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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): February 4, 1999
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CORINTHIAN COLLEGES, INC.
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(Exact Name of Issuer as Specified
in its Charter)
Delaware 0-25283 33-0717312
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(State or Other (Commission File (IRS
Jurisdiction Number) Employer Identification
of Incorporation) Number)
6 Hutton Centre Drive, Suite 400, Santa Ana, California 92707
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (714) 427-3000
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ITEM 5. OTHER EVENTS
On February 4, 1999, the Securities and Exchange Commission (the
"Commission") declared effective the Registrant's Registration Statement on Form
S-1 (File No. 333-59505) (the "Registration Statement") relating to the public
offering of 2,700,000 shares of the Registrant's Common Stock, par value $.0001
per share (the "Common Stock"), and an over-allotment option granted by certain
stockholders (the "Selling Stockholders") to the underwriters to purchase up to
405,000 shares of the Registrant's Common Stock. The Registrant's Restated
Certificate of Incorporation became effective simultaneously with the filing of
such Restated Certificate with the Delaware Secretary of State on February 3,
1999. The public offering (the "Offering") commenced on February 4, 1999 upon
the execution of an Underwriting Agreement dated as of February 4, 1999 by and
among the Registrant, the Selling Stockholders named therein, and Salomon Smith
Barney, Credit Suisse First Boston and Piper Jaffray, Inc., as representatives
of the several underwriters named therein. The Registrant's Common Stock began
trading on the New York Stock Exchange on February 5, 1999 under the symbol
"COCO". On February 10, 1999 the Registrant completed the public offering at
$18.00 per share of an aggregate of 2,700,000 shares of Common Stock, all of
which were offered by the Registrant, resulting in net proceeds (after deducting
underwriting discounts payable by the Registrant) of $45,198,000 to the
Registrant.
On February 22, 1999, the underwriters exercised the over-allotment
option granted by the Selling Stockholders in full. On February 25, 1999 the
Selling Stockholders completed the sale of 405,000 shares covered by the over-
allotment option to the underwriters. The Registrant received no proceeds from
the sale of the over-allotment shares.
Concurrent with the consummation of the Offering, the Registrant
entered into a $10 million credit facility with Union Bank of California that
replaced the Registrant's existing line of credit. The new credit facility is a
one year, secured revolving credit facility, bears interests at LIBOR plus 200
basis points and includes a non-usage fee of 1/8% per year on the unused
portion. At maturity, any acquisition advances will convert to a three year
fully amortizing term loan. Under this line of credit, the Company will be
required to maintain certain financial and other covenants. Borrowings under
this line of credit are secured by substantially all personal property of the
Company.
Exhibit No. Description
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99.1 Loan Agreement by and between the Registrant and Union Bank
of California, dated as of February 10, 1999.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CORINTHIAN COLLEGES, INC.
March 4, 1999 /s/ FRANK J. McCORD
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Frank J. McCord
Vice President and Chief Financial Officer
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EXHIBIT 99.1
[LOGO OF UNION BANK OF CALIFORNIA]
LOAN AGREEMENT
THIS LOAN AGREEMENT ("Agreement") is made and entered into as of February
10, 1999 by and between Corinthian Colleges, Inc., a Delaware corporation
("Borrower") and UNION BANK OF CALIFORNIA, N.A., a national banking association
("Bank").
SECTION 1. THE LOAN
1.1.1 The Revolving Loan. Bank will loan to Borrower an amount
not to exceed TEN MILLION DOLLARS ($10,000,000) outstanding in the aggregate at
any one time (the "Revolving Loan"). Borrower may borrow, repay and reborrow all
or part of the Revolving Loan in amounts of not less than Ten Thousand Dollars
($10,000) in accordance with the terms of the Revolving Note; provided, however,
that for at least thirty (30) consecutive days during each twelve (12)-month
period, the principal amount outstanding under the Revolving Loan must be zero
(0). All borrowings of the Revolving Loan must be made before February 5, 2000
at which time all unpaid principal and interest of the Revolving Loan shall be
due and payable except as provided in Section 1.1.2 hereof. The Revolving Loan
shall be evidenced by a promissory note (the "Revolving Note") on the form
attached hereto. Bank shall enter each amount borrowed and repaid in Bank's
records and such entries shall be deemed to be the amount of the Revolving Loan
outstanding. Omission of Bank to make any such entries shall not discharge
Borrower of its obligation to repay in full with interest all amounts borrowed.
1.1.1.1 The Standby L/C Sublimit. As a sublimit to the
Revolving Loan, Bank shall issue, for the account of Borrower, one or more
irrevocable, standby letters of credit (individually, an "L/C" and collectively,
the "L/Cs"). All such standby L/Cs shall be drawn on such terms and conditions
as are acceptable to Bank. The aggregate amount available to be drawn under all
outstanding L/Cs and the aggregate amount of unpaid reimbursement obligations
under drawn L/Cs shall not exceed TWO MILLION DOLLARS ($2,000,000) and shall
reduce, dollar for dollar, the maximum amount available under the Revolving
Loan. No standby L/C shall have an expiry date more than twelve (12) months from
its date of issuance and each L/C shall be governed by the terms of (and
Borrower agrees to execute) Bank's standard form for standby L/C applications
and reimbursement agreements. No L/C shall expire after February 5, 2000.
1.1.2 The Term Loan. Solely to repay a portion of the
Revolving Loan of which advances were made for acquisition purposes, Bank will
loan to Borrower the sum outstanding at the maturity of the Revolving Loan in
one disbursement on or before February 5, 2000 (the "Term Loan"). In the event
of a prepayment of principal and payment of any resulting fees, any prepaid
amounts shall be applied to the scheduled principal payments in the reverse
order of their maturity. The Term Loan shall be evidenced by a promissory note
(the "Term Note") in the form attached hereto.
1.2 Terminology.
As used herein the word "Loan" shall mean, collectively, all the
credit facilities described above.
As used herein the word "Note" shall mean, collectively, all the
promissory notes described above.
As used herein, the words "Loan Documents" shall mean all
documents executed in connection with this Agreement.
1.3 Purpose of Loan. The proceeds of the Revolving Loan shall be
used for general working capital purposes and acquisition advances subject to
the criteria set forth in Subsection 2.3.
1.4 Interest. The unpaid principal balance of the Revolving Loan
shall bear interest at the rate or rates provided in the Revolving Note and
selected by Borrower. The Revolving Loan may be prepaid in full or in part only
in accordance with the terms of the Revolving Note and any such prepayment shall
be subject to the prepayment fee provided for therein.
1.5 Loan Commitment Fee. Borrower shall pay in advance a commitment
fee of Thirty Seven Thousand Five Hundred Dollars ($37,500) on or before the
date of execution of this Agreement. No portion of this fee shall be
reimbursable.
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1.6 Unused Commitment Fee. On the last calendar day of the third
month following the execution of this Agreement and on the last calendar day of
each three-month period thereafter until February 5, 2000, or the earlier
termination of the Loan, Borrower shall pay to Bank a fee of one-eighth percent
(1/8%) per year on the average unused portion of the Loan for the preceding
quarter computed on the basis of actual days elapsed of a year of 360 days.
1.7 Balances. Borrower shall maintain its major depository accounts
with Bank until the Note and all sums payable pursuant to this Agreement have
been paid in full.
1.8 Disbursement. Upon execution hereof, Bank shall disburse the
proceeds of the Loan as provided in Bank's standard form Authorization executed
by Borrower.
1.9 Security. Prior to any disbursement of the Loan, Borrower shall
have executed a security agreement, in the form attached hereto, and a financing
statement, suitable for filing in the office of the Secretary of State of the
State of California and any other state designated by Bank, granting to Bank a
first priority security interest in such of Borrower's property as is described
in said security agreement. Exceptions to Bank's first priority, if any, are
permitted only as otherwise provided in this Agreement. At Bank's request,
Borrower will also obtain executed landlord's and mortgagee's waivers on Bank's
form covering all of Borrower's property located on leased or encumbered real
property.
1.10 Controlling Document. In the event of any inconsistency between
the terms of this Agreement and any Note or any of the other Loan Documents, the
terms of such Note or other Loan Documents will prevail over the terms of this
Agreement.
SECTION 2. CONDITIONS PRECEDENT
2.1 Conditions Precedent to All Advances. Bank shall not be
obligated to disburse all or any portion of the proceeds of the Loan unless at
or prior to the time for the making of such disbursement, the following
conditions have been fulfilled to Bank's satisfaction:
2.1.1 Borrower shall have performed and complied with all terms
and conditions required by this Agreement to be performed or complied with by
its prior to or at the date of the making of such advance and shall have
executed and delivered to Bank the Note and other documents deemed necessary to
Bank;
2.1.2 Borrower shall have provided Bank with certified copies
of resolutions duly adopted by the Board of Directors of Borrower authorizing
this Agreement and the Loan Documents (which resolutions shall also designate
the persons who are authorized to act on Borrower's behalf in connection with
this Agreement and to do the things required of Borrower pursuant to this
Agreement);
2.1.3 Borrower shall have provided Bank with UCC-2 terminations
statements executed by such secured creditors as may be required by bank,
suitable for filing with the Secretary of State in each state designated by
Bank; and
2.1.4 At the time any advance is to made, there shall not exist
any event, condition or act which constitutes an event of default under Section
6 hereof or any event, condition or act with notice, lapse of time or both would
constitute such event of default, nor shall there be any such event, condition,
or act immediately after the making of the advance were it to be made.
2.2 Conditions Precedent to the Initial Advance. The obligation of
Bank to make the initial advance under the Loan shall be subject to the
conditions precedent set forth in Section 2.1 hereof and shall be subject to the
further condition precedent that Borrower shall have successfully completed an
initial public offering raising gross proceeds of not less than Forty Million
Dollars ($40,000,000) and shall have applied the proceeds thereof, all as more
particularly described in the Borrower's Form S-1 filed with the Securities and
Exchange Commission on July 21, 1998, as amended (the "Registration Statement").
2.3 Conditions Precedent to Certain Acquisition Advances. The
obligation of Bank to make any Acquisition Advance which would cause the
aggregate amount of all Acquisition Advances made by Bank to Borrower in any
given fiscal year of Borrower to exceed Two Million Dollars ($2,000,000) shall
be subject to the conditions precedent set forth in Sections 2.1 and 2.2 hereof
and shall also be subject to the following further conditions precedent:
2.3.1 Borrower shall have maintained an EBITDA margin (as
described in Section 4.9 of the Agreement) of not less than seven percent (7%)
of revenues for the six (6) calendar month period most recently ended.
2.3.2 Borrower shall have delivered to Bank copies of (a) the
target company's most recent reviewed or audited financial statements, and (b)
the target company's most recent interim financial statements, and such
financial statements shall reflect that the target company has maintained a
positive EBITDA for the twelve (12) calendar month period most recently ended;
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2.3.3 Borrower shall have delivered to Bank copies of pro forma
financial statements which, on the basis of assumptions deemed reasonable by
Bank, project that Borrower and the target company, on a combined basis after
giving effect to the acquisition, will be in compliance with all affirmative
(including, without limitation, financial) and negative covenants set forth in
this Agreement;
2.3.4 The target company shall be in compliance with all
requirements imposed on it by the Federal Department of Education; and
2.3.5 The total price to be paid by Borrower in connection with
its acquisition of the target company shall not exceed eight (8) times the
target company's EBITDA for the six (6) calendar month period most recently
ended, unless Bank shall otherwise consent in writing.
SECTION 3. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants that:
3.1 Business Activity. The principal business of Borrower is the
ownership and operation of post-secondary education and vocational schools.
3.2 Affiliates and Subsidiaries. Borrower's affiliates and
subsidiaries (those entities in which Borrower has either a controlling interest
or at least a 25% ownership interest) and their addresses, are as provided on a
schedule delivered to Bank on or before the date of this Agreement.
3.3 Authority to Borrow. After application of the Borrower's IPO
proceeds as described in the Registration Statement, the execution, delivery and
performance of this Agreement, the Note and all other agreements and instruments
required by Bank in connection with the Loan will not be in contravention of any
of the terms of any indenture, agreement or undertaking to which Borrower is a
party or by which it or any of its property is bound or affected.
3.4 Financial Statements. The financial statements of Borrower,
including both a balance sheet at December 31, 1998, together with supporting
schedules, and an income statement for the six (6) months ended December 31,
1998, have heretofore been furnished to Bank, and are true and complete and
fairly represent the financial condition of Borrower during the period covered
thereby. Since December 31, 1998, there has been no material adverse change in
the financial condition or operations of Borrower.
3.5 Title. Except for assets which may have been disposed of in the
ordinary course of business, Borrower has good and marketable title to, or has a
valid license or leasehold interest in, all of the property reflected in its
financial statements delivered to Bank and to all property acquired by Borrower
since the date of said financial statements, free and clear of all liens,
encumbrances, security interests and adverse claims except liens and
encumbrances described in the Registration Statement, liens and encumbrances
described in Borrower's most recent financial statement, liens and encumbrances
described in a schedule delivered by Borrower to Bank at or prior to execution
of this Agreement.
3.6 Litigation. There is no litigation or proceeding pending or
threatened against Borrower or any of its property which is reasonably likely to
affect the financial condition, property or business of Borrower in a materially
adverse manner or result in liability in excess of Borrower's insurance coverage
or reserves reflected on its balance sheet.
3.7 Default. Borrower is not now in default in the payment of any of
its material obligations, and there exists no event, condition or act which
constitutes an event of default under Section 6 hereof and no condition, event
or act which with notice or lapse of time, or both, would constitute an event of
default.
3.8 Organization. Borrower is duly organized and existing under the
laws of the state of its organization, and has the power and authority to carry
on the business in which it is engaged and/or proposes to engage.
3.9 Power. Borrower has the power and authority to enter into this
Agreement and to execute and deliver the Note and all of the other Loan
Documents.
3.10 Authorization. This Agreement and all things required by this
Agreement have been duly authorized by all requisite action of Borrower.
3.11 Qualification. Borrower is duly qualified and in good standing
in any jurisdiction where such qualification is required or except where the
failure to be so qualified would not have a material adverse effect on the
financial condition or results of operations of the Borrower.
3.12 Compliance with Laws. Borrower is not in violation with respect
to any applicable laws, rules, ordinances or regulations, except for any such
violations as would not materially affect the operations or financial condition
of Borrower.
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3.13 ERISA. Any defined benefit pension plans as defined in the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), of
Borrower meet, as of the date hereof, the minimum funding standards of Section
302 of ERISA, and to the best of Borrower's knowledge after due inquiry, no
Reportable Event or Prohibited Transaction as defined in ERISA has occurred with
respect to any such plan.
3.14 Regulation U. No action has been taken or is currently planned
by Borrower, or any agent acting on its behalf, which would cause this Agreement
or the Note to violate Regulation U or any other regulation of the Board of
Governors of the Federal Reserve System or to violate the Securities and
Exchange Act of 1934, in each case as in effect now or as the same may hereafter
be in effect. Borrower is not engaged in the business of extending credit for
the purpose of purchasing or carrying margin stock as one of its important
activities and none of the proceeds of the Loan will be used directly or
indirectly for such purpose.
3.15 Continuing Representations. These representations shall be
considered to have been made again at and as of the date of each disbursement of
the Loan and shall be true and correct as of such date or dates.
SECTION 4. AFFIRMATIVE COVENANTS
Until the Note and all sums payable pursuant to this Agreement or any other
of the Loan Documents have been paid in full, unless Bank waives compliance in
writing, Borrower agrees that:
4.1 Use of Proceeds. Borrower will use the proceeds of the Loan only
as provided in subsection 1.3 above.
4.2 Payment of Obligations. Borrower will pay and discharge promptly
all taxes, assessments and other governmental charges and claims levied or
imposed upon it or its property, or any part thereof, provided, however, that
Borrower shall have the right in good faith to contest any such taxes,
assessments, charges or claims and, pending the outcome of such contest, to
delay or refuse payment thereof provided that adequately funded reserves are
established by it to pay and discharge any such taxes, assessments, charges and
claims.
4.3 Maintenance of Existence. Borrower will maintain and preserve
its existence and assets and all rights, franchises, licenses and other
authority necessary for the conduct of its business and will maintain and
preserve its property, equipment and facilities in good order, condition and
repair. Bank may, at reasonable times, visit and inspect any of the properties
of Borrower.
4.4 Records. Borrower will keep and maintain full and accurate
accounts and records of its operations according to generally accepted
accounting principles and will permit Bank to have access thereto, to make
examination and photocopies thereof, and to make audits during regular business
hours. Costs for such audits shall be paid by Borrower.
4.5 Information Furnished. Borrower will furnish to Bank:
(a) Within Forty-Five (45) days after the close of each fiscal
quarter, except for the final quarter of each fiscal year, its unaudited 10Q
report which includes but is not limited to the balance sheet as of the close of
such fiscal quarter, its unaudited income and expense statement with supportive
schedules and statement of retained earnings for that fiscal quarter, prepared
in accordance with generally accepted accounting principles;
(b) Within Ninety (90) days after the close of each fiscal year,
a copy of its 10K report of its statement of financial condition including at
least its balance sheet as of the close of such fiscal year, its income and
expense statement and retained earnings statement for such fiscal year, examined
and prepared on an audited basis by independent certified public accountants
selected by Borrower and reasonably satisfactory to Bank, in accordance with
generally accepted accounting principles applied on a basis consistent with that
of the previous year;
(c) Such other financial statements and information as Bank may
reasonably request from time to time;
(d) In connection with each financial statement provided
hereunder, a statement executed by the chief financial officer of Borrower,
certifying that no default has occurred and no event exists which with notice or
the lapse of time, or both, would result in a default hereunder;
(e) In connection with each fiscal year-end statement required
hereunder, any management letter of Borrower's certified public accountants;
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(f) Prompt written notice to Bank of all events of default
under any of the terms or provisions of this Agreement or of any other
agreement, contract, document or instrument entered, or to be entered into with
Bank; and of any litigation which, if decided adversely to Borrower, would have
a material adverse effect on Borrower's financial condition; and of any other
matter which has resulted in, or is likely to result in, a material adverse
change in its financial condition or operations; and
(g) Prior written notice to Bank of any changes in Borrower's
officers and other senior management; Borrower's name; and location of
Borrower's assets, principal place of business or chief executive office.
4.6 Tangible Net Worth. Borrower will at all times maintain
Tangible Net Worth of not less than Twelve Million Dollars ($12,000,000).
"Tangible Net Worth" shall mean net worth increased by indebtedness of Borrower
subordinated to Bank and decreased by patents, licenses, trademarks, trade
names, goodwill and other similar intangible assets, organizational expenses,
and monies due from affiliates (including officers, shareholders and directors).
4.7 Debt to Tangible Net Worth. Borrower will at all times maintain
a ratio of total liabilities to tangible net worth of not greater than 1.50:1.0.
"Tangible Net Worth" shall mean net worth increased by indebtedness of Borrower
subordinated to Bank and decreased by patents, licenses, trademarks, trade
names, goodwill and other similar intangible assets, organizational expenses,
and monies due from affiliates (including officers, shareholders and directors).
4.8 EBITDA Margin. Borrower will maintain its EBITDA at a minimum
of Seven Percent (7%) of total revenues for any given fiscal quarter.
Compliance of this subsection shall be measured as of the end of each fiscal
quarter. "EBITDA" shall mean earnings before interest, taxes, depreciation, and
amortization. "Debt Service" shall mean the sum of that portion of term
obligations (including principal and interest) coming due during the twelve (12)
months preceding the date of calculation plus non-financed capital expenditures
during the twelve (12) months preceding the date of calculation. Compliance
with this subsection shall be measured as of the end of Borrower's fiscal
quarter, for the quarter then ended.
4.9 EBITDA to Debt Service Ratio. Borrower will maintain a ratio of
EBITDA, less dividends, to Debt Service of not less than 1.25:1.0. "EBITDA"
shall mean earnings before interest, taxes, depreciation, and amortization.
"Debt Service" shall mean the sum of that portion of term obligations (including
principal and interest) coming due during the twelve (12) months preceding the
date of calculation plus non-financed capital expenditures during the twelve
(12) months preceding the date of calculation. Compliance with this subsection
shall be measured as of the end of Borrower's fiscal quarter, for the quarter
then ended.
4.10 Insurance. Borrower will keep all of its insurable property,
real, personal or mixed, insured by companies and in amounts approved by Bank
against fire and such other risks, and in such amounts, as is customarily
obtained by companies conducting similar business with respect to like
properties. Borrower will furnish to Bank statements of its insurance coverage,
will promptly furnish other or additional insurance deemed necessary by and upon
request of Bank to the extent that such insurance may be available and hereby
assigns to Bank, as security for Borrower's obligations to Bank, the proceeds of
any such insurance. Prior to any disbursement of the Loan, Bank will be named
loss payee on all policies insuring collateral and such policies shall require
at least ten (10) days' written notice to Bank before any policy may be altered
or cancelled. Borrower will maintain adequate worker's compensation insurance
and adequate insurance against liability for damage to persons or property.
4.11 Additional Requirements. Borrower will promptly, upon demand by
Bank, take such further action and execute all such additional documents and
instruments in connection with this Agreement as Bank in its reasonable
discretion deems necessary, and promptly supply Bank with such other information
concerning its affairs as Bank may request from time to time.
4.12 Litigation and Attorneys' Fees. Borrower will pay promptly to
Bank upon demand, reasonable attorneys' fees (including but not limited to the
reasonable estimate of the allocated costs and expenses of in-house legal
counsel and legal staff) and all costs and other expenses paid or incurred by
Bank in collecting, modifying or compromising the Loan or in enforcing or
exercising its rights or remedies created by, connected with or provided for in
this Agreement or any of the Loan Documents, whether or not an arbitration,
judicial action or other proceeding is commenced. If such proceeding is
commenced, only the prevailing party shall be entitled to attorneys' fees and
court costs.
4.13 Bank Expenses. Borrower will pay or reimburse Bank for all
costs, expenses and fees incurred by Bank in preparing and documenting this
Agreement and the Loan, and all amendments and modifications thereof, including
but not limited to all filing and recording fees, costs of appraisals, insurance
and attorneys' fees, including the reasonable estimate of the allocated costs
and expenses of in-house legal counsel and legal staff.
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4.14 Reports Under Pension Plans. Borrower will furnish to Bank, as
soon as possible and in any event within 15 days after Borrower knows or has
reason to know that any event or condition with respect to any defined benefit
pension plans of Borrower described in Section 3 above has occurred, a statement
of an authorized officer of Borrower describing such event or condition and the
action, if any, which Borrower proposes to take with respect thereto.
SECTION 5. NEGATIVE COVENANTS
Until the Note and all other sums payable pursuant to this Agreement or any
other of the Loan Documents have been paid in full, unless Bank waives
compliance in writing, Borrower agrees that:
5.1 Encumbrances and Liens. Borrower will not create, assume or
suffer to exist any mortgage, pledge, security interest, encumbrance, or lien
(other than for taxes not delinquent and for taxes and other items being
contested in good faith) on property of any kind, whether real, personal or
mixed, now owned or hereafter acquired, or upon the income or profits thereof,
except to Bank and except for (a) any such mortgage, pledge, security interest,
encumbrance or lien which is in existence and to which the Borrower's property
is subject as of the date of this Agreement so long as the same is reflected on
Borrower's most recent financial statement delivered to Bank, the Registration
Statement or a schedule delivered by Borrower to Bank at or prior to execution
of this Agreement; (b) minor encumbrances and easements on real property which
do not affect its market value, and (c) future purchase money security interests
encumbering only the real or personal property purchased; provided, however,
that all such permitted personal property liens shall not exceed, in the
aggregate, Six Hundred Fifty Thousand Dollars ($650,000) at any time and all
such permitted real property liens shall not exceed, in the aggregate, Six
Hundred Fifty Thousand Dollars ($650,000), at any time.
5.2 Borrowings. Borrower will not sell, discount or otherwise
transfer any account receivable or any note, draft or other evidence of
indebtedness, except to Bank or except to a financial institution at face value
for deposit or collection purposes only and without any fee other than fees
normally charged by the financial institution for deposit or collection
services, except that Borrower may sell, discount and otherwise transfer in the
ordinary course of business notes and other obligation evidencing student loans
made by Borrower or one or more of its affiliates. Except for purchase money
indebtedness permitted pursuant to Section 5.1 above, Borrower will not borrow
any money, become contingently liable to borrow money, nor enter any agreement
to directly or indirectly obtain borrowed money, except pursuant to agreements
made with Bank.
5.3 Sale of Assets, Liquidation or Merger. Borrower will neither
liquidate nor dissolve nor enter into any consolidation, merger, partnership or
other combination, nor convey, nor sell, nor lease all or the greater part of
its assets or business, nor purchase or lease all or the greater part of the
assets or business of another; provided, however, Borrower may acquire, merge or
consolidate with another corporation if Borrower is the surviving corporation
and the acquisition, merger or consolidation would qualify to be financed with
an Acquisition Advance as provided in Section 2 above (whether or not such
acquisition, merger or consolidation is so financed).
5.4 Loans, Advances and Guaranties. Borrower will not, except in the
ordinary course of business as currently conducted and in connection with the
making of student loans, make any loans or advances, become a guarantor or
surety, pledge its credit or properties in any manner or extend credit.
5.5 Investments. Borrower will not purchase the debt or equity of
another person or entity except for savings accounts and certificates of deposit
of Bank, direct U.S. Government obligations and commercial paper issued by
corporations with the top ratings of Moody's or Standard & Poor's, provided all
such permitted investments shall mature within one year of purchase.
5.6 Payment of Dividends. Borrower will not declare or pay any
dividends, other than a dividend payable in its own common stock, or authorize
or make any other distribution with respect to any of its stock now or hereafter
outstanding.
5.7 Retirement of Stock. Borrower will not acquire or retire any
share of its capital stock for value.
5.8 Parent and Subsidiary Property. Borrower will not transfer any
property to its parent or any affiliate of its parent, except for value received
in the normal course of business as business would be conducted with an
unrelated or unaffiliated entity. In no event shall management fees or fees for
services be paid by Borrower to any such direct or indirect affiliate without
Bank's prior written approval.
5.9 Capital Expenditures. Borrower will not make capital
expenditures in excess of Five Million Dollars ($5,000,000) in any fiscal year;
and shall only make such expenditures as are necessary for Borrower (in
Borrower's reasonable discretion) in the conduct of its ordinary course of
business.
5.10 Lease Obligations. After the date of this Agreement, Borrower
will not incur any existing or new lease obligations as lessee which would
result in aggregate lease payments for any fiscal year exceeding Twelve Million
Five Hundred Thousand Dollars ($12,500,000). Each said lease shall be of
equipment or real property needed by Borrower (in Borrower's reasonable
discretion) in the ordinary course of its business.
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SECTION 6. EVENTS OF DEFAULT
The occurrence of any of the following events ("Events of Default") shall
terminate any obligation on the part of Bank to make or continue the Loan and
automatically, unless otherwise provided under the Note, shall make all sums of
interest and principal and any other amounts owing under the Loan immediately
due and payable, without notice of default, presentment or demand for payment,
protest or notice of nonpayment or dishonor, or any other notices or demands:
6.1 Borrower shall fail to pay when due any principal payment, or
shall fail to pay within three (3) days of the date when due any interest,
reimbursement or other payment, required under the terms of the Note, this
Agreement, or any other Loan Documents; or
6.2 Any other default shall occur under the Note.
SECTION 7. MISCELLANEOUS PROVISIONS
7.1 Additional Remedies. The rights, powers and remedies given to
Bank hereunder shall be cumulative and not alternative and shall be in addition
to all rights, powers and remedies given to Bank by law against Borrower or any
other person, including but not limited to Bank's rights of setoff or banker's
lien.
7.2 Nonwaiver. Any forbearance or failure or delay by Bank in
exercising any right, power or remedy hereunder shall not be deemed a waiver
thereof and any single or partial exercise of any right, power or remedy shall
not preclude the further exercise thereof. No waiver shall be effective unless
it is in writing and signed by an officer of Bank.
7.3 Inurement. The benefits of this Agreement shall inure to the
successors and assigns of Bank and the permitted successors and assignees of
Borrower, and any assignment by Borrower without Bank's consent shall be null
and void.
7.4 Applicable Law. This Agreement and all other agreements and
instruments required by Bank in connection therewith shall be governed by and
construed according to the laws of the State of California.
7.5 Severability. Should any one or more provisions of this
Agreement be determined to be illegal or unenforceable, all other provisions
nevertheless shall be effective. In the event of any conflict between the
provisions of this Agreement and the provisions of any note or reimbursement
agreement evidencing any indebtedness hereunder, the provisions of such note or
reimbursement agreement shall prevail.
7.6 Integration Clause. Except for documents and instruments
specifically referenced herein, this Agreement constitutes the entire agreement
between Bank and Borrower regarding the Loan and all prior communications verbal
or written between Borrower and Bank shall be of no further effect or
evidentiary value.
7.7 Construction. The section and subsection headings herein are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
7.8 Amendments. This Agreement may be amended only in writing signed
by all parties hereto.
7.9 Counterparts. Borrower and Bank may execute one or more
counterparts to this Agreement, each of which shall be deemed an original, but
when together shall be one and the same instrument.
SECTION 8. SERVICE OF NOTICES
8.1 Any notices or other communications provided for or allowed
hereunder shall be effective only when given by one of the following methods and
addressed to the respective party at its address given with the signatures at
the end of this Agreement and shall be considered to have been validly given:
(a) upon delivery, if delivered personally; (b) upon receipt, if mailed, first
class postage prepaid, with the United States Postal Service; (c) on the next
business day, if sent by overnight courier service of recognized standing; and
(d) upon telephoned confirmation of receipt, if telecopied.
8.2 The addresses to which notices or demands are to be given may be
changed from time to time by notice delivered as provided above.
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THIS AGREEMENT is executed on behalf of the parties by duly authorized
officers as of the date first above written.
<TABLE>
<CAPTION>
<S> <C>
UNION BANK OF CALIFORNIA, N.A. CORINTHIAN COLLEGES, INC.
By: /s/ Anita P. Saraiya By: /s/ Frank J. McCord
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Title V.P. Title Exec. VP & CFO
--------------------------------------------- -------------------------------------------------------
By: /s/ Stephen W. Dunne By:
----------------------------------------------- ----------------------------------------------------------
Title V.P. Title
--------------------------------------------- --------------------------------------------------------
Address: 500 S. Main Street Orange, Ca. 92868 Address:
----------------------------------------- -----------------------------------------------------
Attention: Anita P. Saraiya VP or Kim Ha VP Attention:
--------------------------------------- ---------------------------------------------------
Telecopier: (714) 565-5770 Telecopier:
-------------------------------------- --------------------------------------------------
Telephone: (714) 565-5789/ (714) 565-5724 Telephone:
--------------------------------------- ---------------------------------------------------
</TABLE>
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