exv10w7



 






Exhibit 10.7




FIRST AMENDMENT TO FRANCHISEE FINANCING AGREEMENT




     This First Amendment to Franchisee Financing Agreement (“Amendment”) is made and
entered into by and among Texas Capital Bank, National Association (“Lender”), ColorTyme,
Inc., a Texas corporation (“ColorTyme”), and Rent-A-Center East, Inc., a Delaware
corporation formerly known as Rent-A-Center, Inc. (“RAC”).



RECITALS




     A. Lender, ColorTyme and RAC entered into that certain Franchisee Financing Agreement dated
April 30, 2002 (as the same has been amended, modified, restated or supplemented from time to time,
the “Agreement”).



     B. Lender, ColorTyme and RAC desire to amend the Agreement in accordance with the terms of
this Amendment.



AGREEMENT




     For good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:



     1. Definitions. All capitalized terms not defined herein shall be construed to have
the meaning and definition set forth in the Agreement.



     2. Amendment to Recital A. Effective as of the date hereof, paragraph A of the
Recitals of the Agreement is hereby amended and restated to read in its entirety as follows:




     A. ColorTyme is a franchisor of “rent-to-own” stores (each such store is
referred to herein as an “RTO Store”) operated by franchisees licensed by
ColorTyme (each such franchisee is herein referred to individually as a
“Franchisee” and collectively as the “Franchisees”), offering
various home entertainment equipment, household equipment, and consumer products and
parts, accessories, and other goods used in connection therewith (all such goods are
referred to herein as “Inventory”), and certain Franchisees may open new
stores for the origination and/or processing of payday loans and the other services
incident to the foregoing (each such store is referred to herein as a “PayDay
Store”). PayDay Stores may be located within existing RTO Stores or in separate
locations attached to an RTO Store and owned and operated by a Franchisee (or its
affiliate).



     3. Amendment to Recital B. Effective as of the date hereof, paragraph C of the
Recitals of the Agreement is hereby amended and restated to read in its entirety as follows:




     C. ColorTyme desires a source of financing for its Franchisees for the purposes
described herein.



     4. Amendment to Article I. Effective as of the date hereof, Article I of the
Agreement is hereby amended and restated to read in its entirety as follows:



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Article I



Credit Facility





     1.1 Credit Facility. Bank shall provide a credit facility for Franchisees on
the terms and subject to the conditions set forth in this Agreement. The amount of the
credit facility shall be up to, but not in excess of, Twenty Million and No/100 Dollars
($20,000,000.00) in the aggregate; provided, however, that (i) up to, but not in excess of,
Fifteen Million and No/100 Dollars ($15,000,000.00) of such credit facility may be utilized
for Inventory Lines of Credit (as defined below) and/or RTO Term Loans (as defined below),
and (ii) up to, but not in excess of, Five Million and No/100 Dollars ($5,000,000.00) of
such credit facility may be utilized for Pay Day Lines of Credit (as defined below) and/or
PDL Term Loans (as defined below). Bank will not finance any transaction or transactions
which would cause the amount financed by Bank pursuant to this Agreement to exceed any of
the limitations set forth in the preceding sentence. Each credit facility extended by Bank
to a Franchisee shall be secured by a first priority security interest in (x) all of the
Franchisee’s inventory, goods, chattel paper, accounts, contract rights, documents,
instruments, note receivables, franchise rights, and general intangibles (specifically
including leases and rental contracts), (y) 100% of the stock or equity interest in such
Franchisee, and (z) such additional collateral as Bank may require, and shall be fully
guaranteed by each of such Franchisee’s principal owners.



     5. Amendment to Article II. Effective as of the date hereof, Article II of the
Agreement is amended and restated to read in its entirety as follows:



Article II



Credit Procedures, Terms and Administration





     2.1 Financing Procedures. The following procedures shall be employed in
determining the availability of financing for Franchisees under this Agreement:




     (a) In the event a Franchisee shall indicate an interest in obtaining financing
for any of the purposes described in Section 2.5, ColorTyme shall provide
the Franchisee with a credit application and other credit documentation, to be
developed by Bank and approved by ColorTyme, and shall assist the Franchisee in
completing such credit application and other credit documents.




     (b) After the Franchisee has completed the credit application and provided the
other credit documents specified by Bank, if such credit application and other
credit documents are acceptable to ColorTyme, ColorTyme shall promptly forward the
executed credit application and other credit documents to Bank at its office in
Dallas, Texas or any other such location Bank may designate in writing to ColorTyme.




     (c) If, following completion of its review of such credit application and other
credit documents and its credit investigation, Bank determines that it will provide
the financing requested, it shall so notify the Franchisee and ColorTyme and, upon
receipt of such additional closing documents and satisfaction of such



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closing conditions as Bank determines to be necessary for the approval and
documentation of the credit in its sole discretion, Bank shall establish one or more
of the following: (i) a revolving line of credit for the Franchisee in accordance
with the terms of this Agreement for such Franchisee’s acquisition of Inventory
and/or such Franchisee’s acquisition or conversion of an RTO Store (an
“Inventory Line of Credit”), (ii) a revolving line of credit for the
Franchisee in accordance with the terms of this Agreement for such Franchisee’s
funding or extension of payday loans (a “PayDay Line of Credit”), (iii) a
term loan facility for such Franchisee’s acquisition of Inventory and/or such
Franchisee’s acquisition or conversion of an RTO Store (an “RTO Term Loan”),
and/or (iv) a term loan facility for such Franchisee in order to build and equip a
PayDay Store (a “PDL Term Loan”). For purposes of this Agreement, the
resulting obligation of a Franchisee to Bank pursuant to any of the credit
facilities described above is referred to as a “Receivable”.




     2.2 Interest Rates. Unless otherwise agreed in writing by Bank and ColorTyme,
the interest rate on each Receivable shall be in accordance with the following schedule: (i)
for each Inventory Line of Credit with a Credit Limit (as that term is hereinafter defined)
of $1,000,000 or less, the rate will be the Prime Rate plus 3.75%; (ii) for each Inventory
Line of Credit with a Credit Limit of more than $1,000,000, the rate will be the Prime Rate
plus 2.75%; (iii) for each RTO Term Loan, the rate will be the same as the rate applicable
to the Franchisee’s Inventory Line of Credit on the date of such RTO Term Loan; (iv) for
each PayDay Line of Credit, the rate will be the Prime Rate plus 4.75%; and (v) for each PDL
Term Loan, the rate will be the Prime Rate plus 4.75%. For purposes of this subparagraph,
the term “Prime Rate” shall mean the “Wall Street Prime Rate” as announced
and published and so designated in the Money Rates Section of the Wall Street Journal
(Southwest Region), as such rates may change from time to time, ColorTyme hereby
acknowledging that the “Wall Street Prime Rate” may not be the lowest rate offered by Bank
to its customers. If such Prime Rate shall cease to be published or is published
infrequently or sporadically, then the Prime Rate shall be determined by reference to
another Prime Rate or similar lending rate index, generally accepted on a national basis, as
selected by Bank in its sole and absolute discretion. Fluctuations in the Prime Rate shall
become effective on the last business day of the calendar month during which such changes in
the Prime Rate occur. Interest will be calculated on the basis of a 360-day year.




     2.3 Credit Limits. Upon approval of an application for financing submitted by
or on behalf of a Franchisee pursuant to this Agreement, Bank shall establish a credit limit
for such Franchisee in an amount agreed upon from time to time by Bank, ColorTyme and such
Franchisee (the credit limit established for each Franchisee with respect to any credit
facility extended to such Franchisee is referred to herein as a “Credit Limit”).
The amount of any Credit Limit may be adjusted from time to time upon written agreement by
Bank, ColorTyme and such Franchisee. It is contemplated that (i) the Credit Limit for
PayDay Lines of Credit will not exceed $85,000, and (ii) the Credit Limit for PDL Term Loans
will not exceed $15,000 (provided that exceptions to this general rule may be agreed to by
ColorTyme and Bank from time to time in their sole and absolute discretion).



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2.4 Advance Limits.




     (a) Advance Limits for RTO Stores. Notwithstanding the amount of the
Franchisee’s applicable Credit Limit(s), the total amount of credit available under
a Franchisee’s Inventory Line of Credit and RTO Term Loan (collectively, the
“RTO Receivables”) shall be limited to the product of the Franchisee’s
Average Monthly Revenue multiplied by five (such advance limit established for each
Franchisee is referred to herein as its “RTO Advance Limit”). For purposes
of this Agreement, a Franchisee’s “Average Monthly Revenue” shall mean the
average monthly total revenue (exclusive of sales tax and any fees or other income
directly attributable to a PayDay Store) of the Franchisee from the sale, lease or
rental of Inventory and other fees, calculated in accordance with generally accepted
accounting principles applied on a consistent basis, for the three (3) calendar
months preceding the most recent review of such Franchisee’s RTO Receivables.
Notwithstanding anything in this section to the contrary, if the RTO Advance Limit
established pursuant to this section would otherwise be an amount that is less than
the then outstanding balance of such RTO Receivables (each such RTO Receivable is
referred to herein as an “Overline Receivable”), the RTO Advance Limit for
such Overline Receivable will be set at the then outstanding balance thereof, and
such Overline Receivable will continue to be administered as provided herein, unless
Bank and ColorTyme agree otherwise. The provisions of this section shall not apply
to any RTO Receivable until the RTO Store for which the financing was provided under
the RTO Receivable has been open for business for one (1) year.



     (b) Notwithstanding the amount of the Franchisee’s applicable Credit Limit(s),
the amount of credit available under a Franchisee’s PayDay Line of Credit shall be
limited to the product of the Franchisee’s Applicable PDL Ratio (as defined below)
multiplied by its PDL Balance at the end of the immediately preceding month (such
advance limit established for such Franchisee is referred to herein as its “PDL
Advance Limit”). For purposes of this Agreement, (i) a Franchisee’s
“Applicable PDL Ratio” shall mean, as applicable, a percentage equal to,
100% during the first six-month period following the initial extension of credit
under a PayDay Line of Credit, 90% during the second six-month period following the
initial extension of credit under a PayDay Line of Credit, 80% during the third
six-month period following the initial extension of credit under a PayDay Line of
Credit, 70% during the fourth six-month period following the initial extension of
credit under a Pay Day Line of Credit, 70% during the fifth six-month period
following the initial extension of credit under a Pay Day Line of Credit, 70% during
the sixth six-month period following the initial extension of credit under a Pay Day
Line of Credit, and 50% at any time thereafter, provided, that Pay Day Lines of
Credit shall mature and be fully due and payable thirty-six (36) months following
the initial extension of credit thereunder (unless the maturity thereof is extended
with the written consent of both Bank and ColorTyme), (ii) a Franchisee’s “PDL
Balance” shall mean, as of any date of determination, the outstanding principal
balance of all of its Eligible PayDay Loans (as defined below), plus the amount of
fees incurred and payable



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thereunder, and (iii) the term “Eligible PayDay Loans” means, with
respect to a Franchisee, each payday loan owing by a borrower thereunder (each such
borrower hereinafter referred to as a “PayDay Borrower”) to such Franchisee
which meets the following requirements at the time it comes into existence and
continues to meet the same until such payday loan is paid in full:




     (1) it is a valid, legally enforceable and unconditional obligation of
such PayDay Borrower;




     (2) it is evidenced by credit documents subject to a security interest
in favor of Bank and conspicuously stamped with a notation indicating such
documents have been collaterally assigned by the Franchisee to Bank, such
notation to be similar in form to “COLLATERALLY ASSIGNED TO TEXAS CAPITAL
BANK AND/OR ITS SUCCESSORS OR ASSIGNS”; and




     (3) it has not remained unpaid more than 30 days after the maturity
date thereof.



     2.5 Use of Proceeds. Bank will advance funds to or on behalf of a Franchisee
pursuant to this Agreement only for: (i) in the case of such Franchisee’s Inventory Line of
Credit and/or RTO Term Loan, (1) such Franchisee’s acquisition of Inventory and/or (2) such
Franchisee’s acquisition or conversion of an RTO Store, (ii) in the case of such
Franchisee’s PayDay Line of Credit, such Franchisee’s funding or extension of payday loans
and/or the opening of a PayDay Store and the other services incident to the foregoing, or
(iii) in the case of such Franchisee’s PDL Term Loan, such Franchisee’s funding of the costs
associated with the build out and equipping of a PayDay Store (to include such items as a
CCTV system, safe, computer, computer printer, exterior signage and approved construction
costs).




     (a) Inventory. Advances under the Inventory Line of Credit or RTO Term
Loan for Inventory will be limited to the lesser of (i) the cost of the Inventory
acquired by the Franchisee; (ii) the amount of the Franchisee’s applicable Credit
Limit; or (iii) the amount of the Franchisee’s RTO Advance Limit.




     (b) Store Acquisitions and Conversions. Advances under the Inventory
Line of Credit or RTO Term Loan for RTO Store acquisitions and/or conversions (i.e.,
the acquisition of existing RTO Stores and/or the acquisition of other “rent-to-own”
stores for conversion to “ColorTyme” RTO Stores) will be limited to the lesser of
(i) in the case of an RTO Store that has been open for business (either as a
“ColorTyme” RTO Store or as another “rent-to-own” store) for one (1) year or more,
the product of the Average Monthly Revenue, as defined in Section 2.4, of
the individual RTO Store multiplied by nine (9); (ii) the amount that would cause
the Debt-to-Revenue Ratio for the Franchisee to equal or exceed 5:1; (iii) except in
the case of advances pursuant to an RTO Term Loan, the amount of the Franchisee’s
applicable Credit Limit; and (iv) the amount of the Franchisee’s RTO Advance Limit.
For purposes of this paragraph, “Debt-to-



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Revenue Ratio” shall mean the ratio of (x) Funded Debt to (y) the
Average Monthly Revenue, as defined in Section 2.4 of the Franchisee
(calculated on an aggregate basis for all RTO Stores owned and/or operated by such
Franchisee and any and all affiliates of such Franchisee); and “Funded Debt”
shall mean, as of any date, the total amount of any liabilities (including the
advance contemplated by this paragraph) that would be reflected on the consolidated
balance sheet of Franchisee and its parent and any and all subsidiaries and
affiliates, if any, in accordance with generally accepted accounting principles
applied on a consistent basis. Financing for RTO Store acquisitions and/or
conversions will be made available only to Franchisees that are, at the time,
already indebted to Bank under a Receivable.




     (c) PayDay Stores. Advances under the PayDay Line of Credit will be
limited to the lesser of (i) the amount of the Franchisee’s applicable Credit Limit;
or (ii) the amount of the Franchisee’s PDL Advance Limit. All advances under the
PayDay Line of Credit or a PDL Term Loan will be made available to the Franchisee
only upon prior written authorization from ColorTyme, and such advances will be
wired directly to the Franchisee.


For purposes of this section, Bank may rely fully on the representations and/or agreements of the
Franchisee with respect to the use of funds, with no obligation to independently verify such
information. The use of any such funds by a Franchisee for any purpose not permitted by this
section will not affect the obligations of ColorTyme or Guarantor under this Agreement.





2.6 Payment Terms. Each Receivable will be repayable as follows:




     (a) In the case of the Inventory Line of Credit, (i) accrued and unpaid
interest shall be payable monthly, and (ii) principal shall be payable in monthly
installments as determined in accordance with Addendum A attached hereto and
made a part hereof, as such Addendum A may be modified from time to time by
the parties to this Agreement. In addition, at the option of Bank or ColorTyme, a
mandatory principal payment shall be made on any Inventory Line of Credit that is an
Overline Receivable (at any time following the initial month in which such Overline
Receivable was first determined to exist) to the minimum extent necessary to cause
the amount of the RTO Receivables to no longer exceed the RTO Advance Limit.




     (b) In the case of an RTO Term Loan, (i) accrued and unpaid interest shall be
payable monthly, and (ii) principal shall be payable in equal monthly installments
over the term of the RTO Term Loan, with the monthly principal installment to equal
the amount of the RTO Term Loan divided by the number of months in the term thereof.
In addition, at the option of Bank or ColorTyme, a mandatory principal payment
shall be made on any RTO Term Loan that is an Overline Receivable (at any time
following the initial month in which such Overline Receivable was first determined
to exist) to the minimum extent necessary to cause the amount of the RTO Receivables
to no longer exceed the RTO Advance Limit.



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     (c) In the case of the PayDay Line of Credit, (i) accrued and unpaid interest
shall be payable monthly, (ii) mandatory principal payments shall be made in such
amounts as may be necessary to ensure that the outstanding principal balance under
the PayDay Line of Credit does not exceed the PDL Advance Limit (any such mandatory
principal payments are to be made within one (1) business day following the
determination thereof), and (iii) all principal and accrued and unpaid interest
shall be fully and finally due and payable 36 months from the initial extension of
credit under such Pay Day Line of Credit, or upon the earlier maturity thereof,
whether by acceleration or otherwise.




     (d) In the case of a PDL Term Loan, (i) accrued and unpaid interests shall be
payable monthly, (ii) principal shall be payable in equal monthly installments over
a period equal to the lesser of (A) 36 months, or (B) the remaining term of any
lease of the space for the applicable PayDay Store, with the monthly principal
installment to equal the amount of the PDL Term Loan divided by the number of months
in the term thereof, and (iii) all principal and accrued and unpaid interest shall
be fully and finally due and payable 36 months from the initial extension of credit
under such PDL Term Loan, or upon the earlier maturity thereof, whether by
acceleration or otherwise.




2.7 Suspension of Advances.




     (a) Advances may, at Bank’s option, be suspended or limited under any RTO
Receivable drawn to an amount greater than the product of the Franchisee’s Average
Monthly Revenue multiplied by four (4) where (i) the ratio of cash expenses (total
annual expenses, less depreciation directly related to the operation of the
Franchisee’s RTO Store(s), calculated in accordance with generally accepted
accounting principles applied on a consistent basis) to total revenue attributable
to the Franchisee’s RTO Stores (calculated in accordance with generally accepted
accounting principles applied on a consistent basis, excluding extraordinary items,
based on a three (3) month rolling average) exceeds 64%; (ii) the Franchisee fails
to maintain the number of rental contracts that are seven (7) or more days past due
(calculated on a three (3) month rolling average) at 8% or less of its total
outstanding rental contracts; (iii) expenses of an RTO Store that has been open for
business for less than twelve (12) months exceed the proforma cash flow projections
as a percent of revenue for that RTO Store; (iv) payments (principal and/or
interest) under any RTO Receivable of the Franchisee are more than fifteen (15) days
past due; (v) the Franchisee fails to submit a copy of the ColorTyme Royalty report
to Bank within 15 days following the end of the month; (vi) Franchisee fails to
submit a copy of the current financial statement within 45 days following the end of
each business month; or (vii) in Bank’s determination, the RTO Receivable is
otherwise in default.




     (b) PayDay Stores. Advances may, at Bank’s option (or at ColorTyme’s
direction), be suspended or limited under any PayDay Line of Credit or PDL term Loan
(in each case, “PDL Receivable”) where (i) the Franchisee either fails to
submit a detailed report evidencing its compliance with



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Section 2.14 within 30 days following the end of each business month or
fails to comply with the PayDay Store Collection Rate for any PayDay Store for a
period of two (2) months or more; (ii) with respect to a PayDay Line of Credit, the
Franchisee fails to submit a borrowing base report to Bank within 30 days following
the end of each business month; (iii) the guarantor(s) of the Franchisee’s PayDay
Line of Credit fails to submit a copy of such guarantor’s annual financial statement
(including without limitation, details on contingent liabilities and cash flow) and
federal (and state, if applicable) income tax return for such guarantor within 45
days following the end of such calendar year; or (iv) in Bank’s determination, the
PDL Receivable is otherwise in default.



     2.8 Financing Terms and Credit Standards. The specific terms of any financing
provided by Bank to Franchisees under this Agreement shall be determined from time to time
by Bank in accordance with its ordinary and customary business practices. The credit
standards for approval of any financing provided by Bank to Franchisees under this Agreement
shall be determined from time to time by Bank and ColorTyme; provided, however, the
application of such credit standards to particular transactions shall be at Bank’s sole
discretion.



     2.9 Credit Approval. Nothing herein shall obligate Bank to accept or approve
any application for financing submitted by or on behalf of any Franchisee. Bank may, in its
discretion, reject or decline any application for financing submitted by or on behalf of any
Franchisee; provided, if Bank rejects or declines any such application, it shall inform
ColorTyme and the Franchisee of the reasons therefor.



     2.10 Collection Procedures. Bank shall use its ordinary and customary
practices and procedures to collect outstanding Receivables, subject to the provisions of
this Agreement.



     2.11 Modification of Receivables. Notwithstanding anything in this Agreement
to the contrary, Bank reserves the right to make such modifications, adjustments and/or
revisions to any Receivables, including the Credit Limits, payment terms and conditions for
advances thereunder, as it deems necessary or appropriate under the circumstances, provided
it may not, without the written consent of ColorTyme, increase the Credit Limits above the
amounts agreed to by ColorTyme pursuant to Section 2.3. Provided Bank shall not
have previously given ColorTyme notice of default with respect to a Receivable pursuant to
Section 4.1, Bank may at any time, at its discretion, amend payment schedules, defer
payments or otherwise modify the terms of any such Receivable, without in any way affecting
the obligations of ColorTyme or the Guarantor under this Agreement.



     2.12 Payments to ColorTyme. Bank shall pay to ColorTyme, from the interest
portion of each payment received by Bank on account of each Receivable, an amount calculated
by multiplying the amount of each such interest payment by a fraction, the denominator of
which is the rate of interest applicable to such Receivable and the numerator of which is
determined on the following scale: (i) with respect to an Inventory Line of Credit and/or
RTO Term Loan, 2.00% if the Franchisee’s aggregate Credit Limit



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for such credit facilities is $1,000,000 or less; (ii) with respect to an Inventory
Line of Credit and/or RTO Term Loan, 1.50% if the Franchisee’s aggregate Credit Limit for
such credit facilities is greater than $1,000,000; or (iii) with respect to a PayDay Line of
Credit and/or PDL Term Loan, 2.00%. The amounts payable pursuant to this section shall be
payable on a monthly basis. The credit documentation between Bank and any Franchisee shall
expressly provide for the payment of such amount to ColorTyme and shall acknowledge that
such amount constitutes a fee payable by such Franchisee to ColorTyme that is fully earned
and non-refundable upon each payment thereof.




     2.13 Field Exams. With respect to any PayDay Stores, Bank may conduct, at the
Bank’s sole discretion, periodic field exams at the Franchisee’s expense; provided however,
so long as no event of default has occurred and is continuing under any PDL Receivable, the
Franchisee will not be required to pay more than $500 per PayDay Store during any calendar
year for any such field exams.




     2.14 PayDay Loan Collections. Any Franchisee with a PayDay Line of Credit
shall maintain a PayDay Collection Rate (as defined below) for each PayDay Store of at least
90%, determined as of the end of each month. For purposes of this Agreement, the term
"PayDay Store Collection Rate” shall mean, as of any date of determination, a ratio
determined by dividing a PayDay Store’s Collected Cash (as defined below) by its Available
Cash. For purposes of this Agreement, (i) the term “Collected Cash” shall mean, for
any month, the sum of payday loan principal collected during such month, plus payday loan
fees collected during such month, plus paydown amounts collected during such month, plus
returned checks collected during such month, and (ii) the term “Available Cash” shall mean,
for any month, the sum of Collected Cash during such month, plus payday loan refunds
received during such month, plus payday loan discounts received during such month, plus past
due open (non-deposited) payday loan amounts as of the last day of the month, plus the net
due amount of all returned checks as of the last day of the month, plus any payday loan or
returned check charged off as uncollectible during the month.




     2.15 Identity of Franchisee. Bank shall not extend to any Franchisee a PayDay
Line of Credit if such Franchisee has obtained any similar financing from any third party
lender for the purpose of financing the making of payday loans.



     6. Amendment to Article IV. Effective as of the date hereof, Article IV of the
Agreement is hereby amended and restated to read in its entirety as follows:



ARTICLE IV



Receivable Defaults





     4.1 Notice of Default. In the event any payments due under any of the
Receivables are delinquent by more than ninety (90) days, in the case of RTO Receivables, or
thirty (30) days, in the case of PDL Receivables, or Bank otherwise declares a default under
any of the Receivables, Bank shall give notice thereof to ColorTyme and the Guarantor.



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     4.2 Foreclosure. Following notice of a default under a Receivable pursuant to
Section 4.1, Bank shall, at its expense, attempt to collect the outstanding
obligations under the Receivable (including making demand therefore from the appropriate
debtor(s) and other persons) and, if necessary, in the case of RTO Receivables, commence
appropriate legal actions to recover the collateral securing such Receivable and to
foreclose the interest of the account debtor(s) and other persons, if any, in such
collateral.




     4.3 Assignment. Following either (i) in the case of RTO Receivables, the Bank
securing possession of the defaulted Receivable or the entry by a court of competent
jurisdiction of an order staying or barring such actions or adjudicating the rights of Bank
with respect to such collateral, or (ii) in the case of PDL Receivables, the notices and
demands contemplated by Sections 4.1 and 4.2 above have been given or made,
Bank may, at its option, sell its interest in any collateral and the defaulted Receivable
secured thereby to ColorTyme, without recourse or warranty of any kind whatsoever, and
ColorTyme shall within five (5) business days, proceed to purchase Bank’s interest in such
collateral and the defaulted Receivable. Contemporaneously with such assignment, ColorTyme
shall pay to Bank an amount (“Repayment Amount”) equal to the outstanding principal
balance of plus accrued, unpaid interest on such Receivable.



     7. Amendment to Section 7.1. Effective as of the date hereof, Section 7.1 of the
Agreement is hereby amended and restated to read in its entirety as follows:




     7.1 Expenses. Each party hereto shall pay and be responsible for its
own expenses incurred in connection with this Agreement and the transactions herein
contemplated; provided, however, ColorTyme and the Guarantor shall reimburse Bank
for all of its reasonable out-of-pocket expenses, including the reasonable fees and
expenses of its legal counsel, incurred in connection with (a) the negotiation and
preparation of this Agreement and the transactions contemplated by this Agreement,
(b) with respect to each PayDay Line of Credit established for a Franchisee, up to a
maximum of Five Hundred Dollars ($500) for the establishment of such PayDay Line of
Credit, (c) the enforcement and collection of Receivables that default, up to a
maximum of One Thousand Dollars ($1,000) for each such default, and (d) the
enforcement or preservation of Bank’s rights under this Agreement following an Event
of Default. All such expenses shall be paid promptly upon request by Bank.



     8. Amendment to Addendum A. Effective as of the date hereof, all references to
“Addendum A” in the Agreement will be deemed to be references to the “Addendum A” attached hereto
as Addendum A.



     9. Effect of Amendment. Except as amended hereby, the Agreement shall remain in full
force and effect.



     10. Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE SUBSTANTIVE LAWS OF THE STATE OF TEXAS (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR
CHOICE OF LAW).



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     11. Counterparts. This Amendment may be executed in counterparts, each of which when
so executed and delivered shall be deemed to be an original and all of which taken together shall
constitute but one and the same instrument. Signatures hereby transmitted by facsimile or other
electronic means shall be effective as originals.



[Remainder of Page Intentionally Left Blank. Signature Page Follows.]




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     IN WITNESS WHEREOF, the parties have executed this Amendment on this 30th day of August, 2005.



	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 	 	COLORTYME, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/Robert F. Bloom	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Robert F. Bloom	 	 
	 

	 	 	 	President and Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	 	 	RENT-A-CENTER EAST, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/Mitchell E. Fadel	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Mitchell E. Fadel	 	 
	 

	 	 	 	Vice President	 	 
	 
	 	 	 	 	 	 
	 	 	TEXAS CAPITAL BANK, NATIONAL ASSOCIATION	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/W. Reed Alton	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	W. Reed Alton	 	 
	 

	 	 	 	Executive Vice President	 	 






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ADDENDUM A




Payment Terms




     For purposes of Paragraph 2.6(a) of the Franchisee Financing Agreement (as amended, the
“Agreement”), dated April 30, 2002, by and between Texas Capital Bank, National
Association, ColorTyme, Inc., and Rent-A-Center East, Inc., the amount of the monthly principal
installment for an Inventory Line of Credit shall be calculated based upon the multiple of the
Franchisee’s Average Monthly Revenue to the principal balance of the Inventory Line of Credit and
any other indebtedness owed by Franchisee to Bank as of the end of the prior calendar month and
shall be payable as follows:



	 	 	 
	Total Debt of Stores open more	 	 
	than one year as a Multiple of	 	 
	Average Monthly Revenue of Stores	 	 
	open more than one year	 	Monthly Principal Payment
	3.99 x or less

	 	6.0% of principal balance
	4.00 x — 4.49 x

	 	6.5% of principal balance
	4.50 x — 4.99 x

	 	7.0% of principal balance
	5.00 x or more

	 	8.0% of principal balance or such
greater amount as may be determined by
Bank in its reasonable sole discretion






Capitalized terms shall have the meanings set forth in the Agreement.





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