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EXHIBIT 10.2
TERM LOAN AND REVOLVING LINE OF CREDIT AGREEMENT
THIS TERM LOAN AND REVOLVING LINE OF CREDIT AGREEMENT (this
"Agreement"), dated as of March 26, 1993, by and between CHILDCARE NETWORK,
INC., a Georgia corporation ("Borrower"), and TRUST COMPANY BANK OF COLUMBUS,
N.A., a national banking association ("Lender").
WITNESSETH:
WHEREAS, Borrower has requested that Lender extend term loans to
Borrower in the principal amount of $2,200,000 to finance Borrower's acquisition
of certain assets of Kinder-Care Learning Centers, Inc. a Delaware
corporation("Kinder-Care"); and
WHEREAS, Borrower has requested that Lender extend a revolving line of
credit to Borrower in an aggregate principal amount not to exceed $175,000 at
any one time outstanding for Borrower's working capital needs; and
WHEREAS, Lender has agreed to extend such term loans and revolving line
of credit to Borrower upon the terms and conditions set forth and contained
herein;
NOW, THEREFORE, for and in consideration of the sum of $10.00 in hand
paid by Lender to Borrower, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree and contract as follows:
ARTICLE I
AMOUNT AND TERMS OF BORROWINGS
Section 1.1 Term Loans and Term Notes. Subject to the terms and
conditions set forth in this Agreement, Lender agrees to lend to Borrower the
aggregate principal amount of $2,200,000 (the "Term Loans") to be evidenced by
two promissory notes each dated the date of execution of this Agreement in the
form of Exhibits "A" and "B" attached hereto and incorporated herein (the "Term
Notes"). The Term Notes shall be payable to the order of Lender in the original
principal amount of $1,775,360.00 and $424,640.00, ("Real Estate Note" and
"Equipment Note" respectively) and shall bear interest on the outstanding
principal balances from the date of the Term Notes to final payment at an annual
rate of interest equal to Lender's Prime Rate from time to time in effect plus
one-half of one percent (.50%) (the "Term Note Rate"), but in no event shall the
Term Note Rate ever be greater than ten percent (10.0%) per annum or less than
six percent (6.0%) per annum, and the Real Estate and Equipment Notes shall
mature on April 1, 1998, or sooner should Lender declare the principal and
accrued interest on the Term Note
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to be immediately due and payable as provided for hereinafter. Accrued and
unpaid interest on the Term Loans shall be due and payable on the first (1st)
day of each calendar month during the term thereof commencing May 1, 1993, and
the principal amount of the Term Loans shall be due and payable in fifty-nine
(59) consecutive monthly installments as provided in said Term Loans with a
sixtieth and final payment equal to the then outstanding principal balance and
all accrued and unpaid interest being due and payable on April 1, 1998; and the
Equipment Note shall be due and payable in sixty (60) consecutive monthly
installments as provided in said Equipment Note with the first such monthly
principal installment being due and payable on May 1, 1993. Any combined
installment of principal and interest shall be first credited to interest in an
amount equal to the amount of accrued and unpaid interest and the portion of
each such installment not so credited to interest shall be credited to
principal.
Section 1.2 Revolving Line of Credit and Revolving Credit Note. Subject
to the terms and conditions of this Agreement, Lender agrees to establish a
revolving line of credit in favor of Borrower in an aggregate principal amount
not to exceed $175,000 at any one time outstanding (the "Revolving Line of
Credit"). Within the limits of the Revolving Line of Credit, Borrower may
borrow, repay and reborrow under the terms of this Agreement; provided, however,
that Borrower may neither borrow nor reborrow should there exist a Default or an
Event of Default. Borrowings and reborrowings under the Revolving Line of Credit
shall be evidenced by a single revolving credit note dated the date of execution
of this Agreement in the form of Exhibit "C" attached hereto and incorporated
herein (the "Revolving Credit Note"). The Revolving Credit Note shall be payable
to the order of Lender in the principal amount of $175,000, shall bear interest
on the outstanding principal balance from the date of the Revolving Credit Note
to final payment at an annual rate of interest equal to Lender's Prime Rate from
time to time in effect (the "Revolving Credit Note Rate") and shall mature on
April 1, 1996, or sooner should Lender declare the principal and accrued
interest on the Revolving Credit Note to be immediately due and payable as
provided for hereinafter. Interest shall accrue on the unpaid principal amount
of each Advance from the date of such Advance at the Revolving Credit Note Rate
and shall be due and payable monthly on the first (1st) day of each calendar
month.
Section 1.3 Method of Borrowing Under the Revolving Line of Credit.
Borrower may borrow under the Revolving Line of Credit by giving Lender written
or telephonic notice (promptly confirmed in writing) of any requested Advance
under the Revolving Line of Credit (a " Notice of Borrowings) specifying (i) the
amount of such Advance and (ii) the date the proposed Advance is to be made
(which shall be a Business Day). Each Notice of Borrowing shall be given to
Lender no later than 12:00 Noon (Columbus, Georgia time) on the
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day of the requested Advance. Lender shall be entitled to rely on any telephonic
Notice of Borrowing which it believes in good faith to have been given by a duly
authorized officer of Borrower and any Advance made by Lender based on such
telephonic notice shall, when deposited by Lender to Borrower's account at
Lender, constitute an Advance under the Revolving Line of Credit for all
purposes hereunder.
Section 1.4 Optional Prepayment of the Term Loans.
(a) Borrower shall have the right to prepay the Term Loans in whole at
any time or in part from time to time, without premium or penalty, but with
accrued and unpaid interest on the principal amount prepaid to the date of such
prepayment. All such prepayments shall first be credited to accrued and unpaid
interest and the balance shall be credited to principal.
(b) Borrower shall notify Lender at least two days in advance of any
such voluntary prepayment. Any partial prepayments shall be in the minimum
principal amount of $10,000 and in increments of $1,000 thereafter (or the
entire outstanding principal amount of either of the Term Loans), and each such
partial prepayment shall be applied in the inverse order of maturity to
principal installments due under the Term Loans as specified by the Borrower.
Section 1.5 Computation of Interest. Interest payable on the Term Notes
and the Revolving Credit Note shall be calculated on the basis of a 360-day year
and the actual number of days elapsed. Any change in the rate of interest
accruing under the Term Note or the Revolving Credit Note and resulting from a
change in Lender's Prime Rate shall be effective as of the opening of business
on the effective date of the change in Lender's Prime Rate.
Section 1.6 Interest Upon Default. In the event that any payment of
principal and/or interest under the Term Notes or the Revolving Credit Note is
not paid within ten (10) Days from its due date, whether or not by reason of
acceleration, such sum shall bear interest from the due date thereof until paid
at the per annum rate which is two percent (2%) above the interest rate which
would otherwise be in effect thereunder (the "'Default Rate"). Interest accruing
at the Default Rate shall be payable upon demand or, if sooner, on the date of
the next installment of principal and/or interest due under the Term Notes or
the Revolving Credit Note, as the case may be.
Section 1.7 Use of Proceeds. The proceeds from the Term Loans and the
Revolving Line of Credit shall be used by Borrower for business and commercial
purposes, including in the case of the Term Loans, for the acquisition of some
of the assets of KinderCare and in the case of the Revolving Line of Credit, for
the general working capital needs of Borrower.
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ARTICLE II.
CONDITIONS TO LOAN CLOSING AND ADVANCES
Section 2.1 Conditions to Effective Date and Obligations of Lender. The
obligation of Lender to advance, at any time, loan funds to Borrower under this
Agreement is subject to the strict satisfaction by Borrower of the following
conditions (all such conditions hereinafter the "Conditions") and this Agreement
shall become effective on the first date such Conditions are so satisfied (the
"Effective Date"). In the event Borrower at any time fails to meet the
Conditions, Lender shall not have any obligation to advance loan funds to
Borrower, but the terms of this Agreement shall continue in full force and
effect with respect to any prior or subsequent advance of loan funds made to
Borrower hereunder.
(a) Opinion of Borrower's Counsel. Borrower shall have delivered to
Lender a favorable written opinion from Hatcher, Stubbs, Land, Xxxxxx and
Xxxxxxxxxx, Counsel to Borrower, dated as of and delivered on the Effective
Date, satisfactory to Lender, with respect to the matters set forth in Sections
3.1, 3.2, 3.5, 3.7 through 3.12, 3.15, 3.17, and 3.18 of this Agreement, the
sale of the assets of Kinder-Care by Borrower has been properly approved by the
Bankruptcy Court in which the Chapter 11 bankruptcy of Kinder-Care is pending,
and covering such additional matters relating to the transactions contemplated
hereby as Lender may reasonable request. Borrower also shall deliver to Lender
title insurance policies with respect to the interest of Lender under the Deeds
to Secure Debt and the Assignments of Leases required by subsection (f) of this
Section 2.1 with such exceptions as are reasonably acceptable to Lender dated
the date of this Agreement.
(b) No Defaults; Certificate. Borrower shall be in full compliance with
all the terms and conditions of this Agreement, and no Default or Event of
Default shall have occurred. The representations and warranties set forth in
this Agreement shall be true and correct in all material respects. Lender
shall have received from Borrower a Certificate of Borrower, substantially in
the form of Exhibit "D" attached hereto and incorporated herein, dated as of and
delivered on the Effective Date, certifying that the representations and
warranties set forth herein are accurate, true and correct in all material
respects on and as of such date, and that the schedules and exhibits attached
hereto are accurate, true and correct in all material respects on and as of such
date, and that no Default or Event of Default exists.
(c) Corporate Action and Authority: Incumbency Certificate. Borrower
shall have delivered to Lender (i) a copy of the organizational papers of
Borrower, certified as true and
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correct by the Secretary of State of the State of Borrower's incorporation, (ii)
certificates from the Secretaries of State of those States (including, without
limitation, Georgia, Alabama, and South Carolina) in which Borrower owns or
leases any property, or otherwise conducts business, certifying Borrower's good
standing as a corporation in such States, and (iii) a copy of the resolutions
passed by the Board of Directors of Borrower authorizing the execution and
delivery of and the performance of the obligations under the Loan Documents and
a copy of the Bylaws of Borrower, certified by the duly elected, qualified and
serving Secretary or Assistant Secretary of Borrower, on behalf of and under the
seal of Borrower, to be true and correct. Borrower also shall have delivered to
Lender a certificate, dated as of and delivered on the Effective Date and signed
on behalf of and under the seal of Borrower by the duly elected, qualified and
serving Secretary or Assistant Secretary of Borrower, certifying the names of
the officers of Borrower authorized to execute and deliver the Loan Documents
and to request borrowings and Advances under this Agreement, together with the
original, not photocopied, signatures of such officers. Such certificate shall
be substantially in the form of Exhibit "E" attached hereto and incorporated
herein.
(d) Delivery of Notes. Borrower shall have executed and delivered to
Lender the Term Notes and the Revolving Credit Note.
(e) Security Agreement. Borrower shall have executed and delivered to
Lender a security agreement in form and substance satisfactory to Lender (the
"Security Agreement"), granting and conveying to Lender a first-priority
security interest and lien (as defined by the Uniform Commercial Code in effect
in Georgia, O.C.G.A. ss.11-g-101 et. seq.) in all assets of Borrower being
purchased from Kinder-Care together with all replacements and substitutions
thereof, excluding vehicles, as set forth and described on Exhibit "F" attached
hereto and incorporated herein (the "Collateral"). The security interests
granted to Lender under the Security Agreement shall secure all obligations of
Borrower under this Agreement. Further, Borrower shall have executed and
delivered to Lender for filing UCC-1 Financing Statements in form and substance
satisfactory to Lender and properly endorsed or executed certificates of title
or other properly executed instruments or documents deemed necessary or proper
by Lender, to enable Lender to establish and perfect the security interests of
Lender in the Collateral as granted by the Security Agreement.
(f) Deeds to Secure Debt. Borrower shall have executed and delivered to
Lender Deeds to Secure Debt and Security Agreement in form and substance
satisfactory to Lender (the "Deed"), granting and conveying to Lender the real
property described in Exhibit "G" attached hereto and incorporated herein (the
"Real Property") subject only to such liens and encumbrances that are acceptable
to Lender, in its sole discretion. The Deed shall secure all obligations of
Borrower under this Agreement.
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(g) Assignment of Leases. Borrower shall have executed and delivered to
Lender Assignments of Leases in form and substance satisfactory to Lender (the
"Assignments") assigning the real property leases scheduled on Exhibit "H"
attached hereto and incorporated herein (the "Leased Real Property") subject
only to such liens and encumbrances that are acceptable to Lender, in its sole
discretion. The Assignments shall secure all obligations of Borrower under this
Agreement.
(h) Subordination Agreement. Borrower shall have executed, and shall
have caused the holders of the Subordinated Debt described on Exhibit "I" to
have executed, in favor of Lender subordination agreements in form and substance
satisfactory to Lender ("Subordination Agreements"), subordinating the
indebtedness evidenced by the Subordinated Debt as provided in the Subordination
Agreements.
(j) Capital Structure and Ownership of Borrower. On and as of the
Effective Date, the capital structure and ownership of Borrower shall be as set
forth on Exhibit "J" attached hereto and incorporated herein.
(k) Insurance. Borrower shall have provided evidence satisfactory to
Lender that Borrower has procured the insurance described in Sections 3.16 and
4.8 hereof and that such insurance is in full force and effect on the Effective
Date.
(l) Environmental Assessment. Borrower shall have completed and
returned to Lender the environmental report or check list form provided Borrower
by Lender.
(m) Appraisals. Lender shall have received appraisals of the Real
Property from appraisers satisfactory to Lender, which appraisals shall have
been conducted not more than ninety (90) days prior to the Effective Date.
(n) Closing and Purchase of Assets. Borrower's purchase of certain
assets of Kinder-Care pursuant to that certain Asset Purchase Agreement dated
January 21, 1993, by and among Borrower (as "Purchaser"), Kinder-Care (as
"Seller"), shall have been closed or completed in all respects and proper
approval of the Bankruptcy Court in which the Chapter 11 bankruptcy of
Kinder-Care is pending has been obtained.
(o) Proceedings. The Loan Documents, upon their execution and delivery,
and all corporate proceedings in connection with the authorization, execution
and delivery of and the performance of the obligations under the Loan Documents,
shall be satisfactory in form and substance to Lender.
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(P) Surveys. Lender shall have received surveys of the Real Property
from surveyors satisfactory to Lender.
Section 2.2 Conditions to Each Advance. At the time of the making by
Lender of each Advance under the Revolving Line of Credit (including the initial
Advance) the following statements shall be true (and each of the giving by
Borrower of a Notice of Borrowing in accordance with Section 1.3 hereof and the
acceptance by Borrower of the proceeds of such Advance shall constitute a
representation and warranty by Borrower that on the date of such Advance, before
and after giving effect thereto and to the application of the proceeds
therefrom, such statements are true):
(i) The representations and warranties contained in Article III hereof
are true and correct in all material respects on and as of the date of such
Advance as though made on and as of such date, and
(ii) No Default or Event of Default exists or would result from such
Advance or from the application of the proceeds therefrom.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
Borrower represents, warrants and covenants to Lender that:
Section 3.1 Organization and Qualification. Borrower (i) is a
corporation duly organized, validly existing and in good standing under the laws
of the State of its incorporation, with the power and authority (corporate and
other) to own its properties and to carry on its business as now conducted, (ii)
is qualified to transact business as a foreign corporation and is in good
standing in each jurisdiction in which such qualification is required under
applicable law, and (iii) has the power and authority (corporate and other) to
execute, deliver and to perform its obligations under the Loan Documents.
Section 3.2 Corporate Authority. The execution and delivery by Borrower
of and the performance by Borrower of its obligations under the Loan Documents
are within Borrower's corporate powers, have been duly authorized by all
requisite shareholder and corporate action on the part of Borrower and do not
and will not (i) violate any provision of any law, rule or regulation, any
judgement, order or ruling of any court or governmental agency, the
organizational papers or Bylaws of Borrower, or any indenture, agreement or
other instrument to which Borrower is a party or by which Borrower or any of its
properties
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is bound, where any such violation would materially impair Borrower's ability to
meet its obligations under the Loan Documents or (ii) be in conflict with,
result in a breach of, or constitute with notice or lapse of time or both a
default under any such indenture, agreement or other instrument.
Section 3.3 Financial Information. All financial information furnished
by Borrower to Lender in connection with the transaction contemplated by this
Agreement is true and correct in all material respects and has been prepared in
accordance with proper accounting principles consistently applied. Since the
date of such financial information, there has been no material adverse change in
the financial condition of Borrower, and, after due inquiry, there exists no
material contingent liability or obligation assertable against Borrower that is
not identified and disclosed to Lender in Exhibit "K" attached hereto and
incorporated herein.
Section 3.4 Tax Returns; Payment. All federal, state and other tax
returns and reports of Borrower required by law to be filed have been completed
in full and have been duly filed and prepared in good faith with due diligence,
and all taxes, assessments, fees, withholdings and other governmental charges or
levies upon Borrower or its properties, assets and income which are shown on
such returns and reports or which have been billed to Borrower have been paid,
and Borrower maintains adequate reserves and accruals in respect of all such
federal, state and other taxes, assessments, fees, withholdings and other
governmental charges or levies for all fiscal periods. There are no unpaid
assessments pending against Borrower for any taxes, fees, withholdings and other
governmental charges or levies, and Borrower knows of no basis therefor. No
federal, state or other tax return or report of Borrower filed or originally
scheduled-to have been filed during any fiscal year of Borrower since its
incorporation currently is or previously has been the subject of a governmental
investigation or audit.
Section 3.5 Litigation. There are no actions, suits, investigations or
proceedings pending or overtly threatened against or affecting Borrower or its
properties before any court, arbitrator or administrative or governmental body.
Borrower currently is neither in default nor in violation of any applicable law,
statute or ordinance, or of any order of any court which default or violation
might have a material adverse impact on Borrower's assets, business, operations,
prospects, or condition (financial or otherwise).
Section 3.6 No Defaults. No Default or Event of Default exists under
this Agreement.
Section 3.7 Title to Properties. Borrower owns marketable fee simple
title to all of the property and assets of Borrower
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including, without limitation, (i) on the Effective Date, all properties and
assets acquired from Kinder-Care (other than the Leased Real Property and
vehicles), (ii) all properties and assets reflected in the most recently dated
financial statements described in Section 4.1 (other than properties and assets
disposed of in the ordinary course of business), (iii) the Collateral, and (iv)
the Real Property and other assets conveyed by the Deeds, and said property and
assets are free from any Liens or other encumbrances securing indebtedness which
arose through borrowings and from any other Liens except for those Liens
specifically identified and disclosed to Lender in Exhibit "L" attached hereto
and incorporated herein, or defects in title which are substantial in amount or
which affect or impair the operations of the business of Borrower. Borrower
enjoys full and undisturbed possession of the Leased Real Property and all
personal properties held under leases to which it is a party, none of which
contains any unusual or burdensome provision that might materially affect or
impair the operation of such properties and assets. All leases are valid and in
full force and effect. Borrower shall provide Lender, upon request, with true,
correct and complete copies of all leases to which it is a party.
Section 3.8 Enforceability. This Agreement, the Term Note, the
Revolving Credit Note, the Deed, the Security Agreement, and the other Loan
Documents are legal, valid and binding agreements of Borrower enforceable
against Borrower in accordance with their terms.
Section 3.9 Consent. No consent, permission, authorization, order or
license of any governmental authority is necessary in connection with the
execution, delivery, performance or enforcement of the Loan Documents.
Section 3.10 ERISA.
(a) Except as shown on Exhibit "M" attached hereto and incorporated
herein, neither Borrower nor any ERISA Affiliate maintains or contributes to, or
has maintained or contributed to, any Plan that is an ERISA Plan, and except as
shown on Exhibit "M" hereto, Borrower does not maintain or contribute to, and
has not maintained or contributed to, any Plan that is an Executive Arrangement.
(b) Each Plan has at all times been maintained, by its terms and in
operation, in accordance with all applicable laws.
(c) Borrower currently is not, nor will become, subject to any
liability (including withdrawal liability), tax or penalty whatsoever to any
person whomsoever with respect to any Plan including, but not limited to, any
tax, penalty or liability
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arising under Title I or Title IV or ERISA or Chapter 43 of the Code.
(d) Borrower and each ERISA Affiliate has made full and timely payment
of all amounts (i) required to be contributed under the terms of each Plan and
applicable law and (ii) required to be paid as expenses of each Plan. No Plan
has an "amount of unfunded benefit liabilities" (as defined in Section
4001(a)(18) of ERISA).
Section 3.11 Subsidiaries. Borrower has no Subsidiaries.
Section 3.12 Affiliates. Borrower has no Affiliates, other
than the shareholders of record as of the date hereof.
Section 3.13 Indebtedness. Borrower has outstanding no indebtedness,
other than indebtedness under this Agreement, the Subordinated Debt, trade
indebtedness incurred in the ordinary course of business payable within 60 days
of its incurrence and not evidenced by a promissory note, and indebtedness
specifically identified and disclosed to Lender in Exhibit "N" attached hereto
and incorporated herein. There exists no default under the provisions of any
instrument evidencing such indebtedness or of any agreement relating thereto, or
under any other contract or agreement to which Borrower is a party.
Section 3.14 Insurance. All property and assets owned by Borrower are
insured for the benefit of Borrower and Lender in the amounts required by
Section 4.8 hereof.
Section 3.15 Conflicting Agreements or Other Matters. Borrower is not a
party to any contract or agreement or subject to any charter or other corporate
restriction which materially and adversely affects its business, property or
assets, or financial condition or prospects. Neither the execution or delivery
of this Agreement or the other Loan Documents, nor fulfillment of or compliance
with the terms and provisions hereof and thereof, will conflict with, or result
in a breach of the terms, conditions or provisions of, or constitute a default
under, or result in any violation of, or result in the creation of any Lien upon
any of the properties or assets of Borrower pursuant to, the charter or Bylaws
of Borrower, any award of any arbitrator or any agreement (including any
agreement with stockholders), instrument, order, judgment, decree, statute, law,
rule or regulation to which Borrower is subject. Borrower is not a party to, or
otherwise subject to any provision contained in, any instrument evidencing
indebtedness of Borrower, any agreement relating thereto or any other contract
or agreement (including its charter) which limits the amount of, or otherwise
imposes restrictions on the incurring of debt of Borrower of the type to be
evidenced by the Term Notes or the Revolving Credit Note.
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Section 3.16 Pollution and Environmental Control. Borrower has obtained
all permits, licenses and other authorizations which are required under, and is
in compliance with, all federal, state, and local laws and regulations relating
to pollution, reclamation, or protection of the environment, including laws
relating to emissions, discharges releases or threatened releases of pollutants,
contaminants, or hazardous or toxic materials or wastes into air, water, or
land, or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, including without limitation underground storage tanks,
disposal, transport or handling of pollutants, contaminants or hazardous or
toxic materials or wastes.
Section 3.17 Possession of Franchises Licenses. Etc. Borrower possesses
all franchises, certificates, licenses (other than those licenses which cannot
be issued or transferred until after the closing of the purchase of the assets
from Kinder-Care) permits, tags, decals and other authorizations from
governmental or political subdivisions or regulatory authorities relating to the
business of Borrower, and all patents, trademarks, service marks, trade names,
copyrights, licenses and other rights, free from burdensome restrictions, that
are necessary for the ownership, maintenance and operation of any of its
properties and assets, and Borrower is not in violation of any thereof.
Section 3.18 Disclosure. Neither this Agreement nor any other document,
certificate or statement furnished to Lender by or on behalf of Borrower in
connection herewith contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained herein
and therein not misleading. There is no fact peculiar to Borrower which
materially adversely affects or in the future may (so far as Borrower can now
foresee) materially adversely affect the business, property or assets, or
financial condition of Borrower which has not been set forth in this Agreement
or in the other Loan Documents, or in certificates and statements furnished to
Lender by or on behalf of Borrower prior to the date hereof in connection with
the transactions contemplated hereby.
ARTICLE IV.
AFFIRMATIVE COVENANTS
So long as the Term Loans or the Revolving Line of Credit shall remain
unpaid or Lender shall have any commitment hereunder, Borrower covenants and
agrees that:
Section 4.1 Financial Statements. Borrower shall provide Lender with
notice of any change in the dates of the fiscal year now employed for accounting
and reporting purposes, and Borrower shall deliver to Lender:
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(a) Quarterly Statements. As soon as practicable and in any event
within thirty (30) days after each fiscal quarter, an unaudited income and
expense statement and balance sheet and statement of cash flows for Borrower
certified as correct in all material respects by the chief executive officer and
chief financial officer of Borrower;
(b) Annual Audited Statement. As soon as practicable and in any event
within one hundred twenty (120) days after the end of each fiscal year,
statements of income, retained earnings and cash flows of Borrower for the
just-ended fiscal year, and a balance sheet of Borrower as of the end of such
year, setting forth in each case in comparative form corresponding figures from
the preceding fiscal year, all in reasonable detail and reasonably satisfactory
in scope to Lender and accompanied by an unqualified opinion from the present
independent certified public accountants of Borrower or by such other firm of
independent certified public accountants as may be designated by Borrower and be
satisfactory to Lender, which opinion shall state that such financial statements
(i) fairly present the financial condition and the results of operations of
Borrower, (ii) have been prepared in accordance with generally accepted
accounting principles consistently applied, and (iii) result from an examination
by such accountants made in accordance with generally accepted auditing
standards, including such tests of the accounting records and other auditing
procedures as were considered necessary in the circumstances;
(c) Compliance Certificate. Simultaneously with the delivery of the
financial statements required under subsections (a) and (b) of this Section 4.1,
a certificate from the chief executive officer of Borrower in the form of
Exhibit "O" attached hereto and incorporated herein, stating that the financial
statements are correct in all material respects and that they are aware of no
Default or Event of Default, which certificate shall demonstrate in reasonable
detail satisfactory to Lender the compliance of Borrower with Section 5.4
hereof;
(d) Accountants' Reports. Promptly upon receipt thereof, copies of any
report, excluding work papers, submitted to Borrower by independent accountants
in connection with each annual, interim or special audit of the books of
Borrower made by such accountants that substantiate or detail the figures
reported in such audit and, promptly upon the occurrence thereof, notice of the
resignation or discharge of any independent accountants now or hereafter
employed by Borrower;
(e) Shareholder Reports. Promptly upon the transmission thereof, copies
of all financial statements, proxy statements, and other reports sent by
Borrower to its Shareholders and copies of any and all regular or periodic
reports, registration statements, prospectuses or other written communications
that Borrower is or may be required to file with the Securities and Exchange
Commission
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or any governmental department, bureau, commission or agency succeeding to the
functions of the Securities and Exchange Commission;
(f) Other Information. With reasonable promptness, such other financial
information as Lender may reasonably request.
Section 4.2 Maintenance of Books and Inspection of Property and
Records. Borrower shall maintain its books, accounts and records in accordance
with generally accepted accounting principles and shall permit any Person
designated in writing by Lender to visit and inspect any of its properties,~
corporate books and financial records, and make copies thereof and take extracts
therefrom, and to discuss the accounts, affairs and finances of Borrower with
the principal officers thereof, all at such times as Lender may reasonably
request. Borrower shall maintain its properties, real and personal, including,
without limitation, the Collateral, in good condition and Borrower shall not
waste or otherwise permit such properties to deteriorate in value, normal wear
and tear excepted.
Section 4.3 Taxes. Borrower shall pay and discharge all taxes,
assessments, fees, withholdings and other governmental charges or levies imposed
upon it, or upon its income and profits, or upon any property belonging to it,
prior to the date the same shall become delinquent; provided, however, that
Borrower shall not be required to pay and discharge any such tax, assessment,
fee, withholding, charge or levy so long as the legality thereof shall be
promptly and actively contested in good faith and by appropriate proceedings.
Section 4.4 Corporate Existence and Status. Borrower shall maintain its
corporate existence and good standing in its state of incorporation and its
qualification and good standing as a foreign corporation in all jurisdictions
where such qualification is required under applicable law, and shall conduct its
business in the manner in which it is now conducted subject only to changes in
the ordinary course of business.
Section 4.5 Compliance with Law and other Agreements. Borrower shall
conduct its business operations and obtain all necessary permits, and licenses
in compliance with (i) all applicable federal, state and local laws, rules and
regulations, and (ii) all agreements, indentures and mortgages to which it is a
party or by which it or any of its properties is bound.
Section 4.6 Notice of Default. Borrower shall notify Lender of the
occurrence of any Default or Event of Default, and Borrower shall notify Lender
of any default under any Loan Document, or under any other agreement or
obligation with any Person, to which it is a party or by which it or any of its
properties is bound, said notices to be given within five (5) days
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of Borrower's obtaining knowledge of the occurrence of the Default, Event of
Default or other default; provided, however, the failure of Borrower to give
such notice shall not affect the right and power of Lender to exercise any or
all of the remedies on default specified herein.
Section 4.7 Notice of Litigation. Borrower shall promptly notify Lender
of any actions, suits or proceedings instituted by any Person against it
claiming money damages in excess of $50,000 or which otherwise might have a
material adverse impact on Borrower's assets, business, operations, prospects,
or condition (financial or otherwise), said notice to be given within ten (10)
days of the first notice to Borrower of the institution of such action, suit or
proceeding and to specify the amount of damages being claimed or other relief
being sought, the nature of the claim, the Person instituting the action, suit
or proceeding, and any other significant features of the claim.
Section 4.8 Maintenance of Insurance. Borrower shall maintain liability
insurance in the amount of $2,000,000.00 per location of the Leased Real
Property and the Real Property and hazard insurance in the aggregate amount of
$6,000,000.00 for the Leased Real Property and the Real Property, and shall
furnish, upon Lender's request, an officer's certificate specifying the details
of such insurance in effect. All policies of insurance shall name Lender, as an
additional insured and loss payee and shall provide for thirty (30) days' prior
written notice to Lender in the event of cancellation, change, alteration or
modification. Borrower shall obtain such policies of insurance from a company or
companies acceptable to Lender.
Section 4.9 ERISA. Borrower shall and shall cause each ERISA
Affiliate to provide to Lender:
(a) Promptly after the occurrence thereof with respect to any existing
or hereafter adopted Plan, established thereunder, notice of (i) a "reportable
event" described in Section 4043 of ERISA and the regulations issued from time
to time thereunder or (ii) any other event which would subject Borrower or any
ERISA Affiliate to any tax, penalty or liability under Title I or Title IV of
ERISA or Chapter 43 of the Code;
(b) At the same time and in the same manner as such notice must be
provided to the PBGC, or to a Plan participant, beneficiary or alternate payee,
any notice required under Section 101(d), 302(f)(4), 303, 4041(b)(1)(A) or
4041(c)(1)(A) of ERISA or under Section 412 of the Code with respect to any
Plan; and
(c) Upon the request of Lender, (i) true and complete copies of any and
all documents, government reports and determination or opinion letters for any
Plan, or (ii) a current statement of withdrawal liability for each Multiemployer
Plan.
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Section 4.10 Perfection of Security Interest. Borrower shall execute
such documents and perform such acts as may be necessary, in the judgement of
Lender, now or in the future to perfect or continue perfection of the security
interest granted to Lender under the Security Agreement.
Section 4.11. Related Transactions. Borrower shall enter into
contracts, agreements and transactions with and among Affiliates only if such
contracts, agreements and transactions result from arm's-length negotiations
and contain no preferential term or provision.
Section 4.12 Additional Collateral. On and after the Effective Date and
subject to the terms of the Security Agreement, any and all personal property
acquired by Borrower for use at the child care centers being acquired from
Kinder-Care including without limitation, any and all equipment, machinery,
furniture, inventory and accounts (but not including vehicles) shall be subject
to a first priority security interest (other than purchase money security
interests) in favor of Lender, and Borrower shall execute and deliver to Lender
any security agreement, financing statement, deed to secure debt, certificate of
title or other document deemed proper by Lender to perfect such security
interest in Lender.
Section 4.13 Deposits. Borrower shall maintain its primary depository
account with Lender.
Section 4.15 Environmental Compliance: Notification.
(a) Compliance. Borrower shall comply with all applicable federal,
state and local laws, rules, regulations and orders relating to pollution,
reclamation, or protection of the environment, including laws relating to
emissions, discharges, releases or threatened releases of pollutants,
contaminants, or hazardous or toxic materials or wastes into air, water or land,
or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transportation, or handling of pollutants,
contaminants or hazardous or toxic materials or wastes.
(b) Notification. Borrower shall immediately notify Lender in writing
of (i) any notice received by Borrower with respect to any occurrence on any
property owned or leased by Borrower involving the spill, release, leak, seepage
or discharge of any pollutant, contaminant, or hazardous or toxic material or
waste into the air, water or land, or (ii) any complaint, order or citation
received by Borrower with respect to any such occurrence which might have a
material adverse effect on the assets, business, operations, prospects or
condition (financial or otherwise) of Borrower.
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Section 4.15 Business. Borrower shall remain substantially in the
business in which Borrower is engaged as of the date of this Agreement.
ARTICLE V.
NEGATIVE COVENANTS
So long as the Term Loans and the Revolving Line of Credit shall remain
unpaid or Lender shall have any commitment hereunder, Borrower covenants and
agrees that, without the prior written consent of Lender:
Section 5.1 Debt. Borrower shall not create, incur, assume, or suffer to
exist any indebtedness of any description whatsoever, including, without
limitation, secured and unsecured borrowings, and deferred payment obligations,
except (i) indebtedness incurred under this Agreement, (ii) additional
indebtedness, excluding capital lease obligations, not to exceed $100,000.00 in
amount in any one fiscal year of Borrower, (iii) trade indebtedness incurred in
the ordinary course of business payable within 60 days of its incurrence and not
evidenced by a promissory note, (iv) the Subordinated Debt, and (v) existing
debt of the Borrower.
Section 5.2 Loans Investments and Contingent Liabilities. Borrower shall
not (a) guarantee or become contingently liable for, in any manner, whether
directly or indirectly, any obligations or indebtedness of any Person, (b) make
any future loans, advances or extensions of credit to any Person, including,
without limitation, any shareholder, director, officer or employee of Borrower
or (c) make any investments or purchases or acquire any stock, obligations or
securities that are not issued by or guaranteed by the United States Government,
or are of the following types: (i) commercial paper rated Prime-1 or better by
Xxxxx'x Investors Services or "A-1" or better by Standard & Poor's Corporation;
(ii) repurchase agreements secured by United States government securities; (iii)
negotiable certificates of deposit or bankers acceptances issued by Lender or an
affiliate of Lender, except that Borrower may engage in such activities
described in (a), (b) and (c) above to the extent that these activities do not
exceed $100,000 in aggregate amount at any one time during the term of this
Agreement, including extensions and renewals hereof.
Section 5.3 Capital Expenditures. Borrower shall not make or incur
Capital Expenditures, including, without limitation, any capital lease
obligations, in excess of $300,000.00 in any one fiscal year of Borrower except
for the current fiscal year during which Borrower shall not make or incur
Capital Expenditures in excess of $700,000.00 of which $400,000.00 shall be
funded by a portion of the Subordinated Debt. For the purposes of this
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Agreement any capital lease obligation shall be deemed and considered a Capital
Expenditure.
Section 5.4 Financial Requirements. Borrower shall not:
(a) Debt Service Coverage Ratio. Permit its Debt Service Coverage Ratio
at any time to be less than 1.50 to 1.
(b) Shareholder Investment to Total Capitalization. Permit, at any time,
its Shareholder Investment to be less than 35% of its Total Capitalization.
(c) Minimum Tangible Net Worth. Maintain a minimum Tangible Net Worth of
not less than $1,600,000 by December 31, 1993 and shall increase by at least 50%
of net income after tax distributions on a yearly basis.
Section 5.5 Liens and Other Encumbrances. Borrower shall not grant or
permit to exist any Lien on or in, or otherwise encumber, any of its properties
or assets, except for (a) Liens for taxes, assessments or other governmental
charges not yet due and payable or which are being actively contested in good
faith by appropriate proceedings and with respect to which adequate reserves are
being maintained, (b) statutory Liens of landlords and Liens of mechanics,
materialmen and other Liens imposed by law created in the ordinary course of
business for amounts not yet due or which are being contested in good faith by
appropriate proceedings and for which adequate reserves are being maintained,
(c) purchase money security interests, (d) easements, licenses, rights-of-way,
restrictions, covenants and other similar charges or encumbrances not
interfering with the ordinary conduct of the business of Borrower or any of its
properties, and (e) those Liens and encumbrances existing as of the date hereof
and identified and disclosed to Lender in Exhibit "L" attached hereto and
incorporated herein.
Section 5.6 Compliance with ERISA. Neither Borrower nor any ERISA
Affiliate will take, or fail to take, any action with respect to a Plan
including, but not limited to, (i) establishing any Plan, (ii) amending any
Plan, (iii) terminating or withdrawing from any Plan, or (iv) incurring an
amount of unfunded benefit liabilities, as defined in Section 4001(a)(18) of
ERISA, or any withdrawal liability under Title IV of ERISA, where such action or
failure could have a material adverse effect on Borrower, result in a Lien on
the property of Borrower, or require Borrower to provide any security.
Section 5.7 Restricted Payments. Borrower shall not (i) pay any dividend
or other distribution on any shares of its capital stock (other than dividends
payable solely in shares of its capital stock), (ii) make any payment on the
Subordinated Debt other than
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as allowed under the Subordination Agreements, (iii) make any acquisition of any
of Borrower's capital stock (except any acquisition of shares upon conversion
thereof into or exchange thereof for other shares of capital stock of Borrower),
(iv) make any advance, loan, financial accommodation or other extension of
credit to any Person except as permitted in Section 5.2 above; or (v) make any
payment or distribution to any principal shareholder of Borrower other than
salaries and bonuses paid to employees who are also shareholders or any member
of his or her immediate family (other than as allowed under the Subordination
Agreement); provided, however, that at any time while Borrower shall remain an
"S corporation" under Subchapter S of the Code Borrower may make payments to its
shareholders constituting Permissible Tax Distributions.
Section 5.8 Sale and Lease-Back. Borrower shall not enter into any
arrangement with any lender or investor or under which such lender or investor
is a party, providing for the leasing by Borrower of real or personal property
used by Borrower in the operations of Borrower, which has been or is sold or
transferred by Borrower to such lender or investor or to any Person to whom
funds have been or are to be advanced by such lender or investor on the security
of such rental obligations of Borrower.
Section 5.9 Amendments to Subordinated Debt. Borrower shall not amend,
modify or change or consent to any amendment, modification, change or waiver of
any terms of the Subordinated Debt unless Lender shall have consented thereto in
writing.
ARTICLE VI.
EVENTS OF DEFAULT AND REMEDIES
Section 6.1 Events of Default. Any one or more of the following shall
constitute an "Event of Default" hereunder:
(a) Borrower fails to pay when due any payment of principal or interest due
on the Term Notes, the Revolving Credit Note or any other sum due hereunder;
provided, however, that Borrower shall have a ten (10) day cure or grace period
with respect to any such payment; or
(b) Borrower fails to pay when due and fails to cure within any applicable
cure or grace period any payment of principal or interest due on any other
obligation for money borrowed, or defaults on any obligation under conditional
sale or other title retention agreement or on any obligation secured by purchase
money security interest or mortgage, or defaults in the performance of any other
covenant, term or condition contained in any agreement
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under which any such obligation is created, if the effect of such failure to pay
or default is to cause or permit the holder of such obligation to cause such
obligation to become due prior to its date of maturity; provided, however, that
Borrower shall not be deemed to be in default hereunder if Borrower, in good
faith and at its own expense, contests the alleged failure to pay or default by
appropriate legal proceedings; or
(c) Any representation or warranty contained herein or deemed to have been
made hereunder or made by or furnished on behalf of Borrower in connection
herewith shall be false or misleading in any material respect as of the date
made or deemed to have been made; or
(d) Borrower fails to perform or observe any covenant or agreement
contained in Article V of this Agreement or any covenant or agreement contained
in any other Loan Document, or an event of default, as defined in the respective
Loan Document, should occur under any such Loan Document and not be cured within
any applicable grace or cure period provided therein; or
(e) Borrower fails to perform or observe any covenant or agreement
contained in Article IV of this Agreement or any other covenant, term or
condition contained in this Agreement within thirty (30) days after written
notice of such failure; or
(f) Borrower fails to perform or observe any covenant, term or condition
contained in any other agreement and such default shall continue for thirty (30)
days after Borrower knows or has reason to know of any such failure; provided,
however, that Borrower shall not be deemed to be in default hereunder if
Borrower, in good faith and at its own expense, contests the alleged failure by
appropriate legal proceedings: or
(g) Borrower fails to pay its debts generally as they become due; or
(h) Borrower shall make or take any action to make an assignment for the
benefit of creditors, petition or take any action to petition any tribunal for
the appointment of a custodian, receiver or any trustee for it or a substantial
part of its assets, or shall commence or take any action to commence any
proceeding under any bankruptcy, reorganization, arrangement, readjustment of
debt, dissolution, liquidation or debtor relief law or statute of any
jurisdiction, whether now or hereafter in effect including, without limitation,
the Bankruptcy Code; or, if there shall have been filed any such petition or
application, or any such proceeding shall have been commenced against it, in
which an order for relief is entered; or Borrower by any act or omission shall
indicate its consent to, approval of or acquiescence in any such petition,
application or proceeding or order for relief or the appointment of a custodian,
receiver or any trustee for it or any substantial part
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of any of its properties, or shall suffer to exist any such custodianship,
receivership or trusteeship; or
(i) Borrower shall have concealed, removed, or permitted to be concealed or
removed, any part of its property, with intent to hinder, delay or defraud its
creditors or any of them, or made or suffered a transfer of any of its property
which may be fraudulent under any bankruptcy, fraudulent conveyance or similar
law; or shall have made any transfer of its property to or for the benefit of a
creditor at a time when other creditors similarly situated have not been paid;
or shall have suffered or permitted, while insolvent, any creditor to obtain a
Lien upon any of its property through legal proceedings or distraint which is
not vacated within thirty (30) days from the date thereof; or
(j) Any order, judgement or decree is entered in any proceeding against
Borrower decreeing a split-up or dissolution of Borrower, which order, judgement
or decree requires the divestiture of all or a substantial part of the assets of
Borrower, and such order remains unstayed and in effect for more than thirty
(30) days; or
(k) A judgement or order for the payment of money in an amount in excess of
$50,000 or otherwise materially adverse to the business, financial condition,
results of operations or prospects of Borrower, is rendered against Borrower,
and either (i) enforcement proceedings shall have been commenced by any creditor
upon such judgement or order or (ii) there shall be any period of ten (10)
consecutive days during which a stay of enforcement of such judgement or order,
by reason of a pending appeal or otherwise, shall not be in effect; or
(1) Lender, at any time and in good faith shall deem itself insecure (and
for the purposes of this Agreement, Lender shall be entitled to deem itself
insecure when some event occurs, fails to occur or is threatened or some
objective consition exists or is threatened which significantly impairs the
prospects that any of the Funded Debt will be paid when due, which significantly
impairs the value of the Collateral to Lender or which significantly affects the
financial or business condition of Borrower).
Section 6.2 Remedies on Default.
(a) Upon the occurrence and during the continuation of any Event of Default
(other than an Event of Default specified in Section 6.1 (h)), Lender may (i)
terminate all obligations of Lender to Borrower including, without limitation,
all obligations to lend money under the Revolving Line of Credit, and (ii)
declare the Term Notes, the Revolving Credit Note and any other note of Borrower
held by Lender including, without limitation, principal, accrued interest and
costs of collection (including, without
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limitation, reasonable attorneys' fees if collected by or through an attorney or
in bankruptcy or in other judicial proceedings) immediately due and payable,
without presentment, demand, protest or any other notice of any kind, all of
which are expressly waived.
(b) Upon the occurrence of an Event of Default specified in Section 6.1(h),
(i) all obligations of Lender to Borrower including, without limitation, all
obligations to lend money under the Revolving Line of Credit shall terminate
automatically, and (ii) the Term Notes, the Revolving Credit Note and any other
note of Borrower held by Lender including, without limitation, principal,
accrued interest and costs of collection (including, without limitation,
reasonable attorneys' fees if collected by or through an attorney or in
bankruptcy or in other judicial proceedings) shall be immediately due and
payable, without presentment, demand, protest or any other notice of any kind,
all of which are expressly waived.
(c) Upon the occurrence of an Event of Default and/or the acceleration of
the Term Notes, the Revolving Credit Note or any other note of Borrower held by
Lender pursuant to subsections (a) or (b) of this Section 6.2, Lender may pursue
any remedy available to it under this Agreement, under the Term Notes, under the
Revolving Credit Note, under any other note of Borrower held by Lender or under
any other Loan Document, or available at law or in equity, all of which shall be
cumulative.
(d) All payments with respect to this Agreement received by Lender after
the occurrence of an Event of Default and acceleration of the Term Notes, the
Revolving Credit Note or any other note of Borrower held by Lender, shall be
applied first, to the costs and expenses incurred by Lender as a result of the
Event of Default, second, to the payment of accrued and unpaid fees, third, to
the payment of accrued and unpaid interest on any such notes, to and including
the date of such application, fourth, to the payment of the unpaid principal on
such notes, and fifth, to the payment of all other amounts then owing to Lender
under the Loan Documents. No application of the payments will cure any Event of
Default or prevent acceleration, or continued acceleration, of amounts payable
under the Loan Documents or prevent the exercise, or continued exercise, of
rights or remedies of Lender hereunder or under applicable law.
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ARTICLE VII.
DEFINITIONS
For the purposes of this Agreement, the terms:
(a) "Advance" shall mean any advance of funds by Lender to Borrower under
the Revolving Line of Credit.
(b) "Affiliate" shall mean a Person that, at any time such a determination
is made, (i) directly or indirectly through one or more intermediaries controls,
is controlled by, or is under common control with Borrower, (ii) beneficially
owns or holds five percent or more of any class of stock of Borrower, or (iii)
five percent or more of any class of voting common stock (or in the case of a
Person that is not a corporation, five percent or more of the equity interest)
of such Person is beneficially owned or held by Borrower. The term "control"
shall mean the possession of the power to direct or cause, directly or
indirectly, the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise.
(c) "Business Day" shall mean a day of the year on which commercial banks
are not required or authorized to close in Columbus, Georgia.
(d) "Capital Expenditures" shall mean on any date the Borrower's Gross
Property, Plant and Equipment on such date, plus net proceeds from sales of
Borrower's Gross Property, Plant and Equipment during Borrower's then current
fiscal year, minus Borrower's Gross Property, Plant and Equipment as at the
close of Borrower's prior fiscal year.
(e) "Current Assets", "Current Liabilities", "Earnings Before Interest and
Taxes", "Non-Cash Expenses", "Non-Cash Revenues", "Gross Property, Plant and
Equipment", "Operating Lease Expenses", "Interest Expenses", "Depreciation",
"Receivables", "Shareholder Equity", and "Net Income After Taxes" shall have the
meanings normally given them by, and shall be calculated, both as to amounts and
classifications of items, in accordance with, generally accepted accounting
principles, which principles shall be applied on a basis consistent with that
applied to the income and expense statements, the balance sheets, and the
statements of income and retained earnings furnished to Lender pursuant to
Section 4.1.
(f) "Cash Flow" for any given period shall mean the sum of Borrower's Net
Income After Taxes (and Permissible Tax Distributions), plus Depreciation and
amortization, all for such period.
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(g) "Code" shall mean the Internal Revenue Code of 1986, as amended, and
the regulations promulgated and the rulings issued thereunder.
(h) "Current Portion of Funded Debt" shall mean amounts with respect to
Funded Debt which are payable within one year from the date as of which any
determination is made and are classified as Current Liabilities under generally
accepted accounting principles.
(i) "Debt Service Coverage Ratio" as at any date shall mean (i) Cash Flow
for the 12-month period ending on such date divided by (ii) the Current Portion
of Funded Debt on such date.
(j) "Default" shall mean an event that, with notice or lapse of time or
both, would constitute an Event of Default.
(k) "ERISA" shall mean the Employment Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and the
rulings issued thereunder.
(1) "ERISA Affiliate" shall mean each trade or business (whether or not
incorporated) which together with Borrower is treated as a single employer under
Section 414(b), (c), (m) or (o) of the Code.
(m) "Funded Debt" shall mean the Term Loan, the Revolving Line of Credit,
the Subordinated Debt and other indebtedness for borrowed money payable more
than one year from the date of creation thereof or renewable at the option of
Borrower by the terms of the governing instrument to mature more than one year
after the date of creation, capitalized leases, and any indebtedness secured by
a Lien on property owned by Borrower.
(n) "Lien" shall mean any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind or description and shall include, without limitation,
any agreement to give any of the foregoing, any conditional sale or other title
retention agreement, any lease in the nature thereof including any lease or
similar arrangement with a public authority executed in connection with the
issuance of industrial development revenue bonds or pollution control revenue
bonds, and the filing of or agreement to give any financing statement under the
Uniform Commercial Code of any jurisdiction.
(o) "Loan Documents" shall mean and include, as the context requires, this
Agreement, the Term Notes, the Revolving Credit Note, the Deed, the Security
Agreement, the Subordination Agreements, and any and all other instruments,
agreements, documents and writings contemplated hereby or executed in connection
herewith.
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(p) "Multiemployer Plan" shall mean a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA.
(q) "PBGC" shall mean the Pension Benefit Guaranty Corporation and any
successor thereto.
(r) "Permissible Tax Distribution" shall mean with respect to Borrower cash
dividends to its shareholders with respect to each taxable year in an amount not
to exceed the product of (i) Borrower's taxable income for the taxable year
computed for federal income tax purposes under Section 1363(b) of the Code
combining all separately stated items, multiplied by (ii) the sum of (A) the
maximum marginal individual income tax rate in effect for taxable income in such
taxable year under the Code (under the Code as enacted on the date hereof, 31%
for taxable years beginning after 1990), plus (B) the product of (x) the maximum
marginal individual income tax rate in effect for taxable income in such taxable
year of any shareholder under applicable Georgia state income tax laws,
multiplied by (y) the difference of (xx) one (1.00), minus (yy) the amount of
clause (A) above; (e.g., (B) would equal 4.14% for taxable years beginning after
1990 based upon the Code and the Georgia state income tax laws as enacted on the
date hereof).
(s) "Person" shall mean and shall include an individual, a partnership, a
joint venture, a corporation, a trust, an unincorporated association, a
government or any department or agency thereof and any other entity whatsoever.
(t) "Plan" shall mean any employee benefit plan, program, arrangement,
practice or contract, maintained on behalf of Borrower or an ERISA Affiliate,
which provides benefits or compensation to or on behalf of employees or former
employees, whether formal or informal, whether or not written, including but not
limited to the following types of plans:
(i) Executive Arrangements - any bonus, incentive compensation, stock
option, deferred compensation, commission, severance, golden parachute or other
executive compensation plan, rabbi trust, program, contract, arrangement or
practice;
(ii) ERISA Plans - any "employee benefit plan" (as defined in Section
3(3) of ERISA ), including, but not limited to, any defined benefit pension
plan, profit sharing plan, money purchase pension plan, savings or thrift plan,
stock bonus plan, employee stock ownership plan, Multiemployer Plan, or any
plan, fund, program, arrangement or practice providing for medical (including
post-retirement medical), hospitalization, accident, sickness, disability, or
life insurance benefits; and
(iii) Other Employee Fringe Benefits - any stock purchase, vacation,
scholarship, day care, prepaid legal services,
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severance pay or other fringe benefit plan, program, arrangement, contract or
practice.
(u) "Real Property" shall mean the real property owned by Borrower
referenced in Section 2.1 (f) and described on Exhibit "G" attached hereto.
(v) "Shareholder Investment" shall mean the sum of Shareholder Equity plus
Subordinated Debt.
(w) "Subordinated Debt" for any given fiscal year shall mean the
outstanding principal amount, as of the close of such fiscal year, of Funded
Debt of Borrower which is subordinate to the prior payment in full of all
amounts owing by Borrower under the Loan Documents upon terms and conditions
approved by Lender in writing.
(x) "Subsidiary" shall mean any corporation, regardless of its jurisdiction
of incorporation, a majority of the total combined voting power of all classes
of stock entitled to vote of which shall be owned, at the time as of which any
determination is made, by Borrower either directly or indirectly.
(y) "Total Capitalization" shall mean the sum of Shareholder Equity plus
Funded Debt.
(z) "Tangible Net Worth" shall mean Shareholder Equity plus Subordinated
Debt minus Goodwill.
ARTICLE IX.
MISCELLANEOUS
Section 9.1 No-Waiver. No delay or failure on the part of Lender or on
the part of any holder of the Term Notes or the Revolving Credit Note in the
exercise of any right, power or privilege granted under this Agreement, under
any other Loan Document, or available at law or in equity, shall impair any such
right, power or privilege or be construed as a waiver of any Event of Default or
any acquiescence therein. No single or partial exercise of any such right, power
or privilege shall preclude the further exercise of such right, power or
privilege. No waiver shall be valid against Lender unless made in writing and
signed by Lender, and then only to the extent expressly specified therein.
Section 9.2 Notices. Except as otherwise particularly provided herein,
all notices and communications provided for hereunder shall be in writing, and
shall be effective when received if personally delivered or sent via telecopier
or on the second
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business day after the day on which mailed if sent by first-class, certified
mail, postage prepaid, to the following addresses:
(1) If to Lender, Trust Company Bank of Columbus, N.A.
X.X. Xxx 000
Xxxxxxxx, XX 00000-0000
Telecopier number 000-000-0000
Attn: E. Xxxxx Xxxxxxx, III
(2) If to Borrower, Childcare Network, Inc.
X.X. Xxx 0000
Xxxxxxxx, XX 00000
Telecopier number 000-000-0000
Attn: Xxxxx X. Xxxxxxxxxx
Borrower and Lender may change their respective addresses for notice purposes by
notice to all other parties in the manner provided herein.
Section 9.3 Governing Law. This Agreement and all other Loan Documents
shall be governed by and interpreted in accordance with the laws of the State of
Georgia (without regard to the conflict of laws provisions thereof) unless the
individual document specifically provides otherwise.
Section 9.4 Survival of Representations and Warranties. All
representations and warranties contained herein or made by or furnished on
behalf of Borrower in connection herewith shall survive the execution and
delivery of this Agreement and all other Loan Documents.
Section 9.5 Descriptive Headings. The descriptive headings of the several
sections of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
Section 9.6 Severability. If any part of any provision contained in this
Agreement or in any other Loan Document shall be invalid or unenforceable under
applicable law, said part shall be ineffective to the extent of such invalidity
only, without in any way affecting the remaining parts of said provision or the
remaining provisions.
Section 9.7 Time is of the Essence. Time is of the essence in
interpreting and performing this Agreement and all other Loan Documents.
Section 9.8 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which,
taken together, shall constitute one and the same instrument.
26
27
Section 9.9 Payment of Costs. Borrower shall pay all reasonable costs,
expenses, taxes and fees incurred by Lender in connection with the preparation,
execution and delivery of this Agreement and all other Loan Documents including,
without limitation, all recording costs and fees, the costs and professional
fees of counsel for Lender, and any and all stamp, intangible or other taxes
that may be payable or determined in the future to be payable in connection
therewith.
Section 9.10 Successors and Assigns. This Agreement shall bind and inure
to the benefit of Borrower, Lender, and their respective successors and assigns;
provided, however, Borrower shall have no right to assign its rights or
obligations hereunder to any Person. Notwithstanding anything in this Agreement
to the contrary, Lender shall have the right, but shall not be obligated, to
sell participations and sell subparticipations in the loans made pursuant hereto
to other banks, financial institutions and investors.
Section 9.11 Amendments; No Implied Waiver. This Agreement may be amended
or modified, and Borrower may take any action herein prohibited, or omit to
perform any act herein required to be performed by it, only if Borrower shall
obtain the prior written consent of Lender to such amendment, modification,
action or omission to act, and no course or dealing between Borrower and Lender
shall operate as a waiver of any right, power or privilege granted under this
Agreement, under any other Loan Document, or available at law or in equity.
Section 9.12 Rights Cumulative. All rights, powers and privileges granted
hereunder shall be cumulative to and shall not be exclusive of any other rights,
powers and privileges granted by any other Loan Document or available at law or
in equity.
Section 9.13 Set-Off. Upon the occurrence and during the continuation of
an Event of Default, Borrower authorizes the Lender without notice or demand, to
apply any indebtedness due or to become due to Borrower from Lender in
satisfaction of any of the indebtedness, liabilities or obligations of Borrower
under this Agreement, under any other Loan Document or under any other note,
instrument, agreement, document or writing of Borrower held by or executed in
favor of Lender, including, without limitation, the right to set-off against any
deposits or other cash collateral of Borrower held by Lender.
Section 9.14 Construction. Should any provision of this Agreement require
judicial interpretation, the parties hereto agree that the court interpreting or
construing the same shall not apply a presumption that the terms hereof shall be
more strictly construed against one party by reason of the rule of construction
that a document is to be more strictly construed against the party
27
28
who itself or through its agents prepared the same, it being agreed that
Borrower, Lender and their respective agents have participated in the
preparation hereof.
Section 9.15 Holidays. In any case where the date for any action required
to be performed under this Agreement or under any other Loan Document shall be,
in the city where the performance is to be made, a Saturday, a Sunday, a legal
holiday or a day on which banking institutions are authorized by law to close,
then such performance may be made on the next succeeding business day not a
Saturday, a Sunday, a legal holiday or a day on which banking institutions are
authorized by law to close.
Section 9.16 Entire Agreement. This Agreement and the other Loan
Documents executed and delivered contemporaneously herewith, together with the
exhibits and schedules attached hereto and thereto, constitute the entire
understanding of the parties with respect to the subject matter hereof, and any
other prior or contemporaneous agreements, whether written or oral, with respect
thereto including, without limitation, the commitments from Lender to Borrower,
are expressly superseded hereby. The execution of this Agreement and the other
Loan Documents by Borrower was not based upon any facts or materials provided by
Lender, nor was Borrower induced to execute this Agreement or any other Loan
Document by any representation, statement or analysis made by Lender.
WITNESS the hand and seal of the parties hereto through their duly
authorized officers, as of the date first above written.
CHILDCARE NETWORK, INC. INC.
BY: /s/ Xxxxx X. Xxxxxxxxxx, President
------------------------------------------
Xxxxx X. Xxxxxxxxxx, President
ATTEST: /s/ Xxxxxx X. Xxxx, Xx., Secretary
--------------------------------------
Xxxxxx X. Xxxx, Xx., Secretary
[CORPORATE SEAL]
[Execution of document continued on next page]
28
29
TRUST COMPANY BANK OF COLUMBUS, N.A.
BY: /s/ E. Xxxxx Xxxxxxx
------------------------------------------
TITLE: First Vice President
----------------------------------
BY: /s/ Xxxx X. Xxxxxxxx
------------------------------------------
TITLE: Vice President
----------------------------------
[BANK SEAL]
29
30
MODIFICATION TO TERM LOAN AND
REVOLVING LINE OF CREDIT AGREEMENT
This Modification Agreement made and entered into as of the 6th day of
May, 1994, by and between CHILDCARE NETWORK, INC., a Georgia corporation
("Borrower), and TRUST COMPANY BANK OF COLUMBUS, N.A., a national banking
association ("Lender").
WITNESSETH:
WHEREAS, Borrower and Lender entered into a Term Loan and Revolving
Line of Credit Agreement dated as of March 26, 1993 ("Agreement") whereby Lender
extended credit to Borrower in the aggregate amount of $2,375,000.00; and
WHEREAS, Lender has agreed to extend additional credit to Borrower in
the amount of $1,000,000.00 ("Additional Loan") and to make the Additional Loan
subject to the terms and conditions of the Agreement; and
WHEREAS, the parties hereto wish to modify the terms of the Agreement
to provide for the New Loan being made subject to the terms and conditions of
the Agreement and the Agreement being modified to accommodate the Additional
Loan which will be evidenced by a promissory note of even date hereof from
Borrower to Lender in the principal amount of $2,714,160.00, the difference
being a refinance of the present principal balance ($1,714,160.00) of the Term
Loan dated March 26, 1993 in the original amount of $1,750,360.00 from Maker to
Holder.
NOW, THEREFORE, for and in consideration of the sum of $10.00 in hand
paid by Lender to Borrower, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree and contract as follows:
1.
The Agreement is hereby modified by adding thereto the following
sections:
Section 1.1A - Additional Loan. Subject to the terms and conditions of
the Agreement, as modified herein, Lender agrees to lend to Borrower
the principal amount of $1,000,000.00 (the "Additional Loan") to be
evidenced by a promissory note in the amount of $2,714,160.00, a copy
of which is hereto annexed as Exhibit "A" and to which reference is
made for the particular terms and provisions thereof.
Section 1.7A - Use of Proceeds of Additional Loan. The proceeds from
the Additional Loan shall be used to pay certain indebtedness owned by
Borrower to its shareholders totalling $1,000,000.00.
31
2.
The Agreement is hereby further modified by
(a) deleting from ARTICLE V, Section 5.1 the following, "and (v) existing
debt of the Borrower." and inserting in lieu thereof the following: (v)
existing debt of the Borrower, and (vi) additional debt borrowed from the
Lender.";
(b) deleting from ARTICLE V, Section 5.4(b) the following: "at any time"
and inserting in lieu thereof the following: "after December 31, 1994.";
and
(c) deleting from ARTICLE V, Section 5.4(c) the following: "1993" and
inserting in lieu thereof the following, "1994".
3.
Borrower hereby represents, warrants and convenants that it is in full
compliance with the terms of the Agreement, as modified, as of the date hereof
and that all of the covenants, representations and warranties contained in
Articles III, IV and V of the Agreement, as modified, are still true and
correct and that Lender is in compliance with each such representation,
warranty and covenant.
4.
Except as modified hereby, the original Agreement shall other otherwise
remain in full force and effect in accordance with its respective terms,
Borrower and Lender hereby ratifying and confirming the same.
IN WITNESS WHEREOF, Borrower and Lender have caused this modification to
be executed for them and on their behalf and have caused to be hereunto affixed
their corporate seals, by their duly authorized corporate officers, the day and
year first above written.
CHILDCARE NETWORK, INC.
By: /s/ Xxxxx Xxxxxxxxxx
----------------------------------
Title: President
------------------------
Attest: /s/ Xxxxxx X. Xxxx
----------------------------
Title: Secretary
------------------------
32
Signed, sealed and delivered in
the presence of:
/s/ Xxxxx Xxxxx
---------------------------------------
/s/ X. X. Xxxxxx
---------------------------------------
Notary Public, Muscogee County, Georgia
TRUST COMPANY BANK OF COLUMBUS, N.A.
By: /s/ X.X. Xxxxxx
-----------------------
Title: Group V.P.
----------------
Attest: /s/ Xxx X. Patruli
-------------------
Title: AVP
----------------
Signed, sealed and delivered in (Corporate Seal)
the presence of:
/s/ Xxxxx Xxxxx
---------------------------------------
/s/ X. X. Xxxxxx
---------------------------------------
Notary Public, Muscogee County, Georgia
X.X. XXXXXX
-NOTARY PUBLIC-
MUSCOGEE COUNTY, GA
-OFFICIAL SEAL-
My Commission Expires March 20, 1995
3
33
SECOND MODIFICATION TO TERM LOAN AND
REVOLVING LINE OF CREDIT AGREEMENT
This Second Modification Agreement dated as of the 30th day of June,
1995, by and between CHILDCARE NETWORK, INC., a Georgia corporation
("Borrower), and TRUST COMPANY BANK OF COLUMBUS, N.A., a national banking
association ("Lender").
WITNESSETH:
WHEREAS, Borrower and Lender entered into a Term Loan and Revolving
Line of Credit Agreement dated as of March 26, 1993 whereby Lender extended
credit to Borrower in the aggregate amount of $2,375,000.00 which was modified
by a Modification to Term Loan and Revolving Line of Credit Agreement dated as
of May 6, 1994 between Borrower and Lender (as modified, "Agreement");
WHEREAS, Lender has agreed to extend additional credit to Borrower in
the amount of $1,250,000.00 ("Second Additional Loan") and to subject the Second
Additional Loan to the terms and conditions of the Agreement;
WHEREAS, the parties hereto wish to modify the terms of the Agreement
and to subject the Second Additional Loan to the terms and conditions of the
Agreement and the Agreement being modified to accommodate the Second Additional
Loan which will be evidenced by a promissory note of even date herewith from
Borrower to lender in the principal amount of $1,250,000.00; and
WHEREAS, the parties hereto have also agreed to extend the maturity
date of the Term Note dated May 6, 1994 in the original principal amount of
$2,714,160.00 (also defined as the "Additional Loan" in the Agreement) from
April 1, 1998 to April 1, 2000.
NOW, THEREFORE, for and in consideration of the sum of $10.00 in hand
paid by Lender to Borrower, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree and contract as follows:
1.
The Agreement is hereby modified by adding the following language at
the end of Article I, Section 1.1A: "The Additional Loan which is evidenced by
the Term Note dated May 6, 1994 from Borrower to Lender in the original
principal amount of $2,714,160.00 shall be amended and modified to provide for
24 additional monthly installments of $16,200.00 each plus accrued and unpaid
interest and maturity of April 1, 2000 ("Term Note Modification Agreement") a
copy of which is hereby annexed as Exhibit 'A' and when so modified shall
continue to be subject to the terms and provisions of the Agreement."
34
2.
The Agreement is hereby modified by adding thereto the following sections:
Section 1.1B - Second Additional Loan. Subject to the terms and conditions
of the Agreement, as modified herein, Lender agrees to lend to Borrower the
principal amount of $1,250,000.00, (the Second Additional Loan), to be
evidenced by a promissory note in said amount, a copy of which is hereto
annexed as Exhibit "B" and to which reference is made for the particular
terms and provisions thereof.
Section 1.7B - Use of Proceeds of Second Additional Loan. The proceeds
from the Second Additional Loan shall be used to finance the acquisition of
seven KinderCare Daycare Centers located in Xxxxx Xxxx, Xxxxxxx; Xxxxxxx
Xxxx, Xxxxxxx; Conyers, Georgia; Athens, Georgia; Smyrna, Georgia;
Marietta, Georgia; and Chattanooga, Tennessee.
3.
The Agreement is hereby further modified by:
(a) deleting Section 5.4(a) of Article V and in lieu thereof, substituting
the following: "(a) Debt Service Coverage Ratio. Maintain a ratio of net
income after tax distributions plus depreciation and amortization expense
to current maturities of long term debt and capital leases of not less than
1.25 to 1.00.";
(b) deleting Section 5.4(c) of Article V and in lieu thereof, substituting
the following: "(c) Minimum Tangible Net Worth. Maintain at all times a
Tangible Net Worth of not less than $1,100,000.00 plus 50 percent of net
income after distributions on a yearly basis.";
(c) adding a new Section 5.4(d) to Article V as follows: "Fixed Charge
Coverage Ratio. Maintain a ratio of net income before tax distributions
plus interest expense and lease expense to interest expense plus lease
expense of at least 1.50 to 1.00."; and
(d) adding a new Section (m) to Article VI as follows: "(m). The failure
of the current ownership and Board of Directors to maintain controlling
interest in the voting shares of Borrower."
4.
Borrower hereby represents, warrants and covenants that it is in full
compliance with the terms of the Agreement, as modified, as of the date hereof
and that all of the covenants, representations and warranties contained in
Article III, IV and V of the Agreement, as modified, are
35
still true and correct and that Lender is in compliance with each such
representation, warranty and covenants.
5.
Except as modified hereby, the original Agreement shall otherwise remain
in full force and effect in accordance with its respective terms, Borrower and
Lender hereby ratifying and confirming the same.
IN WITNESS WHEREOF, Borrower and Lender have caused this modification to
be executed for them and on their behalf and have caused to be hereunto affixed
their corporate seals, by their duly authorized corporate officers, the day and
year first above written.
CHILDCARE NETWORK, INC.
By: /s/ Xxxxx X. Xxxxxxxxxx
---------------------------
Title: President
-------------------------
Attest: /s/ Xxxxxx X. Xxxx
-----------------------
Title: Secretary
-------------------------
(CORPORATE SEAL)
Signed, sealed and delivered in
the presence of:
/s/ Xx. X. Xxxxxxxx
--------------------------------------
/s/ Xxxxxxx X. Xxxxxx
--------------------------------------
Notary Public, Muscogee County, Georgia
My Commission Expires December 6, 1997
36
TRUST COMPANY BANK OF
COLUMBUS, N.A.
By: /s/ X. X. Xxxxxx
-------------------------------
Title: Sr. V.P.
-------------------------
Attest: /s/
---------------------------
Title: 1st V.P.
-------------------------
(CORPORATE SEAL)
Signed, sealed and delivered in
the presence of:
/s/ Xxx Xxxx
---------------------------------------
Xxxxxxx X. Xxxxx expires 10/25/98
---------------------------------------
Notary Public, Muscogee County, Georgia
37
THIRD MODIFICATION TO TERM LOAN AND
REVOLVING LINE OF CREDIT AGREEMENT
This Second Modification Agreement dated as of the 26th day of June,
1997, by and between CHILDCARE NETWORK, INC., a Georgia corporation
("Borrower"), and SUNTRUST BANK, WEST GEORGIA, N.A., a national banking
association ("Lender").
WITNESSETH:
WHEREAS, Borrower and Lender entered into a Term Loan and Revolving
Line of Credit Agreement dated as of March 26, 1993 whereby Lender extended
credit to Borrower in the aggregate amount of $2,375,000.00 which was modified
by a Modification to Term Loan and Revolving Line of Credit Agreement dated as
of May 6, 1994 between Borrower and Lender, and further modified by the Second
Modification to Term Loan and Revolving Line of Credit Agreement dated as of
June 30, 1995 (as modified, "Agreement"); and
WHEREAS, Lender has agreed to restructure the indebtedness owed by
Borrower and to extend additional credit to Borrower; and
WHEREAS, Lender has agreed to provide a revolving line of credit in the
amount of $2,000,000.00 ("1997 Line of Credit") to Borrower and to extend term
loans up to an aggregate maximum of $5,000,000.00 (" 1997 Term Loans"); and
WHEREAS, the parties hereto wish to modify the terms of the agreement
and to subject the 1997 Line of Credit and the 1997 Term Loans to the terms and
conditions of this agreement and to modify the agreement to accommodate the 1997
Line of Credit and the 1997 Term Loans.
NOW, THEREFORE, for and in consideration of the sum of $10.00 in hand
paid by Lender to Borrower, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree and contract as follows:
1.
The Agreement is hereby modified by deleting Section 1.1 in its
entirety and inserting in lieu thereof the following:
Section 1.1. 1997 Line of Credit and 1997 Term Loans. Subject
to the terms and conditions set forth in this Agreement, Lender agrees
to lend Borrower the aggregate principal amount of $7,000,000.00 to be
evidenced by (i) the 1997 Revolving Line of Credit Note in the
principal amount of $2,000,000.00, a copy of which is hereto annexed as
Exhibit "A" which shall have a maturity of two years from date and
which may be extended for one year pursuant to the terms of said Note;
and (ii) one or more term promissory notes substantially in the form as
the term
1
38
promissory note a copy of which is hereto annexed as Exhibit "B" which
term loans can total a maximum of $5,000,000.00, must be made in
increments greater than $100,000.00, will be repaid based on a 12 year
amortization schedule, and will mature not later than five years from
the date hereof. Provided, however, that the Lender's obligation to
advance funds, and Borrower's ability to borrow and reborrow, under
said 1997 Line of Credit and the Lender to make term loans is
conditioned upon Borrower being in compliance with the terms of this
Agreement and that no Event of Default exists under the terms hereof or
under any other Loan Documents between Lender and Borrower.
Notwithstanding anything to the contrary contained herein or in the
1997 Line of Credit Note or the 1997 Term Notes, the interest rate or
index chosen by the Borrower shall always be the same for said Notes
and Borrower's Obligations to the Bank. The proceeds from the 1997 Line
of Credit and 1997 Term Loans are to be used to pay Borrower's existing
debt to the Lender and for general corporate needs.
2.
The Agreement is hereby modified by capitalizing the words "fiscal
quarter" in Section 4.1(a) the Agreement.
3.
The Agreement is hereby modified by deleting Section 4.12 in its
entirety and inserting in lieu thereof the following:
Section 4.12 Additional Collateral. On and after the effective
date, any and all real property, leasehold interests in real property
and all personal property of whatever kind and nature including,
without limitation, equipment, machinery, furniture, inventory and
accounts (but not including vehicles) acquired by Borrower in
connection with its acquisition and/or operation of childcare centers
shall be subject to a first priority security interest (other than
purchase money security interests) in favor of Lender, and Borrower
shall execute or cause to be executed and deliver to Lender any
security agreement, financing statement, deed to secure debt,
assignment of rents and leases, lessor's estoppel certificate,
certificate of title or other document deemed necessary and proper by
Lender to perfect such security interest in Lender.
4.
Article VI of the Agreement is hereby amended by adding a new paragraph
thereto as follows:
(aa) "Obligations" shall mean all loans contemplated
hereunder, including, without limitation, the 1997 term loan and the
1997 line of credit (including, in each case, all interest thereon),
all commitment fees, all obligations for reimbursement of
2
39
expenses and indemnification, obligations arising under this Agreement
or any other loan document, and all other indebtedness, liabilities,
obligations, covenants and duties of Borrower of every kind, nature and
description, direct or indirect, absolute or contingent, due or not
due, in contract or in tort, liquidated or unliquidated, arising under
any loan document, now existing or hereafter arising, and all renewals,
extensions and modifications of any of the foregoing.
5.
The Agreement is hereby modified by deleting Sections 1.2, 1.3, 1.4,
1.5, 1.6, 1.7 and all subsections thereof.
6.
The Agreement is hereby modified by deleting paragraph 5.4(a) in its
entirety and inserting in lieu thereof the following:
"(a) ADJUSTED FUNDED DEBT TO CASH FLOW RATIO. Permit Adjusted
Funded Debt (as defined in the 1997 Revolving Line of Credit Note) plus
an adjustment for leases (lease expense times seven) divided by
Earnings before tax distributions, interest expense, lease expense,
depreciation and amortization not to exceed 3.50 to 1.00 for two years
following the date of this Third Modification to Term Loan and
Revolving Line of Credit Agreement and shall not exceed 3.00 to 1.00
thereafter.
7.
The Agreement is hereby modified by deleting paragraph 5.4(c) in its
entirety and inserting in lieu thereof the following:
(c) MINIMUM WORTH. Permit its Worth to be less than
$2,500,000.00 which is Borrower's Worth as of this date and such Worth
shall increase by not less than 35 percent of earnings before tax
distributions on a yearly basis. Shareholder distributions in excess of
tax distributions will be permissible as long as Borrower is still in
compliance with this Minimum Worth requirement.
8.
The Agreement is hereby modified by deleting paragraph 5.4(d) in its
entirety and inserting in lieu thereof the following:
"(d) FIXED CHARGED COVERAGE RATIO. Permit Earnings before tax
distributions, interest expense and lease expense divided by interest
expense and rent
3
40
expense not to exceed 1.75 to 1.00 within the one year period following
the date of this Third Modification, and 2.00 to 1.00 thereafter.
9.
Section 4.8 of the Agreement is hereby modified by deleting
"$6,000,000.00" in the third line of said section and inserting in lieu thereof
"$9,000,000.00".
10.
Section 5.1 of the Agreement is hereby modified by deleting the word
"and" in the seventh line of said section appearing immediately before "(v)" and
"(vi)", and adding at the end of said section the following: "; and (vii) Seller
debt financing incurred in connection with acquisition of additional childcare
facilities provided any such debt is subordinated to all obligations of Borrower
to the Lender and such Seller debt financing does not create a breach of the
financial covenants contained in the Agreement, and, provided further, if such
Seller debt financing is not subordinated to the indebtednesses owed by Borrower
to the Lender, then Lender's obligation to advance funds under either the 1997
Line of Credit or 1997 Term Loans shall be reduced by the amount of such
unsubordinated Seller debt financing."
11.
The Agreement is hereby modified by adding at the end of Article VII
the following: "(aa) 'Fiscal Quarter' shall mean Borrower's four quarterly
financial reporting periods the first three of which are each twelve weeks long
and the fourth or final period is sixteen weeks long and every third year said
fourth period is seventeen weeks long with the fourth period ending on or
shortly before or after December 31 of each calendar year."
12.
Borrower hereby represents, warrants and covenants that it is in full
compliance with the terms of the Agreement, as modified, as of the date hereof
and that all of the covenants, representations and warranties contained in
Articles III, IV and V of the Agreement, as modified, are still true and correct
and that Lender is in compliance with each such representation, warranty and
covenants.
13.
Except as modified hereby, the original Agreement shall otherwise
remain in full force and effect in accordance with its respective terms,
Borrower and Lender hereby ratifying and confirming the same.
4
41
IN WITNESS WHEREOF, Borrower and Lender have caused this modification
to be executed for them and on their behalf and have caused to be hereunto
affixed their corporate seals, by their duly authorized corporate officers, the
day and year first above written.
CHILDCARE NETWORK, INC.
By: /s/ Xxxx X. Xxx Xxxxxx
-----------------------------------------
Name: Xxxx X. Xxx Xxxxxx
Title: Chairman of the Board
By: /s/ Xxxxx X. Xxxxxxxxxx
-----------------------------------------
Name: Xxxxx X. Xxxxxxxxxx
Title: President
Attest: /s/ Xxxxxx X. Xxxx, Xx.
-------------------------------------
Name: Xxxxxx X. Xxxx, Xx.
Title: Secretary
[CORPORATE SEAL]
Signed, sealed and delivered in
the presence of:
/s/ Xxxxx XxXxxxx
---------------------------------------
---------------------------------------
Notary Public, Muscogee County, Georgia
Notary Public, Muscogee County, Georgia
My Commission Expires March 26, 2001
SUNTRUST BANK, WEST GEORGIA, N.A.
By: /s/
-----------------------------------------
Title: Vice President
-------------------------------
Attest: /s/
-------------------------------------
Title: VP
-------------------------------
(CORPORATE SEAL)
Signed, sealed and delivered in
the presence of:
/s/ Xxxx X. Xxxxxxxxx
---------------------------------------
Expires - June 19, 1999
---------------------------------------
Notary Public, Muscogee County, Georgia
5
