Exhibit 10.45
$20,000,000
CREDIT AND SECURITY AGREEMENT
dated as of July 31, 2002
among
EDISON SCHOOLS INC.,
as Borrower,
SCHOOL SERVICES LLC,
as Lender,
110th and 5th ASSOCIATES, LLC,
as a Guarantor,
and
XXXXXX XXXXXX CHARTER SCHOOL, LLC,
as a Guarantor
TABLE OF CONTENTS
PAGE
SECTION 1. INTERPRETATION OF AGREEMENT AND NOTES............................................................. 1
1.1 Definitions...................................................................................... 1
1.2 Interpretation and Construction.................................................................. 21
SECTION 2. REVOLVING LOAN COMMITMENT......................................................................... 21
2.1 The Revolving Loans.............................................................................. 21
2.2 Revolving Borrowings; Closings................................................................... 22
2.3 Invoice.......................................................................................... 24
2.4 Security Interests............................................................................... 24
2.5 Termination of Revolving Loan Commitment......................................................... 24
2.6 Reports.......................................................................................... 24
2.7 Reduction of Revolving Loan Commitment........................................................... 24
SECTION 2A. TERM LOAN COMMITMENT.............................................................................. 25
2A.1 The Term Loan.................................................................................... 25
2A.2 Term Loan Borrowings; Closings................................................................... 26
2A.3 Invoice.......................................................................................... 27
2A.4 Security Interests............................................................................... 27
2A.5 Termination of Term Loan Commitment.............................................................. 27
2A.6 Reduction of Term Loan Commitment................................................................ 27
SECTION 3. GENERAL REPRESENTATIONS AND WARRANTIES OF THE BORROWER............................................ 27
3.1 Existence and Power.............................................................................. 27
3.2 Corporate and Governmental Authorization; No Contravention....................................... 28
3.3 Binding Effect................................................................................... 28
3.4 Litigation....................................................................................... 28
3.5 Investment Company............................................................................... 28
3.6 Events of Default or Default..................................................................... 29
3.7 Use of Proceeds.................................................................................. 29
3.8 Accurate and Complete Disclosure................................................................. 29
3.9 Taxes............................................................................................ 29
3.10 Books and Records................................................................................ 29
3.11 Financial Condition.............................................................................. 29
3.12 Insurance........................................................................................ 30
3.13 ERISA............................................................................................. 30
3.14 Owned Real Estate Taxes and Assessments.......................................................... 31
3.15 Other Agreements; Defaults....................................................................... 31
3.16 Compliance with Law.............................................................................. 31
3.17 Solvency......................................................................................... 31
3.18 Owned Real Estate Insurance...................................................................... 32
3.19 Equipment........................................................................................ 32
3.20 SEC Documents................................................................................... 32
SECTION 3A. REPRESENTATIONS AND WARRANTIES OF THE BORROWER RELATING TO COLLATERAL............................. 00
0X.0 Xxxxx xx Xxxxxxxx; Records Location; Etc......................................................... 33
3A.2 No Liens......................................................................................... 33
3A.3 No Adverse Actions............................................................................... 33
3A.4 Filings.......................................................................................... 34
3A.5 Notice........................................................................................... 34
3A.6 Assignment....................................................................................... 34
3A.7 Owned Real Estate Title.......................................................................... 34
3A.8 Flood Zone....................................................................................... 34
3A.9 Certificate of Occupancy; Licenses............................................................... 34
3A.10 Physical Condition............................................................................... 35
3A.11 Filing and Recording Taxes....................................................................... 35
SECTION 4. INSURANCE AND CONDEMNATION........................................................................ 35
4.1 Owned Real Estate Insurance...................................................................... 35
4.2 Use and Application of Insurance Proceeds........................................................ 37
4.3 Condemnation Awards.............................................................................. 37
SECTION 5. LEASING COVENANTS................................................................................. 38
5.1 Covenants........................................................................................ 38
SECTION 5A. ENVIRONMENTAL MATTERS............................................................................. 39
5A.1 Representations and Warranties on Environmental Matters.......................................... 39
5A.2 Covenants on Environmental Matters............................................................... 39
5A.3 Allocation of Risks and Indemnity................................................................ 40
5A.4. No Waiver........................................................................................ 41
SECTION 6. CONDITIONS TO LENDER'S OBLIGATION TO FUND THE BORROWING REQUEST ON THE INITIAL CLOSING DATE....... 41
6.1 Certified Resolutions............................................................................ 41
6.2 Articles of Incorporation........................................................................ 41
6.3 Good Standing Certificates; Etc.................................................................. 41
6.4 Incumbency; Specimen Signatures; By-Laws; Etc.................................................... 41
6.5 Financing Statements............................................................................. 42
6.6 Lien Searches.................................................................................... 42
6.7 Legal Opinions................................................................................... 42
6.8 Other Documents.................................................................................. 42
6.9 Omitted.......................................................................................... 42
6.10 Receivables List................................................................................. 42
6.11 Delivery of Notes................................................................................ 42
6.12 Insurance........................................................................................ 43
6.13 Condemnation..................................................................................... 43
6.14 Brokers.......................................................................................... 43
6.15 Leases........................................................................................... 43
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6.16 Other Agreements................................................................................ 43
SECTION 6A. CONDITIONS TO LENDER'S OBLIGATION TO FUND THE BORROWING REQUEST ON THE INITIAL CLOSING DATE AND
THE SECOND CLOSING DATE .......................................................................... 43
6A.1 Special Conditions................................................................................ 43
6A.2 Special Conditions................................................................................ 43
6A.3 Fees.............................................................................................. 43
6A.4 Mortgages and Other Collateral.................................................................... 44
6A.5 Representations True; No Default or Event of Default; Employment.................................. 44
6A.6 Borrowing......................................................................................... 44
6A.7 Release of Certain Collateral..................................................................... 44
SECTION 7. CONDITIONS TO LENDER'S OBLIGATION TO FUND BORROWING REQUESTS (INCLUDING THE INITIAL BORROWING
REQUEST) AND TO MAINTAIN THE LOANS ............................................................... 45
7.1 Representations True; No Default or Event of Default.............................................. 45
7.2 Borrowing Base.................................................................................... 45
7.3 Borrowing Notice.................................................................................. 46
7.4 Other Matters..................................................................................... 46
7.5 Expenses.......................................................................................... 46
7.6 Adverse Change.................................................................................... 46
7.7 Condemnation...................................................................................... 46
7.8 Security.......................................................................................... 46
SECTION 8. LOAN MATURITY; LOAN PREPAYMENTS.................................................................... 46
8.1 Loan Maturity..................................................................................... 46
8.2 Mandatory Prepayments............................................................................. 46
8.3 Voluntary Prepayments............................................................................. 48
8.4 Allocation of Prepayments......................................................................... 48
8.5 Prepayment Notice................................................................................. 48
8.6 Payment Instructions; Etc......................................................................... 48
SECTION 9. ASSIGNMENTS AND PARTICIPATIONS..................................................................... 48
9.1 Assignments....................................................................................... 48
9.2 Participations.................................................................................... 49
SECTION 10. CERTAIN COVENANTS OF THE BORROWER AND EACH GUARANTOR............................................... 50
10.1 Notice of Default or Event of Default............................................................. 50
10.2 Notice of Material Adverse Change................................................................. 50
10.3 Preservation of Existence......................................................................... 50
10.4 Compliance with Laws.............................................................................. 50
10.5 Enforceability of Obligations..................................................................... 50
10.6 Books and Records................................................................................. 50
10.7 Fulfillment of Obligations........................................................................ 51
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10.8 Maintenance of Office; Notice of Relocation...................................................... 51
10.9 Litigation....................................................................................... 51
10.10 Fees, Taxes and Expenses......................................................................... 51
10.11 Information...................................................................................... 51
10.12 Nature of Business and Permitted Transactions.................................................... 52
10.13 Due Diligence.................................................................................... 52
10.14 Taxes; Charges................................................................................... 52
10.15 Operation; Maintenance; Inspection............................................................... 53
10.16 Taxes on Security................................................................................ 53
10.17 ERISA Events..................................................................................... 53
10.18 Due on Sale and Encumbrance; Transfers of Interests.............................................. 54
10.19 Estoppel Certificates............................................................................ 54
10.20 Handicapped Access............................................................................... 54
10.21 Further Assurances............................................................................... 55
10.22 Equipment Insurance.............................................................................. 55
10.23 New Mortgages and Receivables.................................................................... 56
10.24 Alterations...................................................................................... 57
10.25 Lease Extension.................................................................................. 58
10.26 Compliance Certificate........................................................................... 58
10.27 Accounts Payable................................................................................. 58
10.28 Financial Covenants.............................................................................. 58
10.29 Collateral....................................................................................... 58
SECTION 11. NEGATIVE COVENANTS................................................................................ 58
11.1 No Rescissions or Modifications.................................................................. 59
11.2 No Liens......................................................................................... 59
11.3 No Changes....................................................................................... 59
11.4 Consolidations, Mergers and Sales of Assets...................................................... 59
11.5 Investments in Other Persons..................................................................... 59
11.6 Financial Covenants.............................................................................. 59
11.7 Dissolution...................................................................................... 60
11.8 Change in Business............................................................................... 60
11.9 Liens............................................................................................ 60
11.10 Sale of Assets................................................................................... 60
11.11 Dividends........................................................................................ 60
11.12 New Management Contracts......................................................................... 60
11.13 Options.......................................................................................... 60
11.14 Pre Financing.................................................................................... 60
SECTION 12. DEFAULTS, REMEDIES AND TERMINATION................................................................ 61
12.1 Events of Default................................................................................ 61
12.2 Default Remedies................................................................................. 63
SECTION 13. INDEMNIFICATION; EXPENSES......................................................................... 63
13.1 Indemnification.................................................................................. 63
13.2 Expenses......................................................................................... 65
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SECTION 14. SECURITY INTEREST................................................................................. 66
14.1 Grant of Security Interests...................................................................... 66
14.2 Further Assurances; Protection of Lender's Security Interest..................................... 68
14.3 General Authority................................................................................ 68
14.4 Collection of Receivables........................................................................ 69
14.5 Remedies upon Event of Default................................................................... 69
14.6 Application of Proceeds.......................................................................... 70
14.7 Termination of Security Interests; Release of Collateral......................................... 71
14.8 Lender Acknowledgement........................................................................... 71
14.9 Notes............................................................................................ 71
SECTION 15. MORTGAGE SATISFACTION............................................................................. 71
15.1 Satisfaction..................................................................................... 71
SECTION 16. MISCELLANEOUS..................................................................................... 71
16.1 Notices.......................................................................................... 71
16.2 Survival......................................................................................... 72
16.3 Successors and Assigns........................................................................... 72
16.4 Amendment and Waiver............................................................................. 72
16.5 Counterparts..................................................................................... 73
16.6 Reproduction of Documents........................................................................ 73
16.7 Governing Law; Consent to Jurisdiction and Venue................................................. 73
16.8 Confidentiality.................................................................................. 74
16.9 Waiver of Jury Trial............................................................................. 74
16.10 No Implied Waiver; Cumulative Remedies........................................................... 74
16.11 No Discharge..................................................................................... 75
16.12 Severability..................................................................................... 75
16.13 Prior Understandings............................................................................. 75
16.14 General Source of Funds Representation of Lender................................................. 75
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Exhibits and Schedules
Exhibits
--------
Exhibit A - Form of Borrowing Base Report
Exhibit B - Form of Estoppel Certificate
Exhibit C - Form of Alliance Pledge Agreement
Exhibit D - Form of Revolving Loan Borrowing Notice
Exhibit E - Form of Revolving Note
Exhibit F - Form of Term Loan Borrowing Notice
Exhibit G - Form of Term Note
Exhibit H - Form of Collateral Assignment
Schedules
---------
Schedule 1 - Designated Note Receivables
Schedule 2 - Eligible Owned Real Estate
Schedule 3 - Receivables
Schedule 4 - Eligible Receivables
Schedule 5 - Cost of Owned Properties
Schedule 6 - Form of Entity of Harlem Guarantor and Bayard Guarantor
Schedule 7 - Litigation
Schedule 8 - Location of Records
Schedule 9 - Equipment Owned by Borrower
Schedule 10 - Borrower's Name Changes, Mergers or Consolidations
Schedule 11 - Title Insurance
Schedule 12 - Additional Reporting Requirements
Schedule 13 - Minimum Purchase Price/Financing Proceeds for Owned Real Estate
Schedule 14 - Leases
Schedule 15 - Required Insurance
Schedule 16 - Other Loans Receivable
Schedule 17 - Terms of Philadelphia Management Contracts
Schedule 18 - Excluded Collateral
Schedule 19 - Receivables With Lost or Misplaced Notes
vi
CREDIT AND SECURITY AGREEMENT, dated as of July 31, 2002 (as
modified, supplemented or amended from time to time, this "Agreement"), among
EDISON SCHOOLS INC., a Delaware corporation (together with its successors, the
"Borrower"), SCHOOL SERVICES LLC, a Delaware limited liability company (together
with its successors and any Assignees, the "Lender"), 110th and 5th ASSOCIATES,
LLC, a New York limited liability company (together with its successors, the
"Harlem Guarantor"), and XXXXXX XXXXXX CHARTER SCHOOL, LLC, a Florida limited
liability company (together with its successors, the "Bayard Guarantor").
WHEREAS, Borrower has requested that Lender make a revolving
loan to it in an aggregate amount not to exceed $10,000,000 at any time
outstanding, and Lender is prepared to make such a loan upon the terms and
subject to the conditions hereof; and
WHEREAS, Borrower has requested that Lender make a term loan
to it in an amount of $10,000,000, and Lender is prepared to make such a loan
upon the terms and subject to the conditions hereof.
Accordingly, the parties hereto agree as follows:
SECTION 1. INTERPRETATION OF AGREEMENT AND NOTES.
1.1 Definitions. Except as the context shall otherwise require, the
following terms shall have the following meanings for all purposes of this
Agreement:
"Affiliate" shall mean, with respect to a Person, any other
Person, which directly or indirectly controls, is controlled by or is
under common control with, such Person. The term "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
"Agreement" shall have the meaning set forth in the first
paragraph hereof.
"Albany Loan Documents" means any and all loan documents which
evidence, govern or secure that certain loan in the original principal
amount of $13,000,000.00 made by Borrower in favor of New Covenant
Charter School on August 7, 2001, including, without limitation, any and
all promissory notes, loan agreements, mortgages, assignments of leases
and rents, environmental indemnity agreements and financing statements
and any and all amendments or modifications thereof.
"Alliance Edison LLC Member Interest" means that certain limited
liability company member interest of Alliance Edison LLC, a Delaware
limited liability company, which is held by Borrower.
"Alliance Pledge Agreement" shall mean that certain pledge
agreement in substantially the form attached hereto as Exhibit C, by and
between Borrower and Lender, pursuant to which Borrower shall pledge the
Alliance Edison LLC Member Interest to Lender.
"Arrangement Fee" shall mean $500,000, which fee is the product
of: (a) 2.50%; and (b) $20,000,000, $150,000 of which has been paid by
Borrower to Lender on the date hereof.
"Assignee" shall have the meaning set forth in Section 9.1(b).
"Borrower" shall have the meaning set forth in the first paragraph
of this Agreement.
"Bayard Guarantor" shall have the meaning set forth in the first
paragraph of this Agreement.
"Bayard Guaranty" shall mean that certain Guaranty, dated as of
the date hereof, made by Bayard Guarantor in favor of Lender.
"Bayard Mortgage" shall mean the Mortgage given by Bayard
Guarantor in favor of Lender creating a Lien on the Owned Real Estate
owned by the Bayard Guarantor.
"Borrowing" shall mean each increase in the principal amount of
the Revolving Loans (including the initial funding thereof) in accordance
with Sections 2.1 and 2.2 hereof and the principal amount of the Term
Loan in accordance with Sections 2A.1 and 2A.2.
"Borrowing Base" shall mean, as of any date of determination, an
amount equal to the difference between the sum of:
(a) the product of (w) thirty three (33%) percent and (x) the
aggregate Outstanding Balance of all Eligible Receivables; plus
(b) the product of (1) seventy (70%) percent and (2) the Fair
Market Value of all Eligible Owned Real Estate; minus
(c) to the extent a positive number, the difference between the
outstanding principal balance of the Term Loan minus Seven Million
($7,000,000.00) Dollars.
"Borrowing Base Report" shall mean a report substantially in the
form of Exhibit A hereto.
"Budget" shall mean Borrower's projections and business plan as
previously submitted to Lender on July 19, 2002.
"Business Day" shall mean any day other than a Saturday, Sunday,
public holiday under the Laws of the State of New York or any other day
on which banking institutions are authorized or obligated to close in the
State of New York.
"Change of Control" shall mean, with respect to Borrower:
2
(a) H. Xxxxxxxxxxx Xxxxxxx shall at any time cease to be the
beneficial owner (within Rule 13d-3 promulgated by the Securities and
Exchange Commission under the Exchange Act) of at least 45% of the issued
and outstanding Class B common stock of Borrower;
(b) any Person or group of Persons (within the meaning of Section
13 or 14 of the Exchange Act) shall at any time be the "beneficial
owners" (as defined above) of more of the issued and outstanding Class B
common stock of Borrower than is beneficially owned by H. Xxxxxxxxxxx
Xxxxxxx at such time;
(c) no Class B common stock of Borrower is outstanding; or
(d) during any period of 36 consecutive calendar months,
individuals who were directors of Borrower on the first day of such
period (the applicable "Incumbent Board") shall cease to constitute a
majority of the board of directors of Borrower for any reason other than
death or disability, provided that, for purposes of this clause any
individual becoming a director during any such period subsequent to the
first day thereof whose election, or nomination for election, was
approved by a vote of at least a majority of the directors then
comprising the Incumbent Board for such period shall be considered as
though such individual was a member of the Incumbent Board for such
period.
"Closing Date" shall have the meaning set forth in Sections
2.2(a)(ii) and 2A.2(a) hereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time and any successor thereto, and the regulations
promulgated and rulings issued thereunder.
"Collateral" shall have the meaning set forth in Section 14.1(a)
hereof.
"Collections" shall mean, for any Receivable as of any date:
(a) the sum of all amounts, whether in the form of wire transfer,
cash, checks, drafts, or other instruments, in payment of, or applied to,
any amount owed by any Obligor on account of such Receivable (including
but not limited to all amounts received on account of any Defaulted
Receivable) on or before such date, including, without limitation, all
amounts received on account of such Receivable and all other fees and
charges; and
(b) cash Proceeds of Related Security with respect to such
Receivable.
"Commitment" shall mean the collective reference to the Revolving
Loan Commitment and the Term Loan Commitment.
"Consolidated Debt" shall mean, at any time, the Debt of Borrower
and its Subsidiaries determined on a consolidated basis in accordance
with GAAP, and which shall in any event include, without duplication, the
Debt of any Subsidiary of Borrower
3
which is not included on a consolidated balance sheet of borrower as a
result of FASB 140.
"Consolidated Net Income" shall mean, for any period, the net
income of Borrower and its Subsidiaries determined on a consolidated
basis in accordance with GAAP.
"Consolidated Tangible Net Worth" shall mean, at any time, the
common stockholders' equity of Borrower and its Subsidiaries determined
on a consolidated basis in accordance with GAAP, less the sum of:
(a) all amounts owing to Borrower or any Subsidiary by any
Affiliate of Borrower or such Subsidiary or by any officer, director or
employee of Borrower, any Subsidiary of Borrower or any of their
respective Affiliates; and
(b) the carrying value of all intangible assets of Borrower and
its Subsidiaries.
"Debt" of a Person shall mean, without duplication, such Person's:
(a) indebtedness for borrowed money or for the deferred purchase
price of property or services;
(b) obligations as lessee under leases which shall have been or
should be, in accordance with GAAP, recorded as capital leases;
(c) obligations, whether or not assumed, which are secured by
Liens or payable out of the proceeds or production from property now or
hereafter acquired by such Person;
(d) obligations which are evidenced by notes, acceptances or other
instruments;
(e) contingent or non-contingent obligations to make loans or
advances to any other Person or to reimburse any Person in respect of
amounts paid or to be paid under a letter of credit or similar
instrument;
(f) Guarantees of Debt of others; and
(g) liabilities in respect of unfunded vested benefits under plans
covered by Title IV of ERISA.
"Default" shall mean any event or condition that would become an
Event of Default after notice or passage of time or both.
"Default Rate" shall mean, at any time, the Interest Rate at such
time plus 2% per annum.
"Defaulted Receivable" shall mean a Receivable:
4
(a) in respect of which an event of default (beyond all applicable
notice and grace periods and subject to any and all cure rights) of a
payment obligation or any other material obligation has occurred and is
continuing under the instrument evidencing such Receivable; or
(b) which is identified as uncollectible by Lender in its
reasonable discretion, provided, that the Lender may only deem a
Receivable to be a Defaulted Receivable under this clause (b) upon the
initial request of the Borrower to include such Receivable in the
Borrowing Base and then once during each 180 day period thereafter;
provided, further, that if the Lender deems a Receivable to be a
Defaulted Receivable under this clause (b), subject to the right of the
Lender to exercise its rights under this clause (b) with respect to such
Receivable at a later date as set forth above, it shall no longer be a
Defaulted Receivable if the Borrower delivers to the Lender an Estoppel
Certificate, in the form attached hereto as Exhibit B, executed by the
Obligor of such Receivable within twenty (20) days of the Lender deeming
such Receivable to be a Defaulted Receivable; or
(c) in respect of which an Event of Bankruptcy has occurred and is
continuing with respect to the related Obligor.
"Designated Note Receivables" shall mean the Receivables set forth
on Schedule 1 hereto.
"Dollars" or "$" shall mean the lawful currency of the United
States of America.
"EBITDA" shall mean for any period in question, Borrower's net
income calculated in accordance with GAAP for that period:
(a) plus, to the extent deducted in calculating such net income,
the sum of all interest paid or accrued, income and franchise taxes paid
or accrued, depreciation and amortization, non-cash stock based
compensation charges, write offs of equity investments, and any net
losses incurred on the sale or disposition of assets other than in the
normal course of business;
(b) less, to the extent included in net income, the sum of all net
gains (less losses) from the sale or disposition of assets and other
extraordinary and non-recurring gains.
"Eligible Owned Real Estate" except for the Harlem Real Estate,
fee title real property owned by Borrower, or a wholly-owned subsidiary
of Borrower,
(a) free and clear of all Liens (except for Permitted Liens) in
which Lender will have a valid first priority perfected mortgage if such
mortgage is duly and properly filed of record; and
(b) which, with respect to Owned Real Estate acquired by Borrower
after the date hereof, is reasonably acceptable to Lender in all
respects.
5
Lender hereby agrees that of the date hereof the Eligible
Owned Real Estate is the Owned Real Estate set forth on Schedule 2 attached
hereto.
"Eligible Receivable" shall mean, at any time, any Receivable:
(a) which complies with all applicable Laws and other legal
requirements, whether federal, state or local;
(b) which constitutes an "instrument" as defined in the UCC as in
effect in the State of New York and the jurisdiction whose Law governs
the perfection of Lender's security interest therein;
(c) which was originated in connection with the financing of a
charter school to be owned or operated by an Obligor and which was in
existence as of the date hereof or, if not in existence on the date
hereof, which is provided for in the Budget, and which Obligor is not an
Affiliate of Borrower;
(d) which, together with its Related Security is assignable under
the terms of the applicable Mortgage and/or loan document, including the
note, without any consent of or notice to the related Obligor or any
other Person or which requires consent of or notice to the related
Obligor or any other Person and such consent is received and notice given
or waived by Lender and with respect to which the original note has been
delivered to the Lender;
(e) which is genuine (i.e., is not fraudulent) and constitutes a
legal, valid and binding payment obligation of the related Obligor,
enforceable in accordance with its terms;
(f) which provides for payment in Dollars by the related Obligor;
(g) which is not a Defaulted Receivable;
(h) which was not originated in or subject to the Laws of a
jurisdiction whose Laws would make such Receivable, the related
instrument and Related Security and the assignment thereof to Lender
hereunder unlawful, invalid or unenforceable;
(i) which is owned solely by Borrower free and clear of all Liens
(except for Permitted Liens) and in which Lender will have a valid first
priority perfected security interest;
(j) which has an Obligor which is domiciled in a state (including
the District of Columbia) of the United States of America;
(k) which is not an obligation of the United States government or
any agency, instrumentality or political subdivision thereof;
(l) which arises under loan agreements all of which are in full
force and effect;
6
(m) which is secured by a properly secured first priority mortgage
on the real property owned by the Obligor or leasehold with respect to
which the Obligor is the tenant (subject to the Permitted Liens).
(n) the payment of which (or of any portion of which) has not been
subordinated or deferred;
(o) except for Permitted Construction Loans, which is not a
construction loan; and
(p) in the case of future Receivables, which real property or
leasehold with respect to which the Receivable relates is reasonably
acceptable to Lender in all respects.
Subject to continuing to remain Eligible Receivables under the standards
set forth in clauses (a) through (o) of this definition of Eligible Receivables,
the Lender agrees that as of the date hereof the Receivables set forth on
Schedule 4 hereto are Eligible Receivables.
"Environmental Laws" shall mean any federal, state or local law
(whether imposed by statute, or administrative or judicial order, or
common law), now or hereafter enacted, governing health, industrial
hygiene, the environment or natural resources, or Hazardous Materials,
including, such laws governing or regulating the use, generation,
storage, removal, recovery, treatment, handling, transport, disposal,
control, discharge of, or exposure to, Hazardous Materials.
"Equipment" shall mean all of Borrower's right, title and interest
in and to all now owned and hereafter acquired equipment, vehicles,
furniture, fixtures and machinery, together with all substitutes,
replacements, accessions and additions thereto, and all tools, parts,
accessories and attachments used in connection therewith.
"ERC" means Edison Receivables Company LLC, a Delaware limited
liability company.
"ERC LLC Member Interest" means that certain limited liability
company member interest of ERC which is held by Borrower.
"ERC LLC Pledge Agreement" shall mean that certain pledge
agreement, dated as of the date hereof by and between Borrower and
Lender, pursuant to which Borrower shall pledge certain rights with
respect to the ERC LLC Member Interest to Lender.
"ERC Pledge Agreement" means that certain Pledge Agreement, dated
as of the date hereof, made by Borrower in favor of ERC, as modified,
supplemented and amended from time to time.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and any successor thereto, and the
regulations promulgated and rulings issued thereunder.
7
"ERISA Affiliate" shall mean, with respect to any Person, any
Person which is a member of any group of organizations:
(a) described in Section 414(b) or (c) of the Code of which such
Person is a member; or
(b) solely for purposes of potential liability under Section
302(c)(11) of ERISA and Section 412(c)(11) of the Code and the Lien
created under Section 302(f) of ERISA and Section 412(n) of the Code,
described in Section 414(m) or (o) of the Code of which such Person is a
member.
"ERISA Event" shall mean, with respect to any Person, (i) with
respect to any Plan, a reportable event, as defined in Section 4043 of
ERISA, as to which the PBGC has not by regulation waived the requirement
of Section 4043(a) of ERISA that it be notified within 30 days of the
occurrence of such event, or (ii) the withdrawal of such Person or any
ERISA Affiliate from a multiple employer Plan during a plan year in which
it is a "substantial employer", as defined in Section 4001(a)(2) of
ERISA, or (iii) the failure by such Person or any ERISA Affiliate to meet
the minimum funding standard of Section 412 of the Code or Section 302 of
ERISA with respect to any Plan, including, without limitation, the
failure to make on or before its due date a required installment under
Section 412(m) of the Code or Section 302(e) of ERISA, or (iv) the
distribution under Section 4041 of ERISA of a notice of intent to
terminate any Plan or any action taken by such Person or any ERISA
Affiliate to terminate any Plan, or (v) the adoption of an amendment to
any Plan that pursuant to Section 401(a)(29) of the Code or Section 307
of ERISA would result in the loss of tax-exempt status of the trust of
which such Plan is a part if such Person or an ERISA Affiliate fails to
timely provide security to the Plan in accordance with the provisions of
said Sections, or (vi) the institution by the PBGC of proceedings under
Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Plan, or (vii) the receipt by such Person or
any ERISA Affiliate of a notice from a Multiemployer Plan that action of
the type described in the previous clause (vi) has been taken by the PBGC
with respect to such Multiemployer Plan, or (viii) any event or
circumstance exists which may reasonably be expected to constitute
grounds for such Person or any ERISA Affiliate to incur liability under
Title IV of ERISA or under Sections 412(c)(11) or 412(n) of the Code with
respect to any Plan.
"Event of Bankruptcy" shall mean, for any Person:
(a) that such Person shall fail generally to, or admit in writing
its inability to, pay its debts as they become due; or
(b) a proceeding shall have been instituted and not dismissed for
a period of more than 60 days in a court having jurisdiction in the
premises seeking a decree or order for relief in respect of such Person
in an involuntary case under any applicable bankruptcy, insolvency or
other similar Law now or hereafter in effect, or for the appointment of a
receiver, liquidator, assignee, trustee, custodian, sequestrator,
conservator or other similar official of such Person or for any
substantial part of its property, or for the winding-up or liquidation of
its affairs; or
8
(c) the commencement by such Person of a voluntary case under any
applicable bankruptcy, insolvency or other similar Law now or hereafter
in effect, or such Person's consent to the entry of an order for relief
in an involuntary case under any such Law, or consent to the appointment
of or taking possession by a receiver, liquidator, assignee, trustee,
custodian, sequestrator, conservator or other similar official of such
Person or for any substantial part of its property, or any general
assignment for the benefit of creditors; or
(d) such Person or any Subsidiary of such Person shall take any
corporate action in furtherance of any of the actions set forth in the
preceding clause (a), (b) or (c).
"Event of Default" shall have the meaning assigned thereto in
Section 12.1 hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
"Excluded Collateral" is defined on Schedule 18 attached hereto.
"Expiration Date" shall mean the earliest of:
(a) June 30, 2004, unless extended from time to time, by an
agreement in writing between Borrower and Lender; and
(b) the date on which Lender delivers a Notice of Termination
pursuant to Section 12.1 hereof or an Event of Default described in
Section 12.1(h) hereof occurs.
"Facility Documents" shall mean this Agreement, the Term Note, the
Revolving Note(s), the Bayard Guaranty, the Harlem Guaranty, the
Mortgages, the Alliance Pledge Agreement, the ERC LLC Pledge Agreement,
and all other agreements, documents and instruments delivered pursuant
hereto or thereto or in connection therewith or herewith, all other
documents evidencing, securing, governing or otherwise pertaining to the
Loans, and all amendments, modifications, renewals, substitutions and
replacements of any of the foregoing.
"Fair Market Value" shall mean with respect to any Owned Real
Estate (except for the Harlem Real Estate) set forth on Schedule 2
attached hereto, the cost of such real estate as reflected on Schedule 5,
and with respect to any hereafter acquired real estate, if acquired from
a Person that is not an Affiliate of Borrower in a bona fide arms length
transaction, the cost thereof, and otherwise an amount determined by an
appraiser reasonably acceptable to Lender and Borrower.
"GAAP" shall mean generally accepted accounting principles in the
United States of America, applied on a consistent basis and applied to
both classification of items and amounts, and shall include, without
limitation, the official interpretations thereof by the Financial
Accounting Standards Board, its predecessors and successors.
9
"Granville Loan Documents" means any and all loan documents which
evidence, govern or secure that certain loan in the original principal
amount of $9,000,000.00 made by Borrower in favor of Granville Academy
National, Inc. on March 7, 2001, including, without limitation, any and
all promissory notes, loan agreements, mortgages, assignments of leases
and rents, environmental indemnity agreements and financing statements
and any and all amendments or modifications thereof.
"Gross Site Contribution" means, for each Management Contract, net
revenue (which is gross student funding less costs which Borrower is not
primarily obligated to pay) less direct site expenses (direct site
expenses shall include the cost of instruction, facilities, technology,
and administration, as set forth in the Management Contract budget).
"Guarantee" of or by any Person (the "guarantor") shall mean any
obligation, contingent or otherwise, of the guarantor guaranteeing or
having the economic effect of guaranteeing any Debt or other obligation
of any other Person (the "primary obligor") in any manner, whether
directly or indirectly, and including any obligation of the guarantor,
direct or indirect:
(a) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Debt or other obligation or to purchase (or
to advance or supply funds for the purchase of) any security for the
payment thereof;
(b) to purchase or lease property, securities or services for the
purpose of assuring the owner of such Debt or other obligation of the
payment thereof;
(c) to maintain working capital, equity capital or any other
financial statement condition or liquidity of the primary obligor so as
to enable the primary obligor to pay such Debt or other obligation; or
(d) as an account party in respect of any letter of credit or
letter of guaranty issued to support such Debt or obligation; provided,
that the term Guarantee shall not include endorsements for collection or
deposit in the ordinary course of business.
"Guarantor" shall mean either the Harlem Guarantor or the Bayard
Guarantor; collectively, the "Guarantors".
"Harlem Guarantor" shall have the meaning set forth in the first
paragraph of this Agreement.
"Harlem Guaranty" shall mean that certain Guaranty, dated as of
the date hereof, made by Harlem Guarantor in favor of Lender.
"Harlem Joint Development Agreement" means that certain Joint
Development Agreement, dated February 16, 2001 by and between Harlem
Guarantor and the Museum for African Art with respect to the Harlem Real
Estate.
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"Harlem Membership Interest" shall mean a 100% membership interest
in the Harlem Guarantor.
"Harlem Mortgage" shall mean the Mortgage on the Harlem Real
Estate.
"Harlem Real Estate" shall mean the real property owned by the
Harlem Guarantor located at 0000-0000 Xxxxx Xxxxxx and/or 0000 Xxxxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx.
"Hazardous Materials" shall mean:
(a) petroleum or chemical products, whether in liquid, solid, or
gaseous form, or any fraction or by product thereof;
(b) asbestos or asbestos containing materials;
(c) polychlorinated biphenyls (pcbs);
(d) any explosive or radioactive substances; or
(e) any other substance, material, waste or mixture which is or
shall be listed, defined, or otherwise determined by any governmental
authority to be hazardous, toxic, dangerous or otherwise regulated,
controlled or giving rise to liability under any Environmental Laws.
"Initial Closing Date" shall have the meaning set forth in Section
2.2(a) hereof.
"Interest" shall mean, for each Interest Period, an amount equal
to the sum of the following amounts calculated for each day during such
Interest Period (or portion thereof):
IR x LA x 1
---
360
Where:
IR = the applicable Interest Rate; and
LA = the principal amount of the applicable Loan.
"Interest Period" shall mean:
(a) with respect to any Monthly Payment Date, the period from and
including the preceding Monthly Payment Date to but excluding such
Monthly Payment Date provided that in the case of the initial Monthly
Payment Date, the Interest Period shall mean the period from and
including the Initial Closing Date to but excluding such Monthly Payment
Date; and
(b) with respect to any portion of the Revolving Loan or the Term
Loan repaid or prepaid on a Payment Date other than a Monthly Payment
Date, the period from
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and including the Monthly Payment Date immediately preceding such Payment
Date to but excluding such Payment Date.
"Interest Rate" shall mean twelve (12%) percent per annum,
provided that if an Event of Default shall have occurred and be
continuing, the Interest Rate shall, in the discretion of Lender and upon
notice to Borrower as set forth in Section 2.1.B hereof and Section
2A.1(c) hereof, be the Default Rate.
"Investment" in any Person shall mean any loan or advance to such
Person, any purchase or other acquisition or any capital stock or other
ownership or profit interest, warrants, rights, options, obligations or
other securities of such Person, any capital contribution to such Person
or any other investment in such Person.
"Law" shall mean any law (including common law), constitution,
statute, treaty, regulation, rule, ordinance, order, injunction, writ,
decree or award of any Official Body.
"Lender" shall have the meaning set forth in the first paragraph
of this Agreement.
"Lien", in respect of the property of any Person, shall mean any
ownership interest of any other Person, any mortgage, deed of trust,
hypothecation, pledge, lien, security interest, filing of any financing
statement, charge or other encumbrance or security arrangement of any
nature whatsoever, including, without limitation, any conditional sale or
title retention arrangement, and any assignment, deposit arrangement,
consignment or lease intended as, or having the effect of, security. The
term Lien shall include reservations, exceptions, encroachments,
easements, rights of way, covenants, conditions, restrictions, leases and
other title exceptions and encumbrances affecting the Owned Real Estate.
"Loans" shall mean the collective reference to the Revolving Loans
and the Term Loan; each a "Loan".
"Management Contract" shall mean the principal contract (together
with all annexes, schedules and exhibits thereto) governing the provision
of services by Borrower to a public school, including, without
limitation, charter schools, contract schools and schools secured through
state takeovers.
"Maturity Date" shall mean June 30, 2004 (unless extended from
time to time, by an agreement in writing between Borrower and Lender).
"Merrill Loan Agreement" shall mean that certain Amended and
Restated Credit and Security Agreement, dated as of the date hereof, by
and among Xxxxxxx Xxxxx, Lender, and ERC, as the same shall be amended
and renewed from time to time.
"Xxxxxxx Xxxxx" means Xxxxxxx Xxxxx Mortgage Capital Inc., a
Delaware corporation.
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"Monthly Payment Date" shall mean the 15th day of each month
beginning with September 15, 2002, provided that if any such 15th day is
not a Business Day, then the next succeeding Business Day.
"Monthly Period" shall mean a calendar month.
"Mortgages" means all or each Mortgage, Security Agreement and
Fixture Filing, and Deed of Trust, Security Agreement and Fixture Filing,
as applicable, executed by Borrower, a Guarantor, or another Subsidiary
of Borrower, as the case may be, in favor of Lender, covering the Owned
Real Estate, which, as to the Owned Real Estate in existence on the date
hereof, shall be in the forms previously agreed to by Borrower and Lender
(the "Approved Mortgage Forms"), and which, as to Owned Real Estate
acquired after the date hereof, shall be in form and substance
substantially similar to the Approved Mortgage Forms, with such changes
thereto as shall be required, or as are customary, under applicable local
laws, or due to the particular nature of the Owned Real Property.
"Multiemployer Plan" shall mean, with respect to any Person, a
"multiemployer plan" as defined in Section 4001(a)(3) of ERISA which is
or was at any time during the current year or the immediately preceding
five years contributed to by such Person or any ERISA Affiliate on behalf
of its employees and which is covered by Title IV of ERISA.
"Notes" shall mean the collective reference to the Term Note(s)
and the Revolving Note(s); each a "Note".
"Notice of Termination" shall have the meaning specified in
Section 12.1 hereof.
"Obligations" shall mean the collective reference to the Secured
Revolving Obligations, the Secured Term Obligations, and all other
obligations and liabilities of Borrower hereunder and under the other
Facility Documents.
"Obligor" shall mean, for any Receivable, each and every Person,
charter school, district school, state or local government or any agency
or instrumentality thereof who is obligated to make payments to Borrower
pursuant to such Receivable, including, without limitation, the Person
who is the maker of the instrument evidencing any such Receivable and any
guarantor of any such instrument.
"Official Body" shall mean any government or political subdivision
or any agency, authority, bureau, central bank, commission, department or
instrumentality of either, or any court, tribunal, grand jury or
arbitrator, in each case whether foreign or domestic.
"Outstanding Balance" as to any Receivable shall mean, at any
time, the then outstanding principal amount thereof and all accrued and
unpaid interest with respect thereto (excluding, however, any and all
amounts which Borrower knows or has reason to believe will not be paid by
the related Obligor). The outstanding amount of any Receivable shall be
reduced by all related Collections on the date received.
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"Owned Real Estate" shall mean any and all real property now owned
or hereafter acquired by Borrower or its wholly owned Subsidiaries which
ownership is in fee simple.
"Payment Date" shall mean each Monthly Payment Date and any other
date on which principal of the Revolving Loans or the Term Loan is repaid
or prepaid.
"PBGC" shall mean the Pension Benefit Guaranty Corporation and any
entity succeeding to any or all of its functions under ERISA.
"Permitted Construction Loans" shall mean (a) any construction
loan made by Borrower which has converted to a permanent loan, (b) the
loan evidenced by the Riverhead I Loan Documents, (c) the loan evidenced
by the Rochester Loan Documents, (d) the loan evidenced by the Granville
Loan Documents, (e) the construction loan to be made by Borrower which
shall replace the current loan evidenced by the Stepping Stone Loan
Documents in the form previously delivered to Lender's counsel, and (f)
the loan evidenced by the Albany Loan Documents, provided, in each such
case, the improvements upon the mortgaged property or any phase thereof
is substantially complete, certificates of occupancy and all other
permits and licenses necessary for the intended use thereof have been
obtained, and business operations within the improvements have commenced,
it being understood and agreed that the portion of such Permitted
Construction Loans which are Eligible Receivables as of the date hereof
is set forth on Schedule 4 attached hereto.
"Permitted Equipment Sale or Refinancing" shall mean a third party
agrees in a bona fide transaction to lend against any of Borrower's now
owned or hereinafter acquired Equipment at an advance rate of at least
fifty (50%) percent of the fair market value of the Equipment which is
the subject of the loan, or purchase any such Equipment for a purchase
price of at least fifty (50%) percent of the fair market value of the
Equipment.
"Permitted ERC Financing" means (a) the loan financing made
pursuant to the Merrill Loan Agreement, (b) the Debt evidenced by any
note delivered by ERC to Borrower pursuant to Section 2.02(d) of the
Purchase and Contribution Agreement, and (c) any other financing (i)
wherein accounts receivable and the rights and collections related
thereto of Borrower are transferred to ERC, which transfer is funded by
ERC in whole or in part by borrowings, the issuance of instruments or
securities that are paid principally from the cash flow derived from such
accounts receivable, by cash payment or which constitutes a capital
contribution by the Borrower to ERC, (ii) wherein the lenders obligations
thereunder are secured only by such accounts receivable, related rights,
collections or other assets of ERC except for such security provided
directly by Edison as may secure such obligations of Edison to such
lender as are customary and usual in receivables financings of the type,
(iii) wherein ERC is the borrower thereunder, and (iv) which has a
maximum principal amount which cannot exceed the sum of the amounts under
clauses (i) and (ii) (without regard to the absolute dollar limitation
therein) of the definition of "Borrowing Base" (as defined in the Merrill
Loan Agreement), whether or not the Merrill Loan Agreement is in effect
at such time.
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"Permitted Liens" shall mean:
(a) encumbrances permitted under the Mortgages;
(b) Liens created under this Agreement;
(c) any and all encumbrances, easements, restrictions, covenants,
declarations and other title matters which are exceptions to title (1) on
any mortgagee title policy held by Borrower with respect to a Receivable,
or (2) in any document with respect to the Related Security;
(d) the terms and conditions of the Harlem Joint Development
Agreement;
(e) Liens created under the Purchase and Contribution Agreement;
(f) Liens securing taxes, assessments, governmental charges or
levies not yet delinquent or the payment of which is being contested in
good faith by appropriate proceedings diligently conducted and with
respect to which adequate reserves have been established in accordance
with GAAP and which do not, singly or in the aggregate, adversely affect
in any material respect the Collateral or Lender's interest therein;
(g) Liens arising by operation of law securing any amount not yet
delinquent or the payment of which is being contested in good faith by
appropriate proceedings diligently conducted and with respect to which
adequate reserves have been established in accordance with GAAP and which
do not, singly, or the aggregate, adversely affect in any material
respect the Collateral or Lender's interest therein;
(h) subject to complying with the conditions of a Permitted
Equipment Sale or Refinancing, purchase money security interests and
other Liens granted by Borrower with respect to Equipment owned on the
date hereof or acquired after the date hereof;
(i) until the Special Condition is met, the Lien on, and pledge
of, the Harlem Membership Interest granted by Borrower in favor of ERC
under the ERC Pledge Agreement, which lien and pledge is being pledged by
ERC to Xxxxxxx Xxxxx;
(j) subject to clause (k) below, until the Special Condition
specified in clause (a) of the definition thereof is met, a lien and
pledge on the Designated Notes Receivable granted by Borrower in favor of
ERC under the ERC Pledge Agreement, which lien and pledge is being
pledged by ERC to Xxxxxxx Xxxxx;
(k) subject to clause (j) above, (i) until the Special Condition
specified in clause (b) of the definition thereof is met, a lien and
pledge on the Designated Notes Receivable granted by Borrower in favor of
ERC under the ERC Pledge Agreement, which lien and pledge is being
pledged by ERC to Xxxxxxx Xxxxx, and (ii) once the Special Condition
specified in clause (b) of the definition thereof is met and at least
$1,000,000 and less than $5,000,000 of the Revolving Loan has been
borrowed hereunder, a lien and pledge on the Designated Notes Receivable
granted by Borrower in
15
favor of ERC under the ERC Pledge Agreement which is subordinate to the
Lien on the Designated Note Receivables in favor of the Lender hereunder;
and
(l) the rights of each and every senior lender whose loan is
senior and superior to any of the Permitted Subordinate Loans.
"Permitted Subordinate Loans" means (i) that certain loan in the
original principal amount of $653,000.00 made by Borrower in favor of
Seven Hills Charter School, Inc. and Seven Hills Charter School on
November 25, 1997, (ii) that certain loan in the original principal
amount of $7,407,500.00 made by Borrower in favor of The Charter School
for Applied Technologies on June 27, 2001, (iii) that certain loan in the
original principal amount of $4,343,112.94 made by Borrower in favor of
Friendship Public Charter School, Inc. on November 8, 2000 and (iv) that
certain loan in the original principal amount of $8,500,000.00 made by
Borrower in favor of The Renaissance Academy-Edison Charter School on
March 30, 2000.
"Person" shall mean an individual, corporation, limited liability
company, partnership (general or limited), trust, business trust,
unincorporated association, joint venture, joint-stock company, Official
Body or any other entity of whatever nature.
"Phoenixville Loan Documents" means any and all loan documents
which evidence, govern or secure that certain loan in the original
principal amount of $8,500,000.00 made by Borrower in favor of The
Renaissance Academy-Edison Charter School on March 30, 2000, including,
without limitation, any and all promissory notes, loan agreements,
mortgages, assignments of leases and rents, environmental indemnity
agreements and financing statements and any and all amendments or
modifications thereof.
"Plan" shall mean, with respect to any Person, any employee
benefit or other plan which is or was at any time during the current year
or immediately preceding five years established or maintained by such
Person or any ERISA Affiliate and which is covered by Title IV of ERISA,
other than a Multiemployer Plan.
"Primary Business Line" shall mean:
(a) The management of public schools including charter schools and
contract schools;
(b) The sale of Borrower's intellectual property and systems to
schools and school systems;
(c) The management of summer schools, after-school programs, and
before school programs;
(d) The professional development of teachers;
(e) Consulting with schools and school districts; and
16
(f) All of the above in both domestic and international markets.
"Proceeds" shall mean "proceeds" as defined in Section
9-102(a)(64) of the UCC as in effect in the State of New York and in the
jurisdiction whose law governs the perfection of Lender's interests
therein.
"Purchase and Contribution Agreement" shall mean that certain
Amended and Restated Purchase and Contribution Agreement, dated as of the
date hereof, by and between Borrower and ERC.
"Receivable" shall mean all now owned and hereinafter acquired
promissory notes and instruments, documents and rights and obligations of
Borrower relating thereto including, without limitation the Receivables
set forth in Schedule 3 hereto, it being understood and agreed that
Receivable shall not include (a) any receivable of any nature under, or
contemplated by, the Merrill Loan Agreement or the Purchase and
Contribution Agreement, (b) until the Second Closing Date, the Designated
Note Receivables, or (c) the notes receivables and loans set forth on
Schedule 17 attached hereto.
"Records" shall mean correspondence, memoranda, computer programs,
tapes, discs, papers, books or other documents or transcribed information
of any type, whether expressed in ordinary or machine-readable language.
"Related Security" shall mean with respect to any Receivable:
(a) all mortgages, deed of trust, related collateral contract
rights, lease assignments, security interests or liens and property
subject thereto from time to time, if any, purporting to secure payment
of such Receivable, together with any and all financing statements signed
by an Obligor describing any collateral securing such Receivable and all
of the rights in, to and under each applicable loan agreement related to
each Receivable;
(b) all security interests or liens and property subject thereto
from time to time, if any, purporting to secure payment of such
Receivable, (including, without limitation, pursuant to any real property
mortgage, leasehold mortgage or assignment of leases and rents), together
with any and all financing statements (and other recorded documents or
instruments) signed by an Obligor describing any collateral securing such
Receivable;
(c) guarantees, indemnities, letters of credit, insurance or other
agreements or arrangements of any kind, if any, from time to time
supporting or securing payment of such Receivable (including, without
limitation, pursuant to any payment, completion or performance guaranty);
(d) all Records relating to the Receivables; and
(e) all Proceeds of the foregoing.
17
"Responsible Officer," with respect to a Person, shall mean the
Chief Executive Officer, the President, the Treasurer, any Assistant
Treasurer, Secretary or other authorized officer of such Person (but only
if Lender has received prior written notice of the identity or title of
such other authorized officer).
"Revolving Loan Borrowing Notice" shall have the meaning set forth
in Section 2.2(b) hereof.
"Revolving Loan Commitment" shall mean the obligation of Lender to
make the Revolving Loan to the Borrower in an aggregate amount at any one
time outstanding up to but not exceeding $10,000,000, which amount shall
be reduced in accordance with the provisions of Section 2.7 hereof.
"Revolving Loans" shall mean the revolving loans made by Lender to
Borrower pursuant to Section 2.1 and/or 2.2 hereof.
"Revolving Note" shall have the meaning set forth in Section
2.2(a) hereof, and shall include any subdivision of the Note issued in
accordance with Section 2.2(a).
"Riverhead I Loan Documents" means any and all loan documents
which evidence, govern or secure that certain loan in the original
principal amount of $2,000,000.00 made by Borrower in favor of Riverhead
Charter School on August 1, 2001, including, without limitation, any and
all promissory notes, loan agreements, mortgages, assignments of leases
and rents, environmental indemnity agreements and financing statements
and any and all amendments or modifications thereof.
"Riverhead II Loan Documents" means any and all loan documents
substantially in the form previously submitted to Lender which evidence,
govern or secure that certain loan in the original principal amount of
$538,806.33 made by Borrower in favor of Riverhead Charter School on
January 4, 2002, including, without limitation, any and all promissory
notes, loan agreements, mortgages, assignments of leases and rents,
environmental indemnity agreements and financing statements and any and
all amendments or modifications thereof.
"Rochester Loan Documents" means any and all loan documents which
evidence, govern or secure that certain loan in the original principal
amount of $8,500,000.00 made by Borrower in favor of Genessee Valley Real
Estate Company LLC on August 17, 2001, including, without limitation, any
and all promissory notes, loan agreements, mortgages, assignments of
leases and rents, environmental indemnity agreements and financing
statements and any and all amendments or modifications thereof.
"Second Closing Date Collateral" means the Receivables evidenced
by the following loans: (i) the $653,000 subordinate loan made on
November 25, 1997 to Seven Hills Charter School, (ii) the $4,343,112.94
loan to Friendship Public Charter School Inc. made on November 8, 2000,
and (iii) the $850,000 loan to Milwaukee Urban League Academy of Business
and Economics, Inc. made on December 21, 2000.
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"Secured Revolving Obligations" shall mean all obligations of
Borrower secured under the Facility Documents with respect to the
Revolving Loan, including, without limitation:
(a) principal of and interest (including, without limitation, any
interest which accrues after the commencement of any case, proceeding or
other action relating to the bankruptcy, insolvency or reorganization of
Borrower) on the Revolving Loan under, or any Revolving Note issued
pursuant to, this Agreement; and
(b) all other fees and amounts payable by Borrower hereunder or in
connection herewith.
"Secured Term Obligations" shall mean all obligations of Borrower
secured under the Facility Documents with respect to the Term Loan,
including, without limitation:
(a) all principal of and interest (including, without limitation,
any interest which accrues after the commencement of any case, proceeding
or other action relating to the bankruptcy, insolvency or reorganization
of Borrower) on the Term Loan under, or any Term Note issued pursuant to,
this Agreement; and
(b) all other fees and amounts payable by Borrower hereunder or in
connection herewith.
"Securities Act" shall mean the Securities Act of 1933, as amended
from time to time.
"Security Interest" shall mean the security interest and rights
created pursuant to Section 14 hereof in the Collateral in favor of
Lender.
"Single-Employer Plan" shall mean a single-employer plan as
defined in Section 4001(a)(15) of ERISA which is subject to the
provisions of Title IV of ERISA.
"Site Assessment" means an environmental engineering report for
each real property which constitutes the Owned Real Estate.
"Site IRR" shall mean, for each Management Contract, the discount
rate when the net present value of the estimated Gross Site Contribution
in each of the five years of the contract, less the estimated incremental
cash investments and estimated technology debt service in each of the
five years of the contract, equals the estimated first year cash outlay
of related pre-opening expenses, professional development expenses,
curriculum capital, technology capital and facilities capital.
"Special Condition" shall mean:
(a) the School Reformation Commission of Philadelphia (and/or one
or more other governmental entities in Philadelphia, Pennsylvania) shall
have entered into one or more Management Contracts with Borrower
(collectively, the "Philadelphia Management Contracts"), substantially
upon the terms set forth on Schedule 17 attached hereto; or
19
(b) there being at least five thousand three hundred seventy five
(5375) students subject to new Management Contracts entered into by
Borrower after the date hereof to manage public schools, including
charter schools, contract schools and schools secured through state
takeovers (the "New Management Contracts"), provided each such New
Management Contract shall have an average Site IRR of at least 30% .
"Stepping Stone Loan Documents" means any and all loan documents
which evidence, govern or secure that certain loan in the original
principal amount of $5,500,000.00 made by Borrower in favor of Stepping
Stone Academy Charter School on June 6, 2001, including, without
limitation, any and all promissory notes, loan agreements, mortgages,
assignments of leases and rents, environmental indemnity agreements and
financing statements and any and all amendments or modifications thereof.
"Subsequent Closing Date" shall have the meaning set forth in
Section 2.2(a)(ii) hereof.
"Subsidiary" shall mean, with respect to any Person, any
corporation, limited liability company or other entity of which
securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing
similar functions are at the time directly or indirectly owned by such
Person; provided, that no entity shall be considered a Subsidiary of
Borrower if Borrower obtains such voting power solely by reason of
exercising its rights as a secured party in collateral that consists of
such entity's voting stock; provided, further, that for purposes of this
Agreement and the other Facility Documents, except under the definition
of "Consolidated Debt", "Consolidated Net Income", and "Consolidated Net
Worth", ERC shall not be deemed to be a Subsidiary of the Borrower.
"Term Loan" shall mean the term loan made by the Lender to the
Borrower pursuant to Section 2A.1 and/or 2A.2 hereof.
"Term Loan Borrowing Notice" shall have the meaning set forth in
Section 2A.2(b).
"Term Loan Closing Date" shall have the meaning set forth in
Section 2A.2.
"Term Loan Commitment" shall mean the obligation of Lender to make
the Term Loan in an aggregate amount up to, but not exceeding,
$10,000,000.00.
"Term Note" shall have the meaning set forth in Section 2A.2
hereof and shall include any subdivision of the Note issued in accordance
with Section 2A.2.
"Trenton House" means that certain parcel of land, and
improvements thereon, owned by Borrower and located at 00 Xxxxxxx Xxxxx,
Xxxxxxx, Xxx Xxxxxx.
"Trenton Parking Lot" means that certain parcel of real estate,
and improvements thereon, owned by Borrower and located at 00 Xxxxx
Xxxxxxx Xxxxxx, Xxxxxxx, Xxx Xxxxxx.
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"UCC" shall mean, with respect to any jurisdiction, the Uniform
Commercial Code, or any successor statute, or any comparable law, as the
same may from time to time be amended, supplemented or otherwise modified
and in effect in such jurisdiction.
"Warrant Agreement" shall mean that certain Warrant Agreement,
dated as of the date hereof, between Borrower and Lender, relating to
this Agreement.
1.2 Interpretation and Construction. Unless the context of this
Agreement otherwise clearly requires, references to the plural include the
singular, the singular the plural and the part the whole. References in this
Agreement to "determination" by Lender shall be conclusive absent manifest error
and include good faith estimates by Lender (in the case of quantitative
determinations), and the good faith belief by Lender (in the case of qualitative
determinations). The words "hereof", "herein", "hereunder" and similar terms in
this Agreement refer to this Agreement as a whole and not to any particular
provision of this Agreement. Unless otherwise stated in this Agreement, in the
computation of a period of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
means "to but excluding." The section and other headings contained in this
Agreement are for reference purposes only and shall not control or affect the
construction of this Agreement or the interpretation hereof in any respect.
Section, subsection, exhibit and schedule references are to this Agreement
unless otherwise specified. As used in this Agreement, the masculine, feminine
or neuter gender shall each be deemed to include the others whenever the context
so indicates. All accounting terms not specifically defined herein shall be
construed in accordance with GAAP. Terms not otherwise defined herein which are
defined in the UCC as in effect in the State of New York shall have the
respective meanings ascribed to such terms therein unless the context otherwise
clearly requires. Any provision in this Agreement referring to action to be
taken by any Person, or that such Person is prohibited from taking, shall be
applicable whether such action is taken directly or indirectly by such Person.
All references to Laws, agreements and other documents shall refer to such Laws,
agreements and documents as the same shall have been amended from time to time.
SECTION 2. REVOLVING LOAN COMMITMENT.
2.1 The Revolving Loans. (a) Lender agrees, on the terms of this
Agreement, to make and maintain the Revolving Loan to Borrower, the principal
balance of which may be increased and decreased in accordance with the terms
hereof, during the period from and including the Initial Closing Date to and
excluding the Expiration Date, but not to exceed at any time the lesser of (x)
the Revolving Loan Commitment at such time and (y) the Borrowing Base at such
time. The Revolving Loan shall (unless prepaid or accelerated):
(b) mature on the Maturity Date; and
(c) accrue Interest payable on each Payment Date. The first payment of
interest with respect to the Revolving Loan shall be made on the Monthly Payment
Date after the date on which the Revolving Loan was made. The Revolving Loan
shall be subject to mandatory prepayment as set forth in Section 8.2 hereof and
voluntary prepayment as set forth in Section 8.3 hereof. All sums payable by
Borrower under this Agreement and the
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Revolving Loan shall be paid without counterclaim, set-off, deduction or defense
and without abatement, suspension, deferment, diminution or reduction.
2.1.A Payments of interest on and principal of the Revolving Loan may
be satisfied on each Payment Date from Collections. Notwithstanding the
foregoing, Borrower shall be unconditionally and irrevocably obligated to make
any payments due on the Revolving Loan in the event that Collections (if any)
are insufficient to pay same in full when due.
2.1.B Upon the occurrence and continuation of an Event of Default,
Lender may, in its sole discretion, at any time or from time to time (including
following the Maturity Date), by written notice to Borrower, declare the
Interest Rate applicable to the Revolving Loan to be equal to the Default Rate.
Notwithstanding anything herein to the contrary, the Lender agrees that as of
the date hereof the Receivables set forth on Schedule 4 attached hereto are
Eligible Receivables and the Owned Real Estate set forth on Schedule 2 attached
hereto is Eligible Owned Real Estate.
2.2 Revolving Borrowings; Closings. (a) The initial Borrowing of the
Revolving Loan will occur on the date on which each of the conditions precedent
set forth in Sections 6 (excluding Section 6A) and Section 7 (other than Section
7.2) has been satisfied (the "Initial Closing Date"). The initial Borrowing of
the Revolving Loan shall be in the amount of $250,000.00. If on the Initial
Closing Date the conditions precedent set forth in Section 6, Section 7, and
Sections 6A.1, 6A.3, 6A.4, 6.A6, and 6A.7 have been satisfied, the initial
Borrowing of the Revolving Loan shall be in the amount of $10,000,000.00. If on
the Initial Closing Date the conditions precedent set forth in Sections 6A.1,
6A.3, 6A.4, 6.A6, and 6A.7 are not satisfied, the second closing will occur on
the date, if any, that the conditions precedent in Section 6A.1 or 6A.2, and
6A.3, 6A.4, 6A.5, 6A.6, and 6A.7 have been satisfied (the "Second Closing
Date"). On the Second Closing Date, the second Borrowing of the Revolving Loan
shall be in the amount of:
(i) if the conditions precedent in Section 6A.1, 6A.3, 6A.4,
6A.5, 6A.6 and 6A.7 have been satisfied, the lesser of (A) the total
Revolving Loan Commitment on such date, and (B) the Borrowing Base on
such date, less the outstanding principal balance of the Revolving; or
(ii) if the conditions set forth in Sections 6A.2, 6A.3, 6A.4,
6A.5, 6A.6 and 6A.7 have been satisfied and the Term Loan has been
fully funded, an amount equal to the following, less the outstanding
principal balance of the Revolving Loan (but in no event in excess of
the lesser of (A) the total Revolving Loan Commitment on such date, and
(B) the Borrowing Base on such date): for each additional student in
excess of five thousand three hundred seventy five (5375) students
which is the subject of a New Management Contract, Borrower may draw
$2,000, subject to the provisions of Section 2.2(b).
If on the Second Closing Date the condition set forth in Section 6A.1 is not
satisfied, thereafter upon the conditions set forth in Section 6A.1, 6A.3, 6A.4,
6A.5, 6A.6 and 6A.7 being satisfied, a Borrowing shall occur in the amount of
the lesser of (A) the total Revolving Loan Commitment
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on such date, and (B) the Borrowing Base on such date, less the outstanding
principal balance of the Revolving Loan.
(b) Borrower will give notice to Lender substantially in the form of
Exhibit D hereto of each requested Borrowing (including the initial Borrowing)
(a "Revolving Loan Borrowing Notice"), which notice shall be irrevocable and
effective only upon receipt by Lender, and which shall specify the amount of
such Borrowing, which amount, except as set forth above or unless otherwise
agreed to by Lender, shall not be less than $1,000,000. Additional Borrowings
may occur on each date thereafter specified in the applicable Revolving Loan
Borrowing Notice so long as on such date each of the conditions precedent in
Sections 6A.1 or 6A.2 and 6A.3, 6A.4, 6A.5, 6A.6 and 6A.7 are satisfied, but, in
no event shall Borrower deliver more than one (1) Revolving Loan Borrowing
Notice in any week (each such subsequent date on which a Borrowing occurs, a
"Subsequent Closing Date;" the Subsequent Closing Dates, together with the
Initial Closing Date and Second Closing Date, the "Closing Dates;" and, either
the Initial Closing Date, Second Closing Date or a Subsequent Closing Date, a
"Closing Date").
Borrower shall deliver to Lender a Revolving Loan Borrowing Notice not later
than 10:00 A.M. (New York City time) at least thirteen (13) Business Days before
each Borrowing (other than with respect to the initial $250,000 Borrowing, which
shall require no notice, and other than any re-borrowing of the Revolving Loan
after the full $10,000,000 of the Revolving Loan has been advanced, which
reborrowings shall require at least three (3) Business Days prior notice),
specifying:
(a) the date of such Borrowing; and
(b) the principal amount of such Borrowing.
The Revolving Loan shall be evidenced by a single promissory note (the
"Revolving Note") of Borrower in substantially the form of Exhibit E hereto,
dated the date of the delivery of such Revolving Note to Lender under this
Agreement, payable to Lender in a maximum principal amount equal to the amount
of the Revolving Loan Commitment and otherwise duly completed. The date and
amount of each increase in the principal amount of the Revolving Loan and each
payment made on account of the principal thereof, shall be recorded by Lender on
its books and, prior to any transfer of the Revolving Note, endorsed by Lender
on the schedule attached to the Revolving Note or any continuation thereof.
Lender shall be entitled to have the Revolving Note subdivided, by exchange for
Revolving Notes of lesser denominations or otherwise in connection with an
assignment of all or any portion of the Revolving Loan and the Revolving Note
pursuant to the terms of this Agreement; provided, that in no event may the
Revolving Note be subdivided into denominations of less than $2,500,000.
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The proceeds of each Borrowing shall be sent by wire transfer of immediately
available funds to Borrower in accordance with the following wire instructions:
Comerica Bank
Detroit, Michigan
ABA No. 000-000-000
Account No. 189-158-4110
Ref. Leeds Revolving Loan Proceeds
The Revolving Loan shall be guaranteed by Bayard Guarantor pursuant to the
Bayard Guaranty. The Bayard Guaranty shall be secured by the Bayard Mortgage.
The Revolving Loan shall be a revolving loan facility and, accordingly, if the
Revolving Loan is paid down, Borrower shall have the right to re-borrow under
the Revolving Loan, subject to, and in accordance with, the terms and provisions
hereof.
2.3 Invoice. No later than the fourth Business Day before each Monthly
Payment Date, Lender will provide Borrower with an invoice showing the Interest,
and the other Secured Revolving Obligations due (or estimated to be due)
pursuant to this Agreement on the next Monthly Payment Date.
2.4 Security Interests. The Revolving Loan (and all other Secured
Revolving Obligations) are secured pursuant to this Agreement (including Section
14 hereof) and the Mortgages (other than the Harlem Mortgage) and all other
Facility Documents. Notwithstanding anything in this Agreement or in any other
Facility Document to the contrary, the Harlem Mortgage shall not secure the
Revolving Loan or any portion thereof and no part of the Harlem Real Estate
shall be collateral for the Revolving Loan.
2.5 Termination of Revolving Loan Commitment. (a) The Lender's
commitment to fund additional Borrowings hereunder (and the Revolving Loan
Commitment) shall terminate on the Expiration Date.
(b) Subject to payment in full of the amounts due under the Revolving
Loan, the Borrower may, by giving the Lender not less than five (5) Business
Days prior written notice, terminate the Revolving Loan Commitment (in whole but
not in part).
2.6 Reports. (a) As long as any portion of the Loans are unpaid, on or
before the third Business Day in each month, Borrower shall prepare and forward
to Lender the applicable Borrowing Base Report as of the last day of the
immediately preceding Monthly Period.
(b) Borrower shall furnish to Lender at any time and from time to time
such other or further information in respect of the Receivables or the Obligors
as Lender may reasonably request.
2.7 Reduction of Revolving Loan Commitment. The amount of the Revolving
Loan Commitment shall be permanently reduced as follows:
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(a) during the six-month period commencing on the Initial Closing Date
and ending January 31, 2003, the amount of the Revolving Loan Commitment shall
be permanently reduced by an amount equal to twenty five (25%) percent of the
net amount paid to Borrower upon the refinancing of any Receivable by the
Obligor of such Receivable or upon the voluntary prepayment of all or any
portion of such Receivable, and after January 31, 2003, the Revolving Loan
Commitment shall be permanently reduced by an amount equal to thirty three (33%)
percent of the net amount paid to Borrower upon the refinancing of such
Receivable by the Obligor of such Receivable or upon the voluntary prepayment of
all or any portion of such Receivable, provided, however, that the Revolving
Loan Commitment shall be permanently reduced by an amount equal to the
difference between one hundred (100%) percent of the net cash proceeds of any
sale of the Harlem Membership Interest by ERC and $10,000,000.00, and, further,
provided, that to the extent that any Designated Note Receivable is refinanced
prior to the Second Closing Date, then the Revolving Loan Commitment shall be
reduced as if the refinancing of the Designated Note Receivable occurred after
the Second Closing Date;
(b) by an amount equal to one hundred (100%) percent of the net cash
proceeds of any sale or refinancing of Owned Real Estate other than the Harlem
Real Estate; and
(c) by an amount equal to twenty (20%) percent of the net cash proceeds
of any Permitted Equipment Sale or Refinancing.
SECTION 2A. TERM LOAN COMMITMENT.
2A.1 The Term Loan. (a) Lender agrees, on the terms of this Agreement,
to make a Term Loan to Borrower, in the principal amount not to exceed
$10,000,000.00. The Term Loan shall (unless prepaid or accelerated):
(b) mature on the Maturity Date; and
(c) accrue Interest payable on each Payment Date.
The first payment of interest with respect to the Term Loan shall be
made on the Monthly Payment Date after the date on which the Term Loan was made.
In addition, once the Term Loan has been advanced, upon the date which is the
earlier to occur of (A) the Maturity Date, (B) the date that the Term Loan is
fully due and payable, and (C) the date that the Term Loan is repaid in full,
additional interest on the Term Loan in the amount of $1,600,000 shall be due
and payable. The Term Loan shall be subject to mandatory prepayment as set forth
in Section 8.2 hereof and voluntary prepayment as set forth in Section 8.3
hereof. All sums payable by Borrower under this Agreement and the Term Loan
shall be paid without counterclaim, set-off, deduction or defense and without
abatement, suspension, deferment, diminution or reduction.
Payments of interest on and principal of the Term Loan may be satisfied
on each Payment Date from Collections. Notwithstanding the foregoing, Borrower
shall be unconditionally and irrevocably obligated to make any payments due on
the Term Loan in the event that Collections (if any) are insufficient to pay
same in full when due.
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Upon the occurrence and continuation of an Event of Default, Lender
may, in its sole discretion, at any time or from time to time (including
following the Maturity Date), by written notice to Borrower, declare the
Interest Rate applicable to the Term Loan to be equal to the Default Rate.
2A.2 Term Loan Borrowings; Closings. (a) If on the Initial Closing Date
the conditions precedent set forth in Section 6, Section 7 (other than Section
7.2), and Sections 6A.1, 6A.3, 6A.4, 6A.5, 6A.6, and 6A.7 have been satisfied,
the initial Borrowing of the Term Loan shall be in the amount of $10,000,000.00.
If on the Initial Closing Date the conditions precedent set forth in Sections
6A.1, 6A.3, 6A.4, 6A.5, 6A.6, and 6A.7 are not satisfied, there shall be no
Borrowing of the Term Loan on that date, and the initial Borrowing of the Term
Loan will occur on the Second Closing Date (if any). On the Second Closing Date,
the Borrowing under the Term Loan shall be in the amount of either:
(i) $10,000,000 if the conditions set forth in Sections 6A.1,
6A.3, 6A.4, 6A.5, 6A.6, and 6A.7 has each been satisfied; or
(ii) if the conditions set forth in Section 6A.2, 6A.3, 6A.4,
6A.5, 6A.6 and 6A.7 have each been satisfied, an amount equal to the
$10,000,000 (and, if there are at least 5375 students subject to New
Management Contracts, Borrowing with respect to such New Management
Contracts shall first be allocated to the Term Loan and then to the
Revolving Loan pursuant to Section 2.2(a)(ii)).
(b) Borrower will give notice to Lender substantially in the form of
Exhibit F hereto of each requested borrowing under the Term Loan in accordance
with the terms set forth above in this Section 2A.2 (including the initial
borrowing) (a "Term Loan Borrowing Notice"), which notice shall be irrevocable
and effective only upon receipt by Lender, and which shall specify the amount of
such Borrowing. Additional Borrowings may occur on each date thereafter
specified in the applicable Term Loan Borrowing Notice so long as on such date
each of the conditions precedent in Sections 6A.1 or 6A.2, and 6A.3, 6A.4, 6A.5,
6A.6 and Section 7 are satisfied (each date on which a Term Loan borrowing
occurs, a "Term Loan Closing Date"; and the Term Loan Closing Dates, together
with the Initial Closing Date, the Second Closing Date, and the Second Term Loan
Closing Date, also the "Closing Dates". The Term Loan or any portion thereof,
once repaid, may not be re-borrowed.
Borrower shall deliver to Lender a Term Loan Borrowing Notice not later than
10:00 A.M. (New York City time) at least thirteen (13) Business Days before the
Borrowing of the Term Loan, specifying:
(a) the date of such Borrowing; and
(b) the principal amount of such Borrowing.
The Term Loan shall be evidenced by a single promissory note (the "Term
Note") of Borrower in substantially the form of Exhibit G hereto, dated the date
of the delivery of such Term Note to Lender under this Agreement, payable to
Lender in the principal amount equal to $10,000,000 and otherwise duly
completed.
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The Lender shall be entitled to have the Term Note subdivided, by
exchange for Term Notes of lesser denominations or otherwise in connection with
an assignment of all or any portion of the Term Loan and the Term Note pursuant
to the terms of this Agreement; provided that in no event may the Term Note be
subdivided into denominations of less than $2,500,000.
The proceeds of the Borrowing under the Term Loan shall be sent by wire
transfer of immediately available funds to Borrower in accordance with the
following wire instructions:
Comerica Bank
Detroit, Michigan
ABA No. 000-000-000
Account No. 189-158-4110
Ref. Leeds Term Loan Proceeds
The Term Loan shall be guaranteed by Harlem Guarantor pursuant to the Harlem
Guaranty, and by the Bayard Guarantor pursuant to the Bayard Guaranty. The
Harlem Guaranty shall be secured by the Harlem Mortgage.
2A.3 Invoice. No later than the fourth Business Day before each Monthly
Payment Date, Lender will provide Borrower with an invoice showing the Interest,
and the other Secured Term Obligations due (or estimated to be due) pursuant to
this Agreement on the next Monthly Payment Date.
2A.4 Security Interests. The Term Loan (and all other Secured Term
Obligations) are secured pursuant to this Agreement (including Section 14
hereof), the Mortgages, and all other Facility Documents.
2A.5 Termination of Term Loan Commitment. Lender's commitment to fund a
Borrowing under the Term Loan shall terminate on the Expiration Date.
2A.6 Reduction of Term Loan Commitment. The amount of the Term Loan
Commitment shall be permanently reduced to zero upon the sale of the Harlem
Membership Interest by Xxxxxxx Xxxxx or ERC, or upon the sale or refinancing of
the Harlem Real Estate by Borrower.
SECTION 3. GENERAL REPRESENTATIONS AND WARRANTIES OF THE BORROWER.
Borrower represents and warrants to Lender on and as of each Closing
Date as follows:
3.1 Existence and Power. Borrower is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and has all corporate powers and material governmental licenses, authorizations,
consents and approvals required to carry on its business as now conducted, the
failure of which to obtain would have a material adverse effect on Borrower's
ability to fulfill its obligations under this Agreement and the other Facility
Documents to which it is a party. Each Guarantor is an entity in the form set
forth on Schedule 6 hereto duly organized, validly existing and in good standing
under the laws of the state of its
27
formation, and has all corporate or company powers and all material governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted and to fulfill its obligations under this Agreement
and the other Facility Documents to which it is a party.
3.2 Corporate and Governmental Authorization; No Contravention. The
execution, delivery and performance by Borrower of this Agreement and the other
Facility Documents to which it is a party are within Borrower's powers, have
been duly authorized by all necessary corporate action, require no action by or
in respect of, or filing with, any governmental body, agency or official and do
not contravene, or constitute a default under, any provision of applicable law
or regulation or of the certificate of incorporation or bylaws of Borrower or of
any agreement, judgment, injunction, order, decree or other instrument binding
upon Borrower or result in the creation or imposition of any Lien on any asset
of Borrower or any of its Subsidiaries (except Permitted Liens). The execution,
delivery and performance by each Guarantor of this Agreement and the other
Facility Documents to which it is a party are within such Guarantor's powers,
have been duly authorized by all necessary corporate or company action, require
no action by or in respect of, or filing with, any governmental body, agency or
official and do not contravene, or constitute a default under, any provision of
applicable law or regulation or of the certificate of incorporation or bylaws or
articles of organization or operating or company agreement of each Guarantor or
of any agreement, judgment, injunction, order, decree or other instrument
binding upon each such Guarantor or result in the creation or imposition of any
Lien on any asset of any Guarantor, or any of their Subsidiaries (except
Permitted Liens).
3.3 Binding Effect. This Agreement and each of the other Facility
Documents to which it is a party constitutes a valid and binding agreement of
Borrower. This Agreement will vest absolutely and unconditionally in Lender a
valid security interest in the Collateral, subject to no Liens whatsoever
(except for Permitted Liens and as provided pursuant to the Facility Documents).
Upon the filing of the necessary financing statements under the UCC as in effect
in the jurisdiction whose Law governs the perfection of Lender's security
interests in the Collateral, the Lender's security interest in the Collateral
will be perfected under Article 9 of such UCC, prior to and enforceable against
all creditors of and purchasers from Borrower and all other Persons whatsoever
(other than Lender and its successors and assigns). This Agreement and each of
the other Facility Documents to which it is a party constitutes a valid and
binding agreement of each Guarantor.
3.4 Litigation. Except as is set forth in Schedule 7, there is no
action, suit or proceeding pending against, or to the knowledge of Borrower,
threatened in writing against or affecting Borrower or any Guarantor before any
Official Body in which there is a material likelihood of an adverse decision
which would reasonably be expected to materially adversely affect the business,
financial position or results of operations of Borrower or any Guarantor, or the
ability of Borrower or any Guarantor to fulfill its obligations under this
Agreement or any other Facility Document to which it is a party or which in any
manner draws into question the validity of this Agreement or any other Facility
Document to which Borrower or any Guarantor is a party.
3.5 Investment Company. Borrower is not an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.
28
3.6 Events of Default or Default. No event has occurred, and no
condition exists, that constitutes a Default or an Event of Default.
3.7 Use of Proceeds. The proceeds of each Borrowing and the Loans shall
be used for working capital and school-opening capital and no proceeds of any
Borrowing shall be used, directly or indirectly, for the purpose, whether
immediate, incidental or ultimate, of buying or carrying any "margin stock"
within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System.
3.8 Accurate and Complete Disclosure. To the knowledge of Borrower and
each Guarantor, all information, exhibits, financial statements, or other
reports or documents furnished or to be furnished at any time by or on behalf of
Borrower or any Guarantor to Lender in connection with this Agreement or any
other Facility Document is and will be accurate in all material respects as of
the date so furnished, and no such report or document contains, or will contain,
as of the date so furnished, any untrue statement of a material fact or omits to
state, or will omit to state, as of the date so furnished, a material fact
necessary in order to make the statements contained therein, in the light of the
circumstances under which they were made, not misleading.
3.9 Taxes. Borrower and each Guarantor has filed, or caused to be
filed, all federal and state, and to the best of its knowledge, all local and
foreign, tax reports and returns, if any, required to be filed by it and paid,
or caused to be paid, all amounts of taxes, including interest and penalties,
required to be paid by it, except for such taxes (i) as are being contested in
good faith by proper proceedings and (ii) against which adequate reserves shall
have been established in accordance with and to the extent required by GAAP, but
only so long as the proceedings referred to in clause (i) above could not
subject Borrower, any Guarantor, or Lender to any civil or criminal penalty or
liability or involve any material risk of the loss, sale or forfeiture of any
property, rights or interests covered hereunder.
3.10 Books and Records. Borrower has indicated on its books and records
(including any computer files) that the Receivables have been assigned by
Borrower hereunder to Lender. Borrower maintains at one or more of its
respective offices listed in Schedule 8 hereto all material Records for the
Receivables and Owned Real Estate.
3.11 Financial Condition. (a) None of Borrower or any Guarantor is the
subject of any Event of Bankruptcy and the assignment of Receivables on such day
is not being made in contemplation of the occurrence thereof. Except as
previously disclosed to Lender, since May 15, 2002 there has been no material
adverse change in the business or financial position of Borrower which would be
reasonably likely to have a material adverse affect on Borrower's ability to
fulfill its obligations under this Agreement or any other Facility Document to
which it is a party. Neither Borrower nor any Guarantor is contemplating either
the filing of a petition by it under state or federal bankruptcy or insolvency
laws or the liquidation of all or a major portion of its assets or property, and
Borrower has no knowledge of any Person contemplating the filing of any such
petition against it or any Guarantor.
29
(b) (i) The most-recently available consolidated balance sheet of
Borrower and its Subsidiaries as of the most recent Fiscal Year end and
the related statements of income and cash flows of Borrower and its
Subsidiaries for the Fiscal Year then ended, audited by
PricewaterhouseCoopers LLC, independent accountants, or another
nationally recognized firm of independent accountants, copies of which
have been furnished to Lender, fairly present in all material respects
the consolidated financial position of Borrower and its Subsidiaries as
of such date and the consolidated results of the operations of and
changes in consolidated cash flows of Borrower and its Subsidiaries for
the period ended on such date, all in accordance with GAAP; and
(i) the most-recently available un-audited consolidated
balance sheet of Borrower and its Subsidiaries as of the most recent
fiscal quarter end and the related un-audited statements of income and
cash flows of Borrower and its Subsidiaries for the periods then ended,
copies of which have been furnished to Lender, fairly present in all
material respects the consolidated financial position of Borrower and
its Subsidiaries as at such date and the consolidated results of the
operations of and changes in consolidated cash flows of Borrower and
its Subsidiaries for the periods ended on such date subject to
customary year-end adjustments, all in accordance with GAAP.
3.12 Insurance. All policies of insurance of any kind or nature owned
by Borrower and its Subsidiaries are, to Borrower's knowledge, maintained with
financially sound and reputable insurers. Borrower currently maintains insurance
with respect to its properties and businesses and causes its Subsidiaries to
maintain insurance with respect to their properties and business against loss or
damage of the kinds customarily insured against by corporations engaged in the
same or similar business and similarly situated, of such types and in such
amounts as are customarily carried under similar circumstances by such other
corporations including, without limitation, workers' compensation and general
liability insurance.
3.13 ERISA. (a) No liability under Sections 4062, 4063, 4064 or 4069 of
ERISA has been or is expected by Borrower to be incurred by Borrower or any
ERISA Affiliate with respect to any Plan which is a Single-Employer Plan in an
amount that could reasonably be expected to have a material adverse effect on
the business, financial condition, operations or properties of Borrower and its
Subsidiaries taken as a whole.
(b) No Plan which is a Single-Employer Plan and which is maintained by
Borrower or any of its ERISA Affiliates had an accumulated funding deficiency in
an amount that could reasonably be expected to have a material adverse effect on
the business, financial condition, operations or properties of Borrower and its
Subsidiaries taken as a whole, whether or not waived, as of the last day of the
most recent fiscal year of such Plan ended prior to the date hereof. Neither
Borrower nor any ERISA Affiliate is (A) required to give security to any Plan
which is a Single-Employer Plan pursuant to Section 401(a)(29) of the Code or
Section 307 of ERISA, or (B) subject to a Lien in favor of such a Plan under
Section 302(f) of ERISA.
(c) Each Plan of Borrower and each of its ERISA Affiliates is in
compliance in all material respects with the applicable provisions of ERISA and
the Code, except where the
30
failure to comply could not reasonably be expected to result in any material
adverse effect on the business, financial condition, operations or properties of
Borrower and its Subsidiaries taken as a whole.
(d) Neither Borrower nor any of its Subsidiaries has incurred a tax
liability under Section 4975 of the Code or a penalty under Section 502(i) of
ERISA in respect of any Plan which has not been paid in full, except where the
incurrence of such tax or penalty could not reasonably be expected to result in
a material adverse effect on the business, financial condition, operations or
properties of Borrower and its Subsidiaries taken as a whole.
(e) None of Borrower, any of its Subsidiaries or any ERISA Affiliate
has incurred or reasonably expects to incur any liability under Section 4201 of
ERISA as a result of a complete or partial withdrawal from a Multiemployer Plan
which will result in liability to Borrower, any of its Subsidiaries or any ERISA
Affiliate in an amount that could reasonably be expected to have a material
adverse effect on the business, financial condition, operations or properties of
Borrower and its Subsidiaries taken as a whole.
3.14 Owned Real Estate Taxes and Assessments. The Owned Real Estate is
comprised of more than one parcel, each of which constitutes a separate tax lot
and none of which constitutes a portion of any other tax lot. There are no
pending or, to Borrower's knowledge, proposed, special or other assessments for
public improvements or otherwise affecting the Owned Real Estate, nor are there
any contemplated improvements to the Owned Real Estate that may result in such
special or other assessments.
3.15 Other Agreements; Defaults. Neither Borrower nor any Guarantor are
a party to any agreement or instrument or subject to any court order,
injunction, permit, or restriction which might adversely affect the business,
operations, or condition (financial or otherwise) of Borrower or any Guarantor.
Neither Borrower nor any Guarantor are in violation of any agreement which
violation would have a material adverse effect on Borrower's or any Guarantor's
ability to perform its obligations hereunder or Borrower's, or any Guarantor's
business, properties, or assets, operations or condition, financial or
otherwise.
3.16 Compliance with Law. (a) Except with respect to the Trenton House
and the Trenton Parking Lot, to Borrower's knowledge, Borrower and each
Guarantor, as the case may be, have all requisite licenses, permits, franchises,
qualifications, certificates of occupancy or other governmental authorizations
to own, lease and operate the Owned Real Estate and carry on its business, and
the Owned Real Estate is in compliance with all applicable legal requirements in
all material respects and all building systems contained therein are in good
working order, subject to ordinary wear and tear and except as disclosed in
building condition reports and other documentation delivered to Lender on or
prior to the date hereof; and
(b) No condemnation has been commenced or, to Borrower's knowledge, is
contemplated with respect to all or any portion of the Owned Real Estate or for
the relocation of roadways providing access to the Owned Real Estate.
3.17 Solvency. Giving effect to the Loans, the fair saleable value of
Borrower's assets exceeds and will, immediately following the making of the
Loans, exceed Borrower's total
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liabilities, including, without limitation, subordinated, un-liquidated,
disputed and contingent liabilities. The fair saleable value of Borrower's
assets is and will, immediately following the making of the Loans, be greater
than Borrower's probable liabilities, including the maximum amount of its
contingent liabilities on their Debts as such Debts become absolute and matured.
Borrower's assets do not and, immediately following the making of the Loans will
not, constitute unreasonably small capital to carry out its business as
conducted or as proposed to be conducted. Borrower does not intend to, and does
not believe that it will, incur Debts and liabilities (including contingent
liabilities and other commitments) beyond its ability to pay such Debts as they
mature (taking into account the timing and amounts of cash to be received by
Borrower and the amounts to be payable on or in respect of obligations of
Borrower).
3.18 Owned Real Estate Insurance. Borrower has obtained and has
delivered to Lender a certificate of insurance for the Owned Real Estate
reflecting the insurance coverages, amounts and other insurance requirements set
forth in this Agreement. No claims have been made under any such policy which
would have a material adverse effect on Borrower's ability to perform its
obligations hereunder, and no Person, including Borrower, has done, by act or
omission, anything which would impair the coverage of any such policy.
3.19 Equipment.
(a) The Borrower owns the Equipment set forth on Schedule 9 hereto.
(b) Borrower will keep the Equipment at such locations in the
continental United States as Borrower may elect, provided that (i) all action
has been taken to grant to Lender a perfected, first priority security interest
in such Equipment (subject only to Permitted Liens), and (ii) Lender's rights in
such Equipment, including, without limitation, the existence, perfection and
priority of the security interest created hereby in such Equipment, are not
adversely affected.
(c) Borrower will maintain or cause the Equipment to be maintained and
preserved in good condition, repair and working order as when acquired and in
accordance with any manufacturer's manual, ordinary wear and tear excepted, and
will forthwith, or in the case of any loss or damage to any Equipment as quickly
as practicable after the occurrence thereof, make or cause to be made all
repairs, replacements and other improvements in connection therewith which are
necessary or desirable, consistent with past practice, or which Lender may
request to such end. Borrower will promptly furnish to Lender a statement
describing in reasonable detail any material loss or damage to any Equipment.
3.20 SEC Documents. The Borrower has filed all required reports,
schedules, forms, statements and other documents (including exhibits and all
other information incorporated therein) with the Securities and Exchange
Commission (the "SEC") since January 1, 2001 (the "Borrower SEC Documents").
Except to the extent that information contained in any Borrower SEC Documents
has been revised or superseded by a later filed Borrower SEC Document: (i) as of
their respective dates, the Borrower SEC Documents complied in all material
respects with the requirements of the Securities Act of 1933 (the "Act") or the
Securities Exchange Act of 1934, as amended (the "1934 Act") as the case may be,
and the rules and regulations of the SEC promulgated thereunder applicable to
the Borrower SEC Documents, and none of the Borrower SEC Documents when filed
contained any untrue statement of a material fact or omitted to state
32
a material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading; (ii) none of the Borrower SEC Documents contains any untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading; and (iii) the
financial statements of the Borrower included in the Borrower SEC Documents
comply as to form, as of their respective dates of filing with the SEC, in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, have been prepared in
accordance with generally accepted accounting principles (except, in the case of
unaudited statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly present in all material respects the consolidated
financial position of the Borrower and its consolidated subsidiaries as of the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended (subject, in the case of unaudited statements, to
normal recurring year-end audit adjustments).
SECTION 3A. REPRESENTATIONS AND WARRANTIES OF THE BORROWER RELATING TO
COLLATERAL.
Borrower represents and warrants to Lender on and as of each Closing
Date:
0X.0 Xxxxx xx Xxxxxxxx; Records Location; Etc. The address of the chief
executive office of Borrower is 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx or, if
Borrower relocates its chief executive office in accordance with Section 10.8
hereof, such other address as Borrower shall have notified Lender in accordance
with such Section. Borrower keeps all of its Records at the offices listed on
Schedule 8 attached hereto. Borrower is a "registered organization" (as defined
in Section 9-102(a)(70) of the UCC) formed in the State of Delaware and, for
purposes of Article 9 of the UCC, Borrower is located in the State of Delaware.
Borrower's name is "Edison Schools Inc." and Borrower has not changed its name,
merged or consolidated with any other Person, except as set forth on Schedule 10
attached hereto.
3A.2 No Liens. Each Receivable, the Related Security, the Collections,
Owned Real Estate, all Equipment and all other Collateral, is owned by Borrower
free and clear of any Lien (except Permitted Liens). Lender has a first priority
perfected security interest in the Collateral free and clear of any Lien (except
Permitted Liens). Borrower has not and will not sell, pledge, assign, transfer
or subject to a Lien any of the Receivables, the Related Security, the
Collections, the Equipment, all other Collateral or the Owned Real Estate, other
than in accordance with the terms of this Agreement.
3A.3 No Adverse Actions. Neither Borrower nor any Guarantor have
performed any acts which would prevent Lender from enforcing any of the terms of
this Agreement or any Facility Document or which would limit Lender in any such
enforcement. Other than financing statements or other similar or equivalent
documents or instruments with respect to the Security Interests and Permitted
Liens, no financing statement, mortgage, security agreement or similar or
equivalent document or instrument covering all or any part of the Collateral is
on file or of record in any jurisdiction in which such filing or recording would
be effective to perfect a Lien on such Collateral.
33
3A.4 Filings. The Security Interests constitute valid security
interests under the UCC securing the Obligations. On or before the initial
Closing Date, all UCC financing statements and other documents required to be
recorded or filed in order to perfect and protect the Security Interests against
all creditors of and purchasers from Borrower and all other Persons whatsoever
shall have been duly filed (or shall have been delivered to Lender for filing)
in each filing office necessary for such purpose and all filing fees and taxes,
if any, payable in connection with such filings shall have been paid.
3A.5 Notice. In the case of a Closing Date, all information set forth
on the related Term Loan Borrowing Notice, Revolving Loan Borrowing Notice, and
Borrowing Base Report is true and correct in all material respects as of such
Closing Date.
3A.6 Assignment. This Agreement constitutes a valid pledge by Borrower,
in favor of Lender, of the Collateral, and a valid assignment by Borrower, to
Lender of the Receivables, in each case enforceable against all creditors of and
purchasers from Borrower.
3A.7 Owned Real Estate Title. To Borrower's knowledge, Borrower and
each Guarantor has good and insurable title to the applicable Owned Real Estate,
free and clear of all Liens whatsoever, except for the Permitted Liens and such
other Liens as are permitted pursuant to the Facility Documents. The Mortgages
create (and upon the recordation thereof and of any related financing statements
there will be perfected):
(i) a valid Lien on the Owned Real Estate, subject only to
Permitted Liens; and
(ii) security interests in and to, and collateral assignments
of, all personalty (including the leases), all in accordance with the
terms thereof, in each case subject only to any Permitted Liens and
such other Liens as are permitted pursuant to the Facility Documents.
To Borrower's knowledge, there are no claims for payment for work,
labor or materials affecting the Owned Real Estate which would have a
material adverse effect on Borrower's or any Guarantor's ability to
perform its obligations hereunder or under any other Facility Document.
None of the Permitted Liens, individually or in the aggregate,
materially interfere with the benefits of the security intended to be
provided by the Mortgages and this Agreement, materially and adversely
affect the value of the Owned Real Estate, materially impair the use or
operations of the Owned Real Estate or impair Borrower's ability to pay
its obligations in a timely manner.
3A.8 Flood Zone. Except as otherwise shown on the survey delivered to
Lender in connection with the initial advance of the Loans, to Borrower's
knowledge, no portion of the improvements comprising the Owned Real Estate is
located in an area identified by the Secretary of Housing and Urban Development
or any successor thereto as an area having special flood hazards pursuant to the
National Flood Insurance Act of 1968, the Flood Disaster Protection Act of 1973
or the National Flood Insurance Act of 1994, as amended, or any successor law.
3A.9 Certificate of Occupancy; Licenses. Except for the Trenton Parking
Lot, to Borrower's knowledge, all certifications, permits, licenses and
approvals, including without limitation, certificates of completion and
occupancy permits, required for the legal use, occupancy and operation of the
Owned Real Estate for their current uses (collectively, the
34
"Licenses") have been obtained and are in full force and effect. Borrower shall
keep and maintain all Licenses in full force and effect. The use being made of
the Owned Real Estate is in conformity with any applicable certificate of
occupancy issued for the Owned Real Estate.
3A.10 Physical Condition. Except as set forth in building reports or
other documentation delivered to Lender, to Borrower's knowledge the Owned Real
Estate, including, without limitation, all buildings, improvements, parking
facilities, sidewalks, storm drainage systems, roofs, plumbing systems, HVAC
systems, fire protection systems, electrical systems, equipment, elevators,
exterior sidings and doors, landscaping, irrigation systems and all structural
components, are in good condition, order and repair in all material respects; to
Borrower's knowledge, there exists no structural or other material defects or
damages in the Owned Real Estate, whether latent or otherwise, and Borrower has
not received written notice from any insurance company or bonding company of any
defects or inadequacies in the Owned Real Estate, or any part thereof, which
would adversely affect the insurability of the same or cause the imposition of
extraordinary premiums or charges thereon or of any termination or threatened
termination of any policy of insurance or bond.
3A.11 Filing and Recording Taxes. All transfer taxes, deed stamps,
intangible taxes or other amounts in the nature of transfer taxes required to be
paid by any Person under applicable legal requirements currently in effect in
connection with the transfer of the Owned Real Estate to Borrower or any
Guarantor, as applicable, have been paid. All mortgage, mortgage recording,
stamp, intangible or other similar tax required to be paid by any Person under
applicable legal requirements currently in effect in connection with the
execution, delivery, recordation, filing, registration, perfection or
enforcement of any of the Facility Documents, including, without limitation, the
Mortgage, have been paid or will be paid as of the date hereof.
SECTION 4. INSURANCE AND CONDEMNATION.
4.1 Owned Real Estate Insurance. Borrower shall maintain insurance as
follows:
(a) Casualty; Business Interruption. Borrower shall keep the Owned Real
Estate insured against damage by fire and the other hazards covered by a
standard extended coverage and all-risk insurance policy for the full insurable
value thereof (without reduction for depreciation or co-insurance), and shall
maintain such other casualty insurance as reasonably required by Lender,
including building ordinance insurance and insurance for acts of terrorism.
Borrower shall keep the Owned Real Estate insured against loss by flood if the
Owned Real Estate is located in an area identified by the Federal Emergency
Management Agency as an area having special flood hazards and in which flood
insurance has been made available under the National Flood Insurance Act of
1968, the Flood Disaster Protection Act of 1973 or the National Flood Insurance
Reform Act of 1994 (as each such act may be amended or succeeded), in an amount
at least equal to the lesser of:
(i) the maximum amount of the Loans; or
(ii) the maximum limit of coverage available under said act.
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Borrower shall maintain use and occupancy insurance covering, as
applicable, rental income or business interruption, with coverage in an amount
not less than twelve (12) months anticipated gross rental income or gross
business earnings, as applicable in each case, attributable to the Owned Real
Estate. Borrower shall not maintain any separate or additional insurance which
is contributing in the event of loss unless it is properly endorsed and
otherwise satisfactory to Lender in all respects. The proceeds of insurance paid
on account of any damage or destruction to the Owned Real Estate shall be paid
to Lender to be applied as provided in Section 4.2.
(b) Liability. Borrower shall maintain:
(i) commercial general liability insurance with respect to the
Owned Real Estate providing for limits of liability of not less than
$5,000,000 for both injury to or death of a person and for property
damage per occurrence; and
(ii) other liability insurance as reasonably required by
Lender.
(c) Form and Quality. All insurance policies shall be endorsed in form
and substance acceptable to Lender to name Lender as an additional insured, loss
payee or mortgagee thereunder, as its interest may appear, with loss payable to
Lender, without contribution, under a standard New York (or local equivalent)
mortgagee clause. All such insurance policies and endorsements shall be fully
paid for and contain such provisions and expiration dates and be in such form
and issued by such insurance companies licensed to do business in the State of
New York, with a rating of "A-X" or better as established by Best's Rating Guide
or "AA" as established by Standard & Poor's. Each policy shall provide that such
policy may not be cancelled or materially changed except upon thirty (30) days'
prior written notice of intention of non-renewal, cancellation or material
change to Lender and that no act or thing done by Borrower shall invalidate any
policy as against Lender. Blanket policies will be permitted provided Lender
receives appropriate endorsements and/or duplicate policies confirming Lender's
right to continue coverage on a pro rata pass-through basis and that coverage
will not be affected by loss on other properties. If Borrower fails to maintain
insurance in compliance with this Section, Lender may obtain such insurance and
pay the premium therefor and Borrower shall, on demand, reimburse Lender for all
expenses incurred in connection therewith. Borrower shall assign the policies or
proofs of insurance to Lender, in such manner and form that Lender and its
successors and assigns shall at all times have and hold the same as security for
the payment of the Loans. Borrower shall deliver copies of all original policies
certified to Lender by the insurance company or authorized agent as being true
copies, together with the endorsements required hereunder. The proceeds of
insurance policies coming into the possession of Lender shall not be deemed
trust funds, and Lender shall be entitled to apply such proceeds as herein
provided.
(d) Adjustments. Borrower shall give immediate written notice of any
loss to the insurance carrier and to Lender. Borrower and each Guarantor hereby
irrevocably authorize and empower Lender, as attorney in fact for Borrower
coupled with an interest, to make proof of loss, to adjust and compromise any
claim under insurance policies, to
36
appear in and prosecute any action arising from such insurance policies, to
collect and receive insurance proceeds, and to deduct therefrom Lender's
expenses incurred in the collection of such proceeds. Nothing contained in this
Section, however, shall require Lender to incur any expense or take any action
hereunder.
4.2 Use and Application of Insurance Proceeds. Lender shall apply
insurance proceeds to costs of restoring the Owned Real Estate or the Loans as
follows:
(a) if the loss is less than or equal to $250,000, Lender shall apply
the insurance proceeds to restoration provided:
(i) no Event of Default or Default exists; and
(ii) Borrower promptly commences and is diligently pursuing
restoration of the Owned Real Estate;
(b) if the loss exceeds $250,000 but is not more than 20% of the
replacement value of the improvements (for projects containing multiple phases
or stand alone structures, such calculation to be based on the damaged phase or
structure, not the project as a whole), Lender shall apply the insurance
proceeds to restoration provided that at all times during such restoration:
(i) no Event of Default or Default exists;
(ii) Borrower promptly commences and is diligently pursuing
restoration of the Owned Real Estate;
(c) if the conditions set forth above are not satisfied or the loss
exceeds the maximum amount specified in Subsection 4.2(b) above, in Lender's
sole discretion, Lender may apply any insurance proceeds it may receive to the
payment of the Loans or allow all or a portion of such proceeds to be used for
the restoration of the Owned Real Estate; and
(d) insurance proceeds applied to restoration will be disbursed on
receipt of satisfactory plans and specifications, contracts and subcontracts,
schedules, budgets, lien waivers and architects' certificates, and otherwise in
accordance with prudent commercial construction lending practices for
construction loan advances.
4.3 Condemnation Awards. Borrower shall immediately notify Lender of
the institution of any proceeding for the condemnation or other taking of the
Owned Real Estate or any portion thereof. Lender may participate in any such
proceeding and Borrower will deliver to Lender all instruments necessary or
required by Lender to permit such participation. Without Lender's prior consent
(which consent shall not be unreasonably withheld or delayed), Borrower:
(a) shall not agree to any compensation or award; and
(b) shall not take any action or fail to take any action which would
cause the compensation to be determined. All awards and compensation for the
taking or purchase
37
in lieu of condemnation of the Owned Real Estate or any part thereof are hereby
assigned to and shall be paid to Lender. Borrower and each Guarantor authorize
Lender to collect and receive such awards and compensation and to give proper
receipts and acquittances therefore, and in the Lender's sole discretion to
apply the same toward the payment of the Loans, notwithstanding that the Loans
may not then be due and payable, or to the restoration of the Owned Real Estate.
Borrower, upon request by Lender, shall execute all instruments requested to
confirm the assignment of the awards and compensation to Lender, free and clear
of all liens, charges or encumbrances.
SECTION 5. LEASING COVENANTS.
5.1 Covenants. Except with respect to the Trenton House and Trenton
Parking Lot under clause (b) and (d) below, Borrower and each Guarantor, with
respect to all leases of the Owned Real Estate:
(a) shall perform the obligations which Borrower or such Guarantor, as
landlord, is required to perform under the leases;
(b) shall enforce the obligations to be performed by the tenants;
(c) shall promptly furnish to Lender any notice of default or
termination received by Borrower or any Guarantor from any tenant, and any
notice of default or termination given by Borrower or any Guarantor to any
tenant;
(d) shall not collect any rents for more than thirty (30) days in
advance of the time when the same shall become due, except for bona fide
security deposits not in excess of an amount equal to two months rent;
(e) shall not enter into any ground lease or master lease of any part
of the Owned Real Estate;
(f) shall not further assign or encumber any lease;
(g) shall not, except with Lender's prior written consent (which
consent shall not be unreasonably withheld or delayed), cancel or accept
surrender or termination of any lease; and
(h) shall not, except with Lender's prior written consent (which
consent shall not be unreasonably withheld or delayed), modify or amend any
lease (except for minor modifications and amendments entered into in the
ordinary course of business, consistent with prudent property management
practices, not affecting the economic terms of the lease), and any action in
violation of clauses (e), (f), (g), and (h) of this Section shall be void at the
election of Lender.
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SECTION 5A. ENVIRONMENTAL MATTERS.
5A.1 Representations and Warranties on Environmental Matters. To
Borrower's knowledge, except as set forth in any environmental report delivered
to Lender prior to the Closing Date:
(a) no Hazardous Material is now used, stored, generated, manufactured,
installed, disposed of or otherwise present at or about the Owned Real Estate
(except for cleaning and other products currently used in connection with the
routine maintenance or repair of the Owned Real Estate in full compliance with
Environmental Laws);
(b) all permits, licenses, approvals and filings required by
Environmental Laws have been obtained, and the use, operation and condition of
the Owned Real Estate does not violate any Environmental Laws; and
(c) no civil, criminal or administrative action, suit, claim, hearing,
investigation or proceeding has been brought or been threatened while the Owned
Real Estate was owned by Borrower or its wholly owned Subsidiary, nor have any
settlements been reached by or with any parties or any liens imposed in
connection with the Owned Real Estate concerning Hazardous Materials or
Environmental Laws while the Owned Real Estate was owned by Borrower or its
wholly owned Subsidiary.
5A.2 Covenants on Environmental Matters.
(a) Borrower and each Guarantor shall:
(i) comply in all respects with applicable Environmental Laws
with respect to the Owned Real Estate;
(ii) notify Lender immediately upon Borrower's and/or any
Guarantor's discovery of any spill, discharge, release or presence of
any Hazardous Material at, upon, under, within, contiguous to or
otherwise affecting the Owned Real Estate;
(iii) promptly remove such Hazardous Materials and remediate
the Owned Real Estate in full compliance with Environmental Laws or as
may be reasonably required by Lender or consultant retained by Lender,
and
(iv) promptly forward to Lender copies of all orders, notices,
permits, applications or other communications and reports in connection
with any spill, discharge, release or the presence of any Hazardous
Material or any other matters relating to the Environmental Laws or any
similar laws or regulations, as they may affect the Owned Real Estate,
or Borrower or any Guarantor.
(b) Neither Borrower nor any Guarantor shall cause, shall prohibit any
other Person within the control of Borrower or any Guarantor from causing, and
Borrower and each Guarantor shall use prudent, commercially reasonable efforts
to prohibit other Persons (including tenants) from:
39
(i) causing any spill, discharge or release, or the use,
storage, generation, manufacture, installation, or disposal, of any
Hazardous Materials at, upon, under, within or about the Owned Real
Estate or the transportation of any Hazardous Materials to or from the
Owned Real Estate (except for cleaning and other products used in
connection with routine maintenance or repair of the Owned Real Estate
in full compliance with Environmental Laws);
(ii) installing any underground storage tanks at the Owned
Real Estate; or
(iii) conducting any activity that requires a permit or other
authorization under Environmental Laws.
(b) Borrower shall provide to Lender, at Borrower's expense promptly
upon the written request of Lender from time to time, a Site Assessment or, if
required by Lender, an update to any existing Site Assessment, to assess the
presence or absence of any Hazardous Materials and the potential costs in
connection with abatement, cleanup or removal of any Hazardous Materials found
on, under, at or within the Owned Real Estate. Borrower shall pay the cost of no
more than one such Site Assessment or update in any twelve (12) month period,
unless Lender's request for a Site Assessment is based on information provided
under Section 5A.2(a), a reasonable suspicion of Hazardous Materials at or near
the Owned Real Estate, a breach of representations under Section 5A.1, or an
Event of Default, in which case any such Site Assessment or update shall be at
Borrower's expense.
5A.3 Allocation of Risks and Indemnity. As between Borrower and each
Guarantor and Lender, all risk of loss associated with non-compliance with
Environmental Laws, or with the presence of any Hazardous Material at, upon,
within, contiguous to or otherwise affecting the Owned Real Estate, shall lie
solely with Borrower and each Guarantor unless caused by the gross negligence or
willful misconduct of Lender. Accordingly, Borrower and each Guarantor shall
bear all risks and costs associated with any loss (including any loss in value
attributable to Hazardous Materials), damage or liability therefrom unless
caused by the gross negligence or willful misconduct of Lender, including all
costs of removal of Hazardous Materials or other remediation required by law.
Borrower and each Guarantor shall indemnify, defend and hold Lender harmless
from and against all loss, liabilities, damages, claims, costs and expenses
(including reasonable costs of defense) arising out of or associated, in any
way, with the non-compliance with Environmental Laws, or the existence of
Hazardous Materials in, on, or about the Owned Real Estate, or a breach of any
representation, warranty or covenant contained in this Article, whether based in
contract, tort, implied or express warranty, strict liability, criminal or civil
statute or common law, including those arising from the joint, concurrent, or
comparative negligence of Lender; however, Borrower and each Guarantor shall not
be liable under such indemnification to the extent such loss, liability, damage,
claim, cost or expense results solely from Lender's gross negligence or willful
misconduct. Borrower's and each Guarantor's obligations under this Section shall
arise upon the discovery of the presence of any Hazardous Material, whether or
not any governmental authority has taken or threatened any action in connection
with the presence of any Hazardous Material, and whether or not the existence of
any such Hazardous Material or potential liability on account thereof is
disclosed in the Site Assessment and shall continue notwithstanding the
repayment of the Loans or any transfer or
40
sale of any right, title and interest in the Owned Real Estate (by foreclosure,
deed in lieu of foreclosure or otherwise)
5A.4. No Waiver. Notwithstanding any provision in this Article or
elsewhere in the Documents, or any rights or remedies granted by the Facility
Documents, Lender does not waive and expressly reserves all rights and benefits
now or hereafter accruing to Lender under the "security interest" or "secured
creditor" exception under applicable Environmental Laws, as the same may be
amended. No action taken by Lender pursuant to the Facility Documents shall be
deemed or construed to be a waiver or relinquishment of any such rights or
benefits under the "security interest exception."
SECTION 6. CONDITIONS TO LENDER'S OBLIGATION TO FUND THE BORROWING REQUEST ON
THE INITIAL CLOSING DATE.
Lender's obligation to fund the Borrowing request hereunder on the
Initial Closing Date shall be subject to the satisfaction, prior to funding such
Borrowing request, of the following conditions:
6.1 Certified Resolutions. Receipt by Lender of a copy of the
resolutions of the Board of Directors or Managers, as applicable, of Borrower
and each Guarantor certified as of the Initial Closing Date by such Person's
secretary, an assistant secretary or other Responsible Officer authorizing the
execution, delivery and performance of this Agreement, if applicable, and the
other Facility Documents to be delivered by such Person and approving the
transactions contemplated hereby and thereby.
6.2 Articles of Incorporation. Receipt by Lender of the articles of
incorporation or organization, as applicable, of Borrower and each Guarantor
certified as of a date reasonably near the Initial Closing Date by the Secretary
of State or other similar official of such Person's jurisdiction of
incorporation or formation.
6.3 Good Standing Certificates; Etc. Receipt by Lender of a good
standing certificate for each of Borrower and each Guarantor dated a date
reasonably near the Initial Closing Date issued by the Secretary of State or
other similar official of such Person's jurisdiction of incorporation or
formation.
6.4 Incumbency; Specimen Signatures; By-Laws; Etc. Receipt by Lender of
a certificate of the secretary of each of Borrower and each Guarantor dated the
Initial Closing Date and certifying:
(a) the names and signatures of the officers authorized on such
Person's behalf to execute this Agreement, if applicable, and the other Facility
Documents to be delivered by such Person (on which certificate Lender may
conclusively rely until such time as Lender shall receive from such Person a
revised certificate meeting the requirements of this Section 6.4); and
(b) a copy of Borrower's and each Guarantor's By-laws or Operating or
Company Agreement, as applicable.
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6.5 Financing Statements. Receipt by Lender of copies of:
(a) proper financing statements naming Borrower as the debtor and
Lender as the secured party and such other similar instruments or documents as
may be necessary or, in the opinion of Lender, desirable under the UCC of all
appropriate jurisdictions to evidence or perfect Lender's security interests in
all Collateral (other than the Second Closing Date Collateral); and
(b) proper financing statements (Form UCC-3) necessary under the laws
of all appropriate jurisdictions necessary to release all security interests or
other rights of any Person in the Collateral (other than the Second Closing Date
Collateral) previously granted by Borrower.
6.6 Lien Searches. Receipt by Lender of certified copies of requests
for information or copies (Form UCC-11) (or a similar search report certified by
parties acceptable to the Lender) dated a date reasonably near the Initial
Closing Date listing all effective financing statements or other liens which
name Borrower or any Guarantor as debtor (under its current name or any previous
name) and which are filed in appropriate jurisdictions, together with copies of
such financing statements (none of which shall cover any of the Collateral).
6.7 Legal Opinions. Receipt by Lender of favorable opinions of:
(a) Xxxxx Xxxxx, Esq., general counsel for Borrower and each Guarantor,
dated on or about the Initial Closing Date, relating to corporate matters, no
litigation, no conflicts and other matters; and
(b) Appropriate local counsel to Borrower and each Guarantor, dated on
or about the Initial Closing Date, relating to legality, validity and
enforceability of each Facility Document to which Borrower and each Guarantor is
a party, and as to such other matters as Lender and Lender's counsel reasonably
may specify in each case, in form and substance acceptable to Lender.
6.8 Other Documents. Receipt by Lender of executed copies of the
Revolving Note, Term Note, the Guarantees, the ERC LLC Pledge Agreement, and the
other Facility Documents (other than the Mortgages, the Alliance Pledge
Agreement and the Collateral Assignments relating to the Second Closing Date
Collateral), each which shall be in full force and effect.
6.9 Omitted.
6.10 Receivables List. Receipt by Lender of a computer file or tape
containing a true and complete list of all Receivables, identified by account
number, account name and by the Outstanding Balance of each Receivable.
6.11 Delivery of Notes. Delivery to Lender of each note or other
instrument evidencing a Receivable (duly endorsed by Borrower in blank or by
allonge) (other than the Designated Note Receivables and the Receivables
constituting the Second Closing Date Collateral), together with a collateral
assignment of the note and Related Security with respect thereto, which
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assignment shall be in recordable form for all such Related Security which has
been recorded in form and substance as attached hereto as Exhibit H.
6.12 Insurance. Evidence of insurance as required by this Agreement and
conforming in all respects to the requirements of Lender.
6.13 Condemnation. No condemnation or adverse zoning or usage change
proceeding shall have occurred or shall have been threatened against the Owned
Real Estate, the Owned Real Estate shall not have suffered any significant
damage by fire or other casualty which has not been repaired or is not being
restored in accordance with this Agreement; no law, regulation, ordinance,
moratorium, injunctive proceeding, restriction, litigation, action, citation or
similar proceeding or matter shall have been enacted, adopted, or threatened by
any governmental authority, which would have, a material adverse effect on the
ability of Borrower or any Guarantor to perform their obligations under the
Facility Documents.
6.14 Brokers. All fees and commissions payable to real estate brokers,
mortgage brokers, or any other brokers or agents in connection with the Loans or
the acquisition of the Owned Real Estate have been paid, such evidence to be
accompanied by any waivers or indemnifications deemed reasonably necessary by
Lender.
6.15 Leases. Borrower shall provide, at Lender's request, true and
current copies of all Leases.
6.16 Other Agreements. The Warrant Agreement shall be executed and
delivered by all parties thereto, and the warrants described therein shall have
been duly issued to Lender.
SECTION 6A. CONDITIONS TO LENDER'S OBLIGATION TO FUND THE BORROWING REQUEST ON
THE INITIAL CLOSING DATE AND THE SECOND CLOSING DATE.
Lender's obligation to fund the Borrowing request hereunder on the Initial
Closing Date (other than the initial advance of $250,000 as set forth in Section
2.2(a)) or the Second Closing Date, as applicable, shall be subject to the
satisfaction, prior to funding such Borrowing request, of the conditions set
forth in Section 6 hereof (other than the items and conditions set forth in
Sections 6.4, 6.6, 6.8, 6.9, and 6.11,), as well as the following conditions:
6A.1 Special Conditions. The satisfaction of the conditions set forth
in clause (a) of the Special Condition, or
6A.2 Special Conditions. The satisfaction of the conditions set forth
in clause (b) of the Special Condition, and
6A.3 Fees. (i) Payment of $350,000 of the Arrangement Fee in
immediately available funds, and (ii) receipt by Lender of Lender's legal fees
and expenses in connection with the entering into of this Agreement, which
condition may be satisfied by payment of such Lender's fees with a portion of
the proceeds of the Loans on the Second Closing Date; and
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6A.4 Mortgages and Other Collateral. (i) The delivery to the Lender of
the Mortgage on the Harlem Real Estate and the payment by the Borrower of
applicable recording taxes, (ii) the delivery to the Lender of the Mortgage on
the other Owned Real Estate and the payment by the Borrower of applicable
recording taxes, (iii) the Owned Real Estate being free and clear of all Liens
(except for Permitted Liens) in which Lender will have a valid first priority
perfected mortgage if such mortgage is duly and properly filed of record, (iv)
the delivery to Lender of an ALTA (or equivalent) mortgagee policy of title
insurance with respect to the Owned Real Estate in the amount set forth on
Schedule 11, with such reinsurance and endorsements as Lender may reasonably
require, containing no exceptions to title (printed or otherwise) other than the
Permitted Liens, and insuring that the Mortgages are a first-priority Lien on
the Owned Real Estate and related collateral, (v) the delivery to Lender of
evidence reasonably acceptable to Lender that (a) following any casualty, the
improvements which form a part of the Owned Real Estate may be reconstructed and
the current use thereof restored, and (b) except as set forth herein, that there
is no litigation, action, citation, injunctive proceedings, or like matter
pending or threatened with respect to the Owned Real Estate which would have a
material adverse effect on the ability of the Borrower or any Guarantor to
perform their obligations under this Agreement, (vi) the execution and delivery
to Lender of Collateral Assignments with respect to the Designated Note
Receivables, and the satisfaction of the conditions set forth in Sections 6.5
and 6.11 with respect thereto, and the delivery to Lender of any third party
consents required in connection therewith, and (vii) legal opinions of
appropriate local counsel to Borrower and each Guarantor, dated on or about the
Initial Closing Date or the Second Closing date, as applicable, relating to
legality, validity and enforceability of each Facility Document to which
Borrower and each Guarantor is a party, and as to such other matters as Lender
and Lender's counsel reasonably may specify, and containing such exceptions as
may be necessary to reflect any issues under New York law with respect to
additional interest and the enforcement thereof, in each case, in form and
substance reasonably acceptable to Lender; and
6A.5 Representations True; No Default or Event of Default; Employment.
(a) The representations and warranties of Borrower contained in Sections 3, 3A,
5 and 5A shall be true in all material respects on and as of such Closing Date
with the same effect as though such representations and warranties had been made
on and as of such Closing Date. There shall exist on such Closing Date no
Default or Event of Default (both before and after giving effect to the
Borrowing requested on such Closing Date); and
(b) Xxxx Xxxxxxx shall be a full time employee of Borrower pursuant to
a contract with a term of at least two (2) years; and
6A.6 Borrowing. In the event that the Second Closing Date is occurring
pursuant to Section 2A.2(a)(ii), Borrowing the full $10,000,000 of the Term Loan
and at least $750,000 of the Revolving Loan; and
6A.7 Release of Certain Collateral. (i) Upon the satisfaction of clause
(a) of the Special Condition on the Second Closing Date (a) Xxxxxxx Xxxxx shall
have released the pledge by ERC of ERC's lien on the Designated Notes Receivable
and the Harlem Membership Interest granted to ERC under the ERC Pledge
Agreement, and (b) ERC shall have released its lien on the Designated Notes
Receivable and the Harlem Membership Interest granted to ERC under the ERC
Pledge Agreement, and terminated the ERC Pledge Agreement; or
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(ii) Upon the satisfaction of clause (b) of the Special
Condition on the Second Closing Date (a) if $5,000,000 or more of the
Revolving Loan is being borrowed on such date, (1) Xxxxxxx Xxxxx shall
have released the pledge by ERC of ERC's lien on the Designated Notes
Receivable granted to ERC under the ERC Pledge Agreement, and (2) ERC
shall release its lien on the Designated Notes Receivable granted to
ERC under the ERC Pledge Agreement, (b) if less than $5,000,000 of the
Revolving Loan is being borrowed on such date, ERC shall have
subordinated its lien on the Designated Note Receivables to Lender's
Lien on the Designated Note Receivables, (c) Xxxxxxx Xxxxx shall have
terminated the pledge by ERC of its lien on the Harlem Membership
Interest granted to ERC under the ERC Pledge Agreement, and (d) ERC
shall have released its lien on the Harlem Membership Interest granted
to ERC under the ERC Pledge Agreement.
SECTION 7. CONDITIONS TO LENDER'S OBLIGATION TO FUND BORROWING REQUESTS
(INCLUDING THE INITIAL BORROWING REQUEST) AND TO MAINTAIN THE LOANS.
Lender's obligation to fund any Borrowing request hereunder (including
the initial Borrowing request) shall be subject to the satisfaction, prior to
the funding of such Borrowing of the following conditions:
7.1 Representations True; No Default or Event of Default.
The representations and warranties of Borrower contained in Sections 3,
3A, 5 and 5A shall be true in all material respects on and as of such Closing
Date with the same effect as though such representations and warranties had been
made on and as of such Closing Date. There shall exist on such Closing Date no
Default or Event of Default (both before and after giving effect to the
Borrowing requested on such Closing Date); provided, however, in the event there
is a claim by any third party, on or prior to the Second Closing Date, that such
third party holds the original promissory note(s) or owns any of, or has a
perfected security interest in, the loans set forth on Schedule 19 attached
hereto, such claim shall not be deemed to be a Default or Event of Default
hereunder and Lender shall fully fund the Revolver Loan and the Term Loan in
accordance with the terms of Sections 2 and 6 hereof on the Second Closing Date.
7.2 Borrowing Base. In the case of a Closing Date, after giving effect
to the Borrowing on such Closing Date, the repayment (if any) of the Loans on
such Closing Date, the inclusion of additional Eligible Receivables and Eligible
Owned Real Estate in the Borrowing Base on such Closing Date and the exclusion
from the Borrowing Base of Receivables and Owned Real Estate (if any) which no
longer constitute Eligible Receivables or Eligible Owned Real Estate (or as to
which there have been Collections) on such Closing Date, the aggregate principal
balance of the Revolving Loan shall not exceed the lesser of (x) the Revolving
Loan Commitment on such Closing Date and (y) the Borrowing Base on such Closing
Date. Such calculation shall be evidenced by the applicable Borrowing Base
Report delivered to Lender on the third Business Day preceding such Closing Date
calculated as of the close of business on the Business Day immediately preceding
the date of delivery.
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7.3 Borrowing Notice. Receipt by Lender of a Revolving Loan Borrowing
Notice in accordance with Section 2.2(a)(ii) hereof or a Term Loan Borrowing
Notice in accordance with Section 2A.2(c) hereof.
7.4 Other Matters. Receipt by Lender of all such approvals, opinions or
other documents or information concerning the Collateral as Lender shall have
reasonably requested.
7.5 Expenses. Borrower shall have paid Lender's costs and expenses in
connection with such advance (including title charges, and reasonable costs and
expenses of Lender's inspecting engineer and attorneys).
7.6 Adverse Change. No material change shall have occurred in the
financial condition of Borrower or any Guarantor which would have, in Lender's
reasonable judgment, a material adverse effect on Borrower's or any Guarantor's
ability to perform its obligations under the Facility Documents.
7.7 Condemnation. No condemnation or adverse zoning or usage change
proceeding shall have occurred or shall have been threatened against the Owned
Real Estate; which would have a material adverse effect on Borrower's ability to
perform its obligations hereunder; the Owned Real Estate shall not have suffered
any damage by fire or other casualty which has not been repaired or is not being
restored in accordance with this Agreement; no Law, moratorium, injunctive
proceeding, restriction, litigation, action, citation or similar proceeding or
matter shall have been enacted, adopted, or threatened by any governmental
authority, which would have, a material adverse effect on Borrower's ability to
perform its obligations under the Facility Documents.
7.8 Security. Such advance shall be secured by the applicable Facility
Documents, subject only to Permitted Liens.
SECTION 8. LOAN MATURITY; LOAN PREPAYMENTS.
8.1 Loan Maturity. On the Maturity Date (or, if different, the
Expiration Date), the full principal amount of the Revolving Loan and Term Loan,
together with accrued Interest thereon and any other amounts due hereunder,
shall be due and payable in full.
8.2 Mandatory Prepayments. (a) Unless an Event of Default shall have
occurred and be continuing, Borrower, shall, without notice, immediately prepay
the Revolving Loan and the Term Loan, without premium, together with Interest
accrued on the amount to be prepaid to the date of prepayment, on any date on
which the aggregate principal balance of the Revolving Loan and Term Loan on
such date exceeds the sum of (i) the Borrowing Base on such date, and (ii) if
the Harlem Real Estate has not been sold or refinanced, $7,000,000, such
prepayment to be in an aggregate principal amount equal to such excess and to be
applied first to the Revolving Loan and then to the Term Loan. Upon the
occurrence and continuance of an Event of Default, Borrower will make payments
on the Loans in accordance with Sections 12 and 14 hereof. If Lender receives a
payment on or with respect to any Receivable, the proceeds of such Receivable
shall be used to prepay the Revolving Loan, and any excess funds shall be used
to prepay the Term Loan.
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(b) Subject to Section 10.18(a) and notwithstanding the foregoing and
any other provision hereunder or in any other Facility Document to the contrary,
in the event any of Borrower or any Guarantor shall sell, transfer or mortgage
any of the Owned Real Estate in accordance with Section 10.18(a) hereof, (a)
100% of the net proceeds of such sale, transfer or mortgage of such Owned Real
Estate (other than the Harlem Real Estate) shall be paid to Lender and applied
as a prepayment of the Revolving Loan and Term Loan, and, in connection
therewith, (i) Lender shall release the lien of the mortgage on such Owned Real
Estate and execute any and all documents, termination agreements and instruments
required to release the lien of the Mortgage and any other Collateral associated
with such Owned Real Estate, and (ii) all of the terms, conditions and
provisions hereunder and under the other Facility Documents with respect to such
Owned Real Estate shall automatically terminate and be of no further force and
effect, and (b) 100% of the net proceeds of such sale, transfer or mortgage of
the Harlem Real Estate shall be paid to Lender and applied as a prepayment of
the Term Loan, and, in connection therewith, (i) Lender shall release the lien
of the Mortgage on the Harlem Real Estate and execute any and all documents,
termination agreements and instruments required to release the lien of the
Mortgage and any other Collateral associated with the Harlem Real Estate, and
(ii) all of the terms, conditions and provisions hereunder and under the other
Facility Documents with respect to the Harlem Real Estate shall automatically
terminate and be of no further force and effect.
(c) On the date on which the Borrower terminates the Revolving Loan
Commitment in accordance with Section 2.5(b), the Borrower shall repay the
Obligations in full.
(d) In the event that the Revolving Loan Commitment shall be reduced
for any reason below the amount of the outstanding principal balance of the
Revolving Loan, on the date of such reduction Borrower shall pay to Lender, as a
prepayment of the Revolving Loan, the amount of such excess.
(e) In the event that any Receivable is refinanced in accordance with
the terms of this Agreement, Borrower shall pay to Lender an amount equal to the
net cash proceeds received by Borrower in connection with such refinancing,
which amount shall be used to prepay the Revolving Loan (and the Revolving Loan
Commitment shall then be reduced in accordance with the terms of Section 2.7
hereof); provided, however, in the event that the amount of such net cash
proceeds is greater than the then outstanding balance of the Revolving Loan,
Borrower shall pay to Lender from such net cash proceeds an amount equal to the
then outstanding balance of the Revolving Loan (and the Revolving Loan
Commitment shall then be reduced in accordance with the terms of Section 2.7
hereof) and if, at the time that such payments are required, the conditions set
forth in Section 7.1, 7.6 and 7.7 are satisfied, Borrower shall have the right
to retain the excess(otherwise such excess shall be paid to Lender as a
prepayment of the Term Loan). Notwithstanding the foregoing, to the extent that
the permanent reduction of the Revolving Loan Commitment required under Section
2.7 in connection with any such refinancing of a Receivable would reduce the
Revolving Loan Commitment below zero, then (i) Borrower shall prepay the
Revolving Loan in full, (ii) Borrower shall prepay the Term Loan in an amount
equal to the amount by which the Revolving Loan Commitment would be reduced
below zero, and (iii) if, at the time that such payments are required, the
conditions set forth in Section 7.1, 7.6 and 7.7 are satisfied, Borrower shall
have the right to retain amounts in excess
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of what is required to be paid under the preceding clauses (i) and (ii)
(otherwise such excess shall be paid to Lender as a prepayment of the Term
Loan).
(f) Following the occurrence of an Event of Default, in the event that
ERC distributes, dividends, contributes, or otherwise pays any sum of money to
Borrower other than pursuant to the Purchase and Contribution Agreement,
Borrower shall, within two (2) days of receipt of such amounts, pay to Lender
such amounts, which amounts shall be used to prepay the Revolving Loan and then
the Term Loan.
8.3 Voluntary Prepayments. Borrower may at any time voluntarily prepay
all or a portion of the Revolving Loan without premium or penalty. The Borrower
may at any time voluntarily prepay all or a portion of the Term Loan without
premium or penalty.
8.4 Allocation of Prepayments. The aggregate principal amount of any
prepayment of the Revolving Loan pursuant to Section 8.2 or 8.3 shall be
allocated, first, to any fees and expenses due to Lender under the Facility
Documents; second, to any Default Rate interest or late charges; third, to
accrued and unpaid interest; fourth, to the principal sum and other amounts due
under the Revolving Loan; and fifth to Term Loan applied as set forth in the
immediately succeeding sentence; provided, however, that Lender may apply such
payments in any order or manner during the continuance of an Event of Default.
The aggregate principal amount of any prepayment of the Term Loan pursuant to
Section 8.2 or 8.3 shall be allocated, first, to any fees and expenses due to
Lender under the Facility Documents; second, to any Default Rate interest or
late charges; third, to accrued and unpaid interest; and fourth, to the
principal sum of the Term Loan and other amounts due under the Facility
Documents; provided, however, that Lender may apply such payments in any order
or manner during the continuance of an Event of Default.
8.5 Prepayment Notice. Borrower shall provide written notice to Lender
of any voluntary prepayment of the Revolving Loan as early as practicable prior
to the date for such prepayment, but in no event later than three (3) Business
Days prior to the date for such prepayment. Borrower shall provide written
notice to Lender of any voluntary prepayment of the Term Loan as early as
practicable prior to the date for such prepayment, but in no event later than
three (3) Business Days prior to the date for such prepayment.
8.6 Payment Instructions; Etc. All payments or prepayments required or
permitted to be made on the Revolving Loan, the Term Loan, the Revolving Note,
the Term Note or otherwise under or in connection with this Agreement
(including, without limitation, pursuant to Section 2 or this Section 8) shall
be made by wire transfer of immediately available funds to Lender's account
designated on the signature page hereto and, in the case of any such mandatory
payments or prepayments, such payments or prepayments shall be due by 1:00 p.m.
(New York City time).
SECTION 9. ASSIGNMENTS AND PARTICIPATIONS.
9.1 Assignments. Borrower may not assign its rights or obligations
hereunder or under the Revolving Note or Term Note.
Lender may (subject in all events to the confidentiality provisions of Section
17.2) assign all or any portion of the Commitments, the Revolving Loan, and the
Term Loan:
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(a) to any (i) wholly-owned subsidiary of Lender, or (ii) Affiliate
of Lender in which Lender owns an equity interest of at least 51%, in each
case without Borrower's prior written consent; and
(b) to any bank or other institution (each such Affiliate, bank or
other institution, an "Assignee") with, so long as no Event of Default has
occurred and is continuing, the prior written consent of Borrower not to
be unreasonably withheld; provided that any assignment of a portion of the
Revolving Loan or the Term Loan shall be in an amount not less than
$2,500,000. The Assignee shall have, to the extent of such assignment
(unless otherwise provided in such assignment), the obligations, rights
and benefits of Lender hereunder with respect to the portion of the
Revolving Loan and/or Term Loan assigned to it. For all purposes of this
Agreement, the Assignee shall, so long as the portion of the Revolving
Loan and/or Term Loan assigned to such Assignee remain unpaid, be entitled
to the rights and benefits of this Agreement with respect to the portion
of the Revolving Loan and/or Term Loan assigned to it as if (and, Borrower
shall be directly obligated to such Assignee under this Agreement as if)
such Assignee were the "Lender" for purposes of this Agreement.
Accordingly, unless otherwise provided, whenever any action, waiver,
notice or consent is to be provided to or by Lender as herein specified,
such action, waiver, notice or consent shall (unless otherwise expressly
specified herein) also be provided to or by each Assignee. If the
Revolving Loan and/or Term Loan are assigned in their entirety, the
Assignee shall become Lender hereunder, Borrower shall have no further
obligation to the assigning Lender, and the assigning Lender shall have no
further obligation to Borrower.
(c) Notwithstanding the provisions of this Section 9.1, no
assignment of an interest in the Revolving Loan or Term Loan to an entity
outside the United States of America shall be effective unless the
prospective Assignee thereof certifies to Borrower that payments to it in
respect of such Loan will not be subject to withholding taxes imposed by
any Official Body in the United States of America or any political
subdivision or taxing authority thereof or therein or that if it is
subject to such withholding taxes it will not seek reimbursement or
gross-up from Borrower.
If School Services LLC, the initial Lender, assigns a portion of the
Revolving Loan Commitment or Term Loan Commitment or its rights in the
Revolving Loan or Revolving Note or Term Loan or Term Note to multiple
lenders, then Borrower agrees to cooperate with School Services LLC in
amending this Agreement so as to provide that School Services LLC will act
as agent for all of such lenders.
9.2 Participations. Subject in all events to the confidentiality
provisions of Section 17.2, and subject to the following sentence, Lender may
with, so long as no Event of Default has occurred and is continuing, the prior
written consent of Borrower, not to be unreasonably withheld, sell or agree to
sell to one or more other Persons a participation in all or any part of the
Revolving Loan Commitment, and/or the Term Loan Commitment, and/or any portion
of the Revolving Loan or the Term Loan held by it or to be made by it. If Lender
sells any such participation, Lender shall remain responsible for the
performance of its obligations hereunder and Borrower shall continue to deal
solely and directly with Lender in connection with Lender's rights and
obligations hereunder. All amounts payable by Borrower to Lender under this
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Agreement shall be determined as if Lender had not sold or agreed to sell any
participations in any portion of the Revolving Loan or Term Loan and as if
Lender were funding all of the Revolving Loan or Term Loan in the same way that
it is funding the portion of the Revolving Loan and Term Loan in which no
participations have been sold. The participant's rights against Lender in
respect of such participation shall be set forth in the agreement executed by
Lender and the participant.
SECTION 10. CERTAIN COVENANTS OF THE BORROWER AND EACH GUARANTOR.
Borrower and each Guarantor covenants and agrees that so long as any Loan
shall remain unpaid, or the Revolving Loan Commitment or Term Loan Commitment
has not been terminated:
10.1 Notice of Default or Event of Default. Borrower shall promptly notify
Lender of (1) any Default or Event of Default, together with a detailed
statement of the steps being taken to cure such Default or Event of Default; (2)
any written notice of a material default received by Borrower under other
obligations relating to the Owned Real Estate or otherwise material to
Borrower's business; and (3) any pending legal, judicial or regulatory
proceedings, including any dispute between Borrower or any Guarantor and any
governmental authority, affecting Borrower or the Owned Real Estate.
10.2 Notice of Material Adverse Change. Promptly upon becoming aware
thereof, Borrower shall give Lender notice of any material adverse change in the
business, operations or financial condition of Borrower.
10.3 Preservation of Existence. Borrower and each Guarantor shall preserve
and maintain their existence, rights, franchises and privileges in the
jurisdiction of its formation, and qualify and remain qualified in good standing
in each jurisdiction where the failure to preserve and maintain such existence,
rights, franchises, privileges and qualification would materially adversely
affect (i) the interests of Lender hereunder or (ii) the ability of Borrower and
each Guarantor to perform its obligations hereunder and under the Facility
Documents.
10.4 Compliance with Laws. Borrower and each Guarantor shall comply in all
material respects with all Laws applicable to Borrower and each Guarantor, their
business and properties and all Collateral and Owned Real Estate subject,
however, to Borrower's right to contest any such Laws.
10.5 Enforceability of Obligations. Borrower and each Guarantor shall take
such actions as are commercially reasonable and within its power, if any, to
ensure that, with respect to each Receivable, the obligation of any related
Obligor to pay the unpaid balance of such Receivable in accordance with the
terms thereof remains legal, valid, binding and enforceable against such
Obligor.
10.6 Books and Records. Borrower will keep proper books of record and
account in which full, true and correct entries shall be made of all dealings
and transactions in relation to its business and activities.
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10.7 Fulfillment of Obligations. Borrower will duly observe and perform
all material obligations and undertakings on its part to be observed and
performed under or in connection with the Receivables, will do nothing to impair
the rights, title and interest of Lender in and to the Collateral and
Receivables.
10.8 Maintenance of Office; Notice of Relocation. Borrower will maintain
at its chief executive office an office where notices, presentations and demands
in respect of this Agreement and the Revolving Note and Term Note may be given
to and made upon it. Borrower shall give Lender 15 days' prior written notice of
any relocation of its chief executive office or jurisdiction of organization.
10.9 Litigation. As soon as possible, and in any event within ten Business
Days of Borrower's knowledge thereof, Borrower shall give Lender notice of (i)
any litigation, investigation or proceeding against Borrower or any Guarantor
which may exist at any time which, in the reasonable judgment of Borrower, could
reasonably be expected to have a material adverse effect on the financial
condition or results of operations of Borrower or impair the ability of Borrower
to perform its obligations under this Agreement or any Facility Documents, or
materially adversely affect the collectibility of the Receivables as a whole,
and (ii) any material adverse development in any such previously disclosed
litigation.
10.10 Fees, Taxes and Expenses. Borrower shall pay all filing fees, stamp
taxes and other similar documentary or excise taxes and expenses, including the
fees and expenses set forth in this Agreement, if any, which may be incurred on
account of or arise out of this Agreement and the documents and transactions
entered into pursuant to this Agreement.
10.11 Information. Borrower shall furnish the following to Lender:
(a) promptly after sending or filing thereof, copies of all reports
which Borrower sends to any of its public security holders, and copies of
all reports on Form 10-K, Form 10-Q and Form 8-K (unless the Form 8-K is
filed solely to file exhibits under Item 7 thereof) which Borrower files
with the SEC and any national securities exchange in the United States of
America;
(b) as soon as available and in any event within 25 days after the
end of each calendar month, management reports prepared by Borrower which,
among other things, shall reflect Borrower's financial performance and
condition at the end of the preceding calendar month (including, without
limitation, such performance relative to the projections contained in the
Budget);
(c) as soon as available and in any event within 45 days after the
end of each of the first three quarters of each Fiscal Year of Borrower, a
consolidated balance sheet of Borrower and its Subsidiaries as of the end
of such quarter and related statements of income and retained earnings and
of cash flows of Borrower and its Subsidiaries for the period commencing
at the end of the previous Fiscal Year and ending with the end of such
quarter, in each case, prepared in accordance with GAAP, certified by the
chief financial officer or the chief accounting officer of Borrower;
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(d) as soon as available and in any event within 90 days after the
end of each Fiscal Year of Borrower, a consolidated balance sheet of
Borrower and its Subsidiaries as of the end of such Fiscal Year and
related statements of income and retained earnings and cash flows of
Borrower and its Subsidiaries for such Fiscal Year, audited by
PricewaterhouseCoopers, LLC, independent accountants, or another
nationally recognized firm of independent accountants, in each case,
prepared in accordance with GAAP, certified by the chief financial officer
or the chief accounting officer of Borrower;
(e) at the same time as provided to Borrower's Board of Directors
and all committees of Borrower's Board of Directors, copies of all
documents, reports and analyses provided to Borrower's Board of Directors
and any committee thereof;
(f) the information set forth in Schedule 12 hereto; and
(g) such other information, documents, records or reports respecting
the Owned Real Estate, Receivables and the Related Security or the
condition or operations, financial or otherwise, of Borrower or any
Guarantor as the Lender may from time to time reasonably request.
10.12 Nature of Business and Permitted Transactions. Borrower shall engage
solely in the Primary Business Line.
10.13 Due Diligence. From time to time, during regular business hours as
requested in writing by Lender, upon five (5) days' prior notice, Borrower shall
permit Lender, or its agents or representatives, (A) to examine and make copies
of and abstracts from all Records in the possession or under the control of
Borrower and its Subsidiaries or the agents of Borrower or its Subsidiaries
relating to Owned Real Estate, Receivables and the Related Security, and (B) to
visit the offices and properties of Borrower and its Subsidiaries, for the
purpose of examining such materials described in clause (A) above, and to
discuss matters relating to Owned Real Estate, Receivables and the Related
Security and other Collateral with any of the officers or employees of Borrower
having knowledge of such matters or with Borrower's independent public
accountants.
10.14 Taxes; Charges. Borrower shall pay before any fine, penalty,
interest or cost may be added thereto, and shall not enter into any agreement to
defer, any real estate taxes and assessments, franchise taxes and charges, and
other governmental charges that may become a Lien upon the Owned Real Estate or
Collateral or become payable during the term of the Loans, and will promptly
furnish Lender with evidence of such payment. Borrower and each Guarantor shall
not suffer or permit the joint assessment of the Owned Real Estate with any
other real property constituting a separate tax lot or with any other real or
personal property. Borrower and each Guarantor, as the case may be, shall pay
when due all claims and demands of mechanics, material men, laborers and others
which, if unpaid, might result in a Lien on the Owned Real Estate; however,
Borrower and Guarantor may contest the validity of such claims and demands so
long as (a) Borrower or any Guarantor notify Lender that it intends to contest
such claim or demand, (b) Borrower and each Guarantor provides Lender with an
indemnity, bond or other security satisfactory to Lender (including an
endorsement to Lender's title insurance policy insuring against such claim or
demand) assuring the discharge of Borrower's obligations for such
52
claims and demands, including interest and penalties, and (c) Borrower or any
Guarantor is diligently contesting the same by appropriate legal proceedings in
good faith and at its own expense. Borrower will promptly pay when due all bills
and costs for labor, materials and specifically fabricated materials incurred in
connection with the Owned Real Estate and never permit to exist beyond the due
date thereof in respect of the Owned Real Estate or any part thereof any Lien,
even though inferior to the Liens of the Facility Documents, and in any event
never permit to be created or exist in respect of the Owned Real Estate or any
part thereof any other or additional Lien other than the liens or security of
the Facility Documents, except for the Permitted Liens.
10.15 Operation; Maintenance; Inspection. Borrower and each Guarantor
shall observe and comply with all legal requirements applicable to the
ownership, use and operation of the Owned Real Estate. Borrower and each
Guarantor shall maintain the Owned Real Estate in good condition and promptly
repair any damage or casualty. Borrower and each Guarantor shall permit Lender
and its agents, representatives and employees, upon reasonable prior written
notice to Borrower and each Guarantor and provided a representative of Borrower
and each Guarantor has an opportunity to be present, to inspect the Owned Real
Estate and conduct such environmental and engineering studies as Lender may
require, provided such inspections and studies do not materially interfere with
the use and operation of the Owned Real Estate.
10.16 Taxes on Security. Borrower and each Guarantor shall pay all taxes,
charges, filing, registration and recording fees, excises and levies payable
with respect to the Revolving Note, Term Note or the Security Interests or the
Receivables created or secured by the Facility Documents, other than income,
franchise and doing business taxes imposed on Lender. If there shall be enacted
any Law (1) deducting the Revolving Loan or Term Loan from the value of the
Owned Real Estate for the purpose of taxation, (2) affecting any Lien on the
Owned Real Estate, or (3) changing existing Laws of taxation of mortgages, deeds
of trust, security deeds, or debts secured by real property, or changing the
manner of collecting any such taxes, Borrower shall promptly pay to Lender, on
demand, all taxes, costs and charges for which Lender is or may be liable as a
result thereof; however, if such payment would be prohibited by law or would
render any Loan usurious, then instead of collecting such payment, Lender may
declare all amounts owing under the Facility Documents to be immediately due and
payable.
10.17 ERISA Events. (a) promptly upon becoming aware of the occurrence of
any ERISA Event which together with all other ERISA Events occurring within the
prior 12 months involve, under ERISA, a payment of money by or a potential
aggregate liability of Borrower or any ERISA Affiliate or any combination of
such entities in excess of $5,000,000, Borrower shall give the Buyer a written
notice specifying the nature thereof, what action Borrower or any ERISA
Affiliate has taken and, when known, any action taken or threatened by the
Internal Revenue Service, the Department of Labor or the PBGC with respect
thereto.
(b) Promptly upon receipt thereof, Borrower shall furnish to the
Buyer copies of:
(i) all notices received by Borrower or any ERISA Affiliate of the
PBGC's intent to terminate any Plan or to have a trustee appointed to
administer any Plan;
53
(ii) all notices received by Borrower or any ERISA Affiliate from
the sponsor of a Multiemployer Plan pursuant to Section 4202 of ERISA
involving a withdrawal liability being assessed against Borrower or any
ERISA Affiliate in excess of $5,000,000; and
(iii) all funding waiver requests filed by Borrower or any ERISA
Affiliate with the Internal Revenue Service with respect to any Plan, the
accrued benefits of which exceed the present value of the plan assets as
of the date the waiver request is filed by more than $5,000,000, and all
communications received by Borrower or any ERISA Affiliate from the
Internal Revenue Service with respect to any such funding waiver request.
10.18 Due on Sale and Encumbrance; Transfers of Interests. Without the
prior written consent of Lender neither Borrower, any Guarantor nor any other
Person having an ownership or beneficial interest in Borrower shall:
(a) directly sell, transfer, convey, mortgage, pledge, or assign any
interest in the Owned Real Estate or any part thereof, except that
Borrower or any Guarantor, as the case may be, may sell or mortgage any
Owned Real Estate having a purchase price or financing proceeds at least
equal to the amounts set forth on Schedule 13 hereto; or
(b) further encumber, alienate, xxxxx x Xxxx or xxxxx any other
interest in the Owned Real Estate or any part thereof, whether voluntarily
or involuntarily; or
(c) enter into any lease, easement or other agreement granting
rights in or restricting the use or development of the Owned Real Estate
(except for leases existing on the date hereof and reflected on Schedule
14 hereto or as otherwise set forth in Section 5.1 hereof); or
(d) with respect to the Harlem Real Estate, enter into, or close
title to any property under, any land disposition agreement or any other
agreement with New York City or any other governmental authority.
10.19 Estoppel Certificates. Borrower, within ten (10) days after request,
shall furnish to Lender a written statement, duly acknowledged, setting forth
the amount due on the Loans, the terms of payment of the Loans, the date to
which interest has been paid, whether any offsets or defenses exist against the
Loans, and, if any are alleged to exist, the nature thereof in detail, and such
other matters as Lender reasonably may request.
10.20 Handicapped Access. Except with respect to the Trenton House and
Trenton Parking Lot, Borrower:
(a) shall ensure that the Owned Real Estate at all times complies in
all material respects with the requirements of the Americans with
Disabilities Act of 1990, the Fair Housing Amendments Act of 1988, all
state and local laws and ordinances related to handicapped access and all
rules, regulations, and orders issued pursuant thereto including, without
limitation, the Americans with Disabilities Act Accessibility Guidelines
for Buildings and Facilities (collectively, "Access Laws"); and
54
(b) has no actual knowledge as to the Owned Real Estate's
non-compliance with any Access Laws where the failure to so comply could
have a material adverse effect on the Owned Real Estate or on Borrower's
ability to repay the Loans in accordance with the terms hereof. Borrower
agrees to give prompt notice to Lender of the receipt by Borrower of any
written complaints related to violation of any Access Laws with respect to
the Owned Real Estate and of the commencement of any proceedings or
investigations which relate to compliance with applicable Access Laws.
10.21 Further Assurances. Borrower and each Guarantor will at its expense,
at any time and from time to time, promptly execute and deliver all further
instruments and documents and take all further action that may be necessary or
desirable or that Lender may request in order:
(a) to perfect and protect the security interest purported to be
created hereby;
(b) to enable Lender to exercise and enforce its rights and remedies
hereunder in respect of the Collateral;
(c) to effect otherwise the purposes of this Agreement; or
(d) to (A) deliver and assign to Lender each note, instrument or
chattel paper evidencing Receivables duly indorsed and accompanied by
executed instruments of transfer or assignment, all in form and substance
satisfactory to Lender, as may be necessary or desirable or that Lender
may request in order to assign the Receivable to Lender, and (B)
furnishing to Lender from time to time statements and schedules further
identifying and describing the Collateral and such other reports in
connection with the Collateral as Lender may reasonably request, all in
reasonable detail.
10.22 Equipment Insurance. (a) Borrower will, at its own expense, maintain
insurance with respect to the Equipment in such amounts, against such risks, in
such form and with such insurers, as shall be reasonably satisfactory to Lender
and with such insurers, as shall be satisfactory to Lender from time to time.
Each policy for liability insurance shall provide for all losses to be paid on
behalf of Lender and Borrower as their respective interests may appear, and each
policy for property damage insurance shall provide for all losses (except for
losses of less than $10,000 per occurrence) to be paid directly to Lender. Each
such policy shall in addition (A) include Lender as an insured party thereunder
(without any representation or warranty by or obligation of Lender thereunder)
as its interest may appear, (B) provide that any loss thereunder shall be
payable to Lender to its own account, notwithstanding any action, inaction or
breach of representation or warranty by Borrower, (C) provide that at least 30
days' prior written notice of cancellation or of lapse shall be given to Lender
by the insurer. Borrower will, if so requested by Lender, deliver to Lender
original or duplicate policies of all liability and property damage insurance
and, as often as Lender may reasonably request, a report of a reputable
insurance broker with respect to such insurance. Borrower will also, at the
request of Lender, duly execute and deliver instruments of assignment of such
insurance policies and cause the respective insurers to acknowledge notice of
such assignment.
(b) In the case of any loss involving damage to Equipment as to which
clause (c) of this Section 10.22 is not applicable, Borrower will make or cause
to be made the necessary
55
repairs to or replacements of such Equipment, and any proceeds of insurance
maintained by Borrower pursuant to this Section 10.22(b) shall be paid promptly
to Borrower and applied to the costs of such repairs or replacements.
(c) Upon the occurrence and during the continuance of an Event of Default
or the actual or constructive total loss (in excess of $10,000 per occurrence)
of any Equipment, all insurance payment in respect of such Equipment and all
other Collateral shall be paid to Lender and applied in the same manner that
property insurance is applied pursuant to Section 4.2 hereof.
10.23 New Mortgages and Receivables. (a) Upon the acquisition thereof,
Borrower shall grant to Lender a first priority Mortgage or Lien to Lender with
respect to any hereafter acquired Owned Real Estate or Receivable.
(b) In connection with the grant of any Mortgage pursuant to Section
10.23(a), Borrower shall deliver to Lender the following:
(i) an "as-built" survey of the Owned Real Estate, dated or updated
to a date not earlier than thirty (30) days prior to the date of the
making of such Mortgage, certified to Lender and the issuer of the title
insurance, prepared by a licensed surveyor acceptable to Lender and the
issuer of the title insurance, and conforming to Lender's current standard
survey requirements. Without limitation, the minimum requirements for the
survey shall be as set forth in the 1992 Minimum Standard Detail
Requirements for ALTA/ACSM Land Title Surveys, "Urban Survey"
classification;
(ii) an engineering report or architect's certificate with respect
to the Owned Real Estate, covering, among other matters, inspection of
heating and cooling systems, roof and structural details; showing no
failure of compliance with building plans and specifications, applicable
legal requirements (including requirements of the Americans with
Disabilities Act) and fire, safety and health standards; reviewing and
approving, among other matters, soil tests, plans and specifications
(including heating, ventilation and cooling systems, roof and structural
details, mechanical and electrical systems), and compliance with local,
state or federal laws, regulations, codes, etc., and containing a
declaration satisfactory to Lender that there will be no asbestos in the
Owned Real Estate. The engineer/architect preparing such report or
certificate must be satisfied that the Owned Real Estate is in compliance
with fire, safety and health standards which such engineer/architect deems
reasonable, in addition to standards imposed by law, regulation or codes.
As requested by Lender, such report shall also include an assessment of
the Owned Real Estate's tolerance for earthquake and seismic activity;
(iii) a Site Assessment of the applicable Owned Real Estate;
(iv) legal opinions of appropriate counsel to Borrower and the
applicable Subsidiary, as applicable, dated on or about the date of the
making of such Mortgage, relating to legality, validity and enforceability
of each Facility Document to which Borrower and such Subsidiary is
entering into on such date, and as to such other matters
56
as Lender and Lender's counsel reasonably may specify in each case, in
form and substance reasonably acceptable to Lender;
(v) the delivery to Lender of an ALTA (or equivalent) mortgagee
policy of title insurance with respect to the Owned Real Estate in the
amount of the purchase price paid by Borrower or the applicable
Subsidiary, with such reinsurance and endorsements as Lender may
reasonably require, containing no exceptions to title (printed or
otherwise) other than the Permitted Liens, and insuring that such Mortgage
is a first-priority Lien on the Owned Real Estate and related collateral;
(vi) the delivery to Lender of evidence reasonably acceptable to
Lender that (a) the Owned Real Estate and the operation thereof comply
with all legal requirements in all material respects, including that all
requisite certificates of occupancy, building permits, and other licenses,
certificates, approvals or consents required of any governmental authority
have been issued; and
(vii) at Lender's request, Borrower shall use commercially
reasonable efforts to furnish Lender with zoning letters from applicable
municipal agencies, and utility letters from applicable service providers
relating to the applicable Owned Property.
(c) In connection with the grant of any Receivable pursuant to
Section 10.23(a), Borrower shall deliver to Lender the following:
(i) proper financing statements naming Borrower as the debtor and
Lender as the secured party and such other similar instruments or
documents as may be necessary or, in the opinion of Lender, desirable
under the UCC of all appropriate jurisdictions to evidence or perfect
Lender's security interests in the Collateral acquired;
(ii) each note or other instrument evidencing the applicable
Receivable (duly endorsed by Borrower in blank or by allonge), together
with a collateral assignment of the note and Related Security with respect
thereto, which assignment shall be in recordable form for all such Related
Security which has been recorded and otherwise in form and substance as
attached hereto as Exhibit H; and
(iii) legal opinions of appropriate counsel to Borrower and the
applicable Subsidiary, as applicable, dated on or about the date of the
making of collateral assignment, relating to legality, validity and
enforceability of each Facility Document to which Borrower and such
Subsidiary is entering into on such date, and as to such other matters as
Lender and Lender's counsel reasonably may specify in each case, in form
and substance reasonably acceptable to Lender.
10.24 Alterations. Borrower and each Guarantor shall obtain Lender's prior
written consent (which consent shall not be unreasonably withheld) to any
alterations to any improvements that would reasonably be expected to have a
material adverse effect on Borrower's financial condition, the use, operation or
value of the Owned Real Estate, other than those contemplated by the Budget.
57
10.25 Lease Extension. At Lender's request, upon the occurrence of a
Default or Event of Default, Borrower shall deliver, or cause to be delivered, a
notice to the landlord to extend the term of the Ground Lease between Jersey
City Redevelopment Agency and Borrower, dated as of March 1, 2000, as assigned
by Borrower to The Xxxxxxxxx Charter School, Inc. Borrower hereby irrevocably
authorizes and empowers Lender, as attorney in fact for Borrower coupled with an
interest, to deliver any such lease extension notice upon the occurrence of a
Default or Event of Default if Borrower fails to deliver such Notice upon
Lender's request.
10.26 Compliance Certificate. Together with the financial statements
delivered pursuant to Section 10.11, Borrower shall deliver to Lender a
certificate signed by Borrower's chief financial officer or chief accounting
officer setting forth calculations in reasonable detail demonstrating compliance
(or failure to comply) with Section 11.6.
10.27 Accounts Payable. Borrower shall pay all of its accounts payable
within the terms thereof.
10.28 Financial Covenants. The Borrower shall have a minimum of
$25,000,000 of EBITDA for the fiscal year ended June 30, 2003.
10.29 Collateral. The Borrower shall (i) on or before September 15, 2002,
execute and deliver to Lender Collateral Assignments with respect to the Second
Closing Date Collateral referred to in clauses (i) and (ii) of the definition
thereof, and shall satisfy the conditions set forth in Sections 6.5 and 6.11
with respect thereto, and shall deliver to Lender any third party consents
required in connection therewith, (ii) use best efforts to obtain, on or before
September 15, 2002, the third party consent required to execute and deliver the
Collateral Assignment with respect to the Second Closing Date Collateral
referred to in clause (iii) of the definition thereof, and upon obtaining such
consent, execute and deliver to Lender a Collateral Assignment with respect
thereto, and shall satisfy the conditions set forth in Sections 6.5 and 6.11
with respect thereto, (iii) use best efforts to obtain, on or before September
15, 2002, the third party consent required to execute the Alliance Pledge
Agreement, and upon obtaining such consent, execute and deliver to Lender the
Alliance Pledge Agreement, (iv) on or before September 30, 2002, deliver to
Lender the original promissory notes evidencing the Receivables set forth on
Schedule 19 attached hereto, duly endorsed to Lender, or deliver to Lender
original substitute promissory notes evidencing such Receivables, duly endorsed
to Lender, and (v) with respect to any Equipment which is currently subject to a
financing arrangement which would be in default as a result of the granting of
the Lien hereunder on such Equipment, on or before September 30, 2002, deliver
to Lender the consent of the lender/lienholder under such financing arrangement
to the granting of the Lien on such Equipment hereunder (and automatically upon
such delivery, the applicable Equipment shall constitute Collateral).
SECTION 11. NEGATIVE COVENANTS
Borrower, and as expressly set forth in this Section 11, each
Guarantor, covenants that it will not, without the prior written consent of
Lender (all of which such negative covenants shall automatically terminate upon
the repayment of the Loans in full or the termination of the Commitments as
provided in Section 2.5 and 2A.5 hereof):
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11.1 No Rescissions or Modifications. Rescind, refinance or cancel any
Receivable or modify any terms or provisions thereof, except for (a) the
Phoenixville Loan Documents, the Stepping Stone Loan Documents, and the
Rochester Loan Documents, each of which Borrower shall have the right, without
Lender's consent, to amend and modify as set forth in the draft amendments and
modifications which Borrower delivered to Lender prior to the date hereof, (b)
other amendments with the prior written consent of the Lender and which do not
increase the amount of the loan and do not have a material adverse effect on
Borrower's rights thereunder, (c) except with respect to the Phoenixville Loan
Documents, the refinancing of a Receivable if such refinancing shall yield cash
proceeds to Borrower of no less than 70% of the then outstanding principal
balance of the applicable Receivable, (d) a modification of the Riverhead I Loan
Documents solely to increase the amount of the loan thereunder by $600,000, and
(e) amendments to certain Receivables as specifically set forth in, and
contemplated by, the Budget. In the event that a Receivable is refinanced for
less than the then outstanding principal balance of such Receivable, Borrower
shall have the right to make a subordinate loan to the Obligor of such
Receivable in an amount not greater than the remaining balance of such
Receivable.
11.2 No Liens. Except as otherwise provided herein, sell, assign (by
operation of Law or otherwise) or otherwise dispose of, or grant any option with
respect to, or create or suffer to exist any Lien upon or with respect to, (a)
any Receivable or Related Security or Collections in respect thereof, or (b) any
deposit account to which any Collections of any Receivable are sent, or assign
any right to receive income in respect thereof, other than Liens created under
the Facility Documents, or (c) any Equipment other than a Permitted Equipment
Sale or Refinancing.
11.3 No Changes. (a) Make any change in the character of its business,
which change would materially impair the collectibility of the Receivables, or
(b) change its name, identity or organizational structure in any manner which
would make any financing statement or continuation statement filed in connection
with this Agreement or the transactions contemplated hereby seriously misleading
within the meaning of Section 9-506, 9-507 or 9-508 of the UCC of any applicable
jurisdiction or other applicable Laws unless it shall have given Lender at least
30 days' prior written notice thereof and unless prior thereto it shall have
caused such financing statement or continuation statement to be amended or a new
financing statement to be filed such that such financing statement or
continuation statement would not be seriously misleading.
11.4 Consolidations, Mergers and Sales of Assets. (i) Borrower and each
Guarantor shall not consolidate or merge with or into any other Person or (ii)
sell, lease or otherwise transfer all or substantially all of its assets to any
other Person unless (a) no Default or Event of Default shall have occurred and
be continuing immediately before and immediately after such transaction and (b)
in the case of a consolidation or merger, Borrower is the survivor of such
transaction.
11.5 Investments in Other Persons. Neither Borrower nor any Guarantor
shall make or hold any Investment in any Person unless, with respect to
Borrower, such Person is engaged in the Primary Business Line.
11.6 Financial Covenants. (a) Permit the ratio of Consolidated Debt to
Consolidated Tangible Net Worth as of the last day of any fiscal quarter to be
greater than 0.60:1.
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(b) Permit Consolidated Tangible Net Worth as of the last day of any
fiscal quarter to be less than the sum of (x) $200,000,000, (y) 50% of
cumulative (to the extent positive) Consolidated Net Income for each fiscal
quarter ended after the date hereof, and (z) 100% of the aggregate net proceeds,
including the fair market value of property other than cash (as determined in
good faith by the Board of Directors of Borrower), received by Borrower from the
issuance and sale of any capital stock of Borrower after the date hereof, or in
connection with the exchange or conversion of any Debt of Borrower into capital
stock of Borrower after the date hereof.
(c) Permit any cash bonuses at the corporate headquarter level until
there is positive EBIDTA and then only to the extent of positive EBITDA except
that bonuses which are contained in the Budget may be paid in respect of fiscal
year 2002.
(d) Permit any Subsidiary of Borrower to incur Debt other than
pursuant to this Agreement (including, without limitation, pursuant to the terms
of Section 10.18) and the other Facility Documents.
11.7 Dissolution. Unless the Loans are repaid in full by the proceeds of
such action, take any action which would result in termination of Borrower's
business, dissolution or liquidation, including partial (whether by spin-off,
split-off or otherwise split-off or otherwise) of Borrower.
11.8 Change in Business. Take any action which would result in any
material change in the business of Borrower or material departure from
Borrower's Primary Product Line, or the entering into any new or non-core
business.
11.9 Liens. Encumber or xxxxx x Xxxx on any of the assets of Borrower or
any Guarantor other than under this Agreement and the Permitted Liens.
11.10 Sale of Assets. Subject to Sections 10.18 and 11.2(c) and the
Permitted Liens (and as otherwise set forth under the Purchase and Contribution
Agreement) sell any assets of Borrower in excess of 10% of the existing assets
of Borrower.
11.11 Dividends. Pay common stock dividends.
11.12 New Management Contracts. Enter into Management Contracts (i)
outside of the ordinary course of the Primary Business Line, or (ii) which have
a projected Site IRR of less than thirty percent (30%) during the term of such
Management Contract, or (iii) which do not comply in all respects with the
Budget, or (iv) which do not contain standardized provisions which are
consistent with past practices of Borrower (with such changes as prudent
business judgment may dictate or as may be required by applicable law).
11.13 Options. Re-price any of Borrower's stock options or warrants
outstanding as of the date hereof.
11.14 Pre Financing. Finance the construction or acquisition of any
charter school unless such new financing is included in the Budget, it being
understood that a payment of an
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existing financed mortgage shall not increase the amount permitted to be
pre-financed under the Budget.
SECTION 12. DEFAULTS, REMEDIES AND TERMINATION.
12.1 Events of Default. If one or more of the following events ("Events of
Default") shall occur and be continuing:
(a) Borrower shall fail to pay when due any Interest on the
Revolving Loan or Term Loan, or any fees or other amount payable
hereunder, and such failure shall continue for three (3) Business Days; or
(b) Borrower shall fail to make any payment or prepayment of
principal when due; or
(c) Borrower shall fail to observe or perform any covenant or
agreement contained in the Warrant Agreement (or any warrant issued to the
Lender in connection therewith); or
(d) except as otherwise provided in this Section 12.1, Borrower or
any Guarantor shall fail to observe or perform any covenant or agreement
contained in this Agreement for 30 days after the earlier to occur of (i)
written notice thereof to Borrower or any Guarantor by Lender and (ii)
knowledge thereof by Borrower or any Guarantor; or
(e) any representation, warranty, certification or statement made by
Borrower or any Guarantor in this Agreement or in any certificate,
financial statement or other document delivered pursuant to this Agreement
shall prove to have been incorrect in any material respect when made (or
deemed made) for 30 days after the earlier to occur of (i) written notice
thereof to Borrower by Lender and (ii) knowledge thereof by Borrower; or
(f) a judgment or order for the payment of money in excess of
$5,000,000 shall be rendered against Borrower or any Guarantor and such
judgment or order shall continue unsatisfied and unstayed for a period of
30 days; or
(g) the first priority perfected security interest of Lender in and
to the Collateral is revoked or invalidated, or otherwise ceases to be a
first priority perfected security interest in favor of Lender in and to
the Collateral for the earlier of (i) one Business Day after actual
knowledge thereof by Borrower and (ii) one Business Day after written
notice thereof has been given to Borrower by Lender or, in either case,
such longer period (not to exceed five Business Days as determined in
consultation with, and with the consent of, Lender) as Borrower, acting in
good faith and with all due diligence, requires to re-establish the first
priority perfected security interest of Lender in and to the Collateral;
or
(h) an Event of Bankruptcy shall occur with respect to Borrower or
any Guarantor; or
(i) (x) Borrower or any Subsidiary thereof shall fail to pay any
principal of, or interest on, any Debt that is outstanding in a principal
amount of at least $5,000,000 when
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due and such failure shall continue beyond the applicable grace period; or
(y) Borrower or any Subsidiary thereof shall otherwise default under any
agreement or instrument in a principal amount of at least $5,000,000; or
(j) a Change of Control of Borrower shall have occurred; or
(k) except for the litigation matters set forth on Schedule 7
attached hereto, there shall be pending any litigation, investigation or
proceeding which Borrower is required to disclose pursuant to Section
10.9, which in the reasonable opinion of Lender is likely to materially
adversely impair the ability of Borrower or any Guarantor to perform its
obligations under this Agreement or any other Facility Document; or
(l) any provision (except any provision that shall be immaterial to
Lender) of any Facility Document shall for any reason cease to be a legal,
valid and binding obligation of Borrower or any Guarantor, or Borrower or
any Guarantor shall so state in writing; or
(m) the certificate of incorporation or articles of organization of
Borrower or any Guarantor shall be amended, supplemented or otherwise
modified without the consent of Lender (except as expressly permitted
hereunder); or
(n) the occurrence of any event which materially adversely affects
the collectibility of a material portion of the Receivables; or
(o) Borrower or any Guarantor shall fail to maintain at least the
types of insurance set forth in Schedule 16 hereto in at least the minimum
amounts set forth in Schedule 16 hereto or any such insurance shall be
issued by an insurance company or companies not licensed to do business in
the applicable state(s) or not rated "A-VIII" or better by A.M. Best
Company and, in any such case, such failure or condition shall continue or
exist for 30 days after the earlier to occur of (i) written notice thereof
to Borrower by Lender and (ii) knowledge thereof by Borrower; or
(p) a material adverse change in Borrower has occurred as measured
against the Budget; or
(q) the sale, transfer, conveyance, pledge, mortgage or assignment
of any part or all of the Owned Real Estate, or any interest therein, or
any interest in any Guarantor (other than Permitted Liens), in violation
of Section 10.18 of this Agreement; or
(r) Any default under any document or instrument, other than the
Facility Documents, evidencing or creating a Lien on the Owned Real Estate
or any part thereof for 20 days after the earlier to occur of (i) written
notice thereof to Borrower or any Guarantor by Lender and (ii) knowledge
thereof by Borrower or any Guarantor;
then, and in every such event and so long as such Event of Default shall be
continuing, Lender may, (i) by notice to Borrower (such notice, a "Notice of
Termination") (x) terminate the Revolving Loan Commitment and Term Loan
Commitment and/or (y) declare the Revolving Notes and Term Notes (together with
accrued interest thereon) to be, and the Revolving Notes and Term Notes shall
thereupon become, immediately due and payable without presentment,
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demand, protest or other notice of any kind, all of which are hereby waived by
Borrower; provided that in the event of an actual or deemed entry of an order
for relief with respect to Borrower under state or federal bankruptcy or
insolvency laws, or any other Event of Default specified in clause (h) above
which has the effect of staying actions against Borrower, without any notice to
Borrower or any other act by Lender, the Revolving Loan Commitment and Term Loan
Commitment shall thereupon terminate and the Revolving Note and Term Note
(together with accrued interest thereon) shall become immediately due and
payable without presentment, demand, protest or other notice of any kind, all of
which are hereby waived by Borrower and (ii) exercise any or all of the rights
and remedies set forth in this Agreement and under applicable law.
12.2 Default Remedies. In addition to (and without limiting Lender's
remedies under) Section 12.1, if an Event of Default shall have occurred and be
continuing, Lender may exercise any right, power or remedy permitted to it by
law, either by suit in equity or by action at law, or both, whether for specific
performance of any covenant or agreement contained in the Facility Documents or
for an injunction against a violation of any of the terms of the Facility
Documents or in aid of any exercise of any power granted to Lender in the
Facility Documents, or may proceed to enforce payment of the Revolving Loan and
Term Loan or to enforce any other legal or equitable right of Lender under this
Agreement. No remedy herein (including, without limitation, in Section 12.1
hereof) conferred upon Lender is intended to be exclusive of any other remedy
and each and every remedy shall be cumulative and shall be in addition to every
other remedy given hereunder or now or hereafter existing at law, in equity, by
statute or otherwise. No course of dealing on the part of Lender, or any delay
or failure on the part of Lender to exercise any right or power, shall operate
as a waiver of such right or power or otherwise prejudice the rights, powers and
remedies of Lender. No failure to insist upon strict compliance with any
covenant, term, condition or other provision of the Facility Documents or the
Revolving Note or Term Note shall constitute a waiver by Lender of any such
covenant, term, condition or other provision or of any Default or Event of
Default in connection therewith. To the extent effective under applicable Law,
Borrower hereby agrees to waive, and does hereby absolutely and irrevocably
waive and relinquish, the benefit and advantage of any valuation, stay,
appraisement, extension or redemption laws now existing or that may hereafter
exist that, but for this provision, might be applicable to any sale made under
any judgment, order or decree of any court, or otherwise, based on the Revolving
Loan or Term Loan or on any claim for interest in respect of the Revolving Loan
or Term Loan. If an Event of Default shall occur and be continuing, Borrower
will pay to Lender, to the extent not prohibited by applicable Law and not paid
in accordance with Section 12.1 hereof, such further amount as shall be
sufficient to cover the reasonable costs and expenses of collection and of the
taking of remedial actions and the maintenance of enforcement proceedings,
including, without limitation, reasonable attorneys' fees and disbursements.
SECTION 13. INDEMNIFICATION; EXPENSES.
13.1 Indemnification. (a) Borrower agrees to indemnify and hold harmless
Lender, the directors, officers, employees, agents and Affiliates of Lender and
each Person who controls Lender within the meaning of the Securities Act or the
Exchange Act from and against any and all claims, damages, losses, liabilities,
costs or expenses (including reasonable attorneys' fees and any and all
reasonable expenses whatsoever incurred in investigating, preparing or defending
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against any litigation, commenced or threatened, whether or not Lender is a
party thereto, or any claim whatsoever, and any and all amounts paid in
settlement of any claim or litigation), joint or several, to which any of them
may become subject to the extent that any such claims, damages, losses,
liabilities, costs or expenses arise under, in connection with or otherwise
relate to the transactions contemplated herein, including, without limitation,
any litigation relating to the proposed or actual use of the proceeds of any
Borrowing, or under the Securities Act, the Exchange Act or other federal or
state statutory law or regulation, at common law or otherwise, provided, that
Borrower shall not be liable to Lender for:
(i) losses incurred by Lender as a result of the fraudulent
actions, gross negligence or willful misconduct of Lender; or
(ii) losses, claims, damages, liabilities and expenses arising
out of the imposition by any taxing authority of any federal income,
state or local income or franchise taxes, or any other taxes imposed
on or measured by gross or net income, gross or net receipts,
capital, doing business taxes, net worth and similar items
(including any interest, penalties or additions with respect
thereto) upon Lender (including any liabilities, costs or expenses
with respect thereto) or any other tax or similar charge which is
excluded from indemnification pursuant to the express terms of this
Agreement. The foregoing is in addition to any rights (including
without limitation rights to indemnity) to which Lender may
otherwise be entitled; provided that this provision shall not
entitle Lender to be paid hereunder twice for the same loss.
(b) The obligations of Borrower under this Section 13.1 shall be in
addition to any liability which it may otherwise have and shall extend, upon the
same terms and conditions, to each Person, if any, who controls Lender within
the meaning of the Securities Act or the Exchange Act and to each director of
Lender.
Promptly upon receipt by Lender under this Section 13.1 of notice of the
commencement of any suit, action, claim, proceeding or governmental
investigation against Lender, Lender shall, if a claim in respect thereof is to
be made against Borrower hereunder, notify Borrower in writing of the
commencement thereof. Borrower may participate in and assume the defense of any
such suit, action, claim, proceeding or investigation at its expense. No
settlement of any suit, action, claim proceeding or investigation (regardless of
which party is controlling the defense) shall be made without the approval of
Borrower and Lender, such approval not to be unreasonably withheld, delayed or
conditioned. After notice from Borrower to Lender of its intention to assume the
defense thereof with counsel reasonably satisfactory to Lender and so long as
Borrower so assumes, and diligently proceeds with, the defense thereof in a
manner reasonably satisfactory to Lender, Borrower shall not be liable for any
legal expenses of separate counsel for Lender unless there shall be a conflict
between the interests of Borrower and Lender, in which case Lender shall have
the right to employ one separate counsel to represent it (at Borrower's
expense). If Borrower assumes the defense of any suit, Borrower shall use all
reasonable efforts to:
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(i) consult, from time to time, with Lender about the strategy being
pursued;
(ii) promptly inform Lender of any material developments in such
suit; and
(iii) forward to Lender promptly after receipt thereof copies of any
notices, filings, requests or other written materials relating to such
suit, and if Lender reasonably determines that the defense being carried
out by Borrower materially adversely affects the interests of Lender,
Lender shall notify Borrower of such determination and Borrower and Lender
shall use reasonable efforts to agree on a defense strategy that is
acceptable to both parties and, failing such agreement within 20 days of
the aforesaid notice, Borrower shall pay the reasonable expenses of
separate counsel retained by Lender.
(c) Lender shall use its good faith efforts to mitigate, reduce or
eliminate any losses, expenses or claims for indemnification; provided, that
Lender shall not be obligated to take any action which would subject Lender to
any unreimbursed cost or expense or which would otherwise be disadvantageous to
Lender.
The agreement, indemnities and other statements of Borrower in or made pursuant
to this Section 13.1 will remain in full force and effect, regardless of any
investigation, or statement as to the results thereof, made by or on behalf of
Lender or any of the officers, directors or controlling persons referred to in
this Section 13.1. The provisions of this Section 13.1 shall survive the
termination or cancellation of this Agreement.
13.2 Expenses. Borrower agrees, promptly upon receipt of a written
invoice, to pay or cause to be paid, and to save Lender harmless against
liability for the payment of, all reasonable out-of-pocket expenses including,
without limitation, reasonable attorneys' fees, accountant's and other third
parties' fees and expenses, and any filing fees and expenses incurred by or on
behalf of Lender (but excluding salaries and overhead costs incurred by or on
behalf of Lender):
(a) in connection with the negotiation, execution, delivery and
preparation of this Agreement and the other Facility Documents and the
transactions contemplated by or undertaken pursuant to or in connection
herewith or therewith (including, without limitation, the perfection or
protection of Lender's security interest in the Collateral); and
(b) from time to time:
(i) relating to any requested amendments, waivers or consents under
the Facility Documents;
(ii) arising in connection with Lender's enforcement or preservation
of its rights (including, without limitation, the perfection and
protection of its interest in the Collateral) under the Facility
Documents; or
(iii) arising in connection with any audit, dispute, disagreement,
litigation or preparation for litigation involving the Facility Documents.
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SECTION 14. SECURITY INTEREST.
14.1 Grant of Security Interests. (a) In order to secure the full and
punctual payment of the Obligations in accordance with the terms thereof,
Borrower hereby grants to Lender a continuing security interest in and to all of
Borrower's right, title and interest in and to all tangible and intangible
personal property and fixtures of Borrower, wherever located and, whether now
owned or existing or hereafter acquired or arising and regardless of where
located, of every kind and description (collectively, the "Collateral"),
including, without limitation, the following:
(i) the Receivables;
(ii) the Related Security with respect to the Receivables,
(iii) all Collections, including all cash collections and other cash
proceeds of the Receivables; and
(iv) all Equipment (other than any Equipment which is currently
subject to a financing arrangement which would be in default as a result
of the granting of the Lien hereunder on such Equipment);
(v) all of Borrower's right, title and interest in and to all
inventory of any kind (including, without limitation, all types of goods,
property and other assets that are held by Borrower for sale, lease or
other disposition in the ordinary course of Borrower's business or to be
furnished under a contract for services, whether such goods, property and
other assets are raw, in process and finished, and materials and supplies
used or consumed in the business of Borrower, and goods returned to or
repossessed by Borrower and goods in which Borrower has an interest in
mass or a joint or other interest or right of any kind), and all accession
thereto and products thereof;
(vi) all of Borrower's right, title and interest in and to all
present and future accounts (other than the cash security account
maintained by Borrower pursuant to that certain Cash Collateral Agreement,
dated as of December 20, 2001 by and between Borrower and Citicorp USA,
Inc., and any and all funds or sums now or hereafter deposited in such
account, all replacements and substitutions thereof, all instruments and
documents in connection therewith, all powers, options, rights and
privileges pertaining thereto, and all proceeds of the foregoing),
contract rights, chattel paper, documents and instruments (any and all
such accounts, contract rights, chattel paper, instruments, documents and
rights and obligations being hereinafter referred to as the "Accounts");
(vii) (a) except for the Harlem Membership Interest, all of
Borrower's right, title and interest in and to all general intangibles;
(b) all rights, interest, choses in action, causes of action, claims and
all other intangible property of every kind and nature, in each instance
whether now owned or hereafter acquired by Borrower, including, without
limitation, all corporate and other business records, all loans,
royalties, all Seller Subordinated Notes (as defined in the Purchase and
Contribution Agreement, and all other forms of obligations receivable
whatsoever (other than Receivables); (c) all trademarks, patents, trade
secrets, licenses, copyrights, goodwill, inventions, designs,
registrations, permits, franchises and licenses; (d) all computer
programs, software,
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printouts and correspondence, and advertising materials; (e) all customer
and supplier contracts, sale orders, rights under license and franchise
agreements, and other contracts and contract rights; (f) all interests in
partnerships and joint ventures (including, without limitation, certain
rights with respect to the ERC LLC Membership Interest as set forth in the
ERC LLC Pledge Agreement), including all moneys due from time to time in
respect thereof; (g) all federal, state and local tax refunds and federal,
state and local tax refund claims; (h) all right, title and interest under
leases, subleases, licenses and concessions and other agreements relating
to personal property, including all moneys due from time to time in
respect thereof; (i) all payments due or made to Borrower in connection
with any requisition, confiscation, condemnation, seizure or forfeiture of
any property by any person or governmental authority; (j) all collection
accounts and deposit accounts (general or special) with any bank or other
financial institution; (k) all credits with and other claims against third
parties (including carriers and shippers) other than accounts; (l) all
rights to indemnification; (m) all reversionary interests in pension and
profit sharing plans and reversionary, beneficial and residual interests
in trusts; (n) all proceeds of insurance of which the Borrower is the
beneficiary; (o) all letters of credit, guaranties, liens, security
interests and other security held by or granted to the Borrower; and (p)
all other intangible property, whether or not similar to the foregoing, in
each instance, however and wherever arising (hereinafter collectively
referred to as "General Intangibles"); and
(viii) all cash and non-cash Proceeds of any of the foregoing and,
to the extent not otherwise included, all payments under insurance
(whether or not Lender is the loss payee thereof), and any indemnity,
warranty or guaranty, payable by reason of loss or damage to or otherwise
with respect to any of the foregoing Collateral); in each case, howsoever
Borrower's interest therein may arise or appear (whether by ownership,
security interest, claim or otherwise).
(b) Notwithstanding anything to the contrary contained in this
Section 14.1 or elsewhere in this Agreement, "Collateral" expressly excludes
Excluded Collateral. To the extent the provisions of this Section 14.1 or other
provisions of this Agreement create a security interest in any property that
subsequently falls within the definition of Excluded Collateral, Lender hereby
agrees that such property shall be automatically released at that time from any
such security interest and that Lender shall from that time have no further
security interest or other right in or to such property.
(c) Notwithstanding anything to the contrary contained in this
Section 14.1 or elsewhere in this Agreement, "Collateral" expressly excludes (i)
until Borrower executes and delivers to Lender the Alliance Pledge Agreement
pursuant to Section 10.29(iii), the Alliance Membership Interest (and
automatically upon such execution and delivery, the Alliance Membership Interest
shall constitute Collateral), and (ii) until Borrower executes and delivers to
Lender the applicable Collateral Assignment pursuant to Section 10.29(i) and/or
Section 10.29(ii), the applicable Second Closing Date Collateral (and
automatically upon such execution and delivery, the applicable Second Closing
Date Collateral shall constitute Collateral).
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(d) The Security Interests are granted as security only and shall
not subject Lender to, or transfer or in any way affect or modify, any
obligation or liability of Borrower with respect to any of the Collateral or any
transaction in connection therewith.
14.2 Further Assurances; Protection of Lender's Security Interest. (a) In
connection with the grant under Section 14.1 (but subject to Section 14.1(b)),
Borrower agrees to record and file, at its own expense, financing statements
with respect to the Collateral, whether now existing and hereafter created or
acquired, suitable to reflect the transfer of accounts, general intangibles and
chattel paper (each as defined in Article 9 of the UCC) and meeting the
requirements of applicable state law in such manner and in such jurisdictions as
are necessary to perfect the pledge of the Collateral to Lender. Additionally,
Borrower shall if any Account, Receivable or General Intangible shall be
evidenced by a promissory note or other instrument or chattel paper, delivering
and pledging to Lender hereunder such note, instrument or chattel paper duly
indorsed and accompanied by executed instruments of transfer or assignment, all
in form and substance satisfactory to Lender, as may be necessary or desirable
or that Lender may request in order to perfect and preserve the security
interest purported to be created hereby
(b) Borrower shall maintain its books and records so that such
records shall indicate clearly that Borrower's right, title and interest in the
Collateral has been collaterally assigned by Borrower to Lender.
(c) Borrower agrees that from time to time, at its sole expense, it
shall promptly authenticate and deliver all additional instruments and documents
and take all additional actions that Lender may reasonably request in order to
perfect the interests of Lender in and to, or to protect, the Collateral or to
enable Lender to exercise or enforce any of its rights thereunder and hereunder.
To the fullest extent permitted by applicable Law, Lender shall be permitted,
and Borrower hereby authorizes Lender, to file the original UCC-! Financing
statements and amendments to financing statements and assignments thereof
consistent with the terms of this Agreement (including any amendment hereto or
other modification hereof). Carbon, photographic or other reproductions of this
Agreement or any financing statement shall be sufficient as a financing
statement.
14.3 General Authority. Borrower hereby irrevocably appoints Lender its
true and lawful attorney, with full power of substitution, in the name of
Borrower, or otherwise, for the sole use and benefit of Lender, but at
Borrower's expense, to the extent permitted by Law to exercise, at any time and
from time to time while an Event of Default has occurred and is continuing, all
or any of the following powers with respect to all or any of the Collateral:
(a) to demand, xxx for, collect, receive and give acquittance for
any and all monies due or to become due thereon or by virtue thereof,
(b) to settle, compromise, compound, prosecute or defend any action
or proceeding with respect thereto,
(c) to sell, transfer, assign or otherwise deal in or with the
Collateral or the proceeds or avails thereof, as fully and effectually as
if Lender were the absolute owner thereof, and
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(d) to extend the time of payment of any or all thereof and to
make any allowance and other adjustments with reference thereto;
provided, that Lender shall give Borrower 10 days' prior written notice of the
time and place of any sale or other intended disposition of any of the
Collateral. Borrower agrees that such notice constitutes "reasonable
authenticated notification of disposition" within the meaning of Section 9-611
of the UCC.
14.4 Collection of Receivables. Subject to the mandatory prepayment
obligations set forth in Section 8.2 hereof, and notwithstanding anything in
this Agreement or in any other Facility Document to the contrary, Borrower shall
have the right to collect any and all payments of interest and principal made by
the Obligors under the Receivables and to exercise any and all rights and
remedies Borrower has under the loan documents which evidence, govern or secure
the Receivables until an Event of Default has occurred and is continuing. Upon
the occurrence and continuation of an Event of Default, Lender shall be entitled
to collect and all payments of interest and principal made by the Obligors under
the Receivables and to exercise any and all rights and remedies under such
Facility Documents. The Lender shall have the right at any time, upon the
occurrence and during the continuance of an Event of Default, or a Default, to
notify the account debtors or obligors under any Receivables and General
Intangibles and to direct such account debtors or Obligors to make payment of
all amounts due or to become due to the Borrower thereunder directly to the
Lender and, upon such notification and at the expense of the Borrower and to the
extent permitted by law, to enforce collection of any such Receivables and
General Intangibles. The Borrower hereby irrevocably appoints the Lender the
Borrower's attorney-in-fact and proxy, with full authority in the place and
stead of the Borrower and in the name of the Borrower or otherwise, from time to
time in the Lender's discretion, to take any action and to execute any
instrument which the Lender may deem necessary or advisable to accomplish the
purposes of this Agreement, including, without limitation, (i) upon the
occurrence and continuance of an Event of Default, or a Default, to ask, demand,
collect, xxx for, recover, compound, receive and give acquitence and receipts
for moneys due and to become due under or in respect of any Collateral; (ii)
upon the occurrence and continuance of an Event of Default, or a Default, to
receive, indorse, and collect any drafts or other instruments, documents and
chattel paper in connection with clause (i) of this subsection (b); and (iii)
upon the occurrence of an Event of Default, or a Default, to file any claims or
take any action or institute any proceedings which the Lender may deem necessary
or desirable for the collection of any Collateral or otherwise to enforce the
rights of the Lender with respect to any Collateral. The powers conferred on the
Lender hereunder are solely to protect its interest in the Collateral and shall
not impose any duty upon it to exercise any such powers. Except for the safe
custody of any Collateral in its possession and the accounting for moneys
actually received by it hereunder, the Lender shall have no duty as to any
Collateral or as to the taking of any necessary steps to preserve rights against
prior party or any other rights pertaining to any Collateral.
14.5 Remedies upon Event of Default. If any Event of Default has
occurred and is continuing, Lender may exercise all rights of a secured party
under the applicable UCC and, in addition, Lender may, without being required to
give any notice, except as herein provided or as may be required by mandatory
provisions of Law, sell the Collateral or any part thereof in any commercially
reasonable manner at public or private sale, for cash, upon credit or for future
delivery, and at such price or prices as Lender may deem satisfactory. Borrower
will execute
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and deliver such documents and take such other action as Lender reasonably deems
necessary or advisable in order that any such sale may be made in compliance
with Law. Upon any such sale, Lender shall have the right to deliver, assign and
transfer to the purchaser thereof the Collateral so sold. Each purchaser at any
such sale shall hold the Collateral so sold to it absolutely and free from any
claim or right of whatsoever kind, including any equity or right of redemption
of Borrower which may be waived, and Borrower, to the extent permitted by Law,
hereby specifically waives all rights of redemption, stay or appraisal which it
has or may have under any Law now existing or hereafter adopted. Lender, instead
of exercising the power of sale herein conferred upon it, may proceed by a suit
or suits at law or in equity to foreclose the Security Interests and sell the
Collateral, or any portion thereof, under a judgment or decree of a court or
courts of competent jurisdiction.
For the purpose of enforcing any and all rights and remedies under this
Agreement, Lender shall have access to and may use Borrower's books and records
relating to the Collateral and Borrower shall:
(a) deliver to Lender such information relating to the Collateral
as Lender may reasonably request, and
(b) deliver to Lender all Records required to the be maintained
pursuant to this Agreement relating to the Collateral and take all such other
actions as are necessary to enable Lender to protect and enforce its rights in
the Collateral.
14.6 Application of Proceeds. Upon the occurrence and during the
continuance of an Event of Default, the proceeds of any realization upon, or
sale of, the Collateral or any Collections shall be applied by Lender in the
following order of priorities:
first, to payment of the expenses of such realization or sale,
including the reasonable fees of agents and counsel for Lender, and all
reasonable expenses, liabilities and advances incurred or made by Lender in
connection therewith, and any other unreimbursed expenses for which Lender is to
be reimbursed pursuant to Section 13 of this Agreement and unpaid fees owing to
Lender under this Agreement;
second, to the payment of accrued but unpaid interest on the
Secured Revolving Obligations in accordance with this Agreement;
third, to the payment of unpaid principal of the Secured Revolving
Obligations;
fourth, to the ratable payment of all other Secured Revolving
Obligations, until all Secured Revolving Obligations shall have been paid in
full;
fifth, to the payment of accrued but unpaid interest on the
Secured Term Obligations in accordance with this Agreement;
sixth, to the payment of unpaid principal of the Secured Term
Obligations; and
finally, to payment to Borrower or its successors or assigns, or
as a court of competent jurisdiction may direct or as required by applicable
law.
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14.7 Termination of Security Interests; Release of Collateral. Upon the
repayment in full of all Obligations and the termination of the Commitments
under this Agreement, the Security Interests shall terminate and all rights to
the Collateral shall revert to Borrower. Upon any such termination of the
Security Interests, Lender will, at the expense of Borrower, execute and deliver
to Borrower such documents as Borrower shall reasonably request to evidence the
termination of the Security Interests. Lender will release its Lien on the
Equipment to the extent that a Permitted Equipment Sale or Refinancing occurs.
14.8 Lender Acknowledgement. Lender acknowledges that the Borrower has
sold for fair value or contributed all right, title and interest in the
Transferred Assets (as defined in the Purchase and Contribution Agreement) to
ERC, who has granted a security interest in all such Transferred Assets to
Xxxxxxx Xxxxx. Notwithstanding anything herein, in any Facility Document or any
other agreement to the contrary, Lender acknowledges that it understands and
intends that the Borrower has no legal, equitable or beneficial interest in such
Transferred Assets and that neither such assets nor any other assets of ERC are,
or will be, available to satisfy the obligations of the Borrower under this
Agreement.
14.9 Notes. The Borrower represents and warrants that set forth on
Schedule 17 are all now existing notes receivable and loans receivable of the
Borrower excluding the Receivables.
SECTION 15. MORTGAGE SATISFACTION.
15.1 Satisfaction. (a) Upon the repayment in full of all Obligations
and the termination of the Commitments under this Agreement, the Lender shall
execute all documents necessary to satisfy and release the lien of any Mortgage
filed by the Lender on the Owned Real Estate. Upon any such satisfaction of a
Mortgage, Lender will, at the expense of Borrower, execute and deliver to
Borrower such documents as Borrower shall reasonably request to evidence the
satisfaction of the Mortgage.
(b) Upon the repayment in full of all Secured Term Obligations and
the termination of the Term Loan Commitment under this Agreement the Lender
shall execute all documents necessary to satisfy and release the lien of Harlem
Mortgage. Upon any such satisfaction of the Harlem Mortgage, Lender will, at the
expense of Borrower, execute and deliver to Borrower such documents as Borrower
shall reasonably request to evidence the satisfaction of the Harlem Mortgage or,
upon Borrower's request, assign, without recourse, representation or warranty,
the Harlem Mortgage.
SECTION 16. MISCELLANEOUS.
16.1 Notices. All communications under this Agreement or the Notes
shall be in writing and shall be delivered or mailed or sent by facsimile
transmission or electronic transmission and confirmed in writing (a) if to
Lender, at the following address:
c/o Leeds Weld & Co.
000 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxx
71
with a copy to:
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx Xxxxxxxx, Esq.
and (b), if to Borrower, at the following address:
Edison Schools Inc.
000 Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: General Counsel
With a copy to:
Coudert Brothers LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
or at such other address or facsimile number as the parties shall have furnished
in writing to each other.
Any written communication so addressed and mailed by certified or registered
mail, return receipt requested, shall be deemed to have been given when so
mailed. All other written communications shall be deemed to have been given upon
receipt thereof.
16.2 Survival. All representations, warranties and covenants made by
Borrower or any Guarantor herein or by Borrower or any Guarantor in any
certificate or other instrument delivered under or in connection with this
Agreement shall be considered to have been relied upon by Lender and shall
survive regardless of any investigation made by Lender or on Lender's behalf.
16.3 Successors and Assigns. This Agreement shall be binding upon the
parties hereto and their respective successors and assigns, and shall inure to
the benefit of and be enforceable by the parties hereto and their respective
successors and assigns permitted hereunder. Whether or not expressly so stated,
the provisions of Sections 13.1 and 13.2 hereof shall be for the benefit of, and
shall be enforceable by, any Person who shall no longer be a Lender hereunder
but who shall have incurred any expense or been subjected to any liability
referred to therein while, or on the basis of being, a Lender.
16.4 Amendment and Waiver. This Agreement and the Revolving Notes and
Term Notes may be amended or supplemented, and the observance of any term hereof
or thereof may be waived, with the written consent of Borrower and Lender (or,
if multiple Lenders, Lenders with respect to at least 51% in aggregate unpaid
principal amount of the Loans), provided,
72
however, that no such amendment, supplement or waiver shall, without the written
consent of all Lenders, (a) change, with respect to the Loans, the amount or
time of any required prepayment or payment of principal or premium or the rate
or time of payment of interest, or change the funds in which any prepayment or
payment on the Loans is required to be made; (b) reduce the Borrowing Base, (c)
reduce the percentage of the aggregate principal amount of the Loans required
for any amendment, consent or waiver hereunder; or (d) release any material Lien
on any of the Collateral or affect the priority thereof.
16.5 Counterparts. This Agreement may be executed and delivered
simultaneously in two (2) or more counterparts, each of which shall be deemed an
original, but all such counterparts shall together constitute but one and the
same instrument.
16.6 Reproduction of Documents. This Agreement and all documents
relating hereto (other than the Notes), including, without limitation, (a)
consents, waivers and modifications that may hereafter be executed, (b)
documents received by Lender or Borrower, as the case may be, on any Closing
Date, and (c) certificates and other non-proprietary information heretofore or
hereafter furnished to Lender or Borrower may be reproduced by the receiving
party by any photographic or other similar process and such receiving party may
destroy any original document so reproduced; provided, however, that, subject to
compliance with Section 16.8 hereof, there shall be no restriction on Lender's
or Borrower's ability to reproduce this Agreement and related documents for use
by Lender, Borrower, or any Affiliate thereof. Lender agrees not to use
Borrower's trademarks without written permission or to use same in a way that
imperils Borrower's use of such trademarks. Lender and Borrower each stipulate
that, to the extent permitted by applicable Law and court or agency rules, any
such reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by Lender or Borrower,
as the case may be, in the regular course of business) and that any enlargement,
facsimile or further reproduction of such reproduction shall be admissible in
evidence to the same extent.
16.7 Governing Law; Consent to Jurisdiction and Venue. THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK. Each of Lender and Borrower and each Guarantor hereby irrevocably (i)
agrees that any suit, action or other legal proceeding arising out of or
relating to the Facility Documents or any Note may be brought in any court of
record in the State of New York located in New York County or in the courts of
the United States of America located in such County, (ii) consents to the
nonexclusive jurisdiction of each such court in any such suit, action or
proceeding, and (iii) waives any objection which it may have to the laying of
venue of any such claim that any such suit, action or proceeding has been
brought in an inconvenient forum and covenants that it will not seek to
challenge the jurisdiction of any such court or seek to oust the jurisdiction of
any such court, whether on the basis of inconvenient forum or otherwise. Each of
Lender and Borrower and each Guarantor irrevocably consents to the service of
any and all process in any such suit, action or proceeding by mailing copies of
such process to Lender or Borrower and each Guarantor, as the case may be, at
its address for notices provided in Section 16.1 hereof. Each of Lender and
Borrower and each Guarantor agrees that a final, non-appealable judgment in any
such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
All
73
mailings under this Section 16.7 shall be by registered or certified mail,
return receipt requested. Nothing in this Section 16.7 shall affect Lender's or
Borrower's right to serve legal process in any other manner permitted by Law or
affect either party's right to bring any suit, action or proceeding against the
other party or any of its properties in the courts of any other jurisdiction.
16.8 Confidentiality. Borrower, Lender, and each Guarantor (each, a
"Recipient") shall hold all non-public information obtained pursuant to this
Agreement and the transactions contemplated hereby or effected in connection
herewith ("Transactions") in accordance with customary procedures for handling
confidential information of this nature and will not disclose such information
to outside parties, but may make disclosure (a) to their respective directors,
officers, employees, agents, counsel, auditors and other representatives
(collectively, "Representatives") who need to know such non-public information
for purposes of evaluating the Transactions, who are informed of the
confidential nature of such non-public information and who agree to be bound by
the terms of this Section 16.8, (b) as reasonably required by a bona fide
transferee or participant (or prospective transferee or participant which agrees
in writing to comply with this Section 16.8), (c) as necessary in order to
obtain any consents, approvals, waivers or other arrangements required to permit
the execution, delivery and performance of this Agreement and (d) as required or
requested by any Official Body or pursuant to legal process or as required by
applicable Law; provided, that that non-public information shall not include
information which (i) is or becomes generally available to the public other than
as a result of a disclosure by a Recipient or its Representatives, (ii) was
available to a Recipient on a nonconfidential basis prior to its disclosure to
such Recipient by the other party or such other party's Representative or (iii)
becomes available to a Recipient on a non-confidential basis from a source other
than the other party or such other party's Representatives, who is not known by
such Recipient to be bound by a confidentiality agreement with the Recipient or
otherwise prohibited from transmitting the information to such Recipient. In the
event that Borrower or Lender (as applicable, the "disclosing party") is so
required or requested to make any disclosure pursuant to clause (d) above, it is
agreed that the disclosing party shall use reasonable efforts to give prompt
notice of such requirement or request so that such other party may seek an
appropriate protective order. As determined on any date, the obligations under
this Section 16.8 shall terminate one year following the then current Expiration
Date described in clause (i) of the definition thereof but in no event shall
such obligations terminate more than two years following such determination
date.
16.9 Waiver of Jury Trial. EACH PARTY HERETO HEREBY KNOWINGLY,
VOLUNTARILY, INTENTIONALLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE
ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP BETWEEN THEM ESTABLISHED BY THIS AGREEMENT, ANY NOTE OR ANY OTHER
CONTRACT, INSTRUMENT, DOCUMENT, OR AGREEMENT ENTERED INTO IN CONNECTION WITH
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN), OR ACTIONS OF ANY OTHER
PERSON.
16.10 No Implied Waiver; Cumulative Remedies. No course of dealing and
no delay or failure of Lender in exercising any right, power or privilege under
the Facility Documents shall
74
affect any other or future exercise thereof or the exercise of any other right,
power or privilege; nor shall any single or partial exercise of any such right,
power or privilege or any abandonment or discontinuance of steps to enforce such
a right, power or privilege preclude any further exercise thereof or of any
other right, power or privilege. The rights and remedies of Lender under the
Facility Documents are cumulative and not exclusive of any rights or remedies
which Lender would otherwise have.
16.11 No Discharge. The obligations of Borrower and each Guarantor
under the Facility Documents shall be absolute and unconditional and shall
remain in full force and effect without regard to, and shall not be released,
discharged or in any way affected by (a) any exercise or nonexercise of any
right, remedy, power or privilege under or in respect of the Facility Documents
or applicable Law, including, without limitation, any failure to set-off or
release in whole or in part by Lender of any balance of any deposit account or
credit on its books in favor of Borrower, or any waiver, consent, extension,
indulgence or other action or inaction in respect of any thereof, or (b) any
other act or thing or omission or delay to do any other act or thing which could
operate as a discharge of Borrower as a matter of law.
16.12 Severability. The provisions of this Agreement are intended to be
severable. If any provision of this Agreement shall be held invalid or
unenforceable in whole or in part in any jurisdiction, such provision shall, as
to such jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without in any manner affecting the validity or enforceability
of such provision in any other jurisdiction or the remaining provisions hereof
in any jurisdiction.
16.13 Prior Understandings. The parties hereto hereby agree that this
Agreement sets forth the entire understanding of the parties relating to the
subject matter hereof, and supersedes all prior understandings and agreements,
whether written or oral.
16.14 General Source of Funds Representation of Lender. The source of
funds to be used by Lender in making the Loans hereunder does not include assets
of any employee benefit plan subject to Title I of ERISA.
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IN WITNESS WHEREOF, the parties hereto have cause this
Agreement to be duly executed as of the day and year first above written.
EDISON SCHOOLS INC.,
as Borrower
By: /s/ Xxxxx Xxxxx
-------------------------------
Name: Xxxxx Xxxxx
Title: Senior Vice President
and General Counsel
110TH AND 5th ASSOCIATES, LLC,
as a Guarantor
By: /s/ Xxxxx Xxxxx
-------------------------------
Name: Xxxxx Xxxxx
Title: Senior Vice President
and General Counsel
XXXXXX XXXXXX CHARTER SCHOOL, LLC,
as a Guarantor
By: /s/ Xxxxx Xxxxx
-------------------------------
Name: Xxxxx Xxxxx
Title: Senior Vice President
and General Counsel
SCHOOL SERVICES LLC, as Lender
By: /s/ Xxxxxx Xxxxxxxxx
-------------------------------
Name: Xxxxxx Xxxxxxxxx
Title: Treasurer
Address for Funds Transfer:
HSBC Bank USA
ABA No.: 000000000
For credit to: Leeds Equity Partners III, L.P.
Account No.: 134019075
[SIGNATURE PAGE TO CREDIT AGREEMENT]
EXHIBIT E
[Form of Revolving Note]
REVOLVING NOTE
$10,000,000 July ___, 0000
Xxx Xxxx, Xxx Xxxx
FOR VALUE RECEIVED, Edison Schools Inc., a Delaware
corporation (the "Borrower") for value received, hereby promises to pay to
School Services LLC (the "Lender") or its assigns, the principal sum of TEN
MILLION AND 00/100 Dollars ($10,000,000) (or such lesser amount as shall equal
the aggregate unpaid principal amount of the Revolving Loan made by Lender to
Borrower under the Credit Agreement (as defined below)), in lawful money of the
United States of America and in immediately available funds, on the dates and in
the principal amounts provided in the Credit Agreement, and to pay interest on
the unpaid principal amount of this Note, in like money and funds, for the
period commencing on the date of this Note until this Note shall be paid in
full, at the rates per annum and on the dates provided in the Credit Agreement.
The date and amount of each increase in the principal balance
of Revolving Loan made by Lender shall be recorded by Lender on its books and,
prior to any transfer of this Note, endorsed by Lender on the schedule attached
hereto or any continuation thereof.
This Note is the Revolving Note referred to in the Credit and
Security Agreement (as modified and supplemented and in effect from time to
time, the "Credit Agreement") dated as of the date hereof among Borrower, Lender
and other parties, and evidences the Revolving Loan made by Lender thereunder.
Capitalized terms used in this Note have the respective meanings assigned to
them in the Credit Agreement.
The Credit Agreement provides for the acceleration of the
maturity of this Note upon the occurrence of certain events and for prepayments
of the Revolving Loan upon the terms and conditions specified therein. This Note
is secured by the Collateral in accordance with and entitled to the benefits of
the Credit Agreement and the Mortgages (excluding the Harlem Mortgage).
Borrower agrees to perform and observe duly and punctually
each of the covenants and agreements set forth in the Credit Agreement. All such
covenants and agreements are incorporated by reference in this Note, and this
Note shall be interpreted and construed as if all such covenants and agreements
were set forth in full in this Note at this place.
Borrower hereby waives diligence, presentment, demand and
notice of any kind. The non-exercise by the holder hereof of any right in any
one instance shall not limit the other (or further) exercise of that right in
that (or any other) circumstances.
By its holding of this Note, Lender shall be deemed to accept
the terms of the Credit Agreement and agrees to be bound thereby.
This Note shall be governed by and construed in accordance
with the law of the State of New York.
IN WITNESS WHEREOF, EDISON SCHOOLS INC. has caused this Note
to be duly executed on its behalf by its officers thereunto duly authorized.
EDISON SCHOOLS INC.
By:
---------------------------------
Name:
Title:
2
LOAN SCHEDULE
The Note evidences the aggregate principal balance of the Revolving
Loan made under the within-described Credit Agreement to Borrower, on the dates,
in the principal amounts, bearing interest at the rates set forth below, subject
to the payments and prepayments of principal set forth below:
PRINCIPAL UNPAID PRINCIPAL
AMOUNT OF AMOUNT PAID AMOUNT OF THE NOTATION
DATE OF BORROWING BORROWING INTEREST RATE OR PREPAID REVOLVING LOAN MADE BY
----------------- --------- ------------- --------------- ----------------- ---------
EXHIBIT G
[Form of Term Note]
TERM NOTE
$10,000,000 July 31, 0000
Xxx Xxxx, Xxx Xxxx
FOR VALUE RECEIVED, Edison Schools Inc., a Delaware
corporation (the "Borrower") for value received, hereby promises to pay to
School Services LLC (the "Lender") or its assigns, the principal sum of TEN
MILLION AND 00/100 Dollars ($10,000,000) (or such lesser amount as shall equal
the aggregate unpaid principal amount of the Term Loan made by Lender to
Borrower under the Credit Agreement (as defined below)), in lawful money of the
United States of America and in immediately available funds, on the dates and in
the principal amounts provided in the Credit Agreement, and to pay interest on
the unpaid principal amount of this Note, in like money and funds, for the
period commencing on the date of this Note until this Note shall be paid in
full, at the rates per annum and on the dates provided in the Credit Agreement.
The date and amount of each increase in the principal balance
of Term Loan made by Lender shall be recorded by Lender on its books and, prior
to any transfer of this Note, endorsed by Lender on the schedule attached hereto
or any continuation thereof.
This Note is the Term Note referred to in the Credit and
Security Agreement (as modified and supplemented and in effect from time to
time, the "Credit Agreement") dated as of the date hereof among Borrower, Lender
and other parties, and evidences the Term Loan made by Lender thereunder.
Capitalized terms used in this Note have the respective meanings assigned to
them in the Credit Agreement.
The Credit Agreement provides for the acceleration of the
maturity of this Note upon the occurrence of certain events and for prepayments
of the Term Loan upon the terms and conditions specified therein. This Note is
secured by the Collateral in accordance with and entitled to the benefits of the
Credit Agreement and the Mortgages.
Borrower agrees to perform and observe duly and punctually
each of the covenants and agreements set forth in the Credit Agreement. All such
covenants and agreements are incorporated by reference in this Note, and this
Note shall be interpreted and construed as if all such covenants and agreements
were set forth in full in this Note at this place.
Borrower hereby waives diligence, presentment, demand and
notice of any kind. The non-exercise by the holder hereof of any right in any
one instance shall not limit the other (or further) exercise of that right in
that (or any other) circumstances.
By its holding of this Note, Lender shall be deemed to accept
the terms of the Credit Agreement and agrees to be bound thereby.
This Note shall be governed by and construed in accordance
with the law of the State of New York.
IN WITNESS WHEREOF, EDISON SCHOOLS INC. has caused this Note
to be duly executed on its behalf by its officers thereunto duly authorized.
EDISON SCHOOLS INC.
By:
-----------------------------
Name:
Title:
2
LOAN SCHEDULE
The Note evidences the aggregate principal balance of the Term Loan
made under the within-described Credit Agreement to Borrower, on the dates, in
the principal amounts, bearing interest at the rates set forth below, subject to
the payments and prepayments of principal set forth below:
PRINCIPAL UNPAID PRINCIPAL
AMOUNT OF AMOUNT PAID OR AMOUNT OF THE NOTATION
DATE OF BORROWING BORROWING INTEREST RATE PREPAID TERM LOAN MADE BY
----------------- --------- ------------- --------------- ----------------- ---------
