exv10w3






Exhibit 10.3




SENIOR SUBORDINATED LOAN AND SECURITY AGREEMENT




Dated as of August 25, 2010




by and among




REGIONAL MANAGEMENT CORP.,

REGIONAL FINANCE CORPORATION OF SOUTH CAROLINA,

REGIONAL FINANCE CORPORATION OF GEORGIA,

REGIONAL FINANCE CORPORATION OF TEXAS,

REGIONAL FINANCE CORPORATION OF NORTH CAROLINA,

REGIONAL FINANCE CORPORATION OF ALABAMA, and

REGIONAL FINANCE CORPORATION OF TENNESSEE




and



THE LENDERS PARTY HERETO



and



PALLADIUM CAPITAL MANAGEMENT III, L.L.C.,

AS AGENT FOR THE LENDERS



 









 





Table of Contents




	 	 	 	 	 
	 	 	Page	 
	SECTION 1. DEFINITIONS
	 	 	1	 
	1.1. Defined Terms
	 	 	1	 
	1.2. Accounting Terms
	 	 	13	 
	1.3. Other Terms Defined in UCC
	 	 	14	 
	1.4. Other Interpretive Provisions
	 	 	14	 
	 
	 	 	 	 
	SECTION 2. COMMITMENT OF THE LENDERS
	 	 	15	 
	2.1. Subordinated Loan
	 	 	15	 
	2.2. Interest and Fee Computation; Collection of Funds
	 	 	16	 
	2.3. Additional Interest
	 	 	16	 
	2.4. Taxes
	 	 	17	 
	2.5. Single Obligation; Collateral Security
	 	 	18	 
	 
	 	 	 	 
	SECTION 3. CONDITIONS OF BORROWING
	 	 	18	 
	3.1. Loan Documents
	 	 	18	 
	3.2. Search Results; Lien Terminations
	 	 	18	 
	3.3. Organizational and Authorization Documents
	 	 	19	 
	3.4. Insurance
	 	 	19	 
	3.5. Additional Documents
	 	 	19	 
	3.6. Event of Default
	 	 	19	 
	3.7. Material Adverse Effect
	 	 	19	 
	3.8. Litigation
	 	 	19	 
	3.9. Representations and Warranties
	 	 	20	 
	3.10. Closing Fee
	 	 	20	 
	3.11. Agent’s Expenses
	 	 	20	 
	 
	 	 	 	 
	SECTION 4. REPRESENTATIONS AND WARRANTIES
	 	 	20	 
	4.1. Warranties and Representations Re Contracts
	 	 	20	 
	4.2. Warranties and Representations Re Collateral Generally
	 	 	21	 
	4.3. Solvent Financial Condition
	 	 	21	 
	4.4. Organization and Authority
	 	 	21	 
	4.5. Financial Statements
	 	 	22	 
	4.6. Full Disclosure
	 	 	22	 
	4.7. Pending Litigation
	 	 	22	 
	4.8. Titles to Properties
	 	 	22	 
	4.9. Licenses
	 	 	22	 
	4.10. Transaction is Legal and Authorized; Restrictive Agreements
	 	 	23	 
	4.11. Taxes
	 	 	23	 
	4.12. Compliance with Law
	 	 	23	 
	4.13. Borrowers’ Office and Names
	 	 	23	 
	4.14. Subsidiaries
	 	 	24	 
	4.15. No Default
	 	 	24	 
	4.16. Use of Proceeds
	 	 	24	 






i









 





Table of Contents
(continued)




	 	 	 	 	 
	 	 	Page	 
	4.17. Bank Accounts
	 	 	24	 
	4.18. Borrowers’ Representations and Warranties Re Collateral
	 	 	25	 
	4.19. ERISA
	 	 	25	 
	4.20. Labor Relations
	 	 	25	 
	 
	 	 	 	 
	SECTION 5. FINANCIAL AND OTHER COVENANTS
	 	 	25	 
	5.1. Payment of Taxes and Claims
	 	 	26	 
	5.2. Maintenance of Properties and Existence
	 	 	26	 
	5.3. Guaranties
	 	 	26	 
	5.4. Borrowing Base Ratio
	 	 	26	 
	5.5. Business Conducted
	 	 	27	 
	5.6. Debt
	 	 	27	 
	5.7. Further Assurances
	 	 	27	 
	5.8. Subsidiaries
	 	 	27	 
	5.9. Interest Coverage Ratio
	 	 	27	 
	5.10. Accurate Records Re Collateral
	 	 	28	 
	5.11. Prohibition on Distributions; Equity Capital Changes
	 	 	28	 
	5.12. Limitation on Bulk Purchases
	 	 	28	 
	5.13. Transactions with Affiliates
	 	 	28	 
	5.14. Accounting Changes
	 	 	29	 
	5.15. Financial Statements
	 	 	29	 
	5.16. Inspection
	 	 	30	 
	5.17. Plans
	 	 	31	 
	 
	 	 	 	 
	SECTION 6. GRANT OF SECURITY INTEREST
	 	 	31	 
	6.1. Creation of Security Interest in Collateral
	 	 	31	 
	6.2. Financing Statements
	 	 	31	 
	6.3. Location of Collateral
	 	 	32	 
	6.4. Protection of Collateral; Reimbursement
	 	 	32	 
	6.5. Release of Collateral
	 	 	32	 
	 
	 	 	 	 
	SECTION 7. EVENTS OF DEFAULT
	 	 	33	 
	7.1. Interest or Principal
	 	 	33	 
	7.2. Warranties or Representations
	 	 	33	 
	7.3. Financial Covenants
	 	 	33	 
	7.4. Other Covenants
	 	 	33	 
	7.5. Insolvency
	 	 	34	 
	7.6. Attachment, Judgment, Tax Liens
	 	 	34	 
	7.7. Default in Other Agreements
	 	 	34	 
	7.8. Loss of License
	 	 	34	 
	7.9. Liens
	 	 	34	 
	7.10. Assignment of Agreement
	 	 	34	 
	7.11. Change in Control
	 	 	34	 






ii









 




Table of Contents
(continued)



	 	 	 	 	 
	 	 	Page	 
	7.12. Subsidiary Guaranty Termination
	 	 	35	 
	7.13. Crimes
	 	 	35	 
	7.14. ERISA Liability
	 	 	35	 
	 
	 	 	 	 
	SECTION 8. REMEDIES IN GENERAL; AGENT’S MANAGEMENT FEE; ADDITIONAL EQUITY
	 	 	35	 
	8.1. Remedies
	 	 	35	 
	8.2. Agent’s Performance of Obligors’ Obligations
	 	 	36	 
	 
	 	 	 	 
	SECTION 9. CERTAIN REMEDIES AS TO COLLATERAL
	 	 	36	 
	9.1. Remedies — Collateral
	 	 	36	 
	 
	 	 	 	 
	SECTION 10. AMENDMENTS AND WAIVERS
	 	 	40	 
	 
	 	 	 	 
	SECTION 11. THE AGENT
	 	 	41	 
	11.1. Appointment and Authorization
	 	 	41	 
	11.2. Delegation of Duties
	 	 	41	 
	11.3. Liability of Agent
	 	 	41	 
	11.4. Reliance by Agent
	 	 	42	 
	11.5. Notice of Default
	 	 	42	 
	11.6. Collateral Matters
	 	 	43	 
	11.7. Agency for Perfection
	 	 	43	 
	11.8. Concerning the Collateral and the Related Loan Documents
	 	 	43	 
	 
	 	 	 	 
	SECTION 12. ASSIGNMENTS; PARTICIPATIONS
	 	 	43	 
	 
	 	 	 	 
	SECTION 13. MISCELLANEOUS
	 	 	45	 
	13.1. Obligations Absolute
	 	 	45	 
	13.2. Entire Agreement
	 	 	46	 
	13.3. Amendments; Waivers
	 	 	46	 
	13.4. WAIVER OF DEFENSES; WAIVER OF DISCOVERY
	 	 	46	 
	13.5. ARBITRATION
	 	 	46	 
	13.6. FORUM SELECTION AND CONSENT TO JURISDICTION
	 	 	47	 
	13.7. WAIVER OF JURY TRIAL
	 	 	47	 
	13.8. Assignability
	 	 	48	 
	13.9. [RESERVED.]
	 	 	48	 
	13.10. Confirmations
	 	 	48	 
	13.11. Confidentiality
	 	 	48	 
	13.12. Binding Effect
	 	 	49	 
	13.13. Governing Law
	 	 	49	 
	13.14. Enforceability; Usury
	 	 	49	 
	13.15. Survival of Borrowers’ Representations; Termination and Release of Liens
	 	 	50	 
	13.16. Extensions of Lenders’ Commitment
	 	 	50	 






iii









 




Table of Contents
(continued)



	 	 	 	 	 
	 	 	Page	 
	13.17. Time of Essence
	 	 	50	 
	13.18. Counterparts; Facsimile Signatures
	 	 	50	 
	13.19. Notices
	 	 	51	 
	13.20. Costs, Fees and Expenses
	 	 	51	 
	13.21. Indemnification
	 	 	52	 
	13.22. Revival and Reinstatement of Obligations
	 	 	53	 
	13.23. Customer Identification — USA Patriot Act Notice
	 	 	53	 






iv









 






Senior Subordinated Loan and Security Agreement




     This SENIOR SUBORDINATED LOAN AND SECURITY AGREEMENT dated as of
August 25, 2010 (this “Agreement”), is executed by and between REGIONAL MANAGEMENT CORP., a
South Carolina corporation (“Regional”), REGIONAL FINANCE CORPORATION OF SOUTH CAROLINA, a
South Carolina corporation (“RFCSC”), REGIONAL FINANCE CORPORATION OF GEORGIA, a Georgia
corporation (“RFCG”), REGIONAL FINANCE CORPORATION OF TEXAS, a Texas corporation
(“RFCTX”), REGIONAL FINANCE CORPORATION OF NORTH CAROLINA, a North Carolina corporation
(“RFCNC”), REGIONAL FINANCE CORPORATION OF ALABAMA, an Alabama corporation
(“RFCA”), and REGIONAL FINANCE CORPORATION OF TENNESSEE, a Tennessee corporation
(“RFCTN”, and together with Regional, RFCSC, RFCG, RFCTX, RFCNC and RFCA are herein
individually referred to as a “Borrower” and collectively referred to as
“Borrowers”), whose chief executive offices are located at 509 West Butler Road,
Greenville, South Carolina 29607 (with a mailing address of Post Office Box 776, Mauldin, South
Carolina 29662), the Persons identified herein as Lenders, and PALLADIUM CAPITAL MANAGEMENT III,
L.L.C., as Agent for Lenders (in such capacity, “Agent”).



R E C I T A L S:




     A. Borrowers have entered into a Senior Subordinated Loan and Security Agreement, dated as of
June 29, 2007 (the “Existing Subordinated Loan Agreement”), among Borrowers and the Lender
(as defined in the Existing Subordinated Loan Agreement).



     B. Borrowers desire to obtain funds to refinance the amounts presently outstanding under the
Existing Subordinated Loan Agreement. Pursuant to Borrowers’ requests, Lenders are willing to
extend such financial accommodations to Borrowers under the terms and conditions set forth herein.



     NOW THEREFORE, in consideration of the premises, and the mutual covenants and agreements set
forth herein, Borrowers agree to borrow from Lenders, and Lenders agree to lend to Borrowers,
subject to and upon the following terms and conditions:



A G R E E M E N T S:




SECTION 1. DEFINITIONS.




     1.1. Defined Terms.



          For the purposes of this Agreement, the following capitalized words and phrases shall have the
meanings set forth below.



          “Act” shall have the meaning set forth in Section 13.23 hereof.



          “Additional Interest” shall have the meaning set forth in Section 2.3 hereof.



          “Additional Interest Rate” shall have the meaning set forth in Section 2.3
hereof.



 









 





          “Adjusted Net Income” shall mean, with respect to any fiscal period of Borrowers, the
Net Income before provision for income taxes for such fiscal period (to the extent taxes are not
already added back in the calculation of Net Income.



          “Adjusted Tangible Assets” shall mean all assets except: (a) trademarks, tradenames,
franchises, goodwill, and other similar intangibles; (b) assets located and notes and receivables
due from obligors domiciled outside the United States of America, Puerto Rico, or Canada; and (c)
accounts, notes, and other receivables due from Affiliates or employees of Borrowers.



          “Adjusted Tangible Net Worth” shall mean the remainder of (a) net book value (after
deducting related depreciation, obsolescence, amortization, valuation, and other proper reserves)
at which the Adjusted Tangible Assets of Borrowers would be shown on a balance sheet at such date,
but excluding any amounts arising from write-ups of assets, and reduced by any charge-offs as
required under the Senior Credit Agreement minus (b) the amount at which its liabilities (other
than capital stock, surplus, and retained earnings) would be shown on such balance sheet, and
including as liabilities all reserves for contingencies and other potential liabilities, as
determined in accordance with GAAP.



          “Affiliate” of any Person shall mean (a) any other Person which, directly or
indirectly, controls or is controlled by or is under common control with such Person, (b) any
officer or director of such Person, and (c) with respect to a Lender, any entity administered or
managed by such Lender, or an Affiliate or investment advisor thereof. A Person shall be deemed to
be “controlled by” any other Person if such Person possesses, directly or indirectly, power to
direct or cause the direction of the management and policies of such Person whether by contract,
ownership of voting securities, membership interests or otherwise.



          “Agreement” shall have the meaning assigned in the Preamble to this Agreement.



          “Bankruptcy Code” shall mean the United States Bankruptcy Code, as now existing or
hereafter amended.



          “Borrowers” shall have the meanings assigned in the Preamble to this Agreement.



          “Borrowing Base” shall mean the sum of the Adjusted Tangible Net Worth of Borrowers,
plus all Subordinated Debt of Borrowers.



          “Bulk Purchase Limit” shall have the meaning set forth in Section 5.12
hereof.



          “Business Day” shall mean any day other than a Saturday, Sunday or a legal holiday on
which commercial banks are authorized or required to be closed for the conduct of commercial
banking business in New York City.



          “Capital Lease” shall mean, as to any Person, a lease of any interest in any kind of
property or asset, whether real, personal or mixed, or tangible or intangible, by such Person, as
lessee, that is, or should be, in accordance with GAAP, recorded as a “capital lease” on the
financial statements of such Person.



2









 





          “Capital Securities” shall mean, with respect to any Person, all shares, interests,
participations or other equivalents (however designated, whether voting or non-voting) of such
Person’s capital, whether now outstanding or issued or acquired after the date hereof, including
common shares, preferred shares, membership interests in a limited liability company, limited or
general partnership interests in a partnership or any other equivalent of such ownership interest.



          “Capitalized Lease Obligations” shall mean, as to any Person, all rental obligations
of such Person, as lessee under a Capital Lease which are or will be required to be capitalized on
the books of such Person.



          “Casualty or Condemnation Event” shall mean the uninsured loss or destruction of any
Borrower’s assets having a book value in the aggregate of $10,000,000 or more during any fiscal
year as a result of a casualty, condemnation event or series of events or an award in lieu of
condemnation.



          “Change in Control” shall mean, as of any date of determination, any of the following:
(a) Parallel and Palladium, taken together as a whole, ceases to own and control, beneficially and
of record, directly or indirectly, at least 51% of the voting equity of Regional; (b) Regional
ceases to own and control, beneficially and of record, directly or indirectly, 100% of the voting
stock of any of the other Borrowers; and (c) any holder of voting equity of any Borrower (other
than Regional) is not a Borrower or Guarantor under this Agreement.



          “Closing Date” shall have the meaning set forth in Section 2.1(a) hereof.



          “Collateral” shall mean:



          (a) all present and future Contracts and all payments thereunder in whatever form, including
cash, checks, notes, drafts, chattel paper (including, without limitation, all tangible and
electronic chattel paper), and other instruments for the payment of money, together with any
guaranties and security therefor, and all of each Borrower’s books and records relating thereto
(including, without limitation, all computer records, computer programs, and computer source
codes);



          (b) Security Documents relating to the Contracts, together with each Borrower’s rights in the
Property covered thereby and any policies of insurance insuring such Property;



          (c) any assets of any Borrower in which Agent receives a security interest, on behalf of
Lenders, or which thereafter come into Agent’s possession, custody, or control;



          (d) all proceeds of insurance including, without limitation, property, casualty, and title
insurance, affecting the Contracts;



          (e) all proceeds, property, property rights, privileges and benefits arising out of, from the
enforcement of, or in connection with the Contracts and Security Documents, the property rights and
the policies of insurance referred to above, all credit balances in favor of any Borrower on any
Lender’s books, and all other general intangibles relating to or arising out of the Contracts;



3









 





          (f) all deposit accounts into which proceeds of the Contracts are deposited; and



          (g) All equity interests in any Borrower’s Subsidiaries (but not to exceed 65% of the equity
interests of any Subsidiaries organized or formed under the laws of a jurisdiction other than the
United States (or any state thereof) or the District of Columbia); provided, however, that the
Collateral shall not include the equity interests of RMC Reinsurance until such time that 65% of
the stock of RMC Reinsurance is pledged to Agent.



          Notwithstanding anything contained in this Agreement to the contrary (except as provided in
the next sentence), in no event shall the Collateral include, and no Borrower shall be deemed to
have granted a security interest in, any of such Borrower’s right, title or interest in any license
(including but not limited to any license related to such Borrower’s consumer lending activities),
contract, agreement, permit, letter of credit right or asset, to the extent, but only to the
extent, that such a grant would, under the terms of such license, contract, agreement, permit,
letter of credit right or the documentation governing such asset, be prohibited by or result in a
breach or termination of the terms of, or constitute a default under, such license, contract,
agreement, permit, letter of credit right or the documentation or the applicable law, rules or
regulations governing such license, contract, agreement, permit, letter of credit right or asset
(other than to the extent that any such term (x) has been waived by the other parties to such
license, contract, agreement, permit, letter of credit right or documentation governing such asset
or (y) would be rendered ineffective under the UCC (including Sections 9- 406, 9-407, 9-408, 9-409
or other applicable provisions of the UCC or the uniform commercial code as in effect in any
relevant jurisdiction) or any other applicable law (including the Bankruptcy Code) or principles of
equity; provided, that (A) immediately upon the ineffectiveness, lapse or termination of any such
provision, the Collateral shall include, and such Borrower shall be deemed to have granted a
security interest in, all such right, title and interest as if such provision had never been in
effect and (B) the foregoing exclusion shall in no way be construed so as to limit, impair or
otherwise affect Agent’s unconditional continuing security interest in and Liens upon any rights or
interests of a Borrower in or to monies due or to become due under any such license, contract,
agreement, permit, letter of credit right or the documentation governing such asset.
Notwithstanding the foregoing, the Collateral shall include all Contracts.



          “Consolidated” and “consolidated” refers to the consolidation of the accounts
of any Borrower and Subsidiaries in accordance with GAAP, including principles of consolidation.



          “Consulting Agreements” shall mean, collectively, (i) Consulting Agreement dated as of
March 21, 2007 between Richard A. Godley, Sr. and Regional, (ii) Consulting Agreement dated as of
March 21, 2007 between Brenda F. Kinlaw and Regional and (c) Consulting Agreement dated as of March
21, 2007 between Jerry L. Shirley and Regional, as each may be amended, modified, restated,
replaced or supplemented from time to time in accordance with Section 5.13.



          “Contingent Liability” and “Contingent Liabilities” shall mean, respectively,
each obligation and liability of any Borrower and all such obligations and liabilities of any
Borrower incurred pursuant to any agreement, undertaking or arrangement by which such Borrower:
(a) guarantees, endorses or otherwise becomes or is contingently liable upon (by direct or indirect



4









 




agreement, contingent or otherwise, to provide funds for payment, to supply funds to, or
otherwise to invest in, a debtor, or otherwise to assure a creditor against loss) the indebtedness,
dividend, obligation or other liability of any other Person in any manner (other than by
endorsement of instruments in the course of collection), including any indebtedness, dividend or
other obligation which may be issued or incurred at some future time; (b) guarantees the payment of
dividends or other distributions upon the shares or ownership interest of any other Person; (c)
undertakes or agrees (whether contingently or otherwise): (i) to purchase, repurchase, or
otherwise acquire any indebtedness, obligation or liability of any other Person or any property or
assets constituting security therefor, (ii) to advance or provide funds for the payment or
discharge of any indebtedness, obligation or liability of any other Person (whether in the form of
loans, advances, stock purchases, capital contributions or otherwise), or to maintain solvency,
assets, level of income, working capital or other financial condition of any other Person, or (iii)
to make payment to any other Person other than for value received; (d) agrees to lease property or
to purchase securities, property or services from such other Person with the purpose or intent of
assuring the owner of such indebtedness or obligation of the ability of such other Person to make
payment of the indebtedness or obligation; (e) to induce the issuance of, or in connection with the
issuance of, any letter of credit for the benefit of such other Person; or (f) undertakes or agrees
otherwise to assure a creditor of any other Person against loss. The amount of any Contingent
Liability shall (subject to any limitation set forth herein) be deemed to be the outstanding
principal amount (or maximum permitted principal amount, if larger) of the indebtedness, obligation
or other liability guaranteed or supported thereby.




          “Contract Debtor” shall mean each Person who is obligated to a Borrower to perform any
duty under or to make any payment pursuant to the terms of a Contract.



          “Contracts” shall mean all of each Borrower’s right, title, and interest in and to
each presently existing and hereafter arising loan account, account, contract right, Instrument,
note, document, chattel paper, general intangible, and all other forms of obligations owing to each
Borrower, all rights of each Borrower to receive payment thereof, together with all guarantees or
other rights of each Borrower obtained in connection therewith, and any collateral therefor.



          “Debt” shall mean, with respect to any Person, all liabilities, obligations and
indebtedness, whether or not contingent, (i) in respect of borrowed money or evidenced by bonds,
notes, debentures or similar instruments, (ii) representing the balance deferred and unpaid of the
purchase price of any property or services (except any such balance that constitutes an account
payable to a trade creditor created, incurred, assumed or guaranteed by such Person in the
ordinary course of business of such Person in connection with obtaining goods, material or services
that is not overdue by more that ninety (90) days, unless being contested in good faith), (iii) all
obligations as lessee under leases which have been, or should be, in accordance with GAAP recorded
as capital leases, (iv) all reimbursement and other obligations with respect to letters of credit,
bankers’ acceptances and surety bonds, whether or not matured, (v) all indebtedness created or
arising under any conditional sale or other title retention agreement with respect to property
acquired by such Person, and (vi) all obligations of such Person under any Hedge Agreements.



          “Default Rate” shall mean the Interest Rate plus two percent (2%) per annum.



5









 





          “Depreciation” shall mean the total amounts added to depreciation, amortization,
obsolescence, valuation and other proper reserves, as reflected on any Borrower’s consolidated
financial statements and determined in accordance with GAAP.



          “Distribution” shall mean, in respect of any corporation: (a) payment or making of any
dividend or other distribution of property in respect to the capital stock of such corporation,
other than distributions in capital stock of the same class; or (b) the redemption or other
acquisition of any capital stock of such corporation.



          “Eligible Assignee” shall mean (a) a commercial bank, commercial finance company or
other lender, having total assets in excess of $500,000,000; (b) any Lender listed on the signature
page of this Agreement; (c) any Affiliate of any Lender; and (d) any other Person reasonably
acceptable to the Agent.



          “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended and
supplemented from time to time.



          “ERISA Affiliate” shall mean any trade or business (whether or not incorporated) under
common control with any Borrower or Guarantor within the meaning of Section 414(b) or (c) of the
IRS Code (and Sections 414(m) and (o) of the IRS Code for purposes of provisions relating to
Section 412 of the IRS Code).



          “Event of Default” shall mean any of the events or conditions which are set forth in
SECTION 7 hereof.



          “Existing Subordinated Loan Agreement” shall have the meaning assigned in the Recitals
to this Agreement.



          “Foreign Plan” shall mean any employee benefit plan or arrangement (a) maintained or
contributed to by any Borrower or Subsidiary that is not subject to the laws of the United States;
or (b) mandated by a government other than the United States for employees of any Borrower or
Subsidiary.



          “GAAP” shall mean generally accepted accounting principles set forth from time to time
in the opinions and pronouncements of the Accounting Principles Board and the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial Accounting
Standards Board (or agencies with similar functions of comparable stature and authority within the
U.S. accounting profession), which are applicable to the circumstances as of the date of
determination, provided, however, that interim financial statements or reports shall be deemed in
compliance with GAAP despite the absence of footnotes and fiscal year-end adjustments as required
by GAAP.



          “Guarantor” shall mean, individually and collectively, any Person guaranteeing the
Obligations of Borrowers.



          “Hedging Contracts” shall means interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements, or any other agreements or arrangements entered



6









 




into by any Borrower and designed to protect such Borrower against fluctuations in interest
rates or currency exchange rates and not for speculative purposes.




          “Hedging Obligations” means, with respect to any Borrower, all liabilities of such
Borrower to any Person under any Hedging Contract.



          “Holdings” shall mean Regional Holdings LLC, a Delaware limited liability company.



          “Indemnified Party” and “Indemnified Parties” shall mean, respectively, each
of Lenders and any parent corporation, Affiliate or Subsidiary of any Lender, and each of their
respective officers, directors, employees, attorneys and agents, and all of such parties and
entities.



          “Interest Payment Date” shall mean the first day of each calendar month.



          “Interest Rate” shall mean Thirteen and One-Quarter Percent (13.25%) per annum.



          “IRS Code” shall mean the Internal Revenue Code of 1986, as amended from time to time,
and any successor statute, and regulations promulgated hereunder.



          “Lenders” shall mean, initially, Richard A. Godley, an individual residing at 2824
Knighton Chapel Road, Fountain Inn, South Carolina 29644, Jerry Shirley, an individual residing at
112 King Arthur Drive, Piedmont, South Carolina 29673, Brenda Kinlaw, an individual residing at 627
Parkland Avenue, Inman, South Carolina 29607 and Palladium Equity Partners III, L.P., a Delaware
limited partnership, and after the date hereof, any such Lender’s successors and assigns, and any
other person that becomes a party to this Agreement pursuant to an Assignment and Acceptance
Agreement in the form of Exhibit A hereto.



          “Lien” or “Liens” shall mean, with respect to any Person, any interest granted
by such Person in any real or personal property, asset or other right owned or being purchased or
acquired by such Person (including an interest in respect of a Capital Lease) which secures payment
or performance of any obligation and shall include any mortgage, lien, encumbrance, title retention
lien, charge or other security interest of any kind, whether arising by contract, as a matter of
law, by judicial process or otherwise.



          “Loan Documents” shall mean each of the agreements, documents, instruments and
certificates set forth in Section 3.1 hereof and any and all such other instruments,
documents, certificates and agreements from time to time executed and delivered by any Borrower or
any Obligor for the benefit of Lenders pursuant to any of the foregoing, and all amendments,
restatements, supplements and other modifications thereto.



          “Management Agreement” shall mean the Parallel Financial Advisory Services/Transaction
Fee Letter dated as of March 21, 2007, among Parallel, Palladium Capital and Regional, as may be
amended from time to time in accordance with Section 5.13.



7









 





          “Management Fee Subordination Agreement” shall mean the Subordination Agreement of
even date among Parallel, Palladium Capital, Regional and Lenders.



          “Material Adverse Effect” shall mean (a) a material adverse change in, or a material
adverse effect upon, the assets, business, properties or financial condition or results of
operations of Borrowers taken as a whole, (b) a material impairment of the ability of Borrowers to
perform any of the Obligations under any of the Loan Documents, or (c) a material adverse effect on
(i) any substantial portion of the Collateral, (ii) the legality, validity, binding effect or
enforceability against Borrowers of any of the Loan Documents, (iii) the perfection or priority of
any Lien granted to Agent under any Loan Document, or (iv) the rights or remedies of Lenders under
any Loan Document.



          “Maturity Date” shall mean October 25, 2013, unless extended by Lenders pursuant to
any modification, extension or renewal note executed by Borrowers and accepted by Lenders in their
sole and absolute discretion in substitution for the Subordinated Notes.



          “Multiemployer Plan” shall mean any employee benefit plan of the type described in
Section 4001(a)(3) of ERISA, to which any Borrower, guarantor or ERISA Affiliate makes or is
obligated to make contributions, or during the preceding five plan years, has made or been
obligated to make contributions.



          “Net Income” shall mean, with respect to any Borrower and Subsidiaries for any period,
the net income (or loss) of any Borrower and Subsidiaries for such period as determined in
accordance with GAAP, excluding any gains or losses from Asset Dispositions, any
extraordinary gains or losses and any gains or losses from discontinued operations, but excluding
any and all of the following included in such determination of net income (without duplication):
(a) gain or loss arising from the sale of capital assets, such as property, plant and equipment;
(b) gain or loss arising from any write-up or write-down in the book value of any asset in the
ordinary course of business (excluding Contracts); (c) earnings or losses of any corporation
acquired by any Borrower in any manner, to the extent realized by such other corporation prior to
the date of acquisition; (d) earnings of any business entity in which any Borrower has an
ownership interest or of any Subsidiary that is not also a Guarantor unless (and only to the
extent) such earnings shall actually have been received by any Borrower in the form of cash
distributions; (e) earnings or losses of any Person to which assets of any Borrower shall have
been sold, transferred, or disposed of, or into which any Borrower shall have been merged or which
has been a party with Borrower to any consolidation or other form of reorganization, prior to the
date of such transaction; (f) gain or loss arising from the acquisition of any debt or equity
security of any Borrower or from cancellation or forgiveness of debt; (g) gain or loss arising
from extraordinary items, as determined in accordance with GAAP, or from any other one-time or
nonrecurring transaction; (h) non-cash gain or loss; (i) any actual taxes paid by or on behalf of
any Borrower or its Subsidiaries; (j) any net income or gain or loss (without duplication) (i)
from the disposition of any discontinued operations, including but not limited to Upstate Motor
Company and Regional Check Advance, a division of RFCSC and (ii) from the discontinued operations
of Upstate Motor Company and Regional Check Advance incurred prior to the earlier of July 21, 2007
or the date such discontinued operations are sold; (k) restructuring charges approved by Agent in
its reasonable discretion; (l) amortization of intangibles, including but not



8









 




limited to financing costs, goodwill and the effects of purchase accounting; and (m) all
accrued but unpaid management fees, costs and expenses payable to Parallel and Palladium Capital.




          “Non-Excluded Taxes” shall have the meaning set forth in Section 2.4(a)
hereof.



          “Obligations” shall mean the Subordinated Loan, as evidenced by the Subordinated
Notes, all interest accrued thereon (including interest which would be payable as post-petition in
connection with any bankruptcy or similar proceeding, whether or not permitted as a claim
thereunder), any fees due Lenders hereunder, any expenses incurred by Lenders hereunder, including
without limitation, all liabilities and obligations of any Borrower under this Agreement and under
any other Loan Document, together with any and all renewals, extensions, restatements or
replacements of any of the foregoing.



          “Obligor” shall mean each Borrower, each Subsidiary and any other guarantor,
accommodation endorser, third party pledgor, or any other party liable with respect to the
Obligations.



          “Other Taxes” shall mean any present or future stamp or documentary taxes or any other
excise or property taxes, charges or similar levies which arise from the execution, delivery,
enforcement or registration of, or otherwise with respect to, this Agreement or any of the other
Loan Documents.



          “Palladium” shall mean Palladium Equity Partners III, L.P., a Delaware limited
partnership, and any Affiliates or Related Funds thereof, in its individual capacity and not in its
capacity as a Lender hereunder.



          “Palladium Capital” shall mean Palladium Capital Management III, L.L.C., a Delaware
limited liability company and any Affiliates or Related Funds thereof, in its individual capacity
and not in its capacity as Agent hereunder.



          “Parallel” shall mean Parallel Investment Partners, LLC, a Delaware limited liability
company, and any Affiliates or Related Funds thereof.



          “PBGC” shall mean the Pension Benefit Guaranty Corporation.



          “Pension Plan” shall mean any employee pension benefit plan (as such term is defined
in Section 3(2) of ERISA), other than a Multiemployer Plan, that is subject to Title IV of ERISA
and is sponsored or maintained by any Borrower, guarantor or ERISA Affiliate or to which the any
Borrower, guarantor or ERISA Affiliate contributes or has an obligation to contribute, or in the
case of a multiple employer or other plan described in Section 4064(a) of ERISA, has made
contributions at any time during the preceding five plan years.



          “Permitted Debt” shall have the meaning assigned in Section 5.6.



          “Permitted Liens” shall mean the following: (a) Liens, whether presently existing or
created hereafter, pursuant to the Loan Documents or Liens in favor of Senior Lenders; (b) Liens
for taxes or assessments or other governmental charges or levies not yet due and payable or which
are being contested in accordance with Section 5.1, (c) workers’, mechanics’,



9









 




suppliers’, carriers’, warehousemen’s or other similar Liens (i) arising in the ordinary
course of business or (ii) securing obligations being contested in accordance with Section
5.1, (d) Liens arising in respect of leases and subleases, (e) landlord’s liens arising by
operation of law, (f) purchase money Liens on assets acquired by any Borrower or any of its
Subsidiaries in the ordinary course of its business to secure the purchase price of such asset or
Debt incurred solely for the purpose of financing the acquisition of such asset, (g) deposits and
pledges of cash securing (i) obligations incurred in respect of workers’ compensation, unemployment
insurance, social security or other forms of governmental insurance or benefits, (ii) the
performance of bids, tenders, leases, contracts (other than for the repayment of borrowed money)
and statutory obligations or (iii) obligations on surety, appeal or performance bonds, (h)
easements, zoning restrictions, licenses, covenants and similar encumbrances on real property and
minor irregularities in the title thereto that do not (i) secure obligations for the payment of
money or (ii) materially impair the value of such property or its use in the normal conduct of
business, (i) liens in favor of collecting banks arising from the endorsement of negotiable
instruments for deposit or collection in the ordinary course of business, (j) the title of a lessor
or sublessor to lease property under any lease, and (k) Liens with respect to Capitalized Lease
Obligations, (l) Liens described on Schedule 4.8.




          “Permitted Refinancing” shall mean, with respect to any Debt, any refinancing thereof;
provided, however, that (i) no Event of Default shall have occurred and be continuing or would
arise therefrom, (ii) any such refinancing Debt shall (a) not be on financial and other terms that
are materially more onerous in the aggregate than the Debt being refinanced and shall not have
defaults, rights or remedies materially more burdensome in the aggregate to the obligor than the
Debt being refinanced, (b) not have a stated maturity or Weighted Average Life to Maturity that is
shorter than the Debt being refinanced, (c) be at least as subordinate to the Obligations as the
Debt being refinanced (and unsecured if the refinanced Debt is unsecured), and (d) be in a
principal amount that does not exceed the principal amount so refinanced, plus all accrued and
unpaid interest thereon, plus the stated amount of any premium and other payments required to be
paid in connection with such refinancing pursuant to the terms of the Debt being refinanced, plus
the amount of reasonable expenses of Borrowers or any of its Subsidiaries incurred in connection
with such refinancing, and (iii) the sole obligors and/or guarantors on such Debt shall not include
any Person other than the obligors and/or guarantors on such Debt being refinanced.



          “Person” shall mean any natural person, partnership, limited liability company,
corporation, trust, joint venture, joint stock company, association, unincorporated organization,
government or agency or political subdivision thereof, or other entity, whether acting in an
individual, fiduciary or other capacity.



          “Plan” shall mean any employee benefit plan (as such term is defined in Section 3(3)
of ERISA) established by a Borrower or guarantor or, with respect to any such plan that is subject
to Section 412 of the IRS Code or Title IV of ERISA, an ERISA Affiliate.



          “Property” shall mean the personal and any real property described in the Security
Documents which secure the obligations of a Contract Debtor under a Contract.



          “Regional” shall have the meaning assigned in the Preamble to this Agreement.



10









 





          “Regional Holdings” shall have the meaning set forth in Section hereof.



          “Related Fund” shall mean with respect to any Person, an Affiliate of such Person, or
a fund or account managed by such Person or an Affiliate of such Person.



          “Related Rights” means all Chattel Papers, Electronic Chattel Papers, Payment
Intangibles, Promissory Notes, Letter-of-Credit-Rights, Documents and Instruments relating to the
Accounts or the General Intangibles and all rights now or hereafter existing in and to all security
agreements, leases, and other contracts securing or otherwise relating to any Accounts or General
Intangibles or any such Chattel Papers, Electronic Chattel Papers, Payment Intangibles, Promissory
Notes, Letter-of-Credit-Rights, Documents and Instruments.



          “Required Lenders” shall mean at any time the Lenders whose Subordinated Loan
Commitments aggregate at least sixty-six percent (66%) of the total Subordinated Loan Commitments
hereunder.



          “RFCA” shall have the meaning assigned in the Preamble to this Agreement.



          “RFCG” shall have the meaning assigned in the Preamble to this Agreement.



          “RFCNC” shall have the meaning assigned in the Preamble to this Agreement.



          “RFCSC” shall have the meaning assigned in the Preamble to this Agreement.



          “RFCTN” shall have the meaning assigned in the Preamble to this Agreement.



          “RFCTX” shall have the meaning assigned in the Preamble to this Agreement.



          “RMC Reinsurance” shall mean RMC Reinsurance, Ltd., a Turks and Caicos Islands
company.



          “Security Documents” shall mean all security agreements, chattel mortgages, deeds of
trust, mortgages, or other security instruments or agreements of every type and nature securing the
obligations of a Contract Debtor under a Contract.



          “Senior Credit Agreement” shall mean that certain Third Amended Loan and Security
Agreement by and among the Senior Lenders, Borrowers and Bank of America, N.A as the agent, as such
agreement may be amended, modified or supplemented from time to time.



          “Senior Debt” shall mean Debt to be provided by the Senior Lenders in an initial
amount of not more than $240,000,000 pursuant to the Senior Loan Documents and any refinancing or
replacement of such Debt in the lesser of (x) not more than $240,000,000 pursuant to the Senior
Loan Documents, and (y) an amount no greater than the sum of (i) the unpaid principal amount of
Debt owed to the Senior Lenders at the time of such refinancing or replacement, and (ii) the amount
of the unfunded commitments of the Senior Lenders at such time. The maximum amount of Senior Debt
may be increased upon the prior written consent of Agent, which consent shall not be unreasonably
withheld or delayed, based on submission of pro



11









 




forma financial statements and projections, which statements and projections have been
prepared in good faith, and which reflect present and future compliance with the covenants
contained in this Agreement. Notwithstanding the foregoing, if Borrowers deliver projections
which were prepared in good faith demonstrating that Borrowers will be in compliance with the
financial covenants contained in this Agreement for the periods covered by the projections, then
Lenders will be deemed to have consented to the increase in the maximum amount of Senior Debt as
reflected in such projections.




          “Senior Lenders” shall mean Bank of America, N.A. and any other financial institution
party to the Senior Loan Documents.



          “Senior Loan Documents” shall mean the documents listed on Schedule 17(a) to
the Senior Credit Agreement.



          “Subordination Agreement” shall mean that certain Intercreditor and Lien Subordination
Agreement of even date herewith by and among the Senior Lenders, Lenders and Borrowers.



          “Subordinated Debt” shall mean any Debt of any Borrower which is subordinated to the
Obligations in a manner satisfactory to Agent, including right and time of payment of principal and
interest.



          “Subordinated Loans” shall mean the direct advances made by Lenders to Borrowers in
the form of a Subordinated Loan under and pursuant to this Agreement, as set forth in Section
2.1 of this Agreement.



          “Subordinated Loan Commitment” shall mean, for each Lender, the principal amount set
forth beside such Lender’s name on Schedule I attached hereto.



          “Subordinated Loan Mandatory Prepayment” shall have the meaning set forth in
Section 2.1(d) hereof.



          “Subordinated Loan Optional Prepayment” shall have the meaning set forth in
Section 2.1(e) hereof.



          “Subordinated Notes” shall mean each term note in the form prepared by and acceptable
to Lenders, dated as of the date hereof, in the amount of the Subordinated Loan Commitment of each
Lender and maturing on the Maturity Date, duly executed by Borrowers and payable to the order of
such Lender, together with any and all renewal, extension, modification or replacement notes
executed by Borrowers and delivered to such Lender and given in substitution therefor.



          “Subsidiary” and “Subsidiaries” shall mean, individually and collectively, any
wholly owned subsidiaries of any Borrower, and their respective successors and assigns, and each of
the other corporations, partnerships, limited partnerships, limited liability companies, limited
liability partnerships, joint ventures or other entities of which or in which such Borrower owns,
directly or indirectly, such number of outstanding Capital Securities as have more than



12









 




fifty percent (50%) of the ordinary voting power for the election of directors or other
managers of such corporation, partnership, limited liability company or other entity.




          “Subsidiary Guarantors” shall mean Upstate Motor Company and any other Subsidiary
executing and delivering a Subsidiary Guaranty.



          “Subsidiary Guaranty” shall mean, the Unconditional Guaranty of even date herewith
made by each of the Subsidiary Guarantors in favor of Agent, on behalf of Lenders.



          “Subsidiary Security Agreement” shall mean, the Security Agreement of even date
herewith made by each of the Subsidiary Guarantors in favor of Agent, on behalf of Lenders.



          “Taxes” shall mean any and all present and future taxes, duties, levies, imposts,
deductions, assessments, charges or withholdings, and any and all liabilities (including interest
and penalties and other additions to taxes) with respect to the foregoing.



          “UCC” shall mean the Uniform Commercial Code in effect in the state of New York from
time to time.



          “Unmatured Event of Default” shall mean any event which, with the giving of notice,
the passage of time or both, would constitute an Event of Default.



          “Voidable Transfer” shall have the meaning set forth in Section 13.22 hereof.



          “Weighted Average Life to Maturity” shall mean, when applied to any Debt at any date,
the number of years obtained by dividing (a) then outstanding principal amount of such Debt into
(b) the sum of the total of the product obtained by multiplying (i) the amount of each scheduled
installment, sinking fund, serial maturity or other required payment of principal including payment
at final maturity, in respect thereof, by (ii) the number of years (calculated to the nearest
one-twelfth) that will elapse between such date and the making of such payment.



          “Working Capital” shall mean current assets minus current liabilities (excluding the
current portion of Debt).



     1.2. Accounting Terms.



          Any accounting terms used in this Agreement which are not specifically defined herein shall
have the meanings customarily given them in accordance with GAAP. Calculations and determinations
of financial and accounting terms used and not otherwise specifically defined hereunder and the
preparation of financial statements to be furnished to Agent pursuant hereto shall be made and
prepared, both as to classification of items and as to amount, in accordance with sound accounting
practices and GAAP as used in the preparation of the financial statements of any Borrower on the
date of this Agreement. If any changes in accounting principles or practices from those used in
the preparation of the financial statements are hereafter occasioned by the promulgation of rules,
regulations, pronouncements and opinions by or required by the Financial Accounting Standards Board
or the American Institute of Certified Public Accountants (or any successor thereto or agencies
with similar functions), which results in a material change



13









 




in the method of accounting in the financial statements required to be furnished to Agent
hereunder or in the calculation of financial covenants, standards or terms contained in this
Agreement, the parties hereto agree to enter into good faith negotiations to amend such provisions
so as equitably to reflect such changes to the end that the criteria for evaluating the financial
condition and performance of each Borrower will be the same after such changes as they were before
such changes; and if the parties fail to agree on the amendment of such provisions, such Borrower
will furnish financial statements in accordance with such changes, but shall provide calculations
for all financial covenants, perform all financial covenants and otherwise observe all financial
standards and terms in accordance with applicable accounting principles and practices in effect
immediately prior to such changes. Calculations with respect to financial covenants required to be
stated in accordance with applicable accounting principles and practices in effect immediately
prior to such changes shall be reviewed and certified by each Borrower’s accountants.




     1.3. Other Terms Defined in UCC.



          All other capitalized words and phrases used herein and not otherwise specifically defined
herein shall have the respective meanings assigned to such terms in the UCC, to the extent the same
are used or defined therein.



     1.4. Other Interpretive Provisions.



          (a) The meanings of defined terms are equally applicable to the singular and plural forms of
the defined terms. Whenever the context so requires, the neuter gender includes the masculine and
feminine, the single number includes the plural, and vice versa, and in particular the word
“Borrower” shall be so construed.



          (b) Section and Schedule references are to this Agreement unless otherwise specified. The
words “hereof”, “herein” and “hereunder” and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of this Agreement.



          (c) The term “including” is not limiting, and means “including, without limitation”.



          (d) In the computation of periods of time from a specified date to a later specified date, the
word “from” means “from and including”; the words “to” and “until” each mean “to but excluding”,
and the word “through” means “to and including”.



          (e) Unless otherwise expressly provided herein, (i) references to agreements (including this
Agreement and the other Loan Documents) and other contractual instruments shall be deemed to
include all subsequent amendments, restatements, supplements and other modifications thereto, but
only to the extent such amendments, restatements, supplements and other modifications are not
prohibited by the terms of any Loan Document, and (ii) references to any statute or regulation
shall be construed as including all statutory and regulatory provisions amending, replacing,
supplementing or interpreting such statute or regulation.



14









 





          (f) To the extent any of the provisions of the other Loan Documents are inconsistent with the
terms of this Agreement, the provisions of this Agreement shall govern.



          (g) This Agreement and the other Loan Documents may use several different limitations, tests
or measurements to regulate the same or similar matters. All such limitations, tests and
measurements are cumulative and each shall be performed in accordance with its terms.



SECTION 2. COMMITMENT OF THE LENDERS.




     2.1. Subordinated Loan.



          (a) Subordinated Loan Commitment. Subject to the terms and conditions of this
Agreement and the other Loan Documents, and in reliance upon the representations and warranties of
Borrowers set forth herein and in the other Loan Documents, each Lender agrees to make a
Subordinated Loan equal to such Lender’s Subordinated Loan Commitment. Each Subordinated Loan
shall be available to Borrowers in a single principal advance on the date on which all of the
conditions set forth in SECTION 3 have been satisfied (the “Closing Date”).
Borrowers shall use the proceeds of the Subordinated Loans to refinance all amounts outstanding
under the Existing Subordinated Loan Agreement and to pay transaction fees and other costs and
expenses incurred in connection with refinancing the amounts outstanding under the Existing
Subordinated Loan Agreement and the Loan Documents. The Subordinated Loans shall be due in full on
the Maturity Date, unless the credit extended under the Subordinated Loans is otherwise
accelerated, terminated or extended as provided in this Agreement.



          (b) Subordinated Loan Interest and Payments. Except as otherwise provided in this
Section 2.1(b) and Section 2.2, the unpaid principal amount of the Subordinated
Loans shall bear interest at the Interest Rate in effect. Interest on the Subordinated Loans shall
be due and payable, in arrears, monthly on each Interest Payment Date on or after September 1, 2010
and on the Maturity Date. From and after the Maturity Date, and after the occurrence and during
the continuation of an Event of Default, interest on the outstanding principal balance of the
Subordinated Loans shall accrue at the Default Rate and shall be payable in cash upon demand from
Agent. In the event of a Default, the obligations of Borrowers with respect to Additional Interest
shall remain unchanged.



          
(c) Subordinated Loan Repayments. The then outstanding principal balance of the
Subordinated Loans shall be payable on the Maturity Date.



          
(d) Subordinated Loan Mandatory Prepayments. Subject to the Subordination Agreement,
at Agent’s option, Borrowers shall make a prepayment (the “Subordinated Loan Mandatory
Prepayment”), on a pro rata basis, of the entire outstanding principal amount of the
Subordinated Loans upon the occurrence of (1) a Casualty or Condemnation Event, (2) a Change in
Control, and (3) the sale of assets which in the aggregate constitutes 20% or more of the
aggregated Borrowers’ assets. Upon the sale of any assets of any Borrower, other than in the
ordinary course of business and if such sale is in an aggregate amount in excess of $100,000, and
to the extent the proceeds of such sale are used neither to (i) prepay the Senior Debt nor (ii)
purchase a substitute asset within one hundred eighty (180) days following such sale, Borrowers



15









 









shall prepay the Subordinated Loans, on a pro rata basis, with the net proceeds from such sale
which is not so otherwise used.




          (e) Subordinated Loan Optional Prepayments.



               (i) Provided that no Event of Default then exists under this Agreement, Borrowers may
voluntarily prepay (a “Subordinated Loan Optional Prepayment”) the principal balance of the
Subordinated Loans, in whole at any time, subject to the following conditions:



                    (A) Not less than ten (10) days prior to the date upon which Borrowers desire to make such
prepayment, Borrowers shall deliver to Agent written notice of its intention to prepay the
Subordinated Loans, which notice shall be irrevocable and state the prepayment amount and the
prepayment date; and



                    (B) Borrowers shall pay to Agent all unpaid expenses, fees and other items payable under this
Agreement or any other Loan Document, and shall pay to Lenders, all accrued and unpaid interest on
the Subordinated Loans through the date of such prepayment on the principal balance being prepaid.



     2.2. Interest and Fee Computation; Collection of Funds.



          Except as otherwise set forth herein, all interest and fees shall be calculated on the basis
of a year consisting of 360 days and shall be paid for the actual number of days elapsed.
Principal payments submitted in funds not immediately available shall continue to bear interest
until collected. If any payment to be made by Borrowers hereunder or under the Subordinated Notes
shall become due on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day and such extension of time shall be included in computing any interest in
respect of such payment. Notwithstanding anything to the contrary contained herein, the final
payment due under the Subordinated Loans must be made by wire transfer or other immediately
available funds. All payments made by Borrowers hereunder or under any of the Loan Documents shall
be made without setoff, counterclaim, or other defense. To the extent permitted by applicable law,
all payments hereunder or under any of the Loan Documents (including any payment of principal,
interest or fees) to, or for the benefit, of any Person shall be made by Borrowers free and clear
of, and without deduction or withholding for, or account of, any taxes now or hereinafter imposed
by any taxing authority.



     2.3. Additional Interest.



          In addition to the interest payable on the Subordinated Notes at the Interest Rate provided
for in Section 2.1(b), the unpaid principal amount of the Subordinated Notes shall bear
additional interest (“Additional Interest”) at the rate of two percent (2%) per annum (the
“Additional Interest Rate”), payable monthly in arrears on each Interest Payment Date. At
the election of Borrowers, each installment of Additional Interest may be paid as cash or by adding
the amount thereof to the unpaid principal amount of the Subordinated Notes. Borrowers shall be
deemed to have elected to add the Additional Interest to the unpaid principal amount of the
Subordinated Notes unless at least two Business Days prior to an Interest Payment Date,
Borrowers notify Agent that it intends to pay Additional Interest in cash on such Interest



16









 







Payment Date. Each such election by Borrowers shall be irrevocable. Agent shall note the amount
of each such installment of Additional Interest, whereupon the amount of such installment shall be
for all purposes hereunder unpaid principal of the Subordinated Notes.



     2.4. Taxes.



          (a) All payments made by Borrowers under this Agreement shall be made free and clear of, and
without deduction or withholding for or on account of, any present or future income, stamp or other
taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter
imposed, levied, collected, withheld or assessed by any governmental authority, excluding net
income taxes and franchise taxes (imposed in lieu of net income taxes) imposed on Lenders as a
result of a present or former connection between Lenders and the jurisdiction of the governmental
authority imposing such tax or any political subdivision or taxing authority thereof or therein
(other than any such connection arising solely from Lenders having executed, delivered or performed
its obligations or received a payment under, or enforced, this Agreement or any other Loan
Document). If any such non-excluded taxes, levies, imposts, duties, charges, fees, deductions or
withholdings (collectively, “Non-Excluded Taxes”) or Other Taxes are required to be
withheld from any amounts payable to Lenders hereunder, the amounts so payable to Lenders shall be
increased to the extent necessary to yield to Lenders (after payment of all Non-Excluded Taxes and
Other Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts
specified in this Agreement. If, after any such adjustment, any part of a Non-Excluded Tax or
Other Tax paid by Lenders or payable on behalf of Lenders is subsequently recovered by Lenders,
Lenders shall reimburse the Borrower to the extent of the amount so recovered.



          (b) Borrowers shall pay any Other Taxes to the relevant governmental authority in accordance
with applicable law.



          (c) At the request of Borrowers and at Borrowers’ sole cost, Lenders shall take reasonable
steps to (i) contest their liability for any Non-Excluded Taxes or Other Taxes that have not been
paid, or (ii) seek a refund of any Non-Excluded Taxes or Other Taxes that have been paid.



          (d) Whenever any Non-Excluded Taxes or Other Taxes are payable by Borrowers, as promptly as
possible thereafter Borrowers shall send to Agent a certified copy of an original official receipt
received by the Borrower showing payment thereof. If Borrowers fail to pay any Non-Excluded Taxes
or Other Taxes when due to the appropriate taxing authority or fail to remit to Agent the required
receipts or other required documentary evidence or if any governmental authority seeks to collect a
Non-Excluded Tax or Other Tax directly from Lenders for any other reason, Borrowers shall indemnify
Lenders on an after-tax basis for any incremental taxes, interest or penalties that may become
payable by Lenders.



          (e) The agreements in this Section shall survive the satisfaction and payment of the
Obligations and the termination of this Agreement.



17









 





     2.5. Single Obligation; Collateral Security.




          The Subordinated Loans constitute one general obligation of Borrowers, and shall be secured by
Agent’s security interest in and Lien upon all of the Collateral, on behalf of Lenders, which
security interest is subordinate only to security interests in assets of Borrowers that are
Permitted Liens, and by all other security interests, Liens, claims and encumbrances heretofore,
now or at any time or times hereafter granted by Borrowers to Agent.


SECTION 3. CONDITIONS OF BORROWING.




          Notwithstanding any other provision of this Agreement, the obligations of Lenders to disburse,
make or continue all or any portion of the Subordinated Loans, and otherwise to perform any of
their obligations under this Agreement are subject to the satisfaction of all of the following
conditions precedent, which satisfaction shall be determined by Agent in its sole discretion.



     3.1. Loan Documents.



          Borrowers shall have executed and delivered to Agent all of the following Loan Documents, all
of which must be satisfactory to Agent and Agent’s counsel in form, substance and execution:



          (a) Loan Agreement. Five copies of this Agreement duly executed by Borrowers.



          (b) Subordinated Notes. The Subordinated Notes duly executed by Borrowers, in the
form prepared by and acceptable to Agent.



          (c) Parent Pledge Agreement. The Pledge Agreement dated as of the date of this
Agreement executed by Regional in the form prepared by and acceptable to Agent.



          (d) Subsidiary Guaranty. The Subsidiary Guaranty, dated as of the date of this
Agreement, executed by each of the Subsidiaries, respectively, in the form prepared by and
acceptable to Agent.



          (e) Subordination Agreement. The Subordination Agreement, dated as of the date of
this Agreement, and in the form prepared by and acceptable to Agent.



          (f) Management Fee Subordination Agreement. The Management Fee Subordination
Agreement, dated as of the date of this Agreement, in the form prepared by and acceptable to Agent.



     3.2. Search Results; Lien Terminations.



          Borrowers shall have provided (i) payoff letters evidencing repayment in full of the Existing
Subordinated Loan Agreement, the termination of all agreements relating thereto and the release of
all Liens granted in connection therewith, with UCC or other appropriate



18









 




termination statements and documents effective to evidence the foregoing (other than Permitted
Liens), and (ii) such other UCC termination statements as Agent may reasonably request.




     3.3. Organizational and Authorization Documents.



          Each Borrower shall have provided to Agent copies of (i) the Certificate of Incorporation and
By-Laws of such Borrower and each Subsidiary; (ii) resolutions of the Board of Directors of such
Borrower and each Subsidiary approving and authorizing such Person’s execution, delivery and
performance of the Loan Documents to which it is party and the transactions contemplated thereby;
(iii) signature and incumbency certificates of the officers of such Borrower and each Subsidiary
executing any of the Loan Documents, each of which such Borrower hereby certifies to be true and
complete, and in full force and effect without modification, it being understood that Agent may
conclusively rely on each such document and certificate until formally advised by such Borrower of
any changes therein; and (iv) good standing certificates in the state of formation of such Borrower
and each Subsidiary and in each other state in which such Borrower is qualified to do business.



     3.4. Insurance.



          Borrowers shall have provided to Agent evidence satisfactory to Agent of the existence of
insurance required to be maintained pursuant to Section 5.2(a), together with evidence
that Agent has been named as a lender’s loss payee on all related insurance policies subject to the
prior rights of the Senior Lenders.



     3.5. Additional Documents.



          Borrowers shall have provided to Agent such other certificates, financial statements,
schedules, resolutions, opinions of counsel, notes and other documents which are provided for
hereunder or which Agent shall require.



     3.6. Event of Default.



          No Event of Default, or Unmatured Event of Default, shall have occurred and be continuing.



     3.7. Material Adverse Effect.



          There shall not have occurred any event having a Material Adverse Effect since December 31,
2009.



     3.8. Litigation.



          No litigation or governmental proceeding shall have been instituted against any Borrower or
any of its officers or shareholders which could reasonably be expected to have a Material Adverse
Effect.



19









 





     3.9. Representations and Warranties.



          Each representation or warranty of Borrowers or any Subsidiary contained herein or in any Loan
Document shall be true and correct as of the Closing Date, as though made on such date, except to
the extent such representation or warranty expressly relates to an earlier date.



     3.10. Closing Fee.



          Each Lender shall have received from the Borrowers payment of a closing fee, in cash, in an
amount equal to the product of (i) 40 basis points and (ii) such Lender’s Subordinated Loan
Commitment.



     3.11. Agent’s Expenses.



          Borrowers shall have paid or reimbursed Agent for all reasonable costs, fees and expenses
incurred by Agent, or for which Agent has become obligated, in connection with the negotiation,
preparation, execution and delivery of this Agreement and the other Loan Documents.


     SECTION 4. REPRESENTATIONS AND WARRANTIES.




          To induce Lenders to make the Subordinated Loans, Borrowers make the following representations
and warranties to Lenders, each of which shall survive the execution and delivery of this
Agreement:




     4.1. Warranties and Representations Re Contracts.





          With respect to the Contracts included in the Collateral:



          (a) Each Contract is a bona fide, valid, and binding obligation of the Contract Debtor,
enforceable in accordance with the terms of the Contract except to the extent enforceability may be
limited by applicable bankruptcy, insolvency, moratorium, reorganization or similar laws affecting
the enforcement of creditors’ rights generally or by equitable principles relating to
enforceability, and each Borrower does not know of any fact which impairs or will impair the
validity of any such Contract.



          (b) Each Contract and related Security Documents are free of any claim for credit, deduction,
discount, allowance, defense (including the defense of usury), dispute, counterclaim or setoff
except to the extent that such claims could not, individually or in the aggregate, reasonably be
expected to materially adversely affect the business or condition (financial or otherwise) of
Borrowers.



          (c) Each Contract is free of any prior assignment (except for assignments to a Borrower),
superior security interest, lien, claim, or encumbrance in favor of any Person other than Agent
except for Permitted Liens.



20









 





          (d) Each Contract correctly sets forth the loan terms between such Borrower and the Contract
Debtor, including the interest rate applicable thereto.



          (e) To the knowledge of Borrowers, the Security Documents correctly set forth the legal
description of any subject real property and reasonably describe the subject personal property
collateral.



          (f) To the knowledge of Borrowers, the signatures of all Contract Debtors are genuine and each
Contract Debtor had the legal capacity to enter into and execute such documents on the date
thereof.



     4.2. Warranties and Representations Re Collateral Generally.



          With respect to all Collateral, including the Contracts:



          (a) All state and federal laws have been complied with by Borrowers in conjunction with the
Collateral, the non-compliance with which would have a material adverse effect on the value,
enforceability or collectability of the Collateral.



          (b) At the time of the assignment of any Collateral by any Borrower, such Borrower has good
and valid title to, and full right and authority to pledge and collaterally assign, the same.



          (c) The provisions of this Agreement and the other Loan Documents create legal and valid Liens
on all the Collateral in favor of Agent and when all proper filings, recordings and other actions
necessary to perfect such Liens have been made or taken such Liens will constitute perfected and
continuing Liens on all the Collateral, having priority over all other Liens on the Collateral
(except for Permitted Liens) securing all the Obligations, and enforceable against each Borrower
and all third parties.



     4.3. Solvent Financial Condition.



          Except as set forth on Schedule 4.3, immediately prior to the Subordinated Loans, the
present fair salable value of the respective assets of Borrowers and any Guarantors are greater
than the amount required to pay their respective liabilities, and each is able to pay its debts as
they mature.



     4.4. Organization and Authority.



          Each Borrower (i) is a corporation duly organized, validly existing and in good standing under
the laws of the state in which it is incorporated; (ii) has all requisite corporate power to carry
on its business as now conducted; and (iii) is duly qualified and is authorized to do business as a
foreign corporation and is in good standing as an entity in each jurisdiction where such
qualification is necessary.



21









 





     4.5. Financial Statements.



          Except as set forth on Schedule 4.5, the audited financial statements of Borrowers
and any Guarantors for the fiscal year ending December 31, 2009, are true and correct and have been
prepared in accordance with GAAP, consistently applied (except for changes in application in which
Borrowers’ accountants concur) and present fairly in all material respects the financial position
of Borrowers and Guarantors as of such dates and the results of their operations for such periods.
Since the date of the most recent financial statements delivered pursuant to this Agreement, there
has been no material adverse change in the condition, financial or otherwise, of any Borrower and
any Guarantor.



     4.6. Full Disclosure.



          The financial statements referred to in Section 4.5 above, this Agreement, and any
written statement furnished by Borrowers to Agent (copies of which have been previously delivered),
do not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements contained therein or herein not misleading, in light of the circumstances
under which it was made; provided, that with respect to any projections and pro forma financial
information contained in the materials referenced above, Borrowers represent only that such
information was prepared in good faith based upon assumptions believed to be reasonable at the time
made in light of the circumstances when made, it being recognized by Agent that such financial
information as it relates to future events is not to be viewed as fact and that actual results
during the period covered by such financial information may differ from the projected results as
set forth therein by a material amount.



     4.7. Pending Litigation.



          There are no proceedings pending, or to the knowledge of any Borrower threatened, against or
affecting any Borrower or any Guarantor in any court or before any Governmental Authority or
arbitration board or tribunal which involve the possibility of materially and adversely affecting
the business or condition (financial or otherwise) of Borrower or any Guarantor to perform any of
its Obligations. Neither any Borrower nor any Guarantor is in default with respect to any order of
any court, Governmental Authority or arbitration board or tribunal.



     4.8. Titles to Properties.



          Each Borrower has good and marketable title to the property (including all of the Collateral)
it purports to own, free from Liens except for Permitted Liens and as set forth on Schedule
4.8.



     4.9. Licenses.



          Except as set forth on Schedule 4.9, each Borrower has all licenses, permits, and
franchises necessary for the conduct of its business which violation or failure to obtain would
materially and adversely affect its business or condition (financial or otherwise).



22









 





     4.10. Transaction is Legal and Authorized; Restrictive Agreements.



          The execution and delivery of this Agreement and related documents by Borrowers, the grant of
the liens to Agent in respect of the Collateral by Borrowers, and compliance by Borrowers with all
of the provisions of this Agreement are valid, legal, binding and enforceable in accordance with
their terms (except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally
or by general equitable principles relating to enforceability) and will not conflict with or result
in any breach of any of the provisions of any bylaws, charter or instrument to which any Borrower
is a party. None of Borrowers are party to any agreement, and none are subject to any corporate
restriction, which adversely affects their ability to execute, deliver, and perform the Loan
Documents to which they are a party and repay the Obligations owing by it.



     4.11. Taxes.



          All tax returns required to be filed by any Borrower and any Guarantor in any jurisdiction
have been filed when due (after giving effect to any extensions permitted by applicable law and
regulations), and all taxes, assessments, and other governmental charges upon Borrowers, or upon
any of its properties, income or franchises, which are due and payable, have been paid when due,
except to the extent the validity thereof is being contested in good faith by proper proceedings
which stay the imposition of any penalty, fine or Lien resulting from non-payment thereof and with
respect to which adequate reserves in accordance with GAAP have been set aside for the payment
thereof. The provisions for reserves for taxes on the books of Borrower are adequate in all
material respects for all unaudited fiscal years, and for its current fiscal period.



     4.12. Compliance with Law.



          Except as set forth on Schedule 4.12, each Borrower: (a) is not in violation of any
laws, ordinances, or governmental rules or regulations to which it or its business is subject, the
violation of which would materially and adversely affect the business or condition (financial or
otherwise) of Borrowers, and (b) has not used illegal, improper, fraudulent or deceptive marketing
techniques or unfair business practices with respect to the Contracts which would materially and
adversely affect the business or condition (financial or otherwise) of Borrowers. Except as set
forth on Schedule 4.12, each Borrower has fully complied with all applicable federal
statutes and all rules and regulations promulgated thereunder and with all provisions of law of
each state whose laws, rules, and regulations relate to the Contracts, except to the extent that
such non-compliance would not materially and adversely affect the business or condition (financial
or otherwise) of Borrowers.



     4.13. Borrowers’ Office and Names.



          As of the Closing Date, each Borrower’s chief executive office is located at the address
stated on Schedule 4.13 hereof, and each Borrower covenants and agrees that it will not, without
prior written notification to Agent, relocate said chief executive office. As of the Closing Date,
the exact legal name of each Borrower is as set forth on the signature page of this



23









 




Agreement and no Borrower has, during the five years immediately prior to the date of this
Agreement, been known by or used any other legal name.




     4.14. Subsidiaries.



          As of the Closing Date, Schedule 4.14 is a correct and complete list of the names and
relationship to each Borrower of each and all of Borrowers’ Subsidiaries and such Schedule sets
forth each Borrower’s direct and indirect equity interest in each Subsidiary. As of the Closing
Date, the outstanding shares of each such Subsidiary owned directly or indirectly by each Borrower
are duly authorized, validly issued, fully paid and nonassessable.



     4.15. No Default.



          Neither Borrowers nor any of their Subsidiaries are in default with respect to any note, loan
agreement, mortgage, lease, or other material agreement to which such Borrower or any such
Subsidiary is a party or by which it is bound, which default would have a material adverse effect
on the business or condition (financial or otherwise) of Borrowers and their Subsidiaries taken as
a whole.



     4.16. Use of Proceeds.



          None of the transactions contemplated in this Agreement (including the use of the proceeds of
the Loans) will violate or result in the violation of Section 7 of the Securities Exchange Act of
1934, as amended, or any regulations issued pursuant thereto, including , without limitation,
Regulations T, U and X of the Federal Reserve Board. No Borrower owns or intends to carry or
purchase any “margin stock” within the meaning of said Regulation U. None of the proceeds of the
loans will be used, directly or indirectly, by any Borrower or any of its Subsidiaries to purchase
or carry any “security” within the meaning of the Securities Exchange Act of 1934, as amended.
Borrowers shall use the proceeds of the Subordinated Loan to pay the costs, fees and items of
expense, in connection with the incurrence of the Debt and transactions contemplated by this
Agreement. The Subordinated Loan, including interest rate, fees and charges as contemplated
hereby, represents a bona fide business loan.



     4.17. Bank Accounts.



          Schedule 4.17 sets forth, as of the Closing Date, a complete and accurate list of (i)
the name of each Person with which each Borrower or any of its Subsidiaries has a deposit account,
cash management account, safekeeping or custodial account, lock box, vault and deposit box; and
(ii) the purpose of each such account, box or vault. Other than as set forth in Schedule
4.17, as of the Closing Date, neither Borrowers nor any of their Subsidiaries maintain any
account or other arrangement with any Person pursuant to which funds or securities of, or monies,
checks, instruments, remittances, proceeds or other payments to such Borrower or such Subsidiary
may be received or accepted by such Person for or on behalf of such Borrower or such Subsidiary.



24









 





     4.18. Borrowers’ Representations and Warranties Re Collateral.



          Each Borrower represents and warrants to Lenders that so long as such Borrower is obligated to
Lenders, that:



          (a) the Collateral shall be owned solely by such Borrower, and no other Person, other than
Agent, has or will have any right, title, interest, claim or lien therein except for Permitted
Liens;



          (b) except as specifically consented to in writing by Agent, that the Collateral, including
any monies resulting from the lease, rental, sale or other disposition thereof, shall remain free
and clear of any liens, excepting for liens hereby granted to Agent and Permitted Liens; and



          (c) Such Borrower shall pay and discharge, when due, all taxes, levies, assessments and other
charges upon the Collateral, except to the extent the validity thereof is being contested in good
faith by proper proceedings which stay the imposition of any penalty, fine or Lien resulting from
non-payment thereof and with respect to which adequate reserves in accordance with GAAP have been
set aside for the payment thereof.



     4.19. ERISA.



          No Borrower or any of its Subsidiaries maintains or sponsors, or has past, present or future
obligations of contribution to a Plan or a Pension Plan or is a participating employer in, or has
past, present or future obligations of contribution to, a Multiemployer Plan. No Borrower or any
of its Subsidiaries has an ERISA Affiliate.



     4.20. Labor Relations.



          No Borrower or Subsidiary is party to or bound by any collective bargaining agreement. There
are no material grievances, disputes or controversies with any union or other organization of any
Borrower’s or Subsidiary’s employees, or, to any Borrower’s knowledge, any asserted or threatened
strikes, work stoppages or demands for collective bargaining which would reasonably be expected to
result in a material adverse change in the financial condition of Borrowers taken as a whole. No
Borrower or Subsidiary is party to or bound by any management or consulting agreement, the breach
or termination of which would reasonably be expected to result in a material adverse change in the
financial condition of Borrowers taken as a whole.


SECTION 5. FINANCIAL AND OTHER COVENANTS.




          Each Borrower covenants that so long as this Agreement or any Obligation of any Borrower to
Lenders exists:



25









 





     5.1. Payment of Taxes and Claims.



          Each Borrower shall pay, before they become delinquent, all taxes, assessments, and other
governmental charges imposed upon it or its property or the Collateral and all claims or demands
which, if unpaid, might result in the creation of a Lien upon its property or the Collateral except
to the extent the validity thereof is being contested in good faith by proper proceedings which
stay the imposition of any penalty, fine or Lien resulting from non-payment thereof and with
respect to which adequate reserves in accordance with GAAP have been set aside for the payment
thereof.



     5.2. Maintenance of Properties and Existence.



          Each Borrower shall:



          (a) maintain insurance with respect to its properties and business against such casualties and
contingencies of such types and in such amounts as is customary with companies of similar size and
in the same or similar business as such Borrower;



          (b) keep true books, records, and accounts of all its business transactions with complete
entries made to permit the preparation of financial statements in accordance with GAAP;



          (c) keep in full force and effect its corporate existence, rights, and franchises, as the case
may be except as otherwise permitted under this Agreement or the other Loan Documents or as would
not reasonably be expected to have a material adverse effect on the business or condition
(financial or otherwise) of such Borrower; and



          (d) not violate any laws, ordinances, or governmental rules or regulations to which it is
subject which violation might materially and adversely affect the business or condition (financial
or otherwise) of such Borrower so that all Contracts will be valid, binding and legally enforceable
in accordance with their terms, subsequent to the assignment thereof to Agent.



     5.3. Guaranties.




          No Borrower shall become or be liable in respect of any guaranty except (a) by endorsement, in
the ordinary course of business, of negotiable instruments for deposit or collection issued in the
ordinary course of such Borrower’s business, (b) for guaranties in respect of Debt permitted by
Section 5.6, (c) for guaranties incurred in the ordinary course of business with respect
to surety and appeal bonds, performance bonds and other similar obligations, (d) for guaranties
with respect to leases, and (e) for guaranties set forth on Schedule 5.3.



     5.4. Borrowing Base Ratio.




          Borrowers shall not permit the ratio of (a) all Senior Debt plus any Debt not subordinated to
the Senior Debt (numerator), to (b) Borrowing Base (denominator) to exceed 3.75:1, at any time.
All amounts calculated under this Paragraph 5.4 shall be calculated on a consolidated basis for all
corporations comprising Borrowers and RMC Reinsurance.



26









 





     5.5. Business Conducted.



          No Borrower shall engage, directly or indirectly, in any line of business other than the
businesses of substantially the type in which such Borrower is engaged (or in the case of RFCA and
RFCTN, proposes to be engaged) on the Closing Date and businesses reasonably related thereto.



     5.6. Debt.



          Except as previously and expressly consented to in writing by Agent, no Borrower shall,
directly or indirectly, permit, incur or maintain any Debt, other than (a) the Obligations, (b)
Debt set forth on Schedule 5.6, (c) Debt evidencing intercompany loans among Borrowers and
Guarantors, (d) the Subordinated Debt, (e) current accounts payable, accrued expenses and customer
advance payments incurred in the ordinary course of business, (f) Debt secured by Permitted Liens;
(g) Debt permitted under Section 5.3, (h) the Senior Debt, (i) unsecured Debt in addition
to the foregoing in an aggregate amount not to exceed $1,000,000 at any one time outstanding, and
(j) any Debt representing a Permitted Refinancing of the foregoing or a refinancing permitted by
the Intercreditor Agreement (collectively, “Permitted Debt”).



     5.7. Further Assurances.



          Each Borrower shall from time to time execute and deliver to Agent such other documents and
shall take such other action as may be reasonably requested by Agent in order to implement or
effectuate the provisions of, or more fully perfect the rights granted or intended to be granted by
each Borrower to Agent pursuant to the terms of, this Agreement, the Loan Documents, or any other
agreement executed and delivered to Agent by such Borrower.



     5.8. Subsidiaries.



          Borrowers shall not, directly or indirectly, organize or acquire any other Subsidiaries
without the prior written consent of Agent, which consent shall not be unreasonably withheld,
conditioned or delayed; provided, however, such Subsidiary (other than a Subsidiary that is
organized or formed under the laws of a jurisdiction other than the United States (or any state
thereof) or the District of Columbia) executes and delivers a Guaranty substantially in the form
executed by the Guarantors on the date hereof in favor of Agent, for the benefit of Lenders, within
thirty (30) days of becoming a Subsidiary of Borrowers its business as and where the same is
currently located as heretofore or as hereafter conducted by it.



     5.9. Interest Coverage Ratio.



          Beginning with the fiscal quarter ending September 30, 2010, Borrowers shall maintain a ratio,
calculated as of the last day of each fiscal quarter of Borrowers, of not less than (a) the
Adjusted Net Income for the fiscal year to date plus interest expense for the fiscal year to date
(numerator) to (b) interest expense for the fiscal year to date (denominator) as follows:



	 	 	 	 	 

	Fiscal Quarter Ending September 30, 2010 and for each
fiscal quarter thereafter calculated

based on the then fiscal year to date
	 	 	Ratio 1.15 to 1






27









 







          As used herein, “interest expense” means the aggregate amount of interest paid by Borrowers on
all indebtedness, including Borrowers’ Obligations to Lenders, during the applicable fiscal period.



     5.10. Accurate Records Re Collateral.



          Borrowers shall maintain accurate and complete files relating to the Contracts and other
Collateral to the reasonable satisfaction of Agent.



     5.11. Prohibition on Distributions; Equity Capital Changes.



          Borrowers shall not, without Agent’s prior written consent, directly or indirectly (a)
declare, make, or incur any liability to make any Distribution, except for Distributions by a
Subsidiary of a Borrower to such Borrower or (b) make any change in its capital equity structure
which would reasonably be expected to materially and adversely affect repayment of the Subordinated
Loan or other Obligations provided that, changes in Borrowers’ capital equity structures as
otherwise permitted by this Agreement or the Loan Documents, shall be permitted.



     5.12. Limitation on Bulk Purchases.



          Borrowers shall not purchase from any one seller Contracts with an aggregate purchase price
greater than the lesser of (i) $3,200,000 and (ii) 11% of Availability (as such term is defined
under the Senior Credit Agreement) (“Bulk Purchase Limit”) in a single transaction or as
part of an integrated series of transactions, unless (a) Borrowers shall have given Agent at least
ten (10) Business Days prior notice of the proposed purchase, together with a copy of the purchase
agreement (the agreement shall be written in all cases) and such other information as Agent may
reasonably request, and (b) Agent has notified Borrowers, within ten days after the date Borrowers
have provided all the information requested by Agent, that the Contracts being purchased and the
terms of the purchase are reasonably satisfactory to Agent.



     5.13. Transactions with Affiliates.



          Except as permitted by this Agreement, the Loan Documents or the Intercreditor Agreement, no
Borrower shall sell, transfer, distribute, or pay any money or property to any Affiliate of such
Borrower, or lend or advance money or property to any Affiliate of such Borrower, or invest in (by
capital contribution or otherwise), or purchase or repurchase any stock or indebtedness, or any
property, of any Affiliate of such Borrower or become liable on any guaranty of the indebtedness,
dividends, or other obligation of any Affiliate of such Borrower. Notwithstanding the foregoing,
(a) Borrowers may make loans and advances to, and sell, transfer, distribute and pay any money and
property to, and invest in, and become liable on any guaranty of any Permitted Debt of, Borrowers,
(b) Borrowers may make loans to RMC Reinsurance provided that the aggregate principal balance of
such loans does not exceed at any one time $400,000, (c) Regional may make cash Distributions to
its shareholders in accordance with the terms of Section 5.11, (d) Regional may pay to (i)
Richard A. Godley, Sr., Jerry L. Shirley and Brenda F. Kinlaw the payments contemplated under the
Consulting Agreements, provided, however, that the Consulting Agreements shall not be amended to
the extent that such



28









 




amendments would be adverse to the interests of Lenders, including but not limited to any
increase in the payments to be paid thereunder, unless Agent provides its written consent to such
amendment which consent shall not be unreasonably withheld, delayed or conditioned, and (ii)
Parallel, Palladium Capital and their respective Related Funds’ fees for advisory and management
services, and all costs and expenses related thereto pursuant to the Management Agreement,
provided, however, that the Management Agreement shall not be amended to the extent that such
amendment would be adverse to the interests of Lenders, including but not limited to any increase
in the fees to be paid thereunder, unless Agent provides its written consent to such amendment,
which consent shall not be unreasonably withheld, delayed or conditioned, and (e) Regional may
issue stock options pursuant to the Management Incentive Plan and provided that no Event of Default
exists or would result therefrom, may purchase and repurchase any stock issued pursuant to such
management incentive plan. Regional may sell its division, Regional Check Advance, and its
subsidiary, Upstate Motor Company, provided that Senior Lenders receive the net cash sale proceeds
of any such sale to be applied to the Senior Debt. For any transaction with or among Affiliates
permitted by this Agreement, Borrowers shall deliver to Agent at least seven (7) Business Days’
prior to the consummation of such transaction; (i) written notice describing the transaction,
including, without limitation, information that would be reasonably required for Agent to determine
whether additional documentation is required to maintain perfected security interests in the
Collateral; and (ii) a reaffirmation by all Borrowers of the representations, warranties, covenants
and other agreements contained in this Agreement.




     5.14. Accounting Changes.



          Each Borrower shall maintain its books and records in accordance with GAAP including the
charging off the unpaid balance of its delinquent Contracts and maintenance of loss reserves. No
Borrower shall (i) make any significant change in accounting treatment or reporting practices,
except as permitted or required by GAAP, or (ii) change its fiscal year.



     5.15. Financial Statements.



          Borrowers shall submit to Agent:



          (a) Monthly and Annual Statements.



          As soon as practicable: (1) after the end of each month of each fiscal year of Regional, and
in any event within 45 days after the end of such period, and (2) after the end of each fiscal year
of Regional, and in any event within 120 days thereafter, copies of:



               (i) balance sheets of Regional and its Subsidiaries as at the end of such monthly period
and such year;



               (ii) statements of income of Regional and its Subsidiaries for such month and year;



               (iii) statements of cash flows of Regional and its Subsidiaries during such year;



29









 





               (iv) statements of changes in stockholders equity of Regional and its Subsidiaries
during such year;



               (v) statements of material changes of accounting policies, presentations, or principles
made during such year for Regional and its Subsidiaries; and



               (vi) notes to such financial statements.



          Monthly statements and annual statements shall all be in reasonable detail, fairly presenting
the financial position and the results of operations, and certified as complete and correct in all
material respects, subject to change as resulting from year-end adjustments, by the treasurer or
chief financial officer of Holdings, Regional or the applicable Subsidiary, as appropriate. Monthly
financial statements shall be prepared on an individual basis for each Borrower or Guarantor as
well as on a consolidated basis for all Borrowers and Guarantors. Annual statements of Regional
and its Subsidiaries (or if the financial statements of Regional and its Subsidiaries are required
under GAAP to be consolidated with the financial statements of Holdings, then annual statements of
Holdings and its Subsidiaries), shall be audited and prepared in accordance with GAAP and shall be
accompanied by a report thereon unqualified as to scope by an independent nationally recognized
certified accounting firm selected by Holdings or Regional and reasonably satisfactory to Agent.
In addition, the annual statements shall be prepared on a consolidated basis, and on a
consolidating basis for each of Borrowers and Guarantors.



          (b) Audit Reports.



          Promptly upon receipt thereof, one copy of each audit report, if any, submitted to any and all
Borrowers by independent public accountants in connection with any annual, interim, or special
audit or examination made by them of the books of such Borrower.



          (c) Notice of Default or Event of Default.



          Within three (3) Business Days of becoming aware of the existence of any condition or event
which constitutes a Default or an Event of Default, a written notice specifying the nature of the
claimed Default, Event of Default or other default and what action Borrower is taking or proposes
to take with respect thereto.



          (d) Requested Information.



          With reasonable promptness, such other information as, from time to time, may be reasonably
requested by Agent.



     5.16. Inspection.



          Borrowers shall permit Agent and its representatives to make such verifications and
inspections of the Collateral and to make audits and inspections, at any time during normal
business hours of such Borrower and as frequently as Agent reasonably desires upon reasonable
advance notice to such Borrower, of Borrowers’ books, accounts, records, correspondence and such
other papers as it may desire and of Borrowers’ premises and the Collateral. To reimburse



30









 




Agent for the costs of such verifications, inspections and audits, Borrowers shall pay to
Agent all costs of appraisals, inspections, and verifications of the Collateral, including travel,
lodging, and meals for inspections of the Collateral and Borrowers’ operations by Agent plus
Agent’s then customary charge for field examinations and audits and the preparation of reports
thereof, provided, however, that in the absence of a Default or Event of Default, Borrowers shall
not be obligated to pay more than $75,000 in per diem charges in any one calendar year; such costs
and charges shall be payable by Borrowers on demand by Agent. Borrowers shall supply Agent with
copies and shall permit Agent to copy such records and papers as Agent shall request, and shall
permit Agent to discuss Borrowers’ affairs, finances, and accounts with Borrowers’ employees,
officers, and independent public accountants (and by this provision each Borrower hereby authorizes
said accountants to discuss with Agent the finances and affairs of such Borrower) all at such
reasonable times and as often as may be reasonably requested. Borrowers further agree to supply
Agent with such other reasonable information relating to the Collateral and to Borrowers as Agent
shall request. In the event of litigation between any Borrower and Agent, Agent’s right of civil
discovery shall be in addition to, and not in lieu of its rights under this Section 5.16.




     5.17. Plans.



          No Borrower or Borrower Affiliate shall become a party to any Multiemployer Plan or Foreign
Plan.



SECTION 6. GRANT OF SECURITY INTEREST




     6.1. Creation of Security Interest in Collateral.



          Each Borrower hereby irrevocably and unconditionally grants, transfers, and assigns to Agent
all its right, title, and interest in all the Collateral, whether presently existing or hereafter
acquired or arising, in order to secure prompt payment and performance by each Borrower of all its
Obligations. Agent’s title and security interest in the Collateral shall attach to all the
Collateral without further act by Agent or Borrowers. In the event any Collateral, including
proceeds, is evidenced by or consists of Instruments, Borrowers shall, upon the request of Agent
and subject to the prior rights of the Senior Lenders, endorse, assign, and deliver to Agent such
Instruments.



     6.2. Financing Statements.



          Each Borrower hereby (i) authorizes Agent and Agent’s designee to execute and file or record,
or file or record without signature as the case may be where permitted by law, at any time any such
financing statements, continuation statements, and assignments and amendments thereto on such
Borrower’s behalf, including any financial statement that indicate the financing statement covers
“all assets” and (ii) ratifies such authorization to the extent that Agent has filed any such
financing statements, continuation statements and assignments and amendments thereto, prior to the
date hereof.




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     6.3. Location of Collateral.



          Each Borrower represents and warrants that except for Collateral which has been delivered to
Agent or on behalf of the Senior Lenders under the terms hereof: (a) Schedule 6.3 is a correct
and complete list of the location of all of books and records concerning the Collateral, the
locations of the Collateral, and location of all such Borrower’s places of business as of the
Closing Date; and (b) the Collateral shall remain at all times in the possession of such Borrower.
Each Borrower covenants and agrees that, except for Collateral in the possession of Agent, it will
not maintain the Collateral at any location other than those listed in Schedule 6.3, and will not
otherwise change or add to those locations, unless it gives Agent at least 30 days prior notice
thereof and executes and delivers to Agent any and all financing statements and other documents
that Agent reasonably requests in connection therewith. Notwithstanding any provision of this
Agreement to the contrary, upon the occurrence and during the continuance of an Event of Default,
each Borrower shall upon Agent’s request immediately deliver to Agent all Contracts and related
Security Document then existing and thereafter arising.



     6.4. Protection of Collateral; Reimbursement.



          Each Borrower shall pay all expenses of protecting, storing, insuring, handling, maintaining,
and shipping the Collateral and any and all excise, property, sales, and use taxes levied by any
state, federal or local authority on any of the Collateral or in respect of the sale thereof.



     If any Borrower fails promptly to pay any portion thereof when due, Agent may, at its option,
but shall not be required to, pay the same and charge any Borrower’s account under this Agreement
therefor, and each Borrower agrees promptly to reimburse Agent therefor with interest accruing
thereon daily at the rate of interest then in effect under the Note. All sums so paid or incurred
by Agent for any of the foregoing and any and all sums for which Borrowers may become liable under
this Agreement and all reasonable costs and expenses which Agent may incur in enforcing or
protecting its lien or rights and interest in the Collateral or any of its rights or remedies under
this Agreement or any other agreement between the parties hereto or in respect of any of the
transactions occurring thereunder until paid by Borrowers to Agent with interest at the rate of
interest then in effect under the Note, shall be considered as additional indebtedness owing by
Borrowers to Agent under this Agreement and, as such, shall be secured by all the Collateral.
Except for Agent or Agents’ gross negligence or willful misconduct, Agent shall not be liable or
responsible in any way for the safekeeping of any of the Collateral or for any loss or damage
thereto or for any diminution in the value thereof, or for any act or default of any carrier,
forwarding agency, or other Person whatsoever, but the same shall be at Borrowers’ sole risk.



     6.5. Release of Collateral.



          Notwithstanding any other provision of this Agreement to the contrary, upon Borrower’s
request, Agent shall release its security interest in any Contract(s) (and the Security Documents
related thereto) included in the Collateral so long as (a) Borrower obtains Agent’s prior written
consent to such release, which consent shall not be unreasonably withheld, conditioned or delayed;
(b) no Default or Event of Default exists at the time such Contract(s) is



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to be released; (c) Borrower has entered into a written contract for the sale of such
Contract(s) and has delivered to Agent a fully executed copy of such written contract; and (d)
immediately following the pledging of additional Collateral or payment of the Notes, a Default or
Event of Default does not exist under this Agreement. Upon satisfaction of all of the foregoing
conditions, Agent shall release its security interest in such Contract(s) and within a reasonable
period of time, return the original such Contract(s) and original Security Documents in its
possession, if any, being released. Any distribution of interest or principal, or loss of the
Collateral or any of the Property secured thereby, shall not release any Borrower from any of the
Obligations.



SECTION 7. EVENTS OF DEFAULT.




          Borrowers, without notice or demand of any kind, shall be in default under this Agreement upon
the occurrence of any of the following events (each an “Event of Default”).



     7.1. Interest or Principal.



          Failure to pay (i) when due or when declared due and payable, all or any portion of the
principal of Obligations owing to Lenders or (ii) within three (3) Business Days after the same
shall be due, all or any portion of interest on the Obligations, taxes or other sums payable
pursuant to the terms of this Agreement.



     7.2. Warranties or Representations.



          Any warranty, representation, or other statement made or furnished to Agent or Lenders by any
Borrower or any Obligor or any instrument furnished in compliance with this Agreement shall have
been false or misleading in any material respect when made or furnished.



     7.3. Financial Covenants.



          Failure by any Borrower or any Obligor to comply with any financial covenants set forth in
this Agreement relating to any Borrower or any Obligor; provided however that no Event of Default
will exist under this Section if Holdings gives Agent written notice, within 10 days after
financial statements are delivered reflecting the failure to comply with such covenants, of its
intention to cure such failure and within 10 days thereafter purchases additional common stock of
Regional for an amount equal to the amount that, when added to Adjusted Net Income, would result in
Borrowers’ being in compliance with the covenant contained in Section 5.9.



     7.4. Other Covenants.



          Failure by any Borrower or any Obligor to comply with any other covenants or agreements
relating to any Borrower or any Obligor as contained in this Agreement, any Guaranty, or any other
agreement executed in connection herewith or therewith for more than 30 days after such failure
shall first become known to any Borrower or to any Obligor.



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     7.5. Insolvency.



          Dissolution, termination of existence, insolvency (failure to pay its debts as they mature or
the failure to maintain the fair salable value of its assets in excess of its liabilities),
business failure, appointment of a receiver, trustee, custodian or similar fiduciary, assignment
for the benefit of creditors or the commencement of any proceedings under any bankruptcy laws or by
or against any Borrower or any Obligor (if against any Borrower or Obligor , the continuation of
such proceedings for more than 60 days) or the making by any Borrower or any Obligor of any offer
of settlement, extension or composition to its unsecured creditors generally.



     7.6. Attachment, Judgment, Tax Liens.



          The issuance or filing against any Borrower or any Obligor of any lien, attachment,
injunction, execution, tax lien, or judgment for the payment of money in excess of $750,000 which
is not vacated, satisfied or discharged in full or stayed within 30 days after issuance or filing.



     7.7. Default in Other Agreements.



          Default in the payment of any sum due under any instrument of Debt for borrowed money in
excess of $750,000 owed by any Borrower or any Obligor to any Person or any other default under
such instrument of indebtedness other than the Senior Debt which permits such indebtedness to
become due prior to its stated maturity or permits the holders of such indebtedness to elect a
majority of the board of directors or manage the business of any Borrower or any Obligor.



     7.8. Loss of License.



          The loss, revocation, or failure to renew any license, permit, and/or franchise now held or
hereafter acquired by any Borrower, which is necessary for the continued operation of such
Borrower’s business which does or could reasonably be expected to materially adversely affect the
properties and condition (financial or otherwise) of such Borrower.



     7.9. Liens.



          If any Borrower shall pledge, hypothecate or otherwise give a Lien on the Collateral, any
Contract or the stock of RMC Reinsurance to, or if such Lien shall be obtained by, any Person other
than Agent other than Permitted Liens.



     7.10. Assignment of Agreement.



          The attempt by any Borrower to, or if any Borrower shall, assign this Agreement or its rights
hereunder.



     7.11. Change in Control.



          Any Change in Control shall occur.



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     7.12. Subsidiary Guaranty Termination.



          Default under, revocation of, or termination of any Subsidiary Guaranty (other than a
termination as a result of a transaction permitted hereunder).



     7.13. Crimes.



          Any Borrower or Guarantor, or any senior executive office of a Borrower or Guarantor, is
criminally indicted or convicted for (i) a felony committed in the conduct of any Borrower’s or
Guarantor’s business, or (ii) violating any state or federal law (including the Controlled
Substances Act, Money Laundering Control Act of 1986 and Illegal Exportation of War Materials Act)
that could lead to forfeiture of any material Property or any Collateral.



     7.14. ERISA Liability.



          An ERISA Event occurs with respect to a Pension Plan or Multiemployer Plan that has resulted
or could reasonably be expected to result in liability of a Borrower or Guarantor to a Pension
Plan, Multiemployer Plan or PBGC, or that constitutes grounds for appointment of a trustee for or
termination by the PBGC of any Pension Plan or Multiemployer Plan; any Borrower, Guarantor or ERISA
Affiliate fails to pay when due any installment payment with respect to its withdrawal liability
under Section 4201 of ERISA under a Multiemployer Plan; or any event similar to the foregoing
occurs or exists with respect to a Foreign Plan.



SECTION 8. REMEDIES IN GENERAL; AGENT’S MANAGEMENT FEE; ADDITIONAL EQUITY.



     8.1. Remedies.



          In case any Event of Default shall have occurred, then and in every such Event of Default,
Agent may, and at the direction of the Required Lenders, shall, take any or all of the following
actions, at the same time or at different times:



          (a) Acceleration. Declare the Subordinated Loans and all other sums and
Obligations owing to Lenders from Borrowers under this Agreement or any other agreement or loan
between Lenders and Borrowers to be forthwith due and payable, whereupon all such sums shall
forthwith become due and payable without presentment, demand, protest or other notice of any kind,
all of which are hereby expressly waived by Borrowers, and Lenders’ commitments to lend or extend
other financial accommodations on behalf of the Borrower shall be terminated.



          (b) Set-Off. Without notice or other action set-off against any of the
Obligations to Lenders any sum owed by Lenders in any capacity to Borrowers or any Subsidiary
whether due or not, and Lenders shall be deemed to have exercised such right of set-off and to have
made a charge against any such sum immediately upon the occurrence of such Event of Default, even
though the actual book entries may be made at some time subsequent thereto.



          (c) Attorneys’ Fees and Expenses. Add to the Obligations, Agent’s reasonable
expenses to obtain or enforce payment of any Obligations hereunder and the



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enforcement or liquidation of any debt hereunder shall include reasonable attorneys’ fees plus
other legal expenses incurred by Agent.




          (d) Default Rate. Increase the rate of interest under any Obligations to the
Default Rate. Unless otherwise agreed by Agent, the Default Rate shall each be retroactive to the
date of the first occurrence of an Event of Default.



          (e) Other Remedies. Exercise any other remedies under the Uniform Commercial Code
or other applicable law, or any other Loan Document, including but not limited to proceeding to
enforce its right by suit in equity, action at law or other appropriate proceeding, whether with
respect to any Collateral or for payment or the specific performance of the covenants or agreements
contained in this Agreement or any other Loan Document, all in such order and in such manner as
Agent determines.



     8.2. Agent’s Performance of Obligors’ Obligations.



          If Borrowers or any other Obligor fails to comply with any of the covenants or perform any of
its Obligations set forth herein or in any other Loan Document, Agent may, but shall have no
obligation to, perform any such Obligations or undertake any act to cause such covenant to be
complied with, including, but not limited to, discharging any Lien on any asset other than
Permitted Liens. Any and all sums, and all costs and expenses incurred by Agent in so performing
or causing compliance, shall be payable on demand together with interest at the Default Rate,
respectively, from the date of any such payment by Agent until the date paid by Borrowers. Any
such performance by Agent shall not cure any Unmatured Event of Default or Event of Default by
Borrowers until all amounts owed under this Section 8.2 to Agent have been paid by the
Borrower.


SECTION 9. CERTAIN REMEDIES AS TO COLLATERAL.




     9.1. Remedies — Collateral



          (a) Upon the occurrence of an Event of Default and subject to the prior rights, if any, of
the Senior Lenders:



               (i) with respect to Accounts and General Intangibles:



                    (A) If Agent shall so request, Borrowers shall forthwith do one or more of the following:
(A) legend, in form and manner acceptable to Agent, its books, records and documents evidencing or
pertaining to its Accounts and General Intangibles with an appropriate reference to the fact that
such Collateral has been assigned to Agent and that Agent has a security interest therein and
notify any Person with an obligation with respect to such Collateral of Agent’s security interest
therein, (B) account for and transmit to Agent, in the same form as received, all proceeds of
collection of such Collateral received by Borrowers and, until so transmitted, hold the same in
trust for Agent and not commingle such proceeds with any other of its funds, (C) deliver, at its
own expense, any or all books, record or other documents relating to such Collateral to Agent at a
place designated by Agent, provided that Agent agrees to allow the South Carolina Board of
Financial Institutions to examine any original notes, mortgages or other evidence of indebtedness
by Regional’s borrowers that have been delivered by Borrower to



36









 




Agent, and (D) notify the obligors on such Collateral that the Accounts and General
Intangibles of Borrowers have been assigned to Agent and that payments in respect thereof shall be
made directly to Agent.




                    (B) Agent, without notice to, or assent by, Borrowers and in the name of Borrowers or its
own name, or otherwise, may (but need not) (A) notify the obligors of any of Borrowers’ Accounts or
General Intangibles to make payments thereon directly to Agent; (B) ask for, demand, collect,
receive, compound and give acquittance for such Collateral or any part thereof; (C) extend the time
of payment for such Collateral or compromise or settle any such Collateral for cash, credit or
otherwise, and upon any terms and conditions; (D) endorse the name of Borrowers on any check, draft
or other order or instrument for the payment of moneys payable to Borrowers which have been issued
in respect of such Collateral; (E) file any claims and commence, maintain or discontinue any
action, suits or other proceedings deemed by Agent necessary or advisable for the purpose of
collecting or enforcing payment of any such Collateral; (vi) at Agent’s sole discretion make test
verifications of such Collateral or any portion thereof; (F) execute any instrument and do any and
all other things necessary and proper to protect and preserve and realize upon such Collateral and
other rights contemplated hereby; and (G) without obligation to resort to other security, at any
time and from time to time, sell, re-sell, assign and deliver all or any of such Collateral, in one
or more parcels at the same or different times, and all right, title and interest, claim and demand
therein and any right of redemption thereof, at public or private sale, for cash, upon credit or
for future delivery and at such price or prices and on such reasonable terms as Agent may
determine, with the proceeds thereof to be applied in the manner provided herein.



                    (C) Borrowers hereby agrees that Agent may exercise the rights and remedies provided
herein and that the exercise of such rights and remedies by Agent, including, without limitation,
the sale of Accounts or General Intangibles, may be accomplished without demand, advertisement or
notice (except as required by law) all of which (to the extent permitted by law) are hereby
expressly waived. If any notice of a proposed sale or other disposition of such Collateral shall
be required by law, such notice shall be deemed reasonable and proper if given at least 10 days
before such sale or other disposition. Agent shall not be obligated to make any sale regardless of
notice of sale having been given. Agent may adjourn any public or private sale from time to time
by announcement at the time and place fixed therefor, and such sale may, without further notice, be
made at the time and place to which it was so adjourned. Agent shall not be obligated to take any
action authorized by this section, but in the event that Agent elects to take any such action, it
shall not be responsible to Borrowers except for its gross negligence or willful misconduct.



     (ii) As to Inventory and Equipment:



                    (A) Upon notice to such effect, Borrowers shall deliver, at Borrowers’ own expense, any or
all Inventory and Equipment to Agent at a place designated by Agent;



                    (B) Agent may take possession of any or all Inventory and Equipment and, for that purpose,
enter, with the aid and assistance of any Person or Persons, any



37









 




premises where the Collateral, or any part thereof, is, or may be, placed or assembled, and
remove any of the same;




                    (C) Agent may execute any instrument and do all other things necessary and proper to
protect and preserve and realize upon such Collateral and other rights contemplated hereby; and



                    (D) Without obligation to resort to other security, at any time and from time to time,
Agent may sell, assign and deliver at the same or different times, all right, title, interest or
claim of Borrowers in such Collateral, and any right of redemption thereof, at public or private
sale, in one or more parcels, for cash, upon credit or for future delivery, and at such price or
prices and on such terms as Agent may determine.



                    (E) Borrowers hereby agree that the exercise by Agent of the rights and remedies under
this section, including, without limitation, sale of Inventory or Equipment may be accomplished
without demand, advertisement or notice (except as required by law), all of which (to the extent
permitted by law) are hereby expressly waived. If any notice of a proposed sale or other
disposition shall be required by law, such notice shall be deemed reasonable and proper if given at
least 10 days before such sale or other disposition. Agent shall not be obligated to make any sale
regardless of notice of sale having been given. Agent may adjourn any public or private sale from
time to time by announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned. Agent may offer any
Inventory or Equipment for sale in its then present condition and has no duty to repair or clean
the Collateral prior to sale and the failure to make such repairs or clean the Collateral shall not
effect the commercial reasonableness of the sale. Agent may disclaim all warranties including
warranties of title, possession, quiet enjoyment, merchantability, fitness for a particular and any
such disclaimer shall not effect the commercial reasonableness of the sale. Agent shall not be
obligated to take any of the action authorized by this section, but in the event that Agent elects
to take any such action, it shall not be responsible to the Borrower except for its gross
negligence or willful misconduct.



     (iii) As to Instruments, Chattel Paper and Investment Property:



                    (A) If Agent shall so request, Borrowers shall forthwith do one or more of the following:
(A) legend, in form and manner acceptable to Agent, Borrowers’ books, records and documents
evidencing or pertaining to any Instruments, Chattel Paper or Investment Property with an
appropriate reference to the fact that such assets have been assigned to Agent and that Agent has a
security interest therein and notify any Person with an obligation with respect to such Collateral
of Agent’s security interest therein, (B) account for and transmit to Agent, in the same form as
received, all proceeds of collection of such Collateral received by it and, until so transmitted,
to hold the same in trust for Agent and not commingle such proceeds with any other of its funds,
(C) deliver, at its own expense, any or all books, records or other documents relating to such
Collateral to Agent at a place designated by Agent, and (D) notify the obligors on such Collateral
that such assets have been assigned to Agent and that payments in respect thereof shall be made
directly to Agent.



38









 





                    (B) Agent, without notice to, or assent by, Borrowers and in the name of Borrowers or its
own name, or otherwise, may (but need not) (A) notify the obligors of any of Borrowers’
Instruments, Chattel Paper or Investment Property to make payments thereon directly to Agent; (B)
ask for, demand, collect, receive, compound and give acceptance for the such Collateral or any part
thereof; (C) extend the time of payment for such Collateral or compromise or settle any such
Collateral for cash, credit or otherwise, and upon any terms and conditions; (D) endorse the name
of Borrowers on any check, draft or other order or instrument for the payment of moneys payable to
Borrowers which have been issued in respect of such Collateral; (E) file any claims and commence,
maintain or discontinue any action, suits or other proceedings deemed by Agent necessary or
advisable for the purpose of collecting or enforcing payment of any such Collateral; (F) at Agent’s
sole discretion make test verifications of such Collateral or any portion thereof; (G) execute any
instrument and do any and all other things necessary and proper to protect and preserve and realize
upon such Collateral and other rights contemplated hereby; and (H) without obligation to resort to
other security, at any time and from time to time, sell, re-sell, assign and deliver all or any
such Collateral, in one or more parcels at the same or different times, and all right, title and
interest, claim and demand therein and any right of redemption thereof, at public or private sale,
for cash, upon credit or for future delivery and at such price or prices and on such terms as Agent
may determine, with the proceeds thereof to be applied in the manner provided herein.



                    (C) Borrowers hereby agree that Agent may sell such Collateral or any part thereof at
public or private sale or at any broker’s board or on any securities exchange, for cash, upon
credit or for future delivery, and at such price or prices as Agent may deem satisfactory. Agent
may be the purchaser of any or all of the Collateral so sold at any public sale. Borrowers
covenant and agree that it will execute and deliver such documents and take such other action as
Agent deems necessary or advisable in order that any such sale may be made in compliance with law.
Upon any such sale Agent shall have the right to deliver, assign and transfer to the purchaser
thereof the Collateral so sold. Each purchaser at any such sale shall hold the Collateral so sold
absolutely and free from any claim or right of whatsoever kind, including any equity or right of
redemption of Borrowers which may be waived, and Borrowers, to the extent permitted by law, hereby
specifically waive all rights of redemption, stay or appraisal which it has or may have under any
law now existing or hereafter adopted. Borrowers further acknowledge that Agent may deem it
impracticable to effect a public sale of any part of the securities included in the Collateral, and
therefore authorize Agent in connection with any such private sale, if Agent deems it advisable to
do so, (A) to restrict the prospective bidders on or purchasers of any of the Collateral to a
limited number of sophisticated investors who will represent and agree that they are purchasing for
their own account for Investment and not with a view to the distribution or sale of any of such
securities, (B) to cause to be placed on certificates for any or all of the Collateral or on any
other securities pledged hereunder a legend to the effect that such security has not been
registered under the Securities Act of 1933 and may not be disposed of in violation of the
provision of said Act, and (C) to impose such other limitations or conditions in connection with
any such sale as Agent deems necessary or advisable in order to comply with said Act or any other
law. The notice (if any) of such sale shall (x) in case of a public sale, state the time and place
fixed for such sale, (y) in case of sale at a broker’s board or on a securities exchange, state the
board or exchange at which such sale is to be made and the day on which the Collateral, or the
portion thereof so being sold, will first be offered for sale at such board or exchange, and (z) in
the case of a private sale, state the day after which such sale



39









 




may be consummated. Any such public sale shall be held at such time or times within ordinary
business hours and at such place or places as Agent may fix in the notice of such sale. At any
such sale, the Collateral may be sold in one lot as an entirety or in separate parcels, as Agent
may determine. Agent shall not be obligated to make any such sale pursuant to any such notice.
Agent may, without notice or publication, adjourn any public or private sale or cause the same to
be adjourned from time to time by announcement at the time and place fixed for the sale, and such
sale may be made at any time or place to which the same may be so adjourned.




          (b) Application of Proceeds; Deficiency.




          (i) Subject to the prior rights of the Senior Lenders, Agent shall apply the net
proceeds of any such collection, realization or sale, after deducting all reasonable costs
and expenses of every kind incurred therein or incidental to the care or safekeeping of any
of the Collateral or in any way relating to the Collateral or the rights of Agent hereunder,
including, without limitation, first, to the Agent’s reasonable attorneys’ fees and
disbursements, then, to the payment to the Lenders of the Obligations on a pro rata basis,
and then, only after such application and after the payment by Agent of any other amount
required by any provision of law, need Agent account for the surplus, if any, to the
Borrower.




          (ii) Borrowers shall remain liable for any deficiency if the proceeds of any sale or
other disposition of the Collateral are insufficient to pay the Obligations and the
reasonable fees and disbursements of any attorneys employed by Agent to collect such
deficiency.


SECTION 10. AMENDMENTS AND WAIVERS. 




          No amendment or waiver of any provision of this Agreement or any other Loan Document, and no
consent with respect to any departure by Borrowers therefrom, shall be effective unless the same
shall be in writing and signed by Required Lenders (or by Agent at the written request of Required
Lenders) and Borrowers, and then any such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given; provided, however,
that no such waiver, amendment, or consent shall, unless in writing and signed by all the Lenders
and Borrowers and acknowledged by Agent, do any of the following:



          (a) increase or extend the Subordinated Loan Commitment of any Lender;



          (b) postpone or delay any date fixed by this Agreement or any other Loan Document for any
payment of principal, interest, fees or other amounts due to the Lenders (or any of them) hereunder
or under any other Loan Document;



          (c) reduce the principal of, or the rate of interest specified herein on any Subordinated
Loan, or any fees or other amounts payable hereunder or under any other Loan Document;



          (d) change the percentage of the Subordinated Loan Commitments or of the aggregate unpaid
principal amount of the Loans which is required for the Lenders or any of them to take any action
hereunder;



40









 





          (e) amend this Section 10 or any provision of this Agreement providing for consent
or other action by all Lenders;



          (f) release substantially all of the Collateral other than as permitted by Section
11.6 or release any Guarantor; or



          (g) change the definition of “Required Lenders”.


SECTION 11. THE AGENT.




     11.1. Appointment and Authorization. Each Lender hereby designates and appoints
Palladium Capital Management III, L.L.C. as its Agent under this Agreement and the other Loan
Documents and each Lender hereby irrevocably authorizes Agent to take such action on its behalf
under the provisions of this Agreement and each other Loan Document and to exercise such powers
and perform such duties as are expressly delegated to it by the terms of this Agreement or any
other Loan Document, together with such powers as are reasonably incidental thereto. Agent agrees
to act as such on the express conditions contained in this Section 11. Notwithstanding any
provision to the contrary contained elsewhere in this Agreement or in any other Loan Document,
Agent shall not have any duties or responsibilities to Lenders, except those expressly set forth
herein, nor shall Agent have or be deemed to have any fiduciary relationship with any Lender, and
no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be
read into this Agreement or any other Loan Document or otherwise exist against Agent. Without
limiting the generality of the foregoing sentence, the use of the term “agent” in this Agreement
with reference to Agent is not intended to connote any fiduciary or other implied (or express)
obligations arising under agency doctrine of any applicable law. Instead, such term is used
merely as a matter of market custom, and is intended to create or reflect only an administrative
relationship between independent contracting parties. Except as expressly otherwise provided in
this Agreement, Agent shall have and may use its sole discretion with respect to exercising or
refraining from exercising any discretionary rights or taking or refraining from taking any
actions which Agent is expressly entitled to take or assert under this Agreement and the other
Loan Documents, including the exercise of remedies pursuant to Sections 8 and 9 and any action so
taken or not taken shall be deemed consented to by Lenders.



     11.2. Delegation of Duties. Agent may execute any of its duties under this
Agreement or any other Loan Document by or through agents, employees or attorneys-in-fact and
shall be entitled to advice of counsel concerning all matters pertaining to such duties. Agent
shall not be responsible for the negligence or misconduct of any agent or attorney-in-fact that it
selects as long as such selection was made without gross negligence or willful misconduct.



     11.3. Liability of Agent. Agent shall not (i) be liable for any action taken or
omitted to be taken by any of them under or in connection with this Agreement or any other Loan
Document or the transactions contemplated hereby (except for its own gross negligence or willful
misconduct), or (ii) be responsible in any manner to any of the Lenders for any recital,
statement, representation or warranty made by Borrowers or any subsidiary or Affiliate of any



41









 




Borrower, or any officer thereof, contained in this Agreement or in any other Loan Document,
or in any certificate, report, statement or other document referred to or provided for in, or
received by Agent under or in connection with, this Agreement or any other Loan Document, or the
validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other
Loan Document, or for any failure of Borrowers or any other party to any Loan Document to perform
its obligations hereunder or thereunder. Agent shall not be under any obligation to any Lender to
ascertain or to inquire as to the observance or performance of any of the agreements contained in,
or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books
or records of any Borrower or any of Borrowers’ Subsidiaries or Affiliates.




     11.4. Reliance by Agent. Agent shall be entitled to rely, and shall be fully
protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit,
letter, telegram, facsimile, telex or telephone message, statement or other document or
conversation believed by it to be genuine and correct and to have been signed, sent or made by the
proper Person or Persons, and upon advice and statements of legal counsel (including counsel to
Borrowers), independent accountants and other experts selected by Agent. Agent shall be fully
justified in failing or refusing to take any action under this Agreement or any other Loan
Document unless it shall first receive such advice or concurrence of the Required Lenders as it
deems appropriate and, if it so requests, it shall first be indemnified to its satisfaction by all
Lenders against any and all liability and expense which may be incurred by it by reason of taking
or continuing to take any such action. Agent shall in all cases be fully protected in acting, or
in refraining from acting, under this Agreement or any other Loan Document in accordance with a
request or consent of the Required Lenders and such request and any action taken or failure to act
pursuant thereto shall be binding upon all of the Lenders.



     11.5. Notice of Default. Agent shall not be deemed to have knowledge or notice
of the occurrence of any Default or Event of Default, unless Agent shall have received written
notice from a Lender or Borrowers referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a “notice of default.” Agent will notify Lenders of its
receipt of any such notice. Upon the written request of any Lender, Agent shall declare a Default
under this Agreement and send notice thereof to the Borrowers within ten (10) Business Days, with
a copy provided to each of the Lenders, unless such Default is cured or waived. Otherwise, Agent
shall take such action with respect to such Default or Event of Default as may be requested by the
Required Lenders provided, however, that unless and until Agent has received any
such request, Agent may (but shall not be obligated to) take such action, or refrain from taking
such action, with respect to such Default or Event of Default as it shall deem advisable. Agent
and each of the Lenders agree to use reasonable good faith efforts to disclose to each other, as
soon as practicable after discovery by a senior officer with direct responsibility for the
management of the transactions with Borrowers, any information or communication (believed to be
reliable and substantially accurate) which the disclosing Lender has reason to believe (a) is not
known by Agent or the other Lenders (as applicable) and (b) may have a material and adverse effect
upon the business or operations of the Borrowers and/or upon the collateral security for the
Subordinated Loans, and as a result, may impair the repayment of the Subordinated Loans as and
when due; provided, however, that neither the Agent nor the other Lenders shall
have any liability as a result of its or their failure to disclose any information pursuant to
this paragraph, nor shall



42









 




any Lender assert any such failure by Agent or another Lender as a defense to any claim
asserted against a Lender under the provisions of this Agreement.




     11.6. Collateral Matters.



          (a) Lenders hereby irrevocably authorize Agent, at its option and in its sole discretion,
to release any Agent’s Lien upon any Collateral (i) upon the termination of this Agreement and
payment and satisfaction in full by Borrowers of all Subordinated Loans and all other Obligations;
(ii) constituting property being sold or disposed of if the sale or disposition is made in
compliance with this Agreement (and Agent may rely conclusively on any such certificate, without
further inquiry); (iii) constituting property in which Borrowers owned no interest at the time the
Lien was granted or at any time thereafter; or (iv) constituting property leased to Borrowers under
a lease which has expired or been terminated in a transaction permitted under this Agreement.



          (b) Agent shall have no obligation whatsoever to any of the Lenders to assure that the
Collateral exists or is owned by Borrowers or is cared for, protected or insured or has been
encumbered, or that the Agent’s Liens have been properly or sufficiently or lawfully created,
perfected, protected or enforced or are entitled to any particular priority, or to exercise at all
or in any particular manner or under any duty of care, disclosure or fidelity, or to continue
exercising, any of the rights, authorities and powers granted or available to Agent pursuant to any
of the Loan Documents, it being understood and agreed that in respect of the Collateral, or any
act, omission or event related thereto, Agent may act in any manner it may deem appropriate, in its
sole discretion given Agent’s own interest in the Collateral in its capacity as one of the Lenders
and that Agent shall have no other duty or liability whatsoever to any Lender as to any of the
foregoing.



     11.7. Agency for Perfection. Each Lender hereby appoints each other Lender as
agent for the purpose of perfecting the Lenders’ security interest in assets which, in accordance
with Article 9 of the Code, can be perfected only by possession. Should any Lender (other than
Agent) obtain possession of any such Collateral, such Lender shall notify Agent thereof, and,
promptly upon Agent’s request therefor shall deliver such Collateral to Agent or in accordance
with Agent’s instructions.



     11.8. Concerning the Collateral and the Related Loan Documents. Each Lender
authorizes and directs Agent to enter into this Agreement and the other Loan Documents, for the
ratable benefit and obligation of Agent and Lenders. Each Lender agrees that any action taken by
Agent or Required Lenders, as applicable, in accordance with the terms of this Agreement or the
other Loan Documents, and the exercise by Agent or Required Lenders, as applicable, of their
respective powers set forth therein or herein, together with such other powers that are reasonably
incidental thereto, shall be binding upon all of the Lenders.


SECTION 12. ASSIGNMENTS; PARTICIPATIONS.




          (a) Any Lender may, with the written consent of Agent (which consent shall not be
unreasonably withheld), and, pursuant to the Subordination Agreement if applicable, the consent of
the Senior Lenders, and written consent of Borrowers so long as no Event of Default



43









 




has occurred and is continuing, assign and delegate to one or more Eligible Assignees
(provided that no consent of Agent or any Borrower shall be required in connection with any
assignment and delegation by a Lender to an Affiliate of such Lender and no consent of any Borrower
shall be required in connection with any assignment and delegation by a Lender to another Lender)
(each an “Assignee”) all, or any ratable part of all, of the Subordinated Loans, the Subordinated
Loan Commitments and the other rights and obligations of such Lender hereunder, in a minimum amount
of $500,000; provided, however, that Borrowers and Agent may continue to deal solely and directly
with such Lender in connection with the interest so assigned to an Assignee until (i) written
notice of such assignment, together with payment instructions, addresses and related information
with respect to the Assignee, shall have been given to Borrowers and Agent by such Lender and the
Assignee; and (ii) such Lender and its Assignee shall have delivered to Borrowers and Agent an
Assignment and Acceptance in the form of Exhibit A (“Assignment and Acceptance”),
together with any Subordinated Note or Subordinated Notes subject to such assignment.




          (b) From and after the date that Agent notifies the assignor Lender that it has received
an executed Assignment and Acceptance and payment of the above-referenced processing fee, (i) the
Assignee thereunder shall be a party hereto and, to the extent that rights and obligations have
been assigned to it pursuant to such Assignment and Acceptance, shall have the rights and
obligations of a Lender under the Loan Documents, and (ii) the assignor Lender shall, to the extent
that rights and obligations hereunder and under the other Loan Documents have been assigned by it
pursuant to such Assignment and Acceptance, relinquish its rights and be released from its
obligations under this Agreement (and in the case of an Assignment and Acceptance covering all or
the remaining portion of an assigning Lender’s rights and obligations under this Agreement, such
Lender shall cease to be a party hereto).



          (c) By executing and delivering an Assignment and Acceptance, the assigning Lender
thereunder and the Assignee thereunder confirm to and agree with each other and the other parties
hereto as follows: (i) other than as provided in such Assignment and Acceptance, such assigning
Lender makes no representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this Agreement or the
execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement
or any other Loan Document furnished pursuant hereto or the attachment, perfection, or priority of
any Lien granted by Borrowers to Agent or any Lender in the Collateral; (ii) such assigning Lender
makes no representation or warranty and assumes no responsibility with respect to the financial
condition of Borrowers or the performance or observance by Borrowers of any of their obligations
under this Agreement or any other Loan Document furnished pursuant hereto; (iii) such Assignee
confirms that it has received a copy of this Agreement, together with such other documents and
information as it has deemed appropriate to make its own credit analysis and decision to enter into
such Assignment and Acceptance; (iv) such Assignee will, independently and without reliance upon
Agent, such assigning Lender or any other Lender, and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in taking or not
taking action under this Agreement; (v) such Assignee appoints and authorizes Agent to take such
action as agent on its behalf and to exercise such powers under this Agreement as are delegated to
Agent by the terms hereof, together with such powers, including the discretionary rights and
incidental power, as are reasonably incidental thereto; and (vi) such Assignee agrees that it will



44









 




perform in accordance with their terms all of the obligations which by the terms of this
Agreement are required to be performed by it as a Lender.




          (d) Subject to the restrictions of the Subordination Agreement, any Lender may at any time
sell to one or more commercial banks, financial institutions, or other Persons (other than a
natural person) not Affiliates of any Borrower (a “Participant”) participating interests in
any Subordinated Loans that Lender and the other interests of that Lender (the “originating
Lender”) hereunder and under the other Loan Documents; provided, however, that (i)
the originating Lender’s obligations under this Agreement shall remain unchanged, (ii) the
originating Lender shall remain solely responsible for the performance of such obligations, (iii)
Borrowers and Agent shall continue to deal solely and directly with the originating Lender in
connection with the originating Lender’s rights and obligations under this Agreement and the other
Loan Documents, and (iv) no Lender shall transfer or grant any participating interest under which
the Participant has rights to approve any amendment to, or any consent or waiver with respect to,
this Agreement or any other Loan Document (other than the rights described in Section 10 as
being rights that are voted on by all Lenders), and all amounts payable by Borrowers hereunder
shall be determined as if such Lender had not sold such participation; except that, if amounts
outstanding under this Agreement are due and unpaid, or shall have been declared or shall have
become due and payable upon the occurrence of an Event of Default, each Participant shall be deemed
to have the right of set-off in respect of its participating interest in amounts owing under this
Agreement to the same extent and subject to the same limitation as if the amount of its
participating interest were owing directly to it as a Lender under this Agreement.


SECTION 13. MISCELLANEOUS.




     13.1. Obligations Absolute.



          None of the following shall affect the Obligations of Borrowers or any other Obligor to
Lenders under this Agreement or Agent’s rights with respect to the Collateral:



          (a) acceptance or retention by Agent of other property or any interest in property as
security for the Obligations;



          (b) release by Agent of any of Borrowers, any other Obligor or of all or any part of the
Collateral or of any party liable with respect to the Obligations;



          (c) release, extension, renewal, modification or substitution by Lenders of the
Subordinated Notes, or any note evidencing any of the Obligations, or the compromise of the
liability of Borrowers or any guarantor of the Obligations; or



          (d) failure of Agent to resort to any other security or to pursue Borrowers or any other
obligor liable for any of the Obligations before resorting to remedies against the Collateral.



45









 





     13.2. Entire Agreement.



          This Agreement and the other Loan Documents (i) are valid, binding and enforceable against
Borrowers and Lenders in accordance with their respective provisions and no conditions exist as to
their legal effectiveness; (ii) constitute the entire agreement between the parties with respect to
the subject matter hereof and thereof; and (iii) are the final expression of the intentions of
Borrowers and Lenders. No promises, either expressed or implied, exist between Borrowers and
Lenders, unless contained herein or therein. This Agreement, together with the other Loan
Documents, supersedes all negotiations, representations, warranties, commitments, term sheets,
discussions, negotiations, offers or contracts (of any kind or nature, whether oral or written)
prior to or contemporaneous with the execution hereof with respect to any matter, directly or
indirectly related to the terms of this Agreement and the other Loan Documents. This Agreement and
the other Loan Documents are the result of negotiations among Lenders, Borrowers and the other
parties thereto, and have been reviewed (or have had the opportunity to be reviewed) by counsel to
all such parties, and are the products of all parties. Accordingly, this Agreement and the other
Loan Documents shall not be construed more strictly against Lenders merely because of Lenders’
involvement in their preparation.



     13.3. Amendments; Waivers.



          No delay on the part of Agent or Lenders in the exercise of any right, power or remedy shall
operate as a waiver thereof, nor shall any single or partial exercise by Agent or Lenders of any
right, power or remedy preclude other or further exercise thereof, or the exercise of any other
right, power or remedy. No amendment, modification or waiver of, or consent with respect to, any
provision of this Agreement or the other Loan Documents shall in any event be effective unless the
same shall be in writing and acknowledged by Agent, and then any such amendment, modification,
waiver or consent shall be effective only in the specific instance and for the specific purpose for
which given.



     13.4. WAIVER OF DEFENSES; WAIVER OF DISCOVERY.



          BORROWERS, ON BEHALF OF THEMSELVES AND ANY GUARANTOR OF ANY OF THE OBLIGATIONS, (A) WAIVE
EVERY PRESENT AND FUTURE DEFENSE, CAUSE OF ACTION, COUNTERCLAIM OR SETOFF WHICH BORROWERS OR SUCH
GUARANTOR MAY NOW HAVE OR HEREAFTER MAY HAVE TO ANY ACTION BY THE LENDERS IN ENFORCING THIS
AGREEMENT, (B) WAIVE ANY RIGHT TO DISCOVERY IN ANY LITIGATION OR ARBITRATION TO WHICH THE LENDERS,
BORROWERS AND/OR ANY SUCH GUARANTOR ARE PARTIES, AND (C) PROVIDED THE LENDERS ACT IN GOOD FAITH,
RATIFY AND CONFIRM WHATEVER THE LENDERS MAY DO PURSUANT TO THE TERMS OF THIS AGREEMENT. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDERS GRANTING ANY FINANCIAL ACCOMMODATION TO
BORROWERS.



     13.5. ARBITRATION.



          ANY DISPUTE ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE BREACH THEREOF, THAT CANNOT
BE RESOLVED BY MEDIATION WITHIN



46









 




THIRTY (30) DAYS SHALL, AT THE ELECTION OF THE AGENT (WHICH ELECTION THE AGENT MAY MAKE OR
DECLINE TO MAKE IN ITS SOLE DISCRETION AND WITHOUT THE CONSENT OF BORROWERS OR THE OTHER LENDERS)
BE FINALLY RESOLVED BY ARBITRATION ADMINISTERED BY THE AMERICAN ARBITRATION ASSOCIATION UNDER ITS
COMMERCIAL ARBITRATION RULES, AND JUDGMENT UPON THE AWARD RENDERED BY THE ARBITRATORS MAY BE
ENTERED IN ANY COURT HAVING JURISDICTION. THE ARBITRATION WILL BE CONDUCTED IN THE ENGLISH
LANGUAGE IN THE CITY OF NEW YORK, NEW YORK, IN ACCORDANCE WITH THE UNITED STATES ARBITRATION ACT.
THERE SHALL BE THREE ARBITRATORS, NAMED IN ACCORDANCE WITH SUCH RULES.




     13.6. FORUM SELECTION AND CONSENT TO JURISDICTION.



          UNLESS THE LENDERS SHALL HAVE ELECTED TO RESOLVE A DISPUTE WITH BORROWERS BY ARBITRATION IN
ACCORDANCE WITH SECTION 13.5 ABOVE, ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER, OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, SHALL BE BROUGHT AND
MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF NEW YORK LOCATED IN THE BOROUGH OF MANHATTAN
OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK; PROVIDED THAT NOTHING
IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE THE LENDERS FROM BRINGING SUIT OR TAKING
OTHER LEGAL ACTION IN ANY OTHER JURISDICTION. BORROWERS HEREBY EXPRESSLY AND IRREVOCABLY SUBMIT TO
THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK LOCATED IN THE BOROUGH OF MANHATTAN AND OF
THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY SUCH
LITIGATION AS SET FORTH ABOVE. BORROWERS FURTHER IRREVOCABLY CONSENT TO THE SERVICE OF PROCESS BY
REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK.
BORROWERS HEREBY EXPRESSLY AND IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION WHICH THEY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION
BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT
IN AN INCONVENIENT FORUM.



     13.7. WAIVER OF JURY TRIAL.



          BORROWERS, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE IRREVOCABLY ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT, ANY NOTE, ANY OTHER LOAN DOCUMENT,
ANY OF THE OTHER OBLIGATIONS, THE COLLATERAL, OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT
DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING
FROM ANY LENDING RELATIONSHIP EXISTING IN CONNECTION WITH ANY OF THE



47









 




FOREGOING, OR ANY COURSE OF CONDUCT OR COURSE OF DEALING IN WHICH THE LENDERS AND BORROWERS
ARE ADVERSE PARTIES, AND AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL, AT THE ELECTION OF THE
LENDERS (WHICH ELECTION THE LENDER MAY MAKE OR DECLINE TO MAKE IN THEIR SOLE DISCRETION AND WITHOUT
THE CONSENT OF BORROWERS), UNLESS THE AGENT SHALL HAVE ELECTED TO RESOLVE A DISPUTE WITH BORROWERS
BY ARBITRATION IN ACCORDANCE WITH SECTION 13.5, BE TRIED BEFORE A COURT AND NOT BEFORE A
JURY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDERS GRANTING ANY FINANCIAL ACCOMMODATION
TO BORROWERS.




     13.8. Assignability.



          Any Lender may at any time assign such Lender’s rights in this Agreement, the other Loan
Documents, the Obligations, or any part thereof and transfer such Lender’s rights in any or all of
the Collateral, and such Lender thereafter shall be relieved from all liability with respect to
such Collateral. In addition, any Lender may at any time sell one or more participations in such
Lender’s Subordinated Loan. Borrowers may not sell or assign this Agreement, or any other
agreement with the Lender or any portion thereof, either voluntarily or by operation of law,
without the prior written consent of Agent. This Agreement shall be binding upon Lenders and
Borrowers and their respective legal representatives and successors. All references herein to any
Borrower shall be deemed to include any successors, whether immediate or remote.



     13.9. [RESERVED.]



     13.10. Confirmations.



          Borrowers and Agent agree from time to time, upon written request received by it from the
other, to confirm to the other in writing the aggregate unpaid principal amount of the Subordinated
Loans then outstanding.



     13.11. Confidentiality.



          The Lenders agree to use commercially reasonable efforts (equivalent to the efforts such
Lender applies to maintain the confidentiality of its own confidential information) to maintain as
confidential all information provided to it by Borrowers, including all information designated as
confidential, except that a Lender may disclose such information (a) to Persons employed or engaged
by such Lender in evaluating, approving, structuring or administering the Subordinated Loan; (b) to
any assignee or participant or potential assignee or participant that has agreed to comply with the
covenant contained in this Section 13.11 (and any such assignee or participant or
potential assignee or participant may disclose such information to Persons employed or engaged by
them as described in clause (a) above); (c) as required or requested by any federal or state
regulatory authority or examiner, or any insurance industry association, or as reasonably believed
by such Lender to be compelled by any court decree, subpoena or legal or administrative order or
process; (d) as, on the advice of such Lender’s counsel, is required by law; (e) in connection with
the exercise of any right or remedy under the Loan Documents or in connection with any litigation
to which such Lender is a party; (f) to any nationally recognized



48









 




rating agency that requires access to information about such Lender’s investment portfolio in
connection with ratings issued with respect to such Lender; or (g) that ceases to be confidential
through no fault of such Lender.




     13.12. Binding Effect.



          This Agreement shall become effective upon execution by Borrowers and Lenders. If this
Agreement is not dated or contains any blanks when executed by Borrowers, Agents is hereby
authorized, without notice to Borrowers, to date this Agreement as of the date when it was executed
by Borrowers, and to complete any such blanks according to the terms upon which this Agreement is
executed.



     13.13. Governing Law.



          This Agreement, the Loan Documents and the Subordinated Notes shall be delivered and accepted
in and shall be deemed to be contracts made under and governed by the internal laws of the State of
New York applicable to contracts made and to be performed entirely within such state, without
regard to conflict of laws principles.



     13.14. Enforceability; Usury.



          (a) Wherever possible, each provision of this Agreement shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision of this Agreement
shall be prohibited by, unenforceable or invalid under any jurisdiction, such provision shall as to
such jurisdiction, be severable and be ineffective to the extent of such prohibition or invalidity,
without invalidating the remaining provisions of this Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction.



          (b) It is the intention of Lenders and Borrowers to conform strictly to the laws of the
State of New York or the laws of such other jurisdiction which may be found to apply to the subject
transaction relating to the maximum rate of interest which may be lawfully contracted for or
charged. Nothing contained in this Agreement or any other Loan Document shall be construed to mean
that Borrowers have contracted to pay or are obligated to pay any sum or sums to Lenders in excess
of those which may lawfully be charged or contracted for under applicable law of the State of New
York or other applicable law. If any provision of this Agreement or any of the other Loan
Documents shall require payment of any sum or sums of interest in excess of the maximum permitted
rate which may be lawfully contracted for or charged, then Borrowers and Lenders agree that such
result is as a consequence of their inadvertence and/or mistake, and the interest charge for which
Borrowers are liable under this instrument shall be recomputed for the sole and limited purpose of
determining the extent of the Obligations and liabilities of Borrowers to Lenders so that the
interest charges for which Borrowers are liable shall not exceed the maximum permitted rate which
is determined to be applicable. Additionally, any sums of interest which are collected by Lenders
from Borrowers or other source in connection with the Subordinated Loan evidenced hereby which are
in excess of the maximum permitted rate shall, for the sole and limited purpose of determining the
extent of the Obligations and liabilities of Borrowers to Lenders, be credited against the amount
of principal for which Borrowers are liable to Lenders after giving effect to any recomputation and



49









 




adjustment required pursuant to the foregoing provisions of this section, or if such
outstanding principal balance and interest are paid in full, any such excess shall be remitted by
Lenders to Borrowers.




     13.15. Survival of Borrowers’ Representations; Termination and Release of Liens.



          (a) All covenants, agreements, representations and warranties made by Borrowers herein
shall, notwithstanding any investigation by Agent, be deemed material and relied upon by Lenders
and shall survive the making and execution of this Agreement and the Loan Documents and the
issuance of the Subordinated Notes, and shall be deemed to be continuing representations and
warranties until such time as Borrowers have fulfilled all of their Obligations to Lenders, and
Lenders have been indefeasibly paid in full in cash. The Lenders, in extending financial
accommodations to Borrowers, are expressly acting and relying on the aforesaid representations and
warranties.



          (b) Upon the indefeasible payment in full to Lenders of all principal and interest on the
Subordinated Loans and the performance of all the Obligations of Borrowers and each Obligor
hereunder, then (i) Borrowers’ obligations under SECTION 5 hereof shall terminate and be of no
further force or effect, and (ii) Agent shall release all Liens granted to Agent by Borrowers or
any other Obligor to secure the Obligations.



     13.16. Extensions of Lenders’ Commitment.



          This Agreement shall secure and govern the terms of (i) any extensions or renewals of Lenders’
commitment hereunder, and (ii) any replacement note executed by Borrowers and accepted by Lenders
in their sole and absolute discretion in substitution for the Subordinated Notes.



     13.17. Time of Essence.



          Time is of the essence in making payments of all amounts due Lenders under this Agreement and
in the performance and observance by Borrowers of each covenant, agreement, provision and term of
this Agreement.



     13.18. Counterparts; Facsimile Signatures.



          This Agreement may be executed in any number of counterparts and by the different parties
hereto on separate counterparts and each such counterpart shall be deemed to be an original, but
all such counterparts shall together constitute but one and the same Agreement. Receipt of an
executed signature page to this Agreement by facsimile or other electronic transmission shall
constitute effective delivery thereof. Electronic records of executed Loan Documents maintained by
Agent shall deemed to be originals thereof.



50









 





     13.19. Notices.



          Except as otherwise provided herein, Borrowers waive all notices and demands in connection
with the enforcement of Lenders’ rights hereunder. All notices, requests, demands and other
communications provided for hereunder shall be in writing and addressed as follows:



	 	 	 

	To a Borrower:

	 	c/o Regional Management Corp.
	 

	 	509 West Butler Road
	 

	 	Greesville, SC 29607
	 

	 	Attention: Robert D. Barry
	 

	 	Telephone No.: 864-422-8011
	 

	 	Telecopier No.: 864-422-8035
	 

	 	Email: bbarry@rmcorp.biz
	 
	 	 
	To a Lender:

	 	c/o Palladium Capital Management III, L.L.C.
	 

	 	1270 Avenue of the Americas, 22nd Floor
	 

	 	New York, NY 10020
	 

	 	Attention: Erik Scott
	 

	 	Telephone No.: 212-218-5169
	 

	 	Telecopier No.: 212-218-5155
	 

	 	Email: escott@palladiumequity.com





or, as to each party, at such other address as shall be designated by such party in a written
notice to each other party complying as to delivery with the terms of this section. All notices
addressed as above shall be deemed to have been properly given (i) if served in person, upon
acceptance or refusal of delivery; (ii) if mailed by certified or registered mail, return receipt
requested, postage prepaid, on the third (3rd) day following the day such notice is
deposited in any post office station or letter box; or (iii) if sent by recognized overnight
courier, on the first (1st) day following the day such notice is delivered to such
carrier. No notice to or demand on Borrowers in any case shall entitle Borrowers to any other or
further notice or demand in similar or other circumstances.




     13.20. Costs, Fees and Expenses.



          Borrowers shall pay or reimburse Agent for all costs, fees and expenses incurred by Agent or
for which Agent becomes obligated in connection with the negotiation, preparation, consummation,
collection of the Obligations or enforcement of this Agreement, the other Loan Documents and all
other documents provided for herein or delivered or to be delivered hereunder or in connection
herewith (including any amendment, supplement or waiver to any Loan Document), or during any
workout, restructuring or negotiations in respect thereof, including reasonable consultants’ fees
and attorneys’ fees and time charges of counsel to Agent, which shall also include attorneys’ fees
and time charges of attorneys who may be employees of Agent or any Affiliate of Agent, plus costs
and expenses of such attorneys or of Agent; search fees, costs and expenses; and all taxes payable
in connection with this Agreement or the other Loan Documents, whether or not the transaction
contemplated hereby shall be consummated. In furtherance of the foregoing, Borrowers shall pay any
and all stamp and other taxes, UCC search fees, filing fees and other costs and expenses in
connection with the execution and delivery of



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this Agreement, the Subordinated Notes and the other Loan Documents to be delivered hereunder,
and agrees to save and hold Agent harmless from and against any and all liabilities with respect to
or resulting from any delay in paying or omission to pay such costs and expenses. That portion of
the Obligations consisting of costs, expenses or advances to be reimbursed by Borrowers to Agent
pursuant to this Agreement or the other Loan Documents which is not paid on or prior to the date
hereof shall be payable by Borrowers to Agent on demand. If at any time or times hereafter Agent:
(a) employs counsel for advice or other representation (i) with respect to this Agreement or the
other Loan Documents, (ii) to represent Agent in any litigation, contest, dispute, suit or
proceeding or to commence, defend, or intervene or to take any other action in or with respect to
any litigation, contest, dispute, suit, or proceeding (whether instituted by Agent, Borrowers, or
any other Person) in any way or respect relating to this Agreement, the other Loan Documents or
Borrowers’ business or affairs, or (iii) to enforce any rights of Agent against Borrowers or any
other Person that may be obligated to Agent by virtue of this Agreement or the other Loan
Documents; (b) takes any action to protect, collect, sell, liquidate, or otherwise dispose of any
of the Collateral; and/or (c) attempts to enforce or enforces any of Agent’s rights or remedies
under the Agreement or the other Loan Documents, the costs and expenses incurred by Agent in any
manner or way with respect to the foregoing, shall be part of the Obligations, payable by Borrowers
to Agent on demand.




     13.21. Indemnification.



          Borrowers agree to defend (with counsel satisfactory to Lenders), protect, indemnify,
exonerate and hold harmless each Indemnified Party from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and
distributions of any kind or nature (including the disbursements and the reasonable fees of counsel
for each Indemnified Party thereto, which shall also include, without limitation, reasonable
attorneys’ fees and time charges of attorneys who may be employees of any Indemnified Party), which
may be imposed on, incurred by, or asserted against, any Indemnified Party (whether direct,
indirect or consequential and whether based on any federal, state or local laws or regulations,
including securities laws, environmental laws, commercial laws and regulations, under common law or
in equity, or based on contract or otherwise) in any manner relating to or arising out of this
Agreement or any of the Loan Documents, or any act, event or transaction related or attendant
thereto, the preparation, execution and delivery of this Agreement and the Loan Documents,
including the making or issuance and management of the Subordinated Loan, the use or intended use
of the proceeds of the Subordinated Loan, the enforcement of Lenders’ rights and remedies under
this Agreement, the Loan Documents, the Subordinated Notes, any other instruments and documents
delivered hereunder, or under any other agreement between Borrowers and Lenders; provided, however,
that Borrowers shall not have any obligations hereunder to any Indemnified Party with respect to
matters determined by a court of competent jurisdiction by final and nonappealable judgment to have
been caused by or resulting from the willful misconduct or gross negligence of such Indemnified
Party. To the extent that the undertaking to indemnify set forth in the preceding sentence may be
unenforceable because it violates any law or public policy, Borrowers shall satisfy such
undertaking to the maximum extent permitted by applicable law. Any liability, obligation, loss,
damage, penalty, cost or expense covered by this indemnity shall be paid to each Indemnified Party
on demand, and failing prompt payment, together with interest thereon at the Default Rate from the
date incurred by each Indemnified Party until paid by the Borrower, shall be added to the
Obligations of



52









 




Borrowers and be secured by the Collateral. The provisions of this Section shall survive the
satisfaction and payment of the other Obligations and the termination of this Agreement.




     13.22. Revival and Reinstatement of Obligations.



          If the incurrence or payment of the Obligations by any Obligor or the transfer to Lenders of
any property should for any reason subsequently be declared to be void or voidable under any state
or federal law relating to creditors’ rights, including provisions of the Bankruptcy Code relating
to fraudulent conveyances, preferences, or other voidable or recoverable payments of money or
transfers of property (collectively, a “Voidable Transfer”), and if a Lender is required to
repay or restore, in whole or in part, any such Voidable Transfer, or elects to do so upon the
reasonable advice of its counsel, then, as to any such Voidable Transfer, or the amount thereof
that such Lender is required or elects to repay or restore, and as to all reasonable costs,
expenses, and attorneys fees of such Lender, the Obligations shall automatically shall be revived,
reinstated, and restored and shall exist as though such Voidable Transfer had never been made.



     13.23. Customer Identification — USA Patriot Act Notice.



          The Agent hereby notifies Borrowers that pursuant to the requirements of the USA Patriot Act
(Title III of Pub. L. 107-56, signed into law October 26, 2001) (the “Act”), and Agent’s
policies and practices, Agent is required to obtain, verify and record certain information and
documentation that identifies Borrowers, which information includes the name and address of
Borrowers and such other information that will allow Agent to identify Borrowers in accordance with
the Act.



[The remainder of this page has been left blank intentionally.]




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          IN WITNESS WHEREOF, Borrowers and Lenders have executed this Senior Subordinated Loan and
Security Agreement as of the date first above written.



	 	 	 	 	 
	 	REGIONAL MANAGEMENT CORP.

REGIONAL FINANCE CORPORATION OF SOUTH CAROLINA

REGIONAL FINANCE CORPORATION OF GEORGIA

REGIONAL FINANCE CORPORATION OF TEXAS

REGIONAL FINANCE CORPORATION OF NORTH CAROLINA

REGIONAL FINANCE CORPORATION OF ALABAMA

REGIONAL FINANCE CORPORATION OF

TENNESSEE

 	 
	 	By:  	/s/ Robert D. Barry
 	 
	 	 	Name:  	Robert D. Barry 	 
	 	 	Title:  	Chief Financial Officer of each of the
above-listed corporations 	 
	 




 









 





	 	 	 	 	 
	 	
PALLADIUM CAPITAL MANAGEMENT III, L.L.C.,

as Agent

 	 
	 	By:  	/s/ David Perez
 	 
	 	 	Name:  	David Perez 	 
	 	 	Title:  	Managing Director 	 
	 
	 	
PALLADIUM EQUITY PARTNERS III, L.P.,

as a Lender

 	 
	 	By:  	Palladium Equity Partners III, L.L.C.,
Its: General Partner
 	 
	 
	 	By:  	    /s/ David Perez
 	 
	 	 	Name:  	David Perez 	 
	 	 	Title:  	Managing Director 	 
	 
	 	RICHARD A. GODLEY,

as a Lender

 	 
	 	/s/ Richard A. Godley
 	 
	 	 	 
	 
	 	JERRY SHIRLEY,

as a Lender

 	 
	 	/s/ Jerry Shirley
 	 
	 	 	 
	 
	 	BRENDA KINLAW,

as a Lender

 	 
	 	/s/ Brenda Kinlaw
 	 
	 	 	 



 









 







Schedule I




Commitments




	 	 	 	 	 
	Lender	 	Commitment Amount	 
	Palladium Equity Partners III, L.P.
	 	$	20,813,674	 
	Richard A. Godley
	 	$	2,000,000	 
	Jerry Shirley
	 	$	2,000,000	 
	Brenda Kinlaw
	 	$	1,000,000	 
	Total
	 	$	25,813,674