LOAN AND SECURITY AGREEMENT

 

 

 

 

 

LOAN AND SECURITY AGREEMENT

 

by and among

 

WELLS FARGO PREFERRED CAPITAL, INC.

as Lender

 

and

 

CARBIZ USA INC.
AND ITS SUBSIDIARIES

as Borrowers

TABLE OF CONTENTS

		Page
ARTICLE 1	DEFINITIONS	1
Section 1.1	Certain Definitions	1
Section 1.2	Rules of Construction.	11
ARTICLE 2	THE REVOLVING CREDIT FACILITY	11
Section 2.1	The Loan	11
Section 2.2	The Note	12
Section 2.3	Method of Payment	12
Section 2.4	Extension and Adjustment of Maturity Date	12
Section 2.5	Use of Proceeds	12
Section 2.6	Interest.	12
Section 2.7	Advances	13
Section 2.8	Prepayment	13
Section 2.9	Fees	14
ARTICLE 3	SECURITY	14
Section 3.1	Security Interest	14
Section 3.2	Financing Statements	15
Section 3.3	Documents to be Delivered to WFPC	15
Section 3.4	Collections	15
Section 3.5	Additional Rights of WFPC; Power of Attorney.	16
Section 3.6	Additional Collateral Provisions	16
ARTICLE 4	REPRESENTATIONS AND WARRANTIES	17
Section 4.1	Representations and Warranties as to Receivables.	17
Section 4.2	Organization and Good Standing	18
Section 4.3	Perfection of Security Interest	18
Section 4.4	No Violations	19
Section 4.5	Power and Authority	19
Section 4.6	Validity of Agreements	19
Section 4.7	Litigation	19
Section 4.8	Compliance	19
Section 4.9	Accuracy of Information; Full Disclosure.	19
Section 4.10	Taxes	20
Section 4.11	Indebtedness	20
Section 4.12	Investments	20
Section 4.13	ERISA	20
Section 4.14	Hazardous Wastes, Substances and Petroleum Products.	20
Section 4.15	Solvency	21
Section 4.16	Business Location	21
Section 4.17	Capital Stock	21
Section 4.18	No Extension of Credit for Securities	21
ARTICLE 5	CONDITIONS TO LOAN	22
Section 5.1	Documents to be Delivered to WFPC Prior to First Advance	22
Section 5.2	Conditions to all Advances	23
ARTICLE 6	AFFIRMATIVE COVENANTS	23
Section 6.1	Place of Business and Books and Records	24
Section 6.2	Reporting Requirements	24
Section 6.3	Books and Records	24

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Section 6.4	Financial Covenants	25
Section 6.5	Compliance With Applicable Law	26
Section 6.6	Notice of Default	27
Section 6.7	Corporate Existence, Properties	27
Section 6.8	Payment of Indebtedness; Taxes	27
Section 6.9	Notice Regarding Any Plan	27
Section 6.10	Other Information	28
Section 6.11	Litigation	28
Section 6.12	Business Location, Legal Name and State of Organization	28
Section 6.13	Operations	28
Section 6.14	Further Assurances	28
ARTICLE 7	NEGATIVE COVENANTS	29
Section 7.1	Payments to and Transactions with Affiliates	29
Section 7.2	Restricted Payments	29
Section 7.3	Indebtedness	29
Section 7.4	Guaranties	30
Section 7.5	Nature of Business	30
Section 7.6	Negative Pledge	30
Section 7.7	Investments and Acquisitions	30
Section 7.8	Compliance with Formula	30
Section 7.9	Mergers, Sales, Divestitures	30
Section 7.10	Use of Proceeds	30
Section 7.11	Ownership and Management	30
Section 7.12	Amendment to Subordinated Debt	30
ARTICLE 8	EVENTS OF DEFAULT	31
Section 8.1	Failure to Make Payments	31
Section 8.2	Information, Representations and Warranties	31
Section 8.3	Covenants	31
Section 8.4	Collateral	31
Section 8.5	Defaults Under Other Agreements	31
Section 8.6	Certain Events	31
Section 8.7	Possession of Collateral	32
Section 8.8	Guarantor	32
Section 8.9	Credit Documents	32
Section 8.10	Material Adverse Change	32
Section 8.11	Swap Agreement. Any default by a Borrower under any Swap Agreement	32
ARTICLE 9	REMEDIES OF WFPC AND WAIVER	32
Section 9.1	WFPC’s Remedies	32
Section 9.2	Waiver and Release by Borrowers	33
Section 9.3	No Waiver	33
ARTICLE 10	MISCELLANEOUS	33
Section 10.1	Indemnification and Release Provisions	33
Section 10.2	Amendments	34
Section 10.3	APPLICABLE LAW	34
Section 10.4	Notices	34
Section 10.5	Termination and Release	35
Section 10.6	Counterparts	35
Section 10.7	Costs, Expenses and Taxes	35
Section 10.8	Successors and Assigns	36
Section 10.9	Effectiveness of Agreement	36
Section 10.10	JURISDICTION AND VENUE	36
Section 10.11	WAIVER OF JURY TRIAL	36

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Section 10.12	REVIEW BY COUNSEL	36
Section 10.13	Exchanging Information	36
Section 10.14	Acknowledgment of Receipt	36
ARTICLE 11	INTER-BORROWER PROVISIONS
Section 11.1	Certain Borrower Acknowledgments and Agreements	37
Section 11.2	Maximum Amount of Joint and Several Liability	37
Section 11.3	Authorization of Borrower Agent by Borrowers:	38

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LOAN AND SECURITY AGREEMENT

          This LOAN AND SECURITY AGREEMENT is made as of the 15th day of June, 2009 by and among CARBIZ USA INC., a Delaware corporation with its chief executive office at 7115 16th Street E, Suite 105, Sarasota Florida 34243 (“ Borrower Agent ”), and the Persons listed on the signature pages hereto as borrowers (collectively, the “ Borrowers ” and each individually is referred to as a “ Borrower ”), and WELLS FARGO PREFERRED CAPITAL, INC. (“ WFPC ”), an Iowa corporation with its principal office located at 800 Walnut Street, Des Moines, Iowa 50309.

BACKGROUND

          Borrowers have requested and WFPC has agreed to make available to Borrowers a secured revolving credit facility in the amount of the Maximum Principal Amount, all on the terms and subject to the conditions set forth herein.

          NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties covenant and agree as follows:

ARTICLE 1

DEFINITIONS

          Section 1.1 Certain Definitions . The terms defined in this Section 1.1, whenever used and capitalized in this Agreement shall, unless the context otherwise requires, have the respective meanings herein specified.

          “ Acquisition ” means the purchase by Carbiz USA, Inc. of all or substantially all of the assets of Star Financial pursuant to the Acquisition Documents.

          “ Acquisition Documents ” means those certain documents, instruments and agreements listed on Schedule A attached hereto and made part hereof together with all exhibits and schedules thereto.

          “ Advance ” means each advance of the Loan made to Borrowers pursuant to Section 2.1 hereof.

          “ Adjusted Tangible Net Worth ” means Tangible Net Worth minus the sum of (a) Receivables 120 or more days contractually past due, plus (b) the amount by which the then required allowance for loan and lease losses under Section 6.4(c) hereof exceeds actual allowance for loan and lease losses as reported on the most recent financial statements provided to WFPC.

          “ Advance Rate ” means (a) with respect to Star Financial Receivables, 95% through the 60 ^th day following the date hereof and 90% at all times thereafter and (b) with respect to all other Receivables, 55%.

          “ Affiliate ” means (i) any Person who or entity which directly or indirectly owns, controls or holds 5.0% or more of the outstanding beneficial interest in a Borrower; (ii) any entity of which 5.0% or more of the outstanding beneficial interest is directly or indirectly owned, controlled, or

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held by a Borrower; (iii) any entity which directly or indirectly is under common control with a Borrower; (iv) any officer, director, partner or employee of a Borrower or any Affiliate; or (v) any immediate family member of any Person who is an Affiliate. For purposes of this definition, “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of an entity, whether through the ownership of voting securities, by contract, or otherwise. DSC shall not be deemed an Affiliate of a Borrower or any Affiliate of Borrower.

          “ Agreement ” means this Loan and Security Agreement and all exhibits and schedules hereto, as the same may be amended, modified or supplemented from time to time.

          “ Annual Compliance Certificate ” shall mean a certificate in the form of Exhibit A attached hereto and made part hereof.

          “ Applicable Margin ” means 3.35% .

          “ Asset Quality ” means, as of the date of determination, the following percentage: net charge-offs of Receivables (other than the Purchased Receivables) for the 12 month period ending on such date, as a percentage of average Principal Receivables (other than the Purchased Receivables) outstanding during such 12 month period.

          “ Availability Statement ” means the certificate in substantially the form of Exhibit B attached hereto and made part hereof.

          “ Bankruptcy Code ” means the United States Bankruptcy Code as now constituted or hereafter amended and any similar statute or law affecting the rights of debtors.

          “ Base Rate ” means for any date of determination the LIBOR Rate for such date.

          “ Books and Records ” means all of Borrowers’ original ledger cards, payment schedules, credit applications, contracts, lien and security instruments, guarantees relating in any way to the Collateral and other books and records or transcribed information of any type, whether expressed in electronic form in tapes, discs, tabulating runs, programs and similar materials now or hereafter in existence relating to the Collateral.

          “ Borrowers’ Loan Account ” has the meaning assigned to that term in Section 2.1 of this Agreement.

          “ Borrowing Base ” means, as of the date of determination and subject to change from time to time as described below, an amount up to the Advance Rate multiplied by the aggregate balance of outstanding Eligible Receivables. Notwithstanding the foregoing, WFPC may adjust the Advance Rate in the Borrowing Base from time to time and at any time in WFPC’s sole discretion, upon 3 days notice to Borrowers, including, without limitation, to reflect, in WFPC’s judgment, the experience with Borrowers (including without limitation any increased credit, operational, legal, regulatory, political or reputational risk of Borrowers).

          “ Business Day ” means any day except a Saturday, Sunday or other day on which national banks are authorized by law to close including, without limitation, United States federal government

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holidays.

          “ Capital Base ” means the sum of (a) Adjusted Tangible Net Worth, plus (b) Subordinated Debt, plus (c) Derivative Liability.

          “ Code ” means the Internal Revenue Code of 1986, as amended from time to time, and regulations with respect thereto in effect from time to time.

          “ Collateral ” means any and all rights and interests in or to Property of each Borrower, whether now owned or hereafter created or acquired, pledged from time to time as security for the Obligations, which shall specifically include, without limitation, all of the following:

                    (a)      All now owned and hereafter acquired, created, or arising Accounts and Receivables;

                    (b)      All now owned or hereafter acquired Inventory and other Goods of every nature and kind, wherever located; and all accessions, additions, attachments, improvements, substitutions and replacements thereto and thereafter;

                    (c)      All now owned and hereafter acquired, created or arising General Intangibles of every nature, kind and description, including, without limitation, customer lists, choses in action, claims, books, records, goodwill, patents and patent applications, copyrights, trademarks, tradenames, service marks, tradestyles, trademark applications, trade secrets, contracts, contract rights, royalties, licenses, franchises, deposits, license, franchise and royalty agreements, formulae, tax and any other types of refunds, returned and unearned insurance premiums, rights and claims under insurance policies including without limitation, credit insurance and key man life insurance policies, and computer information, software, records and data;

                    (d)      All now owned and hereafter acquired Equipment wherever located, and all replacements, parts, accessions, substitutions and additions thereto;

                    (e)      All now owned or hereafter acquired Fixtures, wherever located;

                    (f)      All now owned and hereafter acquired, created or arising Chattel Paper, Instruments and Documents (including bills of lading, warehouse receipts and other documents of title) of every nature, kind and description;

                    (g)      All now owned and hereafter acquired, created or arising Supporting Obligations and Letter-of-Credit Rights of every nature, kind and description;

                    (h)      All now existing and hereafter acquired or arising deposit accounts, reserves and credit balances of every nature, wherever located, and all documents and records associated therewith;

                    (i)      All Property, now or hereafter in the possession of WFPC;

                    (j)      All now owned or hereafter acquired Investment Property of every kind; and

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                    (k)      The accessions to, and substitutions for an all replacements, products and Proceeds (including, without limitation, insurance proceeds and insurance premiums), whether cash or non-cash, of all of the foregoing Property and interests in Property.

          “ Collections ” means payment of principal, interest and fees on Receivables, the cash and non-cash proceeds realized from the enforcement of such Receivables and any security therefor (including without limitation, proceeds received in connection with the repossession and subsequent sale of motor vehicles securing such Receivable, whether such repossession is conducted by Borrower or any other Person), or the Collateral, proceeds of credit, group life or non-filing insurance, proceeds of insurance on any real or personal property which is part of the collateral for the Receivables.

          “ Commitment ” means the maximum principal amount which WFPC has agreed may be loaned to Borrowers, jointly and severally, pursuant to Article 2 hereof, being, on the date hereof, the Maximum Principal Amount.

          “ Consumer Finance Laws ” means all applicable laws and regulations, federal, state and local, relating to the extension of consumer credit, and the creation of a security interest in personal property or a mortgage in real property in connection therewith, as the case may be, and laws with respect to protection of consumers’ interests in connection with such transactions, including without limitation, any usury laws, the Federal Consumer Credit Protection Act, the Federal Fair Credit Reporting Act, RESPA, the Magnuson-Moss Warranty Act, the Federal Trade Commission’s Rules and Regulations and Regulations B and Z of the Federal Reserve Board, as any of the foregoing may be amended from time to time.

          “ Consumer Purpose Loans ” means loans to one or more individuals the proceeds of which are used to purchase goods, services or merchandise for personal, household or family use.

          “ Control Agreement ” mean that certain Deposit Account Control Agreement (in form and substance satisfactory to WFPC) among Borrowers, WFPC and depository institutions reasonably acceptable to WFPC, as the same may be amended, modified or supplemented from time to time.

          “ Convertible Debentures ” means those certain Convertible Debentures listed on Schedule B attached hereto and made part hereof.

          “ Credit Documents ” means this Agreement, the Note, the Guaranty, the Subordination Agreements, the Intercreditor Agreement, the Control Agreements and any and all additional documents, instruments, agreements and other writings executed and delivered pursuant to or in connection with this Agreement.

          “ Debt ” means, as of the date of determination, all outstanding indebtedness (other than deferred loan origination fees of Borrowers and Derivative Liability) including without limitation (a) all loans made by WFPC to Borrowers; (b) accounts payable as of the date of determination; (c) income tax liabilities; (d) mortgages; (e) deposits and debenture instruments; and (f) Subordinated Debt.

          “ Default ” means an event, condition or circumstance which, with the giving of notice or the passage of time, or both, would constitute an Event of Default.

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          “ Derivative Liability ” means the liabilities that reside on Guarantor’s balance sheet at fair value until they are either converted to stock or they expire relating to any convertible debenture or warrant instruments issued by any Borrower or Guarantor that are convertible or exercisable into common stock at the investor’s option and at a predetermined price; it being acknowledged that that the Financial Accounting Standards Board issued Financial Accounting Statement No. 133 which defines the term “derivative instrument” and prescribes its accounting treatment.

          “ DSC ” means Dealer Services Corporation.

          “ DSC Credit Documents ” means that certain Fourth Amended and Restated Loan and Security Agreement dated as of February 25, 2009 among Borrowers, Guarantor and DSC as amended by a First Amendment dated June 12, 2009 together with all documents, instruments and agreement executed and/or delivered in connection therewith.

          “ DSC Credit Satisfaction ” means the payment in full of the Indebtedness (as that term is defined in the DSC Credit Documents as of the date of this Agreement) and termination of the DSC Credit Documents.

          “ DSC Senior Receivables ” has the meaning assigned to that term in the Intercreditor Agreement.

          “ EBITDA Ratio ” means Borrowers’ earnings before payments of interest, taxes, depreciation and amortization expense for the three (3) month period ending on the date of determination, net of any deficits from the amount required as an allowance for loan and lease losses under Section 6.4(c) hereof, Receivables 120 or more days past due and gains on the extinguishment of Debt, as a percent of interest expense during such three (3) month period in accordance with GAAP principles pursuant to Section 6.4 of this Agreement; provided, the determination of the EBITDA Ratio shall exclude any gain or loss resulting from changes in the Derivative Liability.

          “ Eligible Receivables ” means, as of the date of determination, Receivables (net of unearned interest, fees, insurance commissions, discounts, reserves (except loss reserves funded through the P & L) and holdbacks) which are Chattel Paper, which conform to the warranties set forth in Section 4.1 hereof, in which WFPC has a validly perfected first priority Lien, and which are not any of the following: (i) (A) a Star Financial Receivable for which a payment is 61 or more days past due or (B) any other Receivables for which a payment is: (1) 30 or more days past due for weekly paying obligors, or (2) 61 or more days past due for all other obligors, in each case on a contractual basis; (ii) Receivables subject to repossession or bankruptcy proceedings or the account debtor with respect to which is a debtor under the Bankruptcy Code, unless the account debtor is contractually current; (iii) Receivables subject to foreclosure or other litigation; (iv) Receivables from officers, employees or shareholders of any Borrower or any Affiliate; (v) Receivables which have been deferred or extended more than one billing cycle during any rolling 12 month period or more than two times in the aggregate; (vi) Interest Only Accounts or balloon accounts; (vii) Real Estate Related Accounts; (viii) Receivables arising from deficiency balance accounts; (viii) Receivables with an original term in excess of 60 months (or equivalent term if payment is more often than monthly); (ix) Receivables for which within 60 days of the purchase of such Receivable either (A) WFPC or a Borrower has not received the corresponding original certificate of title or (B) a Borrower has not received possession of the certificate of title evidencing, a first priority perfected security interest, or

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a first priority lien under applicable provisions of the motor vehicle, UCC or other similar law of the jurisdiction in which the motor vehicle is titled and registered by the purchaser at the time the contract is originated as evidenced by a KSR report provided by the applicable Division of Motor Vehicles or equivalent state agency in the applicable jurisdiction where the motor vehicle is titled and registered; (x) accounts that have been modified (other than through a deferral or extension), rescheduled or renewed, (xi) Receivables not materially complying with Borrowers’ underwriting guidelines, (xiv) DSC Senior Receivables and (xv) Receivables which, in WFPC’s reasonable discretion, do not constitute acceptable collateral.

          “ Environmental Control Statutes ” means any federal, state, county, regional or local laws governing the control, storage, removal, spill, release or discharge of Hazardous Substances, including without limitation CERCLA, the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976 and the Hazardous and Solid Waste Amendments of 1984, the Federal Water Pollution Control Act, as amended by the Clean Water Act of 1976, the Hazardous Materials Transportation Act, the Emergency Planning and Community Right to Know Act of 1986, the National Environmental Policy Act of 1975, the Oil Pollution Act of 1990, any similar or implementing state law, and in each case including all amendments thereto and all rules and regulations promulgated thereunder and permits issued in connection therewith.

          “ EPA ” means the United States Environmental Protection Agency, or any successor thereto.

          “ ERISA ” means the Employee Retirement Income Security Act of 1974, all amendments thereto, and any successor statute of similar import, and regulations thereunder, in each case as in effect from time to time. References to sections of ERISA shall be construed to refer to any successor sections.

          “ Event of Default ” has the meaning assigned to that term in Article 8 of this Agreement.

          “ GAAP ” means generally accepted accounting principles applied on a consistent basis, in accordance with the Statement of Auditing Standards No. 69, “The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles in the Independent Auditor’s Report” (SAS 69) or superseding pronouncements, issued by the Auditing Standards Board of the American Institute of Certified Public Accountants and/or in statements of the Financial Accounting Standards Board and/or in such other statements by such other entity as WFPC may reasonably approve, which are applicable in the circumstances as of the date in question. The requirement that such principles be applied on a consistent basis shall mean that the accounting principles observed in a current period are comparable in all material respects to those applied in a preceding period, or, in the event of a material change in any accounting principle from that observed in any previous period (i) financial reports covering preceding periods during the term of this Agreement are restated to reflect such change and provide a consistent basis for comparison among periods and (ii) the financial covenants set forth in Section 6.4 shall be adjusted as determined by WFPC to reflect similar performance standards as those measured by the existing covenants using the previously observed accounting principles.

          “ Guarantor ” shall mean Carbiz Inc., an corporation organized under the laws of Ontario, Canada with a chief executive office at 7115 16th Street E, Suite 105, Sarasota Florida 34243.

          “ Guaranty ” means the Guaranty Agreement dated as of the date hereof from Guarantor in

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favor of WFPC, as the same may be amended, modified, restated or extended from time to time.

          “ Hazardous Substance ” means any toxic, reactive, corrosive, carcinogenic, flammable or hazardous pollutant or other substance, including without limitation petroleum and items defined in Environmental Control Statutes as “hazardous substances,” “hazardous wastes,” “pollutants” or “contaminants.”

          “ Intangible Assets ” means all assets of any Person which would be classified in accordance with GAAP as intangible assets, including without limitation (a) all franchises, licenses, permits, patents, applications, copyrights, trademarks, trade names, goodwill, experimental or organization expenses and other like intangibles, and (b) unamortized debt discount and expense and unamortized stock discount and expense.

          “ Intercreditor Agreement ” means that certain Intercreditor Agreement dated as of the date hereof among Borrowers, Guarantor, DSC and WFPC, as the same may be amended, modified, restated or extended from time to time.

          “ Interest-Only Accounts ” means those Receivables on which collections are applied entirely to interest and expense charges, with no portion thereof being required to reduce the principal balance on the loan prior to the stated maturity of such accounts.

          “ LIBOR Rate ” means the three-month London Interbank Offered Rate for any day as found in the Wall Street Journal, Interactive Edition, or any successor edition or publication and selected by WFPC in its sole discretion for any day during a given month. In the event such rate ceases to be published or quoted, LIBOR Rate shall mean a comparable rate of interest reasonably selected by WFPC. WFPC’s determination of the LIBOR Rate shall be conclusive and binding on Borrowers, absent manifest error.

          “ Lien ” means any mortgage, deed of trust, pledge, lien, security interest, charge or other encumbrance or security arrangement of any nature whatsoever, including without limitation any conditional sale or title retention arrangement, and any assignment, deposit arrangement or lease intended as, or having the effect of, security.

          “ Loan ” means the aggregate principal amount advanced by WFPC to Borrowers pursuant to Section 2.1 of this Agreement, together with interest accrued thereon and fees and costs incurred in connection therewith.

          “ Loan Availability ” means the amount available for Advances under this Agreement on any date as determined in accordance with the Availability Statement submitted to WFPC on such date in accordance with the terms hereof.

          “ Local Authorities ” means individually and collectively the state and local governmental authorities which govern the business and operations owned or conducted by Borrowers or any of them.

          “ Maturity Date ” means June 30, 2011.

          “ Maximum Principal Amount ” means (a) $15,000,000 through and including December 31,

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2009, (b) $17,000,000 commencing January 1, 2010 through and including March 31, 2010 and (c) $20,000,000 at all times thereafter.

          “ Note ” means that certain Promissory Note from Borrowers in favor of WFPC, evidencing the joint and several obligation of Borrowers to repay the Loan, and any and all amendments, renewals, replacements or substitutions therefor.

          “ Obligations ” means all loans now or hereafter made hereunder, each and every draft, liability and obligation of every type and description which Borrowers may now or at any time hereafter owe to WFPC, including specifically, but not limited to payment or performance, as the case may be, of all obligations of Borrowers or any Affiliates of any Borrower owing to a WFPC Affiliate or WFPC pursuant to any interest rate hedge, collar , cap or exchange agreement (including, but not limited to, any ISDA Master Agreement) heretofore or hereafter executed by any Borrower and WFPC or any WFPC Affiliate in connection with the Loan, together with any related schedules and confirmations (a “Swap Agreement”) (whether such debt, liability or obligation now exists or is hereafter created or incurred, whether it arises in a transaction involving WFPC alone or in a transaction involving a WFPC Affiliate or other creditors of Borrowers, and whether it is direct or indirect, due or to become due, absolute or contingent, primary or secondary, liquidated or unliquidated, or sole, joint, several or joint and several), including any extensions and renewals thereof, and substitutes therefore and all indebtedness of Borrowers arising under this Agreement, the Note or any other loan or credit agreement between Borrowers and WFPC, whether now in effect or hereafter entered into and including, without limitation, all Loans.

          “ PBGC ” means the Pension Benefit Guaranty Corporation, or any successor thereto.

          “ Person ” means all natural persons, corporations, limited partnerships, general partnerships, joint stock companies, limited liability companies, joint ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts or other organizations, whether or not legal entities, and federal and state governments and agencies or regulatory authorities and political subdivisions thereof, or any other entity.

          “ Plan ” means any employee benefit plan subject to the provisions of Title IV of ERISA which is maintained in whole or in part for employees of Borrowers or any Affiliate of Borrowers.

          “ Principal Receivables ” means as of the date of determination, Receivables (including discounts) net of unearned interest and unearned commission.

          “ Property ” means any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible.

          “ Purchased Receivables ” means those specific Receivables purchased by Borrowers prior to the date hereof in connection with purchase transactions consummated in October, 2007, December, 2007 and July, 2008.

          “ Real Estate Related Accounts ” means Receivables arising from loans (a) the proceeds of which are used to purchase or improve real property; or (b) collateralized or secured by an interest in real property; and shall include without limitation home equity accounts.

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          “ Receivables ” means all chattel paper (as defined in the UCC) and all lien, title retention and security agreements, chattel mortgages, chattel paper, bailment leases, installment sale agreements, instruments, consumer finance paper and/or promissory notes securing and evidencing loans made, and/or time sale transactions acquired, by a Borrower and any other right of a Borrower to receive payment thereunder, including, without limitation, all loans, extensions of credit or a Borrower’s right to payment for goods sold or services rendered by such Borrower related to those accounts.

          “ Related Party ” means, collectively, each Borrower, Guarantor, each Subsidiary of a Borrower and/or Guarantor and each Subsidiary and/or Affiliate of a Borrower and/or Guarantor.

          “ Reportable Event ” has the meaning assigned to that term in Section 4.13 of this Agreement.

          “ Request for Advance ” means the certificate in the form of Exhibit C attached hereto or an online advance request and made part hereof to be delivered by Borrowers to WFPC as a condition of each Advance pursuant to Section 2.7 hereof.

          “ Restricted Payments ” means payments by Borrowers, or any of them, (other than payments between Borrowers) which constitute (a) redemptions, repurchases, dividends or distributions of any kind with respect to a Borrower’s capital stock or any warrants, rights or options to purchase or otherwise acquire any shares of a Borrower’s capital stock or (b) payments of principal or interest on Subordinated Debt.

          “ Schedule of Receivables and Assignment ” means a Schedule of Receivables and Assignment to be submitted by Borrowers to WFPC pursuant to Section 6.2(c) hereof, describing the Receivables assigned and pledged to WFPC on the date hereof and thereafter for the period to which such schedule relates and confirming the assignment and pledge of such Receivables.

          “ Senior Debt ” means all Debt of Borrowers, or any of them, not expressed to be subordinated or junior to any other Debt of Borrowers, or any of them, and specifically excluding Derivative Liability.

          “ Senior Debt to Capital Base Ratio ” means the ratio of Senior Debt to Capital Base.

          “ Star Financial ” means Star Financial Services.

          “ Star Financial Receivable ” means a Receivable purchased from Star Financial pursuant to the Acquisition Documents.

          “ Star Financial Subordinated Debt ” means the Debt evidenced by Subordinated Promissory Notes listed on Schedule C attached hereto and made part hereof.

          “ Subordinated Debt ” means any indebtedness of Borrower for borrowed money and which shall contain provisions subordinating the payment of such indebtedness and the liens and security interests securing such indebtedness to Senior Debt, in form, substance and extent acceptable to WFPC, in its sole discretion.

          “ Subordination Agreement ” means, individually, and “ Subordination Agreements ” means,

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collectively (a) the Trafalgar Subordination Agreement, (b) those certain Subordination and Intercreditor Agreements dated as of the date hereof among Borrowers, Guarantor, the holders of the Convertible Debentures and WFPC, (c) those certain Subordination Agreements dated as of the date hereof among Borrowers, Guarantor, the holders of the Star Financial Subordinated Debt and WFPC and (d) any other subordination agreement entered into among Borrowers, a holder of Subordinated Debt and WFPC from time to time, as each of the same may be amended, modified, restated or extended from time to time.

          “ Subsidiary ” of any entity means any corporation of which such entity directly or indirectly owns or controls at least a majority of the outstanding stock having general voting power. For purposes of this definition, “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of an entity, whether through the ownership of voting securities, by contract, or otherwise.

          “ Tangible Net Worth ” means, at any date, total assets minus total liabilities reduced by the value of convertible debentures and derivative liabilities, minus, to the extent not otherwise excluded (i) the cost of treasury shares; (ii) the amount equal to the value shown on its books of Intangible Assets, including the excess paid for assets acquired over their respective book values on the books of the corporation from which acquired; and (iii) investments in and loans to any Subsidiary or Affiliate or to any shareholder, director or employee of Borrowers, any Subsidiary or any Affiliate.

          “ Termination Date ” means the earlier of (a) the Maturity Date, as such date may be extended from time to time in accordance with the provisions of Section 2.4 of this Agreement or (b) the date on which the Commitment is terminated and the Loan becomes due and payable pursuant to Section 9.1.

          “ Trafalgar ” means Trafalgar Capital Specialized Investment Fund, Luxembourg.

          “ Trafalgar Documents ” means certain Secured Convertible Debentures listed on Schedule D attached hereto and made part hereof.

          “ Trafalgar Subordination Agreement ” means that certain Subordination and Intercreditor Agreement dated as of the date hereof among Borrowers, Guarantor, Trafalgar and WFPC, as the same may be amended, modified, restated or extended from time to time.

          “ WFPC ” means Wells Fargo Preferred Capital, Inc., an Iowa corporation, and its respective successors and assigns.

          “ WFPC Affiliate ” means, in relation to WFPC, any entity controlled, directly or indirectly, by WFPC, any entity that controls, directly or indirectly, WFPC or any entity directly or indirectly under common control with WFPC. For this purpose, “control” of any entity means ownership of a majority of the voting power of such entity.

          “ WFPC Senior Collateral ” has the meaning assigned to that term in the Intercreditor Agreement.

          “ WFPC Senior Debt ” means all Debt of Borrowers, or any of them, other than Subordinated Debt and Debt owing to DSC.

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          “ WFPC Senior Debt to Capital Base Ratio ” means the ratio of WFPC Senior Debt to Capital Base.

          “ WFPC Senior Receivables ” has the meaning assigned to that term in the Intercreditor Agreement.

          Section 1.2      Rules of Construction .

                    (a)      Accounting Term . Except as otherwise provided herein, financial and accounting terms used in the foregoing definitions or elsewhere in this Agreement shall be defined in accordance with GAAP.

                    (b)      Uniform Commercial Code . Except as otherwise provided herein, terms used in the foregoing definitions or elsewhere in this Agreement that are defined in the Uniform Commercial Code, including without limitation, “ Accounts ”, “ Documents ”, “ Instruments ”, “ General Intangibles ”, “ Chattel Paper ”, “ Inventory ”, “ Goods ”, “ Equipment ”, “ Fixtures ”, “ Supporting Obligations ”, “ Letter of Credit Rights ” and “ Investment Property ” shall have the respective meanings described to such terms in the Uniform Commercial Code as in effect in the State of Iowa from time to time.

ARTICLE 2

THE REVOLVING CREDIT FACILITY

          Section 2.1      The Loan . Until the Termination Date and subject to the terms and conditions of this Agreement, WFPC shall, upon the prior application of Borrowers, from time to time, make Advances to Borrowers on or after the date of this Agreement, which Borrowers may repay and reborrow from time to time, in the maximum principal amount at any one time outstanding not to exceed the lesser of the amount of the Commitment or the Borrowing Base in effect as of the date of determination, as follows:

                    (a)      WFPC shall establish on its books an account in the name of Borrowers (the “Borrowers’ Loan Account”). A debit balance in Borrowers’ Loan Account shall reflect the amount of Borrowers’ indebtedness to WFPC from time to time by reason of Advances and other appropriate charges (including, without limitation, interest charges) hereunder. At least once each month, WFPC shall provide to Borrowers a statement of Borrowers’ Loan Account which statement shall be considered correct and accepted by Borrowers and conclusively binding upon Borrowers in the absence of manifest error unless Borrowers notify WFPC to the contrary within 30 days of WFPC’s providing such statement to Borrowers.

                    (b)      Borrowers shall prepare a completed Availability Statement as of each month end and forward such statement to WFPC by the 20th day of the following month.

                    (c)      Each Advance made hereunder shall, in accordance with GAAP, be entered as a debit to Borrowers’ Loan Account, and shall be in a principal amount which, when aggregated with all other Advances then outstanding, shall not exceed the lesser of the then effective Borrowing Base

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or Commitment.

                    (d)      The Loan shall be due and payable to WFPC on the Termination Date. Upon the occurrence of an Event of Default, WFPC shall have rights and remedies available to it under Article 9 of this Agreement.

                    (e)      WFPC has the right at any time, and from time to time, in its reasonable discretion (but without any obligation) to set aside reasonable reserves against the Borrowing Base in such amounts as it may deem appropriate.

          Section 2.2      The Note . The indebtedness of Borrowers to WFPC hereunder shall be evidenced by the Note. The principal amount of the Note will be the Maximum Principal Amount; provided, however, that notwithstanding the face amount of the Note, Borrowers’ liability under the Note shall be limited at all times to the actual indebtedness (principal, interest and fees) then outstanding and owing by Borrowers to WFPC hereunder.

          Section 2.3       Method of Payment . Borrowers shall make all payments of principal and interest on the Note in lawful money of the United States of America and in funds immediately available by wire transfer, to WFPC at its address referred to in Section 10.4 of this Agreement or at such other address as WFPC otherwise directs. Whenever any payment is due on a day, which is not a Business Day, the date for payment shall be extended to the next succeeding Business Day and interest shall be paid for such extended time.

          Section 2.4       Extension and Adjustment of Maturity Date . Upon the mutual agreement of all parties to this agreement, the Maturity Date may be extended. Any extension to the Maturity Date shall be in writing and executed by the authorized representatives of each party.

          Section 2.5      Use of Proceeds . Advances shall be used to finance (a) the consummation of the Acquisition on the date hereof, (b) Borrowers acquisition of Borrowers’ portfolios of Consumer Purpose Loans which constitute Eligible Receivables and (c) for other lawful corporate purposes except as limited under this Agreement.

          Section 2.6      Interest .

                    (a)      In the absence of an Event of Default or Default hereunder, the outstanding balance of the Loan will bear interest at an annual rate at all times equal to the Base Rate plus the Applicable Margin.

                    (b)      Interest shall be payable monthly in arrears on the first day of each month commencing on the first such date after the first Advance under the Loan and continuing until the Commitment is terminated and Obligations are indefeasibly paid in full. Interest as provided hereunder will be calculated on the basis of a 360 day year and the actual number of days elapsed. The rate of interest provided for hereunder is subject to increase or decrease when and as the Base Rate increases or decreases in an amount corresponding to the change in the Base Rate. Any such change in interest rate hereunder shall take effect the first day of the month following a change in the Base Rate.

                    (c)      Notwithstanding the foregoing, upon the occurrence and during the continuance of an Event of Default or Default hereunder, including after maturity and before and after judgment, Borrowers hereby agree to pay to WFPC interest on the outstanding principal balance of the

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Loan and, to the extent permitted by law, overdue interest with respect thereto, at the rate of 2.50% per annum above the rate otherwise applicable to the Loan.

                    (d)      To the extent permitted by law, payments of interest and fees not received within 10 days of the date due, are subject to a late charge equal to the greater of $500 or 5.0% of the amount past due, which late charge shall be in addition to any charge, fee or interest otherwise payable hereunder.

          Section 2.7       Advances .

                    (a)      Borrower Agent shall notify WFPC in writing not later than 10:00 a.m., Des Moines, Iowa, time, on the date of each requested Advance under the Commitment, specifying the date, amount and purpose of the Advance. Such notice shall be submitted via WFPC’s online automatic advance request system or in the form of the Request for Advance, shall be certified by the President or Treasurer (or such other authorized Person as Borrower Agent directs from time to time) of Borrower Agent and shall contain the following information and representations, which shall be deemed affirmed and true and correct as of the date of the requested Advance:

                              (i)      the aggregate amount of the requested Advance, which shall be in multiples of $5,000 but not less than the lesser of $5,000 or the unborrowed balance of the Commitment; and

                              (ii)      statements that the representations and warranties set forth in Article 4 are true and correct as of the date of the Advance; no Event of Default or Default exists either immediately prior to and after making such Advance; and that there has been no material adverse change in Borrowers’ financial condition, operations or business since the date of the monthly and audited annual financial statements most recently delivered by Borrowers to WFPC pursuant to Sections 5.1(l) or 6.2 of this Agreement.

                    (b)      Subject to the satisfaction of the conditions set forth in Section 2.7(a) and 5.2, and the other terms of this Agreement, WFPC shall make the requested Advance available to Borrowers by wiring such amount to an account designated by Borrower Agent and in Borrowers’ name, or as otherwise instructed by Borrower Agent, not later than 5:00 p.m., Des Moines, Iowa, time on the day of the requested Advance.

                    (c)      Each request for an Advance pursuant to this Section 2.7 shall be irrevocable and binding on Borrowers.

          Section 2.8      Prepayment .

                    (a)      Optional Prepayments . Borrowers may prepay the Loan from time to time, in full or in part not to exceed $100,000 without notice, and, in part, in excess of $100,000 upon 7 Business Day’s prior notice to WFPC without premium or penalty, provided that (i) in the event Borrowers repay the Loan in full prior to the Maturity Date, Borrowers shall pay a sum equal to 2.0% of the Commitment as a prepayment fee; (ii) prepayments shall be in a minimum amount of $10,000 and $10,000 increments in excess thereof; and (iii) partial prepayments prior to the Termination Date shall not reduce WFPC’s Commitment under this Agreement and may be reborrowed, subject to the terms and conditions hereof for borrowing, and partial prepayments will be applied first to accrued interest and fees and then to outstanding Advances. Each Borrower acknowledges that the above

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described fee is an estimate of WFPC’s damages in the event of early termination and is not a penalty. In the event of termination of the credit facility established pursuant to this Agreement, all of the Obligations shall be immediately due and payable upon the termination date stated in any notice of termination. All undertakings, agreements, covenants, warranties and representations of Borrowers contained in the Credit Documents shall survive any such termination, and WFPC shall retain its liens in the Collateral and all of its rights and remedies under the Credit Documents notwithstanding such termination until Borrowers have paid the Obligations to WFPC, in full, in immediately available funds, together with the applicable termination fee, if any.

                    (b)      Mandatory Prepayments . In the event that amounts outstanding hereunder at any time exceed the Borrowing Base (whether established by an Availability Statement or otherwise) Borrowers shall pay to WFPC immediately and without demand or notice of any kind required, the amount by which Borrowers’ indebtedness hereunder exceeds the Borrowing Base then applicable, together with all accrued interest on the amount so paid and any fees and costs incurred in connection therewith.

          Section 2.9      Fees . Borrowers shall pay to WFPC, at WFPC’s offices, the following:

                    (a)      Administrative Fee . A non-refundable administrative fee of $1,000 shall be due and payable monthly in arrears on the first day of each month commencing on the first such date after the funding of this Agreement and continuing until the Commitment is terminated and the Obligations are indefeasibly paid in full, in which event a monthly installment of the administrative fee shall be paid on the date of such termination.

                    (b)      Unused Line Fee . Borrowers shall pay a monthly unused line fee at the rate of 0.25% per annum (computed on the basis of a 360 day year and the actual number of days elapsed) on the average daily unused Commitment during such month. Such fee shall be payable monthly in arrears on the first day of each month, and on the Termination Date, unless the Commitment is terminated on an earlier date, in which event the unused line fee shall be paid on the date of such termination.

ARTICLE 3

SECURITY

          Section 3.1      Security Interest . To secure the payment and performance of the Obligations, each Borrower hereby grants to WFPC a continuing general Lien on and a continuing security interest in all of the Collateral, wherever located, whether now owned or hereafter acquired, existing or created, together with all replacements and substitutions therefor, and the cash and non-cash proceeds thereof. Upon execution and delivery of the Intercreditor Agreement and the Trafalgar Subordination Agreement and pursuant to the terms thereof, the Liens and security interests of WFPC in the WFPC Senior Collateral shall be first and prior perfected Liens and security interests pursuant to the terms of the Intercreditor Agreement, and the Liens and security interests of WFPC in all other Collateral shall be first and prior perfected Liens and security interests subject solely to DSC’s prior Lien and security interests. Such Liens and security interests of WFPC in the Collateral may be retained by WFPC until all of the Obligations have been indefeasibly satisfied in full and the Commitment has expired or otherwise has been terminated.

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          Section 3.2      Financing Statements . WFPC is hereby authorized by each Borrower to file any financing statements covering the Collateral or an amendment that adds collateral covered by the financing statement or an amendment that adds a debtor to a financing statement, in each case whether or not a Borrower’s signature appears thereon. Borrowers agree to comply with the requirements of all state and federal laws and requests of WFPC in order for WFPC to have and maintain a valid and perfected security interest in the Collateral with the priorities set forth in the Intercreditor Agreement and the Trafalgar Subordination Agreement.

          Section 3.3      Delivery of Documents . All Receivables of Borrowers shall be stamped and assigned to WFPC as follows to evidence the assignment to WFPC:

The within instrument or agreement is pledged as collateral to Wells Fargo Preferred Capital, Inc., its successors and assigns.

          Borrowers shall: (a) upon the request of WFPC, deliver to WFPC, the Collateral and all Documents, General Intangibles and Instruments relating to Collateral and, upon request of WFPC, deliver to WFPC or its designee any other property in which Borrowers have granted WFPC a security interest hereunder, including, but not limited to, all of Borrowers’ Books and Records including all computers, computer related equipment, tapes and software; (b) execute and deliver to WFPC, for the benefit of WFPC, such assignments, mortgages, financing statements, amendments thereto and continuation statements thereof, in form satisfactory to WFPC, and such additional agreements, documents or instruments as WFPC may, from time to time, require to evidence, perfect and continue to perfect WFPC’s liens and security interests granted hereunder and (c) clearly and accurately note and differentiate in its books and records the specific listings of DSC Senior Receivables and WFPC Senior Collateral. The preceding sentence shall apply only to the WFPC Senior Collateral until DSC Credit Satisfaction. WFPC may in its sole discretion recor