**EXHIBIT10.1**

 

**FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT**

 

THISFIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT (this “Agreement”) is made andentered into as of the 8th day of October, 2004, among **FCC, LLC,d/b/a First Capital**, a Florida limited liability company (“Lender”),**PAWNMART, INC.**, a Nevada corporation (“Borrower”),and **XPONENTIAL, INC.**, a Delawarecorporation (“Parent”; Borrower and Parent are sometimes referred toherein individually as an “Obligor” and collectively as the “Obligors”).

 

**W****ITNESSETH:**

 

WHEREAS, Obligors and Lender are parties to thatcertain Loan and Security Agreement dated as of June 17, 2004 (as amended,restated, modified or supplemented from time to time, the “Loan Agreement”);and

 

WHEREAS, Obligors have requested that Lender eliminatethe $1,000,000 reserve against the Borrowing Base in exchange for a securityinterest from Parent in favor of Lender in all rights, title and interest ofParent in and to the Securities Account (as defined below); and

 

WHEREAS,Lender has agreed to do so on the terms and conditions set forth herein.

 

NOW,THEREFORE, in consideration of the foregoing premises, and other good andvaluable consideration, the receipt and legal sufficiency of which are herebyacknowledged, the parties hereto hereby agree as follows:

 

1.                                       All capitalized terms used herein and nototherwise expressly defined herein shall have the respective meanings given tosuch terms in the Loan Agreement.

 

2.                                       (a)                                  Toinduce Lender to eliminate the $1,000,000 reserve against the Borrowing Baseand to continue to make Loans to Borrower from time to time pursuant to theLoan Agreement, Parent hereby grants to Lender, for itself and as agent for anyAffiliate of Lender, a security interest in, and assigns, mortgages and pledgesto Lender, for itself and as agent for any Affiliate of Lender, all of Parent’sright, title and interest in and to thatcertain securities or brokerage account number                           maintained by Parent with Wachovia Securities (the “Securities Account”),together with all cash, stocks, bonds, mutual fund shares and other assets nowor hereafter held therein, all interest and dividends paid or payable inconnection therewith, and all other products and proceeds thereof(collectively, together with the Securities Account, the “Parent Collateral”).  The Parent Collateral shall secure all of theObligations.

 

(b)                                 Parentrepresents and warrants to Lender that (i) Parent has established theSecurities Account, (ii) the SecuritiesAccount consists of the assets listed on Appendix 1 attached hereto,(iii) the risk ratings (if available) and market values for the assets in theSecurities Account set forth on Appendix 1 are true and correct as ofthe date hereof, (iv) the

 

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Parent Collateral is not subject to any Lien, other than the securityinterest in favor of Lender created hereby, (v) Parent is a Delawarecorporation, (vi) Parent’s chief executive office is located at 6400 AtlanticBlvd., Norcross GA  30071, (vii) theexecution, delivery, and performance of this Agreement are within Parent’scorporate powers, have been duly authorized, do not violate Parent’sconstituent documents, any law or regulation applicable to Parent, or anyindenture, agreement, or undertaking to which Parent is a party or by whichParent or any of Parent’s property is bound; and (viii) this Agreement constitutes the valid,binding and enforceable obligation of Parent in accordance with the termshereof, except as enforceability may be limited by bankruptcy, insolvency,fraudulent conveyance, moratorium or other similar laws applicable to creditors’rights generally or by generally applicable equitable principles affecting theenforcement of creditors’ rights.

 

(c)                                  Parentcovenants and agrees in favor of Lender that (i) Parent shall not suffer orpermit any of the Parent Collateral to be subject to any Lien, other than thesecurity interest in favor of Lender created hereby; (ii) Parent shall promptly notify Lender in theevent that the market value of the assets in the Securities Account decreasesbelow $1,000,000 or the risk rating of any of the assets therein is downgraded;(iii) Parent shall continue to maintain the Securities Account and, in theevent that the aggregate market value of the assets contained in the SecuritiesAccount falls below $1,000,000 at any time, then Parent shall, within fiveBusiness Days, deposit cash or additional securities into the SecuritiesAccount of a value equal to or greater than such shortfall, and such additionalsecurities shall be of a type and risk rating reasonably satisfactory to Lenderin its discretion (it being understood that any such additional securitieswhich are traded on a national securities exchange and which do not cause therisk of the portfolio of assets held in the Securities Account, on aweighted-average basis, to be greater than such risk as of the date hereofshall be deemed to be satisfactory to Lender); (iv) Parent shall promptlyprovide Lender with copies of all statements and other information received byParent with respect to the Securities Account and such other information withrespect thereto as Lender may reasonably request from time to time, and (v)Parent shall provide Lender with all passwords and similar information in orderto enable Lender to obtain information regarding the Securities Account via theinternet.

 

(d)                                 Lender acknowledges and agrees that Parentmay (i) trade the securities contained in the Securities Account, and (ii)withdraw assets from the Securities Account, in each case so long as, after givingeffect to any such trade or withdrawal, (x) no Default exists, (y) theaggregate market value of the assets contained in the Securities Account is atleast $1,000,000, and (z) the overall risk of the portfolio of assets held inthe Securities Account, on a weighted average basis, is not greater than suchrisk as of the date hereof.  Lenderagrees that it shall promptly, and in any event within two Business Days afterLender’s receipt of a written request from Parent, provide Lender’s writtenconsent to Wachovia Securities with respect to a withdrawal of assets from theSecurities Account to the extent that such withdrawal is permitted by thisAgreement and the other Loan Documents.

 

(e)                                  Parent acknowledges that, while a Defaultexists, Lender shall have the sole authority to give instructions to thesecurities intermediary with respect to the Securities Account, and Lender may(but shall not be obligated to) cause the Parent Collateral to be

 

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liquidated and have the net proceeds of such liquidation applied to theObligations, and/or (ii) instruct the securities intermediary to trade any ofthe assets in the Securities Account for such other assets as Lender may selectin its sole discretion.

 

(f)                                    Borrower is a direct, wholly-owned subsidiaryof Parent, and Parent hereby confirms to Lender that (i) the elimination of the$1,000,000 reserve against the Borrowing Base will, by increasing the borrowingavailability of Borrower under the Loan Agreement, be of significant value toParent, and (ii) the elimination of such reserve constitutes reasonablyequivalent value for the grant of the security interest by Parent contemplatedhereby.  Parent represents and warrantsto Lender that, both before and after giving effect to the transactionscontemplated by this Agreement, Parent has assets of a fair salablevalue which exceeds the amount required to pay its debts as they becomeabsolute and matured (including contingent, subordinated, unmatured andunliquidated liabilities), and Parent is able to and anticipates that it willbe able to meet its debts as they mature, and Parent has adequate capital toconduct the business in which it is or proposes to be engaged.

 

3.                                       The Loan Agreement is amended by deleting **Item 1 of the Schedule** to the LoanAgreement and inserting the following in lieu thereof:

 

**1.****                                     ****Borrowing Base**

 

“Borrowing Base” means, at any time, an amountequal to:

 

(a)                                  thelesser of:

 

(i)                                     $4,500,000,and

 

(ii)                                  thesum of:

 

(A)                              75%of the dollar amount of Eligible Accounts; plus

 

(B)                                thelesser of:

 

(1)                                  $1,000,000,and

 

(2)                                  30%of the dollar value (determined at the lower of Borrower’s Cost ormarket value) of Eligible Inventory;

 

provided, however,that the amount advanced pursuant to the foregoing clause (a)(ii)(B) shall notexceed 35% of the total principal amount of loans outstanding hereunder at anytime;

 

minus

 

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(b)                                 the sum of:

 

(i)                                     a reserve inan amount to be determined by Lender in the event that, for any calendarquarter, Borrower’s Cost for all goods sold during such period divided byBorrower’s gross sales (excluding all pawn service charges, finance charges andsimilar items) during such period is greater than 0.80; plus

 

(iii)                               a reserve inan amount to be determined by Lender in the event that, for any consecutivethree-month period, the dollar amount of Pawn Loans that result in a forfeitureby the Customer of the Pawned Item exceeds 70% of the aggregate dollar amountof all Pawn Loans advanced during such period; plus

 

(iv)                              a reserve inan amount to be determined by Lender in the event that the dollar amount ofPawn Loans for which the underlying Pawned Items consisting of a single productcategory (such as motor vehicles, jewelry, or general merchandise) exceeds 40%of the total amount of Pawn Loans at any time; plus

 

(v)                                 such otherreserves as Lender may establish from time to time in its discretion, plus

 

(vi)                              the amountavailable to be drawn under, plus the amount of any unreimbursed draws with respectto, any letters of credit or acceptances which have been issued, created orguaranteed by Lender or any Affiliate of Lender for Borrower’s account.

 

4.                                       Obligors acknowledge that they have not yetdelivered to Lender landlord’s waivers with respect to various premises leasedby Borrower.  Obligors acknowledge thatLender may, in its discretion (a) establish reserves against the Borrowing Basefor rental payments for such premises, and/or (b) exclude any Inventory locatedat such premises from the Borrowing Base.

 

5.                                       The effectiveness of this Agreement isconditioned upon the satisfaction of the following conditions precedent, ineach case in a manner acceptable to Lender:

 

(a)                                  Lender shall have received a securitiesaccount control agreement in form and substance satisfactory to Lender, dulyexecuted by Wachovia Securities and Parent; and

 

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(b)                                 Lender shall have received such lien searchresults and other information necessary to confirm Lender’s perfected,first-priority security interest in the Parent Collateral, subject to no otherLien.

 

6.                                       Each Obligor hereby restates, ratifies, andreaffirms each and every term, condition representation and warranty heretoforemade by it under or in connection with the execution and delivery of the LoanAgreement, as amended hereby, and the other Loan Documents, as fully as thoughsuch representations and warranties had been made on the date hereof and withspecific reference to this Agreement and the Loan Documents.

 

7.                                       Except as set forth herein, the LoanAgreement shall be and remain in full force and effect as originally written,and shall constitute the legal, valid, binding and enforceable obligation ofObligors to Lender.

 

8.                                       In consideration of the accommodations madeby Lender hereunder, Borrower agrees to pay to Lender on demand all costs andexpenses of Lender in connection with the preparation, execution, delivery andenforcement of this Agreement and the other Loan Documents and any othertransactions contemplated hereby and thereby, including, without limitation,the reasonable fees and out-of-pocket expenses of legal counsel to Lender.

 

9.                                       To induce Lender to enter into thisAgreement, each Obligor hereby represents and warrants that, as of the datehereof, and after giving effect to the terms hereof, there exists no Event ofDefault under the Loan Agreement or any of the other Loan Documents.

 

10.                                 This Agreement may be executed in any numberof counterparts and by different parties hereto in separate counterparts, eachof which, when so executed and delivered, shall be deemed to be an original andall of which counterparts, taken together, shall constitute but one and thesame instrument.

 

11.                                 This Agreement shall be binding upon andinure to the benefit of the successors and permitted assigns of the partieshereto.

 

12.                                 This Agreement shall be governed by, andconstrued in accordance with, the laws of the State of Georgia, other than itslaws respecting choice of law.

 

[SIGNATURES ON NEXT PAGE]

 

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IN WITNESS WHEREOF, Borrower, Parent and Lender have caused thisAgreement to be duly executed as of the date first above written.

 

 
|   | PAWNMART,  INC.                       |
|--------|---------------------------------------|
|   |                                  |
|   | By:                                   |   /s/  Robert W. Schleizer |   |
|   | Name:  Robert W. Schleizer            |
|   | Title:   Chief Financial Officer |
|   |                                  |
|   |                                  |
|   | XPONENTIAL,  INC.                     |
|   |                                  |
|   | By:                                   |   /s/  Robert W. Schleizer |   |
|   | Name:   Robert W. Schleizer      |
|   | Title:   Chief Financial Officer |
|   |                                  |
|   |                                  |
|   | FCC,  LLC, d/b/a First Capital        |
|   |                                  |
|   | By:                                   |   /s/  Evan G. Jones |   |
|   | Name:   Evan G. Jones            |
|   | Title:   Senior Vice President   |

 

Eachof the undersigned acknowledges the foregoing and agrees that his respectiveValidity and Support Agreement in favor of Lender dated as of June 17, 2004remains in full force and effect, subject to no right of offset, claim orcounterclaim.

 
| /s/  Robert W. Schleizer |   |
|--------------------------|--------|
| ROBERT  W. SCHLEIZER     |
|                     |
|                     |
| /s/  Dwayne A. Moyers    |   |
| DWAYNE  A. MOYERS        |

 

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**APPENDIX 1**

 
| 350,000 |   | LEVEL 3 9.125% 5/01/08  52729N-AC-4   |   | 75.75   |   | 265,125 |   |
|---------|--------|---------------------------------------|--------|---------|--------|---------|--------|
|    |   |                                  |   |    |   |    |   |
| 120,000 |   | LEVEL 3 COMM 11% 3/15/08  52729N-AK-6 |   | 78.25   |   | 93,900  |   |
|    |   |                                  |   |    |   |    |   |
| 100,000 |   | SHOLODGE 9.55% 9/1/07  825034-AC-5    |   | 92.00   |   | 92,000  |   |
|    |   |                                  |   |    |   |    |   |
| 200,000 |   | SIX FLAGS 8.875% 2/1/10  83001P-AD-l  |   | 94.625  |   | 189,250 |   |
|    |   |                                  |   |    |   |    |   |
| 103,000 |   | SIX FLAGS 9.75% 4/15/13  83001P-AF-6  |   | 96.00   |   | 98,880  |   |
|    |   |                                  |   |    |   |    |   |
| 131,000 |   | TRUMP 12.625% 3/15/10 89816R-AE-7     |   | 104.75  |   | 137,223 |   |
|    |   |                                  |   |    |   |    |   |
| 313,000 |   | TRUMP ATL 11.25% 5/01/06  897907-AA-9 |   | 85.75   |   | 268,397 |   |
|    |   |                                  |   |    |   |    |   |
| 112,000 |   | PACWEST TELECOM 13.5 2009             |   | 98.00   |   | 109,760 |   |
|    |   |                                  |   |    |   |    |   |
| 100,000 |   | MAGNA ENT 7.25% 2/15/09               |   | 109.881 |   | 109,881 |   |

 

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3520 Northwest 58th Street

Oklahoma City, OK 73112

Phone: 405-917-9600

Fax:405-917-9660

Website:www.firststcapital.com

 

October 5, 2004

 

VIAUPS

 

Mr. Robert W. Schleizer

Pawn Mart, Inc.

Xponential, Inc.

6400 Atlantic Boulevard, Suite 190

Norcross, Georgia  30071

 

RE:                              Amendment to Section 2(f) of the Loan andSecurity Agreement dated June 17, 2004 (the “Loan Agreement”) betweenFCC, LLC (“First Capital”), PawnMart, Inc., and Xponential, Inc.

 

Dear Mr. Schleizer,

 

To ensure that the Loan Agreement remains inconformance with First Capital guidelines, effective as of the date hereof theLoan Agreement shall be amended to add the new following sentence to Section2(f) thereof:

 

“TheBorrower shall make each payment required hereunder, and/or under anyInstrument delivered hereunder, without setoff, deduction or counterclaim.”

 

Please acknowledge your acceptance of theforgoing change to the Loan Agreement by signing where indicated below andreturning two original, executed copies of this Letter Amendment to me in theenclosed UPS envelope.  Please retain onecopy of this Letter Amendment for your records.

 

Should you have any questions, please contactme at (405) 917-1105.

 
| Sincerely,                                     |
|------------------------------------------------|
|                                           |
| /s/ Rebecca Thompson                           |   |
|                                           |
| Rebecca Thompson                               |
| Vice President and  Corporate Counsel          |
|                                           |
| ACKNOWLEDGED AND AGREED:                       |
|                                           |
| PawnMart, Inc.                                 |
|                                           |
| /s/ Robert W. Schleizer                        |   |
| Robert W. Schleizer,  Executive Vice President |
|                                           |
| Xponential, Inc.                               |
|                                           |
| /s/ Robert W. Schleizer                        |   |
| Robert W. Schleizer, Chief  Financial Officer  |
|                                                |  |  |

 

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**ACCOUNT CONTROL AGREEMENT**

 

Date:  October 14, 2004

 

Client name and address:

Xponential, Inc.

6400 Atlantic Blvd., Suite 190

Norcross, Georgia  30071

(Hereinafter referred to as “Debtor”)

 

Lender name and address:

FCC, LLC, d/b/a First Capital

125 TownPark Lane, Suite 190

Kennesaw, Georgia  30144

(Hereinafter referred to as “Lender”)

 

Wachovia Securities

10700 Wheat First Drive

Glen Allen, VA  23060

Attn:  Credit/Margin Dept.

(Hereinafter referred to as “Broker”)

 

Debtor has granted Lender a security interest in a securities accountmaintained by Broker for Debtor.  Theparties are entering into this agreement to perfect Lender’s security interestin that account.

 

THE ACCOUNT.  Broker representsand warrants to Lender that (I) Broker maintains custody of securities accountnumber 1192-1233 (the “Account”) for Debtor; (II) the account is not amargin account; (III) **Exhibit A** is astatement produced by the Broker in the ordinary course of its businessregarding the property credited to the Account at the statement’s date andBroker does not know of any inaccuracy in the statement; and (IV) Broker doesnot know of any claim to or interest in the Account, except for claims andinterests of the parties referred to in this agreement.

 

CONTROL BY DEBTOR.  Until Brokerreceives a notice from Lender that Lender will exercise exclusive control overthe Account (a “Notice of Exclusive Control”), Broker will promptly comply withall notifications it receives from Debtor directing it to take any action withrespect to the property in the Account (each an “Entitlement Order”) withoutfurther consent from Lender; provided, however, that, without thewritten consent of Lender, Broker shall not permit Debtor to withdraw anyproperty from the Account.  Lender herebydesignates the following officers as officers who are authorized to consent towithdrawals from the Account:

 
| **Name**     | ** ** | **Title**             |
|--------------|------------|-----------------------|
| Evan Jones   |       | Senior Vice President |
| Ron Warnock  |       | Senior Vice President |
| Brian Cuttic |       | Senior Vice President |

 

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or any other officers from time to time designated by Lender in writingto Broker.  Broker shall be entitled torely on any written instructions which it reasonably believes are initiated byany such designated officers of Lender.

 

DEBTOR’S RIGHTS IN ACCOUNT.  IfLender notifies Broker that Lender will exercise exclusive control over theAccount (a “Notice of Exclusive Control”), Broker will promptly cease complyingwith Entitlement Orders or other directions concerning the Account originatedby Debtor and promptly commence to comply with all Entitlement Orders itreceives from Lender.

 

PRIORITY OF LENDER’S SECURITY INTEREST. Broker subordinates in favor of Lender any security interest, lien orright of setoff it may have, now or in the future, against the Account orproperty in the Account, except that Broker will retain its prior lien on propertyin the Account to secure payment for property purchased for the Account andnormal commissions and fees for the Account.

 

Broker will not agree with any third party that Broker will comply withEntitlement Orders originated by the third party.

 

STATEMENTS, CONFIRMATIONS AND NOTICES OF ADVERSE CLAIMS.  Broker will send copies of all statements andconfirmations for the Account simultaneously to Debtor and Lender.  Broker will use reasonable efforts topromptly notify Lender and Debtor if any other person claims that it has aproprietary interest in property in the Account.

 

BROKER’S RESPONSIBILITIES. Except for permitting a withdrawal, delivery or payment in violation ofsection entitled “Debtor’s Rights in Account,” Broker will not be liable toLender for complying with Entitlement Orders from Debtor that are received byBroker before Broker receives and has a reasonable opportunity to act on aNotice of Exclusive Control.  Broker willnot be liable to Debtor for complying with a Notice of Exclusive Control orwith Entitlement Orders originated by Lender, even if Debtor notifies Brokerthat Lender is not legally entitled to issue the Entitlement Order or Notice ofExclusive Control, unless Broker takes the action after it is served with aninjunction, restraining order or other legal process enjoining it from doingso, issued by a court of competent jurisdiction, and had a reasonableopportunity to act on the injunction, restraining order or other legal process,or Broker acts in collusion with Lender in violating Debtor’s rights.

 

This agreement does not create any obligation of Broker except forthose expressly set forth in this agreement. In particular, Broker need not investigate whether Lender is entitledunder Lender’s agreements with Debtor to give an Entitlement Order or a Noticeof Exclusive Control.  Broker may rely onnotices and communications which it believes have been given by the appropriateparty.

 

INDEMNITY.  Lender and Debtorwill indemnify Broker, its officers, directors, employees and agents againstclaims, liabilities and expenses arising out of this agreement (includingreasonable attorneys’ fees and disbursements), except to the extent the claims,liabilities or expenses are caused by Broker’s gross negligence or

 

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willful misconduct.  Lender’s andDebtor’s liability under this section is joint and several.

 

LIABILITY.  Broker will not beliable to Debtor or Lender for any expense, claim, loss, damage, or cost (“Damages”)arising out of or relating to its performance under this agreement other thanDamages which result directly from its acts or omissions constituting grossnegligence or willful misconduct, and subject to the limits of the nextsentence.  Broker’s liability is limitedto direct money Damages actually incurred. In no event will Broker be liable for any punitive, special, indirect,or consequential damages, including but not limited to lost profits, even ifadvised of the possibility or likelihood of such damages.

 

TERMINATION; SURVIVAL.  Lendermay terminate this agreement by notice to Broker and Debtor.  Broker may terminate this agreement on thirty(30) days’ notice to Lender and Debtor. If Lender notifies Broker that Lender’s security interest in the Accounthas terminated, this agreement will immediately terminate.  Sections entitled “Broker’s Responsibilities”and “Indemnity” will survive termination of this agreement.

 

MISCELLANEOUS PROVISIONS. Governing Law.  This agreement andthe Account will be governed by the laws of the Commonwealth of Virginia.  Broker and Debtor may not change the lawgoverning the Account without Lender’s express written agreement.  Entire Agreement.  This agreement is the entire agreement andsupersedes any prior agreements and contemporaneous oral agreements, of theparties concerning its subject matter. Amendments.  No amendment of, orwaiver of a right under, this agreement will be binding unless it is in writingand signed by the party to be charged. Severability.  To the extent a provisionof this agreement is unenforceable, this agreement will be construed as if theunenforceable provision were omitted. Financial Assets.  All propertycredited to the Account will be treated as financial assets underArticle 8 of the Commonwealth of Virginia Uniform Commercial Code.  Successors and Assigns.  A successor to or  assignee of Lender’s right and obligationsunder the security  agreement betweenLender and Debtor will succeed to Lender’s right and obligations under thisagreement.  Notices.  A notice or other communication to a partyunder this agreement will be in writing (except that Entitlement Orders may begiven orally), will be sent to the party’s address set forth above or to suchother address as the party may notify the other parties and will be effectiveon receipt.

 

REMAINDER OF PAGEINTENTIONALLY LEFT BLANK

 

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IN WITNESS WHEREOF, Debtor, Lender and Brokerhave caused this Agreement to be duly executed as of the date first above written.

 
| DEBTOR: XPONENTIAL, INC.                           |                                |
|----------------------------------------------------|-------------------------------------|
|                                               |                                |
| By:                                                |   /s/ Robert W. Schleizer |   |
| Name:  Robert  W. Schleizer                   |                                |
| Title:  Chief  Financial Officer              |                                |
|                                               |                                |
|                                               |                                |
| BROKER:    Wachovia Securities |                                |
|                                               |                                |
| By:                                                |   /s/ D. Scott Anderson   |   |
| Name:  D.  Scott Anderson                     |                                |
| Title:  Vice  President                       |                                |
|                                               |                                |
|                                               |                                |
| LENDER: FCC, LLC, d/b/a First Capital              |
|                                               |                                |
| By:                                                |   /s/ Evan G. Jones       |   |
| Name:  Evan G.  Jones                         |                                |
| Title:  Senior  Vice President                |                                |

 

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