EXHIBIT 10.2
[BANK OF AMERICA LETTERHEAD]
July 20, 2000
Mr. Steve Fredrickson
Mr. Kevin Stevenson
PRA Holdings 1, LLC
120 Corporate Blvd., Suite 100
Norfolk, VA 23502
Dear Steve and Kevin:
Thank you for the opportunity to make the following commitment to you. Bank of
America, N.A. (the "Bank") is pleased to have approved for PRA Holding I, LLC
(the "Borrower") a credit facility consisting of a Term Loan in an amount not
to exceed $550,000.00 (the "Loan"). This commitment is to be used by you for
the purpose of purchasing real estate located in Hutchinson, Kansas and making
improvements thereto.
This commitment is subject to the execution and delivery to the Bank of legal
documents yet to be prepared, including, without limitation a promissory note,
guaranty and collateral documents. All such documents must be satisfactory in
form and substance to the Bank.
The making and funding of any loans under this commitment (in addition to any
other conditions which may be required in the documents referred to in the
preceding paragraph) is expressly subject to the terms and conditions set
forth in the attached Terms and Conditions.
If you find the terms and conditions of this commitment to be acceptable to
you, please execute the enclosed copy of this letter and return it to the
undersigned. If not accepted, this commitment shall expire on July 28, 2000.
We appreciate the opportunity to provide you with the financial services of
Bank of America, N.A.
Sincerely,
/s/ BUFFY J. BAREFOOT
Buffy J. Barefoot
Vice President
Accepted and agreed to this 20 day of July, 2000.
PRA Holding I, LLC Portfolio Recovery Associates, LLC
By: /s/ KEVIN P. STEVENSON By: /s/ STEVEN D. FREDRICKSON
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TERMS AND CONDITIONS
BORROWER: PRA Holding I, LLC
PURPOSE: Purchase real estate located at 500 West 1st Street, 505 West 2nd
Street, 507 West 2nd Street, and 113 North Monroe Street, all in Hutchinson,
Kansas and make improvement thereto.
AMOUNT OF LOAN: $550,000.00
INTEREST RATE:
30-Day LIBOR changing daily, as determined by Bank of America and adjusted for
reserves, deposit insurance assessments and other regulatory costs, plus
2.25%.
REPAYMENT TERMS:
In sixty consecutive monthly installments of principal in the amount of
$4,583.33 plus interest payable on the first day of each month beginning
September 1, 2000, and one final installment of all unpaid principal and
accrued interest payable on July 21, 2005.
LOAN DOCUMENTS:
The Loan shall be made under and governed by definitive Loan documents to be
executed and delivered by the Borrower to the Bank and containing the terms
set forth in this commitment and such other terms, conditions,
representations, warranties and covenants as are usual and customary in
lending transactions such as the Loan, which documents may include one or more
promissory notes, guaranties, deeds of trust and such other documents executed
and/or delivered by Borrower, any guarantor or third party in connection with
the Loan (collectively, the "Loan Documents").
COLLATERAL:
A first priority deed of trust on real property owned by the Borrower
described as 500 West 1st Street, 505 West 2nd Street, 507 West 2nd Street,
and 113 North Monroe Street, all located in Hutchinson, Kansas 67501 (the
"Real Property").
GUARANTORS:
This Loan shall be unconditionally and fully guaranteed by Portfolio Recovery
Associates, LLC whose obligations to the Bank shall be joint and several with
Borrower and all other guarantors, if any, and shall be on such other written
terms as are acceptable to the Bank.
TITLE INSURANCE, APPRAISAL AND ENVIRONMENTAL QUESTIONNAIRE
The Loan is subject to Bank obtaining title insurance containing no title
exceptions except those satisfactory to the Bank, insuring the Bank's deed of
trust, and an internal review by the Bank of the data, assumptions and
conclusions found in the appraisal. The Loan is further subject to the Bank
receiving a report from the Borrower with respect to an investigation and
audit of the Real Property showing that the Property is environmentally
acceptable to the Bank.
SURVIVAL:
This commitment letter shall constitute one of the Loan Documents and shall
survive the closing of the Loan, the execution and delivery of all Loan
Documents, and the making of any advances or
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disbursements thereunder. In the event of a conflict between a provision
contained in this commitment letter and a provision of any other Loan
Document, the terms of the other Loan Document shall control.
EXPIRATION/RENEWAL CLAUSES:
Any commitment to advance funds under the Loan shall expire on July 21, 2005
and the Bank shall have no further obligation to extend credit. Any renewal,
extension of maturity and/or expiration date, or increase in amount of this
Loan by the Bank shall be governed by the terms of this commitment unless
otherwise agreed to by the Bank, in writing.
CONDITIONS TO FIRST ADVANCE:
Prior to the making by the Bank of the first advance to the Borrower, the
following conditions precedent shall have been satisfied.
The Bank shall have received, duly executed, all Loan Documents and any other
documents and instruments necessary or advisable in connection with the Loan,
all of which shall be in form and substance satisfactory to the Bank and its
counsel.
All deeds of trust and other documents and instruments deemed by the Bank and
its counsel to be necessary or advisable in connection with the collateral
described herein shall have been recorded or filed in all necessary places,
and sent to or received by all necessary persons, as the case may be.
With respect to the Real Property collateral herein, the Bank shall have
received (i) evidence satisfactory to the Bank of a casualty insurance and a
flood insurance policy, if in a flood plain, with standard mortgagee clauses
attached in favor of and in form satisfactory to Bank, and (ii) a mortgagee
title insurance policy issued by a title insurance company acceptable to the
Bank insuring the lien created by the Bank's deed of trust on such Real
Property, subject only to prior liens referred to in this commitment and such
other exceptions to title as may be acceptable to the Bank, in its sole
discretion.
REPORTING REQUIREMENTS:
So long as the Borrower is indebted to the Bank, the Guarantor shall submit to
the Bank the following:
1. Quarterly, within 45 days of the end of each quarter, internally
prepared financial statements of the Guarantor including a balance
sheet and income statement; and
2. Annually, within 120 days following the end of the Guarantor's fiscal
year, a balance sheet and income statement prepared in accordance
with generally accepted accounting principles on an audited basis by
an independent certified public accountant acceptable to the Bank,
including statements of financial condition, income, cash flows and
changes in shareholders' equity.
3. Quarterly, within 45 days of quarter-end a covenant compliance
certificate.
REPRESENTATIONS AND WARRANTIES:
Good Standing. Borrower and guarantor are limited liability corporations, duly
organized, validly existing and in good standing under the laws of Virginia
and has the power and authority to own its property and to carry on its
business in each jurisdiction in which Borrower does business.
Authority and Compliance. Borrower has full power and authority to execute and
deliver the Loan Documents and to incur and perform the obligations provided
for therein, all of which have been duly authorized by all proper and
necessary action of the appropriate governing body of Borrower. No consent or
approval of any public authority or other third party is required as a
condition to the validity of any
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Loan Document, and Borrower is in compliance with all laws and regulatory
requirements to which it is subject.
Binding Agreement. This Agreement and the other Loan Documents executed by
Borrower constitute valid and legally binding obligations of Borrower,
enforceable in accordance with their terms.
Litigation. There is no material proceeding involving Borrower or Guarantor
pending or, to the knowledge of Borrower and Guarantor, threatened before any
court or governmental authority, agency or arbitration authority, except as
disclosed to Bank in writing and acknowledged by Bank prior to the date of
this Agreement.
No Conflicting Agreements. There is no charter, bylaw, stock provision,
partnership agreement or other document pertaining to the organization, power
or authority of Borrower and no provision of any existing agreement, mortgage,
indenture or contract binding on Borrower or affecting its property, which
would conflict with or in any way prevent the execution, delivery or carrying
out of the terms of this Agreement and the other Loan Documents.
Ownership of Assets. Borrower has good title to its assets, and its assets are
free and clear of liens, except those granted to Bank and as disclosed to Bank
in writing prior to the date of this Agreement.
Taxes. All taxes and assessments due and payable by Borrower have been paid or
are being contested in good faith by appropriate proceedings and the Borrower
has filed all tax returns which it is required to file.
Financial Statements. The financial statements of Guarantor heretofore
delivered to Bank have been prepared in accordance with GAAP applied on a
consistent basis throughout the period involved and fairly present Borrower's
financial condition as of the date or dates thereof, and there has been no
material adverse change in Borrower's financial condition or operations since
December 31, 1999. All factual information furnished by Borrower to Bank in
connection with this Agreement and the other Loan Documents is and will be
accurate and complete on the date as of which such information is delivered to
Bank and is not and will not be incomplete by the omission of any material
fact necessary to make such information not misleading.
Place of Business. Borrower's chief executive office is located at
Riverside Commerce Center
120 Corporate Boulevard, Suite 100
Norfolk, VA 23502
Environmental Compliance. The conduct of Borrower's business operations and
the condition of Borrower's property does not and will not violate any federal
laws, rules or ordinances for environmental protection, regulations of the
Environmental Protection Agency and any applicable local or state law, rule,
regulation or rule of common law and any judicial interpretation thereof
relating primarily to the environment or Hazardous Materials.
Continuation of Representation and Warranties. All representations and
warranties made under this Letter of Commitment shall be deemed to be made at
and as of the date hereof and at and as of the date of any advance under any
Loan.
FINANCIAL COVENANTS:
Until full payment and performance of all obligations of Borrower under the
Loan, Guarantor will, unless Bank consents otherwise in writing (and without
limiting any requirement of any other loan document):
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Net Worth: Maintain at all times a net worth at no less than $20,000,000.00.
Cash Flow Coverage Ratio: Maintain a minimum ratio of cash flow to debt
service of not less than 1.50 to 1.00. For this purpose cash flow coverage
shall be defined as: (Net Income + Depreciation + Amortization + Interest
Expense - Distributions) divided by (Prior Period's Current Maturity of Long
Term Debt + Interest Expense).
All accounting terms not specifically defined or specified herein shall have
the meanings generally attributed to such terms under generally accepted
accounting principles ("GAAP"), as in effect from time to time, consistently
applied.
AFFIRMATIVE COVENANTS:
Until full payment and performance of all obligations of Borrower under the Loan
Documents, Borrower will, without the prior written consent of Bank (and
without limiting any requirement of any other Loan Documents):
Insurance. Maintain insurance with responsible insurance companies on such of
its properties, in such amounts and against such risks as is customarily
maintained by similar businesses operating in the same vicinity, specifically
to include fire and extended coverage insurance covering all assets, business
interruption insurance, workers compensation insurance and liability
insurance, all to be with such companies and in such amounts as are
satisfactory to Bank and providing for at least 30 days prior notice to Bank
of any cancellation thereof. Satisfactory evidence of such insurance will be
supplied to Bank prior to funding under the Loan(s) and 30 days prior to each
policy renewal.
Existence and Compliance. Maintain its existence, good standing and
qualification to do business, where required and comply with all laws,
regulations and governmental requirements including, without limitation,
environmental laws applicable to it or to any of its property, business
operations and transactions.
Adverse Conditions or Events. Promptly advise Bank in writing of (i) any
condition, event or act which comes to its attention that would or might
materially adversely affect Borrower's financial condition or operations or
Bank's rights under the Loan Documents, (ii) any material litigation filed by
or against Borrower, (iii) any event that has occurred that would constitute
an event of default under any Loan Documents and (iv) any uninsured or
partially uninsured loss through fire, theft, liability or property damage in
excess of an aggregate of $50,000.00.
Taxes and Other Obligations. Pay all of its taxes, assessments and other
obligations, including, but not limited to taxes, costs or other expenses
arising out of this transaction, as the same become due and payable, except to
the extent the same are being contested in good faith by appropriate
proceedings in a diligent manner.
Maintenance. Maintain all of its tangible property in good condition and
repair and make all necessary replacements thereof, and preserve and maintain
all licenses, trademarks, privileges, permits, franchises, certificates and
the like necessary for the operation of its business.
Environmental. Immediately advise Bank in writing of (i) any and all
enforcement, cleanup, remedial, removal, or other governmental or regulatory
actions instituted, completed or threatened pursuant to any applicable
federal, state, or local laws, ordinances or regulations relating to any
Hazardous Materials affecting Borrower's business operations; and (ii) all
claims made or threatened by any third party against
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Borrower relating to damages, contribution, cost recovery, compensation, loss or
injury resulting from any Hazardous Materials. Borrower shall immediately notify
Bank of any remedial action taken by Borrower with respect to Borrower's
business operations. Borrower will not use or permit any other party to use any
Hazardous Materials at any of Borrower's places of business or at any other
property owned by Borrower except such materials as are incidental to Borrower's
normal course of business, maintenance and repairs and which are handled in
compliance with all applicable environmental laws. Borrower agrees to permit
Bank, its agents, contractors and employees to enter and inspect any of
Borrower's places of business or any other property of Borrower at any
reasonable times upon three (3) days prior notice for the purposes of conducting
an environmental investigation and audit (including taking physical samples) to
insure that Borrower is complying with this covenant and Borrower shall
reimburse Bank on demand for the costs of any such environmental investigation
and audit. Borrower shall provide Bank, its agents, contractors, employees and
representatives with access to and copies of any and all data and documents
relating to or dealing with any Hazardous Materials used, generated.
manufactured, stored or disposed of by Borrower's business operations within
five (5) days of the request therefore.
NEGATIVE COVENANTS:
Until full payment and performance of all obligations of Borrower under the Loan
Documents, Borrower will not, without the prior written consent of Bank (and
without limiting any requirement of any other Loan Documents):
Transfer of Assets or Control. Sell, lease, assign or otherwise dispose of or
transfer any assets, except in the normal course of its business, or enter into
any merger or consolidation, or transfer control or ownership of the Borrower or
from or acquire any subsidiary.
Liens. Grant, suffer or permit any contractual or noncontractual lien on or
security interest in its assets, except in favor of Bank, or fail to promptly
pay when due all lawful claims, whether for labor, materials or otherwise.
Extensions of Credit. Make any loan or advance to any individual, partnership,
corporation or other entity.
Borrowings. Create, incur, assume or become liable in any manner for any
indebtedness (for borrowed money, deferred payment for the purchase of assets,
lease payments, as surety or guarantor for the debt for another, or otherwise)
other than to Bank, except for normal trade debts incurred in the ordinary
course of Borrowers business, and except for existing indebtedness disclosed to
Bank in writing and acknowledged by Bank prior to the date of this Agreement.
Character of Business. Change the general character of business as conducted at
the date hereof, or engage in any type of business not reasonably related to its
business as presently conducted.
EVENTS OF DEFAULT:
A default shall occur under this Letter of Commitment and under each of the Loan
Documents and under any other promissory note executed by Borrower in favor of
Bank if the Borrower, any endorser or any guarantor of the Loan defaults in the
payment of any amounts due and owing under the Loan or any other indebtedness
owing to Bank or fails to timely and properly observe, keep or perform any term,
covenant, agreement or condition in any of the Loan Documents or in any other
loan agreement, promissory note, security agreement, deed of trust, deed to
secure debt, mortgage, assignment or other contract securing or evidencing
payment of any indebtedness of Borrower, any endorser or any guarantor of any
loan to Bank or to any affiliate or subsidiary of Bank of America Corporation.
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REMEDIES UPON DEFAULT:
If an event of default shall occur Bank shall have all rights, powers and
remedies available under each of the loan Documents as well as all rights and
remedies available at law or in equity.
CLOSING COSTS AND EXPENSES:
The Borrower shall pay all costs and expenses incurred by the Bank in connection
with the Bank's review, due diligence and closing of the Loan, including
attorneys' fees incurred by the Bank in connection with the negotiation and
preparation of the Loan Documents, the costs of any environmental investigation
and audit, appraisal, title insurance premiums, survey and inspection fees,
whether or not the Loan actually closes.
MATERIAL ADVERSE CHANGE:
This commitment may be terminated, in the sole discretion of the Bank, upon the
occurrence of a material adverse change in the financial condition of the
Borrower or any other person liable to the Bank for the repayment of this Loan.
NON-ASSIGNABLE
This commitment and the right of Borrower to receive loans hereunder may not be
assigned by Borrower.
RELIANCE:
This commitment constitutes an offer by the Bank to the Borrower to make a Loan
on the terms and conditions set forth herein and should not be relied upon by
any third party for any purpose.
AMENDMENT AND WAIVER:
No alteration, modification, amendment or waiver of any terms and conditions of
this commitment, or of any of the documents required by or delivered to the Bank
under this commitment, shall be effective or enforceable against the Bank unless
set forth in a writing signed by the Bank.
GOVERNING LAW:
This commitment and the Loan shall be governed by and construed in accordance
with the laws of the Commonwealth of Virginia (without regard to choice of law
principles).
INTEGRATION:
The terms set forth above represent the entire understanding between the
Borrower and the Bank with respect to the subject matter of this commitment, and
this commitment supersedes any prior and contemporaneous agreements,
commitments, discussions and understandings, oral or written, with respect to
the subject matter of this commitment.
ARBITRATION:
Any controversy or claim between or among the parties hereto including but not
limited to those arising out of or relating to this agreement or any related
instruments, agreements or documents including any claim based on or arising
from an alleged tort, shall be determined by binding arbitration in accordance
with the Federal Arbitration Act (or if not applicable, the applicable state
law), and the rules of practice and procedure for the arbitration of commercial
disputes of Judicial Arbitration and Mediation Services, Inc. (J.A.M.S.).
Judgment upon any arbitration award may be entered in any court having
jurisdiction. Any party to this instrument, agreement or document may bring an
action, including a summary or expedited proceeding, to compel arbitration of
any controversy or claim to which this agreement applies in any court having
jurisdiction over such action.
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EXPIRATION:
This commitment is to be closed within 30 days of the acceptance date. Should
this commitment not be accepted by the expiration date, and not closed within 30
days of the acceptance date, then the Bank shall have no further obligation to
extend credit hereunder.
The terms and conditions set forth above are accepted this 20 day of July, 2000.
BORROWER: PRA Holding I, LLC
By: /s/ KEVIN P. STEVENSON
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Title: /s/ Member's Representative
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GUARANTOR Portfolio Recovery Associates, LLC
By: /s/ STEVEN D. FREDRICKSON
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Title: President
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