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EXHIBIT 10.24
FIRST LOAN MODIFICATION AGREEMENT
This First Loan Modification Agreement ("Modification") is dated January
29, 2000 and is between Computer Learning Centers, Inc., a Delaware corporation
(the "Borrower"), and First Union National Bank (the "Lender").
RECITALS
1. The Borrower is indebted to the Lender under a Second Amended and
Restated Revolving Credit Note dated December 31, 1999, in the face amount of
Twelve Million Dollars ($12,000,000) (the "Note").
2. As of January 28, 2000, there was due on the Note principal of
$7,955,000 plus interest of $46,565.83 and attorneys' fees. As of December 31,
1999, attorneys' fees and expenses totaled $24,052.91. Additional attorneys'
fees and expenses have accrued since December 31, 1999.
3. The Note is governed by the terms of an Amended and Restated
Credit Agreement dated December 31, 1999 between the Borrower and the Lender
(the "Credit Agreement").
4. Payment of the Note is secured by the collateral described in an
Amended and Restated Security Agreement dated December 31, 1999 between the
Borrower and the Lender (the "Security Agreement").
5. Computer Learning Centers of Quebec, Inc., a wholly-owned
subsidiary of the Borrower, guarantees payment of the Note pursuant to an
Unconditional Guaranty Agreement dated January 17, 2000.
6. To secure payment of the Unconditional Guaranty Agreement,
Computer Learning Centers of Quebec, Inc. executed in favor of the Lender a Deed
of Hypothec dated January 17, 2000.
7. To secure payment of amounts owing to both the Borrower and
Computer Learning Centers of Quebec, Inc., Delta College, Inc., a wholly-owned
subsidiary of Computer Learning Centers of Quebec, Inc., executed in favor of
each of the Borrower and Computer Learning Centers of Quebec, Inc. a Deed of
Hypothec dated January 14, 2000.
8. The Borrower has requested that the Lender make certain
modifications to the Credit Agreement and the Note, to enable the Lender to
advance to the Borrower additional sums. The Lender is willing to consent to the
Borrower's requests subject to the terms and provisions of this Modification.
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NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and adequacy of which are acknowledged, the
parties agree as follows:
Section 1. Recitals. The parties hereby acknowledge the accuracy of
the Recitals and incorporate the Recitals into this Modification.
Section 2. Amendment to Note. The FOR VALUE RECEIVED paragraph of the
Note is deleted in its entirety and replaced with the following:
FOR VALUE RECEIVED, COMPUTER LEARNING CENTERS, INC., a
Delaware corporation, unconditionally promises to pay on the
Revolving Credit Termination Date, to the order of FIRST UNION
NATIONAL BANK, successor-by-merger to CoreStates Bank, N.A. (the
"Lender"), at the office of the Lender at 0000 Xxxxx Xxxxxx Xxxx,
XxXxxx, Xxxxxxxx 00000, in lawful money of the United States of
America and in immediately available funds, the principal amount
of the lesser of (a) Fifteen Million Dollars ($15,000,000), as
reduced pursuant to the terms and conditions of the Amended and
Restated Credit Agreement dated December 31, 1999, between the
Borrower and the Lender (as the same may be amended, modified,
extended, renewed, supplemented or replaced from time to time, the
"Credit Agreement"), or (b) the aggregate unpaid principal amount
of all Revolving Credit Loans made by the Lender to the Borrower
pursuant to the Credit Agreement. The Credit Agreement is
incorporated into and made a part of this Note. Capitalized terms
hereinbefore or hereinafter used without definition shall have the
meanings assigned to such terms in the Credit Agreement.
Section 3. Amendment to Credit Agreement.
A. Revolving Credit Maximum Amount. The definition of
Revolving Credit Maximum Amount in Subsection 1.1 of the Credit Agreement is
deleted in its entirety and replaced with the following:
"Revolving Credit Maximum Amount": Fifteen Million Dollars
($15,000,000) effective January 29, 2000; provided, however, that
on and after February 8, 2000, the Revolving Credit Maximum Amount
may exceed Twelve Million Dollars ($12,000,000) only in the sole
and absolute discretion of the Lender; on and after March 1, 2000,
the Revolving Credit Maximum Amount may exceed Eleven Million
Dollars ($11,000,000) only in the sole and absolute discretion of
the Lender; and on and after May 1, 2000, the Revolving Credit
Maximum Amount may exceed Ten Million Dollars ($10,000,000)
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only in the sole and absolute discretion of the Lender, all
subject to the provisions of Subsection 6.17 below.
B. Procedure for Revolving Credit Borrowing. Subsection 2.3 of
the Credit Agreement is deleted in its entirety and replaced with the following:
Procedure for Revolving Credit Borrowing. (a) On and after
February 8, 2000, the terms of the Lender's Sweep Plus product
shall control the manner in which funds are transferred between
the Operating Account and the Revolving Credit Loan for credit or
debit to the Revolving Credit Loan. The initial Sweep Plus Ceiling
shall be Five Million Five Hundred Thousand Dollars ($5,500,000).
The Lender agrees to make advances under the Revolving Credit Loan
in excess of the Sweep Plus Ceiling, subject to Subsection 2.1
above and any other provision of this Agreement, and provided
that, in such cases the Borrower shall also disclose to the Lender
(i) the amount to be borrowed, (ii) the requested Borrowing Date,
(iii) the specified purpose of the borrowing, (iv) the specified
source of repayment of the advance, and (v) the anticipated
repayment date of the advance. The Lender may adjust the Sweep
Plus Ceiling not more than once for each of the Borrower's fiscal
quarters.
(b) Before February 8, 2000, the procedure for borrowing
set forth in this Subsection 2.3(b) shall apply. The Borrower may
borrow under the Revolving Credit Commitment during the Revolving
Credit Commitment Period on any Business Day, provided that the
Borrower shall give the Lender irrevocable notice (which must be
received by the Lender prior to 11:00 a.m., McLean, Virginia time)
two (2) Business Days before the requested Borrowing Date,
specifying (i) the amount to be borrowed, and (ii) the requested
Borrowing Date. Each borrowing pursuant to the Revolving Credit
Commitment shall be in an aggregate principal amount of Fifty
Thousand Dollars ($50,000) or a whole multiple thereof. The
proceeds of all Revolving Credit Loans will be made available to
the Borrower by the Lender by transfer of such proceeds in
immediately available funds to a deposit account of the Borrower
at the Lender designated for such purpose.
C. Principal Payments. Subsection 2.10 of the Credit Agreement
is deleted in its entirety and replaced with the following:
Principal Payments. (a) On and after February 8, 2000, the
terms of the Lender's Sweep Plus product shall control the manner
in which funds are transferred between the Operating Account and
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the Revolving Credit Loan for credit or debit to the Revolving
Credit Loan.
(b) Before February 8, 2000, the procedure for borrowing
set forth in this Subsection 2.10(b) shall apply. The Borrower may
at any time from time to time pay the principal of Revolving
Credit Loans in whole or in part, upon irrevocable notice to the
Lender at least one (1) Business Day in advance, specifying the
date and amount of payment. If any such payment notice is given by
the Borrower, the payment amount specified in such notice shall be
due and payable on the date specified therein.
D. Post-Closing Requirements. Subsection 5.2 of the Credit
Agreement is deleted in its entirety and replaced with the following:
The Borrower shall deliver to the Lender, on or before
February 1, 2000, the following:
(a) Borrower Proceedings. Copies of all corporate
proceedings undertaken by the Borrower, in form and substance
satisfactory to the Lender, authorizing (i) the execution,
delivery and performance of this Modification, and (ii) the
borrowings contemplated thereunder, Certified as to authenticity
by an Authorized Officer of the Borrower, as of January 29, 2000,
which certificate shall state that the proceedings thereby
Certified are in full force and effect and have not been amended,
modified, revoked or rescinded as of the date of such certificate.
(b) Related Agreements. True and complete copies, Certified
as to authenticity by the Borrower, of such contracts, documents
or instruments to which the Borrower is a party as the Lender may
reasonably request, including, without limitation, a copy of any
debt instrument or security agreement to which the Borrower is a
party.
(c) Subsidiary Proceedings. Copies of all corporate
proceedings undertaken by both CLCQ and Delta College, in form and
substance satisfactory to the Lender, authorizing (i) the
execution, delivery and performance of the Credit Documents as
described in Subsection 5.2(c) of the Amended and Restated Credit
Agreement dated December 31, 1999, (ii) the borrowings
contemplated thereunder and (iii) the granting by them of the
security interests and other Liens granted or to be granted by
them pursuant to the Credit Documents, Certified as to
authenticity by an Authorized Officer of CLCQ or Delta College,
which certificate shall state that the proceedings thereby
Certified are in full force
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and effect and have not been amended, modified, revoked or
rescinded as of the date of such certificate.
(d) Subsidiary Incumbency Certificates. Certificate of an
Authorized Officer of each of CLCQ and Delta College, as to the
incumbency and signature of the Authorized Officer of CLCQ and
Delta College executing any Credit Document as described in
Subsection 5.2(c) of the Amended and Restated Credit Agreement
dated December 31, 1999, satisfactory in form and substance to the
Lender and its counsel, duly executed by the Authorized Officers
of CLCQ and Delta College.
(e) Legal Opinions. The executed legal opinions of counsel
to the Borrower and each of CLCQ and Delta College, in form and
content satisfactory to the Lender, which legal opinions shall
cover such matters incident to the transactions contemplated by
the Amended and Restated Credit Agreement dated December 31, 1999,
and this Modification, as the Lender may reasonably require.
(f) Landlord Agreement. A written agreement of the owner of
the Borrower Chief Executive Office to be located in Manassas,
Virginia, consenting to enforcement of the Lender's rights in
connection therewith.
(g) Payment of Expenses. Payment of all expenses of the
Lender then incurred, pursuant to Section 9.6 of the Credit
Agreement.
E. Weekly Cash Flow Projection. A new Section 6.13 is added to
the Credit Agreement as follows:
6.13 Weekly Cash Flow Projections. Furnish to the Lender
by facsimile to Mr. J. Xxxxx Xxxxxxxxx at 000-000-0000, each
Friday beginning on February 4, 2000, the Borrower's cash flow
projection (of expected cash inflows and outflows and of expected
borrowing requirements) for each of the next six weekly periods,
in detail and scope satisfactory to the Lender in the Lender's
sole and absolute discretion, certified by the Chief Financial
Officer of the Borrower.
F. Delivery of Retail Installment Contracts. A new Section
6.14 is added to the Credit Agreement as follows:
6.14 Delivery of Original Retail Installment Contracts.
Use its best efforts to deliver by February 15, 2000, but in any
event no later than February 29, 2000, physical possession to the
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Lender of originals (with original signatures) of all Retail
Installment Contracts with respect to which the obligor/payor is
no longer attending any classes being given by the Borrower,
having either dropped the program or graduated from the program,
and on which payments are due and owing to the Borrower, unless
the delivery of such originals would violate a state, federal or
accreditation regulatory requirement, as confirmed by a written
legal opinion acceptable to the Lender in its reasonable
discretion, and subject to the Lender's receipt of a copy of the
applicable regulation and the Lender's independent confirmation of
the regulatory requirement with the regulatory body. The Borrower
shall deliver with the originals of the contracts copies of the
Borrower's business records setting forth payments received on the
contract and the current balance owing on the contract, and an
assignment (subject to the terms of the Security Agreement)
executed by the Borrower covering each original Retail Installment
Contract (on a form to be supplied by the Lender). The Borrower
shall furnish to the Lender by mail at 0000 Xxxxx Xxxxxx Xxxx,
XX-0000, XxXxxx, Xxxxxxxx 00000-0000, Attention: J. Xxxxx
Xxxxxxxxx, as soon as available, but in no event more than thirty
(30) days after the end of each month, a report showing payments
and current balances on each original Retail Installment Contract,
possession of which the Borrower has delivered to the Lender. The
Borrower shall provide to the Lender unfettered physical access,
during normal business hours with prior notice to the Borrower, to
all credit files, payment history files and any other data
regarding the original Retail Installment Contracts delivered to
Lender.
G. Business Consultant. A new Section 6.15 is added to the
Credit Agreement as follows:
6.15 Business Consultant. As soon as possible but no
later than February 9, 2000, engage and employ under a fully
executed contract (a copy of which the Borrower shall immediately
deliver to the Lender) a professional turnaround consultant chosen
from the Lender's list of approved professional turnaround
consultants attached hereto as Exhibit 1 (the "Consultant"), cause
the Consultant to undertake a comprehensive study of the
Borrower's business and to prepare a written report, and take all
necessary action to cause the Consultant to deliver to the Lender
within thirty (30) days after engagement the written report
together with a plan of implementation acceptable to the Lender in
its sole discretion. The Consultant shall assist the Borrower in
making permanent improvements in all aspects of the daily
operations and
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management of the Borrower. The Consultant shall assess the
Borrower's current financial operations and organization, and
shall render advice to the Borrower regarding cost reduction
measures, streamlining of the organization and improving
profitability. The Borrower authorizes the Consultant to
communicate directly with the Lender at any and all times to
discuss or review any aspect of the Borrower's business and any
matter regarding the engagement between the Borrower and the
Consultant, or to transmit any information relating to the
Borrower's business to the Lender, all without any further
authorization from or notice to the Borrower. The Borrower shall
not terminate its contract with the Consultant unless the Lender
shall so consent in writing, which consent shall not be
unreasonably withheld or delayed. The Borrower shall continue
employing the services of the Consultant until the Lender is
satisfied, in its reasonable discretion, that the Consultant has
fulfilled the functions and purposes for which it was retained.
H. Business Plan. A new Section 6.16 is added to the Credit
Agreement as follows:
6.16 Business Plan. Furnish to the Lender by mail at 0000
Xxxxx Xxxxxx Xxxx, XX-0000, XxXxxx, Xxxxxxxx 00000-0000,
Attention: J. Xxxxx Xxxxxxxxx, or by facsimile to J. Xxxxx
Xxxxxxxxx at 000-000-0000, as soon as available, but in no event
later than March 20, 2000, a business plan setting forth in
specific detail the precise actions which the Borrower plans to
take to enable it to replenish the Borrower's working capital,
address operational issues of the Borrower, and return to
profitability, which business plan shall be approved by the board
of directors of the Borrower, and shall be consistent with the
terms and conditions of the Credit Agreement, as modified by this
Modification. The Consultant shall assist the Borrower in
implementing the Business Plan and shall monitor and report to the
Lender at least once every two weeks as to the progress being made
toward implementing the Business Plan.
I. Tax refunds. A new Section 6.17 is added to the Credit
Agreement as follows:
6.17 Tax Refunds. Make, execute and deliver all such
assurances, instruments and documents as the Lender may request to
vest in and assure to the Lender its rights and claims in and to
any and all tax refunds owing to the Borrower, and execute and
deliver to the Lender any agreements, notices and/or assignments
and do such other things as may be satisfactory to the Lender in
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order that all sums due and to become due to the Borrower in the
form of tax refunds shall be duly assigned to the Lender and paid
over to the Lender by the federal government. Upon receipt by the
Lender of any such tax refunds, the Lender shall apply any such
tax refunds to permanently reduce the principal balance of the
Revolving Credit Loans to an amount no less than $10,000,000 (and
notwithstanding the definition of Revolving Credit Maximum Amount,
which shall be deemed amended to conform to this Subsection 6.17),
and shall promptly notify the Borrower as to such application.
Section 4. Other Terms. Except as specifically modified herein, all other
terms and conditions of the Credit Agreement, the Note, and all other documents
evidencing, securing or otherwise documenting the terms and provisions of the
Revolving Credit Loan remain in full force and effect and are hereby ratified
and confirmed. The modifications contained herein shall not constitute a
novation of the Borrower's obligations under the Revolving Credit Loan.
Section 5. Representations. The Borrower represents, warrants and agrees
that (i) there are no claims, defenses or setoffs with respect to the Note, or
with respect to the indebtedness evidenced or secured thereby or with respect to
the collection or enforcement of any of the same; (ii) to the best of the
Borrower's knowledge, information and belief, no event of default has occurred
and is continuing under the Credit Agreement, except that the Borrower believes
that, upon finalization of the January 31, 2000 financial statements, the
Borrower will be in violation of the Tangible Net Worth requirement for January
31, 2000 set forth in Subsection 7.1(d) of the Credit Agreement; (iii) the
representations and warranties of the Borrower set forth in the Credit Agreement
and the other Credit Documents or which are contained in any certificate,
document or financial or other statement furnished pursuant to or in connection
with the Credit Agreement are true and complete in all material respects on and
as of the date of this Modification; (iv) the Lender has made no representations
or commitments, oral or written, or undertaken any obligations other than as
expressly set forth in this Modification; and (v) it shall take no action to
challenge the first priority perfected security interest granted to the Lender
under the Security Agreement and shall affirmatively represent to third parties
that it has granted such a security interest to the Lender.
Section 6. Release. To induce the Lender to enter into this Modification,
the Borrower releases and forever discharges the Lender and each of its
employees, agents, directors, officers, attorneys, successors, and assigns, from
any and all matters or claims, actions, causes of action, suits, debt,
agreements, and demands whatsoever whether known or unknown, in law or in
equity, or otherwise, which the Borrower ever had, now has, or shall have
against the Lender or any of the parties described above by reason of any act,
cause, matter or thing whatsoever existing or done from the beginning of time to
the date of this Modification.
Section 7. Amendments. No amendment of this Modification and no waiver of
any one or more of the provisions hereof shall be effective unless set forth in
writing and signed by the parties hereto.
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Section 8. Binding Nature. This Modification shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.
Section 9. Choice of Law. This Modification shall be governed by, and
enforced pursuant to, the internal laws of the Commonwealth of Virginia, and the
parties hereto consent to the jurisdiction and venue of the Circuit Court of any
county in the Commonwealth of Virginia or the United States District Court for
the Eastern District of Virginia.
Section 10. Waiver of Jury Trial. Each party to this Modification agrees
that any suit, action or proceeding, whether claim or counterclaim, brought or
instituted by any party hereto or any successor or assign of any party, on or
with respect to this Modification or which in any way relates to the Revolving
Credit Loan, shall be tried only by a court and not by a jury. Each party hereby
expressly waives any right to a trial by jury in any such suit, action or
proceeding.
IN WITNESS WHEREOF, the Borrower and the Lender have executed this
Modification with the specific intention of creating a document under seal as of
the date and year first above stated.
BORROWER
WITNESS: COMPUTER LEARNING CENTERS, INC,
By: /S/ Xxxx X. Xxxxxx
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(SEAL)
Xxxx X. Xxxxxx, Vice President and Chief
Financial Officer
LENDER
FIRST UNION NATIONAL BANK
By: /S/ J. Xxxxx Xxxxxxxxx
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(SEAL) J. Xxxxx Xxxxxxxxx, Vice President
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