1
AMENDED AND RESTATED
CREDIT AGREEMENT
between
COMPUTER LEARNING CENTERS, INC.,
and
FIRST UNION NATIONAL BANK,
as successor-by-merger to
CORESTATES BANK, N.A.
2
TABLE OF CONTENTS
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PAGE
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SECTION 1. CONSTRUCTION AND DEFINITIONS 2
1.1 Defined Terms 2
1.2 Other Definitional Provisions 14
SECTION 2. AMOUNT AND TERMS OF LOAN COMMITMENTS 15
2.1 Revolving Credit Commitment 15
2.2 Revolving Credit Note 16
2.3 Procedure for Revolving Credit Borrowing 16
2.4 Unused Facility Fee 16
2.5 Reduction of Revolving Credit Commitment 17
2.6 Payment at Revolving Credit Termination Date 17
2.7 Conversion of Revolving Credit Loans to Convertible Term
Loans 17
2.8 Convertible Term Loan Units 17
2.9 Convertible Term Loan Note 17
2.10 Optional Prepayments 17
2.11 Interest Rate Conversion Options; Minimum Amount of Loans 17
2.12 Number and Amounts of Eurodollar Tranches 17
2.13 Interest Rates and Payment Dates 17
2.14 Computation of Interest and Fees 18
2.15 Inability to Determine Interest Rate 18
2.16 Payments 18
2.17 Illegality 18
2.18 Requirements of Law 19
2.19 Taxes 20
2.20 Indemnity 20
2.21 Certain Calculations 20
SECTION 3. LETTERS OF CREDIT 20
3.1 Letter of Credit Commitment 20
3.2 Procedure for Issuance and Renewal of Letters of Credit 21
3.3 Reimbursement of the Lender 21
3.4 Commissions, Fees and Charges 21
3.5 Interest on Amounts Disbursed under Letters of Credit 22
3.6 Computation of Interest and Fees; Payment not on Business
Days 22
3.7 Increased Costs 22
3.8 Nature of Obligations and Indemnities 23
3.9 Inconsistency in Documents 25
SECTION 4. REPRESENTATIONS AND WARRANTIES 25
4.1 Financial Condition 25
4.2 No Change 25
4.3 Organization and Good Standing; Compliance with Law 25
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4.4 Authorization; Enforceable Obligations 26
4.5 No Legal Bar 26
4.6 No Material Litigation; Labor Matters 26
4.7 No Default 26
4.8 Ownership of Property; Liens 27
4.9 Business Premises 27
4.10 Subsidiaries 27
4.11 Environmental 27
4.12 Solvency 27
4.13 Taxes 28
4.14 Federal Regulations 28
4.15 Employee Matters 28
4.16 Investment Company Act; Other Regulations 30
4.17 Accuracy and Completeness of Information 30
4.18 Purpose of Loans 31
4.19 CLCQ and Delta College 31
SECTION 5. CONDITIONS PRECEDENT 33
5.1 Conditions to Initial Extensions of Credit 33
(a) Credit Documents 33
(b) Borrowing Certificate 33
5.2 Post-Closing Requirements 33
(a) Borrower Proceedings 33
(b) Borrower Incumbency Certificate 34
(c) Subsidiary Credit Documents 34
(d) Consents 34
(e) Related Agreements 34
(f) Subsidiary Proceedings 34
(g) Subsidiary Incumbency Certificate 34
(h) Subsidiary Organizational Documents 35
(i) Filings, Registrations and Recordings 35
(j) Legal Opinions 35
(k) Landlord Agreement 35
(l) Other Documents 35
(m) Payment of Expenses 35
5.3 Conditions to Each Loan 35
(a) Representations and Warranties 35
(b) No Default 35
(c) No Material Litigation 35
(d) No Material Adverse Change 35
(e) Additional Matters 36
SECTION 6. AFFIRMATIVE COVENANTS 36
6.1 Financial Information 36
6.2 Payment of Obligations 38
6.3 Conduct of Business and Maintenance of Existence 38
6.4 Maintenance of Property; Insurance 38
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6.5 Inspection of Property and Books and Records 39
6.6 Notices 39
6.7 Government Regulations 40
6.8 Employee Benefit Plans 40
6.9 Environmental 40
6.10 Perfection of Security Interest 41
6.11 Year 2000 Compatibility 41
6.12 Primary Bank Accounts 42
SECTION 7. NEGATIVE COVENANTS 42
7.1 Financial Condition Covenants 42
(a) Leverage Ratio 42
(b) Fixed Charge Coverage Ratio 42
(c) Current Ratio 42
(d) Tangible Net Worth 42
7.2 Limitation on Indebtedness 43
7.3 Limitation on Liens 43
7.4 Limitation on Negative Pledge Clauses 44
7.5 Limitation on Contingent Obligations 44
7.6 Limitations on Fundamental Changes 44
7.7 Limitation on Acquisitions 44
7.8 Limitation on Sale of Assets 44
7.9 Limitation on Restricted Payments 45
7.10 Limitation on Transactions with Affiliates 45
7.11 Limitation on Subsidiaries 45
7.12 Limitation on Investments, Loans and Advances 45
7.13 Limitation on Optional Payments and Modifications 46
7.14 Limitation on Sale and Leaseback 46
7.15 Fiscal Year 46
7.16 Places of Business 46
7.17 Change of Name 46
7.18 ERISA 46
7.19 Environmental 46
7.20 Limitation on Inconsistent Agreements 47
SECTION 8. EVENTS OF DEFAULT 47
SECTION 9. MISCELLANEOUS 51
9.1 Amendments and Waivers 51
9.2 More Restrictive Provisions 51
9.3 Notices 52
9.4 No Waiver; Cumulative Remedies 52
9.5 Survival of Representations and Warranties 52
9.6 Payment of Expenses and Taxes 53
9.7 Further Assurances 53
9.8 Unenforceability 53
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9.9 Indemnification Concerning Fees 54
9.10 Waiver of Trial by Jury 54
9.11 Additional Waivers 54
9.12 Successors and Assigns; Transfers of Interests 54
9.13 Counterparts 55
9.14 Governing Law 55
9.15 Submission To Jurisdiction 55
9.16 Release 55
9.17 Waiver by Lender 56
Schedule I Borrower Business Premises
Schedule 4.6 Litigation
Schedule 4.11 Environmental Matters
Schedule 7.3 Permitted Liens
Exhibit A Form of Officer Default Certificate
Exhibit B Form of Officer Financial Covenant Certificate
Exhibit C Sweep Plus Loan and Investment Services Description
Exhibit D Form of Borrowing Certificate
Exhibit E Form of Projections
Exhibit F CLCQ Capital Stock
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AMENDED AND RESTATED
CREDIT AGREEMENT
This AMENDED AND RESTATED CREDIT AGREEMENT is made as of the 31st day
of December, 1999, by and between COMPUTER LEARNING CENTERS, INC., a Delaware
corporation (the "Borrower"), and FIRST UNION NATIONAL BANK, as successor by
merger to CORESTATES BANK, N.A. (the "Lender").
RECITALS
1. The Lender and the Borrower are parties to a Credit Agreement
dated as of December 23, 1996, which evidences a line of credit facility for
advances under a line of credit for working capital, and for the issuance of
letters of credit for the account of the Borrower. The Credit Agreement was
amended pursuant to a First Amendment Agreement dated October 30, 1998 and a
Second Amendment Agreement dated June 10, 1999.
2. The debt under the line of credit facility is evidenced by an
Amended and Restated Revolving Credit Note dated October 30, 1998 in the face
amount of $20,000,000.
3. Payment of the Amended and Restated Revolving Credit Note is
secured by a security interest in the personal property collateral described in
a Security Agreement dated December 23, 1996.
4. As of December 22, 1999, there was due under the Amended and
Restated Revolving Credit Note principal of $5,425,000 and interest of
$65,503.82. In addition, the Lender has issued the following letters of credit
for the account of the Borrower:
Letter of Credit Number Amount
----------------------- ------
M 407953 $750,000.00
M 409910 $25,800.00
M 409947 $34,000.00
406477 $2,142,000.00
400152P $91,128.50
400153 $1,000,000.00
5. The Borrower has requested that the Lender modify certain terms of
the Existing Credit Facility (as defined below), and waive the Borrower's
failure to comply with the Fixed Charge Coverage Ratio covenant for the quarter
ending October 31, 1999. The Lender is agreeable to modifying certain terms and
conditions of the Existing Credit Facility, and waiving the Borrower's failure
to comply with the financial covenant for the quarter ending October 31, 1999,
as set forth below.
In consideration of the foregoing, the Lender and the Borrower agree as
follows:
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SECTION 1. CONSTRUCTION AND DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following terms have
the following meanings:
"Accountant Default Certificate": a certificate, in form and content
satisfactory to the Lender, of the independent certified public accountants who
reviewed annual financial statements of the Borrower and its Subsidiaries (a)
certifying to the Lender whether, in the course of such review, any information
came to their attention causing them to know or believe that any Default or
Event of Default existed and, if so, setting forth the facts relevant thereto,
and (b) certifying to the Lender that they reviewed the Officer Financial
Covenant Certificate accompanying such financial statements and certifying to
the Lender whether they have any reason to know or believe that any of the
calculations contained in such Officer Financial Covenant Certificate are not
accurate in any material respect and, if so, setting forth the facts relevant
thereto.
"Adjusted Net Income": for a particular period, the consolidated net
income of the Borrower and its Subsidiaries for such period determined in
conformity with GAAP consistently applied, plus, to the extent deducted in
determining such net income for such period, (a) provision for taxes applicable
to such period, (b) the amount of all depreciation, amortization and other
noncash charges applicable to such period, (c) the amount of Interest Expense
applicable to such period, and (d) the amount of all payments required to be
made by the Borrower and its Subsidiaries (whether or not actually made) during
such period on account of Operating Leases, minus fifty percent (50%) of the
amount of Capital Expenditures during such period.
"Affiliate": as to any Person: (a) any Person in which such Person
legally or beneficially owns or holds, directly or indirectly, twenty-five
percent (25%) or more of the capital stock, partnership interests, joint venture
interests, membership interests or other equity interests; (b) any partnership
in which such Person is a general partner or any joint venture in which such
Person is a joint venturer; and (c) any Person that is a director, officer or
employee of any of the foregoing or of such Person or that legally or
beneficially owns or holds, directly or indirectly, twenty-five percent (25%) or
more of the capital stock, partnership interests, joint venture interests,
membership interests or other equity interests in any of the foregoing or in
such Person.
"Agreement": this Amended and Restated Credit Agreement, as amended,
modified, extended, renewed, supplemented or replaced from time to time.
"Authorized Officer": in the case of any Person, the President or any
Vice President of such Person whose name and title appears on a certificate of
incumbency of the authorized officers of such Person delivered concurrently with
the execution of this Agreement, as such certificate of incumbency may be
amended from time to time.
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"Available Commitment": on a particular date, the amount, if any, by
which the Revolving Credit Maximum Amount as of such date exceeds the Total
Applicable Usage as of such date.
"Borrower Business Premises": the collective reference to the Borrower
Chief Executive Office and the other premises of the Borrower identified in
Schedule I.
"Borrower Chief Executive Office": the real property and improvements
leased by the Borrower known as 00000 Xxxxxx Xxxxx Xxxx, Xxxxx 000, Xxxxxxx,
Xxxxxxxx 00000 until the Borrower changes the location of its chief executive
office (which the Borrower believes will occur on or about February 1, 2000), at
which time the Borrower Chief Executive Office shall be 00000 Xxxxx Xxxx Xxxx,
Xxxxxxxx, Xxxxxxxx 00000.
"Borrower Institution": any campus or institution of the Borrower or any
of its Domestic Subsidiaries, or any branch or location of any thereof, engaged
or created or intended to be engaged, directly or indirectly, in any business or
business operations of the Borrower or any of its Domestic Subsidiaries,
including the provision of information technology training or services,
computer-related training or services or other educational training or services.
"Borrower Security Agreement": as amended, modified, extended, renewed,
supplemented or replaced from time to time, the Amended and Restated Security
Agreement dated of even date herewith, by the Borrower in favor of the Lender.
"Borrowing Date": any Business Day specified in a notice pursuant to
Subsection 2.3 as a date on which the Borrower requests the Lender to make a
Revolving Credit Loan hereunder.
"Business Day": a day other than a Saturday, Sunday or other day on which
commercial banks in McLean, Virginia, are authorized or required by law to
close.
"Canadian Corporations": collectively, CLCQ and Delta College.
"Capital Expenditures": for a particular period, the aggregate amount of
expenditures made or accrued by the Borrower and its Subsidiaries during such
period (including expenditures made with respect to Capital Leases) which, in
conformity with GAAP, are required to be included in a property, plant,
equipment or comparable fixed asset account reflected in a consolidated balance
sheet of the Borrower and its Subsidiaries, but excluding expenditures made in
connection with the replacement or restoration of assets to the extent
reimbursed or financed from insurance proceeds paid on account of loss of or
damage to the assets being replaced or restored or from awards of compensation
arising from the taking by condemnation or eminent domain of the assets being
replaced or restored.
"Capital Lease": in the case of any Person, any lease of any property
(real, personal or mixed) by such Person as lessee which, in conformity with
GAAP, would be required to be capitalized on a balance sheet of such Person.
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"Cash Equivalents": (a) securities issued or directly and fully
guaranteed or insured by the United States of America, or any agency or
instrumentality thereof, having maturities of not more than 24 months from the
date of acquisition; (b) time deposits with the Lender, certificates of deposit
issued by the Lender, and time deposits with, and certificates of deposit issued
by, any commercial bank incorporated under the laws of the United States of
America or any state thereof which has a combined capital, surplus and undivided
profits at least equal to One Hundred Million Dollars ($100,000,000.00), and
having maturities of not more than 18 months from the date of acquisition; (c)
repurchase obligations with a term of not more than 7 days underlying securities
of the types described in clauses (a) and (b) above entered into with the Lender
or with any commercial bank incorporated under the laws of the United States of
America or any state thereof which has a combined capital, surplus and undivided
profits at least equal to One Hundred Million Dollars ($100,000,000.00); and (d)
commercial paper of the Lender or the holding company controlling the Lender and
commercial paper rated at least A-1 or the equivalent thereof by Standard &
Poor's Corporation or P-1 or the equivalent thereof by Xxxxx'x Investors
Service, Inc., and, in either case, maturing within 24 months after the date of
acquisition.
"Certified" shall mean that the information, statement, schedule, report
or other document required to be "Certified" contains a representation by the
Borrower that to the Borrower's knowledge and belief after diligent inquiry,
such information, statement, schedule, report or other document is true and
complete in all material respects.
"Change of Control": (a) any Person, or two or more Persons acting in
concert, shall directly or indirectly acquire, after the date of this Agreement,
beneficial ownership (within the meaning of Rule 13d-3 of the Securities and
Exchange Commission under the Securities Exchange Act of 1934) of thirty percent
(30%) or more of the issued and outstanding voting capital stock of the Borrower
on a fully-diluted basis; or (b) individuals who, as of the date of this
Agreement, constitute the Board of Directors of the Borrower (together with any
new director whose election by or whose nomination for election was approved by
a vote of at least two-thirds (2/3) of the directors then still in office who
either were directors as of such time or whose election or nomination for
election was previously so approved) shall for any reason cease to constitute a
majority of the Board of Directors of the Borrower.
"CLCQ": Computer Learning Centers of Quebec, Inc., a Quebec corporation
"Closing Date": the date on which this Agreement and all other documents
as set forth in Section 5 are executed by the Borrower and the Subsidiaries (as
applicable) and delivered to the Lender, and all other closing conditions set
forth in Section 5 are satisfied.
"Code": the Internal Revenue Code of 1986, as amended from time to time.
"Collateral": all property, interests and rights, and the products and
proceeds thereof, now or hereafter directly or indirectly securing any of the
Obligations pursuant to the Borrower Security Agreement.
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"Commitments": the collective reference to the Revolving Credit
Commitment and the L/C Commitment.
"Commonly Controlled Entity": a Person, whether or not incorporated,
which is part of a controlled group including the Borrower or which is under
common control with the Borrower, as defined in Sections 414(b) and (c) of the
Code.
"Contingent Obligation": as to any Person, any obligation of such Person
guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends,
letters of credit or other obligations (the "primary obligations") of any other
Person (the "primary obligor") in any manner, whether directly or indirectly,
including, without limitation, any obligation of such Person, whether or not
contingent (a) to purchase any such primary obligation or any property
constituting direct or indirect security therefor, (b) to advance or supply
funds (i) for the purchase or payment of any such primary obligation or (ii) to
maintain working capital or equity capital of the primary obligor or otherwise
to maintain the net worth or solvency of the primary obligor, (c) to purchase
property, securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor to make
payment of such primary obligation or (d) otherwise to assure or hold harmless
the owner of any such primary obligation against loss in respect thereof.
"Contractual Obligation": as to any Person, any provision of any security
issued by such Person or of any agreement, instrument or undertaking to which
such Person is a party or by which it or any of its property is bound.
"Credit Documents": the collective reference to this Agreement, the Note,
the Borrower Security Agreement, the L/C Agreements and each other agreement,
contract, promissory note or other instrument, security agreement, assignment,
pledge agreement, indemnification agreement, subordination agreement, mortgage,
deed of trust, guaranty and other document now or hereafter evidencing,
guaranteeing, securing (directly or indirectly), subordinating other obligations
of the Borrower or any Other Obligor to, or containing any warranties,
covenants, agreements or representations of any Person relating to, any
Indebtedness, liability or obligation of the Borrower or any Other Obligor to
the Lender, as each of the documents referred to in this definition may be
amended, modified, extended, renewed, supplemented or replaced from time to
time.
"Current Ratio": on a particular date, the ratio of (a) Total Current
Assets as of such date to (b) Total Current Liabilities as of such date.
"Default": the occurrence of any event which, with the giving of notice
or the lapse of time, or both, would constitute an Event of Default.
"Delta College": Delta College, Inc., a Quebec corporation.
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"Disqualified": the certification, eligibility, authorization or
accreditation (provisional or otherwise) of the Borrower, any of its Domestic
Subsidiaries or any Borrower Institution, or any educational program of any
thereof, to receive, commit or disburse funds under, or to administer or
participate in, any Student Financial Aid Program, or the participation therein
of any thereof, shall for any reason expire or be revoked, suspended, terminated
or determined to be invalid, in whole or in part, retroactively or
prospectively.
"Disqualified Revenues Ratio": as of any date, the ratio, expressed as a
percentage and rounded upwards, if necessary, to the nearest one-one hundredth
of one percent (1/100%), of (a) the sum, without duplication and determined in
accordance with GAAP for the four (4) most recently ended quarterly accounting
periods of the Borrower, of the gross revenues of each of the Borrower, its
Domestic Subsidiaries and Borrower Institutions which is Disqualified as of such
date, to (b) the consolidated gross revenues of the Borrower and its Domestic
Subsidiaries for such four (4) quarterly accounting periods of the Borrower,
determined in accordance with GAAP.
"Dollars" and "$": dollars in lawful currency of the United States of
America.
"Domestic Subsidiary": as to any Person, a Subsidiary which is organized
under the laws of the United States of America or any State thereof and which
has its chief executive office and each of its places of business in the United
States of America.
"Environmental Assessment": an environmental site assessment, including
such audits, tests and procedures as the Lender or the contractor performing the
same may deem necessary, together with a written report thereon, performed and
prepared by an experienced, responsible and reputable contractor satisfactory to
the Lender relating to past or current presence, manufacture, generation,
production, processing, use, handling, treatment, storage or disposal of
Hazardous Substances on Obligor Use Property, past or current Hazardous
Substance Contamination, or compliance with Environmental Laws of Obligor Use
Property and past or current operations conducted on Obligor Use Property.
"Environmental Claim": shall mean any letter, notice, claim, demand,
summons, citation, directive or other written communication and any
investigation, action, suit, proceeding, litigation, judgment or decree by or
from the United States Environmental Protection Agency or any other Person
alleging, establishing or otherwise relating to any Hazardous Substance
Contamination or any violation of any Environmental Law.
"Environmental Laws": the Resource Conservation and Recovery Act, the
Comprehensive Environmental Response, Compensation and Liability Act, the Toxic
Substances Control Act, the Federal Insecticide, Fungicide, and Rodenticide Act,
the Federal Water Pollution Control Act, the Safe Drinking Water Act, the Clean
Air Act, the Solid Waste Disposal Act, the Emergency Planning and Community
Right-To-Know Act, as each of the foregoing may be amended from time to time,
and all rules, regulations, codes, orders, decrees, judgments, injunctions,
notices and demand letters now or hereafter enacted, promulgated, approved,
issued or entered thereunder, as the same may be amended from time to time, and
all other federal,
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state, local and foreign laws, rules, regulations, codes, permits, directives,
orders, decrees, judgments, injunctions, notices and demand letters now or
hereafter enacted, promulgated, approved, issued or entered, and as amended from
time to time, relating to the protection of the health of human beings or other
living things or relating to pollution or protection of air, water, land or any
other aspect of the environment, including, without limitation, all of the same
relating to the presence, manufacture, generation, production, processing, use,
handling, treatment, storage, disposal, importation, transportation,
distribution or registration, or the release, emission, discharge or spilling
into air, water, land or any other aspect of the environment, of any Hazardous
Substance.
"ERISA": the Employee Retirement Income Security Act of 1974, as amended
from time to time.
"Event of Default": any of the events specified in Section 8.
"Existing Credit Facility": The credit facility made available by the
Lender to the Borrower and evidenced by the Amended and Restated Revolving
Credit Note, the Credit Agreement (as amended) and the Security Agreement, as
described in the recitals of this Agreement.
"Fixed Charge Coverage Ratio": for a particular period, the ratio of (a)
Adjusted Net Income for such period, to (b) Fixed Charges for such period.
"Fixed Charges": for a particular period, the sum of (a) the amount of
all payments required to be made by the Borrower and its Subsidiaries (whether
or not actually made) on account of Operating Leases during such period, (b) the
amount of Interest Expense applicable to such period, and (c) the aggregate
amount of Long-Term Debt which will be due and payable within 12 months after
the end of such period (i.e., the current portion of Long-Term Debt).
"GAAP": generally accepted accounting principles in the United States of
America in effect from time to time. In the event of a change in GAAP affecting
any of the covenants contained in Subsection 7.1 or definitions contained in
Section 1 relating to such covenants, such covenants and definitions shall
continue to be applied as though such change in GAAP had not occurred unless and
until the Borrower and the Lender shall agree in writing to amend or adjust such
covenants or definitions as deemed necessary as a result of such change in GAAP.
"good faith": with respect to any determination, request or other action
to be made or taken by any party hereto "in good faith," that such party shall
make or take such determination, request or other action honestly and not
maliciously.
"Governmental Authority": any nation or government, any state or other
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or
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administrative functions of or pertaining to government, and any Person owned
or controlled directly or indirectly by any of the foregoing, whether domestic
or foreign.
"Hazardous Substance": any hazardous substance, hazardous material,
hazardous waste, toxic substance, toxic material, toxic waste, industrial waste,
medical waste, infectious waste, biomedical waste, biohazardous waste,
pollutant, contaminant, chemical, acid, solvent, caustic, oil, petroleum,
petroleum-based product, asbestos, asbestos-containing substance or material,
flammable substance, flammable material, explosive substance, explosive
material, radon, radioactive substance, radioactive material, urea formaldehyde
foam insulation, polychlorinated biphenyls, methane and any other substance or
material the presence, manufacture, generation, production, processing, use,
handling, treatment, storage, disposal, release, emission, discharge, spilling,
importation, transportation, distribution or registration of which is prohibited
or regulated by any Environmental Law. The meaning of each term used in this
definition shall include, without limitation, the meaning or meanings assigned
to such term by any Environmental Laws.
"Hazardous Substance Contamination": (a) the contamination, as a result
of any Hazardous Substance, of any Obligor Use Property; or (b) the
contamination, as a result of any manufacture, generation, production,
processing, use, handling, treatment, storage, disposal, release, emission,
discharge or spilling of any Hazardous Substance on or from any Obligor Use
Property, of any surrounding, adjacent or nearby air, water, land or other
property or other aspect of the environment which requires remedial action under
any Environmental Law.
"Indebtedness": as to any Person, without duplication: (a) any
obligation, indebtedness or liability of such Person for the payment of money or
any other item, which, in conformity with GAAP, would be required to be included
in the liability section of a balance sheet of such Person or in a note to the
liability section of a balance sheet of such Person, excluding reserves to the
extent that such reserves do not constitute obligations; (b) any obligation,
indebtedness or liability of such Person arising under any conditional sale or
other title retention agreement with respect to property acquired by such
Person, notwithstanding that the remedies of the seller, lender or lessor under
such agreement in case of default are limited to repossession or sale of
property; (c) any obligation, indebtedness or liability of any Person secured
directly or indirectly by any contingent or noncontingent security interest or
other Lien in or upon any present or future property of such Person, whether or
not such Person is personally liable for such obligation, indebtedness or
liability; and (d) any obligation, indebtedness or liability of such Person in
connection with any Capital Lease.
"Insolvency": at any particular time in respect of a Multiemployer Plan,
insolvency of such Multiemployer Plan within the meaning of Section 4245 of
ERISA.
"Interest Expense": for a particular period, the total interest expense
of the Borrower and its Subsidiaries for such period on a consolidated basis.
"Interest Payment Date": the first day of each month, for interest due
for the preceding month, commencing on January 1, 2000.
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"Investment": legal or beneficial ownership of any capital stock,
partnership interest, joint venture interest, membership interest or other
equity interest in, or any promissory note, bond, debenture or other
Indebtedness of or issued by, or any capital contribution to, or any other
investment in or security (as defined in the Securities Act of 1933 or the
Securities Exchange Act of 1934, or any successor legislation, as amended from
time to time) of or issued by, any corporation, limited liability company,
partnership, joint venture or other Person.
"L/C Aggregate Undrawn Amount": at a particular date, the aggregate
undrawn amount, as of such date, of all Letters of Credit issued and
outstanding.
"L/C Agreements": as amended, modified, extended, renewed, supplemented
or replaced from time to time, such applications, reimbursement agreements and
other agreements in form and content satisfactory to the Lender requesting
issuance of one or more Letters of Credit and setting forth reimbursement
obligations and other terms and conditions relating thereto.
"L/C Commission Rate": Three-quarters of one percent (.75%) per annum.
"L/C Commitment": as defined in Subsection 3.1.
"L/C Exposure": at a particular time, the sum of (a) the L/C Aggregate
Undrawn Amount as of such time and (b) L/C Reimbursement Obligations as of such
time.
"L/C Reimbursement Obligations": at a particular time, the aggregate
amount of all drawings made under Letters of Credit which, as of such time, have
not been reimbursed by the Borrower to the Lender.
"Letters of Credit": as defined in Subsection 3.1.
"Leverage Ratio": at a particular time, the ratio of (a) Total
Liabilities as of such time, to (b) Tangible Net Worth as of such time.
"Lien": any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other) or preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever (including, without limitation, any conditional sale or other title
retention agreement, any Capital Lease having substantially the same economic
effect as any of the foregoing, and the filing of any financing statement under
the Uniform Commercial Code or comparable law of any jurisdiction in respect of
any of the foregoing).
"Loans": the Revolving Credit Loans.
"Long-Term Debt": all Indebtedness of the Borrower and its Subsidiaries
which matures more than one (1) year from the date of the financial statement
reflecting such
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15
Indebtedness (excluding reserves for deferred income taxes and other reserves to
the extent that such reserves do not constitute obligations).
"Material Adverse Effect": a material adverse effect with respect to the
business, assets, operations, business prospects or financial condition of the
Borrower, any of its Subsidiaries or any Other Obligor, or a material adverse
effect with respect to the risks to the Lender attending the Collateral, with
respect to the risks to the Lender attending any commitments of the Lender which
could give rise to any Obligations, or with respect to the prospect for payment
or collection in full of the Obligations.
"Material Litigation": in the case of any Person, any litigation, action,
suit, proceeding or investigation pending or overtly threatened in writing
against such Person or any Subsidiary of such Person, or any of their property,
at law or in equity, which, if determined adversely to such Person or such
Subsidiary, as the case may be, could reasonably be expected to have a material
adverse effect on the business, assets, operations, business prospects or
financial condition of such Person or any Subsidiary of such Person, or a
material adverse effect with respect to the risks to the Lender attending the
Collateral, with respect to the risks to the Lender attending any commitments of
the Lender which could give rise to any Obligations, or with respect to the
prospect for payment or collection in full of the Obligations.
"Multiemployer Plan": a Plan which is a multiemployer plan as defined in
Section 4001(a) (3) of ERISA.
"Note": the Revolving Credit Note.
"Obligations": as amended, modified, extended, renewed, supplemented,
increased, refinanced, consolidated or replaced from time to time, all present
and future Loans and other Indebtedness, liabilities and obligations of the
Borrower to the Lender of every kind and nature, whether arising under or in
connection with this Agreement, the other Credit Documents or otherwise
(including, without limitation, all principal amounts, including future
advances, interest charges, fees and all other charges and sums, as well as all
costs and expenses, including attorneys' fees and expenses, payable or
reimbursable by the Borrower under or pursuant to this Agreement, the other
Credit Documents and otherwise), whether direct or indirect, contingent or
noncontingent, matured or unmatured, accrued or not accrued, liquidated or
unliquidated, secured or unsecured, related or unrelated to this Agreement,
whether or not now contemplated, whether arising in contract, tort, equity or
otherwise, whether the liability of the Borrower with respect thereto is joint
or several or both, and whether or not any instrument or agreement relating
thereto specifically refers to this Agreement, including, without limitation,
all present and future obligations of the Borrower in connection with overdrafts
in any checking or other account now or hereafter maintained by the Borrower
with the Lender, and all claims against the Borrower arising or re-arising on
account of or as a result of any payment made by the Borrower or any Other
Obligor with respect to any obligations included in this definition which is
rescinded or recovered from or restored or returned under authority of any law,
rule, regulation, order of court or Governmental Authority, or in connection
with any compromise or settlement relating thereto or relating to any pending or
threatened action, suit or proceeding
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16
relating thereto, whether arising out of any proceedings under the United States
Bankruptcy Code or otherwise.
"Obligor Use Property": the collective reference to any real property or
improvements (or portion thereof) owned, leased, subleased, occupied, used or
operated by the Borrower, any of its Subsidiaries or any Other Obligor.
"Officer Default Certificate": an appropriately completed certificate in
form substantially similar to Exhibit A, but in form and content satisfactory to
the Lender, signed by the chief financial officer of the Borrower certifying
whether, as of a particular date and to the knowledge and belief of such officer
after diligent inquiry, any Default or Event of Default existed and, if so,
setting forth all relevant facts with respect thereto.
"Officer Financial Aid Program Certificate": a certificate in form and
content satisfactory to the Lender, signed by the chief financial officer of the
Borrower and certifying, as of and for a particular time and to the knowledge
and belief of such officer after diligent inquiry (a) for the Borrower, each of
its Domestic Subsidiaries and each Borrower Institution, the Student Financial
Aid Programs with respect to which the Borrower, such Domestic Subsidiary or
such Borrower Institution, or its educational programs, is authorized,
accredited, certified and eligible (provisionally or otherwise) to participate
and is not Disqualified, (b) for the Borrower, each of its Domestic Subsidiaries
and each Borrower Institution, default rates with respect to Student Financial
Aid Programs, and (c) a summary of the current status of any actions,
proceedings, investigations or reviews of which the Borrower was required to
notify the Lender pursuant to clause (ii) of Subsection 6.6(b) of this
Agreement.
"Officer Financial Covenant Certificate": an appropriately completed
certificate substantially similar to Exhibit B, but in form and content
satisfactory to the Lender, signed by the chief financial officer of the
Borrower setting forth calculations of the covenants contained in Subsection 7.1
as of a particular time or for a particular period.
"Operating Account": the demand deposit account, no. 2014139511328,
maintained with the Lender.
"Operating Lease": as to any Person, any lease of any property (real,
personal or mixed) by such Person as lessee which is not a Capital Lease.
"Other Obligor": each Person other than the Borrower that is now or
hereafter primarily or secondarily, or contingently or noncontingently, liable
for or obligated upon or in connection with any of the Obligations, or, whether
or not so liable, that has granted any lien or security interest to or for the
benefit of the Lender as security for any of the Obligations or any obligations
of any other Person in connection with any of the Obligations, or that has
subordinated to any of the Obligations any Indebtedness or obligations to such
Person of any other Person.
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"PBGC": the Pension Benefit Guaranty Corporation established pursuant to
Subtitle A of Title IV of ERISA.
"Permitted Factoring Agreement": Any agreement for the sale by the
Borrower or any of its Subsidiaries without recourse to the Borrower or any of
its Subsidiaries of accounts of the Borrower or any of its Subsidiaries,
provided that (a) the aggregate face amount of all such accounts so sold during
any four (4) consecutive quarterly accounting periods of the Borrower beginning
on or after the date of this Agreement does not exceed $250,000, and (b) no
Default or Event of Default shall have occurred and be continuing at the time of
any such agreement or sale.
"Permitted PMSI": any purchase money security interest (including Capital
Leases, leases intended as security and title retention agreements) created
under the Uniform Commercial Code of any jurisdiction in equipment of the
Borrower, provided that (a) such security interest is assumed or created by the
Borrower contemporaneously with the Borrower's acquisition of rights in such
goods, (b) such security interest secures no obligations of the Borrower or any
other Person other than Indebtedness of the Borrower incurred in connection with
the acquisition of such goods, (c) such security interest attaches to no
property of the Borrower other than such goods and the proceeds thereof, and (d)
neither the assumption or creation by the Borrower of such security interest nor
the incurrence by the Borrower of such Indebtedness violates any provision of
this Agreement or any of the other Credit Documents.
"Person": an individual, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated association,
joint venture, Governmental Authority or other entity of whatever nature.
"Plan": at a particular time, any employee benefit plan which is covered
by ERISA and in respect of which The Borrower, any Subsidiary of the Borrower or
a Commonly Controlled Entity is (or, if such plan were terminated at such time,
would under Section 4069 of ERISA be deemed to be) an "employer" as defined in
Section 3(5) of ERISA.
"Prime Rate": the rate which the Lender announces from time to time as
its prime lending rate, as in effect from time to time. The Prime Rate is a
reference rate and does not necessarily represent the lowest or best rate
actually charged to any customer. The Lender may make commercial loans or other
loans at rates of interest at, above or below the Prime Rate.
"Reorganization": with respect to any Multiemployer Plan, the condition
that such plan is in reorganization within the meaning of such term as used in
Section 4241 of ERISA.
"Requirement of Law": as to any Person, the certificate of incorporation
and by-laws or other organizational or governing documents of such Person, and
any law, treaty, rule or regulation or determination of an arbitrator or a court
or other Governmental Authority, in each case applicable to or binding upon such
Person or any of its property or to which such Person or any of its property is
subject.
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18
"Restricted Payment": any payment or other transfer of money or other
tangible or intangible property of any kind of the Borrower or any of its
Subsidiaries to any Affiliate of any of them which is not expressly permitted by
this Agreement, including, without limitation, any dividend or other
distribution on account of capital stock or other securities, any loan, advance
or capital contribution, any repayment of any loan, advance or capital
contribution, any redemption or other repurchase of any securities, and any
payment for services.
"Revolving Credit Loan Balance": at a particular time, the aggregate
principal amount of Revolving Credit Loans made and outstanding.
"Revolving Credit Commitment": as defined in Subsection 2.1.
"Revolving Credit Commitment Period": the period from and including the
date of this Agreement to but not including the Revolving Credit Termination
Date or such earlier date as the Revolving Credit Commitment shall terminate as
provided herein.
"Revolving Credit Loan": as defined in Subsection 2.1.
"Revolving Credit Maximum Amount": Twelve Million Dollars ($12,000,000)
through and including January 31, 2000; Eleven Million Dollars ($11,000,000)
from February 1, 2000 through and including April 30, 2000; and Ten Million
Dollars ($10,000,000) from and after May 1, 2000.
"Revolving Credit Note": as defined in Subsection 2.2.
"Revolving Credit Termination Date": February 28, 2001.
"Student Financial Aid Program": any program under Title IV of the Higher
Education Act of 1965, under which financial aid or financial assistance is
provided to or for students by the United States of America or any Governmental
Authority of the United States of America.
"Subsidiary": as to any Person, (a) a corporation of which shares of
capital stock having voting power to elect a majority of the board of directors
or other managers of such corporation are owned, or the management of which is
otherwise controlled, directly or indirectly, or both, through one or more
intermediaries, by such Person, and (b) any partnership, limited liability
company, association, joint venture or other business entity of which more than
fifty percent (50%) of the voting equity interests is owned, or the management
of which is otherwise controlled, directly or indirectly, or both, through one
or more intermediaries, by such Person.
"Sweep Plus": the cash management product of the Lender which monitors
the Operating Account and triggers advances under the Revolving Credit Loan to
fund the Operating Account to maintain a target level, to cover checks presented
on the Operating Account, and to sweep excess cash above the target level to
minimize the Revolving Credit Loan balance, all as
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19
further described in the Sweep Plus Loan and Investment Services Description
attached as Exhibit C.
"Sweep Plus Ceiling": the maximum amount of the Revolving Credit Loan up
to which the Sweep Plus product will fund. For each of the Borrower's fiscal
quarters, beginning on the first day of such quarter, the Sweep Plus Ceiling
shall equal the average outstanding principal balance of the Revolving Credit
Loan for the prior fiscal quarter, rounded up to the nearest $100,000, plus
$1,000,000; provided, however, that at no time shall the Sweep Plus Ceiling
exceed the then Revolving Credit Maximum Amount less the then L/C Exposure.
"Tangible Net Worth": at a particular date, the amount, if any, by which
(a) Total Assets as of such date, exclusive of goodwill, trademarks, trade
names, licenses and such other assets as are properly classified as intangible
assets in conformity with GAAP, and exclusive of all transactions with, and all
amounts due or to become due to the Borrower or its Subsidiaries from, and all
investments in, Affiliates, exceeds (b) Total Liabilities as of such time.
"Total Assets": at a particular date, the aggregate amount which, in
conformity with GAAP, would be included in a total assets or comparable account
reflected in a consolidated balance sheet of the Borrower and its Subsidiaries
as of such date.
"Total Applicable Usage": at a particular date, the sum of (a) the
Revolving Credit Loan Balance as of such date and (b) L/C Exposure as of such
date.
"Total Current Assets": at a particular date, the aggregate amount which,
in conformity with GAAP, would be included in a total current assets or
comparable account reflected in a consolidated balance sheet of the Borrower and
its Subsidiaries as of such date.
"Total Current Liabilities": at a particular date, the aggregate amount
which, in conformity with GAAP, would be included in a total current liabilities
or comparable account reflected in a consolidated balance sheet of the Borrower
and its Subsidiaries as of such date.
"Total Liabilities": at a particular date, the aggregate amount which, in
conformity with GAAP, would be included in a total liabilities or comparable
account reflected in a consolidated balance sheet of the Borrower and its
Subsidiaries as of such date.
1.2 Other Definitional Provisions. (a) Unless otherwise specified
therein, all terms defined in this Agreement shall have the defined meanings
when used in the Note, the Borrower Security Agreement or any other Credit
Document.
(b) As used herein, in the Note, in the Borrower Security
Agreement and in any other Credit Document, accounting terms not defined in
Subsection 1.1 and accounting terms partly defined in Subsection 1.1, to the
extent not defined, shall have the respective meanings given to them under GAAP.
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20
(c) As used herein, in the Note, in the Borrower Security
Agreement and in any other Credit Document, terms defined by the Uniform
Commercial Code as in effect in the Commonwealth of Virginia on the date hereof
shall, except to the extent that the context otherwise requires, have the
respective meanings given to them under such Uniform Commercial Code.
(d) Unless the context otherwise requires, each reference in
this Agreement, the Note, the Borrower Security Agreement or any other Credit
Document to this Agreement, the Note, the Borrower Security Agreement or any
other Credit Document shall be deemed to refer to this Agreement, the Note, the
Borrower Security Agreement or such other Credit Document as the same may be
amended, modified, extended, renewed, supplemented or replaced from time to
time.
(e) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and Section,
Subsection, Schedule and Exhibit references are to this Agreement unless
otherwise specified.
(f) The use of the singular in this Agreement shall also refer
to the plural and vice versa, and the use of any gender, including the neuter,
shall also refer to each of the other genders, including the neuter.
(g) The captions and headings contained in this Agreement are
for convenience of reference only and shall not affect the meaning, or the
construction or interpretation, of this Agreement.
(h) The phrases "satisfactory to the Lender," "acceptable to
the Lender" and similar phrases shall mean reasonably satisfactory or reasonably
acceptable to the Lender in its reasonable judgment exercised in good faith.
(i) In the event of any inconsistency between any provision of
this Agreement and any provision of any other Credit Document, or in the event
of the need in any context for the construction or interpretation of any
provision of this Agreement or any other Credit Document, no such inconsistency
and no such provision shall be construed or interpreted against the Lender on
the one hand, and in favor of the Borrower or any Other Obligor on the other
hand.
SECTION 2. AMOUNT AND TERMS OF LOAN COMMITMENTS
2.1 Revolving Credit Commitment. Subject to the terms and conditions
hereof, the Lender agrees to make revolving credit loans (individually, a
"Revolving Credit Loan" and, collectively, the "Revolving Credit Loans") to the
Borrower from time to time during the Revolving Credit Commitment Period in an
aggregate principal amount at any one time outstanding not to exceed the
Revolving Credit Maximum Amount (the "Revolving Credit Commitment"); provided
that the Revolving Credit Loan Balance shall not at any time exceed an
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21
amount equal to the Revolving Credit Maximum Amount as of such time, minus the
L/C Exposure as of such time. During the Revolving Credit Commitment Period, the
Borrower may use the Revolving Credit Commitment by borrowing, paying the
Revolving Credit Loans in whole or in part, and reborrowing, all in accordance
with and subject to the terms and conditions of this Agreement, including
Subsection 2.10 and 2.20.
2.2 Revolving Credit Note. The Revolving Credit Loans made by the
Lender shall be evidenced by, and payable with interest in accordance with the
Second Amended and Restated Revolving Credit Note dated of even date herewith
(as amended, modified, extended, renewed, supplemented or replaced from time to
time, the "Revolving Credit Note"), payable to the order of the Lender. The date
and amount of each Revolving Credit Loan made by the Lender, and the date and
amount of each payment or prepayment of principal thereof, as reflected on the
Lender's books and records with respect to the Revolving Credit Note, shall
constitute prima facie evidence, absent manifest error, of the accuracy of the
information so reflected. The Revolving Credit Note shall (a) be stated to
mature on the Revolving Credit Termination Date and (b) bear interest on the
unpaid principal amount thereof from time to time outstanding at the applicable
interest rate per annum determined as provided in Subsections 2.13 and 2.14.
Interest on the Revolving Credit Note shall be payable on the dates specified in
Subsection 2.13(f).
2.3 Procedure for Revolving Credit Borrowing. (a) If the Borrower
subscribes to the Lender's Sweep Plus product, the terms of the 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 $5,500,000. The Lender will 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. The
Lender may adjust the Sweep Plus Ceiling not more than once for each of the
Borrower's fiscal quarters. (b) If the Borrower chooses not to subscribe to the
Lender's Sweep Plus product, 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) 2
Business Days prior to the requested Borrowing Date, specifying (i) the amount
to be borrowed, and (ii) the requested Borrowing Date. Each borrowing pursuant
to the Revolving Credit Commitment shall be in an aggregate principal amount of
Fifty Thousand Dollars ($50,000.00) or a whole multiple thereof. The proceeds of
all Revolving Credit Loans will be made available to the Borrower by the Lender
by transfer of such proceeds in immediately available funds to a deposit account
of the Borrower at the Lender designated for such purpose.
2.4 Unused Facility Fee. The Borrower agrees to pay to the Lender an
unused facility fee from and including the first day of the Revolving Credit
Commitment Period to the Revolving Credit Termination Date, computed at the rate
of three-eighths of one percent (3/8%) per annum on the average daily amount of
the Available Commitment during the period for which payment is made, payable
monthly in arrears on the first day of each month, commencing
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January 1, 2000, and on the Revolving Credit Termination Date or such earlier
date as the Revolving Credit Commitment shall terminate as provided herein.
2.5 Reduction of Revolving Credit Commitment. (intentionally deleted).
2.6 Payment at Revolving Credit Termination Date. On the Revolving
Credit Termination Date, the Borrower shall pay to the Lender in full the
Revolving Credit Loan Balance, together with all accrued and unpaid interest
thereon.
2.7 Conversion of Revolving Credit Loans to Convertible Term Loans.
(intentionally deleted).
2.8 Convertible Term Loan Units. (intentionally deleted).
2.9 Convertible Term Loan Note. (intentionally deleted).
2.10 Principal Payments. (a) If the Borrower subscribes to the Lender's
Sweep Plus Product the terms of the product shall control the manner in which
funds are transferred between the Operating Account and the Revolving Credit
Loan for credit or debit to the Revolving Credit Loan. (b) If the Borrower
chooses not to subscribe to the Lender's Sweep Plus Product, 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.
2.11 Interest Rate Conversion Options: Minimum Amount of Loans.
(intentionally deleted).
2.12 Number and Amounts of Eurodollar Tranches. (intentionally
deleted).
2.13 Interest Rates and Payment Dates.
(a) Revolving Credit Loans shall bear interest for the period
from and including the Borrowing Date to the Closing Date on the unpaid
principal amount thereof at a rate per annum equal to the Prime Rate. Revolving
Credit Loans shall bear interest for the period from and after the Closing Date
on the unpaid principal amount at a rate per annum equal to the Prime Rate plus
1%.
(b) (intentionally deleted)
(c) (intentionally deleted)
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23
(d) If an Event of Default shall occur, all Revolving Credit
Loans shall, at the Lender's option, bear interest on the unpaid principal
amount thereof at a rate per annum equal to the Prime Rate plus four percent
(4%) per annum.
(e) Except to the extent prohibited by applicable law, any
judgment or order of any Governmental Authority entered for payment of principal
or any other amounts bearing interest under this Agreement shall bear interest
at the rates and calculated in the manner applicable under this Agreement to
such amounts.
(f) Interest shall be payable in arrears on each Interest
Payment Date, and the Borrower authorizes the Lender to debit the Operating
Account for all such interest payments.
2.14 Computation of Interest and Fees. (a) Unused facility fees under
Subsection 2.4 and interest in respect of the Loans shall be calculated on the
basis of a 360 day year for the actual days elapsed (including the first but
excluding the last day of the relevant period). Any change in the interest rate
on Loans resulting from a change in the Prime Rate (as a result of a change in
the Prime Rate) shall become effective as of the opening of business on the day
on which such change in the Prime Rate shall become effective.
(b) Each determination of an interest rate by the Lender
pursuant to any provision of this Agreement shall be conclusive and binding on
the Borrower in the absence of manifest error.
2.15 Inability to Determine Interest Rate. (intentionally deleted).
2.16 Payments. All payments (including prepayments) to be made by the
Borrower under this Agreement, the Note or any other Credit Document, whether on
account of principal, interest, fees, expenses or other amounts, shall be made
without deduction, setoff or counterclaim and shall be made at the Lender's
office set forth in Subsection 9.3, in lawful money of the United States of
America and in immediately available funds. If any payment hereunder becomes due
and payable on a day other than a Business Day, such payment shall be extended
to the next succeeding Business Day, and, with respect to payments of principal,
interest thereon shall be payable during such extension. The Lender may charge
and deduct from any deposit account of the Borrower at the Lender any amounts
credited to such account and apply the same to pay principal, interest, service
charges, fees, expenses or any other sums or charges due and unpaid under this
Agreement, the Note or any other Credit Documents. The Lender may, in addition
to all other rights and remedies available to it, set off against any
Obligations due and unpaid any sums or property owing to the Borrower by the
Lender or held or controlled by the Lender for the Borrower. The Borrower
confirms the Lender's right to a banker's lien and setoff, and nothing in this
Agreement or any other Credit Document shall be deemed to replace, supercede,
limit, waive or prohibit the Lender's right of banker's lien and setoff.
2.17 Illegality. (intentionally deleted).
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24
2.18 Requirements of Law. (a) If any generally applicable Requirement
of Law or any change therein or in the interpretation or application thereof or
compliance by the Lender with any request or directive (whether or not having
the force of law) from any central bank or other Governmental Authority arising
from and after the Closing Date:
(i) does or shall subject the Lender to any additional tax of
any kind whatsoever with respect to this Agreement or the Note, or change the
basis of taxation of payments to the Lender of principal, fees, interest or any
other amount payable hereunder (except for changes in the rate of tax on the
overall net income of the Lender);
(ii) does or shall impose, modify or hold applicable any
reserve, special deposit, assessment, capital adequacy, compulsory loan or
similar requirement against assets held by, or deposits or other liabilities in
or for the account of, advances or loans by, or other credit extended by, or any
other acquisition of funds by, any office of the Lender; or
(iii) does or shall impose on the Lender any other condition;
and the result of any of the foregoing is to increase the cost to the Lender, by
any amount which the Lender deems to be material, of making, renewing or
maintaining advances or extensions of credit or to reduce any amount receivable
hereunder, then, in any such case, the Borrower shall promptly pay the Lender
upon demand any additional amounts necessary to compensate the Lender for such
additional cost or reduced amount receivable reasonably allocable to this
Agreement, together with interest on such additional amounts from the date
demand is made until payment in full thereof at the rate applicable to Revolving
Credit Loans. If the Lender becomes entitled to claim any additional amounts
pursuant to this Subsection, it shall promptly notify the Borrower of the event
by reason of which it has become so entitled. A certificate as to any additional
amounts payable pursuant to the foregoing sentence submitted by the Lender to
the Borrower shall show the means by which such additional amounts have been
calculated and shall be conclusive in the absence of manifest error. This
covenant shall survive the termination of this Agreement and payment of the Note
for a period of 1 year.
(b) If the Lender shall have determined that the adoption from
and after the Closing Date of any generally applicable law, rule, regulation or
guideline regarding capital adequacy, or any change therein from and after the
Closing Date or in the interpretation or application thereof or compliance by
the Lender or any corporation controlling the Lender with any request or
directive regarding capital adequacy (whether or not having the force of law)
from any central bank or Governmental Authority, including, without limitation,
the issuance of any final rule, regulation or guideline, does or shall have the
effect of reducing the rate of return on the Lender's or such corporation's
capital as a consequence of its obligations hereunder to a level below that
which the Lender or such corporation could have achieved but for such adoption,
change or compliance (taking into consideration the Lender's or such
corporation's policies with respect to capital adequacy) by an amount deemed by
the Lender to be material, then from time to time, within 2 Business Days after
submission by the Lender to the Borrower of a written request therefor showing
the means by which such additional amounts have been
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25
calculated and stating in reasonable detail the reasons therefor, the Borrower
shall pay to the Lender such additional amount or amounts reasonably allocable
to this Agreement as will compensate the Lender for such reduction.
2.19 Taxes. (a) All payments made by the Borrower under this Agreement
shall be made free and clear of, and without reduction or withholding for or on
account of, any present or future income, stamp or other taxes, levies, imposts,
duties, charges, fees, deductions or withholdings, now or hereafter imposed,
levied, collected, withheld or assessed by any Governmental Authority excluding,
in the case of the Lender, net income and franchise taxes imposed on the Lender
by the jurisdiction under the laws of which the Lender is organized or any
political subdivision or taxing authority thereof or therein (all such
non-excluded taxes, levies, imposts, deductions, charges or withholdings being
hereinafter called "Taxes"). If any Taxes are required to be withheld from any
amounts payable to the Lender hereunder, under the Note or under any other
Credit Document, the amounts so payable to the Lender shall be increased to the
extent necessary to yield to the Lender (after payment of all Taxes, including
those payable on additional amounts paid pursuant to this Subsection) interest
or other amounts payable hereunder at the rates or in the amounts specified in
this Agreement, the Note or any other Credit Document. If the Borrower fails to
pay any Taxes when due to the appropriate taxing authority, the Borrower shall
indemnify the Lender for any incremental taxes, interest or penalties that may
become payable by the Lender as a result of any such failure.
(b) The agreements in this Subsection shall survive the
termination of this Agreement and the payment of the Note and all other amounts
payable hereunder and under the other Credit Documents for a period of 1 year.
2.20 Indemnity. (intentionally deleted).
2.21 Certain Calculations (intentionally deleted).
SECTION 3. LETTERS OF CREDIT
3.1 Letter of Credit Commitment. Subject to the terms and conditions
hereof, the Lender agrees to issue for the account of the Borrower standby
letters of credit for such purposes, in such amounts, for the benefit of such
Persons and subject to such terms and conditions as may be acceptable to the
Lender in its discretion .(individually, as amended, modified, extended,
renewed, supplemented or replaced from time to time, a "Letter of Credit," and,
collectively, the "Letters of Credit"), from and including the date of this
Agreement to but not including the date which is 30 days prior to the Revolving
Credit Termination Date (the "L/C Commitment"); provided that the L/C Exposure
shall not on any date exceed an amount equal to the lesser of (a) $4,350,000
through and including February 29, 2000, and $3,500,000 thereafter; and (b) the
Revolving Credit Maximum Amount as of such date, minus the Revolving Credit Loan
Balance as of such date; provided further that no Letter of Credit (including
any renewal or extension thereof, whether or not automatic) shall have an expiry
date which is later than the date which is 1 year after the date of issuance,
renewal or extension of such Letter of Credit; and
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provided further that no Letter of Credit (including any renewal or extension
thereof, whether or not automatic) shall have an expiry date which is later than
the date which is 30 days prior to the Revolving Credit Termination Date; and
provided further that the Lender agrees to extend the February 29, 2000 date set
forth above, to such date as the Lender shall choose in good faith as long as
the Borrower demonstrates to the Lender, on or before February 29, 2000, in the
Lender's sole and absolute discretion, that the Borrower is diligently
attempting to obtain the cancellation of the $1,000,000 Letter of Credit in
favor of The Travelers Insurance Company.
3.2 Procedure for Issuance and Renewal of Letters of Credit. (a) The
Borrower may request the Lender to issue a Letter of Credit by delivering to the
Lender at its office specified in Subsection 9.3 (i) such L/C Agreements as the
Lender may require, completed to the satisfaction of the Lender, (ii) the
proposed form of such Letter of Credit (which shall comply with the applicable
requirements set forth herein) and (iii) such other certificates and documents
and information as the Lender may reasonably request.
(b) The Borrower may request the extension or renewal of a
Letter of Credit issued hereunder which is not automatically renewed in
accordance with the terms contained therein, by giving written notice to the
Lender at least 3 Business Days prior to the then current expiry date of such
Letter of Credit (provided that the Lender may accommodate notices on shorter
notice in its sole discretion).
3.3 Reimbursement of the Lender. In the case of each drawing paid
under any Letter of Credit, the Lender shall promptly notify the Borrower of
such drawing and of the amount thereof, and the Borrower (i) shall reimburse the
Lender for the amount of such drawing not later than the close of business on
the first Business Day following the day on which the Borrower received notice
of such drawing, and (ii) shall pay (A) all charges and expenses relating to
such drawing as may be payable in accordance with Subsection 3.4 or the
applicable L/C Agreements and (B) interest at the rate specified in Subsection
3.5 on the amount of such drawing for the period commencing on and including the
date of payment of such drawing and ending on and including the date the
Borrower reimburses the Lender for such drawing. Notwithstanding any other
provision of this Agreement, the payment by the Lender of each drawing under a
Letter of Credit shall be deemed to constitute an irrevocable notice of
borrowing by the Borrower under Subsection 2.3 and, at any time after such
request, the Lender is irrevocably authorized by the Borrower to, and the Lender
may, make Revolving Credit Loans to the Borrower in an amount equal to the
amount of such payment and any charges, expenses or interest referred to in the
foregoing clauses (A) and (B), notwithstanding any limitations set forth in
Subsection 2.3, and apply the proceeds of such Revolving Credit Loans in payment
of the Borrower's L/C Reimbursement Obligations and other obligations in
connection with such payment.
3.4 Commissions. Fees and Charges. (a) In the case of each issuance,
renewal or extension of any Letter of Credit, the Borrower agrees to pay to the
Lender (i) an issuance fee equal to One Hundred Dollars ($100.00), and (ii) a
commission on the face amount of such Letter of Credit calculated at the L/C
Commission Rate, based upon a year of 360 days and payable for the actual number
of days in the original term, the renewal term or the extended term
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of such Letter of Credit, provided that the amount of such commission shall not
be less than Two Hundred Fifty Dollars ($250.00) per quarter annum (or a portion
thereof).
(b) Payment of the fees set forth in this Subsection shall be a
condition to the issuance of each Letter of Credit; provided that, in the case
of any automatic renewal or automatic extension of any Letter of Credit in
accordance with the terms thereof, such fees shall be paid by the Borrower prior
to the date of such automatic renewal or automatic extension.
(c) In addition to the fees referred to above in this
Subsection, the Borrower agrees to pay or reimburse the Lender for such normal
and customary fees, costs and expenses as are incurred or charged by the Lender
or any correspondents of the Lender in issuing, effecting payment under,
maintaining or administering any Letter of Credit (including, without
limitation, amendment fees, correspondent bank fees, reissuance costs and
cancellation fees) upon notice and invoice by the Lender to the Borrower of such
costs and expenses.
3.5 Interest on Amounts Disbursed under Letters of Credit. The
Borrower agrees to pay to the Lender interest on any and all amounts drawn under
any Letter of Credit until reimbursed in full at a fluctuating rate per annum
equal to the rate applicable to Revolving Credit Loans. Interest accrued
hereunder shall be payable on demand. All payments by the Borrower to the Lender
shall be made in lawful currency of the United States and in immediately
available funds without setoff or counterclaim to the Lender at its office
specified in Subsection 9.3.
3.6 Computation of Interest and Fees; Payment not on Business Days.
(a) Any change in any interest rate under this Section 3 resulting from a change
in the Prime Rate shall become effective as of the opening of business on the
day on which such change in the Prime Rate becomes effective.
(b) If any payment under this Section 3 becomes due and payable
on a day which is not a Business Day, the maturity thereof shall be extended to
the next succeeding Business Day, and, in the case of any amount drawn under a
Letter of Credit, interest thereon shall be payable at the then applicable rate
during such extension.
3.7 Increased Costs. If any generally applicable law or regulation or
other Requirement of Law, or any change in the interpretation or application
thereof by any Governmental Authority charged with the administration thereof,
shall either (a) impose, modify, assess or deem applicable any reserve, special
deposit, assessment, capital adequacy or similar requirement against letters of
credit issued by the Lender or (b) impose on the Lender any other condition
regarding any Letter of Credit, and the result of any event referred to in
clauses (a) or (b) above shall be to increase the cost to the Lender of issuing
or maintaining such Letter of Credit, then, within ten (10) Business Days after
delivery to the Borrower by the Lender of a certificate as to the fact and
amount of such increased cost, the Borrower shall pay to the Lender such
additional amounts reasonably allocable to this Agreement which shall be
sufficient to compensate the Lender for such increased cost, together with
interest on each such amount from the date such certificate is received by the
Borrower until payment in full thereof at the rate
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provided in Subsection 3.5. A certificate as to the fact and amount of such
increased cost incurred by the Lender as a result of any event mentioned in
clauses (a) or (b) above, submitted by the Lender to the Borrower, shall show
the means by which such additional amounts have been calculated and shall be
conclusive, absent manifest error. This covenant shall survive the termination
of this Agreement and payment of the Note for a period of one (1) year.
3.8 Nature of Obligations; Indemnities. (a) The obligations of the
Borrower under this Section 3 shall be absolute and unconditional under any and
all circumstances and irrespective of any setoff, counterclaim or defense to
payment which the Borrower may have or have had against the Lender, any
correspondents of the Lender or any beneficiary of a Letter of Credit; provided
that this provision shall not be deemed a waiver by the Borrower of the
assertion of any compulsory counterclaim. The Borrower assumes all risks of the
acts or omissions of the users of the Letters of Credit and all risks of the
misuse of the Letters of Credit. None of the Lender or any of its correspondents
shall be responsible:
(i) for the form, validity, sufficiency, accuracy,
genuineness or legal effect of any draft drawn under any Letter of Credit or any
document specified in any applications for any of the Letters of Credit, even if
it should in fact prove to be in any or all respects invalid, insufficient,
inaccurate, fraudulent, or forged and even if the Borrower shall have notified
the Lender or any of its correspondents thereof;
(ii) for the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign any of the Letters
of Credit or any of the rights or benefits thereunder or proceeds thereof in
whole or in part, which may prove to be invalid or ineffective for any reason;
(iii) for failure of any draft to bear any reference or
adequate reference to any of the Letters of Credit, or failure of any Person to
note the amount of any draft on the reverse of any of the Letters of Credit or
to surrender or to take up any of the Letters of Credit or to send forward any
such document apart from drafts as required by the terms of any of the Letters
of Credit, each of which provisions, if contained in a Letter of Credit itself,
it is agreed, may be waived by the Lender;
(iv) for errors, omissions, interruptions or delays in
transmission or delivery of any messages, by mail, cable, telegraph, telex or
otherwise, whether or not in cipher;
(v) for any error, neglect, default, suspension or
insolvency of any correspondents of the Lender;
(vi) for errors in translation or for errors in
interpretation of technical terms;
(vii) for any loss or delay, in the transmission or
otherwise, of any such document or draft or of proceeds thereof;
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(viii) for any failure of any draft or document presented
under a Letter of Credit to comply with, or for any determination by the Lender
whether the same complies with, the terms of such Letter of Credit; or
(ix) for any other circumstances whatsoever in making or
failing to make payment under a Letter of Credit; provided that the Borrower
shall have a claim against the Lender, and the Lender shall be liable to the
Borrower, to the extent, but only to the extent, of any direct, as opposed to
consequential, damages suffered by the Borrower which the Borrower proves were
caused by the Lender's willful misconduct or gross negligence. None of the above
shall affect, impair or prevent the vesting of any of the rights or powers of
the Lender. The Lender shall have the right to transmit the terms of the Letter
of Credit as requested without translating them.
(b) In furtherance and extension and not in limitation of the
specific provisions in this Section 3, (i) any action taken or omitted by the
Lender or by any of its correspondents under or in connection with any of the
Letters of Credit, if taken or omitted in good faith or pursuant to instructions
of the Borrower, shall be binding upon the Borrower and shall not put the Lender
or any of its correspondents under any resulting liability to the Borrower and
(ii) the Lender may accept documents that appear on their face to be in order,
without responsibility for further investigation, regardless of any notice or
information to the contrary.
(c) The Borrower hereby agrees at all times to protect,
indemnify and save harmless the Lender and its correspondents from and against
any and all claims, actions, suits and other legal proceedings, and from and
against any and all losses, claims, demands, liabilities, damages, costs,
charges, reasonable counsel fees and other expenses which they or any of them
may, at any time, sustain or incur by reason of or in consequence of or arising
out of the issuance of any of the Letters of Credit unless caused by the
Lender's gross negligence or willful misconduct; it being the intention of the
parties that this Agreement shall be construed and applied to protect and
indemnify the Lender and its correspondents against any and all risks involved
in the issuance of all of the Letters of Credit unless caused by the Lender's
gross negligence or willful misconduct, all of which risks, whether or not
foreseeable, being hereby assumed by the Borrower, including, without
limitation, any and all risks of all acts by any Governmental Authority,
domestic or foreign. The Lender and its correspondents shall not in any way be
liable for any failure by any of them or any other Person to pay a draft drawn
under any of the Letters of Credit as a result of any acts, whether rightful or
wrongful, of any Governmental Authority, or any other cause not readily within
their control or the control of their respective correspondents, agents or
sub-agents. Without limiting the generality of the foregoing, the Borrower shall
reimburse the Lender and its correspondents, and shall pay and indemnify the
Lender and its correspondents, against payment of, out-of-pocket costs and
expenses, withholding taxes, liabilities and damages, including, without
limitation, attorneys' fees, incurred or sustained by any of them in connection
with any of the Letters of Credit or by reason of any such failure to pay. Also,
without limiting the generality of the foregoing, the Borrower shall be
responsible for, and shall reimburse the Lender upon demand for, any and all
commissions, fees and other charges paid or payable by the Lender to any bank
which shall be an advising bank or
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a beneficiary of a Letter of Credit which shall, in reliance thereon, have
issued its own letter of credit in respect of obligations of the Borrower.
3.9 Inconsistency in Documents. In the event of any conflict or
inconsistency between any provision of any L/C Agreement, or the interpretation
or construction thereof, and any provision of this Agreement, or the
interpretation or construction thereof, then the provision of this Agreement, or
the interpretation or construction thereof, shall control.
SECTION 4. REPRESENTATIONS AND WARRANTIES
To induce the Lender to enter into this Agreement and to make the
Revolving Credit Loans and to issue Letters of Credit, the Borrower hereby
represents and warrants to the Lender that:
4.1 Financial Condition. The following financial statements of the
Borrower have been delivered to the Lender:
(a) the audited consolidated statement of income and retained
earnings of the Borrower for the fiscal year of the Borrower ended January 31,
1999, and the audited consolidated statement of cash flows of the Borrower for
such fiscal year, and the audited consolidated balance sheet of the Borrower as
at the end of such fiscal year; and
(b) the statement of income and retained earnings of the
Borrower for the quarterly accounting period of the Borrower ended October 31,
1999, and for the current fiscal year of the Borrower through the end of such
quarterly accounting period, and the statement of cash flows of the Borrower for
such quarterly accounting period and for the current fiscal year of the Borrower
through the end of such quarterly accounting period, and the balance sheet of
the Borrower as at the end of such quarterly accounting period.
The documents listed in this Subsection 4.1 have been prepared in conformity
with GAAP consistently applied, are correct and complete in all material
respects and present fairly the financial position of the Borrower as of the
dates of such statements and the results of operations of the Borrower for the
periods covered by such statements.
4.2 No Change. As of the Closing Date, there shall not have been any
material adverse change in the business, operations, property or financial or
other condition of the Borrower from the date of the most recent financial
statements referred to in Subsection 4.1 hereof.
4.3 Organization and Good Standing; Compliance with Law. The Borrower
(a) is a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware, (b) has the legal right to own and operate
its property, to lease the property it operates as lessee and to conduct the
business in which it is currently engaged, (c) is duly qualified to conduct
business and is in good standing under the laws of the State of Delaware, the
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Commonwealth of Virginia, the Commonwealth of Pennsylvania, the State of Texas,
the State of Illinois, the State of California and each other jurisdiction in
which such qualification is required by applicable law, and (d) is in compliance
with all Requirements of Law except to the extent that the failure to comply
therewith could not, in the aggregate, reasonably be expected to have a Material
Adverse Effect.
4.4 Authorization; Enforceable Obligations. The Borrower has the legal
right to make, deliver and perform the Credit Documents to which it is a party
and to borrow hereunder and has taken all necessary action to authorize the
borrowings on the terms and conditions of this Agreement and the Note and to
authorize the execution, delivery and performance of the Credit Documents to
which it is a party. No consent or authorization of, filing with or other act by
or in respect of any Governmental Authority is required in connection with the
borrowings hereunder or with the execution, delivery, performance, validity or
enforceability of the Credit Documents to which the Borrower is a party except
those which have been obtained or performed and are in full force and effect.
This Agreement has been, and each other Credit Document to which it is a party
will be, duly executed and delivered on behalf of the Borrower. This Agreement
constitutes, and each other Credit Document to which it is a party when executed
and delivered will constitute, a legal, valid and binding obligation of the
Borrower enforceable against the Borrower in accordance with its terms, except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
4.5 No Legal Bar. The execution, delivery and performance of the
Credit Documents to which the Borrower is a party, the borrowings hereunder and
the use of the proceeds thereof, will not violate any Requirement of Law or any
Contractual Obligation of the Borrower, and will not result in, or require, the
creation or imposition of any Lien on any of its properties or revenues pursuant
to any Requirement of Law or Contractual Obligation, except as contemplated by
the Credit Documents.
4.6 No Material Litigation; Labor Matters. Except as set forth in
Schedule 4.6, no litigation, proceeding or, to the Borrower's actual knowledge,
investigation of or before any arbitrator or Governmental Authority is pending
or, to the knowledge of the Borrower, threatened by or against the Borrower or
against any of its properties or revenues (a) with respect to any of the Credit
Documents or any of the transactions contemplated hereby or thereby, or (b)
which, if determined adversely to the Borrower, could reasonably be expected to
have a Material Adverse Effect. There are no strikes, work stoppages, grievance
proceedings or other controversies pending or, to the knowledge and belief of
the Borrower, imminent or threatened between the Borrower and any employees of
the Borrower or between the Borrower and any union or other collective
bargaining unit representing employees of the Borrower which could reasonably be
expected to have a Material Adverse Effect.
4.7 No Default. The Borrower is not in default under or with respect
to any Contractual Obligation in any respect which could reasonably be expected
to have a Material Adverse Effect. As of the date hereof, no Default or Event of
Default has occurred and is
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continuing and, as of the Closing Date, no Default or Event of Default shall
have occurred and be continuing.
4.8 Ownership of Property; Liens. The Borrower has good title to all
of its property, and none of such property is subject to any Lien, except as
permitted by Subsection 7.3. The Borrower is not the taxpayer against whom the
State of Texas filed in Dallas County, Texas, on July 5, 1990, a state tax lien
in the amount of $23,341.01, no. 90130-2027.
4.9 Business Premises. The Borrower does not own, lease, sublease,
occupy, use or operate any real property or improvements other than the Borrower
Business Premises. The Borrower's chief executive office (within the meaning of
Section 9-103 of the Virginia Uniform Commercial Code) is located at the
Borrower Chief Executive Office. All financial books and records of the Borrower
are located at the Borrower Business Premises.
4.10 Subsidiaries. The Borrower has no Subsidiaries except for the
Canadian Corporations.
4.11 Environmental. To the Borrower's knowledge and except as set forth
in Schedule 4.11: (a) no Hazardous Substance has been released, discharged,
spilled, emitted or disposed of on any Obligor Use Property by the Borrower or
under circumstances as a result of which the Borrower would be liable or
financially responsible for damages or the cost of remediation or clean-up; (b)
there is no existing Hazardous Substance Contamination of any Obligor Use
Property which was caused by the Borrower or under circumstances as a result of
which the Borrower would be liable or financially responsible for damages or the
cost of remediation or clean-up; (c) all operations now or previously conducted
on Obligor Use Property by the Borrower comply with all Environmental Laws; (d)
no underground storage tanks have been installed on any Obligor Use Property by
the Borrower or under circumstances as a result of which the Borrower would be
liable or financially responsible for damages or the cost of removal,
remediation or cleanup; and (e) except as set forth in Schedule 4.11, the
Borrower has not received, and is not aware of, any Environmental Claim against,
relating to or affecting in any way the Borrower or the Borrower's use of any
Obligor Use Property or any operations conducted on any Obligor Use Property by
the Borrower.
4.12 Solvency. On the Closing Date and after giving effect to the
borrowings hereunder on such date and to all other Indebtedness being incurred
on such date in connection therewith (a) the sum of the assets, at a fair
valuation, of the Borrower will, as of such date, exceed the Borrower's debts as
reflected in its most current balance sheet, (b) the present fair saleable value
of the assets of the Borrower will, as of such date, be greater than the amount
that will be required to pay the Borrower's liability on its debts as such debts
become absolute and matured, and (c) the Borrower will have, as of such date,
sufficient capital with which to conduct its business. For purposes of this
Subsection, "debt" means "liability on a claim" and "claim" means any (i) right
to payment, whether or not such right is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed,
legal, equitable, secured or unsecured, or (ii) right to an equitable remedy for
breach of performance if such breach gives rise to a right to payment, whether
or not such right to an equitable remedy is
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reduced to judgment, fixed, contingent, matured, unmatured, disputed,
undisputed, secured or unsecured.
4.13 Taxes. The Borrower has filed or caused to be filed all tax
returns which are required to be filed by the Borrower, and the Borrower has
paid all taxes shown to be due and payable on said returns or on any assessments
made against it or any of its property and all other taxes, fees or other
charges imposed on it or any of its property by any Governmental Authority
(other than any taxes the amount or validity of which are currently being
contested in good faith by appropriate proceedings and with respect to which
reserves in conformity with GAAP have been provided on the books of the
Borrower); and no tax lien has been filed and, to the knowledge of the Borrower,
no claim is being asserted with respect to any such tax, fee or other charge.
4.14 Federal Regulations. (a) No part of the proceeds of any of the
Loans will be used for "purchasing" or "carrying" any "margin stock" within the
respective meanings of each of the quoted terms under Regulation U of the Board
of Governors of the Federal Reserve System as now and from time to time
hereafter in effect or for any purpose which violates the provisions of any
Regulations of such Board of Governors; and (b) if requested by the Lender, the
Borrower will furnish to the Lender a statement to the foregoing effect in
conformity with the requirements of FR Form U-I referred to in said Regulation
U.
4.15 Employee Matters.
(a) With respect to each employee pension benefit plan, as
defined in Section 3(2) of the ERISA (a "Retirement Plan"), established or
maintained or to which contributions have been made by or for the Borrower, or
any Subsidiary of the Borrower (including, for purposes of this Section, any
Commonly Controlled Entity):
(i) each Retirement Plan, including all amendments, that
is intended to be a qualified plan under Section 401 of the Code (a "Qualified
Plan"), is the subject of a favorable determination letter from the Internal
Revenue Service (or an application for such a letter is presently pending);
(ii) each Qualified Plan is and has at all times been
qualified, in form and operation, under Section 401(a) of the Code;
(iii) the Retirement Plan is and has at all times been
administered, maintained and operated in compliance with its terms and with all
applicable provisions of the Code, ERISA and all other applicable Requirements
of Law;
(iv) neither the Borrower nor any Subsidiary of the
Borrower, nor, to the actual knowledge of any director or officer of the
Borrower or any Subsidiary of the Borrower, any other Person who or which is a
"party in interest" (as defined in Section 3(14) of ERISA), or a "disqualified
person" (as defined in Section 4975(e)(2) of the Code), has acted or failed to
act with respect to the Retirement Plan in any manner which constitutes a breach
of
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fiduciary responsibility within the meaning of Title I. Subtitle B, Part 4 of
ERISA, a prohibited transaction within the meaning of Section 4975 of the Code
or Sections 406 through 408 of ERISA, or any other material violation of ERISA;
(v) no contributions to or benefits payable under the
Retirement Plan are past due;
(vi) no proceedings or investigations are pending before
the Internal Revenue Service, the Department of Labor or any court with respect
to the Retirement Plan or the operation thereof;
(vii) if the Retirement Plan is a multiemployer plan, as
defined in Sections 3(37) or 4001(a)(3) of ERISA, neither the Borrower nor any
Subsidiary of the Borrower has incurred, and neither the Borrower nor any
Subsidiary of the Borrower expects to incur, any withdrawal liability which has
not been satisfied in connection with any complete or partial withdrawal from
the Retirement Plan occurring on or before the date hereof; and
(viii) if subject thereto, the Retirement Plan has been
funded in accordance with the minimum funding standards described in Section 412
of the Code and Title I, Subtitle B, Part 3 of ERISA (for which purpose there is
no "accumulated funding deficiency," whether or not waived), and in accordance
with principles that are actuarially sound for such Retirement Plan.
(b) With respect to each Retirement Plan which is a defined
benefit plan, as defined in Section 3(35) of ERISA:
(i) no event has occurred within the twelve (12)-month
period preceding the date hereof, or, to the knowledge of any director or
officer of the Borrower or any Subsidiary of the Borrower, is threatened or
about to occur, which would materially adversely affect the actuarial status of
the Retirement Plan;
(ii) no fact exists in connection with the Retirement
Plan (or with respect to any other defined benefit plan maintained by the
Borrower or any Subsidiary of the Borrower at any time after September 2, 1974)
which constitutes a reportable event (other than those for which notice has been
waived by the PBGC) under Section 4043(b) of ERISA or which constitutes grounds
for termination by, or other liability to, the PBGC pursuant to Title IV of
ERISA;
(iii) all premiums due the PBGC have been timely paid; and
(iv) if the Retirement Plan were terminated, the
termination would qualify under the standard termination procedure, as described
in Section 4041(b) of ERISA (and Part 2617 of the PBGC regulations), without
payment of any additional contributions by the Borrower or any Subsidiary of the
Borrower.
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(c) With respect to each employee welfare benefit plan, as
defined in Section 3(1) of ERISA (a "Welfare Plan"), established or maintained
or to which contributions have been made by or for the Borrower or any
Subsidiary of the Borrower:
(i) the Welfare Plan is and has at all times been
administered, maintained and operated in substantial compliance with its terms
and with all applicable provisions of ERISA and the Code (including the
continuation coverage requirements for group health plans, commonly known as
"COBRA requirements," under former Sections 106(b), 162(i)(2) and (3), and
162(k) of the Code, Section 4980B of the Code and Sections 601-608 of ERISA) and
all other applicable Requirements of Law;
(ii) neither the Borrower nor any Subsidiary of the
Borrower nor, to the actual knowledge of any director or officer of the Borrower
or any Subsidiary of the Borrower, any other Person who or which is a party in
interest as defined in Section 3(14) of ERISA, has acted or failed to act with
respect to the Welfare Plan in any manner which constitutes a breach of
fiduciary responsibility within the meaning of Title I, Subtitle B, Part 4 of
ERISA, a prohibited transaction within the meaning of Sections 406 through 408
of ERISA, or any other violation of ERISA;
(iii) no contributions to or benefits payable under the
Welfare Plan are past due;
(iv) no proceedings, investigations, filings or other
matters are pending before the Department of Labor or any court, with respect to
the Welfare Plan or the operation thereof; and
(v) the Welfare Plan is either unfunded or is funded
solely through insurance contracts.
(d) All Retirement Plans and Welfare Plans (jointly "Benefit
Plans") are in substantial compliance with all applicable reporting, disclosure
and other requirements of the Code and ERISA.
(e) There are no actions, suits or claims pending or, to the
best knowledge of the Borrower or any Subsidiary of the Borrower, threatened
with respect to any Benefit Plan, or any administrator or fiduciary thereof,
other than routine claims for benefits under such Plan.
4.16 Investment Company Act; Other Regulations. The Borrower is not an
"investment company", or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended.
4.17 Accuracy and Completeness of Information. All information and
reports with respect to the Borrower (other than projections) furnished to the
Lender by the Borrower or on behalf of the Borrower were, at the time the same
were so furnished, complete and correct in
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36
all material respects, or have been subsequently supplemented by other
information and reports to the extent necessary to give the Lender a fair and
accurate knowledge of the subject matter in all material respects. All
projections with respect to the Borrower so furnished by the Borrower, as
supplemented, were prepared and presented in good faith, it being recognized by
the Lender that such projections as to future events are not to be viewed as
facts and that actual results during the period or periods covered by any such
projections may differ from the projected results. No fact is known to the
Borrower which materially and adversely affects or in the future may (so far as
the Borrower can reasonably foresee) materially and adversely affect the
business, assets or liabilities, financial condition, results of operations or
business prospects of the Borrower which has not been set forth in the financial
statements referred to in Subsection 4.1 or in such information and reports
disclosed in writing to the Lender prior to the date hereof. No document
furnished or statement made in writing to the Lender by the Borrower in
connection with the negotiation, preparation or execution of this Agreement
contains any untrue statement of a material fact, or omits to state any such
material fact necessary in order to make the statements contained therein not
misleading, in either case which has not been corrected, supplemented or
remedied by subsequent documents furnished or statements made in writing to the
Lender.
4.18 Purpose of Loans. The proceeds of all Revolving Credit Loans shall
be used by the Borrower to provide working capital and to fund a limited amount
of Capital Expenditures.
4.19 CLCQ and Delta College. (a) Each of CLCQ and Delta College (i) is
a Quebec corporation duly organized, validly existing and in good standing, (ii)
has the legal right to own and operate its property, to lease the property it
operates as lessee and to conduct the business which it is currently engaged,
(iii) is duly qualified to conduct business and is in good standing in each
jurisdiction in which such qualification is required by applicable Requirement
of Law, and (iv) is in compliance with all Requirements of Law except to the
extent that the failure to comply therewith could not, in the aggregate,
reasonably be expected to have a Material Adverse Effect.
(b) The authorized capital stock of CLCQ consists of two (2)
classes, namely Common Shares, having voting rights, and Dividend Access Shares,
having no voting rights except as provided in Sections 10.1, 11.1 and 12.2 of
the Articles of Incorporation of CLCQ. All of the issued and outstanding capital
stock of each class of CLCQ stock is legally and beneficially owned by the
persons and in the amounts set forth in Exhibit F attached hereto. All of the
issued and outstanding capital stock of each class of Delta College is legally
and beneficially owned by CLCQ, with the discretionary power and right to
exercise all rights and privileges, including voting rights, with respect
thereto.
(c) No litigation, proceeding or, to the Borrower's actual
knowledge, investigation of or before any arbitrator or Governmental Authority
is pending or, to the knowledge of the Borrower, threatened by or against CLCQ
or Delta College or against any of their properties or revenues which, if
determined adversely to CLCQ or Delta College, as the case may be, could
reasonably be expected to have a Material Adverse Effect. There are no strikes,
work stoppages, grievance proceedings or other controversies pending or, to the
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knowledge and belief of the Borrower, imminent or threatened between CLCQ or
Delta College and any employees of CLCQ or Delta College, respectively, or
between CLCQ or Delta College and any union or other collective bargaining unit
representing employees of CLCQ or Delta College, respectively, which could
reasonably be expected to have a Material Adverse Effect.
(d) Neither CLCQ nor Delta College is in default under or with
respect to any Contractual Obligation in any respect which could reasonably be
expected to have a Material Adverse Effect. The sum of the assets of each of
Delta College and CLCQ, at a fair valuation, exceeds the debts of CLCQ and Delta
College, respectively, exclusive, in the case of Delta College, of debts of
Delta College to the Borrower or CLCQ. The present fair salable value of the
assets of each of CLCQ and Delta College is greater than the amount required to
pay the liability on its debts of CLCQ and Delta College, respectively, as such
debts become absolute and matured, exclusive, in the case of Delta College, of
debts of Delta College to the Borrower or CLCQ. Each of CLCQ and Delta College
has sufficient capital with which to conduct its business. For purposes of this
Subsection, "debt" means "liability on a claim" and "claim" means any (i) right
to payment, whether or not such right is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed,
legal, equitable, secured or unsecured, or (ii) right to an equitable remedy for
breach of performance if such breach gives rise to a right to payment, whether
or not such right to an equitable remedy is reduced to judgment, fixed,
contingent, matured, unmatured, disputed, undisputed, secured or unsecured.
(e) Each of CLCQ and Delta College has good title to all of its
property, and none of such property is subject to any Lien, except as permitted
by Subsection 7.3.
(f) To the Borrower's knowledge: (i) no Hazardous Substance has
been released, discharged, spilled, emitted or disposed of on any Obligor Use
Property by CLCQ or Delta College would be liable or financially responsible for
damages or the cost of remediation or clean-up; (ii) there is no existing
Hazardous Substance Contamination of any Obligor Use Property which was caused
by CLCQ or Delta College or under circumstances as a result of which CLCQ or
Delta College would be liable or financially responsible for damages or the cost
of remediation or clean-up; (iii) all operations now or previously conducted on
Obligor Use Property by CLCQ or Delta College comply with all Environmental
Laws; (iv) no underground storage tanks have been installed on any Obligor Use
Property by CLCQ or Delta College or under circumstances as a result of which
CLCQ or Delta College would be liable or financially responsible for damages or
the cost of removal, remediation or clean-up; and (v) neither CLCQ nor Delta
College has received, and neither CLCQ nor Delta College is aware of, any
Environmental Claim against, relating to or affecting in any way CLCQ or Delta
College or the use of any Obligor use Property by CLCQ or Delta College or any
operations conducted on any Obligor Use Property by CLCQ or Delta College.
(g) Each of CLCQ and Delta College has filed or caused to be
filed all tax returns which are required to be filed by it, and each of CLCQ and
Delta College has paid all taxes shown to be due and payable on said returns on
any assessments made against it or any of
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its property and all other taxes, fees or other charges imposed on it or any of
its property by an Governmental Authority (other than taxes the amount or
validity of which are currently being contested in good faith by appropriate
proceedings and with respect to which reserves in conformity with GAAP have been
provided on the books of CLCQ or Delta College, as applicable), and, to the
knowledge of the Borrower, no claim is being asserted with respect to any such
tax, fee or other charge. No tax lien has been filed against CLCQ or Delta
College or any of their assets.
SECTION 5. CONDITIONS PRECEDENT
5.1 Documents and Other Deliveries at Closing. No waiver or other
agreement of the Lender as set forth in this Agreement or any other document
executed contemporaneously with this Agreement shall be effective or binding on
the Lender until and unless the Lender shall have received:
(a) Credit Documents. In form and content satisfactory to the
Lender: (i) this Agreement, duly executed and delivered by an Authorized Officer
of the Borrower; (ii) the Second Amended and Restated Revolving Credit Note,
conforming to the requirements hereof and duly executed and delivered by an
Authorized Officer of the Borrower; (iii) the Amended and Restated Security
Agreement duly executed and delivered by an Authorized Officer of the Borrower;
and (iv) such financing statements executed by the Borrower as the Lender may
require to further evidence or perfect the rights and interests granted or
contemplated to be granted to or for the benefit of the Lender pursuant to the
Credit Documents.
(b) Borrowing Certificate. A Borrowing Certificate of the
Borrower dated the Closing Date, substantially in the form of Exhibit D, with
appropriate insertions and attachments, satisfactory in form and substance to
the Lender and its counsel, duly executed by an Authorized Officer of the
Borrower.
5.2 Post-Closing Requirements.
The Borrower shall deliver to the Lender, on or before January 14, 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 Agreement and
the other Credit Documents as described in subparagraph (a) above and (c) below,
as applicable, (ii) the borrowings contemplated thereunder and (iii) the
granting by it of the security interests and other Liens granted or to be
granted by it pursuant to the Credit Documents, Certified as to authenticity by
an Authorized Officer of the Borrower, as of the Closing Date, which certificate
shall state that the proceedings thereby Certified are in full force and effect
and have not been amended, modified, revoked or rescinded as of the date of such
certificate.
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(b) Borrower Incumbency Certificate. Certificate of an
Authorized Officer of the Borrower, dated the Closing Date, as to the incumbency
and signature of the Authorized Officers of the Borrower executing any Credit
Document, satisfactory in form and substance to the Lender and its counsel, duly
executed by the Authorized Officers of the Borrower.
(c) Subsidiary Credit Documents. In form and content
satisfactory to the Lender: (i) an Unconditional Guaranty duly executed and
delivered by an Authorized Officer of CLCQ in an amount and on such terms to the
fullest extent permitted by law; (ii) an Unconditional Guaranty duly executed
and delivered by an Authorized Officer of Delta College in an amount and on such
terms to the fullest extent permitted by law; (iii) a Deed of Hypothec duly
executed and delivered by an Authorized Officer of CLCQ on such terms as are to
the fullest extent permitted by law; (iv) a Deed of Hypothec duly executed and
delivered by an Authorized Officer of Delta College on such terms as are to the
fullest extent permitted by law; and (v) a Subordination Agreement among the
Borrower, the Lender, CLCQ and Delta College.
(d) Consents. True and complete copies (in each case Certified
as to authenticity on such date by an Authorized Officer of the Borrower or CLCQ
or Delta College, as the case may be) of all documents and instruments,
including all consents, authorizations and filings, required or advisable under
any Requirement of Law or by Contractual Obligations of the Borrower or CLCQ or
Delta College, in connection with the execution, delivery, performance, validity
and enforceability of this Agreement, the Note and the other Credit Documents,
and such consents, authorizations and filings shall be satisfactory in form and
substance to the Lender and in full force and effect.
(e) 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.
(f) 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 5.2 (c) above, (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 and effect and have not been amended, modified, revoked or rescinded as of
the date of such certificate.
(g) Subsidiary Incumbency Certificate. Certificates 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, satisfactory in form and substance to the Lender and its
counsel, duly executed by the Authorized Officers of CLCQ and Delta College.
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(h) Subsidiary Organizational Documents. True and complete
copies of the certificate of incorporation and bylaws (or comparable documents)
of each of CLCQ and Delta College, Certified as true and complete copies
thereof by an Authorized Officer of each of CLCQ and Delta College.
(i) Filings, Registrations and Recordings. All filings,
registrations and recordings necessary, in the judgment of the Lender, to
perfect, make enforceable or give first priority to any security interest or
other Lien granted to or for the benefit of the Lender pursuant to the Credit
Documents, with the payment of any necessary fee, tax or expense relating
thereto.
(j) Legal Opinions. The executed legal opinion of counsel to
the Borrower and each of CLCQ and Delta College, in form and content
satisfactory to the Lender. Such legal opinion shall cover such matters incident
to the transactions contemplated by this Agreement and the other Credit
Documents as the Lender may reasonably require.
(k) 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.
(l) Other Documents. Such other documents as the Lender or its
counsel shall reasonably require.
(m) Payment of Expenses. Payment of all expenses of the Lender
then incurred, pursuant to Section 9.6 below.
5.3 Conditions to Each Loan. The agreement of the Lender to make any
Revolving Credit Loan requested to be made by it on any date, or to issue any
Letter of Credit requested to be issued by it on any date, is subject to the
satisfaction of the following conditions precedent as of the date such Revolving
Credit Loan is requested to be made or such Letter of Credit is requested to be
issued:
(a) Representations and Warranties. Each of the representations
and warranties made by the Borrower in or pursuant to the Credit Documents shall
be true and complete in all material respects on and as of such date as if made
on and as of such date.
(b) No Default. No Default or Event of Default shall be
continuing on such date.
(c) No Material Litigation. No Material Litigation shall be
pending or, to the Borrower's knowledge, overtly threatened in writing against
the Borrower or any Subsidiary of the Borrower.
(d) No Material Adverse Change. There shall not have occurred
any event or change since the date of the financial statements referred to in
Subsection 4.1 which has had a Material Adverse Effect.
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(e) Additional Matters. All corporate and other proceedings,
and all documents, instruments and other legal matters in connection with the
transactions contemplated by this Agreement and the other Credit Documents shall
be satisfactory in form and substance to the Lender, and the Lender shall have
received such other instruments, legal opinions and other documents in respect
of any aspect or consequence of the transactions contemplated hereby or thereby
as the Lender shall reasonably request. Each borrowing by the Borrower hereunder
shall constitute a representation and warranty by the Borrower as of the date of
such borrowing that the conditions contained in this Subsection 5.2 have been
satisfied.
SECTION 6. AFFIRMATIVE COVENANTS
The Borrower agrees that, until all of the Obligations have been paid in
full and there exists no contingent or non-contingent commitment by the Lender
which could give rise to any Obligations, the Borrower shall:
6.1 Financial Information. Furnish to the Lender by mail at 0000 Xxxxx
Xxxxxx Xxxx, XX-0000, XxXxxx, Xxxxxxxx 00000-0000, attention J. Xxxxx Xxxxxxxxx,
or by facsimile to J. Xxxxx Xxxxxxxxx at 000-000-0000:
(a) as soon as available, but in no event more than 35 days
after the end of each month of February, March, May, June, August, September,
November and December, a statement of income and retained earnings of the
Borrower and its Subsidiaries for the month, a balance sheet of the Borrower and
its Subsidiaries as of the end of the month, and a statement of cash flows for
the Borrower and its Subsidiaries for the month, all with supporting schedules,
and all in detail and scope satisfactory to the Lender, including sufficient
detail showing the calculation of each component of each financial covenant set
forth in Subsection 7.1 below, and Certified by the chief financial officer of
the Borrower;
(b) as soon as available, but in no event more than 45 days
after the end of each fiscal quarter ending on April 30, July 31 and October 31,
a statement of income and retained earnings of the Borrower and its Subsidiaries
for the quarter, a balance sheet of the Borrower and its Subsidiaries as of the
end of the quarter, and a statement of cash flows for the Borrower and its
Subsidiaries for the quarter, all with supporting schedules, and all in detail
and scope satisfactory to the Lender, including sufficient detail showing the
calculation of each component of each financial covenant set forth in Subsection
7.1 below, and Certified by the chief financial officer of the Borrower;
(c) as soon as available but in no event more than 60 days
after the end of each fiscal year, a statement of income and retained earnings
for the Borrower and its Subsidiaries for the fiscal year, a balance sheet of
the Borrower and its Subsidiaries as of the end of the fiscal year, and a
statement of cash flows for the Borrower and its Subsidiaries for the fiscal
year, all with supporting schedules, and all in detail and scope satisfactory to
the Lender,
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including sufficient detail showing the calculation of each component of each
financial covenant set forth in Subsection 7.1 below, and Certified by the chief
financial officer of the Borrower;
(d) not later than the earlier of (i) 24 hours after filing
with the Securities and Exchange Commission or (ii) 55 days after the end of
each quarterly accounting period of the Borrower (A) a copy of the Borrower's
Securities and Exchange Commission Form l0-Q containing a consolidated statement
of income and retained earnings of the Borrower and its Subsidiaries for such
quarterly accounting period and for the current fiscal year of the Borrower
through the end of such quarterly accounting period, and a consolidated
statement of cash flows of the Borrower and its Subsidiaries for the current
fiscal year of the Borrower through the end of such quarterly accounting period,
and a consolidated balance sheet of the Borrower and its Subsidiaries as of the
end of such quarterly accounting period, all prepared in accordance with GAAP
consistently applied, and accompanied by (x) an Officer Default Certificate as
of the end of such quarterly accounting period, and (y) an Officer Financial
Covenant Certificate as of the end of such quarterly accounting period, and, if
applicable, (B) a consolidating statement of income and retained earnings of the
Borrower and its Subsidiaries for such quarterly accounting period and for the
current fiscal year of the Borrower through the end of such quarterly accounting
period, and a consolidating statement of cash flows of the Borrower and its
Subsidiaries for such quarterly accounting period and for the current fiscal
year of the Borrower through the end of such quarterly accounting period, and a
consolidating balance sheet of the Borrower and its Subsidiaries as of the end
of such quarterly accounting period, all prepared in accordance with GAAP
consistently applied;
(e) not later than 55 days after the end of each quarterly
accounting period of the Borrower and in form and content satisfactory to
Lender, a schedule and aging of student account receivables of the Borrower and
its Subsidiaries as of the end of such quarterly accounting period;
(f) not later than the earlier of (i) 24 hours after filing
with the Securities and Exchange Commission or (ii) 100 days after the end of
each fiscal year of the Borrower (A) a copy of the Borrower's Securities and
Exchange Commission Form 10-K containing a consolidated statement of income and
retained earnings of the Borrower and its Subsidiaries for such fiscal year, and
a consolidated statement of cash flows of the Borrower and its Subsidiaries for
such fiscal year, and a consolidated balance sheet of the Borrower and its
Subsidiaries as at the end of such fiscal year, setting forth in each case in
comparative form corresponding figures for the preceding fiscal year of the
Borrower, all prepared in accordance with GAAP consistently applied and examined
and audited by independent certified public accountants satisfactory to the
Lender, in the discretion of the Lender exercised in good faith, and accompanied
by (w) a report of such independent certified public accountants with respect to
such financial statements and examination which is satisfactory to the Lender,
(x) an Accountant Default Certificate, (y) an Officer Financial Covenant
Certificate as at the end of such fiscal year, and (z) an Officer Default
Certificate as at the end of such fiscal year, and (zz) an Officer Financial Aid
Program Certificate for each fiscal year, and, if applicable, (B) a
consolidating statement of income and retained earnings of the Borrower and its
Subsidiaries for such
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fiscal year, and a consolidating statement of cash flows of the Borrower and its
Subsidiaries for such fiscal year, and a consolidating balance sheet of the
Borrower and its Subsidiaries as at the end of such fiscal year, setting forth
in each case in comparative form corresponding figures for the preceding fiscal
year of the Borrower, all prepared in accordance with GAAP consistently applied
by independent certified public accountants satisfactory to the Lender, in the
discretion of the Lender exercised in good faith;
(g) as soon as available but not later than April 30 of each
year, a copy of projections by the Borrower of the operating budget and cash
flow of the Borrower and its Subsidiaries for the fiscal year of the Borrower
and its Subsidiaries, in substantially the form attached as Exhibit E; and (ii)
as soon as available but not later than one (1) week after its submission to the
U.S. Department of Education, a copy of a compliance audit of the administration
by the Borrower and its Domestic Subsidiaries of Student Financial Aid Programs
under Title IV of the Higher Education Act of 1965 conducted by independent
certified public accountants or a government auditor and complying with all
Requirements of Law;
(h) promptly after transmission thereof, copies of all
registration statements and all final regular, special or periodic reports which
the Borrower or any of its Subsidiaries files with the United States Securities
and Exchange Commission (or any successor thereto) or with any stock exchange;
and
(i) promptly, such additional financial and other information
as the Lender may from time to time reasonably request.
6.2 Payment of Obligations. Pay, discharge or otherwise satisfy at or
before maturity or before they become delinquent, as the case may be, all of its
obligations of whatever nature; and cause each of its Subsidiaries to pay,
discharge or otherwise satisfy at or before maturity or before they become
delinquent, as the case may be, all of its obligations of whatever nature.
6.3. Conduct of Business and Maintenance of Existence. (a) Continue,
and cause each of its Subsidiaries to continue, to engage in the business of
information technology education; (b) preserve, renew and keep in full force and
effect, and cause each of its Subsidiaries to preserve, renew and keep in full
force and effect, its organizational existence; (c) take, and cause each of its
Subsidiaries to take, all reasonable action to maintain all rights, privileges
and franchises necessary or desirable in the normal conduct of its business; and
(d) comply with, and cause each of its Subsidiaries to comply with, all
Contractual Obligations and Requirements of Law except to the extent that
failure to comply therewith could not, in the aggregate, reasonably be expected
to have a Material Adverse Effect.
6.4 Maintenance of Property; Insurance. (a) Keep, and cause each of
its Subsidiaries to keep, all property useful and necessary in its business in
good working order and condition; and (b) maintain, and cause each of its
Subsidiaries to maintain, with financially sound and reputable insurance
companies such insurance in at least such amounts and against at least such
risks (but including in any event property casualty, liability, product
liability and
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business interruption) as is reasonably prudent, such insurance being acceptable
to the Lender; and furnish to the Lender, upon written request, full information
as to the insurance carried.
6.5 Inspection of Property and Books and Records. (a) Keep, and cause
each of its Subsidiaries to keep, proper books and records in which true and
complete entries in conformity with GAAP and all Requirements of Law shall be
made of all dealings and transactions in relation to its business and
activities; and (b) permit representatives of the Lender to visit and inspect
any of its properties to review, audit, check and inspect the Borrower's books
and records at any time with or without notice and to make abstracts and
photocopies thereof, and to discuss the affairs, finances and accounts of the
Borrower with the officers, directors, and other representatives of the Borrower
and its accountant all at such times during normal business hours and other
reasonable times and as often as the Lender may request. The Borrower shall pay
to the Lender, upon demand, a cost of all such audits, field examinations,
reviews, verifications and inspections.
6.6 Notices. Promptly give notice to the Lender:
(a) of the occurrence of any Default or Event of Default;
(b) (i) of receipt of any written notice of any default or
event of default under or as defined in any Contractual Obligation of the
Borrower or any of its Subsidiaries which could reasonably be expected to have a
Material Adverse Effect; (ii) of any notice or knowledge that the Borrower, any
of its Domestic Subsidiaries or any Borrower Institution, or any educational
program of any thereof, has been Disqualified, accompanied by a written
calculation by the Borrower of the Disqualified Revenues Ratio as of the date
that the Borrower, such Domestic Subsidiary, such Borrower Institution or such
educational program was Disqualified, and (iii) of any notice or knowledge of
any action or proceeding against, or any investigation or review of, the
Borrower, any of its Subsidiaries or any Borrower Institution, or any
educational program conducted by any thereof, by or on behalf of any accrediting
agency, the Department of Education or any State of the United States of America
or any other Governmental Authority;
(c) of Material Litigation pending or overtly threatened in
writing against the Borrower or any of its Subsidiaries;
(d) of any litigation or proceeding pending against the
Borrower or any of its Subsidiaries involving an uninsured amount of Five
Hundred Thousand Dollars ($500,000.00) or more or in which injunctive or similar
relief is sought; and
(e) of the occurrence of any event which could reasonably be
expected to have a Material Adverse Effect.
Each notice pursuant to this Subsection shall be accompanied by a statement of
an Authorized Officer setting forth details of the occurrence referred to
therein and stating what action the Borrower proposes to take with respect
thereto.
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6.7 Government Regulations. Subject to any other more specific
provisions of this Agreement, comply with, and cause each of its Subsidiaries to
comply with, all applicable Requirements of Law relating to the conduct of its
business.
6.8 Employee Benefit Plans. (a) At all times administer, maintain and
operate, and cause each Subsidiary of the Borrower at all times to administer,
maintain and operate, each of its Benefit Plans in conformity in all material
respects with all applicable provisions of ERISA and other federal and state
statutes relating to employee benefit plans (including the continuation coverage
requirements of ERISA and the Code for group health plans under Section 4980B of
the Code and Sections 601-608 of ERISA); (b) at all times make, and cause each
such Subsidiary of the Borrower at all times to make, all required contributions
and premium payments under each Benefit Plan for all periods after the date
hereof; (c) comply in all material respects with, and cause each Subsidiary of
the Borrower to comply in all material respects with, all applicable reporting,
disclosure and other requirements of ERISA and the Code as they relate to
Benefit Plans, and, if reasonably requested by the Lender, furnish the Lender
with copies of all reports filed in connection therewith promptly after the
filing thereof; (d) notify the Lender promptly of any fact, including, without
limitation, any reportable event under Section 4043(b) of ERISA, arising in
connection with any Retirement Plan which might constitute grounds for the
termination thereof by the PBGC; and (e) furnish to the Lender, promptly upon
its reasonable request therefor, such additional information concerning any
Benefit Plan as the Lender may request.
6.9 Environmental.
(a) Cause all operations of the Borrower and its Subsidiaries
to be conducted in compliance in all material respects with all applicable
Environmental Laws;
(b) promptly deliver to the Lender copies of all reports
prepared by any Governmental Authority, any environmental auditor or engineer,
or any other Person, relating to or in connection with any Environmental Claim
against the Borrower or any of its Subsidiaries, unless the Borrower cannot
obtain such reports or copies thereof;
(c) notify the Lender in writing within 10 Business Days after
the Borrower or any of its Subsidiaries shall have become aware of any
Environmental Claim against the Borrower or any of its Subsidiaries or caused by
any operations conducted by the Borrower or any of its Subsidiaries;
(d) in the event that, to the knowledge of the Borrower or any
of its Subsidiaries, any Hazardous Substance Contamination shall occur which was
caused by the Borrower or any of its Subsidiaries or under circumstances as a
result of which the Borrower or any of its Subsidiaries would be liable or
financially responsible for damages or the cost of remediation or clean-up, or
the Borrower or any of its Subsidiaries shall become aware of any non-compliance
in any material respect of any Obligor Use Property with any Environmental Law
by the Borrower or any of its Subsidiaries which occurred previously, exists now
or shall
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exist hereafter (i) notify the Lender thereof in writing within 10 Business
Days, (ii) if requested by the Lender, engage, at the Borrower's expense, and
deliver to the Lender as promptly as feasible an Environmental Assessment with
respect thereto containing or accompanied by a plan and budget in form and
content reasonably satisfactory to the Lender for the remediation or cure
thereof, (iii) as promptly as feasible, commence and diligently pursue to
completion, or cause to be promptly commenced and diligently pursued to
completion, all actions which are necessary to remediate or cure the same, all
contractors to perform any work in connection therewith to be reasonably
satisfactory to the Lender, and (iv) if requested by the Lender, deliver to the
Lender, within 15 days after request therefor by the Lender, a bond, letter of
credit or similar financial assurance reasonably satisfactory to the Lender
evidencing that the funds necessary are available to pay the cost of such cure
or remediation; and
(e) indemnify, protect and defend the Lender, and its officers,
directors, employees, attorneys and agents, and save harmless the Lender, and
its officers, directors, employees, attorneys and agents, from and against any
and all claims, demands, damages, losses, liabilities, obligations, penalties,
litigation, defenses, judgments, decrees, orders, directives, suits, actions,
proceedings, costs and expenses (including, without limitation, counsel fees and
expenses and experts' fees and expenses) of any kind or nature whatsoever which
may at any time be imposed upon, paid or incurred by or asserted or awarded
against any of them relating to, resulting from or arising out of (i) the
presence, manufacture, generation, production, processing, use, handling,
treatment, storage, disposal, transportation or distribution on or about any
Obligor Use Property of any Hazardous Substance by the Borrower or under any
circumstances as a result of which the Borrower or any of its Subsidiaries would
be liable or financially responsible for damages or the cost of remediation or
clean-up, (ii) any Hazardous Substance Contamination by the Borrower or any of
its Subsidiaries or under circumstances as a result of which the Borrower or any
of its Subsidiaries would be liable or financially responsible for damages or
the cost of remediation or clean-up, (iii) any non-compliance in any material
respect of any Obligor Use Property with any Environmental Law by the Borrower
or any of its Subsidiaries which occurred previously, now exists or shall exist
hereafter, or (iv) any costs associated with any remedial or curative action
relating to any Hazardous Substances, any Hazardous Substance Contamination or
any violation of any applicable Environmental Laws by the Borrower or any of its
Subsidiaries. The indemnification obligations of the Borrower under this
Subsection shall survive the termination of this Agreement and payment of the
outstanding Note for a period of 3 years. The Lender agrees not to delay release
of Collateral in accordance with the last sentence of Subsection 2.2 of the
Borrower Security Agreement on account of any contingent obligation of the
Borrower under the preceding sentence.
6.10 Perfection of Security Interest. Cause the security interest
granted to the Lender pursuant to the Borrower Security Agreement and any other
documents executed contemporaneously with this Agreement to be duly perfected in
accordance with applicable law with respect to all of the Collateral.
6.11 Year 2000 Compatibility. Take all action necessary to assure that
all computer-based systems of the Borrower and each of its Subsidiaries are able
to operate and effectively process data, including dates, on and after January
1, 2000. At the request of the
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47
Lender, the Borrower shall provide the Lender with assurance acceptable to the
Lender of the Year 2000 compatibility of the computer-based systems of the
Borrower and each of its Subsidiaries.
6.12 Primary Bank Accounts. Maintain all primary depository accounts at
the Lender, and deposit or transfer all cash receipts into the Operating
Account. Upon the occurrence of an Event of Default, and immediately upon demand
by the Lender, the Borrower shall deposit all cash receipts directly into the
Operating Account, and shall make all disbursements (except for tuition refunds)
from the Operating Account.
SECTION 7. NEGATIVE COVENANTS
The Borrower agrees that, until all of the Obligations have been paid in
full and there exists no contingent or non-contingent commitment by the Lender
which could give rise to any Obligations, the Borrower shall not, directly or
indirectly:
7.1 Financial Condition Covenants.
(a) Leverage Ratio. Permit the Leverage Ratio to be greater
than 1.75 to 1.00 as of the end of any quarterly accounting period of the
Borrower.
(b) Fixed Charge Coverage Ratio. As of the end of the quarterly
accounting period of the Borrower ending on January 31, 2000, permit the Fixed
Charge Coverage Ratio for the 12-month period then ending to be less than 1.25
to 1.00. As of the end of all subsequent quarterly accounting periods of the
Borrower, permit the Fixed Charge Coverage Ratio for the 12 month period then
ending to be less than 1.50 to 1.00.
(c) Current Ratio. As of the end of any quarterly accounting
period of the Borrower, permit the Current Ratio to be less than 1.00 to 1.00.
(d) Tangible Net Worth. As of the following dates, permit the
Borrower's Tangible Net Worth to be less than the following:
Date Amount
---- ------
January 31, 2000 $46,750,000
April 30, 2000 $47,100,000
July 31, 2000 $47,400,000
October 31, 2000 $48,400,000
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January 31, 2001 $49,500,000
7.2 Limitation on Indebtedness. Create, incur, assume or suffer to
exist any Indebtedness, or permit any of its Subsidiaries to create, incur,
assume or suffer to exist any Indebtedness, except for:
(a) Indebtedness of the Borrower or any of its Subsidiaries
under this Agreement and the other Credit Documents;
(b) current Indebtedness of the Borrower and its Subsidiaries
in connection with trade accounts payable incurred in the ordinary course of
business (including payment obligations under Operating Leases of the Borrower
and its Subsidiaries which the Lender acknowledges the Borrower enters into in
connection with its business);
(c) Indebtedness of the Borrower secured by Permitted PMSIs;
and
(d) other Indebtedness not exceeding Seven Million Dollars
($7,000,000.00) in the aggregate at any time outstanding, subject to the other
provisions of this Agreement, including Subsection 7.3.
7.3 Limitation on Liens. Create, incur, assume or suffer to exist, or
permit any of its Subsidiaries to create, incur, assume or suffer to exist, any
Lien upon any of its property, assets or revenues, whether now owned or
hereafter acquired, except for:
(a) Liens for taxes not yet due or which are being contested in
good faith by appropriate proceedings, provided that adequate reserves with
respect thereto are maintained on the books of the Borrower or the Subsidiary,
as the case may be, in conformity with GAAP and that no notice of lien with
respect thereto is filed in any recording office;
(b) landlords', carriers', warehousemen's, mechanics',
materialmen's, repairmen's, or other like Liens arising in the ordinary course
of business with respect to obligations which are not due or which are being
contested in good faith by appropriate proceedings in a manner which will not
jeopardize or diminish in any material respect any interest of the Lender;
(c) pledges or deposits in connection with workers'
compensation, unemployment insurance and other social security legislation and
deposits securing liability to insurance carriers under insurance or
self-insurance arrangements;
(d) Liens in favor of the Lender created pursuant to the Credit
Documents;
(e) Permitted PMSIs;
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49
(f) Liens which are created for the benefit of a Person solely
to evidence a sale of accounts to such Person by the Borrower or a Subsidiary of
the Borrower pursuant to a Permitted Factoring Agreement and which attach to no
property of the Borrower or any Subsidiary of the Borrower other than such
accounts and the proceeds thereof; and
(g) Liens, if any, described in Schedule 7.3.
7.4 Limitation on Negative Pledge Clauses. Enter into, or permit any
of its Subsidiaries to enter into, any covenant or other agreement with or for
the benefit of any other Person, other than pursuant to this Agreement or the
other Credit Documents, which prohibits or limits the right, power, authority or
ability of the Borrower or the Subsidiary to create, incur, assume or suffer to
exist any security interest or other Lien upon any of its assets, whether now
owned or hereafter acquired.
7.5 Limitation on Contingent Obligations. Create, incur, assume or
suffer to exist, or permit any of its Subsidiaries to create, incur, assume or
suffer to exist, any Contingent Obligation except for:
(a) Contingent Obligations arising in connection with Letters
of Credit or otherwise arising under or in connection with the Credit Documents;
and
(b) Contingent Obligations in the nature of performance bonds
and performance guaranties arising in the ordinary course of business.
7.6 Limitations on Fundamental Changes. Enter into, or permit any of
its Subsidiaries to enter into, any merger, consolidation, amalgamation or share
exchange, or, suffer or permit any business, assets, operations or books and
records of the Borrower or any of its Subsidiaries to be merged, consolidated or
commingled with any business, assets, operations or books and records of any
other Person, or make any material change in the present method of conducting
business.
7.7 Limitation on Acquisitions. Purchase or otherwise acquire, or
permit any of its Subsidiaries to purchase or otherwise acquire, any assets of
any other Person.
7.8 Limitation on Sale of Assets. Convey, sell, assign, transfer,
lease or otherwise dispose of, or permit any of its Subsidiaries to convey,
sell, assign, transfer, lease or otherwise dispose of, any of the Collateral or
any substantial part of its assets, whether now owned or hereafter acquired,
except:
(a) obsolete or worn-out equipment or inventory disposed of in
the ordinary course of business;
(b) the sale of inventory in the ordinary course of business;
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50
(c) sales of accounts of the Borrower or its Subsidiaries
pursuant to a Permitted Factoring Agreement; and
(d) sales, leases or dispositions of assets of the Borrower
(not including the Collateral) having a value, in the aggregate for all such
sales, leases or dispositions, not exceeding thirty percent (30%) of Total
Assets at the time of determination.
7.9 Limitation on Restricted Payments. Make or commit to make, or
permit any of its Subsidiaries to make or commit to make, any Restricted
Payments except:
(a) payments to the Borrower by any Subsidiary of the Borrower;
(b) payments of compensation, stock options, bonuses,
insurance, fringe benefits and reimbursement of expenses to employees of the
Borrower in the ordinary course of business;
(c) payments of dividends in the form of capital stock of the
Borrower by the Borrower to stockholders of the Borrower;
(d) payments made by the Borrower to repurchase securities of
the Borrower, to the extent that such payments are made with proceeds of a
public offering of securities of the Borrower.
7.10 Limitation on Transactions with Affiliates. Except as permitted by
other provisions of this Agreement, enter into, or permit any of its
Subsidiaries to enter into, any transaction with any Affiliate except for
transactions with Affiliates entered into in the ordinary course of business on
terms no less favorable than would apply in a comparable arm's-length
transaction with a Person that is not an Affiliate.
7.11 Limitation on Subsidiaries. Form or acquire, or permit any of its
Subsidiaries to form or acquire, any Subsidiary.
7.12 Limitation on Investments, Loans and Advances. Purchase any
Investment or make any advance, loan or extension of credit to any Person, or
permit any of its Subsidiaries to purchase any Investment or make any advance,
loan or extension of credit to any Person, except for:
(a) extensions of trade credit in the ordinary course of
business;
(b) loans to CLCQ and/or Delta College so long as CLCQ and
Delta College are Subsidiaries of the Borrower, which loans may not exceed
$1,250,000 in the aggregate;
(c) Investments in Cash Equivalents; and
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51
(d) other Investments approved by the Lender in writing.
7.13 Limitation on Optional Payments and Modifications. (a) Unless
commercially reasonable to do so, make, or permit any of its Subsidiaries to
make, any optional payment or prepayment on or redemption of any Indebtedness
(other than Indebtedness pursuant to this Agreement), or (b) unless commercially
reasonable to do so, amend, modify or change, or consent or agree to any
amendment, modification or change to, any of the terms of any Indebtedness
(other than any such amendment, modification or change which would extend the
maturity or reduce the amount of any payment of principal thereof or which would
reduce the rate or extend the date for payment of interest thereon).
7.14 Limitation on Sale and Leaseback. Enter into, or permit any of its
Subsidiaries to enter into, any arrangement with any Person providing for the
leasing by the Borrower or such Subsidiary of real or personal property which
has been or is to be sold or transferred by the Borrower or such Subsidiary to
such Person or to any other Person to whom funds have been or are to be advanced
by such Person on the security of such property or rental obligations of the
Borrower or such Subsidiary.
7.15 Fiscal Year. Permit the fiscal year of the Borrower or any of its
Subsidiaries to end on a day other than January 31.
7.16 Places of Business. Change, or suffer or permit to be changed, the
location of the Borrower Chief Executive Office or the location of the
Borrower's books and records, or have or maintain, other than the Borrower
Business Premises, any business, office or storage location unless the Lender
shall have received 60 days prior written notice of the new location.
7.17 Change of Name. Without giving the Lender at least 60 days prior
written notice and executing and delivering to the Lender such financing
statements and other documents as the Lender may reasonably require after
receipt of such notice, change, or suffer or permit to be changed, the name of
the Borrower or any of its Subsidiaries, or use any trade name, or permit any of
its Subsidiaries to use any trade name, other than its true corporate name and
"Advantec Institutes."
7.18 ERISA. (a) With respect to any Retirement Plan, engage, or
knowingly permit any "party in interest" (as defined in Section 3(14) of ERISA)
or any "disqualified person" (as defined in Section 4975(e)(2) of the Code) to
engage, in any "prohibited transaction" within the meaning of Section 4925 of
the Code or Sections 406 through 408 of ERISA; (b) with respect to any
Retirement Plan, knowingly incur, or permit any Subsidiary of the Borrower to
knowingly incur, any "accumulated funding deficiency" under Section 302 of ERISA
or Section 412 of the Code, whether or not waived; (c) terminate any Retirement
Plan in a manner which could result in the imposition of a lien on any of its
property pursuant to Section 4068 of ERISA; or (d) take any action which
materially adversely affects the qualification of any Qualified Plan.
7.19 Environmental. (a) Permit any Hazardous Substance to be present,
manufactured, generated, produced, processed, used, handled, treated, stored or
disposed of on
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52
any Obligor Use Property in violation of any applicable Environmental Law by the
Borrower or any of its Subsidiaries or under circumstances as a result of which
the Borrower or any of its Subsidiaries would be liable or financially
responsible for damages or the cost of remediation or clean-up; (b) permit to
occur any Hazardous Substance Contamination by the Borrower or any of its
Subsidiaries or under circumstances as a result of which the Borrower or any of
its Subsidiaries would be liable or financially responsible for damages or the
cost of remediation or clean-up; or (c) permit any underground storage tanks to
be installed on any Obligor Use Property by the Borrower or any of its
Subsidiaries or under circumstances as a result of which the Borrower or any of
its Subsidiaries would be liable or financially responsible for damages or the
cost of removal, remediation or clean-up.
7.20 Limitation on Inconsistent Agreements. Enter into, or permit any
of its Subsidiaries to enter into, any agreement which is inconsistent with any
obligations of the Borrower or any of its Subsidiaries under this Agreement or
any of the other Credit Documents.
SECTION 8. EVENTS OF DEFAULT
Upon the occurrence of any of the following events:
(a) The Borrower or any Other Obligor shall fail to pay when
and as due, whether by demand, stated maturity, acceleration or otherwise, any
of the Obligations, including, without limitation, principal and interest on the
Note, L/C Reimbursement Obligations, fees or expenses; or
(b) Any representation or warranty made or deemed made by the
Borrower or any Other Obligor herein or in the other Credit Documents or which
is contained in any certificate, document or financial or other statement
furnished at any time under or in connection with this Agreement or any such
other Credit Document shall prove to have been incorrect in any material respect
on or as of the date made or deemed made; or
(c) The Borrower or any Other Obligor shall fail to observe,
perform or comply with any covenant or agreement contained in this Agreement or
any of the other Credit Documents (other than as provided in (a) above), and, in
the case of any failure of the Borrower or any Other Obligor to observe, perform
or comply with any covenant or agreement to be observed, performed or complied
with:
(i) under Subsection 4.14(b), 6.1(f), 6.4(b) or 6.8(e),
or Subsection 2.2 of the Borrower Security Agreement, such failure shall
continue for 3 Business Days after written notice of such failure from the
Lender to the Borrower;
(ii) under Subsection 6.1(a) through (d), inclusive, or
9.7 or under Subsection 4.1 of the Borrower Security Agreement, such failure
shall continue for 5 Business Days after written notice of such failure from the
Lender to the Borrower;
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53
(iii) under Subsection 6.3(b), 6.10 or 7.3, such failure
shall continue for 5 Business Days after the Borrower becomes aware of such
failure, whether as a result of notice from the Lender or otherwise;
(iv) under Subsection 6.5(b), such failure shall continue
for 1 Business Day after written notice of such failure from the Lender to the
Borrower;
(v) under Subsection 6.9(b) through (d), inclusive, such
failure shall continue for 15 Business Days;
(vi) under Subsection 7.12, such failure shall continue
for 5 Business Days;
(vii) under Subsection 2.3(e) of the Borrower Security
Agreement, such failure shall continue for 3 Business Days after notice of such
failure from the Lender to the Borrower; or
(viii) other than as provided in Section 8(a) and Section
8(c)(i) through (vii), inclusive, and except in the case of any failure of the
Borrower or any Other Obligor to observe, perform or comply with any covenant or
agreement to be observed, performed or complied with under Subsection 4.14(a),
4.18, 6.3(a), 6.6, 6.8(d), 7.1, 7.4, 7.6 through 7.11, inclusive, or 7.13
through 7.18, inclusive, or Subsection 2.3(b) and 2.3(d) of the Borrower
Security Agreement, such failure shall continue for 30 days; or
(d) (i) This Agreement or any of the other Credit Documents
shall be, or shall be held by a court of competent jurisdiction to be, invalid
or unenforceable in any respect reasonably deemed material by the Lender, or
(ii) the security interests and other Liens created in favor of or for the
benefit of the Lender shall cease to be enforceable in any respect reasonably
deemed material by the Lender and of the same effect and priority purported to
be created thereby; or
(e) The Borrower or any Other Obligor shall revoke or
terminate, or attempt to revoke or terminate, or notify the Lender of revocation
or termination of, any continuing obligations or agreements of the Borrower or
such Other Obligor relating in any way to this Agreement or any of the other
Credit Documents; or
(f) The Borrower, any of its Subsidiaries or any Other Obligor
shall (i) default in any payment of any Indebtedness (other than Indebtedness
referred to in paragraph (a) above) or in the payment of any Contingent
Obligation reasonably deemed material by the Lender, beyond any period of grace
but whether or not any required notice has been given, or (ii) default in the
observance or performance of any other agreement or condition otherwise relating
to any such Indebtedness or Contingent Obligation or contained in any instrument
or agreement evidencing, securing or relating thereto, or any other event shall
occur or condition exist, the effect of which default or other event or
condition is to cause, or to permit the holder or holders of such Indebtedness
or beneficiary or beneficiaries of such Contingent Obligation (or a trustee
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54
or agent on behalf of such holder or holders or beneficiary or beneficiaries) to
cause, with the giving of notice if required and expiration of any applicable
grace period, such Indebtedness to become due prior to its stated maturity or
such Contingent Obligation to become payable; or
(g) (i) The Borrower, any of its Subsidiaries or any Other
Obligor shall commence any case, proceeding or other action (A) under any
existing or future law of any jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an
order for relief entered with respect to it or seeking to adjudicate it a
bankrupt or insolvent, or seeking reorganization, arrangement, adjustment,
winding-up, liquidation, dissolution, composition or other relief with respect
to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian
or other similar official for it or for all or any substantial part of its
assets, or the Borrower, any of its Subsidiaries or any Other Obligor shall make
a general assignment for the benefit of its creditors, whether or not any court
assumes jurisdiction thereof; or (ii) there shall be commenced against the
Borrower, any of its Subsidiaries or any Other Obligor any case, proceeding or
other action of a nature referred to in clause (i) above which (A) results in
the entry of an order for relief or any such adjudication or appointment or (B)
remains undismissed for a period of 60 days; or (iii) there shall be commenced
against the Borrower, any of its Subsidiaries or any Other Obligor any case,
proceeding or other action seeking issuance of a warrant of attachment,
execution, distraint or similar process against all or any substantial part of
its assets which results in the entry of an order for any such relief which
shall not have been vacated, discharged or stayed pending appeal, within 60 days
from the entry thereof or (iv) the Borrower, any of its Subsidiaries or any
Other Obligor shall take any action in furtherance of, or indicating its consent
to, approval of, or acquiescence in, any of the acts set forth in clause (i),
(ii) or (iii) above; or (v) the Borrower, any of its Subsidiaries or any Other
Obligor shall be insolvent (as defined in Section 101(32) of the United States
Bankruptcy Code, or any successor legislation), or generally not, or shall be
unable to, or shall admit in writing its inability to, pay its debts as they
become due; or
(h) Dissolution or liquidation of, or the entry of any unstayed
judgment, order, award or decree for the dissolution or liquidation of, the
Borrower or any Other Obligor; or
(i) Injunction or restraint of the Borrower or any Other
Obligor in any manner from conducting its business in whole or in part deemed
material by the Lender in good faith; or
(j) Any material assets of the Borrower or any Subsidiary of
the Borrower shall be attached, levied upon, seized or repossessed and such
assets shall not be released or discharged from such attachment, levy, seizure
or repossession within 60 days; or
(k) There shall occur any event or condition which the Lender
reasonably determines has or will have a Material Adverse Effect, whether or not
such event or condition otherwise constitutes an Event of Default; or
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55
(l) (i) The Borrower or any Commonly Controlled Entity shall,
or, in the judgment of the Lender exercised in good faith, is likely to, incur
any liability in connection with a withdrawal from, or the Insolvency or
Reorganization of, a Multiemployer Plan, or (ii) any other event or condition
shall occur or exist, with respect to a Plan, and in each case in clauses (i)
and (ii) above, such event or condition, together with all other such events or
conditions, if any, could reasonably be expected, in the aggregate, to subject
the Borrower or any Other Obligor to any tax, penalty or other liabilities
deemed material by the Lender in good faith; or
(m) One or more judgments or decrees shall be entered against
the Borrower, any of its Subsidiaries or any Other Obligor involving in the
aggregate liabilities (not paid or fully covered by insurance) equal to or
exceeding Five Hundred Thousand Dollars ($500,000.00) and all such judgments or
decrees shall not have been vacated, discharged or stayed pending appeal within
30 days from the entry thereof; or
(n) The Borrower, any of its Subsidiaries or any Other Obligor
shall be convicted of an offense (other than traffic violations) punishable
under any domestic or foreign criminal statute or law;
(o) There shall occur a Change of Control; or
(p) As at the date that the Borrower, any of its Domestic
Subsidiaries or any Borrower Institution, or any educational program of any
thereof, is Disqualified, the Disqualified Revenues Ratio shall be equal to or
greater than ten percent (10%) and shall not be reduced to less than ten percent
(10%) as at a date within 15 calendar days thereafter;
then, and in any such event, (A) if such event is an Event of Default specified
in paragraph (h) or in clause (i) or (ii) of paragraph (g) above automatically
the Commitments shall immediately terminate and all of the Obligations (with
accrued interest thereon) shall immediately become due and payable, and (B) if
such event is any other Event of Default, either or both of the following
actions may be taken: (i) the Lender may by notice to the Borrower declare the
Commitments to be terminated forthwith, whereupon the Commitments shall
immediately terminate; and (ii) the Lender may by notice to the Borrower,
declare all of the Obligations (with accrued interest thereon) to be due and
payable, whereupon the same shall immediately become due and payable. Except as
expressly provided above in this Agreement, presentment, demand, protest and all
other notices of any kind are hereby expressly waived.
SECTION 9. MISCELLANEOUS
9.1 Amendments and Waivers. Neither this Agreement, the Note or
any other Credit Document, nor any terms hereof or thereof may be amended,
modified, extended, renewed, supplemented or replaced except in accordance with
the provisions of this Subsection. The Lender and the Borrower may from time to
time enter into written amendments, modifications, extensions, renewals,
supplements or replacements for the purpose of amending,
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56
modifying, extending, renewing, supplementing or replacing any provisions of
this Agreement or the other Credit Documents or changing in any manner the
rights of the parties hereunder or thereunder or waiving, on such terms and
conditions as the Lender may specify in such instrument, any of the requirements
of this Agreement or the other Credit Documents or any Default or Event of
Default and its consequences. In the case of any waiver, the Borrower and the
Lender shall be restored to their former positions and rights hereunder and
under the Note, and any Default or Event of Default waived shall be deemed to be
cured; but no such waiver shall extend to any subsequent or other Default or
Event of Default, or impair any right consequent thereupon.
9.2 More Restrictive Provisions. If the Borrower enters into or
becomes bound by any credit agreement, purchase agreement or other agreement,
document or instrument (but not including any statutory requirement or any
requirement imposed by regulatory authorities), or any amendment, modification,
supplement or restatement thereof, which requires the Borrower to comply with
any financial covenants which are in addition to or more restrictive (the
"Additional/More Restrictive Provisions") than the covenants contained in
Subsection 7.1, this Agreement shall be deemed to be automatically and
immediately amended to include such Additional/More Restrictive Provisions. If
such credit agreement, purchase agreement or other agreement or document which
contains the Additional/More Restrictive Provisions, or the Additional/More
Restrictive Provisions, are terminated and of no further force or effect, then
any amendment of this Agreement effected as a result of the provisions of this
Subsection shall be of no further force or effect and this Agreement shall be
deemed to be automatically and immediately amended to conform to the terms of
this Agreement prior to such amendment of this Agreement effected pursuant to
this Subsection as a result of such Additional/More Restrictive Provisions. If,
after an amendment of this Agreement effected pursuant to this Subsection as a
result of Additional/More Restrictive Provisions, such Additional/More
Restrictive Provisions shall be amended or modified and the result of such
amendment or modification is to cause some or all of such Additional/More
Restrictive Provisions to be more restrictive or less restrictive, but in any
event more restrictive than the financial covenants contained in Subsection 7.1
prior to such amendment of this Agreement, then this Agreement shall be deemed
to be automatically and immediately amended to conform to such Additional/More
Restrictive Provisions, as so amended or modified. Upon request of the Lender at
any time or from time to time, the Borrower shall promptly execute and deliver
to the Lender such amendments of this Agreement, and such other agreements,
instruments and documents, as the Lender may request to further memorialize
amendments of this Agreement pursuant to this Subsection.
9.3 Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
facsimile transmission), and, unless otherwise expressly provided herein, shall
be deemed to have been duly given or made when delivered by hand, transmitted by
facsimile transmission or, if sent via Federal Express (or other reputable
commercial overnight courier), return receipt requested, 3 days after delivery
of the return receipt to the sending party, addressed as follows (or to such
other address as may be hereafter notified by the respective parties hereto and
any future holder of the Note):
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57
The Borrower: 00000 Xxxxxx Xxxxx Xxxx
Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx, Vice President
and Chief Financial Officer
Fax: (000) 000-0000
with a copy to: Xxxx Xxxxxxx
0000 Xxxxxxxxxxxxx Xxxxx
XxXxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxxx, Esquire
Fax: (000) 000-0000
The Lender: First Union National Bank
0000 Xxxxx Xxxxxx Xxxx
0xx Xxxxx Xxxxx - XX 1954
XxXxxx, Xxxxxxxx 00000
Attention: J. Xxxxx Xxxxxxxxx, Vice President
Fax: (000) 000-0000
with a copy to: Xxxxx Xxxxxxx Xxxxxxx & Xxxxx LLP
00 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxx, Esquire
Fax: (000) 000-0000
provided that any notice, request or demand to or upon the Lender pursuant to
Subsections 2.3, 2.7, 2.10, and 2.11 shall not be effective until received. No
failure of any party hereto to provide a copy of any notice, request or demand
to Xxxx Xxxxxxx or Xxxxx Xxxxxxx Xxxxxxx & Xxxxx LLP as provided above shall
impair in any way the effectiveness of any such notice, request or demand.
9.4 No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of the Lender, any right, remedy, power or
privilege hereunder or under the Credit Documents, shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, remedy, power or
privilege hereunder or thereunder preclude any other or further exercise thereof
or the exercise of any other right, remedy, power or privilege. The rights,
remedies, powers and privileges herein provided or provided in the other Credit
Documents are cumulative and not exclusive of any rights, remedies, powers and
privileges provided by law.
9.5 Survival of Representations and Warranties. All representations
and warranties made hereunder, in the other Credit Documents and in any
document, certificate or statement delivered pursuant hereto or in connection
herewith shall survive the execution and delivery of this Agreement and the
Note.
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58
9.6 Payment of Expenses and Taxes. The Borrower agrees (a) to pay or
reimburse the Lender for all of its costs and expenses incurred in connection
with the development, preparation and execution of, and any administration,
amendment, modification, extension, renewal, supplement or replacement of, this
Agreement, the other Credit Documents and any other documents prepared in
connection herewith or therewith, and the consummation of the transactions
contemplated hereby and thereby, including, without limitation, the fees and
disbursements of counsel to the Lender, (b) to pay or reimburse the Lender for
all of its costs and expenses incurred in connection with the legal
interpretation, enforcement or preservation of any rights under this Agreement,
the other Credit Documents and any such other documents, including, without
limitation, the fees and disbursements of counsel to the Lender, (c) to pay,
indemnify and hold the Lender harmless from, any and all recording and filing
fees and any and all liabilities with respect to, or resulting from any delay in
paying, stamp, excise and other taxes, if any, which may be payable or
determined to be payable in connection with the execution and delivery of, or
consummation of any of the transactions contemplated by, or any amendment,
modification, extension, renewal, supplement or replacement of, or any waiver or
consent under or in respect of, this Agreement, the other Credit Documents and
any such other documents, and (d) to pay, indemnify and hold the Lender harmless
from, any and all other liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of this Agreement, the other Credit Documents and
any such other documents (all of the foregoing, collectively, the "indemnified
liabilities"); provided that the Borrower shall have no obligation hereunder to
the Lender with respect to indemnified liabilities arising from (i) the gross
negligence or willful misconduct of the Lender, or (ii) legal proceedings
commenced against the Lender by any security holder or creditor thereof arising
out of and based upon rights afforded any such security holder or creditor
solely in its capacity as such. The agreements in this Subsection shall survive
the termination of this Agreement and payment of the Note for a period of 2
years. The Borrower authorizes the Lender to debit from the Operating Account
all such payments or reimbursements which the Borrower is required to make under
this Subsection.
9.7 Further Assurances. The Borrower agrees promptly to do, make,
execute and deliver all such additional and further acts, things, deeds,
assurances, instruments and documents as the Lender may reasonably request to
vest in and assure to the Lender its rights under this Agreement or any of the
other Credit Documents.
9.8 Unenforceability. If any term, provision or condition, or any part
thereof, of this Agreement or any of the other Credit Documents shall for any
reason be found or held invalid or unenforceable by any court or Governmental
Authority, such invalidity or unenforceability shall not affect the remainder of
such term, provision or condition, nor any other term, provision or condition,
and this Agreement and the other Credit Documents shall survive and be construed
as if such invalid or unenforceable term, provision or condition had not been
contained herein or therein; provided, however, that if any rate of interest
provided under this Agreement or any of the other Credit Documents does or shall
exceed the maximum interest rate permitted by law, then such rate of interest
shall immediately be deemed to be reduced to such
- 53 -
59
maximum rate and all previous payments of interest in excess of the maximum rate
shall be deemed to have been payments in reduction of principal and not of
interest.
9.9 Indemnification Concerning Fees. The Borrower agrees to indemnify,
protect and defend the Lender, and save the Lender harmless, from and against
any and all claims, demands, damages, losses, liabilities, obligations,
penalties, litigation, judgments, suits, actions, proceedings, costs and
expenses (including, without limitation, counsel fees and expenses) of any kind
or nature whatsoever which may at any time be imposed upon, paid or incurred by
or asserted or awarded against the Lender relating to, resulting from or arising
out of any broker's or finder's fee or commission which the Lender did not
directly contract to pay.
9.10 Waiver of Trial by Jury. Each of the Borrower and the Lender
agrees that any action, suit or proceeding involving any claim, counterclaim or
cross-claim arising out of or in any way relating, directly or indirectly, to
this Agreement or any of the other Credit Documents, or any liabilities, rights
or interests of the Borrower, the Lender or any other Person arising out of or
in any way relating, directly or indirectly, to any of the foregoing, shall be
tried by a court and not by a jury. Each of the Borrower and the Lender hereby
waives any right to trial by jury in any such action, suit or proceeding, with
the understanding and agreement that this waiver constitutes a waiver of trial
by jury of all claims, counterclaims and cross-claims against all parties to
such actions, suits or proceedings, including claims, counterclaims and
cross-claims against parties who are not parties to this Agreement or the other
Credit Documents. This waiver is knowingly, willingly and voluntarily made by
each of the parties hereto, and each of the parties hereto acknowledges and
agrees that this waiver of trial by jury is a material aspect of the agreements
among them and that no representations of fact or opinion have been made by any
Person to induce this waiver of trial by jury or to modify, limit or nullify its
effect.
9.11 Additional Waivers. The Borrower hereby waives, to the extent the
same may be waived under applicable law: (a) notice of acceptance of this
Agreement or any of the other Credit Documents by any other party hereto; and
(b) all claims and causes of action of the Borrower against the Lender for
punitive, exemplary, consequential, special or other indirect or
non-compensatory damages.
9.12 Successors and Assigns: Transfers of Interests. (a) This Agreement
shall be binding upon and inure to the benefit of the Borrower, the Lender, all
future holders of the Note and their respective successors and assigns, except
that the Borrower may not assign or transfer any of its rights or obligations
under this Agreement without the prior written consent of the Lender.
(b) The Lender may at any time, in its discretion, assign,
transfer or pledge to any Person, or grant to any Person a security interest in,
this Agreement, any of the other Credit Documents or any of its rights hereunder
or thereunder. In addition, the Lender may sell, in such amounts, upon such
terms and to such Persons as the Lender may determine, participation in its
interests under this Agreement or any of the other Credit Documents. In the case
of each such assignment, transfer, pledge, grant or sale (i) the Lender may from
time to time provide to the assignee, transferee, pledgee, secured party or
participant, any information and
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60
documents (or copies thereof) relating to this Agreement and the other Credit
Documents and related transactions, and relating to the business, assets,
operations, business prospects or financial condition of the Borrower,
Subsidiaries of the Borrower and Other Obligors, and (ii) subject to
Requirements of Law, the Lender agrees to continue to administer this Agreement
and the other Credit Documents subject to compensation of the Lender by such
assignees, transferees, pledgees, secured parties or participants.
9.13 Counterparts. This Agreement may be executed by one or more of the
parties to this Agreement on any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
9.14 Governing Law. This Agreement (other than the provisions of
Section 3), the Note and the other Credit Documents (other than the L/C
Agreements), and the rights and obligations of the parties hereunder and
thereunder, shall be governed by and construed and interpreted in accordance
with the internal laws of the Commonwealth of Virginia, exclusive of principles
of conflicts of laws. The provisions of Section 3 of this Agreement, and the
rights and obligations of the parties under Section 3 of this Agreement, shall
be governed by and construed and interpreted in accordance with the internal
laws of the Commonwealth of Virginia, exclusive of principles of conflicts of
laws.
9.15 Submission To Jurisdiction. The Borrower hereby irrevocably and
unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement or any of the other Credit Documents, or
for recognition and enforcement of any judgment in respect thereof, to the
non-exclusive general jurisdiction of the United States District Court for the
Eastern District of Virginia or the Circuit Court of Fairfax County, Virginia;
(b) consents that any such action or proceeding may be brought
in such courts, and waives any objection that it may now or hereafter have to
the venue of any such action or proceeding in any such court or that such action
or proceeding was brought in an inconvenient court and agrees not to plead or
claim the same;
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or certified
mail (or any substantially similar form of mail), postage prepaid, to the
Borrower at its address set forth in Subsection 9.3 or at such other address of
which the Lender shall have been notified pursuant thereto; and
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the right
to xxx in any other jurisdiction.
9.16 Release. The Borrower releases and forever waives and relinquishes
all claims, demands, obligations, liabilities and causes of action of whatsoever
kind or nature,
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61
whether known or unknown, which it has, may have, or might have or assert now or
in the future against the Lender and its directors, officers, employees,
attorneys, agents, successors, predecessors and assigns and any Affiliates,
Subsidiaries or related entities of the Lender and their directors, officers,
employees, attorneys, agents, successors, predecessors and assigns, directly or
indirectly, arising out of, based upon, or in any manner connected with any
transaction, event, circumstance, action, failure to act, or occurrence of any
sort or type, whether known or unknown, which occurred, existed, was taken,
permitted, or begun before the execution of this Agreement.
9.17 Waiver by Lender. Subject to compliance with each and every
closing condition set forth in Section 5, the Lender waives the Borrower's
failure to comply with the Fixed Charge Coverage Ratio covenant for the quarter
ending October 31, 1999.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed under seal and delivered by their proper and duly authorized
officers as of the day and year first above written.
ATTEST/WITNESS: COMPUTER LEARNING CENTERS, INC.
[SIG] By: /s/ XXXXXXX X. XXXXXXXX (SEAL)
-------------------------------- ---------------------------------------
Xxxxxxx X. Xxxxxxxx, Vice President and
Chief Financial Officer
FIRST UNION NATIONAL BANK
[SIG] By: /s/ J. XXXXX XXXXXXXXX (SEAL)
------------------------------- ----------------------------------------
J. Xxxxx Xxxxxxxxx, Vice President
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62
Schedule I
to Credit Agreement
BORROWER BUSINESS PREMISES
000 Xxxxx Xxxxxx Xxxxxxxxx
Xxxxxxx, XX 00000
0000 Xxxxxxxx Xxxxxxxxx
Xxxxx 000
Xxx Xxxxxxx, XX 00000
000 Xxxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
000 Xxxxx Xxxxxx Xxxxxx
Xxxxx 000
Xxx Xxxx, XX 00000
0000 Xxxxx Xxxx Xxxx #000
Xxxxxxxx, XX 00000
000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxx, XX 00000
000 Xxxx Xxxxxxxxx Xxxx, #000
Xxxxxxxxxx, XX 00000
000 Xxxxxxxx Xxxxxx
Xxxxxx, XX 00000
000 Xxxxx Xxxxx Xxxxxx
Xxxxxx, XX 00000
0 Xxxxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
00000 Xxxxxxx Xxxxx
Xxxxxxx Xxxxxxx, XX 00000
The Plaza
0000 Xxxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
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63
0 Xxxxxxxxx Xxxxxx #000
Xxxxxx Xxxx, XX 00000
000 Xxxx Xxxxx 0
Xxxxxxx, XX 00000
00 Xxxxxxxx Xxxx
0xx Xxxxx
Xxxxx Xxxxxxxxxx, XX 00000
0000-X Xxxxxx Xxxx
Xxxxx 000
Xxxxxxxxxx, XX 00000
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Appletree Corporate Center
0000 Xxxxxx Xxxx, Xxxxxxxx X
Xxxxxxxxxxxx, XX 00000
000 Xxxx Xxxxxx Xxxxxxxxx
0xx Xxxxx
Xxxxxxxxxx, XX 00000
One Plymouth Meeting
Xxxxx 000
Xxxxxxxx Xxxxxxx, XX 00000
0000 Xxxxxxxx Xxxxx
Xxxxx 000
Xxxxxxx, XX 00000
0000 Xxxxx Xxxxxxx
Xxxxx 000
Xxxxxxx, XX 00000
000 XX Xxxx 000
Xxxxx, XX 00000
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64
0000 Xxxxxx Xxxx
Xxxxx 000
Xxxxxxxxxx, XX 00000
00000 Xxxxxx Xxxxx Xxxx
Xxxxx 000
Xxxxxxx, XX 00000
0000 Xxxxxxxx Xxxxx Xxxx #000
Xxxxxxxx, XX 00000
0000 Xxxxx Xxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxxxx, Xxxxxxx 00000
0000 Xxxxxxxxx Xxxxxxxxxx
Xxxxx 000
Xxxxxxxx, Xxxxxx X0X 0X0
Carrefour Laval
0000, Xxxx, Xxxxxx-Xxxxxxx
Xxxxx 000
Xxxxx, Xxxxxx X0X 0X0
000 Xxxxxxxxx Xx Xxxxxxxxxxx Xxxxx
Xxxxxx 000
Xxxxxxxx, Xxxxxx X0X 0X0
00000 Xxxxx Xxxx Xxxx
Xxxxxxxx, Xxxxxxxx 00000
- 59 -
65
Schedule 4.6
to Credit Agreement
ACTIVE LITIGATION
On May 5, 1998, a class action lawsuit was filed against the Borrower in
the Superior Court of New Jersey in Bergen County, New Jersey. The complaint
alleges, among other things, that the Borrower's Learning Centers in New Jersey
failed to provide certain educational services and resources, misrepresented
certain information respecting services, resources, occupational opportunities
and student outcomes and violated certain provisions of the New Jersey Consumer
Fraud Act. On November 19, 1999, the Court certified a class consisting of all
persons who, during the six years immediately preceding the commencement of this
action had enrolled in a course or courses of study, education or training
provided by the Borrower at its New Jersey locations for which they incurred
tuition expenses. On December 6, 1999, the Borrower filed a motion with the
Appellate Division of the Superior Court of New Jersey to appeal the November
19, 1999 decision to certify a class. The Borrower is unable to estimate the
outcome of the matter or any potential liability.
Between June 1, 1998 and October 31, 1999, the Borrower was named as
defendant in eight other lawsuits in California, Texas, Virginia, Michigan and
New Jersey by individual students or groups of students who formerly attended
one of the Borrower's Learning Centers. In two of these lawsuits, various
officers and directors of the Borrower have also been named as defendants. The
complaints allege, among other things, that the Borrower's affected Learning
Centers failed to provide plaintiffs with certain educational services and
resources and misrepresented certain information respecting services, resources,
student outcomes and violated certain provisions of the applicable state
consumer laws. During the second quarter of fiscal 2000, two of these cases were
settled resulting in payments to the former students of immaterial amounts. In
the third quarter of fiscal 2000, one case in Virginia was also settled.
Settlement expenses are combined with legal fees and included within general and
administrative expenses in the consolidated financial statements. The Borrower
is unable to estimate the outcome of the other five matters or any potential
liability.
On July 9, 1999, a class action lawsuit was filed against the Borrower in
the Court of Common Pleas in Philadelphia County, Pennsylvania, on behalf of all
students who attended the Learning Center located on Market Street in
Philadelphia within six years of July 9, 1999, who have not obtained employment
in a computer-related job through the Borrower's placement services. On August
2, 1999, the case was removed to the United States District Court for the
Eastern District of Pennsylvania. On October 12, 1999, the United States
District Court for the Eastern District of Pennsylvania remanded the case to the
Court of Common Pleas in Philadelphia County, Pennsylvania. The complaint
alleges, among other things, that this Learning Center failed to provide certain
educational services and resources, misrepresented
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66
certain information respecting services, resources, occupational opportunities
and student outcomes, and violated certain provisions of the Pennsylvania Unfair
Trade Practices and Consumer Protection Law. The Borrower is unable to estimate
the outcome of the matter or any potential liability.
In addition to the lawsuits discussed above, the Borrower is a defendant
in a number of civil lawsuits involving current and former employees, which the
Borrower considers incidental to the Borrower's business and unlikely to have a
material effect on the Borrower's future operations. However, there can be no
assurance that these matters will not have a material adverse effect on the
Borrower's results of operations in a future period, depending in part on the
results for such period.
The Borrower intends to defend itself vigorously in the lawsuits referred
to above; however, there can be no assurance that the Borrower will be
successful in defending the Borrower in any of these proceedings. Even if the
Borrower prevails on the merits in such litigation, the Borrower expects to
incur significant legal and other defense costs as a result of such proceedings.
These proceedings could involve substantial diversion of the time of some
members of management, and an adverse determination in, or settlement of, such
litigation could involve the payment of significant amounts, or could include
terms in addition to such payments, which could have a severe impact on the
Borrower's business, financial condition and results of operations.
There can be no assurance that additional legal proceedings will not be
filed or that adverse action will not be initiated against the Borrower, either
by federal or state regulators, or other parties. Any such legal proceedings or
adverse action could have a severe impact on the Borrower's business, financial
condition and results of operations.
SETTLED LITIGATION
On March 13, 1998, a class action lawsuit was filed against the Borrower
in the United States District Court for the Central District of California on
behalf of all purchasers of the Borrower's Common Stock from October 31, 1997
through March 10, 1998. Over the following two months, eight additional similar
cases were filed in United States District Courts: two in the Central District
of California; five in the Northern District of Illinois; and one in the Eastern
District of Virginia. The complaints alleged violations of the Securities
Exchange Act of 1934, including allegations that the Borrower was experiencing
"operations difficulties" and failed to disclose the alleged difficulties. The
complaints also alleged that Company insiders realized profits by trading their
shares of Company stock while in possession of material adverse information. All
of the complaints were filed on behalf of classes of shareholders of Company
Common Stock beginning as early as March 11, 1997 and ending as late as April 7,
1998. All of these shareholder lawsuits were consolidated and transferred to the
United States District Court for the Eastern District of Virginia. The Borrower
entered into a settlement agreement with the plaintiffs in February 1999,
whereby the Borrower settled these allegations and agreed to
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67
compensation to members of the plaintiffs' class. The terms of the settlement,
which received final judicial approval on July 9, 1999 and have been approved by
the plaintiffs, provided for the payment of $3.0 million in cash ($2.35 million
was covered by the Borrower's insurance policy) and the issuance of 550,000
shares of CLC Common Stock, subject to certain price protection features, which
resulted in an additional 463,152 shares of CLC Common Stock being issued to
guarantee a total settlement of $7.5 million. The Borrower's $650,000 cash
portion of the settlement agreement was paid in April 1999, and the remaining
$2.35 million cash obligation was paid in June 1999.
On April 16, 1999, the United States District Court for the Eastern
District of Virginia modified a confidentiality order that had been entered in
the case. The modification permitted the Borrower's counsel to share with the
United States Securities and Exchange Commission material that the Borrower had
obtained in discovery from certain third parties who had been trading in the
Borrower's common stock. The Borrower sought the modification of the
confidentiality order because the Borrower believes that the material in
question might evidence violations of federal securities laws by those third
parties.
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68
Schedule 4.11
to Credit Agreement
ENVIRONMENTAL MATTERS
NONE
- 63 -
69
Schedule 7.3
to Credit Agreement
PERMITTED LIENS
NONE
- 64 -
70
EXHIBIT A
to Credit Agreement
OFFICER DEFAULT CERTIFICATE
I, _____________________, pursuant to the Amended and Restated Credit
Agreement (the "Credit Agreement") dated December 23, 1999, between COMPUTER
LEARNING CENTERS, INC., a Delaware corporation ("Borrower"), and FIRST UNION
NATIONAL BANK, as successor-by-merger to CORESTATES BANK, N.A. ("Lender"),
hereby certify to Lender that:
1. I am the chief financial officer of Borrower.
2. I have conducted a diligent inquiry concerning whether, as of
____________________ _____, there existed any Default (as defined in the Credit
Agreement) or any Event of Default (as defined in the Credit Agreement).
3. Based upon such inquiry, to my actual knowledge and belief, as of
such date, [there existed no Default (as defined in the Credit Agreement) or
Event of Default (as defined in the Credit Agreement).] [the following
Default[s] (as defined in the Credit Agreement) and Event[s] of Default (as
defined in the Credit Agreement) existed and the relevant facts with respect
thereto are as follows:]
WITNESS my signature of this ______ day of _______________, _____.
----------------------------
Name:
Title:
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71
EXHIBIT B
to Credit Agreement
OFFICER FINANCIAL COVENANT CERTIFICATE
I, ______________________, pursuant to the Amended and Restated Credit
Agreement (the "Credit Agreement") dated December 23, 1999, between COMPUTER
LEARNING CENTERS, INC., a Delaware corporation ("Borrower"), and FIRST UNION
NATIONAL BANK, successor-by-merger to CORESTATES BANK, N.A. ("Lender"), hereby
certify to Lender, that:
1. I am the chief financial officer of Borrower.
2. As of __________________, ____ (all capitalized terms used
hereinafter without definition having the meanings assigned to such terms in the
Credit Agreement):
(a) TANGIBLE NET WORTH FOR Q_____ EQUALED $ ___________
Q ____ Q ____ Q ____ Q ____
(i) Total Assets $______ $______ $______ $______
(ii) Less Intangible Assets ($______) ($______) ($______) ($______)
(iii) Equals Tangible Assets $______ $______ $______ $______
(iv) Total Liabilities $______ $______ $______ $______
(iv) Tangible Net Worth $______ $______ $______ $______
(b) LEVERAGE RATIO FOR Q_____ EQUALED _________ TO 1.00
Q ____ Q ____ Q ____ Q ____
(i) Total Liabilities $______ $______ $______ $______
(ii) Tangible Net Worth (TNW) $______ $______ $______ $______
(ii) Total Liabilities/TNW $______ $______ $______ $______
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72
(c) FIXED CHARGE COVERAGE RATIO FOR 12 MONTH ROLLING PERIOD EQUALED
________ TO 1.00
Q ____ Q ____ Q ____ Q ____ 12 Mo. Rolling
(i) Net Income before tax
for the quarterly periods ended $______ $______ $______ $______ $________
(ii) Depreciation, amortization $______ $______ $______ $______ $________
(iii) Other non-cash charges deducted
in determining such net income $______ $______ $______ $______ $________
(iv) Interest Expense for period $______ $______ $______ $______ $________
(v) Payments under Operating Leases
during the periods then ended $______ $______ $______ $______ $________
(vi) Less 50% of Capital Expenditures
during the periods then ended ($______) ($______) ($______) ($______) ($________)
(vii) ADJUSTED NET INCOME (NUMERATOR) $______ $______ $______ $______ $________
(viii) Payments under Operating Leases
during the periods then ended $______ $______ $______ $______ $________
(ix) Interest Expense for period $______ $______ $______ $______ $________
(x) Current portion of Long-Term
Debt for then ended periods $______ $______ $______ $______ $________
(xi) FIXED CHARGES (DENOMINATOR) $______ $______ $______ $______ $________
(d) CURRENT RATIO FOR Q_____ EQUALED ___________ TO 1.00
Q ____ Q ____ Q ____ Q ____
(i) Total Current Assets $______ $______ $______ $______
(ii) Total Current Liabilities $______ $______ $______ $______
(iii) Current Assets/Current Liabilities ____:_1_ ____:_1_ ____:_1_ ____:_1_
- 67 -
73
WITNESS my signature of this ______ day of _______________, _____
------------------------
Name:
Title:
- 68 -
74
EXHIBIT C
to Credit Agreement
Sweep Plus Loan and Investment Services Description
Sweep Plus Loan and Investment Services Agreement
- 69 -
75
FIRST UNION NATIONAL BANK
SWEEP PLUS LOAN & INVESTMENT SERVICES DESCRIPTION
[FIRST UNION LOGO]
1. Company has indicated the type of investment choice(s) preferred for
operation of the Services, and Bank has informed Company of the fees and charges
associated with the chosen Services, which the Company agrees to pay in
accordance with the Bank's published schedule of fees, as amended from time to
time.
(a) Bank shall calculate the daily "Net Cash Position" in Company's
Demand Deposit Account Number _____________ (the "DDA"). The Net Cash Position
is calculated by using the opening balance of available funds in the DDA, plus
(i) any maturing investment principal and interest due from the "Sweep
Investment Account" (described below), and (ii) any deposits of collected funds
posted to the DDA, minus (A) the daily posting of debits and account holds
placed against the DDA by the Bank, (B) any floor balance which has been
established by the Bank to cover returns, overdrafts, unpaid fees and charges
assessed by the Bank and (C) the outstanding principal balance of the Note, if
any.
(b) If the Net Cash Position calculated above is a surplus, or credit
balance, Company agrees that Bank is authorized, and requests the Bank to debit
the DDA for the purpose of overnight investment of the surplus Net Cash
Position.
2. The overnight investment of a surplus Net Cash Position will occur if
the investable balance is equal to or greater than the minimum specified by Bank
for the instrument chosen by Company. Bank will deposit to the "Sweep Investment
Account" the maturing principal plus interest each banking day so that the sum
may be included in the current day's investment amount. Bank will determine the
interest rate to be paid on a daily basis, in accordance with the applicable
investment tier and investment instrument. Bank may periodically change the rate
differentials between the tiers and the size and the number of tiers. Bank
reserves the right to change the investment instruments and associated minimum
investment requirements. Investment amounts will be rounded downward to the
nearest $1,000.00 for investment purposes.
3. In the event the Net Cash Position calculated above is a deficit, Bank
will advance funds, if available, in accordance with a designated line of credit
which Bank has established with Company for daily working capital purposes.
Advances under this line of credit are hereby authorized to be made
automatically by Bank on a daily basis, with loan principal to be repaid as
collected funds create a surplus Net Cash Position. Loan interest will be
charged to the DDA via ACH debit originated by the Bank on a monthly basis,
unless otherwise agreed by the parties in writing. No load advances shall be
made in an amount less than $1,000, and each loan advance shall be made in
increments of $1,000 each. No loan advances shall be made if this Agreement or
the Note is in default or has been terminated.
4. Bank will notify Company as soon as is practicable if the amount
required to fund the DDA exceeds the available account balance plus invested
funds plus available funds in the line of credit. Unless collected funds to
cover the deficiency are received by 12:00 p.m. Eastern Time the next Bank
business day, Bank, at its discretion, may either return all items received from
the time of deficiency or extend the overdraft. The return of checks by Bank
constitutes termination of this Sevice, and all items subsequently presented
may, at Bank's sole discretion, be returned. Company warrants that individuals
who are authorized to sign Company's checks are also authorized to create
overdrafts, should Bank exercise its discretion by allowing such overdrafts.
Overdraft charges will be billed on a monthly basis in accordance with Bank's
regular fee schedule.
5. Company may provide Bank with additional instructions from time to time
regarding the operation of the Services, including the choice of investments,
enumeration of accounts, disposition of date and other matters involving the
Services. All of the provisions of the Bank's Deposit Agreement and Disclosures
for Non-Personal Accounts are incorporated herein by reference as fully as if
set forth verbatim.
5a2358 (Rev 2.0)
76
[First Union LOGO]
FIRST UNION NATIONAL BANK
SWEEP PLUS LOAN & INVESTMENT SERVICES AGREEMENT
[Date]
------
[Borrower]
----------
[Address]
---------
[City State Zip]
----------------
[Contact Person, Title]
-----------------------
Telephone#: [Telephone#] Fax#: [Fax#]
------------ -------
DDA Account#: [DDA Account#] Taxpayer ID#: [Taxpayer I.D.#]
-------------- ----------------
Peg Amount: $[Peg Amount:0.00]
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First Union National Bank ("Bank") offers to its customers various
Cash Management Services, among which those described below may be found.
Bank and Borrower agree to establish this Agreement for Sweep Plus Loan &
Investment Services described below (the "Services") as of the date set forth
above. To the extent applicable by its terms, this Agreement shall modify and
amend that certain Promissory Note between the parties dated [enter date],
(the "Note")including in part the repayment terms set forth in the Note, as
well as other terms; however, the Note shall continue to be due and payable in
full on the maturity date stated in the Note, or upon demand, if so provided in
the Note.
1. Borrower has indicated the type of investment choice(s) preferred for
the operation of the Services, and Bank has informed Borrower of the fees
and charges associated with the chosen Services, which the Borrower agrees to
pay in accordance with the Bank's schedule of fees, as amended from time to
time.
(a) Bank shall calculate the daily "Net Cash Position" in Borrower's
Demand Deposit Account Number [enter a/c#](the "DDA"). The Net Cash Position is
calculated by using the opening balance of available funds in the DDA, PLUS (i)
any maturing investment principal and interest due from the "Sweep Investment
Account" (described below), and (ii) any deposits of collected funds posted to
the DDA, minus (A) the daily posting of debits and account holds placed against
the DDA by the Bank, (B) any floor balance which has been established by the
Bank to cover returns, overdrafts, unpaid fees and charges assessed by the Bank
and (C) the outstanding principal balance of the Note, if any.
(b) If the Net Cash Position calculated above is a surplus, or credit
balance, Borrower agrees that Bank is authorized, and requests the Bank to
debit the DDA for the purpose of overnight investment of the surplus Net Cash
Position.
2. The overnight investment of a surplus Net Cash Position will occur if
the investable balance is equal to or greater than the minimum specified by
Bank for the instrument chosen by Borrower. Bank will deposit to the" Sweep
Investment Account" the maturing principal plus interest each banking day so
that the sum may be included in the current day's investment amount. Bank will
determine the interest rate to be paid on a daily basis, in accordance with the
applicable investment tier and investment instrument. Bank may periodically
change the rate differentials between the tiers and the size and the number of
tiers. Bank reserves the right to change the investment instruments and
associated minimum investment
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requirements. Investment amounts will be rounded downward to the nearest
$1,000.00 for investment purposes.
3. In the event the Net Cash Position calculated above is a deficit, Bank
will advance funds, if available, in accordance with a designated line of credit
which Bank has established with Borrower for daily working capitol purposes.
Advances under this line of credit are hereby authorized to be made
automatically by Bank on a daily basis, with loan principal to be repaid as
collected funds create a surplus Net Cash Position. Loan interest will be
charged to the DDA via ACH debit originated by the Bank on a monthly basis,
unless otherwise agreed by the parties in writing. No loan advances shall be
made in an amount less than $1,000.00, and each loan advance shall be made in
increments of $1,000.00 each. No loan advances shall be made if this Agreement
of the Note is in default or has been terminated.
4. Bank will notify Borrower as soon as is practicable if the amount
required to fund the DDA exceeds the available account balance plus invested
funds plus available funds in the line of credit. Unless collected funds to
cover the deficiency are recieved by 12:00 p.m. Eastern Time the next Bank
business day, Bank, at its discretion, may either return all items received
from the time of deficiency or extend the overdraft. The return of checks by
Bank constitutes termination of this Service, and all items subsequently
presented may, at Bank's sole discretion, be returned. Borrower warrants
that individuls who are authorized to sign Borrower's checks are also
authorized to create overdrafts, should Bank exercise its discretion by
allowing such overdrafts. Overdraft charges will be billed on a monthly basis
in accordance with Bank's regular fee schedule.
5. Borrower may provide Bank with additional instructions from time to
time regarding the operation of the Services, including the choice of
investments, enumeration of accounts, disposition of date and other matters
involving the Services. All of the provisions of the Bank's Deposit Agreement
and Disclosures for Non-Personal Accounts are incorporated herein by reference
as fully as if set forth verbatim.
[Insert standard borrower signature(s)]
FIRST UNION NATIONAL BANK
CORPORATE
SEAL By:____________________________________________
[Bank Officer's name],[Bank Officer's title]
Page 2
78
EXHIBIT D
to Credit Agreement
BORROWING CERTIFICATE
This Certificate is made pursuant to Subsection 5.1(d) of the Amended and
Restated Credit Agreement of even date herewith (the "Credit Agreement")
between COMPUTER LEARNING CENTERS, INC., a Delaware corporation (the
"Borrower"), and FIRST UNION NATIONAL BANK, as successor-by-merger to
CORESTATES BANK, N.A. Capitalized terms used herein without definition
shall have the meanings assigned to such terms in the Credit Agreement.
The undersigned hereby certifies that, to his actual knowledge and belief:
1. The representations and warranties of the Borrower set forth in
the Credit Agreement and the other Credit Documents, or which are contained
in any certificate, document or financial or other statement furnished
pursuant to or in connection with the Credit Agreement, are true and complete
in all material respects on and as of the date hereof;
2. There are no bankruptcy, insolvency, reorganization, liquidation or
dissolution proceedings pending or, to my knowledge, threatened against the
Borrower, nor has any other event occurred affecting or threatening the
existence of the Borrower; and
3. As of the date of this Agreement, no Default or Event of Default
exists.
IN WITNESS WHEREOF, the undersigned has hereunto set his name as of
the
_____day of ___________________,__________.
_________________________________
Name: Xxxxxxx X. Xxxxxxxx
Title: Vice President and Chief
Financial Officer
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79
_______ OF ______________,SS:
I HEREBY CERTIFY that on this _____ day of ________ 1996, before me, the
undersigned, a Notary Public of said State, personally appeared __________, who
acknowledged himself to be the ______ of Computer Learning Centers, Inc., and
that he, as such, being authorized so to do, executed the foregoing instrument
on behalf of the said Computer Learning Centers, Inc., for the purposes therein
contained.
WITNESS my hand and Notarial Seal.
------------------------------
Notary Public
My Commission expires:
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80
EXHIBIT E
to Credit Agreement
PROJECTIONS
-72-
81
EXHIBIT F
to Credit Agreement
CLCQ CAPITAL STOCK
Class Shareholder Shares
----- ----------- ------
Common Shares Borrower 100
Dividend Access Shares Borrower 512,551
Dividend Access Shares Xxxxx-Xxxxx Matte 7,229
Dividend Access Shares Dolmen (1994) Inc. 28,628
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