EXHIBIT 10.22
FIRST AMENDMENT AND LIMITED WAIVER
TO CREDIT AGREEMENT
This FIRST AMENDMENT AND LIMITED WAIVER TO CREDIT AGREEMENT (this
"Amendment") is dated as of August 4, 1995 and entered into by and among
National Education Corporation, a Delaware corporation (the "Borrower"), the
Bank listed on the signature pages hereof (the "Bank"), and Bankers Trust
Company, as agent for the Bank (the "Agent") and, for purposes of Sections 3
and 4 hereof, the Subsidiaries of the Borrower listed on the signature pages
hereof, and is made with reference to that certain Amended and Restated
Credit Agreement dated as of February 28, 1995 by and among the Borrower, the
Bank and the Agent (the "Credit Agreement"). Capitalized terms used herein
without definition shall have the same meanings herein as set forth in the
Credit Agreement.
RECITALS
WHEREAS, the Borrower and the Bank have agreed, upon the terms and
conditions set forth herein, that certain terms and conditions of the Credit
Agreement should be amended; and
WHEREAS, each of the Subsidiaries of the Borrower party to the
Subsidiary Guaranty ("Subsidiary Guarantors") or the Subordination Agreement
("Subordinated Subsidiaries") desires to acknowledge and consent to this
Amendment and to reaffirm the continuing effectiveness of the Subsidiary
Guaranty or the Subordination Agreement, as the case may be;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein, the parties hereto agree as
follows:
Section 1. AMENDMENTS TO THE CREDIT AGREEMENT
1.1 Amendment to Section 1.01: Defined Terms.
Section 1.01 of the Credit Agreement is hereby amended by adding
thereto the following defined terms in the appropriate alphabetical order:
"`1995 Charges' shall mean the charges, in an aggregate amount not
exceeding $77,820,000 to be taken by the Borrower against its income in
its 1995 fiscal year as the result of the restructuring of the
operations of NETG and Borrower (National Education Corporation
corporate), which shall result in charges not exceeding $30,300,000, and
certain write-offs of goodwill in an amount not exceeding $47,520,000.
1995 Charges shall not, however, include any Second Quarter Charges."
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"`Second Quarter Charges' shall mean operating charges in an
aggregate amount not exceeding $3,100,000 to be taken by the Borrower
against its income in the second quarter of its 1995 fiscal year in
relation to the operations of NETG and its Subsidiaries."
1.2 Amendments to Section 8.09: Ratio of Liabilities to Net
Worth. Section 8.09 of the Credit Agreement is hereby amended by deleting
the proviso therefrom in its entirety and substituting the following proviso
therefor:
"provided that, for purposes of this Section, (a) any addition to
the equity capital of the Borrower resulting from the conversion of
the Convertible Notes shall be deemed to constitute Indebtedness
for the purposes of determining Consolidated Liabilities and
Adjusted Consolidated Net Worth, (b) all liabilities that are
attributable only to Ed Centers Discontinued Operations shall be
disregarded in determining Consolidated Liabilities, (c) all
additions to (or deductions from) Adjusted Consolidated Net Worth
that would result from any net income (or net loss, other than the
Ed Centers Charge) accruing on or after April 1, 1994, that is
attributable solely to Ed Centers Discontinued Operations shall be
disregarded in determining Adjusted Consolidated Net Worth, and (d)
to the extent Adjusted Consolidated Net Worth would be reduced by
any amount as the result of the 1995 Charges or any Second Quarter
Charges, the amount of such reduction shall be disregarded in
determining Adjusted Consolidated Net Worth"
1.3 Amendments to Section 8.10(a): Minimum Consolidated EBITDA.
Section 8.10(a) of the Credit Agreement is hereby amended by deleting the
proviso therefrom in its entirety and substituting the following proviso
therefor:
"provided that, for purposes of this Section, (a) all income,
interest expense, depreciation expense, tax expense, amortization
expense, non-cash gains or losses, minority interests, and income
(or losses) accruing on or after April 1, 1994, that are
attributable only to Ed Centers Discontinued Operations shall be
disregarded in determining Consolidated EBITDA, (b) all 1995
Charges shall be disregarded in determining Consolidated EBITDA,
and (c) all Second Quarter Charges shall be disregarded in
determining EBITDA for the four quarter period ending as of the
last day of the second quarter of the Borrower's 1995 fiscal year"
1.4 Amendments to Section 8.11: Minimum Consolidated Net Worth.
Section 8.11 of the Credit Agreement is hereby amended by deleting the
proviso therefrom and substituting the following proviso therefor:
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"provided that, for purposes of this Section, (a) any addition to
the equity capital of the Borrower resulting from the conversion of
the Convertible Notes shall be deemed to constitute Indebtedness
for the purposes of determining Adjusted Consolidated Net Worth,
(b) any addition to (or deduction from) Adjusted Consolidated Net
Worth that would result from any net income (or net loss, other
than the Ed Centers Charge) accruing on or after April 1, 1994,
that is attributable only to Ed Centers Discontinued Operations
shall be disregarded in determining Adjusted Consolidated Net
Worth, and (c) to the extent Adjusted Consolidated Net Worth would
be reduced by any amount as the result of the 1995 Charges or
Second Quarter Charges, the amount of such reduction shall be
disregarded in determining Adjusted Consolidated Net Worth"
1.5 Amendments to Section 8.12: Fixed Charge Coverage Ratio.
Section 8.12 of the Credit Agreement is hereby amended by deleting the
proviso therefrom and substituting the following proviso therefor:
"provided that for the purposes of this Section, (a) all income,
interest expense, depreciation expense, tax expense, depreciation
expense, amortization expense, non-cash gains or losses, minority
interests, and income (or losses) accruing on or after April 1,
1994, that are attributable only to Ed Centers Discontinued
Operations shall be disregarded in determining Consolidated EBITDA
of the Borrower and its Subsidiaries, (b) all 1995 Charges shall be
disregarded in determining Consolidated EBITDA of the Borrower and
its Subsidiaries, (c) all Second Quarter Charges shall be
disregarded in determining Consolidated EBITDA of the Borrower and
its Subsidiaries for the four quarter period ending on the last day
of the second quarter of the Borrower's 1995 fiscal year, (d) all
lease payments made on or after April 1, 1994, that are
attributable only to Ed Centers Discontinued Operations shall be
disregarded in determining lease payments of the Borrower and its
Subsidiaries, and (e) all Consolidated Fixed Charges accruing on or
after April 1, 1994, that are attributable only to Ed Centers
Discontinued Operations shall be disregarded in determining
Consolidated Fixed Charges of the Borrower and its Subsidiaries"
1.6 Amendments to Schedule II: Material Adverse Changes.
Schedule II to the Credit Agreement is hereby amended by adding the following
paragraph at the bottom thereof:
"The Borrower may take a charges not exceeding $80,920,000 in the
aggregate in its 1995 fiscal year in connection with the
restructuring of NETG and the Borrower (National Education
Corporation corporate), the write-off of certain good will shown on
the books of the Borrower and certain operational charges arising
from the operations of NETG."
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Section 2. LIMITED WAIVER OF SECTION 4.01(c) THE CREDIT AGREEMENT
Agent and the Bank hereby waive the Borrower's compliance with
Section 4.01(c) of the Credit Agreement to the extent and only the extent
necessary to permit the Borrower to delay prepaying the Loans with any Cash
Proceeds received from Career Education Corp. in partial payment of the
purchase price for two schools being sold by the Borrower until the earlier
of the date such sale is completed or October 31, 1995.
The foregoing waiver shall be limited exactly as written, and,
without limiting the generality of the foregoing, such waiver shall not be
construed or deemed a waiver of the Borrower's compliance with any other
Section of the Credit Agreement or of the Borrower's compliance with Section
4.01(c) with respect to any other Asset Sale.
Section 3. REPRESENTATIONS AND WARRANTIES
In order to induce the Bank to enter into this Amendment and to
amend the provisions of the Credit Agreement in the manner provided herein,
the Borrower, and each Subsidiary party to the Subsidiary Guaranty and/or the
Subordination Agreement with respect to itself only, represents and warrants
to the Bank that the following statements are true, correct and complete:
A. Corporate Power and Authority. The Borrower has all requisite
corporate power and authority to enter into this Amendment and to carry out
the transactions contemplated by, and perform its obligations under, the
Credit Agreement as amended by this Amendment (the "Amended Agreement").
Each such Subsidiary has all requisite corporate power and authority to enter
into this Amendment and to be bound hereby.
B. Authorization of Agreements. The execution and delivery of
this Amendment by the Borrower and each such Subsidiary and the performance
of the Amended Agreement by the Borrower have been duly authorized by all
necessary corporate action by the Borrower and each such Subsidiary, as the
case may be.
C. No Conflict. The execution and delivery by the Borrower and
each such Subsidiary of this Amendment and the performance by the Borrower of
the Amended Agreement do not and will not (i) violate any provision of any
law, rule or regulation applicable to the Borrower or any of its
Subsidiaries, the Certificate of Incorporation or Bylaws of the Borrower or
any of its Subsidiaries or any order, judgment or decree of any court or
other agency of government binding on the Borrower or any of its
Subsidiaries, (ii) conflict with, result in a breach of or constitute (with
due notice or lapse of time or both) a default under, or require the consent
of any Person under, any mortgage, deed of trust, credit agreement, loan
agreement or any other agreement contract or instrument to which the Borrower
or any of its Subsidiaries is a party or by which it or any of its property
or assets is bound or to which it may be subject or (iii) result in or
require the creation or imposition of any Lien upon any of their properties
or assets.
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D. Governmental Consents. The execution and delivery by the
Borrower and each such Subsidiary of this Amendment and the performance by
the Borrower of the Amended Agreement do not and will not require any
registration with, consent or approval of, or notice to, or other action to,
with or by, any Federal, state or other governmental authority or regulatory
body or other Person.
E. Binding Obligation. This Amendment and, in the case of the
Borrower, the Amended Agreement, are the legally valid and binding
obligation(s) of the Borrower and each such Subsidiary, enforceable against
the Borrower or such Subsidiary in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or limiting creditors' rights
generally or by equitable principles relating to enforceability.
F. Incorporation of Representations and Warranties From Credit
Agreement. The representations and warranties contained in Section 6 of the
Credit Agreement are and will be true, correct and complete in all material
respects on and as of the date hereof to the same extent as though made on
and as of that date, except to the extent that such representations and
warranties specifically relate to an earlier date, in which case they are
true, correct and complete in all material respects as of such earlier date.
G. Absence of Default. No event has occurred and is continuing
or will result from the consummation of the transactions contemplated by this
Amendment which would constitute an Event of Default or a Default.
Section 4. ACKNOWLEDGEMENT AND CONSENT
Each of the undersigned Subsidiaries of the Borrower acknowledges
that it has reviewed the terms and provisions of the Credit Agreement and
this Amendment and consents to the amendment of the Credit Agreement effected
pursuant to this Amendment. Each of the undersigned Subsidiary Guarantors
hereby confirms that the Subsidiary Guaranty will continue to guaranty to the
fullest extent possible the payment and performance of all Guarantied
Obligations (as defined in the Subsidiary Guaranty), including, without
limitation, the payment and performance of all Obligations of the Borrower
now or hereafter existing under or in respect of the Amended Agreement. Each
of the undersigned Subordinated Subsidiaries hereby confirms that the
Subordination Agreement will continue to subordinate the Subordinated Debt
(as defined in the Subordination Agreement) to Senior Obligations (as defined
in the Subordination Agreement), including, without limitation, all
obligations of the Borrower now or hereafter existing to make payments under
or in respect of the Amended Agreement.
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Each Subsidiary Guarantor acknowledges and agrees that the
Subsidiary Guaranty shall continue in full force and effect and that all of
its obligations thereunder shall be valid and enforceable and shall not be
impaired or affected by the execution or effectiveness of this Amendment.
Each Subsidiary Guarantor represents and warrants that all representations
and warranties contained in the Subsidiary Guaranty are true, correct and
complete in all material respects on and as of the date hereof to the same
extent as though made on and as of that date except to the extent that such
representations and warranties specifically relate to an earlier date, in
which case they are true, correct and complete in all material respects as of
such earlier date.
Each Subordinated Subsidiary acknowledges and agrees that the
Subordination Agreement shall continue in full force and effect and that all
of its obligations thereunder shall be valid and enforceable and shall not be
impaired or affected by the execution or effectiveness of this Amendment.
Each Subordinated Subsidiary represents and warrants that all representations
and warranties contained in the Subordination Agreement are true, correct and
complete in all material respects on and as of the date hereof to the same
extent as though made on and as of that date except to the extent that such
representations and warranties specifically relate to an earlier date, in
which case they are true, correct and complete in all material respects as of
such earlier date.
Each of the undersigned Subsidiaries of the Borrower acknowledges
and agrees that (i) notwithstanding the conditions to effectiveness set forth
in this Amendment, such Subsidiary is not required by the terms of the Credit
Agreement or any other Credit Document to consent to the amendments to the
Credit Agreement effected pursuant to this Amendment and (ii) nothing in the
Credit Agreement, this Amendment or any other Credit Document shall be deemed
to require the consent of any such Subsidiary to any future amendments to the
Credit Agreement.
Section 5. MISCELLANEOUS
A. Reference to and Effect on the Credit Agreement and the Other
Credit Documents.
(i) On and after the date hereof, each reference in the
Credit Agreement to "this Agreement", "hereunder", "hereof", "herein" or
words of like import referring to the Credit Agreement, and each
reference in the other Credit Documents to the "Credit Agreement",
"thereunder", "thereof" or words of like import referring to the Credit
Agreement shall mean and be a reference to the Credit Agreement as
amended by this Amendment.
(ii) Except as specifically amended or modified by this
Amendment, the Credit Agreement and the other Credit Documents shall
remain in full force and effect and are hereby ratified and confirmed.
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(iii) The execution, delivery and performance of this Amendment
shall not, except as expressly provided herein, constitute a waiver of
any provision of, or operate as a waiver of any right, power or remedy
of the Agent or any Bank under, the Credit Agreement or any of the other
Credit Documents.
B. Fees and Expenses. The Borrower acknowledges that all costs,
fees and expenses as described in subsection 11.01 of the Credit Agreement
incurred by the Agent and its counsel with respect to this Amendment and the
documents and transactions contemplated hereby shall be for the account of
the Borrower.
C. Execution in Counterparts; Effectiveness. This Amendment may
be executed in any number of counterparts, and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed an original, but all such counterparts taken together shall constitute
but one and the same instrument.
D. Effectiveness. This Amendment shall become effective as of the
date hereof upon the execution of a counterpart hereof by the Borrower, each
Subsidiary of the Borrower party to the Subsidiary Guaranty or the
Subordination Agreement and the Bank and the delivery of such counterparts to
the Agent.
E. Headings. Section and subsection headings in this Amendment
are included herein for convenience of reference only and shall not
constitute a part of this Amendment for any other purpose or be given any
substantive effect.
F. Applicable Law. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES HERETO AND ALL OTHER ASPECTS HEREOF SHALL BE DEEMED TO BE MADE
UNDER, SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be executed as of the date first above written by their respective
officers thereunto duly authorized.
NATIONAL EDUCATION CORPORATION
By: __________________________
Title: _______________________
NETG HOLDING, INC.
NATIONAL EDUCATION TRAINING
GROUP, INC.,
SPECTRUM INTERACTIVE
INCORPORATED
NATIONAL EDUCATION CENTERS, INC.
ICS LEARNING SYSTEMS, INC.
INTERNATIONAL CORRESPONDENCE
SCHOOLS, INC.,
as the Subsidiary Guarantors
By: __________________________
Title: _______________________
NATIONAL EDUCATION INTERNATIONAL
CORP.
NATIONAL EDUCATION CREDIT
CORPORATION
NATIONAL EDUCATION FOREIGN SALES
CORP.
NATIONAL EDUCATION PAYROLL CORP.
NATIONAL EDUCATION CENTERS, INC.
ICS LEARNING SYSTEMS, INC.
NETG HOLDING, INC.,
as the Subordinated Subsidiaries
By: __________________________
Title: _______________________
BANKERS TRUST COMPANY, as the Bank and as the Agent
By: ___________________________
Title: ________________________
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