LOAN AND SECURITY AGREEMENT

Exhibit 10.1

 

 

 

 

LOAN AND SECURITY AGREEMENT

 

 

 

 

 

By and among

 

 

 

1 ^ST FRANKLIN FINANCIAL CORPORATION

 

 

as Borrower

______________________

 

 

 

WELLS FARGO PREFERRED CAPITAL, INC.

 

as Agent

________________________

 

 

 

Each of the financial institutions

now or hereafter a party hereto

 

as Lenders

 

 

TABLE OF CONTENTS

Page

 

ARTICLE 1  DEFINITIONS

Section  1.1

Certain Definitions

Section  1.2

Rules of Construction.

ARTICLE 2  THE REVOLVING CREDIT FACILITY

Section  2.1

The Loan

Section  2.2

The Notes

Section  2.3

Method of Payment

Section  2.4

Extension and Adjustment of Maturity Date

Section  2.5

Use of Proceeds

Section  2.6

Interest.

Section  2.7

Advances.

Section  2.8

Prepayment.

Section  2.9

Fees

Section  2.10

Regulatory Changes in Capital Requirements; Replacement of a Lender.

Section  2.11

Sharing of Payments

Section  2.12

Pro Rata Treatment

ARTICLE 3  SECURITY

Section  3.1

Security Interest

Section  3.2

Financing Statements

Section  3.3

Documents to be Delivered to Agent

Section  3.4

Collections

Section  3.5

Additional Rights of Agent; Power of Attorney.

Section  3.6

Additional Collateral Provisions.

ARTICLE 4  REPRESENTATIONS AND WARRANTIES

Section  4.1

Representations and Warranties as to Receivables.

Section  4.2

Organization and Good Standing

Section  4.3

Perfection of Security Interest

Section  4.4

No Violations

Section  4.5

Power and Authority.

Section  4.6

Validity of Agreements

Section  4.7

Litigation

Section  4.8

Compliance

Section  4.9

Accuracy of Information; Full Disclosure.

Section  4.10

Taxes

Section  4.11

Indebtedness

Section  4.12

Investments

Section  4.13

ERISA

Section  4.14

Hazardous Wastes, Substances and Petroleum Products.

Section  4.15

Solvency

Section  4.16

Business Location

Section  4.17

Capital Stock

Section  4.18

No Extension of Credit for Securities

ARTICLE 5  CONDITIONS TO LOAN

Section  5.1

Documents to be Delivered to Agent Prior to Effectiveness

Section  5.2

Conditions to all Advances

ARTICLE 6  AFFIRMATIVE COVENANTS

Section  6.1

Place of Business and Books and Records

Section  6.2

Reporting Requirements

Section  6.3

Books and Records

Section  6.4

Financial Covenants

Section  6.5

Compliance With Applicable Law.

Section  6.6

Notice of Default

Section  6.7

Existence, Properties

Section  6.8

Payment of Indebtedness; Taxes

Section  6.9

Notice Regarding Any Plan

Section  6.10

Other Information

Section  6.11

Litigation

Section  6.12

Business Location, Legal Name and State of Organization

Section  6.13

Operations

Section  6.14

Further Assurances

ARTICLE 7  NEGATIVE COVENANTS

Section  7.1

Payments to and Transactions with Affiliates

Section  7.2

Restricted Payments

Section  7.3

Indebtedness

Section  7.4

Guaranties

Section  7.5

Nature of Business

Section  7.6

Negative Pledge

Section  7.7

Investments

Section  7.8

Compliance with Formula

Section  7.9

Mergers, Divestitures

Section  7.10

Use of Proceeds

Section  7.11

Ownership and Management

Section  7.12

Amendment to Subordinated Debt

Section  7.13

Bulk Purchases

Section  7.14

Guarantor Dividends

Section  7.15

Asset Sales

ARTICLE 8  EVENTS OF DEFAULT

Section  8.1

Failure to Make Payments

Section  8.2

Information, Representations and Warranties

Section  8.3

Covenants

Section  8.4

Collateral

Section  8.5

Defaults Under Other Agreements

Section  8.6

Certain Events

Section  8.7

Possession of Collateral

Section  8.8

Guarantor

Section  8.9

Credit Documents

Section  8.10

Hedging Agreements

Section  8.11

Material Adverse Change

ARTICLE 9  REMEDIES OF AGENT AND WAIVER

Section  9.1

Agent’s Remedies

Section  9.2

Waiver and Release by Borrowers

Section  9.3

No Waiver

Section  9.4

Application of Proceeds

ARTICLE 10  MISCELLANEOUS

Section  10.1

Indemnification and Release Provisions

Section  10.2

Amendments.

Section  10.3

APPLICABLE LAW

Section  10.4

Notices

Section  10.5

Termination and Release

Section  10.6

Counterparts

Section  10.7

Costs, Expenses and Taxes

Section  10.8

Participations and Assignments.

Section  10.9

Effectiveness of Agreement

Section  10.10

JURISDICTION AND VENUE

Section  10.11

WAIVER OF JURY TRIAL

Section  10.12

REVIEW BY COUNSEL

Section  10.13

Exchanging Information

Section  10.14

Acknowledgment of Receipt

ARTICLE 11  AGENT

Section  11.1

Appointment of Agent.

Section  11.2

Nature of Duties of Agent

Section  11.3

Lack of Reliance on Agent.

Section  11.4

Certain Rights of Agent

Section  11.5

Reliance by Agent

Section  11.6

Indemnification of Agent

Section  11.7

Agent in its Individual Capacity

Section  11.8

Holders of Notes

Section  11.9

Successor Agent.

Section  11.10

Collateral Matters.

Section  11.11

Delivery of Information

Section  11.12

Defaults

 

 

 

 

 

 

 

LOAN AND SECURITY AGREEMENT

This LOAN AND SECURITY AGREEMENT is made as of the 11th day of September, 2009 by and among 1 ^ST FRANKLIN FINANCIAL CORPORATION, a Georgia corporation with its chief executive office at 135 East Tugalo Street, Toccoa, Georgia 30577 and such other Persons joined hereto from time to time as borrowers pursuant to written agreement by the parties hereto (collectively, the “Borrowers” and each individually is referred to as a “Borrower”), WELLS FARGO PREFERRED CAPITAL, INC., as agent for Lenders (“Agent”), an Iowa corporation with its principal office located at 800 Walnut Street, Des Moines, Iowa 50309, and the financial institutions from time to time party hereto (collectively, the “Lenders” and each individually is referred to as a “Lender”).

BACKGROUND

Borrowers have requested and Agent and Lenders have agreed to make available to Borrowers a secured revolving credit facility in the initial 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.

“ Access Agreement ” shall mean the access agreement, in form and substance acceptable to Agent, executed and delivered to Agent by Borrowers and DHI Computing Service, Inc., doing business through a division known as GOLDPoint Systems.

“ Adjusted Tangible Net Worth ” means Tangible Net Worth minus (a) any deficits from the amount required as Allowance for Loan Losses under Section 6.4(c) hereof and (b) the amount of any accounts to be charged-off, that have not been charged-off, under Section 6.4(e) hereof.

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

“ Advance Rate ” means 80%.

“ 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 held by a Borrower; (iii) any entity which directly or indirectly is under common control with a Borrower; or (iv) any officer, director, partner or employee of a Borrower or any 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.  

“ 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.

“ Allowance for Loan Losses ” means, at all times, the sum of allowance for loan losses, as calculated in accordance with GAAP (inclusive of discounts, Dealer Reserves and dealer holdbacks).

“ Asset Quality ” means, as of the date of determination, the sum of the following percentage: (a) Net Charge-Offs of Receivables for the 12 month period ending on such date, as a percentage of Principal Receivables outstanding during such 12 month period, plus (b) Receivables more than 60 days past due on a contractual basis on such date, as a percentage of gross Receivable on such date.

“ Assignment and Acceptance ” means an assignment and acceptance entered into by an assigning Lender and an assignee Lender, accepted by Agent, in accordance with Section 10.8 in form and substance satisfactory to Agent (in its sole and absolute discretion).

“ Annual Compliance Certificate ” means the certificate in the form of Exhibit A attached hereto and made a part hereof to be delivered by Borrowers to Agent pursuant to Section 6.2(f) hereof.

“ Availability Statement ” means the certificate in substantially the form of Exhibit B attached hereto and made part hereof to be submitted by Borrowers to Agent in accordance with the provisions of this Agreement.

“ 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.

“ Bank Products ” means any one or more of the following types of services or facilities extended to a Borrower by the Agent or any WFPC Affiliate:  (a) Cash Management Services; (b) products under Hedging Agreements; (c) commercial credit card and merchant card services; and (d) leases and other banking products or services as may be requested by any Borrower.

“ 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 equal to the Advance Rate multiplied by the aggregate balance of outstanding Eligible Receivables.  Notwithstanding the foregoing, Agent may adjust the above rates in the Borrowing Base from time to time and at any time in Agent’s commercially reasonable discretion, upon 10 days notice to Borrowers if, in Agent’s commercially reasonable judgment, there has been an adverse change with respect to Borrowers’ Receivables, business operation or regulatory affairs related to Borrowers’ Receivables or business operations.

“ 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 holidays.

“ Capital Base ” means the sum of Adjusted Tangible Net Worth and Subordinated Debt.

“ Cash Management Services ” any services provided from time to time by Agent or any WFPC Affiliate to any Borrower or Subsidiary in connection with operating, collections, payroll, trust, or other depository or disbursement accounts, including automated clearinghouse, e-payable, electronic funds transfer, wire transfer, controlled disbursement, overdraft, depository, information reporting, lockbox and stop payment services.

“ 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:

 

(i)

All of each Borrower’s Receivables, now owned or existing or hereafter arising or acquired;

(ii)

All collateral, security and guaranties now or hereafter in existence for any Receivables;

(iii)

All insurance related to any Receivables, to any collateral or security for any Receivables or to any obligor in respect of any Receivables and all proceeds of such insurance (including, without limitation, all non-filing insurance, credit insurance and credit life insurance related to any Receivables, to any collateral or security for any Receivables, or to any obligor in respect of any Receivables and all proceeds of such insurance);

(iv)

All of each Borrower’s Books and Records related to any Receivables including tapes and software;

(v)

All notes, drafts, deposit accounts, acceptances, documents of title, deeds, policies and policies or certificates of insurance (including without limitation credit insurance, credit life insurance, non-filing insurance and title insurance) and securities (domestic and foreign) and letter of credit rights now or hereafter owned by each Borrower or in which a Borrower has or at any time acquires an interest in connection with any Receivables;

(vi)

All of each Borrower’s Accounts, Documents, Instruments, General Intangibles and Chattel Paper as defined in Section 1.2 (b) of this Agreement, now owned or existing or hereafter arising or acquired, and all payment obligations owed to a Borrower, now owned or existing or hereafter arising or acquired; together with all collateral, security and guaranties now or hereafter in existence for any of the foregoing; and

(vii)

All cash and non-cash proceeds of all the foregoing.

“ 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, or the Collateral, proceeds of credit, group life or non-filing insurance, or proceeds of insurance on any real or personal property which is part of the collateral for the Receivables.

“ Commercial Paper ” means the short term promissory notes issued by Borrowers from time to time in connection with their commercial paper program.

“ Commitment ” means, with respect to each Lender, a commitment of such Lender to make its portion of the Advance in a principal amount up to each such Lender’s Commitment Percentage of the Maximum Principal Amount.

“ Commitment Percentage ” means, for any Lender, the percentage identified as the Commitment Percentage on Schedule I , as such percentage may be modified in connection with any assignment made in accordance with Section 10.8.

“ 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 for personal use including to purchase goods, services or merchandise for personal, household or family use.

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

“ Dealer Reserves ”  means a reserve on Borrower’s Books and Records for charges and claims against dealers.

“ Debt ” means as of the date of determination, all outstanding indebtedness (other than deferred loan origination fees of Borrowers) including without limitation (a) all loans made hereunder to Borrowers; (b) accounts payable as of the date of determination; (c) income tax liabilities; (d) mortgages; (e) deposits, debenture instruments, and other instruments, including all accruals of interest and fees related thereto; (e) all other obligations which in accordance with GAAP would be classified upon a balance sheet as liabilities (except capital stock and surplus earned or otherwise); (f) Subordinated Debt and (g) Other 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.

“ EBITDA Ratio ” means the ratio of such Person’s (a) earnings before payments of interest, taxes, depreciation and amortization expense for the twelve month period ending on the date of determination, net of any deficits from the amount required as an Allowance for Loan Losses under Section 6.4(c) hereof and the amount of any accounts to be charged off, that have not been charged off, in Section 6.4(e) hereof, to (b) interest expense during such twelve month period in accordance with GAAP principles pursuant to Section 6.4 of this Agreement.

 “ Eligible Receivables ” means, as of the date of determination, Receivables (net of unearned interest, fees, dealer reserves, holdbacks, discounts, insurance premiums and commissions thereon), which conform to the warranties set forth in Section 4.1 hereof, in which Agent has a validly perfected first priority Lien, and which are not any of the following: (i) Receivables for which a payment is more than 60 days past due on a contractual basis; (ii) Receivables subject to a bankruptcy proceeding, litigation, foreclosure, repossession or other legal proceeding; (iii) Receivables from employees (unless payments with respect thereto are automatically deducted from such employee’s paycheck) or shareholders of any Borrower or any Affiliate; (iv) Receivables which have been deferred, restructured, extended, renewed, modified or altered not in compliance with Borrowers’ Modification Policy; (vi) Receivables not in compliance with Borrowers’ Underwriting Policy; (vii) if Borrowers have elected to note their first priority Lien on the applicable certificate of title, Receivables for which Agent or Borrowers have not received a valid certificate of title or notification of a valid certificate of title with the Lien of a Borrower noted thereon, if applicable, within 120 days after the origination of the Receivable; (viii) Receivables arising from balloon payment accounts, non-amortizing accounts or Interest-Only Accounts; (ix) Receivables arising from assignments for repossession; (x) Real Estate Related Accounts for which the original term exceeds 120 months; (xi) Receivables which were originated to support the acquisition of commercial vehicles; (xii) Payday Loans; (xiii) Receivables constituting deficiency balance accounts; and (xiv) Receivables which, in Agent’s commercially reasonable discretion, do not constitute acceptable collateral following 10 days notice from Agent to Borrowers.

“ Entity Guarantors ” means, collectively, Frandisco Life Insurance Company, a Georgia corporation, Frandisco Property & Casualty Life Insurance Company, a Georgia corporation, and Franklin Securities, Inc., a Georgia corporation.

“ 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 Agent 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 Agent to reflect similar performance standards as those measured by the existing covenants using the previously observed accounting principles.

“ Guarantors ” shall mean, collectively, Entity Guarantors.

“ Guaranty ” means individually, and “ Guaranties ” means collectively, the limited and unlimited guaranty agreements in form and substance satisfactory to Agent, 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.”

“ Hedging Agreement ” an agreement relating to any interest rate hedge, exchange, swap, cap, floor, collar, option, forward, cross right or obligation, or combination thereof or similar transaction, with respect to interest rate, foreign exchange, currency, commodity, credit or equity risk (including, without limitation, any ISDA Master Agreement).

“ Insurance Premium Dividend ” means distribution to shareholders of Borrowers used solely to pay life insurance premiums.

“ 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.

“ 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 greater of (a) 0.75% per annum or (b) the three-month London Interbank Offered Rate as found in the Wall Street Journal, Interactive Edition, or any successor edition or publication and selected by Agent in its sole discretion for its entire loan portfolio for all borrowers for any day during a given month.  The LIBOR Rate shall be adjusted on the first day of each calendar month based upon the LIBOR Rate as of the last day of the immediately preceding calendar month.  In the event such rate ceases to be published or quoted, LIBOR Rate shall mean a comparable rate of interest reasonably selected by Agent for its entire loan portfolio for all borrowers.  Agent’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 Lenders to Borrowers pursuant to Section 2.1 of this Agreement, together with interest accrued thereon and fees and costs owing hereunder 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 Agent pursuant to 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 September 11, 2012, as such date may be extended from time to time in accordance with the provisions of Section 2.4 of this Agreement.

“ Maximum Principal Amount ” means $60,000,000.

“ Modification Policy ” means that certain policy of Borrowers attached hereto as Exhibit E.

“ Net Charge-Offs ” means Principal Receivables which have been charged off (net of bad debt recoveries).

“ Notes ” mean collectively, the promissory notes to this Agreement of Borrowers in favor of each Lender in form and substance satisfactory to Agent, evidencing the joint and several obligation of Borrowers to repay the Loan, and any and all amendments, renewals, replacements or substitutions therefor, and each is referred to individually as a “Note.”

“ Obligations ” means (a) each and every draft, liability and obligation of every type and description which Borrowers may now or at any time hereafter owe to Agent and Lenders (whether such debt, liability or obligation now exists or is hereafter created or incurred, whether it arises in a transaction involving Agent and/or any Lender alone or in a transaction involving other creditors of Borrowers, or any of them, 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), and including specifically, but not limited to, all indebtedness of Borrowers arising under this Agreement, the Notes, any fee letter or any other loan or credit agreement between or among a Borrower or Borrowers and Agent and/or any Lender, whether now in effect or hereafter entered into and including, without limitation, all Loans and (b) payment or performance, as the case may be, of all obligations of Borrowers with respect to Bank Products.

“ Other Debt ” means Senior Demand Notes, Commercial Paper and Variable Rate Subordinated Debentures.

“ Participant ” has the meaning assigned to that term in Section 10.8 of this Agreement.

“ Payday Loans ” means all loans in which any Borrower holds a personal check from the account debtor for payment of such loan; provided, however, “Payday Loans” shall not include payment arrangements by Borrowers’ obligors such as post-dated checks, ACH transactions that are scheduled for a future date, or recurring ACH transactions.

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

“ Permitted Indebtedness ” means (a) borrowings from Agent and Lenders hereunder; (b) Subordinated Debt; (c) trade indebtedness in the normal and ordinary course of business for value received; (d) indebtedness and obligations incurred to purchase or lease fixed or capital assets, (e) the other indebtedness and obligations described on Schedule II attached hereto and made part hereof, (f) indebtedness in connection with Bank Products, (g) Other Debt and (h) real property leases entered into by Borrowers with respect to the branch offices and other buildings in the ordinary course of their business.

“ Permitted Liens ” means (a) Liens granted to Agent by Borrowers pursuant to this Agreement, (b) Liens existing as of the date hereof described on Schedule III attached hereto and (c) Liens granted to real property landlords by Borrowers on furniture, fixture and equipment.

“ Permitted Tax Distributions ” shall mean as to any taxable year of a Borrower during which such Borrower makes an S corporation election with the Internal Revenue Service and appropriate state agency, an annual distribution necessary to enable each shareholder of such Borrower to pay federal or state income taxes attributable to such shareholder resulting solely from the allocated share of income of such Borrower for such period.

“ 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 net Receivables less unearned interest and insurance commissions (including discounts).

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

“ 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.

“ Receivables ” means 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.

“ Replacement Lender ” has the meaning assigned to that term in Section 2.10(b) of this Agreement.

“ 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 and made part hereof to be delivered by Borrowers to Agent as a condition of each Advance pursuant to Section 2.7 hereof.

“ Required Lenders ” means, at any time, Lenders which are then in compliance with their obligations hereunder and holding in the aggregate at least seventy five percent (75%) of (a) the Commitment Percentage (and participation interest) or (b) if this Agreement has been terminated, the outstanding Loans and participation interest; provided, however, if there are less than three (3) Lenders at any time, Required Lenders shall mean one hundred percent (100%) of Lenders which are then in compliance with their obligations hereunder.

“ Restricted Payments ” means payments by Borrowers, or any of them, which constitute (a) redemptions, repurchases, dividends or distributions of any kind with respect to a Borrower’s stock or any warrants, rights or options to purchase or otherwise acquire any shares of 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 Agent pursuant to the terms hereof, describing the Receivables assigned and pledged to Agent, for the benefit of Agent, 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 on a consolidated basis (including cash overdrafts) other than the Subordinated Debt.  

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

“ Senior Demand Notes ” means the Senior Demand Notes issued by Borrowers from time to time, as more fully described in the most current prospectus with respect to the Senior Demand Notes as filed with the Securities and Exchange Commission, as the same may be amended, modified, supplemented, increased or restated from time to time.

“ Subordinated Debt ” means any indebtedness for borrowed money 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 Agent in its sole discretion.  For purposes hereof, Subordinated Debt includes, without limitation,  the Variable Rate Subordinated Debentures.

“ Subordination Agreement ” means, individually, and “ Subordination Agreements ” means, collectively, the Subordination Agreements executed in connection with the Subordinated Debt, from time to time, each in the form of Exhibit D attached hereto and made part hereof.

“ Subsidiary ” of any entity means any corporation, limited liability company, partnership or other legal entity of which such entity directly or indirectly owns or controls at least a majority of the outstanding stock or other equity interest 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, the amount of the capital stock liability of such Person on a consolidated basis (but excluding the effect of intercompany transactions) plus (or minus in the case of a deficit) its capital surplus and earned surplus 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 such Person, any Subsidiary or any Affiliate.

“ Termination Date ” means the earlier of: (a) the Maturity Date, or (b) the date on which the Commitments are terminated and the Loan becomes due and payable pursuant to Section 9.1.

“ Total Liabilities ” means all liabilities of Borrowers, as determined in accordance with GAAP.

“ Total Liabilities to Tangible Net Worth Ratio ” means the ratio of Total Liabilities to Tangible Net Worth.

“ Underwriting Policy ” means that certain policy of Borrowers attached hereto as Exhibit F .

“ UCC ” means the Uniform Commercial Code as in effect in the State of New York from time to time.

“ Variable Rate Subordinated Debentures ” means the Variable Rate Subordinated Debentures issued by Borrowers from time to time under the Subordinated Indenture (that certain Indenture dated as of October 31, 1984, as the same may be amended, modified, supplemented, restated, renewed, refinanced or replaced from time to time), the repayment of which are subordinate in right of payment to the Obligations, the Senior Demand Notes, the Commercial Paper and any other Indebtedness of Borrowers.

“ WFPC Affiliate ”  means in relation to Agent, any entity controlled, directly or indirectly, by Agent, any entity that controls, directly or indirectly, Agent or any entity directly or indirectly under common control with Agent (including, without limitation, Wachovia Bank, National Association and its subsidiaries and affiliates).  For this purpose, “control” of any entity means ownership of a majority of the voting power of the entity.

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 ”, “ Goods ”, “ Instruments ”, “ General Intangibles ” and “ Chattel Paper ” shall have the respective meanings given to such terms in the UCC.

ARTICLE 2
THE REVOLVING CREDIT FACILITY

Section  2.1

The Loan .  Until the Termination Date, Borrowers may request Lenders to make Advances to Borrowers and, subject to the terms and conditions of this Agreement, each Lender severally and not jointly agrees to lend such Lender’s Commitment Percentage of each requested Advance up to such Lender’s Commitment which Borrowers may repay and reborrow  from time to time.  The aggregate unpaid principal amount at any one time outstanding of all Advances shall not exceed the lesser of the Maximum Principal Amount or the Borrowing Base in effect as of the date of determination.

(a)

Agent 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 Agent and Lenders from time to time by reason of Advances and other appropriate charges (including, without limitation, interest charges) hereunder.  At least once each month, Agent 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 unless Borrowers notify Agent to the contrary within 30 days of Agent’s providing such statement to Borrowers.

(b)

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 or Maximum Principal Amount.

(c)

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

(d)

Agent has the right upon 10 days prior notice to Borrowers at any time, and from time to time, in its commercially reasonable discretion exercised in good faith (but without any obligation), to set aside reasonable reserves against the Borrowing Base in such amounts as it may deem commercially reasonable, including, without limitation, a reserve equal to the amount of outstanding indebtedness in connection with Bank Products.

Section  2.2

The Notes .  The indebtedness of Borrowers to each Lender hereunder shall be evidenced by a separate Note executed by Borrowers in favor of such Lender in the principal amount equal to each such Lender’s Commitment Percentage of the Maximum Principal Amount.  The principal amount of the Notes will be the Maximum Principal Amount; provided , however, that notwithstanding the face amount of the Notes, Borrowers’ liability under the Notes shall be limited at all times to the actual indebtedness (principal, interest and fees) then outstanding and owing by Borrowers to Agent and Lenders hereunder.

Section  2.3

Method of Payment .  Borrowers shall make all payments of principal and interest on the Notes in lawful money of the United States of America and in funds immediately available by wire transfer or funds transfer, to Agent at its address referred to in Section 10.4 of this Agreement or at such other address as Agent 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. As soon as practicable after Agent receives payment from Borrowers, but in no event later than 1 Business Day after such payment has been made, subject to Section 2.7, Agent will cause to be distributed like funds relating to the payment of principal, interest or fees (other than amounts payable to Agent to reimburse Agent for fees and expenses payable solely to Agent pursuant to the terms of this Agreement) or expenses payable to Agent and Lenders in accordance with the terms of this Agreement, in like funds relating to the payment of any such other amounts payable to Lenders.  Borrowers’ obligations to Lenders with respect to such payment shall be discharged by making such payments to Agent pursuant to this Section 2.3 or, if not timely paid or any Event of Default or Default then exists, may be added to the principal amount of the Loans outstanding.  Borrowers hereby authorize Agent to charge the line of credit established hereunder for any amounts that are due and owing pursuant to the terms of this Agreement with such amounts added to the principal amount of the Loans outstanding and Agent may elect to utilize such right in its sole discretion.

Section  2.4

Extension and Adjustment of Maturity Date .  Upon the written agreement of Borrowers, Agent and Lenders, the Maturity Date may be extended.  

Section  2.5

Use of Proceeds .  Advances shall be used to finance Borrowers’ portfolios of Consumer Purpose Loans, for general working capital purposes and 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, and prior to maturity, the outstanding balance of the Loan will bear interest at an annual rate at all times equal to the LIBOR Rate plus 300 basis points; provided however, Agent shall be entitled to retain, solely for its own account, and not remit to Lenders from such monthly interest payment an interest payment in an amount equal to interest on the outstanding balance of the Loan at an annual rate at all times equal to 15 basis points.  

(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 Commitments are terminated and the 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.

(c)

Notwithstanding the foregoing, upon the occurrence and during the continuance of an Event of Default hereunder, including after maturity and before and after judgment, Borrowers hereby agree to pay to Lenders interest on the outstanding principal balance of the Loan and any other obligations 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.

Section  2.7

Advances .

(a)

Borrowers shall notify Agent in writing not later than 12:00 noon Central time, on the date of each requested Advance, specifying the date and amount of the Advance.  Such notice shall be in the form of the Request for Advance shall be certified by the President or Chief Financial Officer (or such other authorized Person as Borrowers direct in writing from time to time) of Borrowers 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 $25,000 but not less than the lesser of $25,000 or the unborrowed balance of the Borrowing Base;

(ii)

confirmation that no Event of Default or Default exists either immediately prior to or 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 Agent pursuant to this Agreement; and

(iii)

statements that the representations and warranties set forth in Article 4 are true and correct as of the date of the Advance in all material respects.

(b)

Agent shall give to each Lender prompt notice (but in no event later than 1:00 P.M., Central time on the date of Agent’s receipt of notice from Borrowers) of each Request for Advance by facsimile or submitted via Agent’s online automatic advance request system.  No later than 2:00 P.M., Central time on the date on which an Advance is requested to be made pursuant to the applicable Request for Advance, each Lender will make available to Agent at the address of Agent set forth in Section 10.4, in immediately available funds, its Commitment Percentage of such Advance requested to be made.  Unless Agent shall have been notified by any Lender at least 5 Business Days prior to the date of Advance that such Lender does not intend to make available to Agent its portion of the Advance to be made on such date, Agent may assume that such Lender will make such amount available to Agent as required above and Agent may, in reliance upon such assumption, make available the amount of the Advance to be provided by such Lender.  Upon fulfillment of the conditions set forth in Sections 2.7(a) and 5.2 for such Advance, and as soon as practicable after receipt of funds from Lenders (but in any event not later than 2:00 P.M., Central time) Agent will make such funds as have been received from Lenders available to Borrowers at the account specified by Borrowers from time to time in writing to Agent.

(c)

Because Borrowers anticipate requesting Advances on a daily basis, resulting in the amount of outstanding Advances fluctuating from day to day, in order to administer the Loan in an efficient manner and to minimize the transfer of funds between Agent and Lenders, Lenders hereby instruct Agent, and Agent may (in its sole discretion, without any obligation) (i) make available, on behalf of Lenders, the full amount of all Advances requested by Borrowers, without giving each Lender prior notice of the proposed Advance, of such Lender’s Commitment Percentage thereof and the other matters covered by the Request for Advance and (ii) if Agent has made any such amounts available as provided in clause (i), upon repayment of Loans by Borrowers, first apply such amounts repaid directly to the amounts made available by Agent in accordance with clause (i) and not yet settled as described below.  If Agent makes an Advance on behalf of Lenders, as provided in the immediately preceding sentence, the amount of outstanding Loans and each Lender’s Commitment Percentage thereof shall be computed weekly rather than daily and shall be adjusted upward or downward on the basis of the amount of outstanding Loans as of 5:00 P.M., Central time on the Business Day immediately preceding the date of each computation; provided , however, that Agent retains the absolute right at any time or from time to time to make the afore-described adjustments at intervals more frequent than weekly.  Agent shall deliver to each of Lenders at the end of each week, or such lesser period or periods as Agent shall determine, a summary statement of the amount of outstanding Loans for such period (such week or lesser period or periods being hereafter referred to as a “ Settlement Period ”).  If the summary statement is sent by Agent and received by Lenders prior to 12:00 Noon, Central time on any Business Day each Lender shall make the transfers described in the next succeeding sentence no later than 3:00 P.M., Central time on the day such summary statement was sent; and if such summary statement is sent by Agent and received by Lenders after 12:00 Noon, Central time on any Business Day, each Lender shall make such transfers no later than 3:00 P.M., Central time no later than the next succeeding Business Day after such summary statement was sent.  If in any Settlement Period, the amount of a Lender’s Commitment Percentage of the Loans is in excess of the amount of Loans actually funded by such Lender, such Lender shall forthwith (but in no event later than the time set forth in the next preceding sentence) transfer to Agent by wire transfer in immediately available funds the amount of such excess; and, on the other hand, if the amount of a Lender’s Commitment Percentage of the Loans in any Settlement Period is less than the amount of Loans actually funded by such Lender, Agent shall forthwith transfer to such Lender by wire transfer in immediately available funds the amount of such difference.  The obligation of each of Lenders to transfer such funds shall be irrevocable and unconditional, without recourse to or warranty by Agent and made without setoff or deduction of any kind.  Each of Agent and Lenders agree to mark their respective books and records at the end of each Settlement Period to show at all times the dollar amount of their respective Commitment Percentages of the outstanding Loans.  Because Agent on behalf of Lenders may be advancing and/or may be repaid Loans prior to the time when Lenders will actually advance and/or be repaid Loans, interest with respect to Loans shall be allocated by Agent to each Lender (including Agent) in accordance with the amount of Loans actually advanced by and repaid to each Lender (including Agent) during each Settlement Period and shall accrue from and including the date such Advance is made by Agent to but excluding the date such Loans are repaid by Borrower in accordance with Section 2.3 or actually settled by the applicable Lender as described in this Section 2.7(c).  All such Advances made by Agent on behalf of Lenders hereunder shall bear interest at the interest rate applicable hereunder for Advances.

(d)

If the amounts described in subsection (b) or (c) of this Section 2.7 are not in fact made available to Agent by a Lender (such Lender being hereinafter referred to as a “ Defaulting Lender ”) and Agent has made such amount available to Borrowers, Agent shall be entitled to recover such corresponding amount on demand from such Defaulting Lender.  If such Defaulting Lender does not pay such corresponding amount forthwith upon Agent’s demand therefor, Agent shall promptly notify Borrowers and Borrowers shall immediately (but in no event later than 10 Business Days after such demand) pay such corresponding amount to Agent.  Agent shall also be entitled to recover from such Defaulting Lender and Borrowers, (i) interest on such corresponding amount in respect of each day from the date such corresponding amount was made available by Agent to Borrowers to the date such corresponding amount is recovered by Agent, at a rate per annum equal to either (A) if paid by such Defaulting Lender, the overnight federal funds rate or (B) if paid by Borrowers, the then applicable rate of interest, calculated in accordance with Section 2.6, plus (ii) in each case, an amount equal to any costs (including reasonable legal expenses) and losses incurred as a result of the failure of such Defaulting Lender to provide such amount as provided in this Agreement.  Nothing herein shall be deemed to relieve any Lender from its obligation to fulfill its commitments hereunder or to prejudice any rights which Borrowers may have against any Lender as a result of any default by such Lender hereunder, including, without limitation, the right of Borrowers to seek reimbursement from any Defaulting Lender for any amounts paid by Borrowers under clause (ii) above on account of such Defaulting Lender’s default.

(e)

The failure of any Lender to make its portion of the Advance to be made by it as part of any Advance shall not relieve any other Lender of its obligation, if any, hereunder to make its Advance on the date of such borrowing, but no Lender shall be responsible for the failure of any other Lender to make the Advance to be made by such other Lender on the date of any Advance.  The amounts payable by each Lender shall be a separate and independent obligation.

(f)

Each Lender shall be entitled to earn interest at the then applicable rate of interest, calculated in accordance with Section 2.6, on outstanding Loans which it has funded to Agent from the date such Lender funded such Advance to, but excluding, the date on which such Lender is repaid with respect to the Loan.

(g)

Notwithstanding the obligation of Borrowers to send written confirmation of a Request for Advance, in the event that Agent agrees to accept a Request for Advance made by telephone, such telephonic request shall be binding on Borrowers whether or not written confirmation is sent by Borrower or requested by Agent.  Agent may act prior to the receipt of any requested written confirmation, without any liability whatsoever, based upon telephonic notice believed by Agent in good faith to be from Borrowers or their agents.  Agent’s records of the terms of any telephonic requests for Advances shall be conclusive on Borrowers in the absence of gross negligence or willful misconduct on the part of Agent in connection therewith.

(h)

Nothing contained in this Section 2.7 or otherwise in this Agreement shall impair or limit any claim of Borrowers against a Defaulting Lender (including, without limitation, expenses incurred by Borrowers by reason of any such default) who breaches its commitment to fund Advances hereunder.

(i)

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 without premium or penalty, provided that (i) in the event Borrowers prepay the Loan in full and terminate this Agreement prior to the Maturity Date, Borrowers shall provide at least 3 Business Days prior notice to Agent and pay a sum equal to 2.0% of the Maximum Principal Amount as a prepayment fee; (ii) prepayments shall be in a minimum amount of $25,000 and $25,000 increments in excess thereof; and (iii) partial prepayments prior to the Termination Date shall not reduce Lenders’ Commitments under this Agreement and may be reborrowed, subject to the terms and conditions hereof for borrowing, and prior to the occurrence of an Event of Default, partial prepayments will be applied first to outstanding Advances and thereafter to other Obligations owing hereunder.  Each Borrower acknowledges that the above described fee is an estimate of Lenders’ 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 Agent 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 Agent and Lenders, in full, in immediately available funds, together with the applicable termination fee, if any.  Notwithstanding the foregoing, in the event that Borrowers repay the Loan in full and terminate this Agreement within 60 days of making a payment under Section 2.10(a), Borrowers shall not be obligated to pay to the specific Lender receiving such payment under Section 2.10(a) the prepayment fee contained in this Section 2.8(a).

(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 Agent 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 Agent, at Agent’s offices, the following:

(a)

Administrative Fee .  A non-refundable administrative fee of $2,000 shall be due and payable monthly in arrears on the first day of each month solely for the account of Agent, commencing on the first such date after the funding of this Agreement and continuing until the Commitments are terminated and the Obligations are indefeasibly paid in full, in which event a pro-rated monthly installment of the administrative fee shall be paid on the date of such termination.

(b)

Unused Line Fee .  A non-refundable unused line fee at the rate of 0.50% per annum (computed on the basis of a 360 day year and the actual number of days elapsed) on the daily unused Commitments.  Such fee shall be payable to Agent, for the account of Lenders in accordance with their Commitment Percentages, monthly in arrears on the first day of each month, and on the Termination Date, unless the Commitments are terminated on an earlier date, in which event the unused line fee shall be paid on the date of such termination.  

Section  2.10

Regulatory Changes in Capital Requirements; Replacement of a Lender .  

(a)

Regulatory Changes in Capital Requirements . If any Lender shall have determined that the adoption or the effectiveness after the date hereof of any law, rule, regulation or guideline regarding capital adequacy, or any change in any of the foregoing or in the interpretation or administration of any of the foregoing by any governmental authority, central lender or comparable agency charged with the interpretation or administration thereof, or compliance by such Lender (or any lending office of such Lender) or such Lender’s holding company with any industry wide request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central lender or comparable agency, has or would have the effect of reducing the rate of return on such Lender’s capital or on the capital of such Lender’s holding company, if any, as a consequence of this Agreement, to a level below that which such Lender or its holding company could have achieved on the portion of the Loans made by such Lender pursuant hereto but for such adoption, change or compliance (taking into consideration such Lender’s policies and the policies of such Lender’s holding company with respect to capital adequacy) by an amount deemed by such Lender to be material and Lender has made such determination with respect to all or substantially all of the loans in its loan portfolio, then from time to time Borrowers shall pay to such Lender on demand such additional amount or amounts as will compensate such Lender or its holding company for any such reduction suffered together with interest on each such amount from the date demanded until payment in full thereof at the rate provided in Section 2.6 with respect to amounts not paid when due.  Agent will notify Borrowers of any event occurring after the date of this Agreement that will entitle a Lender to compensation pursuant to this Section 2.10(a) as promptly as practicable after it obtains knowledge thereof and determines to request such compensation.

(b)

Replacement of a Lender .  If Borrowers become obligated to pay additional amounts to any Lender pursuant to Section 2.10(a), then Borrowers may within 120 days thereafter designate another bank that is acceptable to Agent in its reasonable discretion (such other bank being called a “ Replacement Lender ”) to purchase the Loans of such Lender and such Lender’s rights hereunder, without recourse to or warranty by, or expense to, such Lender, for a purchase price equal to the outstanding principal amount of the Loans payable to such Lender plus any accrued but unpaid interest on such Loans and all accrued but unpaid fees owed to such Lender and any other amounts payable to such Lender under this Agreement, and to assume all the obligations of such Lender hereunder, and, upon such purchase and assumption (pursuant to an Assignment and Acceptance), such Lender shall no longer be a party hereto or have any rights hereunder (other than rights with respect to indemnities and similar rights applicable to such Lender prior to the date of such purchase and assumption) and shall be relieved from all obligations to Borrower hereunder, and the Replacement Lender shall succeed to the rights and obligations of such Lender hereunder.  In addition to the foregoing, if a Replacement Lender purchases such Loans and assumes all such obligations of a Lender hereunder pursuant to this Section 2.10(b), each such replaced Lender shall reimburse Borrowers for all amounts previously paid pursuant to Section 2.10(a) within 30 days of such replacement.

Section  2.11

Sharing of Payments .  If any Lender shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of setoff or otherwise) on account of the Loans made by it in excess of its pro rata share of such payment as provided for in this Agreement, such Lender shall forthwith purchase from the other Lenders such participations in the Loans made by them as shall be necessary to cause such purchasing Lender to share the excess payment accruing to all Lenders in accordance with their respective ratable shares as provided for in this Agreement; provided , however, that if all or any portion of such excess is thereafter recovered from such purchasing Lender, such purchase from each Lender shall be rescinded and each such Lender shall repay to the purchasing Lender the purchase price to the extent of such recovery together with an amount equal to such Lender’s ratable share (according to the proportion of (a) the amount of such Lender’s required repayment to (b) the total amount so recovered from the purchasing Lender) or any interest or other amount paid or payable by the purchasing Lender in respect to the total amount so recovered.  Borrowers agree that any Lender so purchasing a participation from another Lender pursuant to this Section 2.11 may, to the fullest extent permitted by law, exercise all of its rights of payment (including the right of setoff) with respect to such participation as fully as if such Lender were the direct creditor of Borrowers in the amount of such participation.

Section  2.12

Pro Rata Treatment .  Subject to Section 9.4 hereof, each payment or prepayment of principal of the Loan, and each payment of interest on the Loans, actually received by Agent shall be allocated pro rata among Lenders in accordance with the respective principal amounts of their outstanding Loans; provided , however, that the foregoing fees payable hereunder (other than the fees payable under Section 2.9(a) hereof) to Lenders shall be allocated to each Lender based on such Lender’s Commitment Percentage.

ARTICLE 3
SECURITY

Section  3.1

Security Interest .  To secure the payment and performance of the Obligations, each Borrower hereby grants to Agent, for the benefit of Lenders, 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, subject to Permitted Liens.  The Liens and security interests of Agent in the Collateral shall be first and prior perfected Liens and security interests, subject only to Permitted Liens, and may be retained by Agent until all of the Obligations have been indefeasibly satisfied in full and the Commitments have expired or otherwise has been terminated.  

Section  3.2

Financing Statements .  Agent is hereby authorized by each Borrower to file any financing statements covering the Collateral or any amendment adding collateral to any 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 Agent in order for Agent to have and maintain a valid and perfected first security interest in the Collateral.

Section  3.3

Documents to be Delivered to Agent .  All Receivables of Borrowers originated on or after the date hereof shall be stamped or watermarked with the following:

This document is pledged as collateral to Wells Fargo Preferred Capital, as agent.

Borrowers shall (a) upon request of Agent following the occurrence of an Event of Default, deliver to Agent or its designee any other property in which Borrowers have granted Agent a security interest hereunder; and (b) execute and deliver to Agent, for the benefit of Lenders, such assignments, endorsements, allonges to promissory notes, mortgages, financing statements, amendments thereto and continuation statements thereof, in form satisfactory to Agent, and such additional agreements, documents or instruments as Agent may, from time to time, require to evidence, perfect and continue to perfect Agent’s liens and security interests granted hereunder.

Section  3.4

Collections .  Notwithstanding the security interest granted hereunder with respect to the Collateral by Borrowers to Agent, until notice to the contrary is provided to Borrowers by Agent following the occurrence of an Event of Default, Borrowers may service, manage, enforce and receive Collections on Receivables.  Borrowers shall have no power to make any unusual allowance or credit to any obligor without Agent’s prior written consent.  Upon notice by Agent at any time following the occurrence of an Event of Default, Agent may require Borrowers to endorse and deposit all Collections within 1 Business Day of receipt thereof and in the original form received (except for the endorsement of Borrowers, if necessary, to enable the collection of instruments for the payment of money, which endorsements Borrowers hereby agree to make) in such account maintained with such depository as Agent may from time to time specify, such account to limit withdrawals by Borrowers therefrom only to the order of Agent, but to permit withdrawals by Agent therefrom without the co-signature of a Borrower.  Agent may also require Borrowers to enter into an appropriate lock box agreement with Agent or another financial institution acceptable to Agent, in form and content acceptable to Agent, with respect to opening and maintaining a lock box arrangement for the Collections.  Such lock box agreements shall be irrevocable so long as Borrowers are indebted to Agent under this Agreement and this Agreement remains in effect.

Section  3.5

Additional Rights of Agent; Power of Attorney .

(a)

In addition to all the rights granted to Agent hereunder, Agent shall have the right