment, whether tangible or electronic, tendered or received in payment of the
Accounts that constitute Collateral and any other obligation to Borrower; (iv)
to sign Borrower’s name on any invoice or bill of lading relating to any
Account, drafts against account debtors, schedules and assignments of Accounts,
verifications of Accounts and notices to account debtors; and (v) dispose of
any Collateral constituting Accounts and to convert any Collateral constituting
Accounts into other forms of Collateral. But, under no circumstances shall
Bank be under any duty to act in regard to any of the foregoing matters.
Without limiting the provisions of Section 4.3 hereof, but in addition thereto,
Borrower hereby appoints Bank and any employee or representative of Bank as
Bank may from time to time designate, as attorneys-in-fact for Borrower, to
sign and endorse in the name of Borrower, to give notices in the name of
Borrower and to perform all other actions necessary or desirable in the
reasonable discretion of Bank to effect these provisions and carry out the
intent hereof. Borrower hereby ratifies and approves all lawful acts of such
attorneys-in-fact and except as otherwise provided for herein, neither Bank nor
any other such attorneys-in-fact will be liable for any lawful acts of
commission or omission nor for any error of judgment or mistake of fact or law.
The foregoing power, being coupled with an interest, is irrevocable so long as
any Account pledged and assigned to Bank remains unpaid and this Agreement or
any other Loan Document is in force. The costs and expenses of such collection
and enforcement shall be borne solely by Borrower whether the same are incurred
by Bank or on behalf of Bank or Borrower and, if paid or incurred by Bank, the
same shall be an Obligation owing by Borrower to Bank, payable on demand with
interest at the Default Rate, and secured by this Agreement and the other Loan
Documents. Borrower hereby irrevocably authorizes and consents to all account
debtors and other persons communicating after and Event of Default with Bank,
or its agent, with respect to Borrower’s property, business and affairs and to
all of the foregoing persons acting after an Event of Default upon and in
accordance with Bank’s, or its representative’s, instructions, directions and
demands, including, without limitation, Bank’s request and demand to pay money
and deliver other property to Bank or Bank’s representatives, all without
liability to Borrower for so doing, except as otherwise provided herein.



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               (b) After the occurrence of an Event of Default, or the occurrence of an
event or condition which after the giving of any required notice and then lapse
of any required period of time, would be an Event of Default, at Bank’s
request, Borrower will forthwith upon receipt of all checks, drafts, cash and
other tangible and electronic remittances in payment or on account of
Borrower’s Accounts, deposit the same in a special bank account maintained with
Bank or its representative, over which Bank and its representative (as
applicable) have the sole power of withdrawal and will designate with each such
deposit the particular Account upon which the remittance was made. The funds
in said account shall be held by Bank as security for the Obligations. Said
proceeds shall be deposited in precisely the form received except for the
endorsement of Borrower where necessary to permit collection of items, which
endorsement Borrower agrees to make, and which endorsement Bank and its
representative (as applicable) are also hereby authorized to make on Borrower’s
behalf. Pending such deposit, Borrower agrees that it will not commingle any
such checks, drafts, cash and other remittances with any of Borrower’s funds or
property, but will hold them separate and apart therefrom and upon an express
trust for Bank until deposit thereof is made in the special account. After the
occurrence of an Event of Default, or the occurrence of an event or condition
which after the giving of any required notice and then lapse of any required
period of time, would be an Event of Default, Bank may at anytime and from time
to time, in its sole discretion, apply any part of the credit balance in the
special account to the payment of all or any of the Obligations, and to payment
of any other obligations owing to Bank under or on account of this Agreement or
any of the other Loan Documents. On the Revolving Maturity Date and upon the
full and final payment of all of the Obligations and the other obligations as
aforesaid, together with a termination of Bank’s obligation to make additional
Advances, Bank will pay over to the Borrower any excess good and collected
funds received by Bank from Borrower, whether received as a deposit in the
special account or received as a direct payment on any of the Obligations.



               (c) After the occurrence of an Event of Default, or the occurrence of an
event or condition which after the giving of any required notice and then lapse
of any required period of time, would be an Event of Default, Bank shall have
the absolute and unconditional right to apply for and to obtain the appointment
of a receiver, custodian or similar official for all or a portion of the
Collateral, including, without limitation, the Accounts, to, among other
things, manage and sell the same, or any part thereof, and to collect and apply
the proceeds therefrom to payment of the Obligations as provided in this
Agreement and the other Loan Documents. Any such receiver, custodian or
similar official, if required, shall be qualified and licensed as a collection
agency in each state or territory in which any customer Accounts may be so
collected or managed. In the event of such application, Borrower consents to
the appointment of such qualified and licensed receiver, custodian or similar
official and agrees that such receiver, custodian or similar official may be
appointed without further notice to Borrower beyond any notice required to be
given to Borrower prior to the occurrence of an Event of Default, if any,
without regard to the adequacy of any security for the Obligations secured
hereby and without regard to the solvency of Borrower or any other person who
or which may be liable for the payment of the Obligations or any other
obligations of Borrower hereunder. All costs and expenses related to the
appointment of a receiver, custodian or other similar official hereunder shall
be the responsibility of Borrower, but if paid by Bank, Borrower hereby agrees
to pay to Bank, on demand, all such costs and expenses, together with interest
thereon from the date of payment at the Default Rate. All sums so paid by
Bank, and the interest thereon, shall be an Obligation owing by Borrower to
Bank, and secured by this Agreement and the other Loan Documents.
Notwithstanding the appointment of any receiver, custodian or other similar
official, Bank shall be entitled as pledgee to the possession and control of
any cash, deposits, accounts, account receivables, documents, chattel paper,
documents of title or instruments at the present or any future time held by, or
payable or deliverable under the terms of the Loan Documents to Bank. If the
balance of the Obligation outstanding is ZERO at any time prior to the
Revolving Maturity Date, and no Event of Default has occurred or is continuing
and Bank has no further obligation to make Advances, Bank shall terminate the
appointment of any such receiver custodian or similar official.



     5. REPRESENTATIONS AND WARRANTIES.



     Borrower represents and warrants to Bank that, as of the date of this
Agreement, there are no Subsidiaries of Borrower other than the Guarantor.
Further, Borrower represents and warrants to Bank that the certifications,
representations and warranties set forth in the Certificate of Borrower which
has been executed and delivered by Borrower to Bank contemporaneously with the
execution and delivery of this Agreement by Borrower to Bank are true, correct
and accurate as of the date of this Agreement or such other date as may be
specifically set forth in a particular certification, representation or
warranty. Borrower agrees that all certifications, representations and
warranties set forth herein shall be continuing certifications, representations
and warranties of Borrower to Bank.



7









 





     6. AFFIRMATIVE COVENANTS.



     Borrower covenants and agrees that until the termination of Bank’s
obligation under this Agreement to make Credit Extensions and the payment in
full of the Obligations, Borrower shall do each and all of the matters set
forth in this Section 6; and Borrower acknowledges to Bank that the breach or
default by Borrower of any of the covenants and agreements set forth below in
this Section 6 is and the same shall be material.



          6.1 Good Standing and Government Compliance. Borrower shall maintain in
good standing its and each of its Subsidiaries’ organizational existence in
their respective jurisdictions of organization and maintain qualification in
each jurisdiction in which the conduct of their respective businesses or their
respective ownership of property requires that they be so qualified. Borrower
shall comply, and shall cause each Subsidiary to comply with all Requirements
of Law to which they are subject, and shall maintain, and shall cause each of
its Subsidiaries to maintain, in force all licenses, approvals and agreements,
the loss of which or failure to comply with which could have a Material Adverse
Effect, or an adverse effect in a material manner on the Collateral or the
priority of Bank’s security interest in the Collateral.



          6.2 Payment/Performance. Borrower shall pay when due all amounts owing to
Bank under this Agreement and the other Loan Documents and promptly perform all
other obligations of Borrower thereunder and hereunder.



          6.3 Use of Loan Funds. Borrower shall use all loan proceeds disbursed to
Borrower only for the purposes stated in this Agreement and the other Loan
Documents.



          6.4 Financial Statements; Reports; Certificates.



               (a) Borrower shall deliver to Bank each and all of the financial
statements, reports, certificates and other records referenced under this
subsection (a) and such other statements, reports, certificates and records as
Bank may reasonably request from time to time.



                    (i) As soon as available, but in any event within fifteen (15) days after
the end of each calendar month, Borrower shall deliver to Bank internally
prepared consolidated financial statements.



                    (ii) Beginning with the fiscal year ending December 31, 2004, as soon as
available, but in any event within one hundred twenty (120) days after the end
of Borrower’s fiscal year, Borrower shall deliver to Bank audited CPA prepared
consolidated and, upon request of Bank, internally prepared consolidating,
financial statements of Borrower (including a balance sheet, an income
statement and a statement of retained earnings, each with the related notes and
changes in the financial position for such year and setting forth in
comparative form the figures for the prior year) prepared in accordance with
GAAP, consistently applied, together with (with respect to the CPA prepared
statements) an opinion on such financial statements that is unqualified or
qualified in a manner acceptable to Bank from an independent certified public
accounting firm reasonably acceptable to Bank. After the occurrence of an
Event of Default, Bank may request and Borrower shall so provide audited CPA
prepared consolidating statements which meet the foregoing requirements
established for consolidated statements.



                    (iii) Within fifteen (15) days after the last day of each fiscal quarter,
Borrower shall deliver to Bank a statement of Borrower’s Net Finance Receivable
prepared and presented in a manner and format consistent with past practice,
conducted by PriceWaterhouseCoopers, LLP, or such other accounting firm of
national standing selected by Borrower as is acceptable to Bank.



                    (iv) If applicable, Borrower shall deliver to Bank copies of all
statements, reports and notices sent or made available generally by Borrower to
its security holders or to any holders of Subordinated Debt and all reports on
Forms 10-K and 10-Q filed with the Securities and Exchange Commission.



                    (v) Promptly upon receipt of notice thereof, Borrower shall deliver to
Bank a report of any legal actions pending or threatened against Borrower or
any Subsidiary that, in the reasonable opinion of Borrower, could result in
damages or costs to Borrower or any Subsidiary of One Hundred Thousand Dollars
($100,000) or more.



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               (b) Within fifteen (15) days after the last day of each month, Borrower
shall deliver to Bank a Borrowing Base Certificate dated and signed by a
Responsible Officer in substantially the form of Exhibit D hereto that provides
the required information that is current within one day.



               (c) Within fifteen (15) days after the last day of each month, Borrower
shall deliver to Bank with the monthly financial statements a Compliance
Certificate signed by a Responsible Officer in substantially the form of
Exhibit E hereto.



               (d) Borrower shall provide such additional statements and information as
Bank may from time to time request, in form reasonably acceptable to Bank.
Bank shall keep such information confidential which is marked “Confidential”
and which has not been disclosed to third parties, and shall not disclose such
information to any department of Bank which provides investment and stock
brokerage services.



          6.5 Taxes. Borrower shall make, and shall cause each Subsidiary to make,
due and timely payment of, or deposit or withholding of, all federal, state and
local taxes, assessments or contributions required of it by all Requirements of
Law, and will execute and deliver to Bank, on demand, appropriate certificates
attesting to the payment, deposit or withholding thereof; provided that
Borrower or a Subsidiary need not make any payment if the amount or validity of
such payment is contested in good faith by appropriate proceedings and is
reserved against (to the extent required by GAAP) by Borrower.



          6.6 Insurance.



               (a) Borrower, at its expense, shall keep the Collateral insured against
loss or damage by fire, theft, explosion, sprinklers and all other hazards and
risks required by Bank, acting reasonably and taking into account the types and
risks customarily insured against by businesses similar to Borrower’s. Unless
otherwise directed by Bank, the insurance shall be all risk replacement cost
insurance with agreed amount endorsement, standard noncontributing mortgagee
clauses and standard waiver of subrogation clauses. Borrower shall also
maintain general liability, workmen’s compensation and other insurance in
amounts and of a type that are customary to businesses similar to Borrower’s,
unless Bank directs otherwise, in which event Borrower shall maintain such
insurance in amounts and types as Bank directs.



               (b) All policies of insurance shall be in such form and with such
companies as may be reasonably satisfactory to Bank. All policies of property
insurance shall contain a lender’s loss payable endorsement, in a form
reasonably satisfactory to Bank, showing Bank as an additional loss payee, and
all liability insurance policies shall show Bank as an additional insured. All
policies shall specify that the insurer must give at least twenty (20) days’
notice to Bank before canceling its policy for any reason. Upon Bank’s
request, Borrower shall deliver to Bank certified copies of the policies of
insurance and evidence of all premium payments. All proceeds payable under any
casualty policy or policies shall, at Bank’s option, be payable to Bank to be
applied on account of the Obligations, except for casualty policies insuring
loss of assets encumbered by Permitted Liens which are prior to the Lien of
Bank.



          6.7 Primary Depository. Borrower and each of Borrower’s wholly owned
Subsidiaries shall maintain its primary operating depository accounts with Bank
during the term of the Revolving Facility.



          6.8 Financial Covenants. On a consolidated basis, Borrower shall
maintain, as of the last day of each calendar month unless stated otherwise,
and Borrower shall fully and timely comply on a consolidated basis with, each
and every one of the financial maintenance covenants set forth in this Section
and others that may be contained in this Agreement and the other Loan
Documents.



               (a) Debt Coverage. A ratio greater than 8.0:1, calculated on a rolling
twelve-month basis.



               (b) Debt to Tangible Net Worth. A ratio less than 0.40:1.



               (c) Net Income. Borrower shall report a minimum Net Income per quarter of
at least One Dollar ($1.00) (to be tested at the end of each fiscal quarter of
Borrower).



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          6.9 Maintenance of Property. Borrower shall keep and maintain the
Collateral in good working order and condition and make all needful and proper
repairs, replacements, additions, or improvements thereto as are necessary,
reasonable wear and tear excepted.



          6.10 Maintain Security Interest. Borrower shall maintain, protect and
preserve the security interest of Bank in the Collateral and the lien position
of Bank in the Collateral, including, without limitation, (i) the filing of
“claims” under insurance policies and (ii) protecting, defending and maintain
the validity and enforceability of the Trademarks, Patents and Copyrights.



          6.11 Deposit Accounts. Borrower shall maintain and shall cause all of its
Subsidiaries to maintain all their deposit accounts with Bank, except that such
deposit accounts may be maintained elsewhere, but only if subject to a control
agreement in form and substance satisfactory to Bank.



          6.12 Further Assurances. At any time and from time to time, Borrower
shall execute and deliver such further instruments, agreements, documents and
other records and take such further action as may be requested by Bank to
effect the purposes of this Agreement, including, without limitation, the
perfection and continuation of perfection of Bank’s security interests in the
Collateral.



     7. NEGATIVE COVENANTS.



     Borrower covenants and agrees that until the termination of Bank’s
obligation under this Agreement to make Credit Extensions and the payment in
full of the Obligations, Borrower shall not do or permit to be done any of the
matters set forth in this Section 7; and Borrower acknowledges to Bank that the
breach or default by Borrower of any of the covenants and agreements set forth
below in this Section 7 is and the same shall be material.



          7.1 Dispositions. Borrower shall not convey, sell, lease, transfer and
otherwise dispose of and Borrower shall not permit any of its Subsidiaries to
convey, sell, lease, transfer and otherwise dispose of (with respect to both
Borrower and Borrower’s Subsidiaries, by operation of law or otherwise) any
part of and any interest in their respective businesses and properties,
including the Collateral, other than Permitted Transfers.



          7.2 Change in Business; Change in Management or Executive Office.
Borrower shall not engage in any business, or permit any of its Subsidiaries to
engage in any business, other than as reasonably related or incidental to the
businesses currently engaged in by Borrower. Borrower shall not have a Change
in Management and will not, without thirty (30) days’ prior written
notification to Bank, relocate its chief executive office, change its state of
organization or change any other matter that will or could result in Bank’s
security interests in the Collateral becoming unperfected.



          7.3 Mergers or Acquisitions; New Subsidiary. Except for Permitted
Acquisitions, Borrower shall not merge or consolidate, or permit any of its
Subsidiaries to merge or consolidate, with or into any other business
organization, or acquire, or permit any of its Subsidiaries to acquire, all or
substantially all of the capital stock or property of another person without
the prior written consent of Bank, which Bank may grant or withhold in its sole
and absolute discretion. Borrower shall not create or cause to be created or
to come into existence any new Subsidiary after the Closing Date, without the
prior written consent of the Bank.



          7.4 Indebtedness. Borrower shall not create, incur, assume or be or
remain liable with respect to any Indebtedness, or permit any Subsidiary so to
do, other than Permitted Indebtedness and normal and customary unsecured
indebtedness incurred in the ordinary course of business. With respect to
Indebtedness described in clause (c) of the definition of Permitted
Indebtedness in Exhibit A, to the extent not specifically prohibited by the
terms of such Indebtedness, Bank shall have a subordinate lien in and to all
equipment and property financed or acquired with such Indebtedness.



          7.5 Encumbrances. Borrower shall not create, incur, assume or allow any
Lien with respect to the Collateral or any of its property, or assign or
otherwise convey any right to receive income, including the sale of any
Accounts, or permit any of its Subsidiaries so to do, except for Permitted
Liens, or covenant to any other person that Borrower in the future will refrain
from creating, incurring, assuming or allowing any Lien with respect to any of
Borrower’s property.



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          7.6 Judgments. Borrower shall not permit a judgment or judgments for the
payment of money in excess of $500,000 in the aggregate to be entered against
it or any Subsidiary which judgment Borrower permits to remain unsatisfied or
unstayed for a period of thirty (30) days after the same is entered against
Borrower or a Subsidiary.



          7.7 Distributions. Except for Permitted Dividends and Permitted
Investments, Borrower shall not pay any dividends or make any other
distribution or payment on account of or in redemption, retirement or purchase
of any capital stock, or permit any of its Subsidiaries to do so.



          7.8 Investments. Borrower shall not directly or indirectly acquire or
own, or make any Investment in or to any person, or permit any of its
Subsidiaries so to do, other than Permitted Investments.



          7.9 Loans. Except for Permitted Investments and Permitted Acquisitions,
Borrower shall not make or commit to make, or permit any of its Subsidiaries to
make or commit to make, any advance, loan, extension of credit or capital
contribution to, or purchase of any stock, bonds, notes, debentures or other
securities of any person.



          7.10 Loans to Officers. Borrower shall not make, or permit any of its
Subsidiaries to make, any loan or advance directly or indirectly for the
benefit of any past, present, or future stockholder, director, officer,
executive, manager, member, partner or employee of Borrower or a Subsidiary, at
the case may be, other than advances or loans made in the ordinary course of
business consistent with past practice, including but not limited to employee
relocation loans, employee bridge loans and other incidental loans to
employees, all in the ordinary course of business.



          7.11 Compensation. Borrower shall not pay, or permit any Subsidiary to
pay, any compensation to any past, present and future shareholder, director,
officer, executive, member, manager, partner and employee, whether through
salary, bonus or otherwise, if contrary to Borrower’s compensation policies or
the executive compensation rules established by the Securities and Exchange
Commission or the Nasdaq Stock Exchange.



          7.12 Transactions with Affiliates. Borrower shall not directly or
indirectly enter into or permit to exist, or permit any Subsidiary to directly
or indirectly enter into or permit to exist, any material transaction with any
Affiliate of Borrower or any Subsidiary except for transactions that are in the
ordinary course of Borrower’s or such Subsidiary’s business, upon fair and
reasonable terms that are no less favorable to Borrower or Subsidiary than
would be obtained in an arm’s length transaction with a non-affiliated Person.



          7.13 Subordinated Debt. Borrower shall not make any payment in respect of
any Subordinated Debt, or permit any of its Subsidiaries to make any such
payment except in compliance with the terms of such Subordinated Debt, or amend
any provision contained in any documentation relating to the Subordinated Debt
without Bank’s prior written consent.



          7.14 Inventory and Equipment. Borrower shall not store, or permit any
Subsidiary to store, its Inventory and shall not store, or permit any
Subsidiary to store, its Equipment with a bailee, warehouseman or similar
person unless Bank has received a pledge of the warehouse receipt covering such
Inventory and Equipment. Except for Inventory sold in the ordinary course of
business and except for such other locations as Bank may approve in writing,
Borrower shall not move or relocate its Inventory and shall not move or
relocate its Equipment from the location or locations identified in the
Certificate of Borrower and such other locations of which Borrower gives Bank
prior written notice and as to which Borrower signs and files a Financing
Statement where needed to perfect Bank’s security interest.



          7.15 Licenses. Borrower shall not become bound by, or permit its
Subsidiaries to become bound by, any license, agreement or other record which
would have a Material Adverse Effect.



          7.16 Compliance. Borrower shall not become or be controlled by an
“investment company”, within the meaning of the Investment Company Act of 1940,
or become principally engaged in, or undertake as one of its important
activities, the business of extending credit for the purpose of purchasing or
carrying margin stock, or



11









 




use the proceeds of any Credit Extension for such purpose, or permit any
of its Subsidiaries to do any of the foregoing.




          7.17 Negative Pledge Agreements. Borrower shall not permit the inclusion
in any contract to which it becomes a party of any provisions that could
restrict or invalidate the creation of a security interest in Borrower’s rights
and interests in any Collateral.



          7.18 Third Party Agreements. Borrower shall not enter into any agreement
containing any provision that would be violated or breached by the performance
of the obligations of Borrower under this Agreement.



     8. EVENTS OF DEFAULT.



     The occurrence of any one or more of the events, conditions, circumstances
and matters set forth below in this Section 8 shall constitute an Event of
Default by Borrower under this Agreement and the other Loan Documents.
Notwithstanding the foregoing and anything else in this Agreement to the
contrary, if any of the Obligations are payable on demand by Bank, then, in
such event, there are no conditions precedent to Bank’s right to demand payment
of such Obligations, in whole or in part, at any time and from time to time,
without prior notice, until the entire unpaid balance outstanding under such
Obligations, including principal, interest, fees, premiums, charges and costs
and expenses are paid in full. And, there are no conditions precedent to Bank
exercising any of and all of its other rights and remedies at such time or
times as it deems necessary or appropriate to recover full payment of the
Obligations, including, without limitation, the exercise of any of and all of
its rights and remedies set forth in Section 9 below , the exercise of any of
and all of its other rights and remedies granted to it under the Loan Documents
and the exercise of any of and all of its rights and remedies at law and in
equity.



          8.1 Default under Obligations. The occurrence of any event of default or
default condition under any of the Obligations, including, without limitation,
Borrower’s failure to pay, when due, the principal of and interest on any of
the Obligations, or Borrower’s failure to pay, when due, any and all other
amounts due under any of the Obligations, including, without limitation, any
taxes, fees, charges, premiums and costs and expenses.



          8.2 Covenant Default. Borrower fails to perform or satisfy any obligation
under Section 6 or violates any of the covenants contained in Section 7 of this
Agreement, or fails or neglects to perform or observe or otherwise defaults
under any other term, provision, condition, covenant or agreement contained in
this Agreement, in any of the other Loan Documents, or in any other present or
future instrument, document, agreement and other record between Borrower and
Bank or from Borrower to Bank or for the benefit of Bank, whether monetary or
non-monetary, and as to any default under such other term, provision,
condition, covenant or agreement that can be cured, has failed to cure such
default within ten (10) days after Borrower receives notice thereof or any
officer of Borrower becomes aware thereof; provided, however, that if the
default is non-monetary and cannot by its nature be cured within the ten (10)
day period or cannot after diligent attempts by Borrower be cured within such
ten (10) day period, and such default is likely to be cured within a reasonable
time, then Borrower shall have an additional reasonable period (which shall not
in any case exceed thirty (30) days) to attempt to cure such non-monetary
default, and within such reasonable time period the failure to have cured such
default shall not be deemed an Event of Default (provided that Bank shall not
be required to make any Credit Extensions during such cure period).



          8.3 Guarantor Default. The failure of any other person obligated for the
payment of any of the Obligations, either directly or indirectly, or obligated
under this Agreement or any of the other Loan Documents to perform any of the
terms and conditions imposed upon such other person by any of said agreements,
as and when the same are required to be so performed, or the occurrence of some
other default by such other person under any of said agreements.



          8.4 Termination of Supporting Obligation. The termination of or the
occurrence of an event of default or a default condition under any guaranty
agreement or other supporting obligation (inclusive of letters of credit, third
person pledge agreements and third person security agreements) which applies to
this Agreement or any of the other Loan Documents.



12









 





          8.5 Attachment. Borrower’s assets, or any part or portion thereof, are
attached, seized, subjected to a writ or distress warrant, or are levied upon,
or come into the possession of any trustee, receiver or person acting in a
similar capacity and such attachment, seizure, writ or distress warrant or levy
has not been removed, discharged or rescinded within ten (10) days, or if
Borrower is enjoined, restrained or in any way prevented by court order from
continuing to conduct all or any material part of its business affairs, or if a
judgment or other claim becomes a lien or encumbrance upon any material portion
of Borrower’s assets, or if a notice of lien, levy or assessment is filed of
record with respect to any of Borrower’s assets by the United States
Government, or any department, agency or instrumentality thereof, or by any
state, county, municipal or governmental agency, and the same is not paid
within ten (10) days after Borrower receives notice thereof, provided that none
of the foregoing shall constitute an Event of Default where such action or
event is stayed or an adequate bond has been posted pending a good faith
contest by Borrower (provided that no Credit Extensions will be required to be
made during such cure period).



          8.6 Insolvency. Borrower becomes insolvent, or an Insolvency Proceeding
is commenced by Borrower, or an Insolvency Proceeding is commenced against
Borrower and is not dismissed or stayed within thirty (30) days (provided that
no Credit Extensions will be required to be made prior to the dismissal of such
Insolvency Proceeding).



          8.7 Other Agreements. The occurrence of a default in any agreement or
agreements to which Borrower is a party with a third person or persons which
results in a right by such third person or persons, whether or not exercised,
to accelerate the maturity of any Indebtedness in an amount in the aggregate in
excess of 2% of Borrower’s Tangible Net Worth or that could have a Material
Adverse Effect.



          8.8 Subordinated Debt. Borrower makes any payment on account of
Subordinated Debt, except to the extent the payment is allowed under any
subordination agreement entered into with Bank.



          8.9 Misrepresentations. Any misrepresentation or misstatement exists now
or hereafter in any warranty or representation set forth herein, in any other
Loan Document or in any certificate delivered to Bank by any Responsible
Officer pursuant to this Agreement or any other Loan Document, or to induce
Bank to enter into this Agreement or any other Loan Document.



          8.10 Subsidiary Default. Default by any of Borrower’s Subsidiaries under
any Indebtedness or other obligation now owing or which hereafter arises and is
owing to Bank.



     9. BANK’S RIGHTS AND REMEDIES UPON DEFAULT.



          9.1 Rights and Remedies upon an Event of Default. If an Event of Default
shall occur under this Agreement, in addition to any other rights and remedies
which may be available to Bank and without limiting any other rights and
remedies granted to Bank in this Agreement, the other Loan Documents and at law
and in equity, including, without limitation, the rights and remedies provided
to Bank under the Code, which rights and remedies are fully exercisable by Bank
as and when provided herein and therein, Bank shall have the rights and
remedies set forth below in this Section 9.1, any and all of which it may
exercise at its election, without notice of its election and without demand.



               (a) Acceleration of Obligations. Bank may, at its option, accelerate and
declare immediately due and payable the Obligations, as well as any of and all
of the other indebtedness and obligations owing under this Agreement and the
other Loan Documents that are not already due hereunder and that are not
already due thereunder. If there is more than one Obligation, Bank may
accelerate and declare immediately due and payable all of the Obligations, or
Bank may from time to time and at any number of times after the occurrence of
an Event of Default, accelerate and declare immediately due and payable any one
or more of the Obligations as Bank in its discretion elects to accelerate
(provided that upon the occurrence of an Event of Default described in Section
8 under the heading “Insolvency”, all Obligations shall become immediately due
and payable without any action by Bank).



               (b) Terminate Credit Extensions. Bank may limit Borrower’s right to
receive any and all advances under this Agreement and under any other agreement
between Bank and Borrower to such amounts



13









 




as Bank determines from time to time to be appropriate under the
circumstances, Bank may impose a moratorium on future advances under this
Agreement and under any other agreement between Bank and Borrower, and Bank may
terminate the right of Borrower to receive advances under this Agreement and
under any other agreement between Borrower and Bank, and in all the foregoing
instances, Bank’s rights relative to Credit Extensions may be exercised
cumulatively, concurrently, alternatively and in any other manner and at any
time or times as Bank deems appropriate, in its discretion.




               (c) Protection of Collateral. Bank may make such payments and do or cause
to be done such acts as Bank considers necessary or advisable to protect the
Collateral and to preserve, protect, prefect and continue the perfection of its
security interest in the Collateral. Borrower agrees to assemble the
Collateral if Bank so requires and to make the Collateral available to Bank as
Bank may designate. Borrower authorizes Bank and its representatives to enter
the premises where the Collateral is located, to do, among other things Bank
deems necessary or advisable, the following: (i) take and maintain possession
of the Collateral, or any part or parts of it, (ii) pay, purchase, contest or
compromise any encumbrance, charge or lien which in Bank’s determination
appears to be prior or superior to its security interest, and (iii) pay all
costs and expenses incurred in connection with any of the foregoing. With
respect to any of Borrower’s premises, Borrower hereby grants Bank a license to
enter into possession of such premises and to occupy the same, without charge,
in order to exercise any of Bank’s rights and remedies provided herein, at law,
in equity and otherwise.



               (d) Sale and Disposition of Collateral Upon Default.



                    (i) Bank, directly and through others on its behalf, may ship, reclaim,
recover, store, finish, maintain, repair, prepare for sale, advertise for sale
and/or sell the Collateral, or part or parts thereof, for cash or on terms, at
one or more private or public sales held at such place or places as Bank
determines to be commercially reasonable, after having complied with the
provisions of this Agreement, the other Loan Documents and applicable
Requirements of Law relating to sale of the Collateral, including, without
limitation, the requirements of the Code. Bank is hereby irrevocably granted a
license or other right, pursuant to the provisions of this Section 9.1, to use,
without charge, Borrower’s labels, patents, copyrights, rights of use of any
name, trade secrets, trade names, trademarks, service marks, advertising matter
and any property of a similar nature, together with the right of access to all
tangible or electronic media in which any of the foregoing may be recorded or
stored, in completing production of, management of, advertising for sale and
selling any Collateral and, in connection with Bank’s exercise of its rights
under this Section 9.1, Borrower’s rights under all licenses and all franchise
agreements shall inure to Bank’s benefit. Borrower hereby agrees: (i) that
fifteen (15) days notice of any intended sale or disposition of any Collateral
is commercially reasonable; (ii) that a shorter period of notice of not less
than five (5) days will be commercially reasonable if Bank, in its opinion,
deems it necessary to move more expeditiously with disposition of the
Collateral or any part thereof; and (iii) that the foregoing shall not require
a notice if no notice is required under the Code.



                    (ii) Bank may credit bid and purchase at any sale or sales.



                    (iii) The proceeds of any sale of, or other realization upon, all or any
part of the Collateral pursuant to this Section 9.1 shall be applied by Bank in
the following order of priorities, or such other order as Bank may determine or
as may be required under applicable Requirements of Law: first, to payment of
the costs and expenses of such sale or other realization, and all expenses,
liabilities and advances incurred or made by Bank in connection therewith, and
any other unreimbursed costs and expenses for which Bank is to be reimbursed
pursuant to this Agreement and the other Loan Documents; second, to the payment
of unpaid principal of the Obligations; third, to the payment of accrued but
unpaid interest on the Obligations; fourth, to the payment of all other amounts
owing or outstanding by Borrower under the Obligations, this Agreement, the
other Loan Documents and otherwise to Bank as provided herein or therein, until
all the foregoing shall have been paid in full; finally, to payment to Borrower
or its successors or assigns, or as a court of competent jurisdiction may
direct, of any surplus then remaining from such proceeds.



                    (iv) Any deficiency that exists after disposition of the Collateral as
provided above will be paid immediately by Borrower, without demand by Bank,
but this provision shall not require Bank to first dispose of the Collateral
before attempting to recover payment of the Obligations from Borrower or any
other person and Bank shall have the right to proceed successively,
concurrently and alternatively against the Collateral,



14









 




the Borrower and any other person obligated on any of the Obligations in
any order and at any time or times as it deems to be in its best interest.




               (e) Discontinuance of Proceedings; Position of Parties Restored. If Bank
shall have proceeded to enforce any right or remedy under the Loan Documents by
foreclosure, entry, or otherwise and such proceedings shall have been
discontinued or abandoned for any reason, or such proceedings shall have
resulted in a final determination adverse to Bank, then and in every such case
Borrower and Bank shall be restored to their former positions and rights
hereunder, and all rights, powers and remedies of Bank shall continue as if no
such proceedings had occurred or had been taken.



          9.2 Remedies Cumulative. Bank’s rights and remedies under this Agreement,
the Loan Documents and all other agreements shall be cumulative and may be
exercised successively, concurrently, alternatively and in any other order and
at such time or times as Bank elects in its discretion. Bank shall have all
other rights and remedies not inconsistent herewith as provided under the Code,
by law and in equity. No exercise by Bank of one right or remedy shall be
deemed an election, and no waiver by Bank of any Event of Default on Borrower’s
part shall be deemed a continuing waiver. No delay by Bank shall constitute a
waiver, election or acquiescence by it. No waiver by Bank shall be effective
unless made in a written document signed on behalf of Bank and then shall be
effective only in the specific instance and for the specific purpose for which
it was given.



     10. NOTICES.



     Unless otherwise provided in this Agreement, all notices or demands by any
party relating to this Agreement or any other agreement entered into in
connection herewith shall be in writing and (except for financial statements
and other informational documents which may be sent by first-class mail,
postage prepaid) shall be personally delivered or sent by a recognized
overnight delivery service, certified mail, postage prepaid, return receipt
requested, or by facsimile to Borrower or to Bank, as the case may be, at their
respective addresses as set forth on the signature page of this Agreement. The
parties may change the address at which they are to receive notices hereunder
by notice in writing in the foregoing manner given to the other.



     11. WAIVERS.



          11.1 Waiver Of Trial By Jury. To the extent not prohibited by applicable
Requirements of Law, Borrower and Bank each hereby waive their respective
rights to a jury trial of any claim or cause of action based upon or arising
out of any of the Loan Documents or any of the transactions contemplated
therein, including contract claims, tort claims, breach of duty claims and all
other common law or statutory claims. Each party recognizes and agrees that
the foregoing waiver constitutes a material inducement for it to enter into
this Agreement. Each party represents and warrants that it has reviewed this
waiver with its legal counsel and that it knowingly and voluntarily waives its
jury trial rights following consultation with legal counsel.



          11.2 Marshalling of Assets. Borrower hereby waives, to the extent
permitted by law, the benefit of all appraisal, valuation, stay, extension,
reinstatement and redemption laws now in force and those hereafter in force and
all rights of marshalling in the event of any sale hereunder of the Collateral
or any part or any interest therein.



          11.3 Waiver of Action Against Third Persons. Borrower waives any right to
require Bank to bring any action against any other person or to require that
resort be had to any security or to any balances of any deposit or other
accounts or debts or credits on the books of Bank in favor of any other person.



     12. GENERAL PROVISIONS.



          12.1 Indemnification. Borrower hereby agrees to defend, protect,
indemnify and hold harmless Bank, all directors, officers, employees,
attorneys, agents and independent contractors of Bank, from and against all
claims, actions, liabilities, damages and costs and expenses asserted against,
imposed upon or incurred by Bank or any of such other persons as a result of,
or arising from, or relating to this Agreement, the other Loan Documents or



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the transactions contemplated hereby or thereby, except for losses
resulting from the gross negligence or willful misconduct of or breach of this
Agreement by, the person otherwise to be indemnified hereunder.




          12.2 Choice of Law. This Agreement shall be deemed to have been executed
and delivered in the Commonwealth of Virginia regardless of where the
signatories may be located at the time of execution and shall be governed by
and construed in accordance with the substantive laws of the Commonwealth of
Virginia, excluding, however, the conflict of law provisions thereof.



          12.3 Incorporation of Exhibits; Customer and Loan Numbers. All exhibits,
schedules, addenda and other attachments to this Agreement are by this
reference incorporated herein and made a part hereof as if fully set forth in
the body of this Agreement. The Customer and Loan Numbers, if any, stated in
this Agreement are for Bank’s internal business use and reference only and do
not and shall not limit the scope and extent of Bank’s rights hereunder,
including the Obligations secured hereby and the security interests of Bank in
the Collateral.



          12.4 Maintenance of Records by Bank. Borrower acknowledges and agrees
that Bank is authorized to maintain, store and otherwise retain the Loan
Documents or any of them in their original, inscribed tangible form or a record
thereof in an electronic medium or other non-tangible medium which permits such
record to be retrieved in a perceivable form; that a record of any of the Loan
Documents in a non-tangible medium which is retrievable in a perceivable form
shall be the agreement of Borrower to the same extent as if such Loan Document
was in its original, inscribed tangible medium and such a record shall be
binding on and enforceable against Borrower notwithstanding the same is in a
non-tangible form and notwithstanding the signatures of the signatories hereof
are electronic, typed, printed, computer generated, facsimiles or other
reproductions, representations or forms; and that Bank’s certification that a
non-tangible record of any of the Loan Documents is an accurate and complete
copy or reproduction of the original, inscribed tangible form shall be
conclusive, absent clear and convincing evidence of the incorrectness of said
certification, and such non-tangible record or a reproduction thereof shall be
deemed an original and have the same force and effect as the original,
inscribed tangible form.



          12.5 Credit Investigations; Sharing of Information; Control Agreements.
Bank is irrevocably authorized by Borrower, during the term of this Agreement
and until the last to occur of (i) payment in full of all the Obligations and
(ii) termination of Bank’s obligation to make Credit Extensions under this
Agreement, to make or have made such credit investigations as it deems
appropriate to evaluate Borrower’s and its Subsidiaries’ credit or financial
standing, and Borrower authorizes Bank to share with its affiliates its
experiences with Borrower and its Subsidiaries and other information in Bank’s
possession relative to Borrower and its Subsidiaries. Bank (i) shall not have
any obligation or responsibility to provide information to third persons
relative to Bank’s security interest in the Collateral, this Agreement and
otherwise with respect to Borrower and its Subsidiaries and (ii) shall not have
any obligation or responsibility to subordinate its security interest in the
Collateral to the interests of any third persons or to enter into control
agreements relative to the Collateral.



          12.6 Bank’s Liability for Collateral. Notwithstanding anything in this
Agreement or any of the other Loan Documents to the contrary, Bank may at any
time or times during the term of this Agreement make such payments and do or
cause to be done such acts as Bank considers necessary or advisable to protect
the Collateral and to preserve, protect and perfect or continue the perfection
of its security interest in the Collateral. So long as Bank complies with
reasonable banking practices, except as may be provided herein to the contrary,
Bank shall not in any way or manner be liable or responsible for: (i) the
safekeeping of the Collateral; (ii) any loss or damage thereto occurring or
arising in any manner or fashion from any cause; (iii) any diminution in the
value thereof; or (iv) any act or default of any carrier, warehouseman, bailee,
forwarding agency or other person whomsoever.



          12.7 Bank Expenses. If Borrower fails to pay any amounts or furnish any
required proof of payment due to third persons, as required under the terms of
this Agreement and the other Loan Documents, then after ten (10) days prior
written notice to Borrower, and Borrower’s failure to pay such amounts, Bank
may do or cause to be done any or all of the following: (i) make payment of
the same or any part thereof; (ii) set up such reserves as Bank deems necessary
to protect Bank from the exposure created by such failure; and (iii) obtain and
maintain insurance policies of the type required by this Agreement, and take
any action with respect to such policies as Bank deems prudent. Any amounts so
paid or deposited by Bank shall constitute Bank Expenses, shall be immediately
due and payable, shall bear interest at the Default Rate from the date of
payment or deposit and shall be secured by the Collateral. Any payments made
by Bank shall not constitute an agreement by Bank to make similar



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payments in the future or a waiver by Bank of any Event of Default under
this Agreement. If Bank is requested to waive an Event of Default or forbear
taking action relative thereto, Bank may condition any waiver or forbearance it
elects, in its discretion, to grant Borrower on payment by Borrower of such
fees to Bank as Bank deems appropriate under the circumstances and may
condition any such waiver or forbearance on Borrower reimbursing Bank for all
costs and expenses Bank incurs in connection with such waiver or forbearance.




          12.8 No Waiver; No Course of Dealing. Bank, at any time or times, may
grant extensions of time for payment or other indulgences or accommodations to
any person obligated on any of the Obligations, or permit the renewal,
amendment or modification thereof or substitution or replacement therefor, or
permit the substitution, exchange or release of any property securing any of
the Obligations and may add or release any person primarily or secondarily
liable on any of the Obligations, all without releasing Borrower from any of
its liabilities and obligations under any of the Loan Documents and without
Bank waiving any of its rights and remedies under any of the Loan Documents, or
otherwise. No delay or forbearance by Bank in exercising any or all of its
rights and remedies hereunder and under the other Loan Documents or rights and
remedies otherwise afforded by law or in equity shall operate as a waiver
thereof or preclude the exercise thereof during the continuance of any Event of
Default as set forth herein or in the event of any subsequent Event of Default
hereunder. Also, no act or inaction of Bank under any of the Loan Documents
shall be deemed to constitute or establish a “course of performance or dealing”
that would require Bank to so act or refrain from acting in any particular
manner at a later time under similar or dissimilar circumstances.



          12.9 Relationship of Parties; Successors and Assigns. The relationship of
Bank to Borrower is that of a creditor to an obligor (inclusive of a person
obligated on a supporting obligation) and a creditor to a debtor; and in
furtherance thereof and in explanation thereof, Bank has no fiduciary, trust,
guardian, representative, partnership, joint venturer or other similar
relationship to or with Borrower and no such relationship shall be drawn or
implied from any of the Loan Documents and any of Bank’s actions or inactions
hereunder or with respect hereto – and, Bank has no obligation to Borrower or
any other person relative to administration of any of the Obligations and the
Collateral, or any part or parts thereof, except as otherwise set forth herein.
The covenants, terms and conditions herein contained shall bind, and the
benefits and powers shall inure to, the respective heirs, executors,
administrators, successors and assigns of the parties hereto, as well as any
persons who become bound hereto as a debtor. If two or more persons or
entities have joined as Borrower, each of the persons and entities shall be
jointly and severally obligated to perform the conditions and covenants herein
contained. The term “Bank” shall include any payee of the Obligations hereby
secured and any transferee or assignee thereof, whether by operation of law or
otherwise, and Bank may transfer, assign or negotiate all or any of the
Obligations secured by this Agreement from time to time without the consent of
Borrower and without notice to Borrower and any transferee or assignee of Bank
or any transferee or assignee of another may do the same without Borrower’s
consent and without notice to Borrower. Borrower waives and will not assert
against any transferee or assignee of Bank any claims, defenses, set-offs or
rights of recoupment which Borrower could assert against Bank, except defenses
which Borrower cannot waive.



          12.10 Time of Essence. Time is of the essence for the performance of all
of Borrower’s covenants and agreements (inclusive of the Obligations) set forth
in this Agreement and each of the Loan Documents.



          12.11 Amendments in Writing; Integration. All amendments to or
terminations of this Agreement must be in writing. All prior agreements,
understandings, representations, warranties and negotiations between the
parties hereto with respect to the subject matter of this Agreement, if any,
are merged into this Agreement and the Loan Documents.



          12.12 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, shall be deemed to be an original, and all of
which, when taken together, shall constitute but one and the same Agreement.



          12.13 Survival. All covenants, representations and warranties made in
this Agreement shall continue in full force and effect so long as any
Obligations remain outstanding. Notwithstanding anything in this Agreement or
the other Loan Documents to the contrary, the obligations of Borrower to
indemnify Bank as described in Section 12.1 shall survive until all applicable
statute of limitations periods with respect to actions that may be brought
against Bank have run.



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          12.14 Limited License. During the term of this Agreement, Borrower hereby
grants to Bank and its Affiliates, a non-exclusive, world-wide,
non-transferable, royalty-free irrevocable license to use the Borrower’s Marks
(as herein defined) solely for and in connection with the general marketing,
promotion and advertising activities of Bank and its Affiliates. General
marketing, promotion and advertising activities shall include press releases,
product brochures, tombstone ads and other advertising typical in industry
practice and disclosure of Borrower’s Marks on the Bank’s website, including a
link to the Borrower’s website. “Marks” shall mean Borrower’s names, logos,
Trademarks, trade names, service marks and world wide web addresses. Bank
shall use commercially reasonable efforts to cause the appropriate designation
"TM” or the registration symbol “®” to be placed adjacent to the Marks in
connection with the use thereof. Notwithstanding the foregoing, Bank shall be
under no obligation to use any of such Marks. Any marketing, promotion or
advertising materials which incorporate Borrower’s Marks shall be submitted to
Borrower for approval prior to publication.



[THE NEXT PAGE IS THE SIGNATURE PAGE]




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In witness whereof, the parties have caused this agreement to be executed with
authority duly obtained, as of the date first written above.




    	 	 	 	 	 
	Portfolio
            Recovery Associates, Inc
	 	Witness:	 
	 	 	 	 	 
	By:   
          
	 	 	 	 
	 	
	 
	Print
            Name: 
	 	  	

	 	
	 	 	 
	Title:
                
	 	 	Print Name: 	 
	 	
	 	 	








  RBC CENTURA BANK


    By:   



  
    Name: Alfred W. Craft, III

    Title: Commercial Banking Officer
  5700 Lake Wright Drive, Suite 400





Norfolk, Virginia 23502


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