1
EXHIBIT 10.23
SECOND
AMENDED AND RESTATED
CREDIT AGREEMENT
between
COMPUTER LEARNING CENTERS, INC.,
and
FIRST UNION NATIONAL BANK,
as successor-by-merger to
CORESTATES BANK, N.A.
2
TABLE OF CONTENTS
PAGE
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SECTION 1. CONSTRUCTION AND DEFINITIONS 2
1.1 Defined Terms 2
1.2 Other Definitional Provisions 14
SECTION 2. AMOUNT AND TERMS OF LOAN COMMITMENTS 15
2.1 Revolving Credit Commitment 15
2.2 Revolving Credit Note 16
2.3 Procedure for Revolving Credit Borrowing 16
2.4 Facility Fee 17
2.5 Default Fees 17
2.6 Payment at Revolving Credit Termination Date 17
2.7 Conversion of Revolving Credit Loans to Convertible Term
Loans 17
2.8 Convertible Term Loan Units 17
2.9 Convertible Term Loan Note 18
2.10 Principal Prepayments 18
2.11 Interest Rate Conversion Options; Minimum Amount of Loans 18
2.12 Number and Amounts of Eurodollar Tranches 18
2.13 Interest Rates and Payment Dates 18
2.14 Computation of Interest and Fees 19
2.15 Inability to Determine Interest Rate 19
2.16 Payments 19
2.17 Illegality 19
2.18 Requirements of Law 20
2.19 Taxes 21
2.20 Indemnity 21
2.21 Certain Calculations 21
SECTION 3. LETTERS OF CREDIT 21
3.1 Letter of Credit Commitment 21
3.2 Procedure for Issuance and Renewal of Letters of Credit 22
3.3 Reimbursement of the Lender 22
3.4 Commissions, Fees and Charges 23
3.5 Interest on Amounts Disbursed under Letters of Credit 23
3.6 Computation of Interest and Fees; Payment not on Business
Days 23
3.7 Increased Costs 23
3.8 Nature of Obligations and Indemnities 24
3.9 Inconsistency in Documents 26
3.10 Cash Collateral for Letters of Credit 26
SECTION 4. REPRESENTATIONS AND WARRANTIES 26
4.1 Financial Condition 26
4.2 No Change 27
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4.3 Organization and Good Standing; Compliance with Law 27
4.4 Authorization; Enforceable Obligations 27
4.5 No Legal Bar 28
4.6 No Material Litigation; Labor Matters 28
4.7 No Default 28
4.8 Ownership of Property; Liens 29
4.9 Business Premises 29
4.10 Subsidiaries 29
4.11 Environmental 29
4.12 Solvency 30
4.13 Taxes 30
4.14 Federal Regulations 30
4.15 Employee Matters 30
4.16 Investment Company Act; Other Regulations 33
4.17 Accuracy and Completeness of Information 33
4.18 Purpose of Loans 33
4.19 CLCQ and Delta College 33
4.20 No Intent to File Bankruptcy 35
SECTION 5. CONDITIONS PRECEDENT 35
5.1 Conditions to Initial Extensions of Credit 35
(a) Credit Documents 36
(b) Borrowing Certificate 36
(c) Borrower Proceedings 36
(d) Borrower Incumbency Certificate 36
(e) Filings, Registrations and Recordings 36
(f) Other Documents 36
(g) Payment of Expenses 36
5.2 Conditions to Each Loan 37
(a) Representations and Warranties 37
(b) No Default 37
(c) No Material Litigation 37
(d) No Material Adverse Changes 37
(e) Additional Matters 37
5.3 Post-Closing Requirements 37
(a) Landlord Waivers 37
(b) Bank Notice Letters 38
(c) Board of Director Approval 38
SECTION 6. AFFIRMATIVE COVENANTS 38
6.1 Financial Information 38
6.2 Payment of Obligations 40
6.3 Conduct of Business and Maintenance of Existence 40
6.4 Maintenance of Property; Insurance 41
6.5 Inspection of Property and Books and Records 41
6.6 Notices 41
6.7 Government Regulations 42
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6.8 Employee Benefit Plans 42
6.9 Environmental 42
6.10 Perfection of Security Interest 44
6.11 Year 2000 Compatibility 44
6.12 Primary Bank Accounts 44
6.13 Weekly Cash Flow Projections 44
6.14 Delivery of Original Retail Installment
Contracts 44
6.15 Business Consultant 45
6.16 Business Plan 45
6.17 Tax Refunds 45
6.18 Borrowing Base 45
6.19 Monthly Meeting 45
6.20 Correspondence from Department of Education 46
6.21 HCM2 Information 46
6.22 Financial Covenants 46
SECTION 7. NEGATIVE COVENANTS 47
7.1 Financial Condition Covenants 47
7.2 Limitation on Indebtedness 47
7.3 Limitation on Liens 48
7.4 Limitation on Negative Pledge Clauses 48
7.5 Limitation on Contingent Obligations 48
7.6 Limitations on Fundamental Changes 48
7.7 Limitation on Acquisitions 49
7.8 Limitation on Sale of Assets 49
7.9 Limitation on Restricted Payments 49
7.10 Limitation on Transactions with Affiliates 49
7.11 Limitation on Subsidiaries 49
7.12 Limitation on Investments, Loans and Advances 49
7.13 Limitation on Optional Payments and Modifications 50
7.14 Limitation on Sale and Leaseback 50
7.15 Fiscal Year 50
7.16 Places of Business 50
7.17 Change of Name 50
7.18 ERISA 50
7.19 Environmental 51
7.20 Limitation on Inconsistent Agreements 51
7.21 Limitation on Capital Expenditures 51
SECTION 8. EVENTS OF DEFAULT 51
SECTION 9. MISCELLANEOUS 54
9.1 Amendments and Waivers 54
9.2 More Restrictive Provisions 55
9.3 Notices 55
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9.4 No Waiver; Cumulative Remedies 56
9.5 Survival of Representations and Warranties 56
9.6 Payment of Expenses and Taxes 56
9.7 Further Assurances 57
9.8 Unenforceability 58
9.9 Indemnification Concerning Fees 58
9.10 Waiver of Trial by Jury 58
9.11 Additional Waivers 58
9.12 Successors and Assigns; Transfers of Interests 58
9.13 Counterparts 59
9.14 Governing Law 59
9.15 Submission To Jurisdiction 59
9.16 Release 60
9.17 Consent to Relief from Stay 60
9.18 Other Bankruptcy Relief 60
9.19 Waiver by Lender 61
Schedule I Borrower Business Premises
Schedule 4.6 Litigation
Schedule 4.11 Environmental Matters
Schedule 7.3 Permitted Liens
Exhibit A Form of Officer Default Certificate
Exhibit B Form of Officer Financial Covenant Certificate
Exhibit C Sweep Plus Loan and Investment Services Description
Sweep Plus Loan and Investment Services Agreement
Exhibit D Form of Borrowing Certificate
Exhibit E Form of Projections
Exhibit F CLCQ Capital Stock
Exhibit G Form of Notice of Collateral Assignment of Deposit Accounts
Exhibit H Form of Borrowing Base Certificate
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SECOND
AMENDED AND RESTATED
CREDIT AGREEMENT
This SECOND AMENDED AND RESTATED CREDIT AGREEMENT is made as of the 15th
day of May, 2000, by and between COMPUTER LEARNING CENTERS, INC., a Delaware
corporation (the "Borrower"), and FIRST UNION NATIONAL BANK, as successor by
merger to CORESTATES BANK, N.A. (the "Lender").
RECITALS
1. The Lender and the Borrower are parties to an Amended and Restated
Credit Agreement dated as of December 31, 1999, which sets forth the terms and
conditions of a credit facility for advances under a line of credit for working
capital, and for the issuance of letters of credit for the account of the
Borrower. The Amended and Restated Credit Agreement was amended pursuant to a
First Loan Modification Agreement dated January 29, 2000.
2. The debt under the credit facility is evidenced by a Second
Amended and Restated Revolving Credit Note dated December 31, 1999, as amended
by the First Loan Modification Agreement dated January 29, 2000, in the face
amount of $15,000,000.
3. Payment of the Second Amended and Restated Revolving Credit Note
is secured by a security interest in the personal property collateral described
in an Amended and Restated Security Agreement dated December 31, 1999.
4. As of May 10, 2000, there was due under the Second Amended and
Restated Revolving Credit Note principal of $4,914,000.00 and interest of
$17,369.44. In addition, the following letters of credit issued by the Lender
under the credit facility for the account of the Borrower are still in effect:
Letter of Credit Number Amount
M 409910 $25,800.00
M 409947 $34,000.00
406477 $2,142,000.00
400152P $91,128.50
400153 $1,000,000.00
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$3,292,928.50
5. The Borrower has requested that the Lender modify certain terms of
the Existing Credit Facility (as defined below), and waive the Borrower's
failure to comply with certain terms of the Amended and Restated Credit
Agreement. The Lender is agreeable to modifying certain terms and conditions of
the Existing Credit Facility, and waiving the
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Borrower's failure to comply with certain terms of the Amended and Restated
Credit Agreement, as set forth below and in documents executed contemporaneously
with this Agreement.
In consideration of the foregoing, the Lender and the Borrower agree as
follows:
SECTION 1. CONSTRUCTION AND DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following terms have
the following meanings:
"Accountant Default Certificate": a certificate, in form and content
satisfactory to the Lender, of the independent certified public accountants who
reviewed the annual financial statements of the Borrower and its Subsidiaries
(a) certifying to the Lender whether, in the course of such review, any
information came to their attention causing them to know or believe that any
Default or Event of Default existed and, if so, setting forth the facts relevant
thereto, and (b) certifying to the Lender that they reviewed the Officer
Financial Covenant Certificate accompanying such financial statements and
certifying to the Lender whether they have any reason to know or believe that
any of the calculations contained in the Officer Financial Covenant Certificate
are not accurate in any material respect and, if so, setting forth the facts
relevant thereto.
"Adjusted Net Income": for a particular period, the consolidated net
income of the Borrower and its Subsidiaries for such period determined in
conformity with GAAP consistently applied, plus, to the extent deducted in
determining such net income for such period, (a) the provision for taxes
applicable to such period, (b) the amount of all depreciation, amortization and
other noncash charges applicable to such period, (c) the amount of Interest
Expense applicable to such period, and (d) the amount of all payments required
to be made by the Borrower and its Subsidiaries (whether or not actually made)
during such period on account of Operating Leases.
"Affiliate": as to any Person: (a) any Person in which such Person
legally or beneficially owns or holds, directly or indirectly, twenty-five
percent (25%) or more of the capital stock, partnership interests, joint venture
interests, membership interests or other equity interests; (b) any partnership
in which such Person is a general partner or any joint venture in which such
Person is a joint venturer; and (c) any Person that is a director, officer or
employee of any of the foregoing or of such Person or that legally or
beneficially owns or holds, directly or indirectly, twenty-five percent (25%) or
more of the capital stock, partnership interests, joint venture interests,
membership interests or other equity interests in any of the foregoing or in
such Person.
"Agreement": this Second Amended and Restated Credit Agreement, as
amended, modified, extended, renewed, supplemented or replaced from time to
time.
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"Authorized Officer": in the case of any Person, the President or any
Vice President of such Person whose name and title appears on a certificate of
incumbency of the authorized officers of such Person delivered concurrently with
the execution of this Agreement, as such certificate of incumbency may be
amended from time to time.
"Borrower": Computer Learning Centers, Inc., a Delaware corporation.
"Borrower Business Premises": the collective reference to the Borrower
Chief Executive Office and the other premises of the Borrower identified in
Schedule I.
"Borrower Chief Executive Office": the real property and improvements
leased by the Borrower known as 00000 Xxxxx Xxxx Xxxx, Xxxxxxxx, Xxxxxxxx 00000.
"Borrower Institution": any campus or institution of the Borrower, or any
branch or location of any thereof, engaged or created or intended to be engaged,
directly or indirectly, in any business or business operations of the Borrower,
including the provision of information technology training or services,
computer-related training or services or other educational training or services.
"Borrower Security Agreement": as amended, modified, extended, renewed,
supplemented or replaced from time to time, the Second Amended and Restated
Security Agreement dated of even date herewith, by the Borrower in favor of the
Lender.
"Borrowing Base": the sum of (i) thirty-eight percent (38%) of the total
account balances (principal and interest only) as of the most current date
available of Graduate RIC's in the possession of the Lender plus (ii) ten
percent (10%) of the total account balances (principal and interest only) as of
the most current date available of Drop RIC's in the possession of the Lender.
"Borrowing Date": any Business Day specified in a notice pursuant to
Subsection 2.3 as a date on which the Borrower requests the Lender to make a
Revolving Credit Loan hereunder.
"Business Day": a day other than a Saturday, Sunday or other day on which
commercial banks in McLean, Virginia are authorized or required by law to close.
"Canadian Corporations": collectively, CLCQ and Delta College.
"Capital Expenditures": for a particular period, the aggregate amount of
expenditures made or accrued by the Borrower and its Subsidiaries during such
period (including expenditures made with respect to Capital Leases) which, in
conformity with GAAP, are required to be included in a property, plant,
equipment or comparable fixed asset account reflected in a consolidated balance
sheet of the Borrower and its Subsidiaries, but excluding expenditures made in
connection with the replacement or restoration of assets to the extent
reimbursed or financed from insurance proceeds paid on account of loss of or
damage to the
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assets being replaced or restored or from awards of compensation arising from
the taking by condemnation or eminent domain of the assets being replaced or
restored.
"Capital Lease": in the case of any Person, any lease of any property
(real, personal or mixed) by such Person as lessee which, in conformity with
GAAP, would be required to be capitalized on a balance sheet of such Person.
"Cash Collateral Account": the interest-bearing account owned by the
Borrower and pledged to the Lender, which the Borrower shall have no access to
or be permitted to make withdrawals from unless the balance exceeds 110% of the
L/C Exposure.
"Cash Equivalents": (a) securities issued or directly and fully
guaranteed or insured by the United States of America, or any agency or
instrumentality thereof, having maturities of not more than 12 months from the
date of acquisition; (b) time deposits with the Lender and certificates of
deposit issued by the Lender; (c) repurchase obligations with a term of not more
than 7 days underlying securities of the types described in clauses (a) and (b)
above entered into with the Lender; and (d) commercial paper of the Lender or
the holding company controlling the Lender.
"Certified" shall mean that the information, statement, schedule, report
or other document required to be "Certified" contains a representation by the
Borrower that to the Borrower's knowledge and belief after diligent inquiry,
such information, statement, schedule, report or other document is true and
complete in all material respects.
"Change of Control": (a) any Person, or two or more Persons acting in
concert, shall directly or indirectly acquire, after the date of this Agreement,
beneficial ownership (within the meaning of Rule 13d-3 of the Securities and
Exchange Commission under the Securities Exchange Act of 1934) of thirty percent
(30%) or more of the issued and outstanding voting capital stock of the Borrower
on a fully-diluted basis; or (b) individuals who, as of the date of this
Agreement, constitute the Board of Directors of the Borrower (together with any
new director whose election by or whose nomination for election was approved by
a vote of at least two-thirds (2/3) of the directors then still in office who
either were directors as of such time or whose election or nomination for
election was previously so approved) and shall for any reason cease to
constitute a majority of the Board of Directors of the Borrower.
"CLCQ": Computer Learning Centers of Quebec, Inc., a Quebec corporation
"Closing Date": the date on which this Agreement and all other documents
as set forth in Section 5 are executed by the Borrower and the Subsidiaries (as
applicable) and delivered to the Lender, and all other closing conditions set
forth in Section 5 are satisfied.
"Code": the Internal Revenue Code of 1986, as amended from time to time.
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"Collateral": all property, interests and rights, and the products and
proceeds thereof, now or hereafter directly or indirectly securing any of the
Obligations pursuant to the Borrower Security Agreement.
"Commitments": the collective reference to the Revolving Credit
Commitment and the L/C Commitment.
"Commonly Controlled Entity": a Person, whether or not incorporated,
which is part of a controlled group including the Borrower or which is under
common control with the Borrower, as defined in Sections 414(b) and (c) of the
Code.
"Contingent Obligation": as to any Person, any obligation of such Person
guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends,
letters of credit or other obligations (the "primary obligations") of any other
Person (the "primary obligor") in any manner, whether directly or indirectly,
including, without limitation, any obligation of such Person, whether or not
contingent (a) to purchase any such primary obligation or any property
constituting direct or indirect security therefor, (b) to advance or supply
funds (i) for the purchase or payment of any such primary obligation or (ii) to
maintain working capital or equity capital of the primary obligor or otherwise
to maintain the net worth or solvency of the primary obligor, (c) to purchase
property, securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor to make
payment of such primary obligation or (d) otherwise to assure or hold harmless
the owner of any such primary obligation against loss in respect thereof.
"Contractual Obligation": as to any Person, any provision of any security
issued by such Person or of any agreement, instrument or undertaking to which
such Person is a party or by which it or any of its property is bound.
"Credit Documents": the collective reference to this Agreement, the Note,
the Borrower Security Agreement, the L/C Agreements and each other agreement,
contract, promissory note or other instrument, security agreement, assignment,
pledge agreement, indemnification agreement, subordination agreement, mortgage,
deed of trust, guaranty and other document now or hereafter evidencing,
guaranteeing, securing (directly or indirectly), subordinating other obligations
of the Borrower or any Other Obligor to, or containing any warranties,
covenants, agreements or representations of any Person relating to, any
Indebtedness, liability or obligation of the Borrower or any Other Obligor to
the Lender, as each of the documents referred to in this definition may be
amended, modified, extended, renewed, supplemented or replaced from time to
time.
"Credit Facilities": the Revolving Credit Facility and the Standby Letter
of Credit Facility.
"Default": the occurrence of any event which, with the giving of notice
or the lapse of time, or both, would constitute an Event of Default.
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"Delta College": Delta College, Inc., a Quebec corporation.
"Disqualified": the certification, eligibility, authorization or
accreditation (provisional or otherwise) of the Borrower or any Borrower
Institution, or any educational program of any thereof, to receive, commit or
disburse funds under, or to administer or participate in, any Student Financial
Aid Program, or the participation therein of any thereof, shall for any reason
expire or be revoked, suspended, terminated or determined to be invalid, in
whole or in part, retroactively or prospectively.
"Dollars" and "$": dollars in lawful currency of the United States of
America.
"Drop RICs": RICs executed by students who have dropped out of classes
given by the Borrower.
"Environmental Assessment": an environmental site assessment, including
such audits, tests and procedures as the Lender or the contractor performing the
same may deem necessary, together with a written report thereon, performed and
prepared by an experienced, responsible and reputable contractor satisfactory to
the Lender relating to past or current presence, manufacture, generation,
production, processing, use, handling, treatment, storage or disposal of
Hazardous Substances on Obligor Use Property, past or current Hazardous
Substance Contamination, or compliance with Environmental Laws of Obligor Use
Property and past or current operations conducted on Obligor Use Property.
"Environmental Claim": shall mean any letter, notice, claim, demand,
summons, citation, directive or other written communication and any
investigation, action, suit, proceeding, litigation, judgment or decree by or
from the United States Environmental Protection Agency or any other Person
alleging, establishing or otherwise relating to any Hazardous Substance
Contamination or any violation of any Environmental Law.
"Environmental Laws": the Resource Conservation and Recovery Act, the
Comprehensive Environmental Response, Compensation and Liability Act, the Toxic
Substances Control Act, the Federal Insecticide, Fungicide, and Rodenticide Act,
the Federal Water Pollution Control Act, the Safe Drinking Water Act, the Clean
Air Act, the Solid Waste Disposal Act, the Emergency Planning and Community
Right-To-Know Act, as each of the foregoing may be amended from time to time,
and all rules, regulations, codes, orders, decrees, judgments, injunctions,
notices and demand letters now or hereafter enacted, promulgated, approved,
issued or entered thereunder, as the same may be amended from time to time, and
all other federal, state, local and foreign laws, rules, regulations, codes,
permits, directives, orders, decrees, judgments, injunctions, notices and demand
letters now or hereafter enacted, promulgated, approved, issued or entered, and
as amended from time to time, relating to the protection of the health of human
beings or other living things or relating to pollution or protection of air,
water, land or any other aspect of the environment, including, without
limitation, all of the same relating to the presence, manufacture, generation,
production, processing, use, handling, treatment, storage, disposal,
importation, transportation, distribution or registration, or the
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release, emission, discharge or spilling into air, water, land or any other
aspect of the environment, of any Hazardous Substance.
"ERISA": the Employee Retirement Income Security Act of 1974, as amended
from time to time.
"Event of Default": any of the events specified in Section 8.
"Excess Prepayments": Before November 1, 2000, all Prepayment Sources to
the extent they exceed the Standard Prepayments, and on and after November 1,
2000, all Prepayment Sources.
"Existing Credit Facility": The credit facility made available by the
Lender to the Borrower and evidenced by the Second Amended and Restated
Revolving Credit Note, the Amended and Restated Credit Agreement and the Amended
and Restated Security Agreement, as amended by the First Loan Modification
Agreement dated January 29, 2000, as described in the recitals of this
Agreement.
"Existing LCs": The letters of credit listed in paragraph 4 of the
Recitals.
"Fixed Charge Coverage Ratio": for a particular period, the ratio of (a)
Adjusted Net Income for such period, to (b) Fixed Charges for such period.
"Fixed Charges": for a particular period, the sum of (a) the amount of
all payments required to be made by the Borrower and its Subsidiaries (whether
or not actually made) on account of Operating Leases during such period, (b) the
amount of Interest Expense applicable to such period, and (c) the amounts
required to be deposited into the Cash Collateral Account in the next twelve
months.
"GAAP": generally accepted accounting principles in the United States of
America in effect from time to time. In the event of a change in GAAP affecting
any of the covenants contained in Section 7 or definitions contained in Section
1 relating to such covenants, such covenants and definitions shall continue to
be applied as though such change in GAAP had not occurred unless and until the
Borrower and the Lender shall agree in writing to amend or adjust such covenants
or definitions as deemed necessary as a result of such change in GAAP.
"good faith": with respect to any determination, request or other action
to be made or taken by any party hereto "in good faith," that such party shall
make or take such determination, request or other action honestly and not
maliciously.
"Governmental Authority": any nation or government, any state or other
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
and any Person owned or controlled directly or indirectly by any of the
foregoing, whether domestic or foreign.
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"Graduate RICs": RICs executed by students who have graduated from
classes given by the Borrower.
"Hazardous Substance": any hazardous substance, hazardous material,
hazardous waste, toxic substance, toxic material, toxic waste, industrial waste,
medical waste, infectious waste, biomedical waste, biohazardous waste,
pollutant, contaminant, chemical, acid, solvent, caustic, oil, petroleum,
petroleum-based product, asbestos, asbestos-containing substance or material,
flammable substance, flammable material, explosive substance, explosive
material, radon, radioactive substance, radioactive material, urea formaldehyde
foam insulation, polychlorinated biphenyls, methane and any other substance or
material the presence, manufacture, generation, production, processing, use,
handling, treatment, storage, disposal, release, emission, discharge, spilling,
importation, transportation, distribution or registration of which is prohibited
or regulated by any Environmental Law. The meaning of each term used in this
definition shall include, without limitation, the meaning or meanings assigned
to such term by any Environmental Laws.
"Hazardous Substance Contamination": (a) the contamination, as a result
of any Hazardous Substance, of any Obligor Use Property; or (b) the
contamination, as a result of any manufacture, generation, production,
processing, use, handling, treatment, storage, disposal, release, emission,
discharge or spilling of any Hazardous Substance on or from any Obligor Use
Property, of any surrounding, adjacent or nearby air, water, land or other
property or other aspect of the environment which requires remedial action under
any Environmental Law.
"HCM2 Prepayments": cash paid to the Borrower as a result of the
termination or modification of the Borrower's Heightened Cash Monitoring II
status by the Department of Education, representing deferred Title IV loan
fundings owing to the Borrower.
"Indebtedness": as to any Person, without duplication: (a) any
obligation, indebtedness or liability of such Person for the payment of money or
any other item, which, in conformity with GAAP, would be required to be included
in the liability section of a balance sheet of such Person or in a note to the
liability section of a balance sheet of such Person, excluding reserves to the
extent that such reserves do not constitute obligations; (b) any obligation,
indebtedness or liability of such Person arising under any conditional sale or
other title retention agreement with respect to property acquired by such
Person, notwithstanding that the remedies of the seller, lender or lessor under
such agreement in case of default are limited to repossession or sale of
property; (c) any obligation, indebtedness or liability of any Person secured
directly or indirectly by any contingent or noncontingent security interest or
other Lien in or upon any present or future property of such Person, whether or
not such Person is personally liable for such obligation, indebtedness or
liability; and (d) any obligation, indebtedness or liability of such Person in
connection with any Capital Lease.
"Insolvency": at any particular time in respect of a Multiemployer Plan,
insolvency of such Multiemployer Plan within the meaning of Section 4245 of
ERISA.
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"Interest Expense": for a particular period, the total interest expense
of the Borrower and its Subsidiaries for such period on a consolidated basis.
"Interest Payment Date": the first day of each month, for interest due
for the preceding month, commencing on June 1, 2000.
"Investment": legal or beneficial ownership of any capital stock,
partnership interest, joint venture interest, membership interest or other
equity interest in, or any promissory note, bond, debenture or other
Indebtedness of or issued by, or any capital contribution to, or any other
investment in or security (as defined in the Securities Act of 1933 or the
Securities Exchange Act of 1934, or any successor legislation, as amended from
time to time) of or issued by, any corporation, limited liability company,
partnership, joint venture or other Person.
"L/C Aggregate Undrawn Amount": at a particular date, the aggregate
undrawn amount, as of such date, of all Letters of Credit issued and
outstanding.
"L/C Agreements": as amended, modified, extended, renewed, supplemented
or replaced from time to time, such applications, reimbursement agreements and
other agreements in form and content satisfactory to the Lender requesting
issuance of one or more Letters of Credit and setting forth reimbursement
obligations and other terms and conditions relating thereto.
"L/C Commission Rate": two percent (2.00%) per annum.
"L/C Commitment": as defined in Subsection 3.1.
"L/C Exposure": at a particular time, the sum of (a) the L/C Aggregate
Undrawn Amount as of such time and (b) L/C Reimbursement Obligations as of such
time.
"L/C Facility": the facility for the issuance of Letters of Credit by the
Lender for the Borrower.
"L/C Reimbursement Obligations": at a particular time, the aggregate
amount of all drawings made under Letters of Credit which, as of such time, have
not been reimbursed by the Borrower to the Lender.
"Lender": First Union National Bank, a North Carolina banking
corporation.
"Letters of Credit": as defined in Subsection 3.1.
"Leverage Ratio": at a particular time, the ratio of (a) Total
Liabilities as of such time, to (b) Tangible Net Worth as of such time.
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"Lien": any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other) or preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever (including, without limitation, any conditional sale or other title
retention agreement, any Capital Lease having substantially the same economic
effect as any of the foregoing, and the filing of any financing statement under
the Uniform Commercial Code or comparable law of any jurisdiction in respect of
any of the foregoing).
"Loans": the Revolving Credit Loans.
"Long-Term Debt": all Indebtedness of the Borrower and its Subsidiaries
which matures more than one (1) year from the date of the financial statement
reflecting such Indebtedness (excluding reserves for deferred income taxes and
other reserves to the extent that such reserves do not constitute obligations).
"Material Adverse Effect": a material adverse effect with respect to the
business, assets, operations, business prospects or financial condition of the
Borrower, any of its Subsidiaries or any Other Obligor, or a material adverse
effect with respect to the risks to the Lender attending the Collateral, with
respect to the risks to the Lender attending any commitments of the Lender which
could give rise to any Obligations, or with respect to the prospect for payment
or collection in full of the Obligations.
"Material Litigation": in the case of any Person, any litigation, action,
suit, proceeding or investigation pending or overtly threatened in writing
against such Person or any Subsidiary of such Person, or any of their property,
at law or in equity, which, if determined adversely to such Person or such
Subsidiary, as the case may be, could reasonably be expected to have a material
adverse effect on the business, assets, operations, business prospects or
financial condition of such Person or any Subsidiary of such Person, or a
material adverse effect with respect to the risks to the Lender attending the
Collateral, with respect to the risks to the Lender attending any commitments of
the Lender which could give rise to any Obligations, or with respect to the
prospect for payment or collection in full of the Obligations.
"Multiemployer Plan": a Plan which is a multiemployer plan as defined in
Section 4001(a) (3) of ERISA.
"Note": the Revolving Credit Note.
"Obligations": as amended, modified, extended, renewed, supplemented,
increased, refinanced, consolidated or replaced from time to time, all present
and future Loans and other Indebtedness, liabilities and obligations of the
Borrower to the Lender of every kind and nature, whether arising under or in
connection with this Agreement, the other Credit Documents or otherwise
(including, without limitation, all principal amounts, including future
advances, interest charges, fees and all other charges and sums, as well as all
costs and expenses, including attorneys' fees and expenses, payable or
reimbursable by the Borrower under or pursuant to this Agreement, the other
Credit Documents and otherwise), whether direct or
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indirect, contingent or noncontingent, matured or unmatured, accrued or not
accrued, liquidated or unliquidated, secured or unsecured, related or unrelated
to this Agreement, whether or not now contemplated, whether arising in contract,
tort, equity or otherwise, whether the liability of the Borrower with respect
thereto is joint or several or both, and whether or not any instrument or
agreement relating thereto specifically refers to this Agreement, including,
without limitation, all present and future obligations of the Borrower in
connection with overdrafts in any checking or other account now or hereafter
maintained by the Borrower with the Lender, and all claims against the Borrower
arising or re-arising on account of or as a result of any payment made by the
Borrower or any Other Obligor with respect to any obligations included in this
definition which is rescinded or recovered from or restored or returned under
authority of any law, rule, regulation, order of court or Governmental
Authority, or in connection with any compromise or settlement relating thereto
or relating to any pending or threatened action, suit or proceeding relating
thereto, whether arising out of any proceedings under the United States
Bankruptcy Code or otherwise.
"Obligor Use Property": the collective reference to any real property or
improvements (or portion thereof) owned, leased, subleased, occupied, used or
operated by the Borrower, any of its Subsidiaries or any Other Obligor.
"Officer Default Certificate": an appropriately completed certificate in
form substantially similar to Exhibit A, but in form and content satisfactory to
the Lender, signed by the chief financial officer of the Borrower certifying
whether, as of a particular date and to the knowledge and belief of such officer
after diligent inquiry, any Default or Event of Default existed and, if so,
setting forth all relevant facts with respect thereto.
"Officer Financial Aid Program Certificate": a certificate in form and
content satisfactory to the Lender, signed by the chief financial officer of the
Borrower and certifying, as of and for a particular time and to the knowledge
and belief of such officer after diligent inquiry (a) for the Borrower and each
Borrower Institution, the Student Financial Aid Programs with respect to which
the Borrower, or such Borrower Institution, or its educational programs, is
authorized, accredited, certified and eligible (provisionally or otherwise) to
participate and is not Disqualified, (b) for the Borrower, and each Borrower
Institution, default rates with respect to Student Financial Aid Programs, and
(c) a summary of the current status of any actions, proceedings, investigations
or reviews of which the Borrower was required to notify the Lender pursuant to
clause (ii) of Subsection 6.6(b) of this Agreement.
"Officer Financial Covenant Certificate": an appropriately completed
certificate substantially similar to Exhibit B, but in form and content
satisfactory to the Lender, signed by the chief financial officer of the
Borrower setting forth calculations of the covenants contained in Subsection 7.1
as of a particular time or for a particular period.
"Operating Account": the demand deposit account, no. 2014139511328,
maintained with the Lender.
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"Operating Lease": as to any Person, any lease of any property (real,
personal or mixed) by such Person as lessee which is not a Capital Lease.
"Other Obligor": each Person other than the Borrower that is now or
hereafter primarily or secondarily, or contingently or noncontingently, liable
for or obligated upon or in connection with any of the Obligations, or, whether
or not so liable, that has granted any lien or security interest to or for the
benefit of the Lender as security for any of the Obligations or any obligations
of any other Person in connection with any of the Obligations, or that has
subordinated to any of the Obligations any Indebtedness or obligations to such
Person of any other Person.
"PBGC": the Pension Benefit Guaranty Corporation established pursuant to
Subtitle A of Title IV of ERISA.
"Person": an individual, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated association,
joint venture, Governmental Authority or other entity of whatever nature.
"Plan": at a particular time, any employee benefit plan which is covered
by ERISA and in respect of which the Borrower, any Subsidiary of the Borrower or
a Commonly Controlled Entity is (or, if such plan were terminated at such time,
would under Section 4069 of ERISA be deemed to be) an "employer" as defined in
Section 3(5) of ERISA.
"Prepayment Sources": Tax Refund Prepayments and HCM2 Prepayments.
"Prime Rate": the rate which the Lender announces from time to time as
its prime lending rate, as in effect from time to time. The Prime Rate is a
reference rate and does not necessarily represent the lowest or best rate
actually charged to any customer. The Lender may make commercial loans or other
loans at rates of interest at, above or below the Prime Rate.
"Reorganization": with respect to any Multiemployer Plan, the condition
that such plan is in reorganization within the meaning of such term as used in
Section 4241 of ERISA.
"Requirement of Law": as to any Person, the certificate of incorporation
and by-laws or other organizational or governing documents of such Person, and
any law, treaty, rule or regulation or determination of an arbitrator or a court
or other Governmental Authority, in each case applicable to or binding upon such
Person or any of its property or to which such Person or any of its property is
subject.
"Restricted Payment": any payment or other transfer of money or other
tangible or intangible property of any kind of the Borrower or any of its
Subsidiaries to any Affiliate of any of them which is not expressly permitted by
this Agreement, including, without limitation, any dividend or other
distribution on account of capital stock or other securities, any loan,
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advance or capital contribution, any repayment of any loan, advance or capital
contribution, any redemption or other repurchase of any securities, and any
payment for services.
"Revolving Credit Loan Balance": at a particular time, the aggregate
principal amount of Revolving Credit Loans made and outstanding.
"Revolving Credit Commitment": as defined in Subsection 2.1.
"Revolving Credit Commitment Period": the period from and including the
date of this Agreement to but not including the Revolving Credit Termination
Date or such earlier date as the Revolving Credit Commitment shall terminate as
provided herein.
"Revolving Credit Facility": the Revolving Credit loans by the Lender to
the Borrower.
"Revolving Credit Loan": as defined in Subsection 2.1.
"Revolving Credit Maximum Amount": $9,200,000 less all Standard
Prepayments (which shall be applied to permanently reduce the Revolving Credit
Maximum Amount and the Revolving Credit Loan Balance) from the Closing Date
through and including July 31, 2000; $3,700,000 less all Standard Prepayments
(which shall be applied to permanently reduce the Revolving Credit Maximum
Amount and the Revolving Credit Loan Balance) from August 1, 2000 through and
including September 30, 2000; $3,000,000 less all Standard Prepayments (which
shall be applied to permanently reduce the Revolving Credit Maximum Amount and
the Revolving Credit Loan Balance) from October 1, 2000 through and including
October 31, 2000; and the lesser of $2,500,000 or the applicable Borrowing Base
on and after November 1, 2000.
"Revolving Credit Note": as defined in Subsection 2.2.
"Revolving Credit Termination Date": May 31, 2001.
"RICs": Retail Installment Contracts executed by students who have
graduated from or dropped out of classes given by the Borrower from all states
except Illinois.
"Standard Prepayments": payments by the Borrower to the Lender, between
the Closing Date through and including October 31, 2000, from Prepayment
Sources, up to the amount necessary to permanently reduce the Revolving Credit
Facility to $2,500,000.
"Student Financial Aid Program": any program under Title IV of the Higher
Education Act of 1965, under which financial aid or financial assistance is
provided to or for students by the United States of America or any Governmental
Authority of the United States of America.
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"Subsidiary": as to any Person, (a) a corporation of which shares of
capital stock having voting power to elect a majority of the board of directors
or other managers of such corporation are owned, or the management of which is
otherwise controlled, directly or indirectly, or both, through one or more
intermediaries, by such Person, and (b) any partnership, limited liability
company, association, joint venture or other business entity of which more than
fifty percent (50%) of the voting equity interests is owned, or the management
of which is otherwise controlled, directly or indirectly, or both, through one
or more intermediaries, by such Person.
"Sweep Plus": the cash management product of the Lender which monitors
the Operating Account and triggers advances under the Revolving Credit Loan to
fund the Operating Account to maintain a target level, to cover checks presented
on the Operating Account, and to sweep excess cash above the target level to
minimize the Revolving Credit Loan balance, all as further described in the
Sweep Plus Loan and Investment Services Description attached as Exhibit C.
"Tangible Net Worth": at a particular date, the amount, if any, by which
(a) Total Assets as of such date, exclusive of goodwill, trademarks, trade
names, licenses and such other assets as are properly classified as intangible
assets in conformity with GAAP, exceeds (b) Total Liabilities as of such time.
"Tax Refund Prepayments": all tax refunds owed to the Borrower by
federal, state and local taxing authorities, which the Borrower has pledged to
the Lender and has agreed to pay over to the Lender upon receipt.
"Total Assets": at a particular date, the aggregate amount which, in
conformity with GAAP, would be included in a total assets or comparable account
reflected in a consolidated balance sheet of the Borrower and its Subsidiaries
as of such date.
"Total Liabilities": at a particular date, the aggregate amount which, in
conformity with GAAP, would be included in a total liabilities or comparable
account reflected in a consolidated balance sheet of the Borrower and its
Subsidiaries as of such date.
1.2 Other Definitional Provisions.
(a) Unless otherwise specified therein, all terms defined in
this Agreement shall have the defined meanings when used in the Note, the
Borrower Security Agreement or any other Credit Document.
(b) As used herein, in the Note, in the Borrower Security
Agreement and in any other Credit Document, accounting terms not defined in
Subsection 1.1 and accounting terms partly defined in Subsection 1.1, to the
extent not defined, shall have the respective meanings given to them under GAAP.
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(c) As used herein, in the Note, in the Borrower Security
Agreement and in any other Credit Document, terms defined by the Uniform
Commercial Code as in effect in the Commonwealth of Virginia on the date hereof
shall, except to the extent that the context otherwise requires, have the
respective meanings given to them under such Uniform Commercial Code.
(d) Unless the context otherwise requires, each reference in
this Agreement, the Note, the Borrower Security Agreement or any other Credit
Document to this Agreement, the Note, the Borrower Security Agreement or any
other Credit Document shall be deemed to refer to this Agreement, the Note, the
Borrower Security Agreement or such other Credit Document as the same may be
amended, modified, extended, renewed, supplemented or replaced from time to
time.
(e) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and Section,
Subsection, Schedule and Exhibit references are to this Agreement unless
otherwise specified.
(f) The use of the singular in this Agreement shall also refer
to the plural and vice versa, and the use of any gender, including the neuter,
shall also refer to each of the other genders, including the neuter.
(g) The captions and headings contained in this Agreement are
for convenience of reference only and shall not affect the meaning, or the
construction or interpretation, of this Agreement.
(h) The phrases "satisfactory to the Lender," "acceptable to
the Lender" and similar phrases shall mean reasonably satisfactory or reasonably
acceptable to the Lender in its reasonable judgment exercised in good faith.
(i) In the event of any inconsistency between any provision of
this Agreement and any provision of any other Credit Document, or in the event
of the need in any context for the construction or interpretation of any
provision of this Agreement or any other Credit Document, no such inconsistency
and no such provision shall be construed or interpreted against the Lender on
the one hand, and in favor of the Borrower or any Other Obligor on the other
hand.
SECTION 2. AMOUNT AND TERMS OF LOAN COMMITMENTS
2.1 Revolving Credit Commitment. Subject to the terms and conditions
hereof, the Lender agrees to make revolving credit loans (individually, a
"Revolving Credit Loan" and, collectively, the "Revolving Credit Loans") to the
Borrower from time to time during the Revolving Credit Commitment Period in an
aggregate principal amount at any one time outstanding not to exceed the
Revolving Credit Maximum Amount (the "Revolving Credit Commitment"). During the
Revolving Credit Commitment Period, the Borrower may use the
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21
Revolving Credit Commitment by borrowing, paying the Revolving Credit Loans in
whole or in part, and reborrowing, all in accordance with and subject to the
terms and conditions of this Agreement, including Subsection 2.10.
2.2 Revolving Credit Note. The Revolving Credit Loans made by the
Lender shall be evidenced by, and payable with interest in accordance with, the
Third Amended and Restated Revolving Credit Note dated May 15, 2000 (as amended,
modified, extended, renewed, supplemented or replaced from time to time, the
"Revolving Credit Note"), payable to the order of the Lender. The date and
amount of each Revolving Credit Loan made by the Lender, and the date and amount
of each payment or prepayment of principal thereof, as reflected on the Lender's
books and records with respect to the Revolving Credit Note, shall constitute
prima facie evidence, absent manifest error, of the accuracy of the information
so reflected. The Revolving Credit Note shall (a) be stated to mature on the
Revolving Credit Termination Date and (b) bear interest on the unpaid principal
amount thereof from time to time outstanding at the applicable interest rate per
annum determined as provided in Subsections 2.13 and 2.14. Interest on the
Revolving Credit Note shall be payable on the dates specified in Subsection
2.13(f).
2.3 Procedure for Revolving Credit Borrowing.
(a) Unless otherwise determined by the Lender, the terms of the
Lender's Sweep Plus product shall control the manner in which funds are
transferred between the Operating Account and the Revolving Credit Loan for
credit or debit to the Revolving Credit Loan.
(b) If the Lender determines that the Lender's Sweep Plus
product shall no longer be used for Revolving Credit Loans, the procedure for
borrowing set forth in this Subsection 2.3(b) shall apply. The Lender may
withdraw the Sweep Plus product at any time in the sole and absolute discretion
of the Lender. The Borrower may borrow under the Revolving Credit Commitment
during the Revolving Credit Commitment Period on any Business Day, provided that
the Borrower shall give the Lender irrevocable notice (which must be received by
the Lender prior to 11:00 a.m., McLean, Virginia time) two Business Days prior
to the requested Borrowing Date, specifying (i) the amount to be borrowed, and
(ii) the requested Borrowing Date. Each borrowing pursuant to the Revolving
Credit Commitment shall be in an aggregate principal amount of One Thousand
Dollars ($1,000.00) or a whole multiple thereof. The proceeds of all Revolving
Credit Loans will be made available to the Borrower by the Lender by transfer of
such proceeds in immediately available funds to a deposit account of the
Borrower at the Lender designated for such purpose.
(c) Effective November 1, 2000, availability under the
Revolving Credit Facility shall be subject to the delivery to the Lender of a
Borrowing Base Certificate and updated information pertaining to all RICs in the
Lender's possession. Without limiting in any way the provisions of Section 5.2,
in no event shall the Lender be obligated to make a Revolving Credit Loan on and
after November 1, 2000 if the Revolving Credit Loan would cause the total
principal amount of Revolving Credit Loans made and outstanding to exceed the
lesser of $2,500,000 or the then current Borrowing Base. Even if the total
principal amount of Revolving
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Credit Loans outstanding shall at any time and for any reason exceed the lesser
of $2,500,000 or the then current Borrowing Base, the Borrower shall nonetheless
be liable for the entire principal amount of Revolving Credit Loans outstanding,
with interest and other charges, as provided in this Agreement. If the total
principal amount of Revolving Credit Loans shall at any time exceed the lesser
of $2,500,000 or the then current Borrowing Base, the Borrower shall immediately
pay to the Lender upon demand the amount of such excess, with interest as
provided in this Agreement.
2.4 Facility Fee. The Borrower agrees to pay to the Lender a facility
fee from and including May 15, 2000 to the Revolving Credit Termination Date,
computed at the rate set forth below on the average daily amount of the
Revolving Credit Maximum Amount during the period for which payment is made,
payable monthly in arrears on the first day of each month, commencing on June 1,
2000, and on the Revolving Credit Termination Date or such earlier date as the
Revolving Credit Commitment shall terminate as provided herein.
(a) During monthly periods when the Revolving Credit Maximum
Amount exceeds or equals $3,000,000, the Facility Fee shall be 3% per annum.
(b) During monthly periods when the Revolving Credit Maximum
Amount is less than $3,000,000, the Facility Fee shall be 1% per annum.
If the Borrower fully repays all debt under the Revolving Credit
Facility, terminates or cancels all Letters of Credit, and terminates all Credit
Facilities, by September 30, 2000, the Lender shall refund to the Borrower 75%
of all facility fees paid by the Borrower since June 1, 2000.
If the Borrower fully repays all debt under the Revolving Credit
Facility, terminates or cancels all Letters of Credit, and terminates all Credit
Facilities, by December 15, 2000, the Lender shall refund to the Borrower 50% of
all facility fees paid by the Borrower since June 1, 2000.
The Borrower will, effective with the payment due on June 1, 2000, no
longer have to pay an unused facility fee.
2.5 Default Fees. For each Default of which the Lender gives notice to
the Borrower, the Borrower shall pay on demand to the Lender a $5,000 default
fee. For each Default that becomes an Event of Default, the Borrower shall pay
on demand to the Lender a $10,000 default fee. For each Event of Default for
which no cure period is applicable, the Borrower shall pay to the Lender and
immediately be liable for a $15,000 default fee.
2.6 Payment at Revolving Credit Termination Date. On the Revolving
Credit Termination Date, the Borrower shall pay to the Lender in full the
Revolving Credit Loan Balance, together with all accrued and unpaid interest
thereon.
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2.7 Conversion of Revolving Credit Loans to Convertible Term Loans.
(intentionally deleted).
2.8 Convertible Term Loan Units. (intentionally deleted).
2.9 Convertible Term Loan Note. (intentionally deleted).
2.10 Principal Payments.
(a) Unless otherwise determined by the Lender, the terms of the
Lender's Sweep Plus Product shall control the manner in which funds are
transferred between the Operating Account and the Revolving Credit Loan for
credit or debit to the Revolving Credit Loan.
(b) If the Lender determines that the Lender's Sweep Plus
Product shall no longer be used for Revolving Credit Loans, the procedure for
borrowing set forth in this Subsection 2.10(b) shall apply. The Borrower may at
any time from time to time pay the principal of Revolving Credit Loans in whole
or in part, upon irrevocable notice to the Lender at least one (1) Business Day
in advance, specifying the date and amount of payment. If any such payment
notice is given by the Borrower, the payment amount specified in such notice
shall be due and payable on the date specified therein.
(c) The Borrower shall pay to the Lender all Prepayment
Sources, to the extent required under this Agreement, and which are
characterized as Standard Prepayments, and which shall permanently reduce the
amount of Revolving Credit Loans available to the Borrower. The Borrower's
failure to receive any Prepayment Source by the date necessary to reduce the
Revolving Credit Maximum Amount as required by this Agreement shall not relieve
the Borrower of its obligation to permanently reduce the amount outstanding
under the Revolving Credit Facility by the dates and in the amounts as required
in this Agreement.
2.11 Interest Rate Conversion Options: Minimum Amount of Loans.
(intentionally deleted).
2.12 Number and Amounts of Eurodollar Tranches. (intentionally
deleted).
2.13 Interest Rates and Payment Dates.
(a) Revolving Credit Loans shall bear interest for the period
from and after the Closing Date on the unpaid principal amount at a rate per
annum equal to the Prime Rate plus 2%.
(b) (intentionally deleted)
(c) (intentionally deleted)
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(d) If an Event of Default shall occur, all Revolving Credit
Loans shall, at the Lender's option, bear interest on the unpaid principal
amount thereof at a rate per annum equal to the Prime Rate plus five percent
(5%) per annum.
(e) Except to the extent prohibited by applicable law, any
judgment or order of any Governmental Authority entered for payment of principal
or any other amounts bearing interest under this Agreement shall bear interest
at the rates and calculated in the manner applicable under this Agreement to
such amounts.
(f) Interest shall be payable in arrears on each Interest
Payment Date, and the Borrower authorizes the Lender to debit the Operating
Account for all such interest payments.
2.14 Computation of Interest and Fees. (a) Facility fees under
Subsection 2.4 and interest in respect of the Loans shall be calculated on the
basis of a 360 day year for the actual days elapsed (including the first but
excluding the last day of the relevant period). Any change in the interest rate
on Loans resulting from a change in the Prime Rate (as a result of a change in
the Prime Rate) shall become effective as of the opening of business on the day
on which such change in the Prime Rate shall become effective.
(b) Each determination of an interest rate by the Lender
pursuant to any provision of this Agreement shall be conclusive and binding on
the Borrower in the absence of manifest error.
2.15 Inability to Determine Interest Rate. (intentionally deleted).
2.16 Payments. All payments (including prepayments) to be made by the
Borrower under this Agreement, the Note or any other Credit Document, whether on
account of principal, interest, fees, expenses or other amounts, shall be made
without deduction, setoff or counterclaim and shall be made at the Lender's
office set forth in Subsection 9.3, in lawful money of the United States of
America and in immediately available funds. If any payment hereunder becomes due
and payable on a day other than a Business Day, such payment shall be extended
to the next succeeding Business Day, and, with respect to payments of principal,
interest thereon shall be payable during such extension. The Lender may charge
and deduct from any deposit account of the Borrower at the Lender any amounts
credited to such account and apply the same to pay principal, interest, service
charges, fees (including Default Fees and Facility Fees), expenses or any other
sums or charges due and unpaid under this Agreement, the Note or any other
Credit Documents. The Lender may, in addition to all other rights and remedies
available to it, set off against any Obligations due and unpaid any sums or
property owing to the Borrower by the Lender or held or controlled by the Lender
for the Borrower. The Borrower confirms the Lender's right to a banker's lien
and setoff, and nothing in this Agreement or any other Credit Document shall be
deemed to replace, supercede, limit, waive or prohibit the Lender's right of
banker's lien and setoff.
2.17 Illegality. (intentionally deleted).
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2.18 Requirements of Law.
(a) If any generally applicable Requirement of Law or any
change therein or in the interpretation or application thereof or compliance by
the Lender with any request or directive (whether or not having the force of
law) from any central bank or other Governmental Authority arising from and
after the Closing Date:
(i) does or shall subject the Lender to any additional
tax of any kind whatsoever with respect to this Agreement or the Note, or change
the basis of taxation of payments to the Lender of principal, fees, interest or
any other amount payable hereunder (except for changes in the rate of tax on the
overall net income of the Lender);
(ii) does or shall impose, modify or hold applicable any
reserve, special deposit, assessment, capital adequacy, compulsory loan or
similar requirement against assets held by, or deposits or other liabilities in
or for the account of, advances or loans by, or other credit extended by, or any
other acquisition of funds by, any office of the Lender; or
(iii) does or shall impose on the Lender any other
condition;
and the result of any of the foregoing is to increase the cost to the Lender, by
any amount which the Lender deems to be material, of making, renewing or
maintaining advances or extensions of credit or to reduce any amount receivable
hereunder, then, in any such case, the Borrower shall promptly pay the Lender
upon demand any additional amounts necessary to compensate the Lender for such
additional cost or reduced amount receivable reasonably allocable to this
Agreement, together with interest on such additional amounts from the date
demand is made until payment in full thereof at the rate applicable to Revolving
Credit Loans. If the Lender becomes entitled to claim any additional amounts
pursuant to this Subsection, it shall promptly notify the Borrower of the event
by reason of which it has become so entitled. A certificate as to any additional
amounts payable pursuant to the foregoing sentence submitted by the Lender to
the Borrower shall show the means by which such additional amounts have been
calculated and shall be conclusive in the absence of manifest error. This
covenant shall survive the termination of this Agreement and payment of the Note
for a period of 1 year.
(b) If the Lender shall have determined that the adoption from
and after the Closing Date of any generally applicable law, rule, regulation or
guideline regarding capital adequacy, or any change therein from and after the
Closing Date or in the interpretation or application thereof or compliance by
the Lender or any corporation controlling the Lender with any request or
directive regarding capital adequacy (whether or not having the force of law)
from any central bank or Governmental Authority, including, without limitation,
the issuance of any final rule, regulation or guideline, does or shall have the
effect of reducing the rate of return on the Lender's or such corporation's
capital as a consequence of its obligations hereunder to a level below that
which the Lender or such corporation could have achieved but for such adoption,
change or compliance (taking into consideration the Lender's or such
corporation's policies with respect to capital adequacy) by an amount deemed by
the Lender to be material,
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then from time to time, within 2 Business Days after submission by the Lender to
the Borrower of a written request therefor showing the means by which such
additional amounts have been calculated and stating in reasonable detail the
reasons therefor, the Borrower shall pay to the Lender such additional amount or
amounts reasonably allocable to this Agreement as will compensate the Lender for
such reduction.
2.19 Taxes.
(a) All payments made by the Borrower under this Agreement
shall be made free and clear of, and without reduction or withholding for or on
account of, any present or future income, stamp or other taxes, levies, imposts,
duties, charges, fees, deductions or withholdings, now or hereafter imposed,
levied, collected, withheld or assessed by any Governmental Authority excluding,
in the case of the Lender, net income and franchise taxes imposed on the Lender
by the jurisdiction under the laws of which the Lender is organized or any
political subdivision or taxing authority thereof or therein (all such
non-excluded taxes, levies, imposts, deductions, charges or withholdings being
hereinafter called "Taxes"). If any Taxes are required to be withheld from any
amounts payable to the Lender hereunder, under the Note or under any other
Credit Document, the amounts so payable to the Lender shall be increased to the
extent necessary to yield to the Lender (after payment of all Taxes, including
those payable on additional amounts paid pursuant to this Subsection) interest
or other amounts payable hereunder at the rates or in the amounts specified in
this Agreement, the Note or any other Credit Document. If the Borrower fails to
pay any Taxes when due to the appropriate taxing authority, the Borrower shall
indemnify the Lender for any incremental taxes, interest or penalties that may
become payable by the Lender as a result of any such failure.
(b) The agreements in this Subsection shall survive the
termination of this Agreement and the payment of the Note and all other amounts
payable hereunder and under the other Credit Documents for a period of 1 year.
2.20 Indemnity. (intentionally deleted).
2.21 Certain Calculations (intentionally deleted).
SECTION 3. LETTERS OF CREDIT
3.1 Letter of Credit Commitment. Subject to the terms and conditions
hereof, the Lender agrees to issue for the account of the Borrower standby
letters of credit for such purposes, in such amounts, for the benefit of such
Persons and subject to such terms and conditions as may be acceptable to the
Lender in its discretion (individually, as amended, modified, extended, renewed,
supplemented or replaced from time to time, a "Letter of Credit," and,
collectively, the "Letters of Credit"), from and including the date of this
Agreement to but not including the Revolving Credit Termination Date (the "L/C
Commitment"); provided that the L/C Exposure shall not on any date exceed
$3,300,000 through and including July 31, 2000, and $2,575,000 thereafter. No
Letter of Credit (including any renewal or extension thereof, whether
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or not automatic) shall have an expiry date which is later than the date which
is one year after the date of issuance, renewal or extension of such Letter of
Credit; and provided further that, from and after September 30, 2000, no Letter
of Credit (including any renewal or extension thereof, whether or not automatic)
shall have an expiry date which is later than six months following the Revolving
Credit Termination Date; and provided further that the Lender shall be under no
obligation to issue a new Letter of Credit unless all existing Letters of Credit
shall be cash secured to the extent of 110% of their face amount, and the new
Letter of Credit to be issued would be cash secured to the extent of 110% of its
face amount.
3.2 Procedure for Issuance and Renewal of Letters of Credit.
(a) The Borrower may request the Lender to issue a Letter of
Credit by delivering to the Lender at its office specified in Subsection 9.3 (i)
such L/C Agreements as the Lender may require, completed to the satisfaction of
the Lender, (ii) the proposed form of such Letter of Credit (which shall comply
with the applicable requirements set forth herein) and (iii) such other
certificates and documents and information as the Lender may reasonably request.
(b) The Borrower may request the extension or renewal of a
Letter of Credit issued hereunder which is not automatically renewed in
accordance with the terms contained therein, by giving written notice to the
Lender at least forty-five calendar days prior to the then current expiry date
of such Letter of Credit (provided that the Lender may accommodate notices on
shorter notice in its sole discretion).
3.3 Reimbursement of the Lender. In the case of each drawing paid
under any Letter of Credit, the Lender shall promptly notify the Borrower of
such drawing and of the amount thereof, and the Borrower (i) shall reimburse the
Lender for the amount of such drawing not later than the close of business on
the first Business Day following the day on which the Borrower receives notice
of such drawing, and (ii) shall pay (A) all charges and expenses relating to
such drawing as may be payable in accordance with Subsection 3.4 or the
applicable L/C Agreements and (B) interest at the rate specified in Subsection
3.5 on the amount of such drawing for the period commencing on and including the
date of payment of such drawing and ending on and including the date the
Borrower reimburses the Lender for such drawing. The Borrower authorizes the
Lender to debit the Cash Collateral Account for the amount of any reimbursement
or payment obligation under this Subsection 3.3. Notwithstanding any other
provision of this Agreement, the payment by the Lender of each drawing under a
Letter of Credit shall be deemed to constitute an irrevocable notice of
borrowing by the Borrower under Subsection 2.3 and, at any time after such
request, the Lender is irrevocably authorized by the Borrower to, and the Lender
may, make Revolving Credit Loans to the Borrower in an amount equal to the
amount of such payment and any charges, expenses or interest referred to in the
foregoing clauses (A) and (B), notwithstanding any limitations set forth in
Subsection 2.3, and apply the proceeds of such Revolving Credit Loans in payment
of the Borrower's L/C Reimbursement Obligations and other obligations in
connection with such payment.
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3.4 Commissions, Fees and Charges.
(a) In the case of each issuance, renewal or extension of any
Letter of Credit, the Borrower agrees to pay to the Lender (i) an issuance fee
equal to Five Hundred Dollars ($500.00), and (ii) a commission on the face
amount of such Letter of Credit calculated at the L/C Commission Rate, based
upon a year of 360 days and payable for the actual number of days in the
original term, the renewal term or the extended term of such Letter of Credit,
provided that the amount of such commission shall not be less than Two Hundred
Fifty Dollars ($250.00) per quarter annum (or a portion thereof). The Borrower
shall not be entitled to receive a refund or rebate of any such fees or
commissions in the event of early termination of a Letter of Credit.
(b) Payment of the fees set forth in this Subsection shall be
a condition to the issuance of each Letter of Credit; provided that, in the case
of any automatic renewal or automatic extension of any Letter of Credit in
accordance with the terms thereof, the Borrower shall pay such fees before the
date of such automatic renewal or automatic extension.
(c) In addition to the fees referred to above in this
Subsection, the Borrower agrees to pay or reimburse the Lender for such normal
and customary fees, costs and expenses as are incurred or charged by the Lender
or any correspondents of the Lender in issuing, effecting payment under,
maintaining or administering any Letter of Credit (including, without
limitation, amendment fees, correspondent bank fees, reissuance costs and
cancellation fees) upon notice and invoice by the Lender to the Borrower of such
costs and expenses.
3.5 Interest on Amounts Disbursed under Letters of Credit. The
Borrower agrees to pay to the Lender interest on any and all amounts drawn under
any Letter of Credit until reimbursed in full at a fluctuating rate per annum
equal to the rate applicable to Revolving Credit Loans. Interest accrued
hereunder shall be payable on demand. All payments by the Borrower to the Lender
shall be made in lawful currency of the United States and in immediately
available funds without setoff or counterclaim to the Lender at its office
specified in Subsection 9.3.
3.6 Computation of Interest and Fees; Payment not on Business Days.
(a) Any change in any interest rate under this Section 3
resulting from a change in the Prime Rate shall become effective as of the
opening of business on the day on which such change in the Prime Rate becomes
effective.
(b) If any payment under this Section 3 becomes due and payable
on a day which is not a Business Day, the maturity thereof shall be extended to
the next succeeding Business Day, and, in the case of any amount drawn under a
Letter of Credit, interest thereon shall be payable at the then applicable rate
during such extension.
3.7 Increased Costs. If any generally applicable law or regulation or
other Requirement of Law, or any change in the interpretation or application
thereof by any
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Governmental Authority charged with the administration thereof, shall either (a)
impose, modify, assess or deem applicable any reserve, special deposit,
assessment, capital adequacy or similar requirement against letters of credit
issued by the Lender or (b) impose on the Lender any other condition regarding
any Letter of Credit, and the result of any event referred to in clauses (a) or
(b) above shall be to increase the cost to the Lender of issuing or maintaining
such Letter of Credit, then, within ten (10) Business Days after delivery to the
Borrower by the Lender of a certificate as to the fact and amount of such
increased cost, the Borrower shall pay to the Lender such additional amounts
reasonably allocable to this Agreement which shall be sufficient to compensate
the Lender for such increased cost, together with interest on each such amount
from the date such certificate is received by the Borrower until payment in full
thereof at the rate provided in Subsection 3.5. A certificate as to the fact and
amount of such increased cost incurred by the Lender as a result of any event
mentioned in clauses (a) or (b) above, submitted by the Lender to the Borrower,
shall show the means by which such additional amounts have been calculated and
shall be conclusive, absent manifest error. This covenant shall survive the
termination of this Agreement and payment of the Note for a period of one (1)
year.
3.8 Nature of Obligations; Indemnities.
(a) The obligations of the Borrower under this Section 3 shall
be absolute and unconditional under any and all circumstances and irrespective
of any setoff, counterclaim or defense to payment which the Borrower may have or
have had against the Lender, any correspondents of the Lender or any beneficiary
of a Letter of Credit; provided that this provision shall not be deemed a waiver
by the Borrower of the assertion of any compulsory counterclaim. The Borrower
assumes all risks of the acts or omissions of the users of the Letters of Credit
and all risks of the misuse of the Letters of Credit. None of the Lender or any
of its correspondents shall be responsible:
(i) for the form, validity, sufficiency, accuracy,
genuineness or legal effect of any draft drawn under any Letter of Credit or any
document specified in any applications for any of the Letters of Credit, even if
it should in fact prove to be in any or all respects invalid, insufficient,
inaccurate, fraudulent, or forged and even if the Borrower shall have notified
the Lender or any of its correspondents thereof;
(ii) for the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign any of the Letters
of Credit or any of the rights or benefits thereunder or proceeds thereof in
whole or in part, which may prove to be invalid or ineffective for any reason;
(iii) for failure of any draft to bear any reference or
adequate reference to any of the Letters of Credit, or failure of any Person to
note the amount of any draft on the reverse of any of the Letters of Credit or
to surrender or to take up any of the Letters of Credit or to send forward any
such document apart from drafts as required by the terms of any of the Letters
of Credit, each of which provisions, if contained in a Letter of Credit itself,
it is agreed, may be waived by the Lender;
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(iv) for errors, omissions, interruptions or delays in
transmission or delivery of any messages, by mail, cable, telegraph, telex or
otherwise, whether or not in cipher;
(v) for any error, neglect, default, suspension or
insolvency of any correspondents of the Lender;
(vi) for errors in translation or for errors in
interpretation of technical terms;
(vii) for any loss or delay, in the transmission or
otherwise, of any such document or draft or of proceeds thereof;
(viii) for any failure of any draft or document presented
under a Letter of Credit to comply with, or for any determination by the Lender
whether the same complies with, the terms of such Letter of Credit; or
(ix) for any other circumstances whatsoever in making or
failing to make payment under a Letter of Credit; provided that the Borrower
shall have a claim against the Lender, and the Lender shall be liable to the
Borrower, to the extent, but only to the extent, of any direct, as opposed to
consequential, damages suffered by the Borrower which the Borrower proves were
caused by the Lender's willful misconduct or gross negligence. None of the above
shall affect, impair or prevent the vesting of any of the rights or powers of
the Lender. The Lender shall have the right to transmit the terms of the Letter
of Credit as requested without translating them.
(b) In furtherance and extension and not in limitation of the
specific provisions in this Section 3, (i) any action taken or omitted by the
Lender or by any of its correspondents under or in connection with any of the
Letters of Credit, if taken or omitted in good faith or pursuant to instructions
of the Borrower, shall be binding upon the Borrower and shall not put the Lender
or any of its correspondents under any resulting liability to the Borrower and
(ii) the Lender may accept documents that appear on their face to be in order,
without responsibility for further investigation, regardless of any notice or
information to the contrary.
(c) The Borrower hereby agrees at all times to protect,
indemnify and save harmless the Lender and its correspondents from and against
any and all claims, actions, suits and other legal proceedings, and from and
against any and all losses, claims, demands, liabilities, damages, costs,
charges, reasonable counsel fees and other expenses which they or any of them
may, at any time, sustain or incur by reason of or in consequence of or arising
out of the issuance of any of the Letters of Credit unless caused by the
Lender's gross negligence or willful misconduct; it being the intention of the
parties that this Agreement shall be construed and applied to protect and
indemnify the Lender and its correspondents against any and all risks involved
in the issuance of all of the Letters of Credit unless caused by the Lender's
gross negligence or willful misconduct, all of which risks, whether or not
foreseeable, being hereby assumed by the Borrower, including, without
limitation, any and all risks of all acts by any Governmental Authority,
domestic or foreign. The Lender and its correspondents shall not in any
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way be liable for any failure by any of them or any other Person to pay a draft
drawn under any of the Letters of Credit as a result of any acts, whether
rightful or wrongful, of any Governmental Authority, or any other cause not
readily within their control or the control of their respective correspondents,
agents or sub-agents. Without limiting the generality of the foregoing, the
Borrower shall reimburse the Lender and its correspondents, and shall pay and
indemnify the Lender and its correspondents, against payment of, out-of-pocket
costs and expenses, withholding taxes, liabilities and damages, including,
without limitation, attorneys' fees, incurred or sustained by any of them in
connection with any of the Letters of Credit or by reason of any such failure to
pay. Also, without limiting the generality of the foregoing, the Borrower shall
be responsible for, and shall reimburse the Lender upon demand for, any and all
commissions, fees and other charges paid or payable by the Lender to any bank
which shall be an advising bank or a beneficiary of a Letter of Credit which
shall, in reliance thereon, have issued its own letter of credit in respect of
obligations of the Borrower.
3.9 Inconsistency in Documents. In the event of any conflict or
inconsistency between any provision of any L/C Agreement, or the interpretation
or construction thereof, and any provision of this Agreement, or the
interpretation or construction thereof, then the provision of this Agreement, or
the interpretation or construction thereof, shall control.
3.10 Cash Collateral for Letters of Credit.
(a) Beginning on August 1, 2000, and each month thereafter
until the amount on deposit in the Cash Collateral Account equals 110% of the
face amount of all Letters of Credit, the Borrower shall deposit $250,000 into
an interest-bearing account maintained at the Lender (the "Cash Collateral
Account"). The sums on deposit in the Cash Collateral Account shall secure
payment of all Letters of Credit.
(b) In addition to and not in substitution of the Borrower's
payment obligations set forth in Subsection 3.10(a) above, the Borrower shall
pay to the Lender, for deposit into the Cash Collateral Account, all Excess
Prepayments, until the amount on deposit in the Cash Collateral Account equals
110% of the face amount of all Letters of Credit.
SECTION 4. REPRESENTATIONS AND WARRANTIES
To induce the Lender to enter into this Agreement and to make the
Revolving Credit Loans and to issue Letters of Credit, the Borrower hereby
represents and warrants to the Lender that:
4.1 Financial Condition. The following financial statements of the
Borrower have been delivered to the Lender:
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(a) the audited consolidated statement of income and retained
earnings of the Borrower for the fiscal year of the Borrower ended January 31,
2000, and the audited consolidated statement of cash flows of the Borrower for
such fiscal year, and the audited consolidated balance sheet of the Borrower as
at the end of such fiscal year; and
(b) the statement of income and retained earnings of the
Borrower for the quarterly accounting period of the Borrower ended January 31,
2000, and for the current fiscal year of the Borrower through the end of such
quarterly accounting period, and the statement of cash flows of the Borrower for
such quarterly accounting period and for the current fiscal year of the Borrower
through the end of such quarterly accounting period, and the balance sheet of
the Borrower as at the end of such quarterly accounting period.
The documents listed in this Subsection 4.1 have been prepared in conformity
with GAAP consistently applied, are correct and complete in all material
respects and present fairly the financial position of the Borrower as of the
dates of such statements and the results of operations of the Borrower for the
periods covered by such statements.
4.2 No Change. As of the Closing Date, there shall not have been any
material adverse change in the business, operations, property or financial or
other condition of the Borrower from the date of the most recent financial
statements referred to in Subsection 4.1 hereof.
4.3 Organization and Good Standing; Compliance with Law. The Borrower
(a) is a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware, (b) has the legal right to own and operate
its property, to lease the property it operates as lessee and to conduct the
business in which it is currently engaged, (c) is duly qualified to conduct
business and is in good standing under the laws of the State of Delaware, the
Commonwealth of Virginia, the Commonwealth of Pennsylvania, the State of Texas,
the State of Illinois, the State of California and each other jurisdiction in
which such qualification is required by applicable law, and (d) is in compliance
with all Requirements of Law except to the extent that the failure to comply
therewith could not, in the aggregate, reasonably be expected to have a Material
Adverse Effect.
4.4 Authorization; Enforceable Obligations. The Borrower has the legal
right to make, deliver and perform the Credit Documents to which it is a party
and to borrow hereunder and has taken all necessary action to authorize the
borrowings on the terms and conditions of this Agreement and the Note and to
authorize the execution, delivery and performance of the Credit Documents to
which it is a party. No consent or authorization of, filing with or other act by
or in respect of any Governmental Authority is required in connection with the
borrowings hereunder or with the execution, delivery, performance, validity or
enforceability of the Credit Documents to which the Borrower is a party except
those which have been obtained or performed and are in full force and effect.
This Agreement has been, and each other Credit Document to which it is a party
will be, duly executed and delivered on behalf of the Borrower. This Agreement
constitutes, and each other Credit Document to which it is a party when executed
and delivered will constitute, a legal, valid and binding obligation of the
Borrower
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enforceable against the Borrower in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
4.5 No Legal Bar. The execution, delivery and performance of the
Credit Documents to which the Borrower is a party, the borrowings hereunder and
the use of the proceeds thereof, will not violate any Requirement of Law or any
Contractual Obligation of the Borrower, and will not result in, or require, the
creation or imposition of any Lien on any of its properties or revenues pursuant
to any Requirement of Law or Contractual Obligation, except as contemplated by
the Credit Documents.
4.6 No Material Litigation; Labor Matters. Except as set forth in
Schedule 4.6, no litigation, proceeding or, to the Borrower's actual knowledge,
investigation of or before any arbitrator or Governmental Authority is pending
or, to the knowledge of the Borrower, threatened by or against the Borrower or
against any of its properties or revenues (a) with respect to any of the Credit
Documents or any of the transactions contemplated hereby or thereby, or (b)
which, if determined adversely to the Borrower, could reasonably be expected to
have a Material Adverse Effect. There are no strikes, work stoppages, grievance
proceedings or other controversies pending or, to the knowledge and belief of
the Borrower, imminent or threatened between the Borrower and any employees of
the Borrower or between the Borrower and any union or other collective
bargaining unit representing employees of the Borrower which could reasonably be
expected to have a Material Adverse Effect.
4.7 No Default. The Borrower is not in default under or with respect
to any Contractual Obligation in any respect which could reasonably be expected
to have a Material Adverse Effect. As of the date hereof, the Borrower has
failed to comply with:
(a) the Fixed Charge Coverage Ratio covenant (Subsection 7.1 of
the Amended and Restated Credit Agreement) for the fiscal year ending January
31, 2000;
(b) the Leverage Ratio covenant (Subsection 7.1 of the Amended
and Restated Credit Agreement) for the quarter ending January 31, 2000;
(c) the Minimum Tangible Net Worth covenant (Subsection 7.1 of
the Amended and Restated Credit Agreement) for the quarter ending January 31,
2000;
(d) the requirement to reduce the Existing Letters of Credit to
$3,500,000 by March 1, 2000 (Subsection 3.1 of the Amended and Restated Credit
Agreement);
(e) the requirement to deliver the original RICs to the Lender
by no later than February 29, 2000 (Subsection 6.14 of the Amended and Restated
Credit Agreement);
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(f) the requirement to obtain approval of its business plan by
its Board of Directors by no later than March 27, 2000 (Subsection 6.16 of the
Amended and Restated Credit Agreement); and
(g) the requirement that the Borrower deliver its final 10-K to
the Lender within 100 days of its fiscal year end (Subsection 6.1(f) of the
Amended and Restated Credit Agreement).
As of the Closing Date, upon execution of this Agreement and all
documents to be executed in connection with this Agreement, all existing Events
of Default shall have been cured or waived.
4.8 Ownership of Property; Liens. The Borrower has good title to all
of its property, and none of its property is subject to any Lien, except as
permitted by Subsection 7.3. The Borrower is not the taxpayer against whom the
State of Texas filed in Dallas County, Texas, on July 5, 1990, a state tax lien
in the amount of $23,341.01, no. 90130-2027.
4.9 Business Premises. The Borrower does not own, lease, sublease,
occupy, use or operate any real property or improvements other than the Borrower
Business Premises. The Borrower's chief executive office (within the meaning of
Section 9-103 of the Virginia Uniform Commercial Code) is located at the
Borrower Chief Executive Office. All financial books and records of the Borrower
are located at the Borrower Business Premises.
4.10 Subsidiaries. The Borrower has no Subsidiaries except for the
Canadian Corporations.
4.11 Environmental. To the Borrower's knowledge and except as set forth
in Schedule 4.11:
(a) no Hazardous Substance has been released, discharged,
spilled, emitted or disposed of on any Obligor Use Property by the Borrower or
under circumstances as a result of which the Borrower would be liable or
financially responsible for damages or the cost of remediation or clean-up;
(b) there is no existing Hazardous Substance Contamination of
any Obligor Use Property which was caused by the Borrower or under circumstances
as a result of which the Borrower would be liable or financially responsible for
damages or the cost of remediation or clean-up;
(c) all operations now or previously conducted on Obligor Use
Property by the Borrower comply with all Environmental Laws;
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(d) no underground storage tanks have been installed on any
Obligor Use Property by the Borrower or under circumstances as a result of which
the Borrower would be liable or financially responsible for damages or the cost
of removal, remediation or cleanup; and
(e) except as set forth in Schedule 4.11, the Borrower has not
received, and is not aware of, any Environmental Claim against, relating to or
affecting in any way the Borrower or the Borrower's use of any Obligor Use
Property or any operations conducted on any Obligor Use Property by the
Borrower.
4.12 Solvency. On the Closing Date and after giving effect to the
borrowings hereunder on such date and to all other Indebtedness being incurred
on such date in connection therewith (a) the sum of the assets, at a fair
valuation, of the Borrower will, as of such date, exceed the Borrower's debts as
reflected in its most current balance sheet, (b) the present fair saleable value
of the assets of the Borrower will, as of such date, be greater than the amount
that will be required to pay the Borrower's liability on its debts as such debts
become absolute and matured, and (c) the Borrower will have, as of such date,
sufficient capital with which to conduct its business. For purposes of this
Subsection, "debt" means "liability on a claim" and "claim" means any (i) right
to payment, whether or not such right is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed,
legal, equitable, secured or unsecured, or (ii) right to an equitable remedy for
breach of performance if such breach gives rise to a right to payment, whether
or not such right to an equitable remedy is reduced to judgment, fixed,
contingent, matured, unmatured, disputed, undisputed, secured or unsecured.
4.13 Taxes. The Borrower has filed or caused to be filed all tax
returns which are required to be filed by the Borrower, and the Borrower has
paid all taxes shown to be due and payable on said returns or on any assessments
made against it or any of its property and all other taxes, fees or other
charges imposed on it or any of its property by any Governmental Authority
(other than any taxes the amount or validity of which are currently being
contested in good faith by appropriate proceedings and with respect to which
reserves in conformity with GAAP have been provided on the books of the
Borrower); and no tax lien has been filed and, to the knowledge of the Borrower,
no claim is being asserted with respect to any such tax, fee or other charge.
4.14 Federal Regulations.
(a) No part of the proceeds of any of the Loans will be used
for "purchasing" or "carrying" any "margin stock" within the respective meanings
of each of the quoted terms under Regulation U of the Board of Governors of the
Federal Reserve System as now and from time to time hereafter in effect or for
any purpose which violates the provisions of any Regulations of the Board of
Governors; and
(b) if requested by the Lender, the Borrower will furnish to
the Lender a statement to the foregoing effect in conformity with the
requirements of FR Form U-I referred to in Regulation U.
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4.15 Employee Matters.
(a) With respect to each employee pension benefit plan, as
defined in Section 3(2) of the ERISA (a "Retirement Plan"), established or
maintained or to which contributions have been made by or for the Borrower, or
any Subsidiary of the Borrower (including, for purposes of this Section, any
Commonly Controlled Entity):
(i) each Retirement Plan, including all amendments, that is
intended to be a qualified plan under Section 401 of the Code (a "Qualified
Plan"), is the subject of a favorable determination letter from the Internal
Revenue Service (or an application for such a letter is presently pending);
(ii) each Qualified Plan is and has at all times been
qualified, in form and operation, under Section 401(a) of the Code;
(iii) the Retirement Plan is and has at all times been
administered, maintained and operated in compliance with its terms and with all
applicable provisions of the Code, ERISA and all other applicable Requirements
of Law;
(iv) neither the Borrower nor any Subsidiary of the
Borrower, nor, to the actual knowledge of any director or officer of the
Borrower or any Subsidiary of the Borrower, any other Person who or which is a
"party in interest" (as defined in Section 3(14) of ERISA), or a "disqualified
person" (as defined in Section 4975(e)(2) of the Code), has acted or failed to
act with respect to the Retirement Plan in any manner which constitutes a breach
of fiduciary responsibility within the meaning of Title I, Subtitle B, Part 4 of
ERISA, a prohibited transaction within the meaning of Section 4975 of the Code
or Sections 406 through 408 of ERISA, or any other material violation of ERISA;
(v) no contributions to or benefits payable under the
Retirement Plan are past due;
(vi) no proceedings or investigations are pending before
the Internal Revenue Service, the Department of Labor or any court with respect
to the Retirement Plan or the operation thereof;
(vii) if the Retirement Plan is a multiemployer plan, as
defined in Sections 3(37) or 4001(a)(3) of ERISA, neither the Borrower nor any
Subsidiary of the Borrower has incurred, and neither the Borrower nor any
Subsidiary of the Borrower expects to incur, any withdrawal liability which has
not been satisfied in connection with any complete or partial withdrawal from
the Retirement Plan occurring on or before the date hereof; and
(viii) if subject thereto, the Retirement Plan has been
funded in accordance with the minimum funding standards described in Section 412
of the Code and Title I, Subtitle B, Part 3 of ERISA (for which purpose there is
no "accumulated funding deficiency,"
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whether or not waived), and in accordance with principles that are actuarially
sound for such Retirement Plan.
(b) With respect to each Retirement Plan which is a defined
benefit plan, as defined in Section 3(35) of ERISA:
(i) no event has occurred within the twelve (12)-month
period preceding the date hereof, or, to the knowledge of any director or
officer of the Borrower or any Subsidiary of the Borrower, is threatened or
about to occur, which would materially adversely affect the actuarial status of
the Retirement Plan;
(ii) no fact exists in connection with the Retirement Plan
(or with respect to any other defined benefit plan maintained by the Borrower or
any Subsidiary of the Borrower at any time after September 2, 1974) which
constitutes a reportable event (other than those for which notice has been
waived by the PBGC) under Section 4043(b) of ERISA or which constitutes grounds
for termination by, or other liability to, the PBGC pursuant to Title IV of
ERISA;
(iii) all premiums due the PBGC have been timely paid; and
(iv) if the Retirement Plan were terminated, the
termination would qualify under the standard termination procedure, as described
in Section 4041(b) of ERISA (and Part 2617 of the PBGC regulations), without
payment of any additional contributions by the Borrower or any Subsidiary of the
Borrower.
(c) With respect to each employee welfare benefit plan, as
defined in Section 3(1) of ERISA (a "Welfare Plan"), established or maintained
or to which contributions have been made by or for the Borrower or any
Subsidiary of the Borrower:
(i) the Welfare Plan is and has at all times been
administered, maintained and operated in substantial compliance with its terms
and with all applicable provisions of ERISA and the Code (including the
continuation coverage requirements for group health plans, commonly known as
"COBRA requirements," under former Sections 106(b), 162(i)(2) and (3), and
162(k) of the Code, Section 4980B of the Code and Sections 601-608 of ERISA) and
all other applicable Requirements of Law;
(ii) neither the Borrower nor any Subsidiary of the
Borrower nor, to the actual knowledge of any director or officer of the Borrower
or any Subsidiary of the Borrower, any other Person who or which is a party in
interest as defined in Section 3(14) of ERISA, has acted or failed to act with
respect to the Welfare Plan in any manner which constitutes a breach of
fiduciary responsibility within the meaning of Title I, Subtitle B, Part 4 of
ERISA, a prohibited transaction within the meaning of Sections 406 through 408
of ERISA, or any other violation of ERISA;
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(iii) no contributions to or benefits payable under the
Welfare Plan are past due;
(iv) no proceedings, investigations, filings or other
matters are pending before the Department of Labor or any court, with respect to
the Welfare Plan or the operation thereof; and
(v) the Welfare Plan is either unfunded or is funded solely
through insurance contracts.
(d) All Retirement Plans and Welfare Plans (jointly "Benefit
Plans") are in substantial compliance with all applicable reporting, disclosure
and other requirements of the Code and ERISA.
(e) There are no actions, suits or claims pending or, to the
best knowledge of the Borrower or any Subsidiary of the Borrower, threatened
with respect to any Benefit Plan, or any administrator or fiduciary thereof,
other than routine claims for benefits under such Plan.
4.16 Investment Company Act; Other Regulations. The Borrower is not an
"investment company", or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended.
4.17 Accuracy and Completeness of Information. All information and
reports with respect to the Borrower (other than projections) furnished to the
Lender by the Borrower or on behalf of the Borrower were, at the time the same
were so furnished, complete and correct in all material respects, or have been
subsequently supplemented by other information and reports to the extent
necessary to give the Lender a fair and accurate knowledge of the subject matter
in all material respects. All projections with respect to the Borrower so
furnished by the Borrower, as supplemented, were prepared and presented in good
faith, it being recognized by the Lender that such projections as to future
events are not to be viewed as facts and that actual results during the period
or periods covered by any such projections may differ from the projected
results. No fact is known to the Borrower which materially and adversely affects
or in the future may (so far as the Borrower can reasonably foresee) materially
and adversely affect the business, assets or liabilities, financial condition,
results of operations or business prospects of the Borrower which has not been
set forth in the financial statements referred to in Subsection 4.1 or in such
information and reports disclosed in writing to the Lender prior to the date
hereof. No document furnished or statement made in writing to the Lender by the
Borrower in connection with the negotiation, preparation or execution of this
Agreement contains any untrue statement of a material fact, or omits to state
any such material fact necessary in order to make the statements contained
therein not misleading, in either case which has not been corrected,
supplemented or remedied by subsequent documents furnished or statements made in
writing to the Lender.
4.18 Purpose of Loans. The Borrower shall use the proceeds of all
Revolving Credit Loans for working capital and to fund a limited amount of
Capital Expenditures.
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4.19 CLCQ and Delta College.
(a) Each of CLCQ and Delta College (i) is a Quebec corporation
duly organized, validly existing and in good standing, (ii) has the legal right
to own and operate its property, to lease the property it operates as lessee and
to conduct the business in which it is currently engaged, (iii) is duly
qualified to conduct business and is in good standing in each jurisdiction in
which such qualification is required by applicable Requirement of Law, and (iv)
is in compliance with all Requirements of Law except to the extent that the
failure to comply therewith could not, in the aggregate, reasonably be expected
to have a Material Adverse Effect.
(b) The authorized capital stock of CLCQ consists of two (2)
classes, namely Common Shares, having voting rights, and Dividend Access Shares,
having no voting rights except as provided in Sections 10.1, 11.1 and 12.2 of
the Articles of Incorporation of CLCQ. All of the issued and outstanding capital
stock of each class of CLCQ stock is legally and beneficially owned by the
persons and in the amounts set forth in Exhibit F attached hereto. All of the
issued and outstanding capital stock of each class of Delta College is legally
and beneficially owned by CLCQ, with the discretionary power and right to
exercise all rights and privileges, including voting rights, with respect
thereto.
(c) No litigation, proceeding or, to the Borrower's actual
knowledge, investigation of or before any arbitrator or Governmental Authority
is pending or, to the knowledge of the Borrower, threatened by or against CLCQ
or Delta College or against any of their properties or revenues which, if
determined adversely to CLCQ or Delta College, as the case may be, could
reasonably be expected to have a Material Adverse Effect. There are no strikes,
work stoppages, grievance proceedings or other controversies pending or, to the
knowledge and belief of the Borrower, imminent or threatened between CLCQ or
Delta College and any employees of CLCQ or Delta College, respectively, or
between CLCQ or Delta College and any union or other collective bargaining unit
representing employees of CLCQ or Delta College, respectively, which could
reasonably be expected to have a Material Adverse Effect.
(d) Neither CLCQ nor Delta College is in default under or with
respect to any Contractual Obligation in any respect which could reasonably be
expected to have a Material Adverse Effect. The sum of the assets of each of
Delta College and CLCQ, at a fair valuation, exceeds the debts of CLCQ and Delta
College, respectively, exclusive, in the case of Delta College, of debts of
Delta College to the Borrower or CLCQ. The present fair salable value of the
assets of each of CLCQ and Delta College is greater than the amount required to
pay the liability on the debts of CLCQ and Delta College, respectively, as such
debts become absolute and matured, exclusive, in the case of Delta College, of
debts of Delta College to the Borrower or CLCQ. Each of CLCQ and Delta College
has sufficient capital with which to conduct its business. For purposes of this
Subsection, "debt" means "liability on a claim" and "claim" means any (i) right
to payment, whether or not such right is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed,
legal, equitable, secured or unsecured, or (ii) right to an equitable remedy for
breach of performance if such breach gives rise to a right to payment, whether
or not such right to an equitable remedy is
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40
reduced to judgment, fixed, contingent, matured, unmatured, disputed,
undisputed, secured or unsecured.
(e) Each of CLCQ and Delta College has good title to all of its
property, and none of such property is subject to any Lien, except as permitted
by Subsection 7.3.
(f) To the Borrower's knowledge: (i) no Hazardous Substance has
been released, discharged, spilled, emitted or disposed of on any Obligor Use
Property by CLCQ or Delta College or under any circumstances as a result of
which CLCQ or Delta College would be liable or financially responsible for
damages or the cost of remediation or clean-up; (ii) there is no existing
Hazardous Substance Contamination of any Obligor Use Property which was caused
by CLCQ or Delta College or under circumstances as a result of which CLCQ or
Delta College would be liable or financially responsible for damages or the cost
of remediation or clean-up; (iii) all operations now or previously conducted on
Obligor Use Property by CLCQ or Delta College comply with all Environmental
Laws; (iv) no underground storage tanks have been installed on any Obligor Use
Property by CLCQ or Delta College or under circumstances as a result of which
CLCQ or Delta College would be liable or financially responsible for damages or
the cost of removal, remediation or clean-up; and (v) neither CLCQ nor Delta
College has received, and neither CLCQ nor Delta College is aware of, any
Environmental Claim against, relating to or affecting in any way CLCQ or Delta
College or the use of any Obligor use Property by CLCQ or Delta College or any
operations conducted on any Obligor Use Property by CLCQ or Delta College.
(g) Each of CLCQ and Delta College has filed or caused to be
filed all tax returns which are required to be filed by it, and each of CLCQ and
Delta College has paid all taxes shown to be due and payable on said returns on
any assessments made against it or any of its property and all other taxes, fees
or other charges imposed on it or any of its property by any Governmental
Authority (other than taxes the amount or validity of which are currently being
contested in good faith by appropriate proceedings and with respect to which
reserves in conformity with GAAP have been provided on the books of CLCQ or
Delta College, as applicable), and, to the knowledge of the Borrower, no claim
is being asserted with respect to any such tax, fee or other charge. No tax lien
has been filed against CLCQ or Delta College or any of their assets.
4.20 No Intent to File Bankruptcy. The Borrower does not have any
present intent (i) to file any voluntary petition in bankruptcy under any
chapter of the Bankruptcy Code or to have any involuntary petition in bankruptcy
filed against it under any chapter of the Bankruptcy Code or (ii) in any manner
directly or indirectly to seek relief, protection, reorganization, liquidation,
dissolution, or similar relief for debtors under any federal, state or local
law, or in equity, or (iii) in any manner directly or indirectly to cause any
part of the Collateral to be the subject of any bankruptcy or insolvency
proceedings or the property of any bankruptcy or insolvency estate; and the
Borrower acknowledges and agrees that the filing of any such petition or any
action taken by the Borrower to cause the filing of any such petition would be
in bad faith, contrary to the purposes of the Bankruptcy Code, and solely for
purposes
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of delaying, inhibiting, or interfering with the exercise by the Lender of its
rights and remedies with respect to the Collateral and the Credit Facilities.
SECTION 5. CONDITIONS PRECEDENT
5.1 Documents and Other Deliveries at Closing. No waiver or other
agreement of the Lender as set forth in this Agreement or any other document
executed contemporaneously with this Agreement shall be effective or binding on
the Lender until and unless the Lender shall have received:
(a) Credit Documents. In form and content satisfactory to the
Lender: (i) this Agreement, duly executed and delivered by an Authorized Officer
of the Borrower; (ii) the Third Amended and Restated Revolving Credit Note,
conforming to the requirements hereof and duly executed and delivered by an
Authorized Officer of the Borrower; (iii) the Second Amended and Restated
Security Agreement duly executed and delivered by an Authorized Officer of the
Borrower; and (iv) such financing statements executed by the Borrower as the
Lender may require to further evidence or perfect the rights and interests
granted or contemplated to be granted to or for the benefit of the Lender
pursuant to the Credit Documents.
(b) Borrowing Certificate. A Borrowing Certificate of the
Borrower dated the Closing Date, substantially in the form of Exhibit D, with
appropriate insertions and attachments, satisfactory in form and substance to
the Lender and its counsel, duly executed by an Authorized Officer of the
Borrower.
(c) Borrower Proceedings. Copies of all corporate proceedings
undertaken by the Borrower, in form and substance satisfactory to the Lender,
authorizing (i) the execution, delivery and performance of this Agreement and
the other Credit Documents as described in subparagraph (a) above, (ii) the
borrowings contemplated thereunder and (iii) the granting by it of the security
interests and other Liens granted or to be granted by it pursuant to the Credit
Documents, Certified as to authenticity by an Authorized Officer of the
Borrower, as of the Closing Date, which certificate shall state that the
proceedings thereby Certified are in full force and effect and have not been
amended, modified, revoked or rescinded as of the date of such certificate.
(d) Borrower Incumbency Certificate. Certificate of an
Authorized Officer of the Borrower, dated the Closing Date, as to the incumbency
and signature of the Authorized Officers of the Borrower executing any Credit
Document, satisfactory in form and substance to the Lender and its counsel, duly
executed by the Authorized Officers of the Borrower.
(e) Filings, Registrations and Recordings. All filings,
registrations and recordings necessary, in the judgment of the Lender, to
perfect, make enforceable or give first priority to any security interest or
other Lien granted to or for the benefit of the Lender pursuant to the Credit
Documents, with the payment of any necessary fee, tax or expense relating
thereto.
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(f) Other Documents. Such other documents as the Lender or its
counsel shall reasonably require.
(g) Payment of Expenses. Payment of all expenses of the Lender
then incurred, pursuant to Section 9.6 below.
5.2 Conditions to Each Loan. The agreement of the Lender to make any
Revolving Credit Loan requested to be made by it on any date, or to issue any
Letter of Credit requested to be issued by it on any date, is subject to the
satisfaction of the following conditions precedent as of the date such Revolving
Credit Loan is requested to be made or such Letter of Credit is requested to be
issued:
(a) Representations and Warranties. Each of the representations
and warranties made by the Borrower in or pursuant to the Credit Documents shall
be true and complete in all material respects on and as of such date as if made
on and as of such date.
(b) No Default. No Default or Event of Default shall be
continuing on such date.
(c) No Material Litigation. No Material Litigation shall be
pending or, to the Borrower's knowledge, overtly threatened in writing against
the Borrower or any Subsidiary of the Borrower.
(d) No Material Adverse Change. There shall not have occurred
any event or change since the date of the financial statements referred to in
Subsection 4.1 which has had a Material Adverse Effect.
(e) Additional Matters. All corporate and other proceedings,
and all documents, instruments and other legal matters in connection with the
transactions contemplated by this Agreement and the other Credit Documents shall
be satisfactory in form and substance to the Lender, and the Lender shall have
received such other instruments, legal opinions and other documents in respect
of any aspect or consequence of the transactions contemplated hereby or thereby
as the Lender shall reasonably request. Each borrowing by the Borrower hereunder
shall constitute a representation and warranty by the Borrower as of the date of
such borrowing that the conditions contained in this Subsection 5.2 have been
satisfied.
5.3 Post-Closing Requirements.
(a) Landlord Waivers. The Borrower shall make its best,
diligent effort to deliver to the Lender on or before June 30, 2000 a written
agreement of (i) the owners of the Borrower Institutions located in Virginia,
(ii) the owners of the Borrower Institutions located in Pennsylvania, and (iii)
the owners of the Borrower Institutions located in Texas, consenting to
enforcement of the Lender's rights in connection therewith, shall deliver to the
Lender promptly
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upon delivery to a landlord a copy of each piece of correspondence directed to
the landlord by the Borrower requesting or with respect to such consent, and
shall deliver to the Lender promptly upon receipt copies of all correspondence
received from any landlord with respect to such consent. The Borrower authorizes
the Lender to communicate directly with any landlord to resolve any issues
regarding the landlord's consent to the Lender's enforcement of its rights in
the Borrower's property located at the landlord's premises.
(b) Bank Notice Letters. Promptly upon request of the Lender,
the Borrower shall execute and deliver to the Lender letters in the form of
Exhibit G directed to each bank where the Borrower maintains a depository
account notifying the bank of the Lender's superior security interest in the
account.
(c) Board of Director Approval. On or before May 31, 2000, the
Borrower shall deliver evidence satisfactory to the Lender of the approval by
the Borrower's Board of Directors of the business plan (and the May 5, 2000
budget) described in Subsection 6.16.
SECTION 6. AFFIRMATIVE COVENANTS
The Borrower agrees that, until all of the Obligations have been paid in
full and there exists no contingent or non-contingent commitment by the Lender
which could give rise to any Obligations, the Borrower shall:
6.1 Financial Information. Furnish to the Lender by mail at 0000 Xxxxx
Xxxxxx Xxxx, XX-0000, XxXxxx, Xxxxxxxx 00000-0000, attention J. Xxxxx Xxxxxxxxx,
or by facsimile to J. Xxxxx Xxxxxxxxx at 000-000-0000:
(a) as soon as available, but in no event more than 35 days
after the end of each month of February, March, May, June, August, September,
November and December, a statement of income and retained earnings of the
Borrower and its Subsidiaries for the month, a balance sheet of the Borrower and
its Subsidiaries as of the end of the month, and a statement of cash flows for
the Borrower and its Subsidiaries for the month, all with supporting schedules,
and all in detail and scope satisfactory to the Lender, including sufficient
detail showing the calculation of each component of each financial covenant set
forth in Subsection 7.1 below, and Certified by the chief financial officer of
the Borrower;
(b) as soon as available, but in no event more than 45 days
after the end of each fiscal quarter ending on April 30, July 31 and October 31,
a statement of income and retained earnings of the Borrower and its Subsidiaries
for the quarter, a balance sheet of the Borrower and its Subsidiaries as of the
end of the quarter, and a statement of cash flows for the Borrower and its
Subsidiaries for the quarter, all with supporting schedules, and all in detail
and scope satisfactory to the Lender, including sufficient detail showing the
calculation of each component of each financial covenant set forth in Subsection
7.1 below, and Certified by the chief financial officer of the Borrower;
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(c) as soon as available but in no event more than 60 days
after the end of each fiscal year, a statement of income and retained earnings
for the Borrower and its Subsidiaries for the fiscal year, a balance sheet of
the Borrower and its Subsidiaries as of the end of the fiscal year, and a
statement of cash flows for the Borrower and its Subsidiaries for the fiscal
year, all with supporting schedules, and all in detail and scope satisfactory to
the Lender, including sufficient detail showing the calculation of each
component of each financial covenant set forth in Subsection 7.1 below, and
Certified by the chief financial officer of the Borrower;
(d) not later than the earlier of (i) 24 hours after filing
with the Securities and Exchange Commission or (ii) 55 days after the end of
each quarterly accounting period of the Borrower (A) a copy of the Borrower's
Securities and Exchange Commission Form l0-Q containing a consolidated statement
of income and retained earnings of the Borrower and its Subsidiaries for such
quarterly accounting period and for the current fiscal year of the Borrower
through the end of such quarterly accounting period, and a consolidated
statement of cash flows of the Borrower and its Subsidiaries for the current
fiscal year of the Borrower through the end of such quarterly accounting period,
and a consolidated balance sheet of the Borrower and its Subsidiaries as of the
end of such quarterly accounting period, all prepared in accordance with GAAP
consistently applied, and accompanied by (x) an Officer Default Certificate as
of the end of such quarterly accounting period, and (y) an Officer Financial
Covenant Certificate as of the end of such quarterly accounting period, and, if
applicable, (B) a consolidating statement of income and retained earnings of the
Borrower and its Subsidiaries for such quarterly accounting period and for the
current fiscal year of the Borrower through the end of such quarterly accounting
period, and a consolidating statement of cash flows of the Borrower and its
Subsidiaries for such quarterly accounting period and for the current fiscal
year of the Borrower through the end of such quarterly accounting period, and a
consolidating balance sheet of the Borrower and its Subsidiaries as of the end
of such quarterly accounting period, all prepared in accordance with GAAP
consistently applied;
(e) not later than 55 days after the end of each quarterly
accounting period of the Borrower and in form and content satisfactory to
Lender, a schedule and aging of student account receivables (including in-school
and out-of-school receivables) of the Borrower and its Subsidiaries as of the
end of such quarterly accounting period;
(f) not later than the earlier of (i) 24 hours after filing
with the Securities and Exchange Commission or (ii) 100 days after the end of
each fiscal year of the Borrower (A) a copy of the Borrower's Securities and
Exchange Commission Form 10-K containing a consolidated statement of income and
retained earnings of the Borrower and its Subsidiaries for such fiscal year, and
a consolidated statement of cash flows of the Borrower and its Subsidiaries for
such fiscal year, and a consolidated balance sheet of the Borrower and its
Subsidiaries as at the end of such fiscal year, setting forth in each case in
comparative form corresponding figures for the preceding fiscal year of the
Borrower, all prepared in accordance with GAAP consistently applied and examined
and audited by independent certified public accountants satisfactory to the
Lender, in the discretion of the Lender exercised in good faith, and accompanied
by (w) a report of such independent certified public accountants with respect to
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such financial statements and examination which is satisfactory to the Lender,
(x) an Accountant Default Certificate, (y) an Officer Financial Covenant
Certificate as at the end of such fiscal year, and (z) an Officer Default
Certificate as at the end of such fiscal year, and (zz) an Officer Financial Aid
Program Certificate for each fiscal year, and, if applicable, (B) a
consolidating statement of income and retained earnings of the Borrower and its
Subsidiaries for such fiscal year, and a consolidating statement of cash flows
of the Borrower and its Subsidiaries for such fiscal year, and a consolidating
balance sheet of the Borrower and its Subsidiaries as at the end of such fiscal
year, setting forth in each case in comparative form corresponding figures for
the preceding fiscal year of the Borrower, all prepared in accordance with GAAP
consistently applied by independent certified public accountants satisfactory to
the Lender, in the discretion of the Lender exercised in good faith;
(g) as soon as available but not later than April 30 of each
year, a copy of projections by the Borrower of the operating budget and cash
flow of the Borrower and its Subsidiaries for the fiscal year of the Borrower
and its Subsidiaries, in substantially the form attached as Exhibit E; and (ii)
as soon as available but not later than one (1) week after its submission to the
U.S. Department of Education, a copy of a compliance audit of the administration
by the Borrower and its Domestic Subsidiaries of Student Financial Aid Programs
under Title IV of the Higher Education Act of 1965 conducted by independent
certified public accountants or a government auditor and complying with all
Requirements of Law;
(h) promptly after transmission thereof, copies of all
registration statements and all final regular, special or periodic reports which
the Borrower or any of its Subsidiaries files with the United States Securities
and Exchange Commission (or any successor thereto) or with any stock exchange;
and
(i) promptly after transmission thereof, but in no event less
than once each year, a copy of the Management Letter or Internal Control Letter
prepared by the Borrower's CPA firm and delivered to the Borrower; and
(j) promptly after transmission thereof, all written
information submitted to the Board of Directors, and all minutes of Board of
Director and Committee meetings; and
(k) promptly, such additional financial and other information
as the Lender may from time to time reasonably request.
6.2 Payment of Obligations. Pay, discharge or otherwise satisfy at or
before maturity or before they become delinquent, as the case may be, all of its
obligations of whatever nature; and cause each of its Subsidiaries to pay,
discharge or otherwise satisfy at or before maturity or before they become
delinquent, as the case may be, all of its obligations of whatever nature.
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6.3. Conduct of Business and Maintenance of Existence. (a) Continue,
and cause each of its Subsidiaries to continue, to engage in the business of
information technology education; (b) preserve, renew and keep in full force and
effect, and cause each of its Subsidiaries to preserve, renew and keep in full
force and effect, its organizational existence; (c) take, and cause each of its
Subsidiaries to take, all reasonable action to maintain all rights, privileges
and franchises necessary or desirable in the normal conduct of its business; and
(d) comply with, and cause each of its Subsidiaries to comply with, all
Contractual Obligations and Requirements of Law except to the extent that
failure to comply therewith could not, in the aggregate, reasonably be expected
to have a Material Adverse Effect.
6.4 Maintenance of Property; Insurance. (a) Keep, and cause each of
its Subsidiaries to keep, all property useful and necessary in its business in
good working order and condition; and (b) maintain, and cause each of its
Subsidiaries to maintain, with financially sound and reputable insurance
companies such insurance in at least such amounts and against at least such
risks (but including in any event property casualty, liability, product
liability and business interruption) as is reasonably prudent, such insurance
being acceptable to the Lender; and furnish to the Lender, upon written request,
full information as to the insurance carried.
6.5 Inspection of Property and Books and Records. (a) Keep, and cause
each of its Subsidiaries to keep, proper books and records in which true and
complete entries in conformity with GAAP and all Requirements of Law shall be
made of all dealings and transactions in relation to its business and
activities; and (b) permit representatives of the Lender to visit and inspect
any of its properties to review, audit, check and inspect the Borrower's books
and records at any time with or without notice and to make abstracts and
photocopies thereof, and to discuss the affairs, finances and accounts of the
Borrower with the officers, directors, and other representatives of the Borrower
and its accountant all at such times during normal business hours and other
reasonable times and as often as the Lender may request. The Borrower shall pay
to the Lender, upon demand, a cost of all such audits, field examinations,
reviews, verifications and inspections.
6.6 Notices. Promptly give notice to the Lender:
(a) of the occurrence of any Default or Event of Default;
(b) (i) of receipt of any written notice of any default or
event of default under or as defined in any Contractual Obligation of the
Borrower or any of its Subsidiaries which could reasonably be expected to have a
Material Adverse Effect; (ii) of any notice or knowledge that the Borrower or
any Borrower Institution, or any educational program of any thereof, has been
Disqualified, and (iii) of any notice or knowledge of any action or proceeding
against, or any investigation or review of, the Borrower, any of its
Subsidiaries or any Borrower Institution, or any educational program conducted
by any thereof, by or on behalf of any accrediting agency, the Department of
Education or any State of the United States of America or any other Governmental
Authority;
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(c) of Material Litigation pending or overtly threatened in
writing against the Borrower or any of its Subsidiaries;
(d) of any litigation or proceeding pending against the
Borrower or any of its Subsidiaries involving an uninsured amount of One Hundred
Thousand Dollars ($100,000.00) or more or in which injunctive or similar relief
is sought; and
(e) of the occurrence of any event which could reasonably be
expected to have a Material Adverse Effect.
Each notice pursuant to this Subsection 6.6 shall be accompanied by a statement
of an Authorized Officer setting forth details of the occurrence referred to
therein and stating what action the Borrower proposes to take with respect
thereto.
6.7 Government Regulations. Subject to any other more specific
provisions of this Agreement, comply with, and cause each of its Subsidiaries to
comply with, all applicable Requirements of Law relating to the conduct of its
business.
6.8 Employee Benefit Plans.
(a) At all times administer, maintain and operate, and cause
each Subsidiary of the Borrower at all times to administer, maintain and
operate, each of its Benefit Plans in conformity in all material respects with
all applicable provisions of ERISA and other federal and state statutes relating
to employee benefit plans (including the continuation coverage requirements of
ERISA and the Code for group health plans under Section 4980B of the Code and
Sections 601-608 of ERISA);
(b) at all times make, and cause each such Subsidiary of the
Borrower at all times to make, all required contributions and premium payments
under each Benefit Plan for all periods after the date hereof;
(c) comply in all material respects with, and cause each
Subsidiary of the Borrower to comply in all material respects with, all
applicable reporting, disclosure and other requirements of ERISA and the Code as
they relate to Benefit Plans, and, if reasonably requested by the Lender,
furnish the Lender with copies of all reports filed in connection therewith
promptly after the filing thereof;
(d) notify the Lender promptly of any fact, including, without
limitation, any reportable event under Section 4043(b) of ERISA, arising in
connection with any Retirement Plan which might constitute grounds for the
termination thereof by the PBGC; and
(e) furnish to the Lender, promptly upon its reasonable request
therefor, such additional information concerning any Benefit Plan as the Lender
may request.
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6.9 Environmental.
(a) Cause all operations of the Borrower and its Subsidiaries
to be conducted in compliance in all material respects with all applicable
Environmental Laws;
(b) promptly deliver to the Lender copies of all reports
prepared by any Governmental Authority, any environmental auditor or engineer,
or any other Person, relating to or in connection with any Environmental Claim
against the Borrower or any of its Subsidiaries, unless the Borrower cannot
obtain such reports or copies thereof;
(c) notify the Lender in writing within 10 Business Days after
the Borrower or any of its Subsidiaries shall have become aware of any
Environmental Claim against the Borrower or any of its Subsidiaries or caused by
any operations conducted by the Borrower or any of its Subsidiaries;
(d) in the event that, to the knowledge of the Borrower or any
of its Subsidiaries, any Hazardous Substance Contamination shall occur which was
caused by the Borrower or any of its Subsidiaries or under circumstances as a
result of which the Borrower or any of its Subsidiaries would be liable or
financially responsible for damages or the cost of remediation or clean-up, or
the Borrower or any of its Subsidiaries shall become aware of any non-compliance
in any material respect of any Obligor Use Property with any Environmental Law
by the Borrower or any of its Subsidiaries which occurred previously, exists now
or shall exist hereafter (i) notify the Lender thereof in writing within 10
Business Days, (ii) if requested by the Lender, engage, at the Borrower's
expense, and deliver to the Lender as promptly as feasible an Environmental
Assessment with respect thereto containing or accompanied by a plan and budget
in form and content reasonably satisfactory to the Lender for the remediation or
cure thereof, (iii) as promptly as feasible, commence and diligently pursue to
completion, or cause to be promptly commenced and diligently pursued to
completion, all actions which are necessary to remediate or cure the same, all
contractors to perform any work in connection therewith to be reasonably
satisfactory to the Lender, and (iv) if requested by the Lender, deliver to the
Lender, within 15 days after request therefor by the Lender, a bond, letter of
credit or similar financial assurance reasonably satisfactory to the Lender
evidencing that the funds necessary are available to pay the cost of such cure
or remediation; and
(e) indemnify, protect and defend the Lender, and its officers,
directors, employees, attorneys and agents, and save harmless the Lender, and
its officers, directors, employees, attorneys and agents, from and against any
and all claims, demands, damages, losses, liabilities, obligations, penalties,
litigation, defenses, judgments, decrees, orders, directives, suits, actions,
proceedings, costs and expenses (including, without limitation, counsel fees and
expenses and experts' fees and expenses) of any kind or nature whatsoever which
may at any time be imposed upon, paid or incurred by or asserted or awarded
against any of them relating to, resulting from or arising out of (i) the
presence, manufacture, generation, production, processing, use, handling,
treatment, storage, disposal, transportation or distribution on or about any
Obligor Use Property of any Hazardous Substance by the Borrower or under any
circumstances as a result of which the Borrower or any of its Subsidiaries would
be liable or
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financially responsible for damages or the cost of remediation or clean-up, (ii)
any Hazardous Substance Contamination by the Borrower or any of its Subsidiaries
or under circumstances as a result of which the Borrower or any of its
Subsidiaries would be liable or financially responsible for damages or the cost
of remediation or clean-up, (iii) any non-compliance in any material respect of
any Obligor Use Property with any Environmental Law by the Borrower or any of
its Subsidiaries which occurred previously, now exists or shall exist hereafter,
or (iv) any costs associated with any remedial or curative action relating to
any Hazardous Substances, any Hazardous Substance Contamination or any violation
of any applicable Environmental Laws by the Borrower or any of its Subsidiaries.
The indemnification obligations of the Borrower under this Subsection shall
survive the termination of this Agreement and payment of the outstanding Note
for a period of 3 years. The Lender agrees not to delay release of Collateral in
accordance with the last sentence of Subsection 2.2 of the Borrower Security
Agreement on account of any contingent obligation of the Borrower under the
preceding sentence.
6.10 Perfection of Security Interest. Cause the security interest
granted to the Lender pursuant to the Borrower Security Agreement and any other
documents executed contemporaneously with this Agreement to be duly perfected in
accordance with applicable law with respect to all of the Collateral.
6.11 Year 2000 Compatibility. (intentionally deleted).
6.12 Primary Bank Accounts. Maintain all primary depository accounts at
the Lender. The Borrower shall either deposit or (to the extent cash receipts
are deposited into a non-Lender bank account because the Lender does not have a
branch near the Borrower Institution) transfer daily all cash receipts into the
Operating Account. Upon the occurrence of an Event of Default, and immediately
upon demand by the Lender, the Borrower shall deposit all cash receipts directly
into the Operating Account, and shall make all disbursements (except for tuition
refunds) from the Operating Account.
6.13 Weekly Cash Flow Projections. Furnish to the Lender by facsimile
to Mr. J. Xxxxx Xxxxxxxxx at 000-000-0000, each Tuesday beginning on May 16,
2000, the Borrower's cash flow projection (of expected cash inflows and outflows
and of expected borrowing requirements) for each of the next six weekly periods,
together with the actual cash flow data for the prior week ending the previous
Friday, in detail and scope satisfactory to the Lender in the Lender's sole and
absolute discretion, certified by the Chief Financial Officer of the Borrower.
6.14 Delivery of Original Retail Installment Contracts. Deliver by the
25th day of each month physical possession to the Lender of originals (with
original signatures) of all Retail Installment Contracts (except those relating
to Borrower Institutions located in Illinois), with respect to which the
obligor/payor is no longer attending any classes being given by the Borrower,
having either dropped the program or graduated from the program, and on which
payments are due and owing to the Borrower, which are in the Borrower's
possession and which the Borrower has failed to deliver to the Lender. The
Lender acknowledges that the original RICs will be delivered to the Lender in a
sealed envelope. The Borrower shall deliver with the originals of the RICs
copies of the Borrower's business records setting forth payments received
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50
on the RIC and the current balance owing on the RIC, an assignment (subject to
the terms of the Borrower Security Agreement) executed by the Borrower covering
each original RIC (on a form to be supplied by the Lender), and a certificate of
the Borrower's CPA firm confirming that the CPA firm has reviewed the contents
of the package of RICs delivered to the Lender and that the list prepared by the
Borrower setting forth the contents of the package of RICs is true, accurate and
complete. The Borrower shall deliver to the Lender within twenty-five (25) days
after the end of each month a report showing payments and current balances on
each original RIC, possession of which the Borrower has delivered to the Lender.
6.15 Business Consultant. The Borrower acknowledges that it has
retained XxXxxxx Group, Inc., a professional turnaround consultant (the
"Consultant"). The Borrower acknowledges that the Consultant shall assist the
Borrower in making permanent improvements in all aspects of the daily operations
and management of the Borrower. The Borrower acknowledges that the Consultant
shall assess the Borrower's current financial operations and organization, and
shall render advice to the Borrower regarding cost reduction measures,
streamlining of the organization and improving profitability. The Borrower
authorizes the Consultant to communicate directly with the Lender at any and all
times to discuss or review any aspect of the Borrower's business and any matter
regarding the engagement between the Borrower and the Consultant, and to
transmit any information relating to the Borrower's business to the Lender, all
without any further authorization from or notice to the Borrower. The Borrower
shall not terminate its contract with the Consultant unless the Lender shall so
consent in writing, which consent shall not be unreasonably withheld or delayed.
The Borrower shall continue employing the services of the Consultant until the
Lender is satisfied, in its absolute and sole discretion, that the Consultant
has fulfilled the functions and purposes for which it was retained.
6.16 Business Plan. The Lender acknowledges that the Borrower has
delivered to the Lender a business plan setting forth in specific detail the
precise actions which the Borrower plans to take to enable it to replenish the
Borrower's working capital, address operational issues of the Borrower, and
return to profitability, which business plan shall be approved by the board of
directors of the Borrower, and shall be consistent with the terms and conditions
of the Credit Documents. The Consultant shall assist the Borrower in
implementing the Business Plan and shall monitor and report to the Lender at
least once every two weeks as to the progress being made toward implementing the
Business Plan. The Business Plan shall include the budget dated May 5, 2000
printed at 9:33 a.m., and attached as Exhibit E.
6.17 Tax Refunds. Make, execute and deliver all such assurances,
instruments and documents as the Lender may request to vest in and assure to the
Lender its rights and claims in and to any and all tax refunds owing to the
Borrower, and execute and deliver to the Lender any agreements, notices and/or
assignments and do such other things as may be satisfactory to the Lender in
order that all sums due and to become due to the Borrower in the form of tax
refunds shall be duly assigned to the Lender and paid over to the Lender by all
federal or state governments which owe tax refunds to the Borrower.
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6.18 Borrowing Base. Deliver to the Lender on November 1, 2000 and on
or before the 25th day of each month, commencing on November 25, 2000, a
Borrowing Base Certificate as of the end of the preceding month, in the form
attached as Exhibit H accompanied by a schedule listing all RICs in the
Borrower's possession, including those RICs delivered with the Borrowing Base
Certificate.
6.19 Monthly Meeting. Hold a meeting at least once every month (face to
face meetings once each quarter and all other meetings to be by telephone) to
discuss the Borrower's financial condition, among the Lender, the Borrower's
management, the Consultant and two members of the Borrower's Board of Directors,
including the Chairman of the Board of Directors and at least one member of the
Audit Committee.
6.20 Correspondence from Department of Education. Deliver to the Lender
promptly upon receipt all correspondence or other written documents received
with respect to the Borrower from the Department of Education, pertaining to
student loan or cash flow issues.
6.21 HCM2 Information. Deliver to the Lender each month by the 25th day
of the month a running tally of all deferred payments owing to the Borrower by
the Department of Education on account of or as a result of the Borrower's HCM2
status. Immediately upon the Department of Education's modification of the
Borrower's HCM2 status, the Borrower shall notify the Lender in writing of such
change in status and of what the Borrower expects to collect from the Department
of Education as a result of such modification. The Borrower agrees to
immediately xxxx for and collect all such deferred payments becoming due as a
result of such modification within 30 days following such notice to the Lender.
All such HCM2 payments shall constitute Prepayment Sources.
6.22 Financial Covenants. Comply with the following financial
covenants:
(a) Fixed Charge Coverage Ratio. As of the end of each of the
following quarterly accounting periods, achieve at least the following Fixed
Charge Coverage Ratio for the 12-month period then ending, calculated on a
rolling four quarter basis:
Quarter Ending Ratio
-------------- -----
April 30, 2000 1.00 to 1.00
July 31, 2000 .90 to 1.00
October 31, 2000 1.15 to 1.00
January 31, 2001 1.40 to 1.00
April 30, 2001 1.50 to 1.00
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(b) Tangible Net Worth. As of the following dates, achieve at
least the Tangible Net Worth as follows:
Date Amount
---- ------
July 31, 2000 Tangible Net Worth as of April 30, 2000 less $2,300,000
October 31, 2000 Tangible Net Worth as of April 30, 2000 less $2,200,000
January 31, 2001 Tangible Net Worth as of April 30, 2000 less $1,700,000
April 30, 2001 Tangible Net Worth as of April 30, 2000 less $1,200,000
With respect to the calculation of the Borrower's Tangible Net Worth as
of April 30, 2000, the Borrower shall deliver to the Lender on or before June
15, 2000 in writing a calculation of the Borrower's Tangible Net Worth as of
April 30, 2000 Certified by the Borrower's Chief Financial Officer and CPA firm.
(c) Net Profit After Taxes. For each quarter, beginning with
the quarter ending on January 31, 2001, generate a net profit after taxes.
(d) Accounts Receivable. Beginning October 1, 2000, and
continuing at all times thereafter, achieve total Accounts Receivable (short
term and long term) of at least $50,000,000. If the Borrower fails to comply
with this financial covenant, the Borrower shall immediately deposit into the
Cash Collateral Account an amount sufficient to equal 110% of the L/C Exposure.
SECTION 7. NEGATIVE COVENANTS
The Borrower agrees that, until all of the Obligations have been paid in
full and there exists no contingent or non-contingent commitment by the Lender
which could give rise to any Obligations, the Borrower shall not, directly or
indirectly:
7.1 Financial Condition Covenants (moved to Subsection 6.22).
7.2 Limitation on Indebtedness. Create, incur, assume or suffer to
exist any Indebtedness, or permit any of its Subsidiaries to create, incur,
assume or suffer to exist any Indebtedness, except for:
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(a) Indebtedness of the Borrower or any of its Subsidiaries
under this Agreement and the other Credit Documents; and
(b) current Indebtedness of the Borrower and its Subsidiaries
in connection with trade accounts payable incurred in the ordinary course of
business (including payment obligations under Operating Leases of the Borrower
and its Subsidiaries which the Lender acknowledges the Borrower enters into in
connection with its business).
7.3 Limitation on Liens. Create, incur, assume or suffer to exist, or
permit any of its Subsidiaries to create, incur, assume or suffer to exist, any
Lien upon any of its property, assets or revenues, whether now owned or
hereafter acquired, except for:
(a) Liens for taxes not yet due or which are being contested in
good faith by appropriate proceedings, provided that adequate reserves with
respect thereto are maintained on the books of the Borrower or the Subsidiary,
as the case may be, in conformity with GAAP and that no notice of lien with
respect thereto is filed in any recording office;
(b) landlords', carriers', warehousemen's, mechanics',
materialmen's, repairmen's, or other like Liens arising in the ordinary course
of business with respect to obligations which are not due or which are being
contested in good faith by appropriate proceedings in a manner which will not
jeopardize or diminish in any material respect any interest of the Lender;
(c) pledges or deposits in connection with workers'
compensation, unemployment insurance and other social security legislation and
deposits securing liability to insurance carriers under insurance or
self-insurance arrangements; and
(d) Liens in favor of the Lender created pursuant to the Credit
Documents;
7.4 Limitation on Negative Pledge Clauses. Enter into, or permit any
of its Subsidiaries to enter into, any covenant or other agreement with or for
the benefit of any other Person, other than pursuant to this Agreement or the
other Credit Documents, which prohibits or limits the right, power, authority or
ability of the Borrower or the Subsidiary to create, incur, assume or suffer to
exist any security interest or other Lien upon any of its assets, whether now
owned or hereafter acquired.
7.5 Limitation on Contingent Obligations. Create, incur, assume or
suffer to exist, or permit any of its Subsidiaries to create, incur, assume or
suffer to exist, any Contingent Obligation except for:
(a) Contingent Obligations arising in connection with Letters
of Credit or otherwise arising under or in connection with the Credit Documents;
and
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(b) Contingent Obligations in the nature of performance bonds
and performance guaranties arising in the ordinary course of business.
7.6 Limitations on Fundamental Changes. Enter into, or permit any of
its Subsidiaries to enter into, any merger, consolidation, amalgamation or share
exchange, or, suffer or permit any business, assets, operations or books and
records of the Borrower or any of its Subsidiaries to be merged, consolidated or
commingled with any business, assets, operations or books and records of any
other Person, or make any material change in the present method of conducting
business.
7.7 Limitation on Acquisitions. Purchase or otherwise acquire, or
permit any of its Subsidiaries to purchase or otherwise acquire, any assets of
any other Person.
7.8 Limitation on Sale of Assets. Convey, sell, assign, transfer,
lease or otherwise dispose of, or permit any of its Subsidiaries to convey,
sell, assign, transfer, lease or otherwise dispose of, any of the Collateral or
any of its assets, whether now owned or hereafter acquired, except:
(a) obsolete or worn-out equipment or inventory disposed of in
the ordinary course of business; and
(b) the sale of inventory in the ordinary course of business.
7.9 Limitation on Restricted Payments. Make or commit to make, or
permit any of its Subsidiaries to make or commit to make, any Restricted
Payments except:
(a) payments to the Borrower by any Subsidiary of the Borrower;
(b) payments of compensation, stock options, bonuses,
insurance, fringe benefits and reimbursement of expenses to employees of the
Borrower in the ordinary course of business;
(c) payments of dividends in the form of capital stock of the
Borrower by the Borrower to stockholders of the Borrower;
(d) payments made by the Borrower to repurchase securities of
the Borrower, to the extent that such payments are made with proceeds of a
public offering of securities of the Borrower.
7.10 Limitation on Transactions with Affiliates. Except as permitted by
other provisions of this Agreement, enter into, or permit any of its
Subsidiaries to enter into, any transaction with any Affiliate except for
transactions with Affiliates entered into in the ordinary course of business on
terms no less favorable than would apply in a comparable arm's-length
transaction with a Person that is not an Affiliate.
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7.11 Limitation on Subsidiaries. Form or acquire, or permit any of its
Subsidiaries to form or acquire, any Subsidiary.
7.12 Limitation on Investments, Loans and Advances. Purchase any
Investment or make any advance, loan or extension of credit to any Person, or
permit any of its Subsidiaries to purchase any Investment or make any advance,
loan or extension of credit to any Person, except for:
(a) extensions of trade credit in the ordinary course of
business;
(b) loans to CLCQ and/or Delta College so long as CLCQ and
Delta College are Subsidiaries of the Borrower, which loans may not exceed
$500,000 in the aggregate;
(c) Investments in Cash Equivalents; and
(d) other Investments approved by the Lender in writing.
7.13 Limitation on Optional Payments and Modifications. (a) Make, or
permit any of its Subsidiaries to make, any optional payment or prepayment on or
redemption of any Indebtedness (other than Indebtedness pursuant to this
Agreement), or (b) unless commercially reasonable to do so, amend, modify or
change, or consent or agree to any amendment, modification or change to, any of
the terms of any Indebtedness (other than any such amendment, modification or
change which would extend the maturity or reduce the amount of any payment of
principal thereof or which would reduce the rate or extend the date for payment
of interest thereon).
7.14 Limitation on Sale and Leaseback. Enter into, or permit any of its
Subsidiaries to enter into, any arrangement with any Person providing for the
leasing by the Borrower or such Subsidiary of real or personal property which
has been or is to be sold or transferred by the Borrower or such Subsidiary to
such Person or to any other Person to whom funds have been or are to be advanced
by such Person on the security of such property or rental obligations of the
Borrower or such Subsidiary.
7.15 Fiscal Year. Permit the fiscal year of the Borrower or any of its
Subsidiaries to end on a day other than January 31.
7.16 Places of Business. Change, or suffer or permit to be changed, the
location of the Borrower Chief Executive Office or the location of the
Borrower's books and records, or have or maintain, other than the Borrower
Business Premises, any business, office or storage location unless the Lender
shall have received 60 days prior written notice of the new location.
7.17 Change of Name. Without giving the Lender at least 60 days prior
written notice and executing and delivering to the Lender such financing
statements and other documents as the Lender may reasonably require after
receipt of such notice, change, or suffer or
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56
permit to be changed, the name of the Borrower or any of its Subsidiaries, or
use any trade name, or permit any of its Subsidiaries to use any trade name,
other than its true corporate name and "Advantec Institutes."
7.18 ERISA.
(a) With respect to any Retirement Plan, engage, or knowingly
permit any "party in interest" (as defined in Section 3(14) of ERISA) or any
"disqualified person" (as defined in Section 4975(e)(2) of the Code) to engage,
in any "prohibited transaction" within the meaning of Section 4925 of the Code
or Sections 406 through 408 of ERISA;
(b) with respect to any Retirement Plan, knowingly incur, or
permit any Subsidiary of the Borrower to knowingly incur, any "accumulated
funding deficiency" under Section 302 of ERISA or Section 412 of the Code,
whether or not waived;
(c) terminate any Retirement Plan in a manner which could
result in the imposition of a lien on any of its property pursuant to Section
4068 of ERISA; or
(d) take any action which materially adversely affects the
qualification of any Qualified Plan.
7.19 Environmental.
(a) Permit any Hazardous Substance to be present, manufactured,
generated, produced, processed, used, handled, treated, stored or disposed of on
any Obligor Use Property in violation of any applicable Environmental Law by the
Borrower or any of its Subsidiaries or under circumstances as a result of which
the Borrower or any of its Subsidiaries would be liable or financially
responsible for damages or the cost of remediation or clean-up;
(b) permit to occur any Hazardous Substance Contamination by
the Borrower or any of its Subsidiaries or under circumstances as a result of
which the Borrower or any of its Subsidiaries would be liable or financially
responsible for damages or the cost of remediation or clean-up; or
(c) permit any underground storage tanks to be installed on any
Obligor Use Property by the Borrower or any of its Subsidiaries or under
circumstances as a result of which the Borrower or any of its Subsidiaries would
be liable or financially responsible for damages or the cost of removal,
remediation or clean-up.
7.20 Limitation on Inconsistent Agreements. Enter into, or permit any
of its Subsidiaries to enter into, any agreement which is inconsistent with any
obligations of the Borrower or any of its Subsidiaries under this Agreement or
any of the other Credit Documents.
7.21 Limitation on Capital Expenditures. For the fiscal year ending on
January 31, 2001, permit Capital Expenditures to exceed $2,600,000.
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SECTION 8. EVENTS OF DEFAULT
Upon the occurrence of any of the following events:
(a) The Borrower or any Other Obligor shall fail to pay when
and as due, whether by demand, stated maturity, acceleration or otherwise, any
of the Obligations, including, without limitation, principal and interest on the
Note, L/C Reimbursement Obligations, fees or expenses; or
(b) Any representation or warranty made or deemed made by the
Borrower or any Other Obligor herein or in the other Credit Documents or which
is contained in any certificate, document or financial or other statement
furnished at any time under or in connection with this Agreement or any such
other Credit Document shall prove to have been incorrect in any material respect
on or as of the date made or deemed made; or
(c) The Borrower or any Other Obligor shall fail to observe,
perform or comply with any covenant or agreement contained in this Agreement or
any of the other Credit Documents (other than as provided in (a) above), and, in
the case of any failure of the Borrower or any Other Obligor to observe, perform
or comply with any covenant or agreement to be observed, performed or complied
with, other than as provided in Section 8(a), and except in the case of any
failure of the Borrower or any Other Obligor to observe, perform or comply with
any covenant or agreement to be observed, performed or complied with under
Subsection 4.14(a)(Regulation U), 4.18(Use of Loan Proceeds), 6.3(a)(Type of
Business), 6.6(Inspection), 6.8(d)(Reportable Event Under ERISA), 6.22(Financial
Covenants), 7.4(Negative Pledge), 7.6 through 7.11, inclusive (Limitations on
Corporate Transactions), or 7.13 through 7.18, inclusive (Additional Limitations
on Corporate Transactions), or Subsection 2.3(b) and 2.3(d) of the Borrower
Security Agreement, such failure shall continue for five Business Days following
notice ; or
(d) (i) This Agreement or any of the other Credit Documents
shall be, or shall be held by a court of competent jurisdiction to be, invalid
or unenforceable in any respect reasonably deemed material by the Lender, or
(ii) the security interests and other Liens created in favor of or for the
benefit of the Lender shall cease to be enforceable in any respect deemed
material by the Lender and of the same effect and priority purported to be
created thereby; or
(e) The Borrower or any Other Obligor shall revoke or
terminate, or attempt to revoke or terminate, or notify the Lender of revocation
or termination of, any continuing obligations or agreements of the Borrower or
such Other Obligor relating in any way to this Agreement or any of the other
Credit Documents; or
(f) The Borrower, any of its Subsidiaries or any Other Obligor
shall (i) default in any payment of any Indebtedness (other than Indebtedness
referred to in paragraph (a) above) or in the payment of any Contingent
Obligation deemed material by the Lender, beyond any period of grace but whether
or not any required notice has been given, or (ii) default in the
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observance or performance of any other agreement or condition otherwise relating
to any such Indebtedness or Contingent Obligation or contained in any instrument
or agreement evidencing, securing or relating thereto, or any other event shall
occur or condition exist, the effect of which default or other event or
condition is to cause, or to permit the holder or holders of such Indebtedness
or beneficiary or beneficiaries of such Contingent Obligation (or a trustee or
agent on behalf of such holder or holders or beneficiary or beneficiaries) to
cause, with the giving of notice if required and expiration of any applicable
grace period, such Indebtedness to become due prior to its stated maturity or
such Contingent Obligation to become payable; or
(g) (i) The Borrower, any of its Subsidiaries or any Other
Obligor shall commence any case, proceeding or other action (A) under any
existing or future law of any jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an
order for relief entered with respect to it or seeking to adjudicate it a
bankrupt or insolvent, or seeking reorganization, arrangement, adjustment,
winding-up, liquidation, dissolution, composition or other relief with respect
to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian
or other similar official for it or for all or any part of its assets, or the
Borrower, any of its Subsidiaries or any Other Obligor shall make a general
assignment for the benefit of its creditors, whether or not any court assumes
jurisdiction thereof; or (ii) there shall be commenced against the Borrower, any
of its Subsidiaries or any Other Obligor any case, proceeding or other action of
a nature referred to in clause (i) above; or (iii) there shall be commenced
against the Borrower, any of its Subsidiaries or any Other Obligor any case,
proceeding or other action seeking issuance of a warrant of attachment,
execution, distraint or similar process against all or any part of its assets
which results in the entry of an order for any such relief; or (iv) the
Borrower, any of its Subsidiaries or any Other Obligor shall take any action in
furtherance of, or indicating its consent to, approval of, or acquiescence in,
any of the acts set forth in clause (i), (ii) or (iii) above; or (v) the
Borrower, any of its Subsidiaries or any Other Obligor shall be insolvent (as
defined in Section 101(32) of the United States Bankruptcy Code, or any
successor legislation), or generally not able to, or shall be unable to, or
shall admit in writing its inability to, pay its debts as they become due; or
(h) Dissolution or liquidation of, or the entry of any unstayed
judgment, order, award or decree for the dissolution or liquidation of, the
Borrower or any Other Obligor; or
(i) Injunction or restraint of the Borrower or any Other
Obligor in any manner from conducting its business in whole or in part deemed
material by the Lender in good faith; or
(j) Any material assets of the Borrower or any Subsidiary of
the Borrower shall be attached, levied upon, seized or repossessed; or
(k) There shall occur any event or condition which the Lender
determines has or will have a Material Adverse Effect, whether or not such event
or condition otherwise constitutes an Event of Default; or
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(l) (i) The Borrower or any Commonly Controlled Entity shall,
or, in the judgment of the Lender exercised in good faith, is likely to, incur
any liability in connection with a withdrawal from, or the Insolvency or
Reorganization of, a Multiemployer Plan, or (ii) any other event or condition
shall occur or exist, with respect to a Plan, and in each case in clauses (i)
and (ii) above, such event or condition, together with all other such events or
conditions, if any, could reasonably be expected, in the aggregate, to subject
the Borrower or any Other Obligor to any tax, penalty or other liabilities
deemed material by the Lender in good faith; or
(m) One or more judgments or decrees shall be entered against
the Borrower, any of its Subsidiaries or any Other Obligor involving in the
aggregate liabilities (not paid or fully covered by insurance) equal to or
exceeding One Hundred Thousand Dollars ($100,000.00) and all such judgments or
decrees shall not have been vacated, discharged or stayed pending appeal; or
(n) The Borrower, any of its Subsidiaries or any Other Obligor
shall be convicted of an offense (other than traffic violations) punishable
under any domestic or foreign criminal statute or law;
(o) There shall occur a Change of Control; or
(p) The Borrower or any Borrower Institution, or any
educational program of any thereof, is Disqualified,
then, and in any such event, (A) if such event is an Event of Default specified
in paragraph (h) or in clause (i) or (ii) of paragraph (g) above automatically
the Commitments shall immediately terminate and all of the Obligations (with
accrued interest thereon) shall immediately become due and payable, and (B) if
such event is any other Event of Default, either or both of the following
actions may be taken: (i) the Lender may by notice to the Borrower declare the
Commitments to be terminated forthwith, whereupon the Commitments shall
immediately terminate; and (ii) the Lender may, with or without notice to the
Borrower, declare all of the Obligations (with accrued interest thereon) to be
due and payable, whereupon the same shall immediately become due and payable.
Except as expressly provided above in this Agreement, presentment, demand,
protest and all other notices of any kind are hereby expressly waived.
SECTION 9. MISCELLANEOUS
9.1 Amendments and Waivers. Neither this Agreement, the Note or any
other Credit Document, nor any terms hereof or thereof may be amended, modified,
extended, renewed, supplemented or replaced except in accordance with the
provisions of this Subsection. The Lender and the Borrower may from time to time
enter into written amendments, modifications, extensions, renewals, supplements
or replacements for the purpose of amending, modifying, extending, renewing,
supplementing or replacing any provisions of this Agreement or the other Credit
Documents or changing in any manner the rights of the parties hereunder or
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60
thereunder or waiving, on such terms and conditions as the Lender may specify in
such instrument, any of the requirements of this Agreement or the other Credit
Documents or any Default or Event of Default and its consequences. In the case
of any waiver, the Borrower and the Lender shall be restored to their former
positions and rights hereunder and under the Note, and any Default or Event of
Default waived shall be deemed to be cured; but no such waiver shall extend to
any subsequent or other Default or Event of Default, or impair any right
consequent thereupon.
9.2 More Restrictive Provisions. If the Borrower enters into or
becomes bound by any credit agreement, purchase agreement or other agreement,
document or instrument (but not including any statutory requirement or any
requirement imposed by regulatory authorities), or any amendment, modification,
supplement or restatement thereof, which requires the Borrower to comply with
any financial covenants which are in addition to or more restrictive (the
"Additional/More Restrictive Provisions") than the covenants contained in
Section 7, this Agreement shall be deemed to be automatically and immediately
amended to include such Additional/More Restrictive Provisions. If such credit
agreement, purchase agreement or other agreement or document which contains the
Additional/More Restrictive Provisions, or the Additional/More Restrictive
Provisions, are terminated and of no further force or effect, then any amendment
of this Agreement effected as a result of the provisions of this Subsection 9.2
shall be of no further force or effect and this Agreement shall be deemed to be
automatically and immediately amended to conform to the terms of this Agreement
prior to the amendment of this Agreement effected pursuant to this Subsection
9.2 as a result of such Additional/More Restrictive Provisions. If, after an
amendment of this Agreement effected pursuant to this Subsection 9.2 as a result
of Additional/More Restrictive Provisions, such Additional/More Restrictive
Provisions shall be amended or modified and the result of such amendment or
modification is to cause some or all of such Additional/More Restrictive
Provisions to be more restrictive or less restrictive, but in any event more
restrictive than the financial covenants contained in Section 7 prior to such
amendment of this Agreement, then this Agreement shall be deemed to be
automatically and immediately amended to conform to such Additional/More
Restrictive Provisions, as so amended or modified. Upon request of the Lender at
any time or from time to time, the Borrower shall promptly execute and deliver
to the Lender such amendments of this Agreement, and such other agreements,
instruments and documents, as the Lender may request to further memorialize
amendments of this Agreement pursuant to this Subsection 9.2.
9.3 Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
facsimile transmission), and, shall be deemed to have been given when hand
delivered to the party to whom directed, or, if transmitted by facsimile
transmission or by mail whether or not registered or certified, when transmitted
by facsimile transmission or deposited in the mail postage prepaid,
respectively, addressed as follows (or to such other address as may be hereafter
notified by the respective parties hereto and any future holder of the Note):
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The Borrower: 00000 Xxxxx Xxxx Xxxx
Xxxxxxxx, Xxxxxxxx 00000
Attention: Xxxx Xxxxxx, Vice President
and Chief Financial Officer
Fax: (000) 000-0000
with a copy to: Xxxx Xxxxxxx
0000 Xxxxxxxxxxxxx Xxxxx
XxXxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxxx, Esquire
Fax: (000) 000-0000
The Lender: First Union National Bank
0000 Xxxxx Xxxxxx Xxxx
0xx Xxxxx Xxxxx - XX 1954
XxXxxx, Xxxxxxxx 00000
Attention: J. Xxxxx Xxxxxxxxx, Vice President
Fax: (000) 000-0000
with a copy to: Xxxxx Xxxxxxx Xxxxxxx & Xxxxx LLP
0000 Xxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxxxxx, Esquire
Fax: (000) 000-0000
provided that any notice, request or demand to or upon the Lender pursuant to
Subsections 2.3, 2.7, 2.10, and 2.11 shall not be effective until received. No
failure of any party hereto to provide a copy of any notice, request or demand
to Xxxx Xxxxxxx or Xxxxx Xxxxxxx Xxxxxxx & Xxxxx LLP as provided above shall
impair in any way the effectiveness of any such notice, request or demand.
9.4 No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of the Lender, any right, remedy, power or
privilege hereunder or under the Credit Documents, shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, remedy, power or
privilege hereunder or thereunder preclude any other or further exercise thereof
or the exercise of any other right, remedy, power or privilege. The rights,
remedies, powers and privileges herein provided or provided in the other Credit
Documents are cumulative and not exclusive of any rights, remedies, powers and
privileges provided by law.
9.5 Survival of Representations and Warranties. All representations
and warranties made hereunder, in the other Credit Documents and in any
document, certificate or statement delivered pursuant hereto or in connection
herewith shall survive the execution and delivery of this Agreement and the
Note.
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9.6 Payment of Expenses and Taxes. The Borrower agrees (a) to pay or
reimburse the Lender for all of its costs and expenses incurred in connection
with the development, preparation and execution of, and any administration,
amendment, modification, extension, renewal, supplement or replacement of, this
Agreement, the other Credit Documents and any other documents prepared in
connection herewith or therewith, and the consummation of the transactions
contemplated hereby and thereby, including, without limitation, the fees and
disbursements of counsel to the Lender, (b) to pay or reimburse the Lender for
all of its costs and expenses incurred in connection with the legal
interpretation, enforcement or preservation of any rights under this Agreement,
the other Credit Documents and any such other documents, including, without
limitation, the fees and disbursements of counsel to the Lender, (c) to pay,
indemnify and hold the Lender harmless from, any and all recording and filing
fees and any and all liabilities with respect to, or resulting from any delay in
paying, stamp, excise and other taxes, if any, which may be payable or
determined to be payable in connection with the execution and delivery of, or
consummation of any of the transactions contemplated by, or any amendment,
modification, extension, renewal, supplement or replacement of, or any waiver or
consent under or in respect of, this Agreement, the other Credit Documents and
any such other documents, and (d) to pay, indemnify and hold the Lender harmless
from, any and all other liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of this Agreement, the other Credit Documents and
any such other documents (all of the foregoing, collectively, the "indemnified
liabilities"); provided that the Borrower shall have no obligation hereunder to
the Lender with respect to indemnified liabilities arising from (i) the gross
negligence or willful misconduct of the Lender, or (ii) legal proceedings
commenced against the Lender by any security holder or creditor thereof arising
out of and based upon rights afforded any such security holder or creditor
solely in its capacity as such. The agreements in this Subsection shall survive
the termination of this Agreement and payment of the Note for a period of 2
years. The Borrower authorizes the Lender to debit from the Operating Account
all such payments or reimbursements which the Borrower is required to make under
this Subsection 9.6.
9.7 Further Assurances, Power of Attorney. The Borrower agrees
promptly to do, make, execute and deliver all such additional and further acts,
things, deeds, assurances, instruments and documents as the Lender may
reasonably request to vest in and assure to the Lender its rights under this
Agreement or any of the other Credit Documents. Borrower hereby appoints Lender
and its designees as attorney-in-fact of Borrower, irrevocably and with power of
substitution, with authority to execute and deliver from time to time, in the
name and stead of the Borrower, all documents which Borrower is required to, but
has failed or refused to, execute and deliver to Lender pursuant to this
Agreement or any of the Credit Documents, and with authority to take all of the
actions from time to time on behalf of the Borrower, and in the name and stead
of the Borrower, which Lender is authorized to take under this Agreement and the
Credit Documents or which Lender in its good faith discretion deems necessary or
advisable to cause Borrower to be in compliance with any of the terms of this
Agreement or any of the Credit Documents or to carry out and enforce this
Agreement and the Credit Documents. The attorney or designee shall not be liable
for any acts of commission or omission nor for any error of judgment or mistake
of fact or law which does not arise from its gross negligence or willful
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63
misconduct. This power of attorney is coupled with an interest and is
irrevocable so long as any of the Obligations remain unpaid or unperformed or
there exists any commitment by the Lender which could give rise to any
Obligations.
9.8 Unenforceability. If any term, provision or condition, or any part
thereof, of this Agreement or any of the other Credit Documents shall for any
reason be found or held invalid or unenforceable by any court or Governmental
Authority, such invalidity or unenforceability shall not affect the remainder of
such term, provision or condition, nor any other term, provision or condition,
and this Agreement and the other Credit Documents shall survive and be construed
as if such invalid or unenforceable term, provision or condition had not been
contained herein or therein; provided, however, that if any rate of interest
provided under this Agreement or any of the other Credit Documents does or shall
exceed the maximum interest rate permitted by law, then such rate of interest
shall immediately be deemed to be reduced to such maximum rate and all previous
payments of interest in excess of the maximum rate shall be deemed to have been
payments in reduction of principal and not of interest.
9.9 Indemnification Concerning Fees. The Borrower agrees to indemnify,
protect and defend the Lender, and save the Lender harmless, from and against
any and all claims, demands, damages, losses, liabilities, obligations,
penalties, litigation, judgments, suits, actions, proceedings, costs and
expenses (including, without limitation, counsel fees and expenses) of any kind
or nature whatsoever which may at any time be imposed upon, paid or incurred by
or asserted or awarded against the Lender relating to, resulting from or arising
out of any broker's or finder's fee or commission which the Lender did not
directly contract to pay.
9.10 Waiver of Trial by Jury. Each of the Borrower and the Lender
agrees that any action, suit or proceeding involving any claim, counterclaim or
cross-claim arising out of or in any way relating, directly or indirectly, to
this Agreement or any of the other Credit Documents, or any liabilities, rights
or interests of the Borrower, the Lender or any other Person arising out of or
in any way relating, directly or indirectly, to any of the foregoing, shall be
tried by a court and not by a jury. Each of the Borrower and the Lender hereby
waives any right to trial by jury in any such action, suit or proceeding, with
the understanding and agreement that this waiver constitutes a waiver of trial
by jury of all claims, counterclaims and cross-claims against all parties to
such actions, suits or proceedings, including claims, counterclaims and
cross-claims against parties who are not parties to this Agreement or the other
Credit Documents. This waiver is knowingly, willingly and voluntarily made by
each of the parties hereto, and each of the parties hereto acknowledges and
agrees that this waiver of trial by jury is a material aspect of the agreements
among them and that no representations of fact or opinion have been made by any
Person to induce this waiver of trial by jury or to modify, limit or nullify its
effect.
9.11 Additional Waivers. The Borrower hereby waives, to the extent the
same may be waived under applicable law: (a) notice of acceptance of this
Agreement or any of the other Credit Documents by any other party hereto; and
(b) all claims and causes of action of the Borrower against the Lender for
punitive, exemplary, consequential, special or other indirect or
non-compensatory damages.
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9.12 Successors and Assigns: Transfers of Interests.
(a) This Agreement shall be binding upon and inure to the
benefit of the Borrower, the Lender, all future holders of the Note and their
respective successors and assigns, except that the Borrower may not assign or
transfer any of its rights or obligations under this Agreement without the prior
written consent of the Lender.
(b) The Lender may at any time, in its discretion, assign,
transfer or pledge to any Person, or grant to any Person a security interest in,
this Agreement, any of the other Credit Documents or any of its rights hereunder
or thereunder. In addition, the Lender may sell, in such amounts, upon such
terms and to such Persons as the Lender may determine, participation in its
interests under this Agreement or any of the other Credit Documents. In the case
of each such assignment, transfer, pledge, grant or sale (i) the Lender may from
time to time provide to the assignee, transferee, pledgee, secured party or
participant, any information and documents (or copies thereof) relating to this
Agreement and the other Credit Documents and related transactions, and relating
to the business, assets, operations, business prospects or financial condition
of the Borrower, Subsidiaries of the Borrower and Other Obligors, and (ii)
subject to Requirements of Law, the Lender agrees to continue to administer this
Agreement and the other Credit Documents subject to compensation of the Lender
by such assignees, transferees, pledgees, secured parties or participants.
9.13 Counterparts. This Agreement may be executed by one or more of the
parties to this Agreement on any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
9.14 Governing Law. This Agreement, the Note and the other Credit
Documents, and the rights and obligations of the parties hereunder and
thereunder, shall be governed by and construed and interpreted in accordance
with the internal laws of the Commonwealth of Virginia, exclusive of principles
of conflicts of laws.
9.15 Submission To Jurisdiction. The Borrower hereby irrevocably and
unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement or any of the other Credit Documents, or
for recognition and enforcement of any judgment in respect thereof, to the
non-exclusive general jurisdiction of the United States District Court for the
Eastern District of Virginia or the Circuit Court of Fairfax County, Virginia;
(b) consents that any such action or proceeding may be brought
in such courts, and waives any objection that it may now or hereafter have to
the venue of any such action or proceeding in any such court or that such action
or proceeding was brought in an inconvenient court and agrees not to plead or
claim the same;
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(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or certified
mail (or any substantially similar form of mail), postage prepaid, to the
Borrower at its address set forth in Subsection 9.3 or at such other address of
which the Lender shall have been notified pursuant thereto; and
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the right
to xxx in any other jurisdiction.
9.16 Release. The Borrower releases and forever waives and relinquishes
all claims, demands, obligations, liabilities and causes of action of whatsoever
kind or nature, whether known or unknown, which it has, may have, or might have
or assert now or in the future against the Lender and its directors, officers,
employees, attorneys, agents, successors, predecessors and assigns and any
Affiliates, Subsidiaries or related entities of the Lender and their directors,
officers, employees, attorneys, agents, successors, predecessors and assigns,
directly or indirectly, arising out of, based upon, or in any manner connected
with any transaction, event, circumstance, action, failure to act, or occurrence
of any sort or type, whether known or unknown, which occurred, existed, was
taken, permitted, or begun before the execution of this Agreement.
9.17 Consent to Relief from Stay. The Borrower acknowledges and agrees
that if the Collateral or any part thereof shall ever become the subject of any
bankruptcy or insolvency estate, then the Lender shall immediately become
entitled, among other relief to which the Lender may be entitled, to obtain upon
ex parte application therefor and without further notice of action of any kind,
(i) an order from the court prohibiting the use by the trustee in bankruptcy or
by the Borrower as debtor in possession of the Lender's "cash collateral" (as
such term is defined in Section 363 of the Bankruptcy Code) in connection with
the Loan, and (ii) an order from the Court granting immediate relief from the
automatic stay pursuant to Section 362 of the Bankruptcy Code so as to permit
the Lender to exercise all of its rights and remedies hereunder, under the other
Loan Documents and at law and in equity, and the Borrower further acknowledges
and agrees that the occurrence or existence of any Event of Default under this
Agreement shall, in and of itself, constitute "cause" for relief from the
automatic stay pursuant to the provisions of Section 362(d)(1) of the Bankruptcy
Code.
9.18 Other Bankruptcy Relief. The Borrower acknowledges and agrees that
in the event of the filing of any voluntary or involuntary petition in
bankruptcy by or against the Borrower, the Borrower shall not assert or request
any other party to assert that the automatic stay provided by Section 362 of the
Bankruptcy Code shall operate or be interpreted to stay, interdict, condition,
reduce, or inhibit the ability of the Lender to enforce any rights it has by
virtue of this Agreement or the other Loan Documents, or any other rights the
Lender has, whether now or hereafter acquired, against any person or entity
which is not a debtor in such bankruptcy proceedings or against any property
owned by any such non-debtor; and further that, in the event of the filing of
any voluntary or involuntary petition in bankruptcy by or against the Borrower,
the Borrower shall not seek a supplemental stay or any other relief, whether
injunctive or otherwise, pursuant to Section 105 of the Bankruptcy Code or any
other provision of the
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66
Bankruptcy Code, to stay, interdict, condition, reduce, or inhibit the ability
of the Lender to enforce any rights it has by virtue of this Agreement or the
other Loan Documents, or at law or in equity, or any other rights the Lender
has, whether now or hereafter acquired, against any person or entity which is
not a debtor in such bankruptcy proceedings, or against any property owned by
any such non-debtor.
9.19 Waiver by Lender. Subject to compliance with each and every
closing condition set forth in Section 5, the Lender waives (as to (a), (b) and
(c), such waiver shall be a point-in-time waiver) the Borrower's failure to
comply with:
(a) the Fixed Charge Coverage Ratio covenant for the fiscal
year ending January 31, 2000;
(b) the Leverage Ratio covenant for the quarter ending January
31, 2000;
(c) the Minimum Tangible Net Worth covenant for the quarter
ending January 31, 2000;
(d) the requirement to reduce the amounts of the Letters of
Credit to $3,500,000 by March 1, 2000;
(e) the requirement to deliver the RICs to the Lender by no
later than February 29, 2000;
(f) the requirement to obtain approval of its business plan by
its Board of Directors by no later than March 27, 2000;
(g) the requirement to deliver the final 10-K to the Lender
within 100 days of its fiscal year end.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed under seal and delivered by their proper and duly authorized
officers as of the day and year first above written.
ATTEST/WITNESS: COMPUTER LEARNING CENTERS, INC.
By: /s/ Xxxx X. Xxxxx (SEAL)
------------------------------- ---------------------------------------
Xxxx X. Xxxxx, President and Chief
Executive Officer
FIRST UNION NATIONAL BANK
By: /s/ J. Xxxxx Xxxxxxxxx (SEAL)
------------------------------- ---------------------------------------
J. Xxxxx Xxxxxxxxx, Vice President
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Schedule I
to Credit Agreement
BORROWER BUSINESS PREMISES
000 Xxxxx Xxxxxx Xxxxxxxxx
Xxxxxxx, XX 00000
0000 Xxxxxxxx Xxxxxxxxx
Xxxxx 000
Xxx Xxxxxxx, XX 00000
000 Xxxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
000 Xxxxx Xxxxxx Xxxxxx
Xxxxx 000
Xxx Xxxx, XX 00000
0000 Xxxxx Xxxx Xxxx #000
Xxxxxxxx, XX 00000
000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxx, XX 00000
000 Xxxx Xxxxxxxxx Xxxx, #000
Xxxxxxxxxx, XX 00000
000 Xxxxxxxx Xxxxxx
Xxxxxx, XX 00000
000 Xxxxx Xxxxx Xxxxxx
Xxxxxx, XX 00000
0 Xxxxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
00000 Xxxxxxx Xxxxx
Xxxxxxx Xxxxxxx, XX 00000
The Plaza
0000 Xxxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
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0 Xxxxxxxxx Xxxxxx #000
Xxxxxx Xxxx, XX 00000
000 Xxxx Xxxxx 0
Xxxxxxx, XX 00000
00 Xxxxxxxx Xxxx
0xx Xxxxx
Xxxxx Xxxxxxxxxx, XX 00000
0000-X Xxxxxx Xxxx
Xxxxx 000
Xxxxxxxxxx, XX 00000
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Appletree Corporate Center
0000 Xxxxxx Xxxx, Xxxxxxxx X
Xxxxxxxxxxxx, XX 00000
000 Xxxx Xxxxxx Xxxxxxxxx
0xx Xxxxx
Xxxxxxxxxx, XX 00000
One Plymouth Meeting
Xxxxx 000
Xxxxxxxx Xxxxxxx, XX 00000
0000 Xxxxxxxx Xxxxx
Xxxxx 000
Xxxxxxx, XX 00000
0000 Xxxxx Xxxxxxx
Xxxxx 000
Xxxxxxx, XX 00000
000 XX Xxxx 000
Xxxxx, XX 00000
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69
0000 Xxxxxx Xxxx
Xxxxx 000
Xxxxxxxxxx, XX 00000
0000 Xxxxx Xxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxxxx, Xxxxxxx 00000
0000 Xxxxxxxxx Xxxxxxxxxx
Xxxxx 000
Xxxxxxxx, Xxxxxx X0X 0X0
Carrefour Laval
0000, Xxxx, Xxxxxx-Xxxxxxx
Xxxxx 000
Xxxxx, Xxxxxx X0X 0X0
000 Xxxxxxxxx Xx Xxxxxxxxxxx Xxxxx
Xxxxxx 000
Xxxxxxxx, Xxxxxx X0X 0X0
00000 Xxxxx Xxxx Xxxx
Xxxxxxxx, Xxxxxxxx 00000
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Schedule 4.6
to Credit Agreement
ITEM 3. LEGAL PROCEEDINGS
Active Litigation
On May 5, 1998, a class action lawsuit was filed against CLC in the
Superior Court of New Jersey in Bergen County, New Jersey. The complaint
alleges, among other things, that CLC Learning Centers in New Jersey failed to
provide certain educational services and resources, misrepresented certain
information respecting services, resources, occupational opportunities and
student outcomes and violated certain provisions of the New Jersey Consumer
Fraud Act. On November 19, 1999, the Court certified a class consisting of all
persons who, during the six years immediately preceding the commencement of this
action, had enrolled in a course or courses of study, education or training
provided by CLC at CLC's New Jersey locations for which they incurred tuition
expenses. On December 6, 1999, CLC filed a motion with the Appellate Division of
the Superior Court of New Jersey to appeal the November 19, 1999 decision to
certify a class. On January 19, 2000, that motion was denied. CLC is unable to
estimate the outcome of the matter or any potential liability.
On July 9, 1999, a class action lawsuit was filed against CLC in the Court
of Common Pleas in Philadelphia County, Pennsylvania, on behalf of all students
who attended the Learning Center located on Market Street in Philadelphia within
six years of July 9, 1999, who have not obtained employment in a
computer-related job through our placement services. On August 2, 1999, the case
was removed to the United States District Court for the Eastern District of
Pennsylvania. On October 12, 1999, the United States District Court for the
Eastern District of Pennsylvania remanded the case to the Court of Common Pleas
in Philadelphia County, Pennsylvania. The complaint alleges, among other things,
that this Learning Center failed to provide certain educational services and
resources, misrepresented certain information respecting services, resources,
occupational opportunities and student outcomes, and violated certain provisions
of the Pennsylvania Unfair Trade Practices and Consumer Protection Law. CLC is
unable to estimate the outcome of the matter or any potential liability.
Between June 1, 1998 and October 31, 1999, CLC was named as defendant in
three other lawsuits in Texas and New Jersey by individual students or groups of
students who formerly attended one of CLC's Learning Centers. In two of these
lawsuits, various present and former officers, directors and employees of CLC
have also been named as defendants. The complaints allege, among other things,
that CLC's affected Learning Centers failed to provide plaintiffs with certain
educational services and resources and misrepresented certain information
respecting services, resources, and student outcomes and violated certain
provisions of the applicable state consumer laws. CLC is unable to estimate the
outcome of these matters or any potential liability.
In addition to the lawsuits discussed above, CLC is a defendant in a number
of civil lawsuits involving current and former employees, which we consider
incidental to our business and unlikely to have a material effect on our future
operations. However, there can be no assurance that these matters will not have
a material adverse effect on CLC's results of operations in a future period,
depending in part on the results for such period.
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CLC intends to defend itself vigorously in the lawsuits referred to above;
however, there can be no assurance that CLC will be successful in defending
itself in any of these proceedings. Even if CLC prevails on the merits in such
litigation, CLC expects to incur significant legal and other defense costs as a
result of such proceedings. These proceedings could involve substantial
diversion of the time of some members of management, and an adverse
determination in, or settlement of, such litigation could involve the payment of
significant amounts, or could include terms in addition to such payments, which
could have a severe impact on CLC's business, financial condition and results of
operations.
There can be no assurance that additional legal proceedings will not be
filed or that adverse action will not be initiated against CLC, either by
federal or state regulators, or other parties. Any such legal proceedings or
adverse action could have a severe impact on our business, financial condition
and results of operations.
Settled Litigation
During fiscal year 1999 and 2000, CLC was named as defendant in five other
lawsuits in California, Michigan, Texas and Virginia by individual students or
groups of students who formerly attended one of its Learning Centers. The
complaints allege, among other things, that CLC's affected Learning Centers
failed to provide plaintiffs with certain educational services and resources and
misrepresented certain information respecting services, resources, and student
outcomes and violated certain provisions of the applicable state consumer laws.
During the course of fiscal 2000, these cases were settled resulting in payments
to the former students of immaterial amounts. Settlement expenses are combined
with legal fees and included within general and administrative expenses in the
consolidated financial statements.
In addition to the student lawsuits, the Attorney General of Illinois filed
a complaint against CLC in Circuit Court in Xxxx County, Illinois, on March 10,
1998, asserting that CLC had violated the Illinois Private Business and
Vocational Schools Act and the Illinois Consumer Fraud and Deceptive Business
Practices Act (the "Acts") at its Schaumburg, Illinois Learning Center. The
complaint alleged that at the Schaumburg Learning Center, CLC failed to provide
certain educational services and resources and misrepresented certain
information respecting services, resources, occupational opportunities and
student outcomes. On June 8, 1998, CLC reached an agreement with the Attorney
General settling the litigation in the form of a final judgment and Consent
Decree approved by the court ("Consent Decree"). The settlement includes payment
of a voluntary contribution of $90,000 to the Attorney General's consumer
education fund, a provision annually for a four year period of $95,000 worth of
computer hardware and software to schools, programs, community sites and other
non-profit and public institutions in the Chicago area designated by the
Attorney General, and $10,000 worth of training in computer skills annually at
CLC's Schaumburg or Chicago Learning Centers for teachers and other community
based personnel to enable them to make effective use of the computer equipment.
CLC also agreed to take certain measures to assure compliance with state
regulatory requirements, and to establish an ombudsman program and binding
arbitration for the resolution of certain student complaints. CLC has
implemented the measures called for under the first and second years of the
Consent Decree. Failure by CLC to continue to comply with the terms of the
Consent Decree could result in adverse action against the Learning Centers
located in Illinois, including suspension or termination of our licenses to
operate within Illinois and other sanctions. The loss of operating authority in
Illinois could have a material adverse effect on CLC.
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Schedule 4.11
to Credit Agreement
ENVIRONMENTAL MATTERS
NONE
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Schedule 7.3
to Credit Agreement
PERMITTED LIENS
NONE
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74
EXHIBIT A
to Credit Agreement
OFFICER DEFAULT CERTIFICATE
I, XXXX X. XXXXXX, pursuant to the Amended and Restated Credit Agreement
(the "Credit Agreement") dated December 23, 1999, between COMPUTER LEARNING
CENTERS, INC., a Delaware corporation ("Borrower"), and FIRST UNION NATIONAL
BANK, as successor-by-merger to CORESTATES BANK, N.A. ("Lender"), hereby certify
to Lender that:
1. I am the chief financial officer of Borrower.
2. I have conducted a diligent inquiry concerning whether, as of
____________________ _____, there existed any Default (as defined in the Credit
Agreement) or any Event of Default (as defined in the Credit Agreement).
3. Based upon such inquiry, to my actual knowledge and belief, as of
such date, [there existed no Default (as defined in the Credit Agreement) or
Event of Default (as defined in the Credit Agreement).] [the following
Default[s] (as defined in the Credit Agreement) and Event[s] of Default (as
defined in the Credit Agreement) existed and the relevant facts with respect
thereto are as follows:]
WITNESS my signature of this ______ day of ___________________, _____.
----------------------------
Name:
Title:
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EXHIBIT B
to Credit Agreement
OFFICER FINANCIAL COVENANT CERTIFICATE
I, XXXX X. XXXXXX, pursuant to the Second Amended and Restated Credit
Agreement (the "Credit Agreement") dated May 15, 2000, between COMPUTER LEARNING
CENTERS, INC., a Delaware corporation ("Borrower"), and FIRST UNION NATIONAL
BANK, successor-by-merger to CORESTATES BANK, N.A. ("Lender"), hereby certify to
Lender, that:
1. I am the chief financial officer of Borrower.
2. As of __________________, ____ (all capitalized terms used hereinafter
without definition having the meanings assigned to such terms in the Credit
Agreement):
(a) TANGIBLE NET WORTH FOR Q_____ EQUALED $ ___________
Q ____ Q ____ Q ____ Q ____
(i) Total Assets $______ $______ $______ $______
(ii) Less Intangible Assets ($______) ($______) ($______) ($______)
(iii) Equals Tangible Assets $______ $______ $______ $______
(iv) Total Liabilities $______ $______ $______ $______
(iv) Tangible Net Worth $______ $______ $______ $______
(b) FIXED CHARGE COVERAGE RATIO FOR 12 MONTH ROLLING PERIOD EQUALED ________ TO 1.00
Q ____ Q ____ Q ____ Q ____ 12 Mo. Rolling
(i) Net Income before tax
for the quarterly periods ended $______ $______ $______ $______ $________
(ii) Depreciation, amortization $______ $______ $______ $______ $________
(iii) Other non-cash charges deducted
in determining such net income $______ $______ $______ $______ $________
(iv) Interest Expense for period $______ $______ $______ $______ $________
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(v) Payments under Operating Leases
during the periods then ended $______ $______ $______ $______ $________
(vi) Less 50% of Capital Expenditures
during the periods then ended ($______) ($______) ($______) ($______) ($________)
(vii) ADJUSTED NET INCOME (NUMERATOR) $______ $______ $______ $______ $________
(viii) Payments under Operating Leases
during the periods then ended $______ $______ $______ $______ $________
(ix) Interest Expense for period $______ $______ $______ $______ $________
(x) Current portion of Long-Term
Debt for then ended periods $______ $______ $______ $______ $________
(xi) FIXED CHARGES (DENOMINATOR) $______ $______ $______ $______ $________
WITNESS my signature of this ______ day of ____________________, _____
----------------------------
Name:
Title:
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EXHIBIT C
to Credit Agreement
Sweep Plus Loan and Investment Services Description
Sweep Plus Loan and Investment Services Agreement
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EXHIBIT D
to Credit Agreement
BORROWING CERTIFICATE
This Certificate is made pursuant to Subsection 5.1(d) of the Second Amended and
Restated Credit Agreement of even date herewith (the "Credit Agreement") between
COMPUTER LEARNING CENTERS, INC., a Delaware corporation (the "Borrower"), and
FIRST UNION NATIONAL BANK, as successor-by-merger to CORESTATES BANK, N.A.
Capitalized terms used herein without definition shall have the meanings
assigned to such terms in the Credit Agreement. The undersigned hereby certifies
that, to his actual knowledge and belief:
1. The representations and warranties of the Borrower set
forth in the Credit Agreement and the other Credit Documents, or which
are contained in any certificate, document or financial or other
statement furnished pursuant to or in connection with the Credit
Agreement, are true and complete in all material respects on and as of
the date hereof;
2. There are no bankruptcy, insolvency, reorganization,
liquidation or dissolution proceedings pending or, to my knowledge,
threatened against the Borrower, nor has any other event occurred
affecting or threatening the existence of the Borrower; and
3. As of the date of this Agreement, no Default or Event of
Default exists.
IN WITNESS WHEREOF, the undersigned has hereunto set his name as
of the _____ day of __________________, _________.
-----------------------------------
Name: Xxxx X. Xxxxxx
Title: Vice President and Chief
Financial Officer
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79
COMMONWEALTH OF VIRGINIA
COUNTY OF MANASSAS
I HEREBY CERTIFY that on this 15th day of May, 2000, before me, the
undersigned, a Notary Public of said State, personally appeared Xxxx X.
Xxxxxx, who acknowledged himself to be the Vice President and Chief
Financial Officer of Computer Learning Centers, Inc., and that he, as such,
being authorized so to do, executed the foregoing instrument on behalf of
the said Computer Learning Centers, Inc., for the purposes therein
contained.
WITNESS my hand and Notarial Seal.
---------------------------------
Notary Public
My Commission expires:
----------------------
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EXHIBIT G
to Credit Agreement
PROJECTIONS
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EXHIBIT F
to Credit Agreement
CLCQ CAPITAL STOCK
Class Shareholder Shares
----- ----------- ------
Common Shares Borrower 100
Dividend Access Shares Borrower 512,551
Dividend Access Shares Xxxxx-Xxxxx Matte 7,229
Dividend Access Shares Dolmen (1994) Inc. 28,628
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EXHIBIT G
to Credit Agreement
NOTICE OF COLLATERAL ASSIGNMENT
OF DEPOSIT ACCOUNTS
May 15, 2000
SunTrust Bank FKA Crestar Bank ("Bank")
0000 Xxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attn: Ms. Person
Re: Computer Learning Centers, Inc. ("Borrower")
Ladies and Gentlemen:
The Borrower named above has obtained or may hereafter obtain certain loans and
other financial accommodations from First Union National Bank (the "Lender")
under a certain Second Amended and Restated Credit Agreement dated as of May 15,
2000 (as amended from time to time, the "Loan Agreement"), which sets forth the
terms and conditions of a credit facility for advances under a line of credit
for working capital, and for the issuance of letters of credit for the account
of the Borrower. The extensions of credit made pursuant to the Loan Agreement
are secured in part by the cash proceeds of collateral described in a Second
Amended and Restated Security Agreement ("Security Agreement"), which cash
proceeds have been deposited into the Borrower's accounts maintained with you,
and by a certain Assignment of Deposit Accounts dated May 15, 2000 (as at any
time amended, the "Assignment") pursuant to which the Borrower has assigned and
granted to the Lender a security interest in all deposit accounts now or
hereafter maintained with you, including but not limited to account number(s)
________________ , _____________ , and ______________ (collectively, the
"Deposit Accounts"). Copies of the Assignment and the Security Agreement are
enclosed herewith.
Lender hereby notifies you of such assignment and security interest
in the Deposit Accounts.
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This letter of notification shall continue in full force and effect until
terminated in writing by a duly authorized officer of the Lender. By its
signature appearing below, Borrower hereby (I) irrevocably confirms that it has
granted Lender its power of attorney with respect to all Deposit Accounts as set
forth in the Assignment, (ii) instructs you to comply with any instructions of
Lender which are promptly confirmed by it in writing, without any additional
requirement for further endorsement, consent or instruction from the Borrower,
(iii) agrees to indemnify and save Bank harmless from and against any and all
losses arising out of compliance by Bank with the instructions contained herein,
and (iv) agrees to pay Bank's charges for maintenance of the Deposit Accounts
and reasonable legal fees incurred by Bank in connection with the execution and
delivery of this agreement.
If you have any questions or comments, please contact the undersigned at the
address or telephone number appearing below.
Very truly yours,
FIRST UNION NATIONAL BANK ("Lender")
By:
----------------------------------------------
J. Xxxxx Xxxxxxxxx, Vice President
Address:
0000 Xxxxx Xxxxxx Xxxx
7th Floor South Tower, Mail Stop VA-1954
XxXxxx, Xxxxxxxx 00000-0000
Agreed to and accepted on May 15, 2000:
COMPUTER LEARNING CENTERS, INC. ("Borrower")
By:
----------------------------------------------
Xxxx X. Xxxxx, President
Address:
00000 Xxxxx Xxxx Xxxx
Xxxxxxxx, Xxxxxxxx 00000
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SunTrust Bank FKA Crestar Bank ("Bank"), the depository institution referenced
above, hereby acknowledges that it is presently holding the Depository
Account(s) identified above. Bank acknowledges notice of Lender's interest in
the Deposit Account(s) and Lender's power of attorney with respect thereto, and
agrees to accept instructions from Lender with respect to the Deposit
Account(s), so long as such are confirmed promptly in writing from Lender,
without requiring further instruction, consent, or endorsement form Borrower.
Bank confirms that it has not received any prior notice of any other right or
claim to any Deposit Account.
SUNTRUST BANK FKA CRESTAR BANK ("Bank")
By:
------------------------------------
Title:
---------------------------------
Address:
0000 Xxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
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EXHIBIT H
to Credit Agreement
BORROWING BASE CERTIFICATE
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