<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE PERIOD ENDED: MARCH 31, 2000 COMMISSION FILE NUMBER: 000-21363
---------------
EDUCATION MANAGEMENT CORPORATION
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 25-1119571
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
300 SIXTH AVENUE, PITTSBURGH, PA 15222
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (412) 562-0900
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, $.01 PAR VALUE
(Title of class)
PREFERRED SHARE PURCHASE RIGHTS
(Title of class)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
The number of shares of the registrant's Common Stock outstanding as of March
31, 2000 was 28,851,548.
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INDEX
PART I - FINANCIAL INFORMATION PAGE
ITEM 1 - CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)...3-6
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION.............7-9
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS..........................................10
ITEM 2 - CHANGES IN SECURITIES......................................10
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES............................10
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS........10
ITEM 5 - OTHER INFORMATION..........................................10
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K...........................10
SIGNATURES....................................................................11
2
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PART I
ITEM 1 - CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
EDUCATION MANAGEMENT CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, JUNE 30, MARCH 31,
1999 1999 2000
-------- -------- --------
(unaudited) (unaudited)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents, including restricted
balances.............................................. $ 13,254 $ 32,871 $ 715
Receivables ............................................ 9,855 15,333 11,731
Inventories ............................................ 2,094 2,038 2,479
Deferred income taxes .................................. 2,361 2,476 2,476
Other current assets ................................... 4,043 2,991 4,640
-------- -------- --------
Total current assets .............................. 31,607 55,709 22,041
-------- -------- --------
PROPERTY AND EQUIPMENT, NET .............................. 83,166 96,081 120,177
DEFERRED INCOME TAXES AND OTHER LONG-TERM ASSETS ......... 6,830 7,514 8,263
INTANGIBLE ASSETS, NET OF AMORTIZATION ................... 19,607 19,442 28,533
-------- -------- --------
TOTAL ASSETS ...................................... $141,210 $178,746 $179,014
======== ======== ========
LIABILITIES AND SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Current portion of long-term debt ...................... $ 1,346 $ 731 $ 16
Accounts payable ....................................... 3,674 12,110 4,732
Accrued liabilities .................................... 10,204 11,438 9,960
Advance payments ....................................... 32,974 20,909 40,242
-------- -------- --------
Total current liabilities ......................... 48,198 45,188 54,950
-------- -------- --------
LONG-TERM DEBT, LESS CURRENT PORTION ..................... -- 36,500 14,621
DEFERRED INCOME TAXES AND OTHER LONG-TERM LIABILITIES..... 1,501 253 986
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' INVESTMENT:
Common stock ........................................... 295 295 297
Additional paid-in capital ............................. 90,774 93,736 94,838
Treasury stock, at cost ................................ (354) (495) (9,510)
Retained earnings ...................................... 796 3,269 22,832
-------- -------- --------
TOTAL SHAREHOLDERS' INVESTMENT .................... 91,511 96,805 108,457
-------- -------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' INVESTMENT .... $141,210 $178,746 $179,014
======== ======== ========
</TABLE>
The accompanying notes to condensed consolidated financial statements are
an integral part of these statements.
3
<PAGE> 4
EDUCATION MANAGEMENT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED MARCH 31, ENDED MARCH 31,
1999 2000 1999 2000
--------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
NET REVENUES .......................................... $70,575 $83,195 $195,640 $231,068
COSTS AND EXPENSES:
Educational services ................................ 45,122 53,342 124,915 147,769
General and administrative .......................... 14,890 17,491 42,230 48,957
Amortization of intangibles ......................... 314 394 901 1,115
------- ------- -------- --------
60,326 71,227 168,046 197,841
------- ------- -------- --------
INCOME BEFORE INTEREST AND TAXES ...................... 10,249 11,968 27,594 33,227
Interest expense (income), net ...................... (116) 87 (46) 529
------- ------- -------- --------
INCOME BEFORE INCOME TAXES ............................ 10,365 11,881 27,640 32,698
Provision for income taxes .......................... 4,260 4,768 11,361 13,135
------- ------- -------- --------
NET INCOME ............................................ $ 6,105 $ 7,113 $ 16,279 $ 19,563
======= ======= ======== ========
EARNINGS PER SHARE:
Basic ............................................. $ .21 $ .25 $ .56 $ .68
======= ======= ======== ========
Diluted ........................................... $ .20 $ .24 $ .53 $ .66
======= ======= ======== ========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING (000's):
Basic ............................................. 29,414 28,786 29,248 28,921
Diluted ........................................... 30,867 29,733 30,596 29,779
</TABLE>
The accompanying notes to condensed consolidated financial statements are
an integral part of these statements.
4
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EDUCATION MANAGEMENT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED MARCH 31,
1999 2000
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ....................................... $ 16,279 $ 19,563
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
FLOWS FROM OPERATING ACTIVITIES:
Depreciation and amortization................ 12,126 14,694
Changes in current assets and liabilities:
Receivables............................... 1,823 3,767
Inventories............................... (161) (312)
Other current assets ..................... (1,702) (1,529)
Accounts payable.......................... (3,308) (7,799)
Accrued liabilities....................... 42 (1,549)
Advance payments.......................... 14,636 18,417
-------- --------
Total adjustments....................... 23,456 25,689
-------- --------
Net cash flows from operating activities 39,735 45,252
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of subsidiaries, net of cash acquired (500) (8,047)
Expenditures for property and equipment........... (37,304) (36,666)
Other, net........................................ (858) (1,140)
-------- --------
Net cash flows from investing activities (38,662) (45,853)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on debt........................ (37,036) (23,644)
Repurchase of Common Stock........................ -- (9,015)
Net proceeds from issuance of Common Stock ....... 1,899 1,104
Other capital stock transactions, net ............ 8 --
-------- --------
Net cash flows from financing activities (35,129) (31,555)
-------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS............. (34,056) (32,156)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD...... 47,310 32,871
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD............ $ 13,254 $ 715
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest (net of amount capitalized).............. $ 229 $ 31
Income taxes...................................... 9,933 12,023
</TABLE>
The accompanying notes to condensed consolidated financial statements are
an integral part of these statements.
5
<PAGE> 6
EDUCATION MANAGEMENT CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. The accompanying condensed consolidated financial statements should be
read in conjunction with the Notes to Consolidated Financial Statements
included in the Company's 1999 Annual Report on Form 10-K. The accompanying
condensed consolidated balance sheet as of June 30, 1999 has been derived
from the audited balance sheet included in the Company's 1999 Annual Report
on Form 10-K. The accompanying interim financial statements are unaudited;
however, management believes that all adjustments necessary for a fair
presentation have been made and all such adjustments are normal, recurring
adjustments. The results for the three-month and nine-month periods ended
March 31, 2000 are not necessarily indicative of the results to be expected
for the full fiscal year. Unless otherwise noted, references to 1999 and
2000 refer to the periods ended March 31, 1999 and 2000, respectively.
Certain prior period balances have been reclassified to conform to the
current period presentation.
2. Education Management Corporation ("EDMC" or the "Company") is among
the largest providers of proprietary postsecondary education in the United
States, based on student enrollment and revenues. Through its operating
units, primarily the Art Institutes, the Company offers bachelor's and
associate's degree programs and non-degree programs in the areas of design,
media arts, culinary arts, fashion and paralegal studies. The Company has
provided career-oriented education programs for over 35 years.
3. Reflected below is a summary of the Company's capital stock:
<TABLE>
<CAPTION>
PAR VALUE AUTHORIZED MARCH 31, 1999 JUNE 30, 1999 MARCH 31, 2000
<S> <C> <C> <C> <C> <C>
ISSUED:
Preferred Stock $ .01 10,000,000 -- -- --
Common Stock $ .01 60,000,000 29,485,434 29,546,833 29,743,992
HELD IN TREASURY:
Common Stock N/A N/A 78,802 85,646 892,446
</TABLE>
On August 3, 1999, the Board of Directors authorized the Company to
repurchase up to $10 million of its currently outstanding Common Stock. The
quantity and timing of such purchases are determined by management, based
upon market conditions and other factors. Through March 31, 2000, the
Company had repurchased approximately 807,000 shares at an approximate
aggregate cost of $9 million.
4. On August 17, 1999, the Company acquired the outstanding stock of the
American Business & Fashion Institute in Charlotte, North Carolina, since
renamed The Art Institute of Charlotte. On August 26, 1999, the Company
acquired the outstanding stock of Massachusetts Communications College in
Boston, Massachusetts.
The Company's acquisitions have been accounted for using the purchase
method of accounting, with the excess of the purchase price over the fair
value of the assets acquired being assigned to identifiable intangible
assets and goodwill. The results of the acquired entities have been
included in the Company's results from the respective dates of acquisition.
The pro forma effects, individually and collectively, of the acquisitions
in the Company's condensed consolidated financial statements would not
materially impact the reported results.
5. Reconciliation of diluted shares (000's):
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, NINE MONTHS ENDED MARCH 31,
---------------------------- ----------------------------
1999 2000 1999 2000
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Basic shares........................... 29,414 28,786 29,248 28,921
Dilution for stock options............. 1,453 947 1,348 858
-------- -------- -------- --------
Diluted shares......................... 30,867 29,733 30,596 29,779
======== ======== ======== ========
</TABLE>
For the period ended March 31, 2000, options to purchase approximately
197,000 shares were excluded from the diluted earnings per share
calculation because of their antidilutive effect (due to the exercise price
of such options exceeding the average market price for the period).
6
<PAGE> 7
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
This Quarterly Report on Form 10-Q contains statements that may be
forward-looking statements within the meaning of the U.S. Private Securities
Litigation Reform Act of 1995. Those statements can be identified by the use
of forward-looking terminology such as "believes," "estimates,"
"anticipates," "continues," "contemplates," "expects," "may," "will,"
"could," "should" or "would" or the negatives thereof. Those statements are
based on the intent, belief or expectation of the Company as of the date of
this Quarterly Report. Any such forward-looking statements are not
guarantees of future performance and may involve risks and uncertainties
that are outside the control of the Company. Results may vary materially
from the forward-looking statements contained herein as a result of changes
in United States or international economic conditions, governmental
regulations and other factors. The Company expressly disclaims any
obligation or understanding to release publicly any updates or revisions to
any forward-looking statement contained herein to reflect any change in the
Company's expectations with regard thereto or any change in events,
conditions or circumstances on which any such statement is based. The
following discussion of the Company's results of operations and financial
condition should be read in conjunction with the interim unaudited condensed
consolidated financial statements of the Company and the notes thereto,
included herein. Unless otherwise noted, references to 1999 and 2000 are to
the periods ended March 31, 1999 and 2000, respectively.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THE THREE MONTHS ENDED MARCH 31,
1999
Net revenues increased by 17.9% to $83.2 million in 2000 from $70.6 million
in the third quarter of 1999 due primarily to a 15.7% increase in student
enrollment, accompanied by a tuition increase of approximately 4%. Total student
enrollment at the Company's schools increased from 20,711 in 1999 to 23,956 in
2000, including enrollment growth of approximately 10.8% at the schools that
have been operated by the Company for 24 months or more. The Company acquired
both the American Business and Fashion Institute (since renamed The Art
Institute of Charlotte) and Massachusetts Communications College in August 1999.
Educational services expense increased by $8.2 million, or 18.2%, to $53.3
million in 2000 from $45.1 million in 1999, due primarily to the incremental
costs to support higher student enrollment. Educational services expense
represented 64.1% and 63.9% of net revenues for 2000 and 1999, respectively.
General and administrative expense was $17.5 million in 2000, up 17.5% from
$14.9 million in 1999. The increase over the comparable quarter in the prior
year reflects higher marketing and student admissions expense, resulting
primarily from increased employee compensation and media advertising costs.
General and administrative expense, as a percent of net revenues, decreased
slightly as compared to the third quarter of fiscal 1999.
Amortization of intangibles increased by $80,000, to $394,000 in 2000,
resulting primarily from the amortization of intangibles associated with the
August 1999 acquisitions, discussed above.
The Company had net interest expense of $87,000 in 2000, as compared to net
interest income of $116,000 in 1999. This change was attributable to an increase
in the average outstanding borrowings, primarily related to capital
expenditures, acquisitions, and the repurchase of shares of Common Stock.
The Company's effective tax rate was 40.1% in 2000 and 41.1% in 1999. The
effective rates differed from the combined federal and state statutory rates due
to expenses that are nondeductible for tax purposes.
Net income increased by $1.0 million to $7.1 million in 2000 from $6.1
million in 1999, due to the factors described above.
7
<PAGE> 8
NINE MONTHS ENDED MARCH 31, 2000 COMPARED TO THE NINE MONTHS ENDED MARCH 31,
1999
Net revenues increased by 18.1% to $231.1 million for the first nine months
of fiscal 2000 from $195.6 million for the comparable period in fiscal 1999.
Average student enrollment at the Company's schools increased from 19,300 in
1999 to 22,222 in 2000, or 15.1%. The enrollment growth and an approximate 4%
tuition increase resulted in greater net revenues.
Educational services expense increased by $22.9 million, or 18.3%, to $147.8
million in 2000 from $124.9 million in 1999, due primarily to the incremental
costs to support higher student enrollments. As a percentage of net revenues,
educational services expense increased from 63.8% to 64.0%, for the respective
periods.
General and administrative expense was $49.0 million in 2000, up 15.9% from
$42.2 million in 1999. The increase over the comparable period in the prior year
reflects higher marketing and student admissions expense, resulting primarily
from increased employee compensation and media advertising costs. General and
administrative expense represented 21.6% and 21.2% of net revenues in the first
nine months of fiscal 1999, and fiscal 2000, respectively.
Amortization of intangibles increased by 23.8% to $1.1 million in 2000 from
$901,000 in 1999, resulting primarily from the amortization of intangibles
associated with the August 1999 acquisitions discussed above.
The Company had net interest expense of $529,000 in 2000 as compared to net
interest income of $46,000 in 1999. This change was attributable to an increase
in the average outstanding borrowings, primarily related to capital
expenditures, acquisitions, and the repurchase of shares of Common Stock.
The Company's effective tax rate was 40.2% in 2000 and 41.1% in 1999. The
effective rates differed from the combined federal and state statutory rates due
to expenses that are nondeductible for tax purposes.
Net income increased by $3.3 million or 20.2% to $19.6 million in 2000 from
$16.3 million in 1999, due to the factors described above.
SEASONALITY AND OTHER FACTORS AFFECTING QUARTERLY RESULTS
The Company's quarterly revenues and income fluctuate primarily as a result
of the pattern of student enrollments. The Company experiences a seasonal
increase in new enrollments in the fall (fiscal year second quarter), which is
traditionally when the largest number of new high school graduates begin
postsecondary education. Some students choose not to attend classes during
summer months, although the Company's schools encourage year-round attendance.
As a result, total student enrollments at the Company's schools are highest in
the fall quarter and lowest in the summer months (fiscal year first quarter).
The Company's costs and expenses, however, do not fluctuate as significantly as
revenues on a quarterly basis. Historically, the Company's profitability has
been lowest in its fiscal first quarter due to lower revenues combined with
expenses incurred in preparation for the peak enrollments in the fall quarter.
The Company anticipates that the seasonal pattern in revenues and earnings will
continue in the future.
LIQUIDITY AND CAPITAL RESOURCES
The Company generated positive cash flow from operating activities of $45.3
million for the nine months ended March 31, 2000, an increase of $5.5 million
over the comparable period for 1999. The year-to-year improvement results
primarily from the increases in net income and non-cash charges.
The Company had a $32.9 million working capital deficit as of March 31, 2000
as compared to $10.5 million of working capital as of June 30, 1999. The
decrease in working capital was due primarily to cash used for capital
expenditures of $36.7 million and for $23.6 million in debt repayments.
During the quarter, the Company entered into a Credit Agreement (the "Credit
Agreement") which provides for borrowings up to $100.0 million. Borrowings under
this facility bear interest at one of three rates set forth in the Credit
Agreement, at the election of the Company. Certain outstanding letters of credit
reduce this facility. As of March 31, 2000, the Company had approximately $ 85.1
million of borrowing capacity available under the Credit Agreement. The Credit
Agreement contains customary covenants that, among other matters, require the
Company to meet specified interest and leverage ratio requirements, restrict the
repurchase of Common Stock and the incurrence of additional indebtedness. As of
March 31, 2000, the Company was in compliance with all covenants under the
Credit Agreement.
8
<PAGE> 9
Borrowings under the Credit Agreement are used by the Company primarily to
fund working capital needs, resulting from the seasonal pattern of cash receipts
throughout the year. The level of accounts receivable reaches a peak immediately
after the billing of tuition and fees at the beginning of each academic quarter.
Collection of these receivables is heaviest at the start of each academic
quarter.
The Company believes that cash flow from operations, supplemented from time
to time by borrowings under the Credit Agreement, will provide adequate funds
for ongoing operations, planned expansion to new locations, planned capital
expenditures and debt service during the term of the Credit Agreement.
The Company anticipates its capital spending for 2000 will be approximately
equivalent to the 1999 level of expenditures. The 2000 additions will be
primarily related to the further investment in schools acquired or started
during the current and previous four years, continued improvements to the
facilities under construction, additional or replacement school and housing
facilities and classroom technology.
The majority of the Company's facilities are leased. Future commitments on
existing leases will be paid from cash provided from operating activities.
IMPACT OF NEW ACCOUNTING STANDARDS
In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities," was issued. The statement establishes accounting and
reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its fair value.
Additionally, SFAS No. 133 requires that changes in a derivative's fair value be
recognized currently in earnings unless specific hedge accounting criteria are
met. This statement has been amended by SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the effective date of SFAS No.
133." SFAS No. 137 will be effective for all fiscal quarters of fiscal years
beginning after June 15, 2000. The Company is currently evaluating the effects
of SFAS No. 133 and does not believe that the adoption of this standard will
have a material effect on the financial statements or results of operations of
the Company.
9
<PAGE> 10
PART II
ITEM 1 - LEGAL PROCEEDINGS
Not Applicable
ITEM 2 - CHANGES IN SECURITIES
Not Applicable
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
ITEM 5 - OTHER INFORMATION
Not Applicable
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
(4.01) Credit Agreement, dated February 18, 2000, among the
Company, certain banks, National City Bank of Pennsylvania
and First Union National Bank
(4.02) First Amendment to Credit Agreement, dated March 31, 2000,
among the Company, certain banks, National City Bank of
Pennsylvania and First Union National Bank
(15) Report of Independent Public Accountants
(27) Financial Data Schedule submitted to the Securities and
Exchange Commission in electronic format.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed for the three months ended
March 31, 2000.
10
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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 thereunto duly authorized.
EDUCATION MANAGEMENT CORPORATION
(Registrant)
Date: May 15, 2000
/s/ Robert B. Knutson
-----------------------------------------
Robert B. Knutson
Chairman and Chief Executive Officer
/s/ Robert T. McDowell
-----------------------------------------
Robert T. McDowell
Executive Vice President and Chief Financial Officer
11
<PAGE> 1
EXHIBIT 4.01
CREDIT AGREEMENT
by and among
EDUCATION MANAGEMENT CORPORATION
as the Borrower
THE BANKS PARTY HERETO
as the Banks
and
NATIONAL CITY BANK OF PENNSYLVANIA,
as the Agent
and
FIRST UNION NATIONAL BANK,
as Co-Agent
February 18, 2000
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
INDEX OF EXHIBITS..................................................................................................
INDEX OF SCHEDULES.................................................................................................
ARTICLE I. DEFINITIONS............................................................................................1
1.1 Defined Terms...................................................................................1
1.2 GAAP Definitions...............................................................................16
1.3 Other Definitional Conventions.................................................................16
1.4 Headings.......................................................................................16
ARTICLE II. THE CREDIT...........................................................................................16
2.1 Revolving Credit Loans.........................................................................16
2.2 Swing Loans....................................................................................20
2.3 Supplemental Swing Loans.......................................................................22
2.4 Letters of Credit..............................................................................24
2.5 Certain Provisions Relating to Interest Rates..................................................30
2.6 Yield Protection and Reimbursement.............................................................35
2.7 Capital Adequacy...............................................................................37
2.8 Closing Fee....................................................................................38
2.9 Lending Offices................................................................................38
2.10 Time, Place and Manner of Payments.............................................................38
2.11 Payment From Accounts Maintained by the Borrower...............................................38
2.12 Swing Loan Settlement Date Procedures..........................................................38
2.13 Substitution of a Bank.........................................................................39
ARTICLE III. SET-OFF.............................................................................................39
3.1 Set-Off........................................................................................39
ARTICLE IV. REPRESENTATIONS AND WARRANTIES.......................................................................39
4.1 Existence......................................................................................40
4.2 Authority......................................................................................40
4.3 Capitalization of Subsidiaries.................................................................40
4.4 Validity and Enforceability....................................................................40
4.5 No Conflict....................................................................................41
4.6 Consents.......................................................................................41
4.7 Litigation.....................................................................................41
4.8 Compliance With Applicable Laws, etc...........................................................41
4.9 Financial Statements...........................................................................42
</TABLE>
-i-
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<TABLE>
<CAPTION>
PAGE
<S> <C>
4.10 Environmental Matters..........................................................................42
4.11 Deferred Compensation Plans....................................................................43
4.12 Title to Properties............................................................................44
4.13 Intellectual Property..........................................................................44
4.14 Tax Returns and Payments.......................................................................44
4.15 Material Adverse Change........................................................................45
4.16 Solvency.......................................................................................45
4.17 Investment Company Act.........................................................................45
4.18 Public Utility Holding Company Act.............................................................45
4.19 Liens and Security Interests...................................................................45
4.20 Margin Stock...................................................................................45
4.21 Year 2000......................................................................................46
4.22 Updates to Schedules...........................................................................46
4.23 Disclosure.....................................................................................46
4.24 Use of Proceeds................................................................................46
4.25 Insurance......................................................................................46
4.26 Material Contracts; Burdensome Restrictions....................................................47
4.27 Employment Matters.............................................................................47
4.28 Senior Debt Status.............................................................................47
ARTICLE V. AFFIRMATIVE COVENANTS.................................................................................47
5.1 Use of Proceeds................................................................................47
5.2 Furnishing Information.........................................................................48
5.3 Preservation of Existence......................................................................51
5.4 Payment of Taxes and Fees......................................................................52
5.5 Notice of Change of Business...................................................................52
5.6 Hazard and Casualty Insurance..................................................................52
5.7 Good Repair....................................................................................52
5.8 Corporate Records..............................................................................52
5.9 Inspection of Records and Properties...........................................................53
5.10 Continued Ownership of Active Subsidiaries.....................................................53
5.11 Compliance With Laws...........................................................................53
5.12 Further Assurances.............................................................................53
ARTICLE VI. NEGATIVE COVENANTS...................................................................................54
6.1 Maintenance of Ratio of Total Funded Debt to EBITDA............................................54
6.2 Limitation on Total Funded Debt to Total Capitalization........................................54
6.3 Interest Coverage Ratio........................................................................54
6.4 Disposal of Assets.............................................................................54
6.5 Permitted Indebtedness.........................................................................55
6.6 Prohibition on Encumbrances....................................................................56
6.7 Advance of Funds and Investments...............................................................58
6.8 Dividend and Redemption Restrictions...........................................................58
6.9 Merger.........................................................................................59
6.10 Regulations G, X, T and U Compliance...........................................................59
6.11 Cohort Default Rates...........................................................................59
</TABLE>
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<PAGE> 4
<TABLE>
<CAPTION>
PAGE
<S> <C>
6.12 Permitted Acquisitions.........................................................................59
6.13 Change Fiscal Year.............................................................................59
6.14 Change of Business.............................................................................59
ARTICLE VII. CONDITIONS PRECEDENT................................................................................60
7.1 All Revolving Credit Loan, Swing Loan and Supplemental Swing Loan
Disbursements and All Letters of Credit........................................................60
7.2 Conditions Precedent to the Initial Revolving Credit Disbursement and the
Issuance of the Initial Letter of Credit.......................................................60
ARTICLE VIII. EVENTS OF DEFAULT..................................................................................62
8.1 Payment Default................................................................................62
8.2 Cross Defaults.................................................................................62
8.3 Insolvency.....................................................................................63
8.4 Dissolution....................................................................................63
8.5 Adverse Judgments..............................................................................63
8.6 Failure to Comply With Certain Covenants.......................................................63
8.7 Failure to Comply With Other Covenants.........................................................64
8.8 Material Adverse Change........................................................................64
8.9 Misrepresentation..............................................................................64
8.10 Consequences of an Event of Default............................................................64
ARTICLE IX. AGREEMENT AMONG BANKS................................................................................65
9.1 Appointment and Grant of Authority.............................................................65
9.2 Non-Reliance on Agent..........................................................................65
9.3 Responsibility of Agent and Other Matters......................................................66
9.4 Action on Instructions.........................................................................67
9.5 Action in Event of Default.....................................................................67
9.6 Indemnification................................................................................67
9.7 Agent's Rights as a Bank.......................................................................68
9.8 Advances by Agent..............................................................................68
9.9 Payment to Banks...............................................................................68
9.10 Pro Rata Sharing...............................................................................69
9.11 Successor Agent................................................................................69
9.12 Additional Banks...............................................................................69
ARTICLE X. MISCELLANEOUS.........................................................................................70
10.1 Amendments and Waivers.........................................................................70
10.2 Notices........................................................................................71
10.3 Holiday Payments...............................................................................72
10.4 Tax Withholding................................................................................72
10.5 Survival.......................................................................................73
10.6 Costs..........................................................................................73
10.7 Certain Taxes..................................................................................74
10.8 Successors, Assigns and Participations.........................................................74
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<CAPTION>
PAGE
<S> <C>
10.9 Confidentiality................................................................................76
10.10 Indemnification................................................................................77
10.11 Integration....................................................................................78
10.12 Severability...................................................................................78
10.13 APPLICABLE LAW.................................................................................78
10.14 CONSENT TO JURISDICTION........................................................................78
10.15 Counterparts...................................................................................79
</TABLE>
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<PAGE> 6
INDEX OF EXHIBITS
EXHIBIT DESIGNATION EXHIBIT NAME
Exhibit "A" Form of Revolving Credit Note
Exhibit "B" Form of Swing Loan Note
Exhibit "C" Form of Request for Revolving Credit Loan
Exhibit "D" Form of Request for Swing Loan
Exhibit "E" Form of Supplement Swing Loan Note
Exhibit "F" Form of Compliance Certificate
Exhibit "G" Form of Opinion of Counsel to Borrower
Exhibit "H" Form of Assignment and Assumption Agreement
Exhibit "J" Form of Bank Joinder
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<PAGE> 7
INDEX OF SCHEDULES
4.1 Active Subsidiaries
4.3 Ownership of Stock; Rights or Options
4.7 Litigation
4.10 Environmental Matters
4.11 Deferred Compensation Plans
4.13 Intellectual Property
6.5 Permitted Existing Indebtedness of the Borrower
6.6 Permitted Existing Encumbrances
-vi-
<PAGE> 8
CREDIT AGREEMENT
This Credit Agreement is dated as of February 18, 2000 by and
among EDUCATION MANAGEMENT CORPORATION, as the borrower (the "Borrower"), the
FINANCIAL INSTITUTIONS listed on the signature pages hereto and each other
financial institution which, from time to time, becomes a party hereto in
accordance with Section 10.8 (individually, a "Bank" and collectively the
"Banks"), NATIONAL CITY BANK OF PENNSYLVANIA, as the Issuing Bank (the "Issuing
Bank") and NATIONAL CITY BANK OF PENNSYLVANIA, as the Agent for the Banks and
the Issuing Bank (the "Agent") and FIRST UNION NATIONAL BANK as Co-Agent.
WITNESSETH:
WHEREAS, the Borrower has requested the Banks to provide a
revolving credit facility to the Borrower in an aggregate principal amount not
to exceed $80,000,000 (which amount may be increased to $100,000,000 in
accordance with the provisions hereof) which contains sub-facilities for (i) the
issuance of standby letters of credit in an aggregate amount not to exceed
$15,000,000, (ii) a swing line of credit of up to $5,000,000 in the aggregate at
any one time outstanding and (ii) a supplemental swing line of credit of up to
$25,000,000 in the aggregate at any one time outstanding; and
WHEREAS, the Banks are willing to provide such credit upon the
terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of mutual promises contained
herein and other valuable consideration and intending to be legally bound
hereby, the parties hereto agree as follows:
ARTICLE I. DEFINITIONS
1.1 Defined Terms.
As used herein, the following terms shall have the meaning specified
unless the context otherwise requires:
"Accredited Subsidiary" means each Subsidiary which is accredited or
approved, as applicable, by the Accrediting Commission of Career Schools and
Colleges of Technology, the National Association of Trade and Technical Schools,
the American Bar Association, the Southern Association of Colleges and Schools
or any other similar Person which accredits, certifies, or otherwise approves
proprietary post-secondary vocational or career training schools.
"Active Subsidiary" means individually, and Active Subsidiaries shall
mean collectively, (i) each Subsidiary of the Borrower shown on Schedule 4.1
hereof as being an Active Subsidiary as of the Closing Date and (ii) each other
Subsidiary of the Borrower which at any time in the future (A) becomes an
Accredited Subsidiary or (B) has revenues (on a consolidated basis) of $300,000
or more in any Fiscal Year.
"Additional Bank" shall have the meaning given to such term in Section
9.12.
<PAGE> 9
"Affiliate" means, as to any Person, any second Person which, directly
or indirectly through one or more intermediaries, controls, is controlled by, or
is under common control with, such Person. For purposes of this definition, the
terms "control", "controlled by", and "under common control with" shall mean the
possession of the power to direct or cause the direction of the management and
policies of any Person, whether through the ownership of shares, by contract or
otherwise.
"Agent" means National City Bank of Pennsylvania, or any successor
agent, in its capacity as the administrative agent for the Banks and the Issuing
Bank under this Credit Agreement and the other Loan Documents.
"Agent's Fee" means fees payable to the Agent, for its own account, for
arranging and administering the Credit Facility as described in that certain
letter dated November 16, 1999 between the Borrower and the Agent (i.e. all fees
payable under such letter, except for the Closing Fee).
"Applicable Eurodollar Rate Margin" shall have the meaning ascribed to
it in Subsection 2.5(b) hereof.
"Article" means an article of this Credit Agreement unless another
document is specifically referenced.
"Assignment and Assumption Agreement" means an Assignment and
Assumption Agreement substantially in the form of Exhibit "H" hereto by and
among a Purchasing Bank, a Transferor Bank and the Agent, on behalf of itself
and the remaining Banks, and consented to by the Borrower.
"Authorized Officer" means Chairman, Chief Executive Officer,
President, Chief Financial Officer, Treasurer, Controller or Assistant Treasurer
of any Person. The Agent, the Banks and the Issuing Bank shall be entitled to
rely on the incumbency certificates delivered pursuant to Section 7.2 for the
initial designation of each Authorized Officer of the Borrower. Additions or
deletions to the list of Authorized Officers may be made by the Borrower, at any
time, by delivering to the Agent, for redelivery to the Banks and the Issuing
Bank, a revised fully-executed incumbency certificate for the Borrower.
"Availability Period" shall mean the period from and including the
Closing Date to but excluding the Repayment Date.
"Bank" means any Revolving Credit Banks, National City Bank or, unless
the context clearly requires otherwise, the Issuing Bank, together with their
respective successors and assigns.
"Bank Indebtedness" means the liability of the Borrower, as of any date
of determination, without duplication, to pay the Facility Fee, the Agent's Fee,
the Letter of Credit Fees, the Issuance Fee, the outstanding principal amount of
the Revolving Credit Loans, the Swing Loans, the Supplemental Swing Loans, and
any draws upon any Letter of Credit, interest thereon, any other amounts due
pursuant to Article II hereof and all reasonable out-of-pocket expenses incurred
by the Banks or the Agent in connection with the preparation, negotiation,
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<PAGE> 10
administration, enforcement of this Credit Agreement, the Revolving Credit
Notes, the Swing Note, the Supplemental Swing Note, the other Loan Documents,
the transactions contemplated thereby, or the protection of the Agents', the
Banks' or the Issuing Bank's rights under any of the foregoing described
instruments (including but not limited to the reasonable fees and expenses of
counsel) to the extent such expenses are the responsibility of the Borrower
pursuant to this Credit Agreement.
"Bank Joinder" shall mean a joinder after the date hereof by an
Additional Bank under this Agreement and the other Loan Documents in the form of
Exhibit "J" hereto.
"Base Rate" means, as of any date of determination, a rate of interest
per annum equal to the higher of (i) the Agent's Prime Rate, as of such date of
determination, or (ii) the sum of (A) the Federal Funds Rate plus (B) one-half
of one percent (0.5%) per annum, as of such date of determination. Such interest
rate shall change automatically from time to time, effective as of the effective
date of each change in the Prime Rate or the Federal Funds Rate.
"Base Rate Loan" means any Loan which bears, or is to bear, interest
under the Base Rate Option.
"Base Rate Option" means the interest rate option described in item (i)
of Subsection 2.5(b) hereof.
"Benefit Arrangement" means an "employee benefit plan" within the
meaning of Section 3(3) of ERISA, which is not a Plan or a Multiemployer Plan
and which is mentioned, or otherwise contributed to, by any Person for the
benefit of employees of such Person or an ERISA Affiliate thereof.
"Borrower" means Education Management Corporation, a corporation
organized and existing under the laws of the Commonwealth of Pennsylvania and
having its principal office at 300 Sixth Avenue, Suite 800, Pittsburgh,
Pennsylvania 15222.
"Business Day" means (i) with respect to any borrowing or payment on,
renewal of or conversion to a Eurodollar Rate Loan, any day other than (a) a
Saturday or Sunday, (b) a day on which commercial banks in Pittsburgh,
Pennsylvania are required or authorized by law to close and (c) a day on which
dealings are not carried on in the London interbank market and (ii) for all
other purposes, any day other than (a) a Saturday or Sunday or (b) a day on
which commercial banks in Pittsburgh, Pennsylvania are required or authorized by
law to close.
"Capitalized Lease" means, as to any Person, any lease of tangible or
intangible property (whether real, personal or mixed) by such Person as the
lessee under which the obligations of the lessee would be included in
determining total liabilities as shown on the liability side of a balance sheet
of such Person in accordance with GAAP.
"Capitalized Lease Obligations" means, as to any Person and as of any
date of determination, the principal amount of liability of such Person
reflecting the aggregate discounted value of all future payments due under all
Capitalized Leases calculated in accordance with GAAP including, but not limited
to Statement of Financial Accounting Standards No. 13.
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<PAGE> 11
"Closing" means the execution of this Credit Agreement and the issuance
of the Revolving Credit Notes, Swing Note and the Supplemental Swing Notes, all
to be held at the offices of Buchanan Ingersoll Professional Corporation in
Pittsburgh, Pennsylvania.
"Closing Date" means February 18, 2000 or such later date as is
mutually agreeable to the parties hereto.
"Closing Fee" means the fees described in Section 2.8 hereof.
"Code" means the Internal Revenue Code of 1986, as the same may be
amended from time to time and the regulations and rulings promulgated
thereunder, together with any successor legislation thereto.
"Cohort Default Rate" shall have the meaning ascribed thereto by the
DOE in Title 34, Chapter VI, Part 668, Subpart B, Section 17 of the Code of
Federal Regulations (34 C.F.R. Section 668.17), as the same may be amended from
time to time.
"Commitment Amount" means, with respect to each Bank, the dollar amount
set forth for such Bank under the caption "Revolving Credit Commitment" on the
signature page to this Credit Agreement signed by such Bank or in any Assignment
and Assumption Agreement executed by such Bank, whether in the capacity as a
Purchasing Bank or a Transferor Bank.
"Commitment Percentage" means, with respect to each Bank, the
percentage amount set forth for such Bank under the caption "Percentage Amount"
on the signature page to this Credit Agreement signed by such Bank or in any
Assignment and Assumption Agreement executed by such Revolving Credit Bank,
whether in the capacity as a Purchasing Bank or a Transferor Bank, as such
percentage amount may be amended from time to time upon the joinder of an
Additional Bank.
"Compliance Certificate" means a compliance certificate substantially
in the form of Exhibit "F" hereto which shall be delivered by the Borrower to
the Agent and to each Bank in accordance with Subsection 5.2(d) hereof.
"Consolidated" means the consolidation of the accounts of any two or
more Persons in accordance with GAAP.
"Consolidated Net Income" means, for any period, on a Consolidated
basis, the net income of the Borrower and its Subsidiaries determined in
accordance with GAAP consistently applied.
"Contamination" means the presence in soil, groundwater or surface
water of Hazardous Substances in sufficient quantity or concentration to require
material investigation, corrective action or remediation under any Environmental
Law.
"Controlled Group" means, as to any Person, (i) a controlled group of
corporations as defined in Section 1563 of the Code or (ii) a group of trades or
businesses under common control as defined in Section 414(c) of the Code of
which such Person is a part or may become a part.
4
<PAGE> 12
"Credit Agreement" means this Credit Agreement together with the
exhibits and schedules hereto and hereof and all extensions, renewals,
amendments, modifications, restatements and replacements hereof and hereto.
"Credit Facility" means the credit facility consisting of the Revolving
Credit Commitment in the aggregate amount of $80,000,000 (as such facility may
be increased to $100,000,000 in accordance with the provisions hereof) with a
standby letter of credit sub-facility in the aggregate amount of $15,000,000 and
a Swing Loan sub-facility in an amount of $5,000,000 and a Supplemental Swing
Loan sub-facility in an amount of $25,000,000.
"Default" means an event, condition, act or omission to act which
constitutes a default in the performance or observance of any covenant,
agreement or provision of any Loan Document, which event, condition, act or
omission to act would become or constitute an Event of Default with the passage
of time, the giving of notice or both, and without subsequent cure within any
applicable period of time.
"Disbursement" means the one or more advances of proceeds to the
Borrower made pursuant to Sections 2.1, 2.2 and 2.3 hereof.
"Document" means any document, as that term is defined in the UCC, of
any Person, whether now owned or hereafter acquired or created.
"DOE" means to United States Department of Education or as the context
may require, the United States Secretary of Education, or any successor thereto.
"DOL" means the United States Department of Labor or as the context may
require, the United States Secretary of Labor, or any successor thereto.
"Dollars" or "$" means the legal tender of the United States of
America.
"EBITDA" means, for any period, on a Consolidated basis, (i) the sum of
(A) Consolidated Net Income, (B) depreciation and amortization of the Borrower
and its Subsidiaries, (C) net interest expense of the Borrower and its
Subsidiaries, (D) income tax expense (current and deferred) of the Borrower and
its Subsidiaries, and (E) any extraordinary losses included in Consolidated Net
Income minus (ii) any extraordinary gains included in Consolidated Net Income.
"Encumbrance" means any encumbrance, mortgage, lien (statutory or
other), charge, pledge, hypothecation, security interest, assignment,
preference, priority or other security agreement or preferential arrangement of
any kind or nature whatsoever (including, without limitation, any conditional
sale or other title retention agreement and any Capitalized Lease having
substantially the same economic effect as any of the foregoing) in, upon or
against any asset of any Person, whether or not voluntarily given.
"Environmental Claim" means any claim, suit, notice, order, demand or
other communication made by any Person, including the Borrower, with respect to
the Borrower, any of its Subsidiaries or any of their respective properties,
whether owned or leased, that: (i) asserts a violation of any Environmental Law;
(ii) asserts a liability under any Environmental Law;
5
<PAGE> 13
(iii) orders an investigation, corrective action, remediation or other response
under any Environmental Law; (iv) alleges personal injury or property damage
resulting from Hazardous Substances; or (v) alleges that there is or may be
Contamination.
"Environmental Law" means any and all statutes, laws, regulations,
ordinances, rules, judgments, orders, decrees, permits, grants, franchises,
licenses, agreements or other governmental restrictions issued, promulgated or
granted by any Governmental Person relating to the environment or the release of
any materials into the environment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
the same may be amended, from time to time, and the rulings and regulations
promulgated thereunder, together with any successor legislation thereto.
"ERISA Affiliate" means, as of any date of determination and as to any
Person, any member of a Controlled Group of which such Person is a member, and
any trade or business (whether or not incorporated) under common control with
such Person, and all other entities which, together with such Person, are or
were treated as a single employer under Section 414 of the Code (which shall
include any Subsidiary of such Person).
"Eurodollar Rate" means, with respect to each Eurodollar Rate Loan, the
rate of interest per annum with respect to any Interest Period obtained by the
Agent by dividing (the resulting quotient rounded upward to the nearest 1/100th
of 1% per annum) (i) the rate of interest determined by the Agent in accordance
with its usual procedures (which determination shall be conclusive, absent
manifest error) to be the average of the London interbank offered rates listed
on the "LIBO" page of the Reuters Monitor Money Rate Service (or an appropriate
successor thereto or, if Reuters or its successor ceases to provide such quotes,
a comparable replacement as determined by the Agent) at 11:00 A.M. (London,
England time) one (1) Business Day prior to the first day of each Interest
Period for an amount comparable to the Eurodollar Rate Loan for such Interest
Period and having a borrowing date and a maturity comparable to such Interest
Period by (ii) a number (expressed as a decimal) equal to (A) 1.00 minus (B) the
Eurodollar Reserve Percentage, if any. The Eurodollar Rate described above may
also be expressed by the following formula:
<TABLE>
<S> <C>
Average of London interbank offered rates listed on
Eurodollar Rate = "LIBO" page of Reuters Monitor Money Rate Service
---------------------------------------------------
[1.00 - Eurodollar Reserve Percentage]
</TABLE>
"Eurodollar Rate Loans" means any of the Loans bearing interest at a
rate determined on the basis of the Eurodollar Rate.
"Eurodollar Rate Option" means the interest rate option described in
item (ii) of Subsection 2.5(b) hereof.
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<PAGE> 14
"Eurodollar Reserve Percentage" means, for any Interest Period, that
percentage (expressed as a decimal), as calculated by the Agent, which is in
effect on the first day of such Interest Period, as prescribed by the Board of
Governors of the Federal Reserve System (or any successor) for determining the
maximum reserve requirements (including without limitation supplemental,
marginal or emergency reserve requirements) with respect to eurocurrency funding
(currently referred to as "Eurocurrency Liabilities") of a member bank in such
system in an amount comparable to the Eurodollar Rate Loan for such Interest
Period and for a duration comparable to such Interest Period.
"Event of Default" means any event described in Article VIII of this
Credit Agreement.
"Expiration Date" shall have the same meaning as "Repayment Date."
"Facility Fee" means the fee described in Subsection 2.1(g) of this
Credit Agreement.
"FDIC" means the Federal Deposit Insurance Corporation or any Person
succeeding to its functions.
"Federal Funds Rate" means, for any day, a fluctuating interest rate
per annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers, as published for such day (or, if such day is not a Business Day,
for the preceding Business Day) by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day which is a Business Day, the average
of the quotations at approximately 10:00 A.M. (Pittsburgh, Pennsylvania time) on
such day on such transactions received by the Agent from three (3) Federal funds
brokers of recognized standing selected by the Agent in its sole discretion.
"Fiscal Quarter" shall mean each three-month fiscal period of the
Borrower beginning respectively on each successive January 1, April 1, July 1
and October 1 during the term hereof and ending on the immediately succeeding
March 31, June 30, September 30 and December 31.
"Fiscal Year" shall mean each annual fiscal period of the Borrower
beginning July 1 and ending on the immediately succeeding June 30.
"GAAP" shall mean generally accepted United States accounting
principles which shall include, but not be limited to, the official
interpretations thereof as defined by the Financial Accounting Standards Board,
its predecessors and its successors.
"Government Acts" shall have the meaning ascribed to it in Subsection
2.4(g) hereof.
"Governmental Person" means the government of the United States or the
government of any state or locality therein, any political subdivision or any
governmental, quasi-governmental, judicial, public or statutory instrumentality,
authority, body or entity, or other regulatory bureau, authority, body or entity
of the United States or any state or locality therein, including the FDIC, the
Comptroller of the Currency or the Board of Governors of the Federal Reserve
System, any central bank or any comparable authority.
"Governmental Rule" means any law, statute, rule, regulation,
ordinance, order, judgment, guideline or decision of any Governmental Person
(including, without limitation, Governmental Acts).
7
<PAGE> 15
"Guarantee" means, as to any Person, any obligation, direct or
indirect, by which such Person undertakes to guaranty, assume or remain liable
for the payment or performance of another Person's obligations, including but
not limited to (i) endorsements of negotiable instruments, (ii) discounts with
recourse, (iii) agreements to pay or perform upon a second Person's failure to
pay or perform, (iv) remaining liable on obligations assumed by a second Person,
(v) agreements to maintain the capital, working capital, solvency or general
financial condition of a second Person and (vi) agreements for the purchase or
other acquisition of products, materials, supplies or services, if in any case
payment therefor is to be made regardless of the non-delivery of such products,
materials or supplies or the non-furnishing of such services.
"Hazardous Substances" means any (i) hazardous, toxic or polluting
substances or wastes as defined by any Environmental Law; (ii) petroleum
products; or (iii) other substances determined to be hazardous in any law
currently in effect or hereafter enacted.
"Indebtedness for Borrowed Money" as applied to any Person means (i)
the direct liabilities of such Person for money borrowed or credit received
(other than trade accounts payable incurred in the ordinary course of business),
whether evidenced by a bond, note, debenture, Capitalized Lease Obligation,
deferred purchase price arrangement, title retention device, reimbursement
agreement or otherwise, including but not limited to any liabilities calculated
in accordance with GAAP with respect to any currency swap agreement, interest
rate swap, cap, collar or floor agreement or other interest rate management
device, and (ii) the contingent liabilities of such Person under any Guarantee
(including the amount of any guarantee obligations arising under any student
loan programs) of the liabilities described in clause (i) above.
"Indemnified Party" shall have the meaning ascribed to it in Section
10.10 hereof.
"Interest Coverage Ratio" shall mean the ratio of EBITDA to
consolidated net interest expense, each as determined in accordance with GAAP.
"Interest Period" means any individual Interest Period of one (1), two
(2), three (3), four (4), five (5), six (6) or nine (9) months (if available)
selected by the Borrower pursuant to the terms and conditions of Subsection
2.5(c) hereof, commencing on the borrowing date, conversion date or renewal date
of a Eurodollar Rate Loan to which such period shall apply.
"IRS" means the United States Internal Revenue Service or, as the
context may require, the United States Department of Treasury, or any successor
thereto.
"Issuance Fee" means the fee described in item (ii) of Subsection
2.4(e) hereof.
"Issuing Bank" means National City Bank, in its capacity as the issuer
of the Letters of Credit hereunder for the account of the Borrower.
"Lending Office" means, as to any Bank, its office located at the
address set forth in its administrative questionnaire as its "Lending Office" or
such other office as such Bank may thereafter designate as its "Lending Office"
by notice to the Borrower and the Agent.
8
<PAGE> 16
"Letter of Credit" means any stand-by or commercial letter of credit
issued by the Issuing Bank pursuant to Section 2.4 hereof and the other terms
and provisions hereof, for the account of the Borrower or for the account of any
of the Borrower's Subsidiaries provided that the Borrower is a co-obligor
thereof, as any such letter of credit may from time to time be amended,
modified, renewed, extended, supplemented or replaced.
"Letter of Credit Exposure" means, at any date of determination, with
respect to each Revolving Credit Bank, such Revolving Credit Bank's pro rata
share of the Stated Amount of any Letter of Credit then in effect.
"Letter of Credit Fees" means the fees described in item (i) of
Subsection 2.4(e) hereof.
"Loan" means any and, "Loans" mean collectively, all Revolving Credit
Loans, the Swing Loans and Supplemental Swing Loans.
"Loan Documents" means this Credit Agreement, the Notes, and each
Compliance Certificate, each Request for Revolving Credit Loan, each Swing Loan
Request, each Supplemental Swing Loan Request and any application or agreement
for Letter of Credit.
"Margin Stock" shall mean "margin stock" as defined in Regulation U.
"Material Adverse Change" means any circumstance or event which (i)
has, or is substantially likely to have, a material adverse effect upon the
validity or enforceability of this Credit Agreement or any of the other Loan
Documents, (ii) is, or is substantially likely to be, adverse to the business,
properties, assets, financial condition or results of operations of the Borrower
and its Subsidiaries, taken as a whole, and which impairs materially, or could
reasonably be expected to impair materially, the ability of the Borrower to duly
and punctually pay or perform their respective obligations under the Loan
Documents, including without limitation, the loss of any Title IV funding(s)
that is substantially likely to result in the foregoing or (iii) impairs
materially, or is substantially likely to impair materially, the ability of the
Agent or the Banks, to the extent permitted, to enforce the Agent's or the
Banks' legal remedies pursuant to this Credit Agreement and the other Loan
Documents.
"Material Adverse Effect" means an effect that results in or causes or
has a reasonable likelihood of resulting in or causing a Material Adverse
Change.
"Money" means all money, as that term is defined in the UCC, of any
Person, whether now owned or hereafter acquired.
"Money Market Rate" shall be an interest rate as from time to time
determined by the Agent as being the sum of the Federal Funds Rate plus 50 basis
points.
"Money Market Rate Loan" means any Loan which bears, or is to bear,
interest under the Money Market Rate Option.
"Money Market Rate Option" means the interest rate option described in
item (iii) of Subsection 2.5(b) hereof.
9
<PAGE> 17
"Multiemployer Plan" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA to which any Person is making or accruing an obligation to
make contributions or has within any of the preceding five (5) plan years made
or accrued an obligation to make contributions.
"National City Bank" means National City Bank of Pennsylvania, together
with its successors and assigns.
"Net Proceeds" means, with respect to the sale, assignment, lease,
sublease, transfer or other disposition of any of the assets of the Borrower or
its Subsidiaries, in any transaction or series of coordinated transactions, the
net after-tax proceeds of any such transaction after (i) taking into account any
adjustments for basis, gain or other adjustment recognized under the Code and
(ii) deducting therefrom any reasonable closing costs paid by the Borrower or
such Subsidiary in connection therewith.
"Note" means any and, "Notes" shall mean collectively, all of the
Revolving Credit Notes, the Swing Note and the Supplemental Swing Notes.
"Option" means either the Base Rate Option, Money Market Rate Option or
the Eurodollar Rate Option.
"Participant" shall mean any financial institution or other Person
which purchases an individual interest in all or any part of the Revolving
Credit Loans or any particular segment of any Portion thereof.
"Participation" means any sale, made in accordance with the provisions
of Subsection 10.8(d), by any Bank to any Participant of an undivided interest
in all or a part of, such Bank's Revolving Credit Commitment and Revolving
Credit Loans, if any.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions.
"Permitted Acquisitions" means any acquisition by the Borrower or any
of its Subsidiaries of the assets or stock of a second Person which complies
with each of the following conditions: (i) such second Person is engaged in the
education or training business (whether profit or non-profit); (ii) such
acquisition is not hostile in nature (as determined in the reasonable discretion
of the Banks); and (iv) with respect to any acquisition or series of
acquisitions involving assets valued (on a going concern basis) at more than
$2,000,000, the Borrower shall demonstrate, on a pro forma basis and to the
reasonable satisfaction of the Required Banks, that no Default or Event of
Default shall occur as a result of such acquisition(s).
"Permitted Encumbrances" shall mean those Encumbrances allowed pursuant
to Section 6.6(a) hereof.
"Person" means any individual, partnership, corporation, trust, joint
venture or unincorporated organization and any government or any agency,
political subdivision or department thereof.
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<PAGE> 18
"Plan" shall mean any "single employer plan" within the meaning of
Section 4001(a)(15) of ERISA established and maintained by the Borrower or any
ERISA Affiliate.
"Portion" means, at any time, the aggregate principal amount of the
Revolving Credit Loans outstanding hereunder which bears interest at a specific
interest rate for a specific Interest Period pursuant to a request for borrowing
or a notice of interest rate election.
"Prime Rate" means the interest rate per annum publicly announced from
time to time by the Agent as its prime rate, which rate may not be the lowest
interest rate then being charged commercial borrowers by the Agent.
"Prohibited Transaction" shall mean any one or more of the prohibited
transactions defined under Section 406 of ERISA or Section 4975 of the Code and
which is not exempt as a statutory, individual or class exemption under Section
408 of ERISA or Section 4975 of the Code.
"Proprietary Information" means all non-public information about the
Borrower or any of its Subsidiaries which has been furnished by the Borrower or
any of its Subsidiaries, whether furnished before or after the Closing Date, and
regardless of the manner in which it is furnished.
"Purchasing Bank" means a Bank which becomes a party to this Credit
Agreement by executing an Assignment and Assumption Agreement.
"Register" shall have the meaning ascribed to it in Subsection 10.8(c)
hereof.
"Regulation D" means Regulation D promulgated by the Board of Governors
of the Federal Reserve System (12 C.F.R. Part 204 et seq.), from time to time in
effect and as may hereafter be amended and shall include any successor or other
regulation or official interpretation thereof issued by said Board of Governors.
"Regulation G" means Regulation G promulgated by the Board of Governors
of the Federal Reserve System (12 C.F.R. Part 207 et seq.), from time to time in
effect and as may hereafter be amended and shall include any successor or other
regulation or official interpretation thereof issued by said Board of Governors.
"Regulation T" means Regulation T promulgated by the Board of Governors
of the Federal Reserve System (12 C.F.R. Part 220 et seq.), from time to time in
effect and as may hereafter be amended and shall include any successor or other
regulation or official interpretation thereof issued by said Board of Governors.
"Regulation U" means Regulation U promulgated by the Board of Governors
of the Federal Reserve System (12 C.F.R. Part 221 et seq.), from time to time in
effect and as may hereafter be amended and shall include any successor or other
regulation or official interpretation thereof issued by said Board of Governors.
"Regulation X" means Regulation X promulgated by the Board of Governors
of the Federal Reserve System (12 C.F.R. Part 224 et seq.), from time to time in
effect and as may
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<PAGE> 19
hereafter be amended and shall include any successor or other regulation or
official interpretation thereof issued by said Board of Governors.
"Release" means any material spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping or
disposing of Hazardous Substances into the environment.
"Repayment Date" means February 18, 2005.
"Reportable Event" means any one or more events defined in Section
4043(b) of ERISA for which the thirty (30) day notice period has not been waived
by the PBGC.
"Request for Revolving Credit Loan" means any written request for a
revolving credit loan executed by the Borrower and delivered to the Agent
substantially in the form of Exhibit "C" to this Credit Agreement.
"Required Banks" means, as of any date of determination, the holders of
at least fifty-six percent (56%) of the aggregate Revolving Credit Commitments
and, if no Revolving Credit Commitments are then outstanding, the holders of at
least fifty-six percent (56%) of the Bank Indebtedness; provided, however, that,
if any Bank shall have failed to fund its Commitment Percentage of any Loans for
which it was obligated to fund in accordance with the terms and conditions of
this Agreement and any such failure has not been cured (such Bank shall be
referred to in this definition as a "Nonperforming Bank"), then for so long as
any such failure continues, "Required Banks" means Banks that are the holders of
at least fifty-six percent (56%) of the aggregate Revolving Credit Commitments
(excluding the Revolving Credit Commitment of the Nonperforming Bank) and, if no
Revolving Credit Commitments are then outstanding, the holders of at least
fifty-six percent (56%) of the Bank Indebtedness (excluding the Bank
Indebtedness of the Nonperforming Bank); provided, however, in the event that
during the Syndications Period the aggregate Commitment Amounts shall be
increased to $100,000,000, then the foregoing percentage of fifty-six percent
(56%) shall hereafter replaced with sixty-five percent (65%) for all purposes.
"Required Share" shall have the meaning assigned to such term in
Section 2.12.
"Revolving Credit Bank" means any financial institution listed on the
signature pages to this Credit Agreement as having a Commitment Amount with
respect to Revolving Credit Loans and each other financial institution which,
from time to time, becomes a party to this Credit Agreement in accordance with
Subsection 10.8(b) hereof and purchases a Commitment Amount with respect to
Revolving Credit Loans.
"Revolving Credit Commitment" shall have the meaning assigned to it in
Subsection 2.1(a) as the same may be reduced pursuant to Subsection 2.1(f)
hereof.
"Revolving Credit Disbursement" means the several Revolving Credit
Loans made simultaneously by each Revolving Credit Bank under the Revolving
Credit Commitment.
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<PAGE> 20
"Revolving Credit Loan" means each loan of funds by a Revolving Credit
Bank of its Commitment Percentage as described in Section 2.1 hereof.
"Revolving Credit Loan Account" means the bookkeeping account
established by each Revolving Credit Bank in the name of the Borrower pursuant
to Subsection 2.1(i) hereof.
"Revolving Credit Note" means any one or all of the promissory notes of
the Borrower evidencing Bank Indebtedness of the Borrower hereunder with respect
to the Revolving Credit Loans, which Revolving Credit Notes shall be
substantially in the form of Exhibit "A" to this Credit Agreement, and all
extensions, renewals, amendments, modifications, restatements or replacements
thereto or thereof.
"Stated Amount" means the amount available to the beneficiary of any
Letter of Credit for drawing thereunder as such amount is reduced in accordance
with the provisions of such Letter of Credit.
"Subsection" means a numbered subsection of this Credit Agreement,
unless another document is specifically referenced.
"Subsidiary" means any corporation of which at least a majority of the
outstanding stock having by the terms thereof ordinary voting power to elect a
majority of the Board of Directors of such corporation is at the time directly
or indirectly owned or controlled by the Borrower or by one or more of its
Subsidiaries.
"Subsidiary Guarantee" shall mean a Guarantee, in a form acceptable to
the Agent, to be executed and delivered by a Subsidiary in accordance with the
provisions of Subsection 6.5(ix) herein which shall provide that such Subsidiary
shall unconditionally guarantee and become surety for a portion of the Bank
Indebtedness that is limited in amount to the principal amount of the
Indebtedness for Borrowed Money incurred by such Subsidiary in accordance with
Subsection 6.5(ix) and reduced as the principal amount of such Indebtedness for
Borrowed Money is repaid by such Subsidiary in the ordinary course of business
(including without limitation, any prepayments of principal made by the
Subsidiary in the ordinary course of its business so long as such prepayments
are not made with a direct or indirect purpose of reducing or eliminating the
obligations of such Subsidiary under the Subsidiary Guarantee).
"Supplemental Swing Loan Banks" means any financial institution listed
on the signature pages to this Credit Agreement as having a Commitment Amount
with respect to Supplemental Swing Loans and each other financial institution
which, from time to time, becomes a party to this Credit Agreement in accordance
with Subsection 10.8(b) hereof and purchases a Commitment Amount with respect to
Supplemental Swing Loans.
"Supplemental Swing Loan Commitment" shall mean the dollar amount set
forth for each Supplemental Swing Loan Bank under the caption "Supplemental
Swing Loan Commitment" on the signature page to this Credit Agreement signed by
such Bank or in any Assignment and Assumption Agreement executed by such Bank,
whether in the capacity as a Purchasing Bank or a Transferor Bank. The aggregate
Supplemental Swing Loan Commitments of all of the Supplemental Swing Loan Banks
shall not exceed $25,000,000 in the aggregate.
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<PAGE> 21
Notwithstanding anything contained in this Agreement or any of the other Loan
Documents to the contrary, the foregoing commitment is a sub-facility of such
Bank's Revolving Credit Commitment and as such shall mature, expire, be
proportionally reduced or terminate upon the occurrence of a like event
affecting such Bank's Revolving Credit Commitment.
"Supplemental Swing Loan Note" shall mean the Supplemental Swing Loan
Note of the Borrower in the form of Exhibit "C" evidencing the Supplemental
Swing Loans, together with all amendments, extensions, renewals, replacements,
refinancings or refundings thereof in whole or in part.
"Supplemental Swing Loan Request" shall mean a request for Supplemental
Swing Loans made in accordance with Section 2.3(c) hereof.
"Supplemental Swing Loans" shall mean collectively and Supplemental
Swing Loan shall mean separately all Supplemental Swing Loans or any
Supplemental Swing Loan made by Supplemental Swing Loan Banks to the Borrower
pursuant to Section 2.3 hereof.
"Swing Loan Commitment" shall mean National City Bank's commitment to
make Swing Loans to the Borrower pursuant to Section 2.2 hereof in an aggregate
principal amount of up to $5,000,000 outstanding at any time. Notwithstanding
anything contained in this Agreement or any of the other Loan Documents to the
contrary, the foregoing commitment is a sub-facility of such National City
Bank's Revolving Credit Commitment and as such shall mature, expire, be
proportionally reduced or terminate upon the occurrence of a like event
affecting such Bank's Revolving Credit Commitment.
"Swing Loan Note" shall mean the Swing Loan Note of the Borrower in the
form of Exhibit "B" evidencing the Swing Loans, together with all amendments,
extensions, renewals, replacements, refinancings or refundings thereof in whole
or in part.
"Swing Loan Request" shall mean a request for Swing Loans made in
accordance with Section 2.2(b) hereof.
"Swing Loans" shall mean collectively and Swing Loan shall mean
separately all Swing Loans or any Swing Loan made by National City Bank to the
Borrower pursuant to Section 2.2 hereof.
"Swing Loan Settlement Date" shall mean the Tuesday of each week (if
such day is a Business Day and if not, the next succeeding Business Day) and any
other Business Day on which the Agent elects to effect settlement pursuant to
Section 2.12.
"Syndication Period" shall be the earlier of (i) ninety (90) calendar
days following the Closing Date or (ii) the date on which Additional Bank(s)
have joined in this Agreement bringing the aggregate Revolving Credit
Commitments to $100,000,000.
"Teach-Out Obligations" means those certain obligations of any Person
under various state laws to provide for the completion of any enrolled student's
education in the event of the closing of a school.
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"Termination Event" means (i) a Reportable Event with respect to a Plan
or an event described in Section 4062(e) of ERISA with respect to a Plan, (ii)
the withdrawal of the Borrower or any ERISA Affiliate from a Plan during a plan
year in which the Borrower or any such ERISA Affiliate was a "substantial
employer" as such term is defined in Section 4001(a)(2) of ERISA and the
incurrence of liability to the PBGC under Section 4063 of ERISA, (iii) the
incurrence of liability by the Borrower or any such ERISA Affiliate under
Section 4064 of ERISA upon the termination of a Plan, (iv) the distribution of a
notice of intent to terminate a Plan pursuant to Section 4041(a)(2) of ERISA or
the treatment of a Plan amendment as a termination under Section 4041 of ERISA,
or (v) the institution of proceedings to terminate a Plan by the PBGC under
Section 4042 of ERISA.
"Termination Proceeding" means, with respect to any Plan, any
termination proceeding under Section 4042 of ERISA or any successor section of
ERISA.
"Total Capitalization" shall mean the sum of consolidated total
shareholders' equity in the Borrower and all Subsidiaries plus Total Funded
Debt, all as determined in accordance with GAAP.
"Total Funded Debt" means, as of the end of any Fiscal Quarter, on a
Consolidated basis without duplication (including but not limited to any
duplication reflecting Guarantees of the Borrower or any Subsidiary permitted by
Subsection 6.5(a)(iii) hereof), the difference between (a) Indebtedness for
Borrowed Money of the Borrower and its Subsidiaries, as of such date, and (b)
all unrestricted cash and cash equivalents in excess of $5,000,000 held by the
Borrower and its Subsidiaries including without limitation the cash balance as
at the end of such Fiscal Quarter held by the Agent or any Bank in cash
collateral, escrow, direct loan, reserve, electronic funds transfer, trust or
other restricted accounts (exclusive of any such accounts which do not appear on
the Borrower's or such Subsidiary's balance sheet) on behalf of the Borrower or
any of its Subsidiaries.
"Transfer Effective Date" means for each Assignment and Assumption
Agreement, the date upon which such Assignment and Assumption Agreement is
effective.
"Transferor Bank" means a selling Bank pursuant to an Assignment and
Assumption Agreement.
"UCC" means the Uniform Commercial Code as now adopted and from time to
time amended in the Commonwealth of Pennsylvania or any other jurisdiction which
controls the perfection of a security interest.
"Unfunded Benefit Liabilities" means with respect to any Plan, the
amounts described in Section 4001(a)(18) of ERISA.
"Unreimbursed Amount" shall have the meaning assigned to it in
Subsection 2.4(c) hereof.
"Withdrawal Liability" means "withdrawal liability" as defined by the
provisions of Part 1 of Subtitle E to Title IV of ERISA.
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1.2 GAAP Definitions.
Accounting terms used in this Credit Agreement but not defined herein
shall have the meanings ascribed to them under GAAP in effect at the time of the
execution of this Credit Agreement and shall not include the cumulative effect
of accounting changes or accounting principles.
1.3 Other Definitional Conventions.
(i) All terms defined in this Credit Agreement shall have the
above-defined meanings when used in this Credit Agreement, the Revolving Credit
Notes, the other Loan Documents, exhibits, schedules, appendices or any other
document or certificate executed or delivered in connection with this Credit
Agreement, unless the context thereof shall otherwise clearly require.
(ii) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Credit Agreement shall refer to this Credit
Agreement as a whole and not to any particular provision of this Credit
Agreement, and Section and Subsection references are to this Credit Agreement
unless otherwise specified.
(iii) All terms defined in this Credit Agreement in the
singular shall have comparable meanings when used in plural, and vice versa,
unless otherwise specified.
(iv) The word "or" as used herein shall mean and connote
non-exclusive alternative, unless expressly stated or the context clearly
requires otherwise.
1.4 Headings.
The headings of the Sections and Subsections of this Credit Agreement
are inserted for convenience only and shall not be deemed to constitute a part
hereof.
ARTICLE II. THE CREDIT
2.1 Revolving Credit Loans.
(a) Revolving Credit Commitment. The Revolving Credit Banks
severally agree, subject to the terms and conditions hereof and relying upon the
representations and warranties herein set forth, that the Borrower shall have
the right to borrow, repay and reborrow during the Availability Period an
aggregate principal amount not to exceed EIGHTY MILLION AND NO/100 DOLLARS
($80,000,000) at any one time outstanding (the "Revolving Credit Commitment");
provided, however, the amount otherwise available for borrowing under the
Revolving Credit Commitments as of any time of determination shall be reduced by
the sum of (i) the aggregate Stated Amounts of all Letters of Credit issued and
outstanding, as of such date of determination plus (ii) the aggregate
unreimbursed draws of any Letter of Credit plus (iii) the outstanding principal
balance of all Swing Loans plus (iv) the outstanding principal balance of all
Supplemental Swing Loans.
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(b) Individual Bank Commitment Amount. Each of the Revolving
Credit Banks shall be severally liable for advancing its respective Commitment
Percentage set forth opposite such Revolving Credit Bank's name on its signature
pages hereof; provided, however, that no such Revolving Credit Bank shall be
required to make a Revolving Credit Loan if such loan would cause that Revolving
Credit Bank's Revolving Credit Loans to exceed the Commitment Amount set forth
opposite each such Revolving Credit Bank's name on its signature pages hereto or
on the most recent Assignment and Assumption Agreement to which such Bank is a
party.
(c) Revolving Credit Disbursements.
(i) Each Revolving Credit Disbursement under Subsection 2.1(a)
shall be in the aggregate amount of $1,000,000 or more, provided that each
increment in excess of $1,000,000 shall be $100,000 or an integral multiple
thereof. The obligation of the Borrower to repay, on or before the Repayment
Date, the aggregate unpaid principal amount of all Revolving Credit
Disbursements made by the Revolving Credit Banks shall be evidenced by Revolving
Credit Notes substantially in the form of Exhibit "A" hereto, one made by the
Borrower to the order of each Revolving Credit Bank in the Commitment Amount of
such Revolving Credit Bank and delivered to each such Revolving Credit Bank. The
principal amount actually due and owing each Revolving Credit Bank under the
Revolving Credit Loans shall be the aggregate unpaid principal amount of all
Revolving Credit Loans made by such Revolving Credit Bank, all as shown on the
Revolving Credit Loan Accounts established pursuant to Subsection 2.1(i) hereof.
(ii) Each request for a Revolving Credit Disbursement under
Subsection 2.1(a) shall be made by 1:00 P.M. (Pittsburgh, Pennsylvania time) to
the Agent orally or in writing, by an Authorized Officer, (A) in the case of
Base Rate Loans, on or before the same Business Day of the proposed Revolving
Credit Disbursement and (B) in the case of Eurodollar Rate Loans, at least three
(3) Business Days prior to the proposed Revolving Credit Disbursement, in each
case specifying the date on which such Revolving Credit Disbursement is to be
made, the amount thereof, selecting the interest rate therefor pursuant to
Subsection 2.5(b) hereof and, if appropriate, selecting the Interest Period
therefor. Each written request for a Revolving Credit Disbursement shall be
evidenced by, and each oral request for a Revolving Credit Disbursement
hereunder shall be followed by, a Request for Revolving Credit Loan
substantially in the form of Exhibit "C" hereto, duly executed by an Authorized
Officer of the Borrower. Promptly upon receipt of such notice, the Agent shall
notify each Revolving Credit Bank of the Borrower's request and the amount of
such requested Revolving Credit Disbursement which is to be advanced by such
Revolving Credit Bank. Each such Revolving Credit Bank shall make its pro rata
share of such Revolving Credit Disbursement available at the Agent's principal
office in immediately available funds no later than 4:00 P.M. (Pittsburgh,
Pennsylvania time) on the date of the requested Revolving Credit Disbursement.
Each Revolving Credit Disbursement shall be credited by the Agent to a demand
deposit account of the Borrower at the Agent's principal office no later than
4:30 P.M. (Pittsburgh, Pennsylvania time) on the date of such Revolving Credit
Disbursement.
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(d) Interest. The Revolving Credit Notes shall bear interest
on the actual unpaid principal amount thereof from time to time outstanding from
the date thereof until payment in full as set forth in Section 2.5 hereof.
(e) Voluntary Prepayments. The Borrower shall have the right
at its option to prepay any Portion of the Revolving Credit Loans, in whole or
in part, at any time, subject to Borrower's obligation to pay a premium in
accordance with Section 2.6(ii)(A) if a Eurodollar Rate Loan (or part thereof)
is prepaid on a date other than the last day of the applicable Interest Period.
Each such prepayment shall be applied first to the principal balance of the
Revolving Credit Loans and then to any accrued and unpaid interest. Each partial
prepayment shall be in the aggregate amount of $500,000 or more, provided that
each increment in excess of $500,000 shall be $100,000 or an integral multiple
thereof. The Borrower shall give the Agent prior written notice of each
voluntary prepayment specifying the aggregate principal amount to be prepaid,
the date of prepayment and, if one or more Eurodollar Rate Options are in
effect, the Portion(s) of the Revolving Credit Loans being prepaid. Notice of
prepayment having been given as aforesaid, the principal amount specified in
such notice shall become due and payable on the prepayment date.
(f) Voluntary Permanent Reduction of the Revolving Credit
Commitment. The Borrower, upon three (3) Business Days' written notice to the
Agent, may permanently reduce the Revolving Credit Commitment by a minimum
reduction of at least $5,000,000; provided, however, that if such reduction
would require repayment of then outstanding amounts of the Revolving Credit
Loans or any Swing Loans or Supplemental Swing Loans, such repayment must occur
on or before the date on which the voluntary permanent reduction becomes
effective.
(g) Facility Fee. The Borrower agrees to pay to the Agent, for
the benefit of the Revolving Credit Banks, on March 31, 2000, and quarterly in
arrears thereafter on the last day of each succeeding June, September, December
and March during the term of the Revolving Credit Commitment and on the
Repayment Date, a facility fee calculated on the basis of the actual number of
days elapsed times (i) the amount of the Revolving Credit Commitments (as in
effect during such period) times (ii) the applicable percentage per annum set
forth in the chart below:
<TABLE>
<CAPTION>
====================================================== ==========================
RATIO OF TOTAL FUNDED DEBT TO EBITDA FACILITY FEE
(PER ANNUM)
- ------------------------------------------------------ --------------------------
<S> <C>
Greater than 1.75 to 1.0 25 basis points
- ------------------------------------------------------ --------------------------
Greater than 1.0 to 1.0 but less than or 22.5 basis points
equal to 1.75 to 1.0
- ------------------------------------------------------ --------------------------
Less than or equal to 1.0 to 1.0 20 basis points
====================================================== ==========================
</TABLE>
provided, however, the first payment under this Subsection 2.2(h) shall be for
the total number of days elapsed between the Closing Date and March 31, 2000 and
the last payment under this Subsection 2.2(h) shall be for the total number of
days elapsed between the last quarter for which
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payment was received and the Repayment Date. The Facility Fee due hereunder
shall be calculated on the basis of a 365-366 day year and the actual number of
days elapsed. Upon receipt by the Agent of the quarterly financial statements
delivered pursuant to Subsection 5.2(a) hereof, the applicable percentage shall
be adjusted, if necessary, effective on the first day of the calendar month
following delivery of such quarterly financial statements. In calculating the
above ratio, Total Funded Debt shall be determined as of the end of such Fiscal
Quarter and EBITDA shall be measured, on a rolling four quarter basis, for the
immediately preceding four Fiscal Quarters then ended.
(h) Repayment. On the Repayment Date, the Borrower shall repay
in full all of the then unpaid and outstanding Revolving Credit Loans, together
with all interest thereon to the date of such repayment and all other fees and
costs due hereunder.
(i) Revolving Credit Loan Account. Each Revolving Credit Bank
shall open and maintain on its books a Revolving Credit Loan Account in the name
of the Borrower with respect to such Revolving Credit Bank's Revolving Credit
Loans, repayments, prepayments, the computation and payment of interest and the
computation of other amounts due and sums paid to the Agent, on behalf of such
Revolving Credit Bank, pursuant to this Section 2.1. Except in the case of
manifest error in computation, such Revolving Credit Loan Account shall be
conclusive and binding on the Borrower as to the amount at any time due to such
Revolving Credit Bank from the Borrower pursuant to this Section 2.1.
(j) Increase in Revolving Credit Commitments. Borrower, Agent
and Banks acknowledge that the Borrower desires to increase the Revolving Credit
Commitments to an aggregate amount of One Hundred Million Dollars
($100,000,000). Subject to the provisions of this Agreement, the Agent and the
Banks agree that during the Syndications Period one or more banks may be
included as Additional Banks into this Agreement to facilitate such increase in
the Revolving Credit Commitments. During the Syndications Period, the Agent
agrees to continue its good faith efforts to obtain additional banks to join
into this Agreement for such purpose, all on the same terms and conditions as
those of the other Banks. During the Syndications Period, the Borrower shall not
solicit or pursue any Indebtedness for Borrowed Money of the type that may be
permitted under Section 6.5(xi). The Agent shall have no liability to the
Borrower for any failure in procuring an Additional Bank to increase the
Revolving Credit Commitments. To facilitate the foregoing, Borrower may
independently request that one or more Additional Banks join this Agreement. The
selection of any new bank shall be subject to the Borrower's and Agent's
consent, which shall not be unreasonably withheld. The new bank shall join this
Agreement as a Bank pursuant to the procedures contained in Section 9.12.
(k) Mandatory Prepayments. The Borrower shall immediately
prepay the Revolving Credit Loans, in the following amounts:
(i) 100% of the amount of any additional Indebtedness for
Borrowed Money incurred by Borrower or any of its Subsidiaries in excess of the
limitations specified in Section 6.5 hereof; provided, however, that the Agent
and Banks shall not be deemed to consent to or waive any violations of Section
6.5 by reason of the inclusion of this provision herein;
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<PAGE> 27
(ii) 100% of the amount of the proceeds of the sale of assets
by Borrower or any of its Subsidiaries outside the ordinary course of business
in excess of the limitations specified in Section 6.4 hereof; provided, however,
that this Agent and Banks shall not be deemed to consent to or waive any
violations of Section 6.4 by reason of the inclusion of this provision herein;
and
(iii) 100% of the amount of any insurance proceeds received by
Borrower or any of its Subsidiaries in connection with any casualty that results
in a recovery that is more than $500,000 in excess of the replacement cost of
the insured property so damaged.
2.2 Swing Loans.
(a) Swing Loan Commitment. Subject to the terms and conditions
hereof and relying upon the representations and warranties herein set forth, and
in order to facilitate loans and repayments between Settlement Dates, National
City Bank may, at its option, cancelable at any time for any reason whatsoever,
make swing loans (the "Swing Loans") to the Borrower at any time or from time to
time after the date hereof to, but not including, the Expiration Date, in an
aggregate principal amount up to but not in excess of $5,000,000 (the "Swing
Loan Commitment"), provided that the sum of (i) the aggregate Stated Amounts of
all Letters of Credit issued and outstanding, as of such date of determination
plus (ii) the aggregate unreimbursed draws of any Letter of Credit plus (iii)
the outstanding principal balance of all Swing Loans plus (iv) the outstanding
principal balance of all Supplemental Swing Loans plus (v) the outstanding
principal balance of all Revolving Credit Loans, shall not exceed the Revolving
Credit Commitments of all the Banks. Within such limits of time and amount and
subject to the other provisions of this Agreement, the Borrower may borrow,
repay and reborrow pursuant to this Section 2.2. It is acknowledged by National
City Bank that a cancellation of the Swing Loan Commitment shall not in and of
itself reduce National City Bank's Revolving Credit Commitment.
(b) Swing Loan Requests. Except as otherwise provided herein,
the Borrower may from time to time prior to the Expiration Date request National
City Bank to make Swing Loans by delivery to National City Bank not later than
1:00 P.M. (Pittsburgh, Pennsylvania time) on the proposed Borrowing Date of a
duly completed request therefor substantially in the form requested by National
City Bank or by telephone immediately confirmed in writing by letter, facsimile
or telex (each, a "Swing Loan Request"), it being understood that the Agent may
rely on the authority of any individual making such a telephonic request without
the necessity of receipt of such written confirmation. Each Swing Loan Request
shall be irrevocable and shall specify the proposed Borrowing Date, the interest
rate Option and the principal amount of such Swing Loan, which shall be not less
than $100,000.
(c) Making Swing Loans. So long as National City Bank elects
to make Swing Loans, National City Bank shall, after receipt by it of a Swing
Loan Request pursuant to Section 2.2, fund such Swing Loan to the Borrower in
U.S. Dollars and immediately available funds at the Principal Office prior to
3:00 P.M. (Pittsburgh, Pennsylvania time) on the Borrowing Date.
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(d) Swing Loan Note. The obligation of the Borrower to repay
the unpaid principal amount of the Swing Loans made to it by National City Bank,
together with interest thereon shall be evidenced by a demand promissory note of
the Borrower dated the Closing Date in substantially the form attached hereto as
Exhibit B payable to the order of National City Bank in a face amount equal to
the Swing Loan Commitment.
(e) Borrowings to Repay Swing Loans. National City Bank may,
at its option, exercisable at any time for any reason whatsoever, demand
repayment of the Swing Loans from the Revolving Credit Banks, and each Bank
shall make a Revolving Credit Loan in an amount equal to such Bank's Ratable
Share of the aggregate principal amount of the outstanding Swing Loans, plus, if
National City Bank so requests, accrued interest thereon, provided that no Bank
shall be obligated in any event to make Revolving Credit Loans in excess of its
Revolving Credit Commitment. Revolving Credit Loans made pursuant to the
preceding sentence shall bear interest at the Base Rate Option and shall be
deemed to have been properly requested in accordance with Section 2.1 without
regard to any of the requirements of that provision pertaining to Loan Requests.
National City Bank shall provide notice to the Banks (which may be telephonic or
written notice by letter, facsimile or telex) that such Revolving Credit Loans
are to be made under this Section 2.2 and of the apportionment among the Banks,
and the Banks shall be unconditionally obligated to fund such Revolving Credit
Loans (whether or not the conditions specified in Section 2.1 are then
satisfied) by the time National City Bank so requests, which shall not be
earlier than 3:00 P.M. (Pittsburgh, Pennsylvania time) on the Business Day next
after the date the Banks receive such notice from National City Bank.
(f) Voluntary Prepayments. The Borrower shall have the right
at its option to prepay any Portion of the Swing Loans, in whole or in part, at
any time. Each such prepayment shall be applied first to the principal balance
of the Swing Loans and then to any accrued and unpaid interest. Each partial
prepayment shall be in the aggregate amount of $100,000 or more, provided that
each increment in excess of $100,000 shall be $10,000 or an integral multiple
thereof unless the Borrower is prepaying the entire outstanding principal
balance of the Supplemental Swing Loans. The Borrower shall give the Agent prior
written notice of each voluntary prepayment specifying the aggregate principal
amount to be prepaid and the date of prepayment. Notice of prepayment having
been given as aforesaid, the principal amount specified in such notice shall
become due and payable on the prepayment date.
(g) Permanent Reduction of the Swing Loan Commitment.
(A) Voluntary Reduction. The Borrower, upon three (3) Business
Days' written notice to the Agent, may permanently reduce the Swing Loan
Commitment by a minimum reduction of at least $1,000,000; provided, however,
that if such reduction would require repayment of then outstanding amounts of
the Swing Loans, such repayment must occur on or before the date on which the
voluntary permanent reduction becomes effective.
(B) Mandatory Reduction. In the event that the Borrower shall
have reduced the Revolving Credit Commitment of the Banks and National City
Bank's Swing Loan Commitment is greater than its Revolving Credit Commitment as
so reduced, then the Swing Loan Commitment shall be automatically reduced to
National City Bank's Revolving Credit
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Commitment. In the event that National City Bank's Swing Loans exceed the Swing
Loan Commitment, the Borrower shall contemporaneously with the reduction in the
commitment prepay the Swing Loans to an amount less than the Swing Loan
Commitment, as so reduced.
(h) Interest. The Swing Loan Notes shall bear interest on the
actual unpaid principal amount thereof from time to time outstanding from the
date thereof until payment in full as set forth in Section 2.5 hereof.
2.3 Supplemental Swing Loans.
(a) Supplemental Swing Loan Commitment. The Supplemental Swing
Loan Banks severally agree, subject to the terms and conditions hereof and
relying upon the representations and warranties herein set forth, that the
Borrower shall have the right to borrow, repay and reborrow during the
Availability Period an aggregate principal amount not to exceed TWENTY-FIVE
MILLION AND NO/100 DOLLARS ($25,000,000) at any one time outstanding (the
"Supplemental Swing Loan Commitments"); provided, however, the sum of (i) the
aggregate Stated Amounts of all Letters of Credit issued and outstanding, as of
such date of determination plus (ii) the aggregate unreimbursed draws of any
Letter of Credit plus (iii) the outstanding principal balance of all Swing Loans
plus (iv) the outstanding principal balance of all Supplemental Swing Loans plus
(v) the outstanding principal balance of all Revolving Credit Loans, shall not
exceed the Revolving Credit Commitments of all the Banks.
(b) Individual Bank Supplemental Swing Loan Commitment Amount.
The Commitment Percentage with respect to Supplemental Swing Loans for each
Supplemental Swing Loan Bank shall be the same Commitment Percentage as such
Bank's Commitment Percentage for Revolving Credit Loans hereunder. Each
Supplemental Swing Loan to be advanced in accordance with Section 2.3(a) shall
be advanced pro rata among the Supplemental Swing Loan Banks in an amount
corresponding to its Commitment Percentage. Each of the Supplemental Swing Loan
Banks shall be severally liable for advancing its respective Commitment
Percentage set forth opposite such Supplemental Swing Loan Bank's name on its
signature pages hereof; provided, however, that no such Supplemental Swing Loan
Bank shall be required to make a Supplemental Swing Loan to the extent such loan
would cause that Bank's Loans, in the aggregate, to exceed the Commitment Amount
set forth opposite each such Bank's name on its signature pages hereto or on the
most recent Assignment and Assumption Agreement to which such Bank is a party.
(c) Supplemental Swing Loan Requests. Except as otherwise
provided herein, the Borrower may from time to time prior to the Expiration Date
request the Supplemental Swing Loan Banks to make Supplemental Swing Loans by
delivery to Agent not later than 1:00 P.M. (Pittsburgh, Pennsylvania time) on
the Business Day of the proposed Borrowing Date of a duly completed request
therefor substantially in the form requested by Agent or by telephone
immediately confirmed in writing by letter, facsimile or telex (each, a
"Supplemental Swing Loan Request"), it being understood that the Agent may rely
on the authority of any individual making such a telephonic request without the
necessity of receipt of such written confirmation. Each Supplemental Swing Loan
Request shall be irrevocable, shall specify the proposed Borrowing Date and the
principal amount of such Supplemental Swing Loan, which shall be not less than
$500,000, and shall elect an interest rate option, as permitted herein, to be
applicable to such borrowing.
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(d) Making Supplemental Swing Loans. Promptly upon receipt of
notice from the Borrower of its election to borrow Supplemental Swing Loans, the
Agent shall notify each Supplemental Swing Loan Bank of the Borrower's request
and the amount of such requested Supplemental Swing Loan which is to be advanced
by such Supplemental Swing Loan Bank. Each such Supplemental Swing Loan Bank
shall make its pro rata share of such Supplemental Swing Loan disbursement
available at the Agent's principal office in immediately available funds no
later than 4:00 P.M. (Pittsburgh, Pennsylvania time) on the date of the
requested Supplemental Swing Loan. Each Supplemental Swing Loan shall be
credited by the Agent to a demand deposit account of the Borrower at the Agent's
principal office no later than 4:30 P.M. (Pittsburgh, Pennsylvania time) on the
date of such Supplemental Swing Loan.
(e) Supplemental Swing Loan Note. The obligation of the
Borrower to repay the unpaid principal amount of the Supplemental Swing Loans
made to it by the Supplemental Swing Loan Banks, together with interest thereon
shall be evidenced by a demand promissory note of the Borrower dated the Closing
Date in substantially the form attached hereto as Exhibit E payable to the order
of each Supplemental Swing Loan Bank in a face amount equal to such Bank's
Supplemental Swing Loan Commitment.
(f) Borrowings to Repay Supplemental Swing Loans. Each
Supplemental Swing Loan Bank may, at its option, exercisable at any time for any
reason whatsoever, demand that the Supplemental Swing Loans of such Bank be
converted to Revolving Credit Loans by providing Agent with written instructions
to such effect. Upon receipt of a demand by any Supplemental Swing Loan Bank to
convert its Supplemental Swing Loans to Revolving Credit Loans, each Bank shall
make a Revolving Credit Loan in an amount equal to such Bank's Commitment
Percentage of the aggregate principal amount of the Supplemental Swing Loans
being converted, plus, if Supplemental Swing Loan Bank so requests, accrued
interest thereon, provided that no Bank shall be obligated in any event to make
Revolving Credit Loans in excess of its Revolving Credit Commitment. Revolving
Credit Loans made pursuant to the preceding sentence shall bear interest at the
Base Rate Option and shall be deemed to have been properly requested in
accordance with Section 2.1 without regard to any of the requirements of that
provision pertaining to Loan Requests. The Agent shall provide notice to the
Banks (which may be telephonic or written notice by letter, facsimile or telex)
that such Revolving Credit Loans are to be made under this Section 2.2 and of
the apportionment among the Banks, and the Banks shall be unconditionally
obligated to fund such Revolving Credit Loans (whether or not the conditions
specified in Section 2.1 are then satisfied) by the time Agent so requests,
which shall not be earlier than 3:00 P.M. (Pittsburgh, Pennsylvania time) on the
Business Day next after the date the Banks receive such notice from Agent.
(g) Mandatory Conversion of Supplemental Swing Loans. In the
event that the Borrower has Supplemental Swing Loans outstanding for more than
seven (7) calendar days, the Borrower shall borrow Revolving Credit Loans in an
amount necessary to repay such Supplemental Swing Loans. In the event that the
Borrower fails to promptly comply with the preceding sentence, the Agent shall
in its own discretion be permitted to issue a demand on the Banks for Revolving
Credit Loans under the preceding sentence, all as if the Supplemental Swing Loan
Banks had demanded conversion.
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(h) Voluntary Prepayments. The Borrower shall have the right
at its option to prepay any Portion of the Supplemental Swing Loans, in whole or
in part, at any time. Each such prepayment shall be applied first to the
principal balance of the Supplemental Swing Loans and then to any accrued and
unpaid interest.. Each partial prepayment shall be in the aggregate amount of
$500,000 or more, provided that each increment in excess of $500,000 shall be
$100,000 or an integral multiple thereof unless the Borrower is prepaying the
entire outstanding principal balance of the Supplemental Swing Loans. The
Borrower shall give the Agent prior written notice of each voluntary prepayment
specifying the aggregate principal amount to be prepaid and the date of
prepayment. Notice of prepayment having been given as aforesaid, the principal
amount specified in such notice shall become due and payable on the prepayment
date.
(i) Permanent Reduction of the Supplemental Swing Loan
Commitment.
(A) Voluntary Reduction. The Borrower, upon three (3) Business
Days' written notice to the Agent, may permanently reduce the Supplemental Swing
Loan Commitment by a minimum reduction of at least $5,000,000; provided,
however, that if such reduction would require repayment of then outstanding
amounts of the Supplemental Swing Loans, such repayment must occur on or before
the date on which the voluntary permanent reduction becomes effective.
(B) Mandatory Reduction. In the event that the Borrower shall
have reduced the Revolving Credit Commitments with the effect that the
Supplemental Swing Loan Commitment of any Supplemental Swing Loan Bank is
greater than such Bank's Revolving Credit Commitment as so reduced, then such
Bank's Supplemental Swing Loan Commitment shall be automatically reduced to such
Bank's Revolving Credit Commitment. In the event that such Bank's Supplemental
Swing Loans exceed such Bank's Supplemental Swing Loan Commitment, the Borrower
shall contemporaneously with the reduction in the commitment prepay the
Supplemental Swing Loans to an amount less than the Supplemental Swing Loan
Commitment, as so reduced.
(j) Interest. The Supplemental Swing Loan Notes shall bear
interest on the actual unpaid principal amount thereof from time to time
outstanding from the date thereof until payment in full as set forth in Section
2.5 hereof.
2.4 Letters of Credit.
(a) Issuance of Letter of Credit. Subject to the terms and
conditions of this Credit Agreement and in reliance upon the representations and
warranties of the Borrower set forth herein, the Issuing Bank agrees to issue
Letters of Credit, upon the request of the Borrower during the Availability
Period, for the account of the Borrower in an aggregate Stated Amount not to
exceed FIFTEEN MILLION AND NO/100 DOLLARS ($15,000,000); provided, however, the
sum of the outstanding principal balance of Revolving Credit Loans, the Swing
Loans, the Supplemental Swing Loans, the Stated Amount of issued Letters of
Credit and the aggregate
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unreimbursed draws of any Letter of Credit shall at no time exceed the Revolving
Credit Commitment as the same may be reduced from time to time. The issuance of
any Letter of Credit in accordance with the provisions of this Subsection 2.4(a)
shall be in accordance with the Issuing Bank's then current practices relating
to the issuance by the Issuing Bank of stand-by and commercial letters of
credit, as the case may be, including without limitation, the execution of
appropriate application and reimbursement agreements, as well as subject to the
satisfaction of each condition set forth in Section 7.1 hereof. No Letter of
Credit shall be issued with an expiration date beyond the earlier of the
Repayment Date or one year from the date of issuance.
(b) Risk Participations.
(i) Participations. Immediately upon the issuance of any
Letter of Credit, and thereafter, immediately upon each increase or decrease in
the Stated Amount thereof, each Revolving Credit Bank hereby agrees to
irrevocably purchase and shall be deemed to have irrevocably purchased from the
Issuing Bank an undivided, full risk, non-recourse participation in each such
Letter of Credit (including any such increase or decrease in the Stated Amount
of each such Letter of Credit) and in draws thereunder in an amount equal to
such Revolving Credit Bank's Commitment Percentage of the maximum Stated Amount
thereof which is or at any time may become available to be drawn thereunder.
(ii) Restrictions. In the event that the Issuing Bank is
required for any reason to refund or repay to the Borrower, any guarantor or any
other Person (other than a Revolving Credit Bank hereunder) all or any portion
of any amount remitted to the Issuing Bank pursuant to this Credit Agreement,
the Revolving Credit Banks shall promptly remit to the Issuing Bank, within
three (3) Business Days following demand therefor, their respective Commitment
Percentages of the amount which is so refunded or repaid. In the event any
restrictions are imposed upon the Issuing Bank or any of the Revolving Credit
Banks by any Governmental Rule of any Governmental Person having jurisdiction
over the banking activities of the Issuing Bank or any other Revolving Credit
Bank, which would prevent the Issuing Bank from issuing the Letter of Credit or
amending the Letter of Credit or would prevent any Revolving Credit Bank from
honoring its obligations under this Section 2.4, the commitment of the Issuing
Bank to issue the Letter of Credit or enter into any amendment with respect
thereto shall be immediately suspended.
(iii) Notice of Restrictions. If any Revolving Credit Bank
believes any such restriction would prevent such Revolving Credit Bank from
honoring its obligations under this Section 2.4, it shall promptly notify the
Agent. The Agent shall promptly notify the Borrower, the Issuing Bank and the
other Revolving Credit Banks of the existence and nature of (A) any restriction
which would cause the suspension of the commitment of the Issuing Bank to issue
the Letter of Credit or to enter into amendments with respect thereto and (B)
any restriction which would prevent any Revolving Credit Bank from honoring its
obligations under this Section 2.4.
(iv) Effect of Restrictions. Upon receipt of any notice
pursuant to item (iii) above, the Borrower will thereupon undertake reasonable
efforts to obtain the cancellation of each Letter of Credit; provided, however,
that the refusal of any beneficiary of any Letter of Credit to surrender such
Letter of Credit will not be an Event of Default hereunder and the
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Borrower shall undertake good faith efforts to obtain a substitute letter of
credit for such Letter of Credit. Nothing contained in this Subsection 2.4(b)
shall be deemed a termination of the Revolving Credit Commitment and, in the
event of a suspension of the commitment of the Issuing Bank to issue Letters of
Credit or to enter into amendments with respect thereto as set forth above, the
Borrower may continue to borrow under the Revolving Credit Commitment provided
the requirements of Section 7.1 hereof are complied with.
(c) Payment of Amounts Drawn Under Letters of Credit. Upon
each request for a draw under any Letter of Credit by the beneficiary thereof,
the Issuing Bank shall immediately notify the Borrower and the Agent, and the
Borrower shall reimburse, or cause the reimbursement of, the Issuing Bank on
demand in an amount in same day funds equal to the amount of such draw;
provided, however, unless the Borrower shall have notified the Agent and the
Issuing Bank prior to such time that the Borrower intends to reimburse the
Issuing Bank for all or a portion of the amount of such draw with funds other
than the proceeds of Revolving Credit Loans, the Borrower shall conclusively be
deemed to have given a request for a Disbursement under Subsection 2.1(c) hereof
to the Agent requesting the Revolving Credit Banks to make Revolving Credit
Loans at the Base Rate Option on the first Business Day immediately following
the date on which such draw is honored in an aggregate amount equal to the
excess of the amount of such drawing over the amount theretofore received by the
Issuing Bank in reimbursement thereof (the "Unreimbursed Amount"), plus accrued
interest on such amount at the rate set forth in Subsection 2.4(e)(iii) hereof.
If the Borrower shall be deemed to have given a request for a Disbursement under
Subsection 2.1(c) hereof to the Agent pursuant to this Subsection 2.4(c), then,
(notwithstanding the satisfaction or waiver of the conditions specified in
Section 7.1 hereof), the Revolving Credit Banks shall, on the first Business Day
immediately following the date of such draw, make Revolving Credit Loans at the
Base Rate Option in the aggregate amount of the Unreimbursed Amount plus accrued
interest on such amount at the rate set forth in Subsection 2.4(e)(iii) hereof.
The proceeds of any such Revolving Credit Loans shall be applied directly by the
Agent, upon receipt thereof from the Banks, to reimburse the Issuing Bank for
the Unreimbursed Amount plus accrued interest on such amount. The foregoing
shall not limit or impair the obligation of the Borrower to reimburse the
Issuing Bank on demand.
(d) Payment by the Banks. In the event that the Borrower shall
fail to reimburse the Issuing Bank on demand as provided in Subsection 2.4(c)
above in an amount equal to the amount of any draw honored by the Issuing Bank
under any Letter of Credit, the Issuing Bank shall promptly notify the Agent and
each Revolving Credit Bank of the Unreimbursed Amount plus the accrued interest
on such amount and of such Bank's respective participation therein. Each
Revolving Credit Bank shall make available to the Issuing Bank an amount equal
to its respective participation in same day funds, at the office of the Issuing
Bank specified in such notice, not later than 12:00 Noon (Pittsburgh,
Pennsylvania time) on the Business Day specified in such notice by the Issuing
Bank. In the event that any Revolving Credit Bank fails to make available to the
Issuing Bank the amount of such Revolving Credit Bank's participation in such
Letter of Credit as provided in this Subsection 2.4(d), the Issuing Bank shall
be entitled to recover such amount on demand from such Revolving Credit Bank
together with interest at the customary rate set by the Issuing Bank for the
correction of errors among banks for a period of three (3) Business Days after
demand and thereafter, at the Base Rate. Nothing in this
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Subsection 2.4(d) shall be deemed to prejudice the right of any Revolving Credit
Bank to recover from the Issuing Bank any amounts made available by such
Revolving Credit Bank to the Issuing Bank pursuant to this Subsection 2.4(d) in
the event that it is determined by a court of competent jurisdiction that
payment of such amounts with respect to any Letter of Credit by the Issuing Bank
constituted gross negligence or willful misconduct on the part of the Issuing
Bank. The Issuing Bank shall distribute to each other Revolving Credit Bank
which has paid all amounts payable by it under this Subsection 2.4(d) with
respect to such Letter of Credit, such other Revolving Credit Bank's pro rata
share of all payments received by the Issuing Bank from the Borrower in
reimbursement of a draw honored by the Issuing Bank under such Letter of Credit
when such payments are received.
(e) Compensation.
(i) Letter of Credit Fees. (A) Standby Letters of Credit. On
the last Business Day of each March, June, September and December hereafter and
on the Repayment Date, the Borrower agrees to pay to the Agent, on behalf of
each Revolving Credit Bank, to be shared by the Revolving Credit Banks on a pro
rata basis in accordance with each Revolving Credit Bank's risk participation in
such Letter of Credit pursuant to Subsection 2.4(b) hereof, a nonrefundable fee,
payable in arrears, equal to the product of (A) the average Stated Amount of
each standby Letter of Credit outstanding over such period times (B) the
applicable percentage per annum as determined below:
<TABLE>
<CAPTION>
===================================================== =========================
APPLICABLE LETTER
OF
RATIO OF TOTAL FUNDED DEBT TO EBITDA CREDIT PERCENTAGE
(PER ANNUM)
- ----------------------------------------------------- -------------------------
<S> <C>
Greater than 1.75 to 1.0 112.5 basis points
- ----------------------------------------------------- -------------------------
Greater than 1.0 to 1.0, but less than or 90 basis points
equal to 1.75 to 1.0
- ----------------------------------------------------- -------------------------
Less than or equal to 1.0 to 1.0 67.5 basis points
===================================================== =========================
</TABLE>
Upon receipt by the Agent of the quarterly financial statements delivered
pursuant to Subsection 5.2(a) hereof, the applicable percentage shall be
adjusted, if necessary, effective on the first day of the calendar month
following delivery of such quarterly financial statements. In calculating the
above ratio, Total Funded Debt shall be determined as of the end of such Fiscal
Quarter and EBITDA shall be measured, on a rolling four quarter basis, for the
immediately preceding four Fiscal Quarters then ended.
(B) Commercial Letters of Credit. In connection with the
issuance of each commercial Letter of Credit, the Borrower agrees to pay to the
Agent, on behalf of each Revolving Credit Bank, to be shared by the Revolving
Credit Banks on a pro rata basis in accordance with each Revolving Credit Bank's
risk participation in such Letter of Credit
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<PAGE> 35
pursuant to Subsection 2.4(b) hereof, a nonrefundable fee computed at a rate and
payable as from time to time established by the Agent in writing with the
approval of all of the Banks.
(ii) Issuance Fee. In addition to the Letter of Credit Fees
set forth in Subsection 2.4(e)(i) above, the Borrower shall pay to the Issuing
Bank, for its sole account, an Issuance Fee equal to one-eighth of one percent
(1/8%) of the Stated Amount of each Letter of Credit, payable quarterly in
arrears on the last Business Day of each March, June, September and December
hereafter and on the Repayment Date.
(iii) Interest and Other Fees.
(A) With respect to any draw made under any Letter of Credit,
the Borrower shall pay interest, payable on demand, on the amount paid by the
Issuing Bank in respect of such draw from the Business Day of the draw through
the date such amount is reimbursed by the Borrower (including any such
reimbursement out of the proceeds of Revolving Credit Loans pursuant to
Subsection 2.4(c) hereof) at a rate which is at all times equal to (A) if no
Event of Default shall have occurred and be continuing, the Base Rate or (B) if
any Event of Default shall have occurred and be continuing, two percent (2.00%)
per annum in excess of the Base Rate; and
(B) With respect to the issuance, amendment or transfer of any
Letter of Credit and a draw made thereunder, the Borrower shall pay documentary
and processing charges in accordance with the Issuing Bank's standard schedule
for such charges in effect at the time of such issuance, amendment, transfer or
draw, as the case may be.
(f) Duty to Review Demands; Obligation Absolute. The
obligation of the Borrower to reimburse the Issuing Bank for draws made under
any Letter of Credit and the obligations of the Revolving Credit Banks under
Subsection 2.4(d) hereof shall be absolute, unconditional and irrevocable and
shall be paid directly in accordance with the terms of this Credit Agreement
under all circumstances, including, without limitation, the following
circumstances:
(i) any lack of validity or enforceability of such Letter of
Credit;
(ii) the existence of any claim, set-off, defense or other
right which the Borrower may have at any time against a beneficiary or any
transferee of such Letter of Credit (or any Persons for whom any such transferee
may be acting), the Issuing Bank, any Revolving Credit Bank or any other Person,
whether in connection with this Credit Agreement, the transactions contemplated
herein or any unrelated transaction (including any underlying transaction
between the Borrower or one of its Subsidiaries and the beneficiary of such
Letter of Credit);
(iii) any draft, demand, certificate or any other document
presented under such Letter of Credit proving to be forged, fraudulent, invalid
or insufficient in any respect or any statement therein being untrue or
inaccurate in any respect provided that any act or failure to act on the part of
the Issuing Bank does not constitute gross negligence or willful misconduct on
the part of the Issuing Bank;
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(iv) payment by the Issuing Bank under such Letter of Credit
against presentation of a demand, draft or certificate or other document which
does not comply with the terms of such Letter of Credit; provided that such
payment does not constitute gross negligence or willful misconduct on the part
of the Issuing Bank;
(v) any other circumstance or happening whatsoever, which is
substantially similar to any of the foregoing; and
(vi) the fact that an Event of Default shall have occurred and
be continuing.
(g) Indemnification; Nature of the Issuing Bank's Duties. In
addition to amounts payable as elsewhere provided in this Section 2.4, the
Borrower hereby agrees to protect, indemnify, pay and save each Revolving Credit
Bank (including, without limitation, the Issuing Bank) harmless from and against
any and all claims, demands, liabilities, damages, losses, costs, charges and
expenses (including reasonable attorneys' fees) which such Revolving Credit Bank
may incur or be subject to as a consequence, direct or indirect, of (i) the
issuance of the Letter of Credit or any amendment thereto, other than as a
result of the gross negligence or willful misconduct of the Issuing Bank as
determined by a court of competent jurisdiction, (ii) the failure of the Issuing
Bank to honor a draw under any Letter of Credit if the Issuing Bank in good
faith and upon advice of counsel believes that it is prohibited from making such
payment as a result of any act or omission, whether rightful or wrongful, of any
present or future de jure or de facto Governmental Person (all such acts or
omissions herein called "Government Acts"), or (iii) any material breach by the
Borrower of any representation, warranty, covenant, term or condition in, or the
occurrence of any default under, any document related to the issuance or any
amendment of any Letter of Credit.
As between the Borrower and the Issuing Bank, the Borrower
assumes all risks of the acts and omissions of, or misuse of any Letter of
Credit by, the beneficiary of any Letter of Credit. In furtherance and not in
limitation of the foregoing, the Issuing Bank shall not be responsible: (i) for
the form, validity, sufficiency, accuracy, genuineness or legal effect of any
document submitted by any party in connection with the application for or the
issuance or amendment of any Letter of Credit, even if it should in fact prove
to be in any or all respects invalid, insufficient, inaccurate, fraudulent or
forged; (ii) for the validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign any Letter of Credit or the rights
or benefits thereunder or proceeds thereof, in whole or in part, which may prove
to be invalid or ineffective for any reason; (iii) for failure of a beneficiary
of any Letter of Credit to comply fully with conditions required in order to
draw upon any Letter of Credit; (iv) for errors, omissions, interruptions or
delays in transmission or delivery of any messages, by mail, cable, telegraph,
telecopy, telex or otherwise, whether or not they be in cipher; (v) for errors
in interpretation of technical terms; (vi) for any loss or delay in the
transmission or otherwise of any document required in order to make a draw under
any Letter of Credit or of the proceeds thereof; (vii) for the misapplication by
a beneficiary of any Letter of Credit of the Proceeds of any drawing under any
Letter of Credit; (viii) for any consequences arising from causes beyond the
control of the Issuing Bank, including, without limitation, any Government Acts;
and (ix) for any other circumstances whatsoever in making or failing to make
payment under any Letter of Credit; except that the Borrower shall have a claim
against the Issuing Bank, and the Issuing
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<PAGE> 37
Bank shall be liable to the Borrower, to the extent, but only to the extent, of
any direct, as opposed to consequential, damages suffered by the Borrower, as
determined by a court of competent jurisdiction to be the result of (i) the
Issuing Bank's willful misconduct or gross negligence in determining whether
documents presented under any Letter of Credit comply with the terms of any
Letter of Credit, (ii) the Issuing Bank's payment on a draw under any Letter of
Credit to any Person other than the beneficiary of any Letter of Credit or its
lawful successor, representative or assign or (iii) the Issuing Bank's willful
failure to pay under any Letter of Credit after the presentation to it by the
beneficiary of any Letter of Credit or its lawful successor, representative or
assign of a sight draft and certificate or other documents strictly complying
with the terms and conditions of any Letter of Credit, unless the Issuing Bank
in good faith and upon advice of counsel believes that it is prohibited by law
or other legal authority from making such payment. None of the above shall
affect, impair, or prevent the vesting of any of the Issuing Bank's rights or
powers hereunder.
Except for the Issuing Bank's obligations under any Letter of
Credit, the Issuing Bank shall have no liability to the Borrower or to any other
Person resulting from a reduction of the credit rating of the Issuing Bank or
any deterioration in the Issuing Bank's financial condition.
In furtherance and extension and not in limitation of the
specific provisions hereinabove set forth, any action taken or omitted by the
Issuing Bank under or in connection with the Letter of Credit or the related
sight drafts or certificates or documents, if taken or omitted in good faith,
shall not put the Issuing Bank under any resulting liability to the Borrower.
(h) Construction of Application and Agreement for Letter of
Credit. This Credit Agreement is intended to supplement any application or
agreement executed and delivered in connection with the issuance of any Letter
of Credit hereunder. Whenever possible, this Credit Agreement is to be construed
as consistent with any such application or agreement and, to the extent that the
provisions of this Credit Agreement and such application or agreement conflict,
the terms of this Credit Agreement shall control.
2.5 Certain Provisions Relating to Interest Rates.
The Notes shall bear interest, on the actual unpaid principal amount
thereof from time to time outstanding, from the date thereof until payment in
full, at one or more of the rates of interest set forth in this Section 2.5.
(a) Interest Payments. The Borrower shall pay accrued interest
on the unpaid aggregate principal balance of the Notes in arrears (A) with
respect to each Base Rate Loan and Money Market Rate Loan (i) on the last
Business Day of each March, June, September and December of each year during the
term hereof, (ii) at maturity, whether by acceleration or otherwise, of the
Notes, and (iii) thereafter on demand until all amounts outstanding under the
Notes are paid in full; and (B) with respect to each Eurodollar Rate Loan (i) on
the last day of each Interest Period (provided, however, if the Interest Period
chosen for any Eurodollar Rate Loan exceeds three (3) months, interest on that
Eurodollar Rate Loan shall be due and payable on the last day of every three (3)
month period during such Interest Period and on the last day of
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<PAGE> 38
such Interest Period), (ii) at maturity, whether by acceleration or otherwise,
of the Notes, and (iii) thereafter on demand until all amounts outstanding under
the Notes are paid in full.
(b) Interest Rates. The unpaid principal amount of the Loans
shall bear interest for each day until due at one or more rates selected by the
Borrower from among the Options set forth below (subject to the permitted
interest rates that may be selected for each type of Loan as described below);
it being understood that, subject to the provisions of this Credit Agreement,
the Borrower may select different Options to apply simultaneously to different
Portions of the Loans but may select no more than six (6) different Interest
Periods to apply to Eurodollar Rate Loans; provided however, notwithstanding the
Borrower's right to select different Interest Periods to apply to Eurodollar
Rate Loans, the Borrower agrees that during the Syndications Period the Borrower
shall only be permitted to elect Interest Periods of one (1) month to apply to
the Revolving Credit Loans. In the event that any Swing Loan or Supplemental
Swing Loan is bearing interest at the Money Market Rate Option, no additional
Swing Loans or Supplemental Swing Loans, as the case may be, may be borrowed at,
or converted to, the Money Market Rate Option with respect to such type of
Loans. Borrower shall manage the Interest Periods during the Syndications Period
in a manner to permit the inclusion of Additional Bank(s) and, in the event that
it is necessary to terminate one or more Eurodollar Rate tranches prior to the
end of an Interest Period in order to join an Additional Bank, Borrower shall
compensate the Banks in accordance with Section 2.6(ii) below. The Revolving
Credit Loans shall bear interest at either the Base Rate Option or the
Eurodollar Rate Option. The Swing Loans shall bear interest at the Base Rate
Option or the Money Market Rate Option. The Supplemental Swing Loans shall bear
interest at either the Money Market Rate Option or the Base Rate Option.
(i) Base Rate Option. Interest under the Base Rate Option
shall accrue at a rate per annum (computed upon the basis of a year of 365 or
366 days, as the case may be, and the actual number of days elapsed) for each
day equal to the Base Rate.
(ii) Eurodollar Rate Option. Interest under the Eurodollar
Rate Option shall accrue at a rate per annum (computed upon the basis of a year
of 360 days and the actual number of days elapsed) for each day equal to the sum
of (A) the Eurodollar Rate for each Interest Period plus (B) the Applicable
Eurodollar Rate Margin as determined below.
<TABLE>
<CAPTION>
==================================================== ===========================
APPLICABLE
EURODOLLAR
RATIO OF TOTAL FUNDED DEBT TO EBITDA RATE MARGIN
(PER ANNUM)
- ---------------------------------------------------- ---------------------------
<S> <C>
Greater than 1.75 to 1.0 112.5 basis points
- ---------------------------------------------------- ---------------------------
Greater than 1.0 to 1.0, but less than or 90 basis points
equal to 1.75 to 1.0
- ---------------------------------------------------- ---------------------------
Less than or equal to 1.0 to 1.0 67.5 basis points
==================================================== ===========================
</TABLE>
Upon receipt by the Agent of the quarterly financial statements delivered
pursuant to Subsection 5.2(a) hereof, the Applicable Eurodollar Rate Margin
shall be adjusted, if necessary, effective on the first day of the calendar
month following delivery of such quarterly financial statements. In calculating
the above ratio, Total Funded Debt shall be determined as of the end of such
Fiscal Quarter and EBITDA shall be measured, on a rolling four quarter basis,
for the immediately preceding four Fiscal Quarters then ended.
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<PAGE> 39
(iii) Money Market Rate Option. Interest under the Money
Market Rate Option shall accrue at a rate per annum (computed upon the basis of
a year of 360 days and the actual number of days elapsed) for each day equal to
the sum of (A) the Money Market Rate in effect on each given day plus (B) the
Applicable Money Market Rate Margin as determined below.
<TABLE>
<CAPTION>
==================================================== ===========================
APPLICABLE MONEY
MARKET
RATIO OF TOTAL FUNDED DEBT TO EBITDA RATE MARGIN
(PER ANNUM)
- ---------------------------------------------------- ---------------------------
<S> <C>
Greater than 1.75 to 1.0 112.5 basis points
- ---------------------------------------------------- ---------------------------
Greater than 1.0 to 1.0, but less than or 90 basis points
equal to 1.75 to 1.0
- ---------------------------------------------------- ---------------------------
Less than or equal to 1.0 to 1.0 67.5 basis points
==================================================== ===========================
</TABLE>
Upon receipt by the Agent of the quarterly financial statements delivered
pursuant to Subsection 5.2(a) hereof, the Applicable Money Market Rate Margin
shall be adjusted, if necessary, effective on the first day of the calendar
month following delivery of such quarterly financial statements. In calculating
the above ratio, Total Funded Debt shall be determined as of the end of such
Fiscal Quarter and EBITDA shall be measured, on a rolling four quarter basis,
for the immediately preceding four Fiscal Quarters then ended.
(iv) Payment Default Rate. Upon the expiration of any cure
period relating to an Event of Default pursuant to Section 8.1 hereof, and
during the period in which such Event of Default continues, (A) the principal
amount of the Base Rate Loans and Money Market Rate Loans, whether or not the
same have become due and payable by maturity, acceleration, declaration or
otherwise shall bear interest at a rate per annum which shall be two hundred
(200) basis points (2%) above the rate otherwise in effect for the Base Rate
Loans and Money Market Rate Loans, respectively, and (B) the principal amount of
all of the Eurodollar Rate Loans, whether or not the same have become due and
payable by maturity, acceleration, declaration or otherwise, shall bear
interest, until the end of the current Interest Period, at a rate per annum
which shall be two hundred (200) basis points (2%) above the rate otherwise in
effect for the Eurodollar Rate Loans. At the end of each then current Interest
Period, such Eurodollar Rate Loans shall automatically be converted to Base Rate
Loans, and thereafter the interest rate shall be calculated in accordance with
item (A) of this Subsection 2.5(iv).
(c) Interest Periods; Limitations on Elections. In the event
that the Borrower shall at any time fail to elect an interest rate to be
applicable to a Portion of the Loan, such Portion shall bear interest at the
Base Rate Option, until at different interest rate is elected by the Borrower in
accordance with the provisions of this Agreement. At any time when the Borrower
shall select, convert to or renew the Eurodollar Rate Option to apply to all or
any Portion of the outstanding Revolving Credit Loans, it may fix one or more
Interest Periods to apply to Eurodollar Rate Loans. All the foregoing, however,
is subject to the following:
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<PAGE> 40
(i) the nine (9) month Interest Period is subject to such
Interest Period being available to each Bank on a commercially reasonable basis
(as determined by each Bank in its sole discretion);
(ii) any Interest Period which would otherwise end on a day
which is not a Business Day shall be extended to the next Business Day unless
such Business Day falls in the succeeding calendar month in which case such
Interest Period shall end on the next preceding Business Day;
(iii) any Interest Period which begins on the last day of a
calendar month or on a day for which there is no numerically corresponding day
in the subsequent calendar month during which such Interest Period is to end
shall end on the last Business Day of such subsequent month;
(iv) the Eurodollar Rate Loan for each Interest Period shall
be in an aggregate principal amount of $1,000,000 or more; provided, however,
that each incremental unit in excess of $1,000,000 shall be $100,000 or an
integral multiple thereof; and
(v) no Interest Period may be elected which would end after
the Repayment Date.
(d) Elections, Conversions or Renewals of Interest Rate
Options. Elections of or conversions to the Base Rate Option shall continue in
effect until converted as hereinafter provided. Elections of, conversions to or
renewals of the Eurodollar Rate Option shall expire as to each Eurodollar Rate
Loan at the expiration of the applicable Interest Period.
At any time with respect to any Base Rate Loan or at the
expiration of the applicable Interest Period with respect to any Eurodollar Rate
Loan, the Borrower (subject to Subsection 2.5(e) may cause all or any part of
the principal amount of such Loan to be converted to and/or (in the case of
Eurodollar Rate Loans) to be renewed under the Eurodollar Rate Option by notice
to the Agent as hereinafter provided. Such notice (i) may be oral or in writing
and if oral immediately confirmed in writing to the Agent, (ii) shall be
irrevocable, (iii) shall be given not later than 1:00 P.M. (Pittsburgh,
Pennsylvania time) not less than three (3) Business Days prior to the proposed
effective date for conversion to or renewal of, either in whole or in part, the
Eurodollar Rate Option and (iv) shall set forth:
(A) the effective date, which shall be a Business Day;
(B) the new Interest Period or Interest Periods selected; and
(C) with respect to each such Interest Period, the aggregate
principal amount of the corresponding Eurodollar Rate Loan.
At the expiration of each Interest Period, any part (including
the whole) of the principal amount of the corresponding Eurodollar Rate Loan, as
to which no notice of conversion or renewal has been received as provided above,
shall automatically be converted to a Base Rate Loan. The Agent shall notify the
Borrower of any such automatic conversion.
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<PAGE> 41
(e) Eurodollar Rate Unascertainable. In the event that, on any
date on which the Eurodollar Rate would otherwise be set, the Agent shall have
determined (which determination shall be prima facie evidence of the
unascertainability of the Eurodollar Rate) that, by reason of circumstances
affecting the eurodollar market, adequate and reasonable means do not exist for
ascertaining the Eurodollar Rate, the Agent shall give prompt notice of such
determination to the Borrower, and, until the Agent notifies the Borrower that
the circumstances giving rise to such determination no longer exist, the right
of the Borrower to borrow under, convert to or renew the Eurodollar Rate Option
shall be suspended. Any notice of borrowing under, conversion to or renewal of a
Eurodollar Rate Loan which was to become effective during the period of such
suspension shall be treated as a request to borrow under, convert to or renew a
Base Rate Loan with respect to the principal amount therein specified.
(f) Illegality. If any Bank shall determine in good faith
(which determination shall be final and conclusive) that compliance by such Bank
or its Lending Office with any applicable law, treaty or governmental rule,
regulation, guideline, order, request or directive (whether or not having the
force of law), or the interpretation or application thereof by any governmental
authority, has made it unlawful or commercially impractical for any such Bank to
make or maintain Eurodollar Rate Loans (including but not limited to acquiring
eurodollar liabilities to fund Eurodollar Rate Loans), such Bank shall give
notice of such determination to the Agent and the Borrower; provided, however,
that before the giving of such notice pursuant to this Subsection 2.5(f), such
Bank shall designate a different Lending Office, if such designation will avoid
the need for such notice and will not in the judgment of such Bank be otherwise
disadvantageous to such Bank (in determining the issue of "disadvantageous," no
Bank shall be permitted to rely solely upon the basis that it would be
disadvantageous to continue to have Loans subject to the Eurodollar Rate Option
because it is more profitable to compute interest at the Base Rate Option).
Notwithstanding any provision of this Credit Agreement to the contrary, unless
and until such Bank shall have given notice that the circumstances giving rise
to such determination no longer apply:
(A) with respect to any Interest Periods thereafter
commencing, interest on any Eurodollar Rate Loan shall be computed and payable
under the Base Rate Option; and
(B) on such date, if any, as shall be required by law, any
Eurodollar Rate Loans then outstanding shall be automatically converted to Base
Rate Loans and the Borrower shall pay to the Agent, for the account of the
Banks, the accrued and unpaid interest on such Eurodollar Rate Loans to (but not
including) the date of such conversion.
Such Bank shall furnish to the Agent and the Borrower a
certificate as to the amount necessary to compensate such Bank for the costs
associated with any prepayment pursuant to Subsection 2.5(f)(B) above (which
certificate shall be prima facie evidence of the amount owed by the Borrower to
such Bank), and the Borrower shall pay such amount to the Agent for the account
of such Bank, as additional consideration hereunder, within fifteen (15) days of
the Borrower's receipt of such certificate.
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<PAGE> 42
2.6 Yield Protection and Reimbursement.
(i) Yield Protection. Except for changes addressed in
Subsection 2.5(f), if any Governmental Rule issued after the Closing Date or if
any change on or after the Closing Date in any Governmental Rule (including,
without limitation, Regulation D) or the interpretation or application thereof
by any Governmental Person charged with the administration thereof (whether or
not having the force of law):
(A) subjects any Bank, its Lending Office or the Issuing Bank
to any tax, duty, levy, impost, charge, fee, deduction or withholding of any
kind hereunder (other than (x) a tax, including, without limitation, a branch
tax, imposed or based upon the income of such Bank, its Lending Office or the
Issuing Bank and (y) any franchise tax imposed on such Bank, its Lending Office
or the Issuing Bank by the laws of the jurisdiction under which such Bank, such
Lending Office or the Issuing Bank is organized or any political subdivision
thereof) or changes the basis of taxation of any Bank, its Lending Office or the
Issuing Bank with respect to the payments by the Borrower of principal or
interest due hereunder (other than any change which affects, and to the extent
that it affects, the taxation by the United States or any state thereof of the
total net income of such Bank or the Issuing Bank);
(B) imposes, modifies or deems applicable any reserve, special
deposit or similar requirements against assets of, deposits with or for the
account of, or credit extended, commitments to lend or any Letters of Credit
issued or participations purchased therein by any Bank, its Lending Office, the
Issuing Bank or any corporation controlling such Bank or the Issuing Bank (other
than such requirements which are included in determining the applicable rate or
rates of interest hereunder); or
(C) imposes upon any Bank, its Lending Office or the Issuing
Bank any other obligation or condition with respect to this Credit Agreement,
and the result of all of the foregoing is to increase the cost to such Bank, its
Lending Office, the Issuing Bank or any corporation controlling such Bank or the
Issuing Bank, of making the Loans, extending the Revolving Credit Commitment,
issuing any Letter of Credit or making or maintaining any participation in any
Letter of Credit, reduce the net after-tax income receivable by such Bank, its
Lending Office or the Issuing Bank from payments under this Credit Agreement or
impose any expense upon any Bank, its Lending Office, the Issuing Bank or any
corporation controlling such Bank, reduce the rate of return on the capital of
such Bank, its Lending Office, the Issuing Bank or any corporation controlling
such Bank by an amount which such Bank or the Issuing Bank in good faith deems
material,
(A) the Bank or the Issuing Bank so affected shall promptly
notify the Borrower and the Agent of the happening of such event; and of the
amount determined by such Bank, its Lending Office or the Issuing Bank (which
determination shall be prima facie evidence of the amount owed by the Borrower
to such Bank) to be necessary to compensate such Bank or the Issuing Bank for
such increase in cost, reduction in net after tax-income or additional expense;
35
<PAGE> 43
(B) the Borrower shall pay to the affected Bank or the Issuing
Bank, on demand, as additional interest on the Loans or draws under any Letter
of Credit, such amount as will compensate such Bank or the Issuing Bank for such
additional cost or expense or reduced amount, calculated from the date of the
notification by such Bank or the Issuing Bank; and
(C) the Borrower may pay to such affected Bank or the Issuing
Bank the affected Loan or draw under any Letter of Credit in full without the
payment of any additional amount other than on account of such Bank's or the
Issuing Bank's out-of-pocket losses (including funding losses, if any, as
provided in paragraph (ii) below) not otherwise provided for in subparagraph (B)
immediately above.
A certificate as to the increased cost or reduced amount as a result of any of
the foregoing events shall be promptly submitted by such Bank or the Issuing
Bank to the Borrower and the Agent in accordance with the provisions of Section
10.2 hereof. Such certificate shall, in the absence of manifest error, be
conclusive and binding as to the amount thereof. Notwithstanding anything
contained in this Section 2.6 to the contrary, each Bank agrees that it will not
make a request for compensation unless at such time the Bank is making a similar
claim for compensation from certain of its other borrowers which are similarly
situated.
(ii) Reimbursement of Costs and Losses.
(A) Voluntary Breakage. The Borrower hereby agrees to
indemnify each Bank against any loss or expense which such Bank may sustain or
incur as a consequence of the Borrower (x) failing to make any borrowing,
conversion or renewal of a Eurodollar Rate Loan on the scheduled date, (y)
failing to make when due (whether by declaration, acceleration or otherwise);
any payment or prepayment of any amount due hereunder or in voluntarily making
any payment or prepayment of any Eurodollar Rate Loan or any part thereof on any
day other than the last day of its Interest Period.
(B) Involuntary Breakage. The Borrower hereby agrees to
indemnify each Bank against any loss or expense which such Bank may sustain or
incur as a consequence of the Borrower (x) failing, through no fault of its own,
including, without limitation, the circumstances specified in Subsection 2.5(h),
to make any borrowing, conversion or renewal of a Eurodollar Rate Loan on the
scheduled date, (y) failing to make when due (whether by declaration,
acceleration or otherwise) any payment or prepayment of any amount due hereunder
or (z) making any payment or prepayment of any Eurodollar Rate Loans or any part
thereof on any day other than the last day of its Interest Period, including,
but not limited to, any premium or penalty incurred by such Bank in respect of
funds borrowed by it for the purpose of making or maintaining any Eurodollar
Rate Loan or any part thereof as determined by such Bank in the exercise of its
sole but reasonable discretion.
(iii) Notice of Costs and Losses. Each Bank will promptly
notify the Borrower and the Agent of any event of which it has knowledge which
will entitle such Bank to compensation pursuant to this Section 2.5 and will
designate a different Lending Office if such designation will avoid the need
for, or reduce the amount of, such compensation and will not, in the judgment of
such Bank, be otherwise disadvantageous to such Bank. Any Bank incurring
36
<PAGE> 44
such loss or expense pursuant to this Section 2.5 shall furnish to the Borrower
(through the Agent) a certificate signed by an appropriate officer of such Bank
as to the amount of any such loss or expense showing the related calculations in
reasonable detail (which certificate shall be prima facie evidence of the amount
owed by the Borrower to such Bank), and the Borrower shall pay such amount to
such Bank within thirty (30) days of the Borrower's receipt of such
certificate). Notwithstanding the foregoing provisions of this Section 2.5, the
Borrower shall only be obligated to compensate any Bank for any amount arising
or accruing during (x) any time or period commencing not more than ninety (90)
days prior to the date on which such Bank notifies the Agent and the Borrower
that it proposes to demand such compensation and identifies to the Agent and the
Borrower the statute, regulation or other basis upon which the claimed
compensation is or will be based and (y) any time or period during which,
because of the retroactive application of such statute, regulation or other
basis, such Bank did not know that such amount would arise or accrue.
The Borrower's obligations under this Section 2.6 shall survive the
termination of this Credit Agreement and repayment of the Bank Indebtedness.
2.7 Capital Adequacy.
If, after the Closing Date, any adoption of, any change to or any
change in the interpretation of any Governmental Rule by any Governmental Person
exercising control over banks or financial institutions generally or any court
(whether or not having the force of law) affects or would affect the amount of
capital required or expected to be maintained by any Bank or any corporation
controlling such Bank (a "Capital Adequacy Event"), and the result of such
Capital Adequacy Event is to reduce the rate of return on capital of such Bank
or the capital of any corporation controlling such Bank as a consequence thereof
to a level below that which such Bank could have achieved but for such Capital
Adequacy Event (taking into consideration such Bank's policies with respect to
capital adequacy) by an amount which such Bank deems to be material, such Bank
shall promptly deliver to the Borrower and the Agent a statement of the amount
necessary to compensate such Bank for the reduction in the rate of return on its
capital attributable to its Loans and the commitments under this Credit
Agreement (the "Capital Compensation Amount"). Each Bank shall determine the
Capital Compensation Amount in good faith, using reasonable attribution and
averaging methods. Each Bank shall, from time to time, furnish to the Borrower
and the Agent a certificate as to the amount so determined. Such certificate
shall, in the absence of manifest error, be conclusive and binding as to the
amount thereof. Such amount shall be due and payable by the Borrower to such
Bank ten (10) days after such notice is given. As soon as practicable after any
Capital Adequacy Event, such Bank shall submit to the Borrower and the Agent
estimates of the Capital Compensation Amounts that would be payable as a
function of such Bank's commitments hereunder.
The Borrower's obligations under this Section 2.7 shall survive the
termination of this Credit Agreement and repayment of the Bank Indebtedness.
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<PAGE> 45
2.8 Closing Fee.
The Borrower agrees to pay to the Agent, for the benefit of the Banks,
a nonrefundable Closing Fee equal to 0.225% of the Revolving Credit Commitments,
which shall be deemed fully earned by the Banks upon entering into this
Agreement. The Agent shall distribute to each Bank a portion of such Closing Fee
equal in ratio to such Bank's Commitment to the total Revolving Credit
Commitments of all the Banks. If an Additional Bank joins in this Agreement, the
Borrower agrees to pay for the account of such Additional Bank a Closing Fee
equal to 0.225% of such Bank's Revolving Credit Commitment on the date of such
Additional Bank joining in this Agreement.
2.9 Lending Offices.
Each Bank may book its Loans at any Lending Office selected by such
Bank and may change its Lending Office from time to time. All terms of this
Credit Agreement shall apply to any such Lending Office and the Notes shall be
deemed held by each Bank for the benefit of such Lending Office. Each Bank may,
by written notice to the Agent and the Borrower, designate a Lending Office
through which its Loans will be made by it and for whose account payments are to
be made.
2.10 Time, Place and Manner of Payments.
All payments to be made by the Borrower under the Notes or of the
Agent's Fee, the Facility Fee and all other amounts due the Agent, whether for
its own account or for the benefit of the Banks, hereunder shall be made at the
principal office of the Agent set forth in Article X. All payments to be made by
the Borrower under this Credit Agreement shall be paid in Dollars in immediately
available funds no later than 1:30 P.M. (Pittsburgh, Pennsylvania time) on the
date such payment is due. Except as specified elsewhere, if the date on which
any payment is due is not a Business Day such payment shall be due and payable
on the next succeeding day which is a Business Day and such extension of time
shall be included in computing any interest in respect of such payment.
2.11 Payment From Accounts Maintained by the Borrower.
In the event that any payment of principal, interest, Agent's Fee, the
Closing Fee, the Facility Fee, the Letter of Credit Fees or any other amount due
the Agent, whether for its own account or for the benefit of the Banks, under
the Loan Documents is not paid when due, the Agent is hereby authorized to
effect such payment by debiting any demand deposit account of the Borrower
maintained with the Agent. This right of debiting accounts of the Borrower is in
addition to any right of set-off accorded the Agent hereunder or by operation of
law.
2.12 Swing Loan Settlement Date Procedures.
In order to minimize the transfer of funds between the Banks and
National City Bank, the Borrower may borrow, repay and reborrow Swing Loans and
National City Bank may make Swing Loans as provided herein during the period
between Settlement Dates. On each Settlement Date, not later than 2:00 P.M.
(Pittsburgh, Pennsylvania time), the Agent shall notify
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<PAGE> 46
each Bank of its Commitment Percentage of the total of the Revolving Credit
Loans to be made on such date to repay the Swing Loans. Prior to 4:00 P.M.
(Pittsburgh, Pennsylvania time) on such Settlement Date, each Bank shall pay to
the Agent the amount of its Revolving Credit Loan to repay the outstanding Swing
Loans. These settlement procedures are established solely as a matter of
administrative convenience, and nothing contained in this Section 2.12 shall
relieve the Banks of their obligations to fund Revolving Credit Loans on dates
other than a Settlement Date pursuant to Section 2.1 or 2.2(e).
2.13 Substitution of a Bank.
If (i) the obligation of any Bank to fulfill its obligations in
relation to the issuance of any Letter of Credit or the purchase of any risk
participations therein under Section 2.4 has been suspended pursuant to
Subsection 2.4(b)(ii) hereof, (ii) the obligation of any Bank to make Eurodollar
Rate Loans has been suspended pursuant to Subsection 2.5(f) hereof, (iii) any
Bank has demanded compensation under Section 2.5 or Section 2.6 hereof or (iv)
any Bank has failed to fund any Loan properly requested hereunder, the Agent
shall, at the request of the Borrower and with the assistance of the Borrower,
undertake in good faith to obtain a mutually satisfactory substitute lending
institution or lending institutions (which may be one or more of the Banks) to
purchase the Revolving Credit Note and the Supplemental Swing Loan Note, as the
case may be, and assume the Revolving Credit Loans, the Supplemental Swing
Loans, the Revolving Credit Commitment and the Supplemental Swing Loan
Commitment of such Bank, as the case may be, provided, however, in no way shall
the Agent's efforts in trying to obtain a substitute lending institution imply
that the Agent or National City Bank has any obligation to acquire such interest
for its own account.
ARTICLE III. SET-OFF
3.1 Set-Off.
The Borrower hereby gives to the Banks a lien and security interest for
the amount of any Bank Indebtedness upon and in any property, credits,
securities or Monies (whether matured or unmatured) of the Borrower which may at
any time be delivered to, or be in the possession of, or owed by any Bank or any
affiliate of any Bank in any capacity whatever, including the balance of any
deposit account but excluding any trust, fiduciary, reserve, electronic funds
transfer or direct loan accounts, in each case maintained by the Borrower with
such Bank. The Borrower hereby authorizes each Bank in case of an Event of
Default, at such Bank's option, at any time and from time to time, to apply, at
the discretion of such Bank, to the payment of Bank Indebtedness, any and all
such property, credits, securities or Monies now or hereafter in the hands of
such Bank belonging or owed to the Borrower.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES
To induce the Banks, the Issuing Bank and the Agent to enter
into this Credit Agreement, to induce the Banks to make the Revolving Credit
Loans, the Swing Loans and the Supplemental Swing Loans herein provided for, and
to induce the Issuing Bank to issue the
39
<PAGE> 47
Letters of Credit herein provided for, the Borrower represents and warrants to
the Agent, the Banks and the Issuing Bank that:
4.1 Existence.
(a) Borrower's Existence. The Borrower is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania and is duly qualified and in good standing as a
foreign corporation, authorized to do business in each jurisdiction where,
because of the nature of its activities or properties, such qualification is
required, except for those foreign jurisdictions where the Borrower's
non-qualification would not have a Material Adverse Effect.
(b) Active Subsidiary's Existence. Schedule 4.1 attached
hereto sets forth each Active Subsidiary of the Borrower in existence as of the
Closing Date. Except for Active Subsidiaries that have entered into a merger as
permitted by Section 6.9 herein and are not the surviving corporation, each of
the Borrower's Active Subsidiaries is duly organized, validly existing and in
good standing under the laws of the state of its incorporation and is duly
qualified and in good standing as a foreign corporation, authorized to do
business in each jurisdiction where, because of the nature of its activities or
properties, such qualification is required, except for those foreign
jurisdictions where such Active Subsidiary's non-qualification would not have a
Material Adverse Effect.
4.2 Authority.
The Borrower has full power, authority and legal right to engage in the
activities conducted or proposed to be conducted by it and, with respect to the
Loans and Letters of Credit, to execute, deliver and perform its obligations
under the Loan Documents. The Borrower has taken all corporate actions necessary
or appropriate to authorize the execution, delivery and performance of the Loan
Documents.
4.3 Capitalization of Subsidiaries.
Schedule 4.3 lists all of the Subsidiaries of the Borrower, the issued
and outstanding stock of each Subsidiary and the owner thereof. All capital
stock of the Subsidiaries identified on Schedule 4.3 has been duly authorized
and validly issued and is fully paid and nonassessable. There is no stock or
securities convertible or exchangeable for any shares of such Subsidiary's
common stock. Except as set forth on Schedule 4.3, no outstanding rights or
options to subscribe for or to purchase any of such Subsidiary's capital stock
or any stock or securities convertible into or exchangeable for any Subsidiary's
common stock.
4.4 Validity and Enforceability.
This Credit Agreement constitutes a legal, valid and binding obligation
of the Borrower, enforceable in accordance with its terms, subject to the effect
of any applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the enforcement of creditors' rights generally and to general
principles of equity (regardless of whether considered in a proceeding in equity
or at law). The Notes, and each other Loan Documents, when duly
40
<PAGE> 48
executed by the Borrower and delivered in accordance with this Credit Agreement,
will constitute legal, valid and binding obligations of the Borrower,
enforceable in accordance with their respective terms, subject to the effect of
any applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the enforcement of creditors' rights generally and to general
principles of equity (regardless of whether considered in a proceeding in equity
or at law).
4.5 No Conflict.
The execution and delivery of this Credit Agreement, the Notes, and the
other Loan Documents by the Borrower does not conflict with or constitute on the
part of the Borrower a violation of, breach of, or default under (i) its
respective Certificate/Articles of Incorporation or By-Laws, (ii) any indenture,
mortgage, deed of trust, lease, note agreement or other agreement or instrument
to which the Borrower or any Active Subsidiary is a party or by which the
Borrower or any Active Subsidiary of the Borrower is bound, or (iii) any
Governmental Rule of any Governmental Person having jurisdiction over the
Borrower or any Active Subsidiary of the Borrower or any of their respective
activities or property.
4.6 Consents.
All consents, approvals, authorizations and orders of governmental or
regulatory authorities which are required for the consummation of the
transactions contemplated by this Credit Agreement, the Notes and the other Loan
Documents, or which, in any way, would materially adversely affect the validity
or enforceability of any such Loan Document, if not obtained, have been
obtained.
4.7 Litigation.
Except as set forth on Schedule 4.7, there are no actions, suits,
investigations, litigation or governmental proceedings pending, or to the
knowledge of the Borrower threatened, against it or any Active Subsidiary with
respect to the Borrower or such Active Subsidiary.
4.8 Compliance With Applicable Laws, etc.
Neither the Borrower nor any of its Active Subsidiaries is in default
with respect to any order, writ, injunction or decree (i) of any court or (ii)
of any Governmental Person and the Borrower and its Active Subsidiaries are each
substantially complying with all applicable statutes and regulations of each
Governmental Person having jurisdiction over their respective activities;
provided, however, the Borrower shall not be deemed in violation of this Section
4.8 as a result of any non-compliance if (A) such order, writ, injunction or
decree is being contested by the Borrower or any Active Subsidiary in good faith
and by proper proceedings appropriately conducted or (B) the non-compliance with
such order, writ, injunction or decree would not materially and adversely affect
the business operations or financial condition of the Borrower or its
Subsidiaries or the ability of the Borrower and its Subsidiaries, taken as a
whole, to perform their respective obligations under the Loan Documents.
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4.9 Financial Statements.
Copies of the Borrower's (i) audited Consolidated financial statements
for the Fiscal Year ended June 30, 1999 and (ii) unaudited Consolidated
financial statements for the Fiscal Quarter ended September 30, 1999, each
prepared on a basis not inconsistent with that of the preceding Fiscal Year,
have been furnished to the Agent, and each such statement presents fairly the
Consolidated financial condition of the Borrower as of such date and the results
of its operations.
4.10 Environmental Matters.
(i) Except as set forth on Schedule 4.10 hereto, to the best
of the Borrower's knowledge:
(A) the Borrower and each of its Active Subsidiaries is in
compliance with all applicable Environmental Laws except where noncompliance
with any such Environmental Law has not, or could not reasonably be expected to,
result in a Material Adverse Effect;
(B) other than materials used or produced, held, transported
and disposed of in accordance with all Environmental Laws, neither the Borrower
nor any Active Subsidiary has used in its operations, and the property of the
Borrower or such Active Subsidiary is not now and has never been used by the
Borrower or such Active Subsidiary (or, to the best knowledge of the Borrower
after due inquiry, by any predecessor in possession or other Person) for
treatment, generation, storage, recycling, or disposal of Hazardous Substances
in violation of any Environmental Laws, except where noncompliance with any such
Environmental Law has not, or could not reasonably be expected to, result in a
Material Adverse Effect;
(C) no Hazardous Substances are present at any property owned
or leased by the Borrower or any Active Subsidiary, nor will any Hazardous
Substances be present upon any such property or in the operation thereof by the
Borrower or any Active Subsidiary, except which are handled in accordance with
all Environmental Laws, in proper storage containers or where such Hazardous
Substances have not been brought to or stored on the property by the Borrower or
its Active Subsidiaries and have not, or could not reasonably be expected to,
result in a Material Adverse Effect; and
(D) the Borrower and its Active Subsidiaries have all
necessary and appropriate environmental permits, including but not limited to
those for air emissions, water discharges, and treatment, storage and disposal
of the Hazardous Substances, except where noncompliance with any the foregoing
has not, or could not reasonably be expected to, result in a Material Adverse
Effect.
(ii) There are no past, pending or, to the best of the
Borrower's knowledge, threatened Environmental Claims by or against the Borrower
or any Active Subsidiary or with respect to any property of the Borrower or such
Active Subsidiary that, individually or in the aggregate, could have a Material
Adverse Effect on the Borrower and its Active Subsidiaries, taken as a whole.
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4.11 Deferred Compensation Plans.
Except as listed on Schedule 4.11 attached hereto, neither the Borrower
nor any of its Active Subsidiaries has any employee pension benefit plan (as
that term is defined in Section 3(2)(A) of ERISA) other than an employee stock
ownership plan.
Except as set forth on Schedule 4.11:
(A) The Borrower and each ERISA Affiliate is in compliance in
all material respects with any applicable provisions of ERISA with respect to
all Benefit Arrangements, Plans and Multiemployer Plans. There has been no
Prohibited Transaction with respect to any Benefit Arrangement or any Plan or,
to the best knowledge of the Borrower, with respect to any Multiemployer Plan or
Multiple Employer Plan, which could result in any material liability of the
Borrower or any ERISA Affiliates. The Borrower and all ERISA Affiliates have
made when due any and all payments required to be made under any agreement
relating to a Multiemployer Plan or a Multiple Employer Plan or any Law
pertaining thereto. With respect to each Plan and Multiemployer Plan, the
Borrower and all ERISA Affiliates (i) have fulfilled in all material respects
their obligations under the minimum funding standards of ERISA, (ii) have not
incurred any liability to the PBGC, and (iii) have not had asserted against them
any penalty for failure to fulfill the minimum funding requirements of ERISA.
(B) To the best of the Borrower's knowledge, each
Multiemployer Plan and Multiple Employer Plan is able to pay benefits thereunder
when due.
(C) Neither the Borrower nor any ERISA Affiliate has
instituted or intends to institute proceedings to terminate any Plan.
(D) No event requiring notice to the PBGC under Section
302(f)(4)(A) of ERISA has occurred or is reasonably expected to occur with
respect to any Plan, and no amendment with respect to which security is required
under Section 307 of ERISA has been made or is reasonably expected to be made to
any Plan.
(E) The aggregate actuarial present value of all benefit
liabilities (whether or not vested) under each Plan, determined on a plan
termination basis, as disclosed in, and as of the date of, the most recent
actuarial report for such Plan, does not exceed the aggregate fair market value
of the assets of such Plan.
(F) Neither the Borrower nor any ERISA Affiliate has incurred
or reasonably expects to incur any material withdrawal liability under ERISA to
any Multiemployer Plan or Multiple Employer Plan. Neither the Borrower nor any
ERISA Affiliate has been notified by any Multiemployer Plan or Multiple Employer
Plan that such Multiemployer Plan or Multiple Employer Plan has been terminated
within the meaning of Title IV of ERISA and, to the best knowledge of the
Borrower, no Multiemployer Plan or Multiple Employer Plan is reasonably expected
to be reorganized or terminated, within the meaning of Title IV of ERISA.
(G) To the extent that any Benefit Arrangement is insured, the
Borrower and all ERISA Affiliates have paid when due all premiums required to be
paid for all periods through
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the Closing Date. To the extent that any Benefit Arrangement is funded other
than with insurance, the Borrower and all ERISA Affiliates have made when due
all contributions required to be paid for all periods through the Closing Date.
(H) All Plans, Benefit Arrangements and Multiemployer Plans
have been administered in accordance with their terms and applicable Law.
4.12 Title to Properties.
The Borrower and each Active Subsidiary has good title to all of its
properties and assets except for (i) defects in title which, taken as a whole,
are not material to the Borrower or such Active Subsidiary and (ii) other
Permitted Encumbrances.
4.13 Intellectual Property.
The Borrower and each Active Subsidiary owns or licenses all patents,
patent applications, trademarks, trademark applications, permits, service marks,
trade names, copyrights, copyright applications, licenses, franchises,
authorizations and other intellectual property rights that are necessary for the
operations of its business, without infringement upon or conflict with the
rights of any other Person with respect thereto, except where the consequences
in the aggregate would not be reasonably expected to have a Material Adverse
Effect. To the best knowledge of the Borrower, (i) no device, product, process,
method, substance, part or component or other material now employed, or now
contemplated to be employed, by the Borrower or any Active Subsidiary infringes
upon or conflicts with any rights owned by any other Person and (ii) no claim or
litigation regarding any of the foregoing is pending or threatened. No patent,
invention, device, application, principle and no Governmental Rule, standard or
code involving the Borrower's or any Active Subsidiary's intellectual property
is pending or, to the knowledge of the Borrower, proposed, except where the
consequences in the aggregate would not be reasonably expected to have a
Material Adverse Effect. All of the Borrower's and each Active Subsidiary's
material patents, trademarks, permits, service marks, trade names, copyrights,
licenses, franchises and authorizations are listed on Schedule 4.13 hereto.
4.14 Tax Returns and Payments.
The Borrower and each of its Active Subsidiaries have filed all United
States Federal tax returns and the Borrower and each Active Subsidiary has filed
all other material tax returns, or extensions for the filing of such tax returns
within the time parameters permitted by law, which, to the knowledge of the
Borrower, are required by law to be filed by them (except where the failure to
file such tax returns would not materially adversely affect the business,
Consolidated financial conditions or the Consolidated results of operations of
the Borrower and its Subsidiaries as a whole) and have paid all taxes due
pursuant to such returns or pursuant to any assessments levied upon the
Borrower, the Active Subsidiaries or any of their respective properties, assets
or income which are due and payable, (other than those assessments, taxes, fees
or other charges, the amount or validity of which is currently being contested
in good faith by appropriate proceedings and with respect to which reserves in
conformity with GAAP have been
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provided on the books of the Borrower or such Active Subsidiary). The charges,
accruals and reserves on the books of the Borrower and its Active Subsidiaries,
in respect of federal and state income taxes for all fiscal periods to date, are
adequate in accordance with GAAP.
4.15 Material Adverse Change.
Since June 30, 1999, there has been no Material Adverse Change in
operations or financial condition of the Borrower, individually, or the Borrower
and its Subsidiaries taken as a whole, including without limitation, any
Material Adverse Change arising from any litigation of the Borrower or any
Subsidiary whether or not disclosed on Schedule 4.7.
4.16 Solvency.
The Borrower and each Active Subsidiary is, and after giving effect to
the transactions contemplated pursuant to this Credit Agreement and the other
Loan Documents will be, solvent.
4.17 Investment Company Act.
The Borrower is not an "investment company" registered or required to
be registered under the Investment Company Act of 1940, as amended from time to
time, or a company under the "control" of an "investment company," as those
terms are defined in such Act, and shall not become such an "investment company"
or under such "control."
4.18 Public Utility Holding Company Act.
The Borrower is not a "holding company," or a "subsidiary company" of a
"holding company," or an "affiliate" of a "holding company" or an "affiliate" of
a "subsidiary company" of a "holding company" within the meaning of the Public
Utility Holding Company Act of 1935, as amended from time to time.
4.19 Liens and Security Interests.
Except for Permitted Encumbrances, there are no liens or security
interests on any of the real or personal property of the Borrower or any Active
Subsidiary.
4.20 Margin Stock.
The Borrower does not engage or intend to engage principally, or as one
of its important activities, in the business of extending credit for the
purpose, immediately, incidentally or ultimately, of purchasing or carrying
margin stock (within the meaning of Regulation U). No part of the proceeds of
any Loan has been or will be used, immediately, incidentally or ultimately, to
purchase or carry any margin stock or to extend credit to others for the purpose
of purchasing or carrying any margin stock or to refund Indebtedness originally
incurred for such purpose, or for any purpose which entails a violation of or
which is inconsistent with the provisions of the regulations of the Board of
Governors of the Federal Reserve System. Neither the Borrower nor any Active
Subsidiary of the Borrower holds or intends to hold margin stock in
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such amounts that more than 25% of the reasonable value of the assets of the
Borrower or Active Subsidiary of the Borrower are or will be represented by
margin stock.
4.21 Year 2000.
The Borrower has reviewed the areas within its business and operations
which could be adversely affected by, and have developed or are developing a
program to address on a timely basis, the risk that certain computer
applications used by the Borrower (or any of their respective material
suppliers, customers or vendors) may be unable to recognize and perform properly
date-sensitive functions involving dates prior to and after December 31, 1999
(the "Year 2000 Problem"). The Year 2000 Problem will not result in any Material
Adverse Change.
4.22 Updates to Schedules.
Should any of the information or disclosures provided on any of the
Schedules attached hereto become outdated or incorrect in any material respect,
the Borrower shall promptly provide the Agent in writing with such revisions or
updates to such Schedule as may be necessary or appropriate to update or correct
same; provided, however, that no Schedule shall be deemed to have been amended,
modified or superseded by any such correction or update, nor shall any breach of
warranty or representation resulting from the inaccuracy or incompleteness of
any such Schedule be deemed to have been cured thereby, unless and until the
Required Banks, in their sole and absolute discretion, shall have accepted in
writing such revisions or updates to such Schedule.
4.23 Disclosure.
Neither this Credit Agreement nor any other document, statement,
certificate or other instrument delivered to the Agent or the Banks by or on
behalf of the Borrower pursuant to this Credit Agreement or any other Loan
Document 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, in light of the circumstances under which they were made, not
misleading. There is no fact known to the Borrower which materially and
adversely affects or, so far as the Borrower now foresees, will in the future
materially and adversely affect the business, operations, affairs, condition,
properties, assets, financial condition or results of operations of the Borrower
and its Active Subsidiaries which has not been set forth in this Credit
Agreement or in the other documents, instruments, certificates or statements
(financial or otherwise) furnished to the Agent or the Banks by or on behalf of
the Borrower prior to or on the Closing Date.
4.24 Use of Proceeds.
The Borrower and its Subsidiaries intend to use the proceeds of the
Loans in accordance with Section 5.1.
4.25 Insurance.
All insurance policies and other bonds to which Borrower or any of its
Subsidiaries is a party are valid and in full force and effect. No notice has
been given or claim made and no
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grounds exist to cancel or avoid any of such policies or bonds or to reduce the
coverage provided thereby. Such policies and bonds provide adequate coverage
from reputable and financially sound insurers in amounts sufficient to insure
the assets and risks of Borrower and each of its Subsidiaries in accordance with
prudent business practice in the industry of the Borrower and its Subsidiaries.
4.26 Material Contracts; Burdensome Restrictions.
All material contracts relating to the business operations of Borrower
and each of its Subsidiaries, including all material employee benefit plans and
material labor contracts, are valid, binding and enforceable upon the Borrower
or its Subsidiary and each of the other parties thereto in accordance with their
respective terms, and there is no material default thereunder, to the Borrower's
knowledge, with respect to parties other than the Borrower or its Subsidiary.
Neither the Borrower nor any of its Subsidiaries is bound by any contractual
obligation, or subject to any restriction in any organization document, or any
requirement of Law which could reasonably be expected to result in a Material
Adverse Change.
4.27 Employment Matters.
The Borrower and its Subsidiaries conduct their businesses in
compliance with employment Laws, except where the failure to do so could not
reasonably be expected to result in a Material Adverse Change. There are no
outstanding grievances, arbitration awards or appeals therefrom arising out of
any labor contracts or current or threatened strikes, picketing, handbilling or
other work stoppages or slowdowns at facilities of any of the Borrower or any of
its Subsidiaries which in any case could reasonably result in a Material Adverse
Change.
4.28 Senior Debt Status.
The obligations of Borrower under this Credit Agreement and each of the
other Loan Documents to which it is a party do rank and will rank at least pari
passu in priority of payment with all other Indebtedness for Borrowed Money of
Borrower except Indebtedness for Borrowed Money of Borrower to the extent
secured by Permitted Liens. There is no lien upon or with respect to any of the
properties or income of Borrower or Subsidiary of Borrower which secures
indebtedness or other obligations of any Person except for Permitted
Encumbrances.
ARTICLE V. AFFIRMATIVE COVENANTS
From the date hereof and for so much longer thereafter as the
Revolving Credit Commitment is in effect or any of the Bank Indebtedness remains
unpaid, the Borrower agrees, for the benefit of the Banks, the Issuing Bank and
the Agent, that:
5.1 Use of Proceeds.
Proceeds of (i) the Revolving Credit Loans shall be used by the
Borrower (a) to refinance the revolving credit loans, if any, outstanding under
the Borrower's existing agented credit agreement, (b) for general working
capital purposes of the Borrower and its Active Subsidiaries,
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including but not limited to capital expenditures, the acquisition and
development of additional schools, draws to meet DOE regulatory requirements and
Permitted Acquisitions and (c) for the repurchase, subsequent to the Closing
Date, of up to $40,000,000 of the Borrower's common stock; (ii) the Swing Loans
shall be used by the Borrower to finance its general working capital purposes on
a day-to-day basis; (iii) the Supplemental Swing Loans shall be used by the
Borrower to finance its short term borrowing needs for general corporate
purposes; and the Letters of Credit may be issued for general corporate
purposes.
5.2 Furnishing Information.
The Borrower will maintain a system of accounting established and
administered in accordance with GAAP consistently applied, and will maintain its
books in a manner so as to enable it to produce GAAP statements. Further, the
Borrower will:
(a) Quarterly Reports of Borrower. Beginning with the period
ending December 31, 1999, furnish to the Agent, for redelivery to each Bank, as
soon as practicable but in any event within forty-five (45) days after the end
of each Fiscal Quarter, copies of (i) internally prepared Consolidated balance
sheets of the Borrower as at the close of each such Fiscal Quarter and (ii)
internally prepared Consolidated statements of profit and loss, of retained
earnings and cash flows of the Borrower for the quarter then ended and for the
period from the beginning of the Fiscal Year to the date of such balance sheet,
together with figures in comparative form for the corresponding date or period,
as the case may be, one year prior thereto, all prepared in accordance with
GAAP, consistently applied, except for the absence of notes thereon and subject
to year-end adjustments, and in such reasonable detail as the Agent may request;
provided, however, the Borrower shall be deemed in compliance with the timing
requirements of this Section if the Borrower shall file its 10Q statement with
the Securities Exchange Commission in a timely fashion and shall promptly send a
copy of the financial statements to the Agent.
(b) Annual Reports of Borrower. Furnish to the Agent after the
end of each Fiscal Year, for redelivery to each Bank, as soon as practicable but
in any event within one hundred twenty (120) days after the end of each Fiscal
year beginning on or after July 1, 1999, copies of the annual audited
Consolidated financial statements of the Borrower which shall include, among
other things, (A) the Consolidated balance sheet and Consolidated statement of
income of the Borrower as at the end of such Fiscal Year, (B) a Consolidated
statement of profit and loss and (C) a summary of transactions in the
stockholders' equity account of the Borrower, all in reasonable detail, all
prepared in accordance with GAAP and all certified without qualification by an
independent public accountant selected by the Borrower and satisfactory to the
Agent; provided, however, the Borrower shall be deemed in compliance with the
timing requirements of this Section if the Borrower shall file its 10K statement
with the Securities Exchange Commission in a timely fashion and shall promptly
send a copy of the financial statements to the Agent.
(c) Annual Reports of the Active Subsidiaries. Furnish to the
Agent as soon as practicable but in any event within one hundred twenty (120)
days after the end of each Fiscal Year beginning on or after July 1, 1999,
copies of the internally prepared consolidating balance
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sheet and consolidating income statement including each Active Subsidiary as at
the end of such Fiscal Year, and in such reasonable detail as the Agent may
request.
(d) Compliance Certificate. Together with each delivery of
financial statements pursuant to Subsections 5.2(a), 5.2(b) and 5.2(c) above, a
Compliance Certificate substantially in the form of Exhibit "F" attached hereto,
signed by the Chief Financial Officer, or in his absence, the Treasurer of the
Borrower, stating that he has caused the terms of this Credit Agreement and of
the Notes to be reviewed and has made, or caused to be made under his
supervision, a review of the transactions and condition of the Borrower and its
Active Subsidiaries during the accounting period covered by such financial
statements and that nothing has come to his attention to lead him to believe
that any Event of Default hereunder or any condition or event which, after
notice or lapse of time or both, would constitute an Event of Default exists. If
any such Event of Default, condition or event existed or exists, such
certificate shall specify the nature and period of existence thereof and what
action the Borrower or such Active Subsidiary has taken or is taking or proposes
to take with respect thereto. Each such certificate shall also contain, for the
period to which the same relates, calculations in reasonable detail manifesting
compliance as of the close of such accounting period with the covenants
contained in Sections 6.1 through 6.6 inclusive and Section 6.12 hereof. Such
certificate shall in all respects be in form and substance satisfactory to
Agent.
(e) Notification of Defaults. Furnish to the Agent, for
redelivery to each Bank, prompt notice upon the occurrence of any event of
default or of any event which, with the giving of notice or the lapse of time,
or both, would constitute an event of default under any Indebtedness for
Borrowed Money involving liabilities in excess of $500,000 in the aggregate.
(f) Other Reports, Information and Notices. The Borrower will
deliver or cause to be delivered to the Agent, for redelivery to each Bank,
within the time periods set forth below, the following other reports,
information and notices:
(i) Notice of Events of Default and Material Adverse Changes.
Promptly after any Authorized Officer of the Borrower has learned of the
occurrence or existence of an Event of Default or a Material Adverse Change,
telephonic notice thereof specifying the details thereof, the anticipated effect
thereof and the action which the Borrower has taken, is taking or proposes to
take with respect thereto, which notice shall be promptly confirmed in writing
within five (5) days by an Authorized Officer of the Borrower.
(ii) Notice of Breach of Material Contract. Promptly after any
Authorized Officer of the Borrower has learned of the occurrence or existence of
a default by any party to any material contract to which the Borrower or any
Active Subsidiary is a party which default has had or which may reasonably be
expected to have a Material Adverse Effect, telephonic notice thereof specifying
the details thereof, the anticipated effect thereof and the action which the
Borrower is taking or proposes to take with respect thereto, which notice shall
be promptly confirmed in writing within five (5) days by an Authorized Officer
of the Borrower.
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(iii) Notice of Litigation.
(A) Promptly after the commencement thereof, written notice of
any action, suit, proceeding or investigation before any Governmental Person
affecting the Borrower or any Active Subsidiary, except for actions, suits,
proceedings and investigations which, if adversely determined, would not and
could not, individually or in the aggregate, reasonably be expected to result in
a Material Adverse Change; and
(B) promptly after any Authorized Officer of the Borrower has
notice thereof, written notice of any decision, ruling, judgment which has had
or which could reasonably be expected to have a Material Adverse Effect and any
appeal, reversal or other significant action in connection with any such action,
suit, proceeding or investigation before any Governmental Person affecting the
Borrower or any Active Subsidiary.
(iv) Orders, Etc. Promptly after receipt thereof, a copy of
any order, writ, decree, judgment, decision or injunction issued by any
Governmental Person in any proceeding, action, suit or investigation to which
the Borrower or any Active Subsidiary is a party which would or could reasonably
be expected to result in a Material Adverse Change.
(v) ERISA Reports.
(A) As soon as possible, and in any event not later than the
date notice is sent to the PBGC, notice of any Reportable Event regarding any
Plan or Benefit Arrangement of the Borrower, any Active Subsidiary of the
Borrower or any ERISA Affiliate and an explanation of any action which has been
or which is proposed to be taken with respect thereto;
(B) concurrent with the filing thereof, a copy of any request
to the United States Secretary of the Treasury for a waiver or variance of the
minimum funding standards of Section 302 of ERISA and Section 412 of the Code
with respect to any Plan or Benefit Arrangement of the Borrower, any Active
Subsidiary of the Borrower or any ERISA Affiliate;
(C) as soon as possible, but in no event later than sixty (60)
days after an officer of the Borrower becomes aware of unfunded accumulated
benefit obligations for any Plan of the Borrower or any ERISA Affiliate, as
determined in accordance with the Financial Accounting Standards Board Statement
of Financial Accounting Standards No. 87, Employer's Accounting for Pensions (or
any superseding statement thereto), written notice of the occurrence of such
event;
(D) upon the request of the Agent, copies of each annual
report (Form 5500 Series) with accompanying schedules filed with respect to any
Plan or Benefit Arrangement of the Borrower or any ERISA Affiliate;
(E) promptly after receipt thereof, a copy of any notice which
the Borrower or any ERISA Affiliate may receive from the PBGC relating to the
intention of the PBGC to terminate any Plan or Benefit Arrangement, or to
appoint a trustee to administer any Plan or Benefit Arrangement, or to assert
any liability under Title IV of ERISA against the Borrower or any ERISA
Affiliate;
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(F) a copy of any notice of assessment of Withdrawal Liability
received by the Borrower or any ERISA Affiliate in relation to any Multiemployer
Plan;
(G) as soon as possible, and in no event later than the date
notification is sent to the PBGC, notice of the failure by the Borrower or any
ERISA Affiliate to make a required installment or other payment under Section
302 of ERISA and Section 412 of the Code;
(H) concurrent with the filing thereof, a copy of any Notice
of Intent to Terminate any Plan of the Borrower or any ERISA Affiliate filed
under Section 4041(c) of ERISA; and
(I) promptly after receipt thereof, but without any obligation
or responsibility to secure the same, copies of any calculations of estimated
Unfunded Benefit Liabilities (or, if applicable, the portions of any estimated
Unfunded Benefit Liabilities that would be allocated to the Borrower or any
ERISA Affiliate under Sections 4063 and 4064 or Section 4062(e) of ERISA) for
any Plans of the Borrower, any Active Subsidiary of the Borrower or any ERISA
Affiliate.
(vi) Notice of Environmental Claims. Promptly after receipt
thereof, the Borrower shall deliver to the Agent, for redelivery to the Banks,
notice of any material Environmental Claim.
(vii) Tax Returns. The Borrower shall deliver to the Agent,
for redelivery to the Banks, promptly upon request, copies of all Federal tax
returns and reports filed by the Borrower or any Active Subsidiary in respect of
taxes measured by income (excluding sales, use and like taxes).
(viii) Notices of Tax Audits. Promptly, and in any event
within ten (10) days after receipt thereof by the Borrower or any Active
Subsidiary, the Borrower shall furnish to the Agent, for redelivery to the
Banks, a copy of each notice from any Governmental Person received by the
Borrower or any Active Subsidiary of a threatened material adverse adjustment to
any Federal tax return of the Borrower or any Active Subsidiary and a copy of
each subsequent notice with respect thereto from any such Governmental Person.
(g) Updates to Schedules. Together with each delivery of the
Borrower's annual financial statements pursuant to Subsection 5.2(b) hereof, the
Borrower shall provide the Agent, for redelivery to the Banks, with written
revisions or updates to Schedule 4.1, 4.3, 4.7, 4.10, 4.11, 4.13 and 5.12;
provided, however, that no schedule shall be deemed to have been amended,
modified or superseded by any such correction or update, nor shall any breach of
warranty or representation resulting from the inaccuracy or incompleteness of
any such schedule be deemed to have been cured thereby, unless and until the
Required Banks, in their sole and absolute discretion, shall have accepted in
writing such revisions or updates to such schedule.
5.3 Preservation of Existence.
Except as otherwise permitted pursuant to Section 6.9, at its own cost
and expense, the Borrower will, and will cause each Active Subsidiary to, do all
things necessary to preserve and keep in full force and effect its corporate
existence and its qualification under the laws of the
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state of its incorporation. Further, the Borrower will, and will cause each
Active Subsidiary, other than Active Subsidiaries which no longer exist as a
result of a transaction permitted pursuant to Section 6.9, to maintain, preserve
and renew all rights, powers and privileges which are material to the
Consolidated operation of the Borrower's business, including the accreditation
of its Accredited Subsidiaries (the loss of which accreditation shall be deemed
for purposes of this Credit Agreement to be material).
5.4 Payment of Taxes and Fees.
The Borrower will, and will cause each of its Active Subsidiaries to,
promptly pay and discharge all taxes, assessments, and governmental charges and
levies upon it or upon its income, profits or property except for taxes,
assessments and governmental charges or levies (a) the payment of which is being
contested in good faith by appropriate proceedings, or (b) the non-payment of
which would not reasonably be expected to have a Material Adverse Effect on the
Borrower and its Subsidiaries taken as a whole, and as to which it shall have
set aside on its books reserves for such claims as are determined to be adequate
by the application of GAAP consistently applied.
5.5 Notice of Change of Business.
The Borrower will promptly give written notice to the Agent if the
Borrower or any of its Active Subsidiaries which is a Person primarily engaged
in proprietary education or other related fields ceases to be so primarily
engaged.
5.6 Hazard and Casualty Insurance.
The Borrower will, and will cause each Active Subsidiary to, keep and
maintain hazard and casualty insurance with responsible insurance companies on
such of the properties of the Borrower and its Active Subsidiaries, in such
amounts and against such risks as is customarily maintained by similar
businesses similarly situated and owning, leasing or operating similar
properties.
5.7 Good Repair.
The Borrower will, and will cause each Active Subsidiary to, do all
things necessary to maintain, preserve, protect and keep its respective property
in good repair, working order and condition, ordinary wear and tear excepted,
and make all necessary and proper repairs, renewals and replacements so that its
respective business carried on in connection therewith may be conducted at all
times as presently conducted.
5.8 Corporate Records.
The Borrower will, and will cause each Active Subsidiary to, maintain
proper books of record and account in accordance with sound accounting practice
in which full, true and correct entries shall be made of all its respective
property and assets and its respective dealings and business affairs.
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5.9 Inspection of Records and Properties.
The Borrower will, and will cause each Active Subsidiary to, permit, on
reasonable prior notice from the Agent or any Bank or their respective agents or
representatives to visit during regular office hours any of their respective
properties, to examine their respective physical assets, books of account and
other records, and to discuss their respective affairs and accounts with, and be
advised about them by the management of the Borrower, or any Active Subsidiary,
and as often as the Agent or such Bank may reasonably request.
5.10 Continued Ownership of Active Subsidiaries.
Except as permitted by Section 6.9, without the written consent of all
of the Banks, the Borrower shall not sell, transfer or otherwise dispose of any
of its capital stock of an Active Subsidiary.
5.11 Compliance With Laws.
The Borrower will, and will cause each Active Subsidiary to, perform
and promptly comply in all material respects, and cause all property of the
Borrower and each Active Subsidiary to be maintained, used and operated in all
material respects in accordance with all Governmental Rules (including, without
limitation, zoning ordinances, building codes and Environmental Laws) of every
duly constituted Governmental Person applicable to the Borrower, each Active
Subsidiary or any of their respective properties) except for those alleged
violations which are being contested in good faith and by appropriate
proceedings promptly initiated and diligently conducted and if an appropriate
provision, as shall be required by GAAP, shall have been made therefor. The
foregoing notwithstanding, the Borrower shall not be deemed to be in violation
of this Section 5.11 as the result of any failure to comply with such
Governmental Rule if (A) the applicability of such Governmental Rule is being
contested by the Borrower or any Active Subsidiary in good faith and by proper
proceedings appropriately conducted or (B) the non-compliance with such
Governmental Rule would not reasonably be expected to materially and adversely
affect the business operations or financial condition of the Borrower or its
Active Subsidiaries or the ability of the Borrower and its Active Subsidiaries,
taken as a whole, to perform their respective obligations under the Loan
Documents.
5.12 Further Assurances.
At any time and from time to time, upon the Agent's request, the
Borrower shall, and shall cause each Active Subsidiary to, make, execute and
deliver, or cause to be made, executed and delivered, to the Agent and where
appropriate shall cause to be recorded or filed, and from time to time
thereafter to be re-recorded and refiled at such time and in such offices and
places as shall be deemed reasonably desirable by the Banks, any and all such
further certificates and other documents as the Banks may consider necessary or
desirable in order to continue and preserve the obligations of the Borrower
under the Notes and other Loan Documents.
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ARTICLE VI. NEGATIVE COVENANTS
From the date hereof and for so much longer thereafter as the
Revolving Credit Commitment is in effect or any of the Bank Indebtedness remains
unpaid, the Borrower agrees, for the benefit of the Banks, the Issuing Bank and
the Agent, that:
6.1 Maintenance of Ratio of Total Funded Debt to EBITDA.
The Borrower will not permit or suffer to exist, as of the end of each
Fiscal Quarter ending hereafter, its ratio of Total Funded Debt, as determined
as of the end of such Fiscal Quarter, to EBITDA, as determined for immediately
preceding four (4) Fiscal Quarters then ended to be greater than 2.5 to 1.0.
6.2 Limitation on Total Funded Debt to Total Capitalization.
The Borrower will not permit or suffer to exist, at any time, its
percentage of Total Funded Debt to Total Capitalization to be greater than 50%.
6.3 Interest Coverage Ratio.
The Borrower will not permit or suffer to exist, as determined on each
Fiscal Quarter ending hereafter for the immediately preceding four Fiscal
Quarters then ended (i.e. a rolling four Fiscal Quarter basis), its Interest
Coverage Ratio to be less than 4.0 to 1.0.
6.4 Disposal of Assets.
The Borrower will not, nor will it permit any of its Subsidiaries to,
sell, lease or otherwise dispose of, in any one Fiscal Year during the term
hereof, assets having an aggregate fair market value in excess of $2,500,000 or
directly or indirectly enter into an agreement or arrangement whereby the
Borrower or any of its Subsidiaries shall sell or transfer assets having an
aggregate fair market value in excess of $2,500,000; provided, however, that the
amount by which the actual disposition of assets in any Fiscal Year does not
exceed the amount permitted to be sold, leased or otherwise disposed of in such
Fiscal Year shall be added to the aggregate fair market value of assets
permitted to be sold, leased or otherwise disposed of in the next succeeding
Fiscal Year so long as in no event shall the aggregate fair market value of
assets sold, leased or otherwise disposed of exceed $5,000,000 in any Fiscal
Year, and provided, further that nothing contained in this Section 6.4 shall
prohibit the sale, lease or other disposition of the assets associated with (i)
the sale of inventory in the ordinary course of business or (ii) merger or
consolidation otherwise permitted pursuant to Section 6.9 of this Credit
Agreement. Notwithstanding the foregoing, so long as no Default or Event of
Default is then in existence or would reasonably result therefrom, the Borrower
and the Subsidiaries shall be permitted to enter into sale and lease-back
transactions of owned real estate and improvements and such transactions shall
not be included in the foregoing limitations.
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6.5 Permitted Indebtedness.
The Borrower will not, and will not permit any Subsidiary to, guarantee
or incur or suffer to exist any Indebtedness for Borrowed Money except:
(i) the Bank Indebtedness;
(ii) Indebtedness for Borrowed Money secured by Permitted
Encumbrances;
(iii) Guarantees of Indebtedness for Borrowed Money to the
extent such Indebtedness for Borrowed Money is permitted by this Section 6.5.
(iv) Indebtedness for Borrowed Money incurred by any
Subsidiary and due to the Borrower;
(v) Indebtedness for Borrowed Money not specifically
enumerated in items (i) through (iv) above outstanding on the Closing Date as
more fully set forth on Schedule 6.5, as the same may be extended or renewed but
not increased.
(vi) Guarantees of Teach-Out Obligations and other
education-related obligations of the Borrower or its Active Subsidiaries;
(vii) Advances by the Borrower to any Subsidiary for the
purpose of financing a Permitted Acquisition;
(viii) Guarantees of any student loan programs of the Borrower
or its Active Subsidiaries in an aggregate amount of up to $5,000,000;
(ix) Indebtedness for Borrowed Money in a principal amount of
up to $25,000,000 in the aggregate outstanding in connection with real estate
financings (other than sale and lease-back transactions permitted by Section 6.4
above), including without limitation, any reimbursement obligations incurred
with respect to a bond financing that is secured by real estate, provided that,
neither the Borrower nor any Subsidiary of the Borrower shall Guarantee any
Indebtedness for Borrowed Money permitted under this Subsection and, further
provided that, if such Indebtedness for Borrowed Money is incurred by a
Subsidiary, the Subsidiary shall execute a Subsidiary Guarantee;
(x) In addition to the other Indebtedness for Borrowed Money
permitted by this Section 6.5, Indebtedness for Borrowed Money whether now
outstanding or hereafter incurred by the Borrower or any Subsidiary that when
aggregated with other Indebtedness for Borrowed Money of the type permitted by
this Subsection of the Borrower and all of the Subsidiaries (excluding Bank
Indebtedness) is less than $10,000,000 at any time;
(xi) In the event that the Syndications Period has expired and
no increase in the Revolving Credit Commitments has occurred, in addition to the
Indebtedness for Borrowed Money permitted in clauses (i) through (x) above,
Indebtedness for Borrowed Money incurred by the Borrower in an aggregate
principal amount of up to $20,000,000 at any one time outstanding
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so long as all such Indebtedness for Borrowed Money is subordinated to the Bank
Indebtedness on terms and conditions acceptable to the Required Banks and is not
supported by a Guarantee of any Subsidiary or secured by any Encumbrance;
(xii) Indebtedness for Borrowed Money incurred by the Borrower
or its Subsidiaries with respect to indemnification of outside directors or
officers which indemnification is consistent with authority under law and the
by-laws of the Borrower or such Subsidiary; and
(xiii) Indebtedness for Borrowed Money incurred by the
Borrower or its Subsidiaries with respect to any currency swap agreement,
interest rate swap, cap, collar or floor agreement or other interest rate
management device, provided that such agreements or devices are not entered into
for speculative purposes.
6.6 Prohibition on Encumbrances.
(a) Lien Prohibition. The Borrower will not create, assume,
incur or suffer to exist, or allow any Subsidiary to create, assume, incur or
suffer to exist, any Encumbrance upon any of its assets, whether now owned or
hereafter acquired, nor acquire nor agree to acquire any asset subject to an
Encumbrance, except:
(i) Encumbrances in favor of the Agent and/or the Banks
granted hereunder;
(ii) Encumbrances for taxes or assessments or governmental
charges or levies which are not due or remain payable, without penalty, or which
are being contested in good faith by appropriate proceedings and with respect to
which the Borrower or the affected Subsidiary has created reserves which are
determined by the Borrower to be adequate by the application of GAAP
consistently applied;
(iii) Encumbrances to secure the obligations of the Borrower
or any Subsidiary under workmen's compensation laws, unemployment insurance
laws, social security laws or other similar legislation;
(iv) Encumbrances to secure the obligations of the Borrower or
any Active Subsidiary directly associated with state licensing or accreditation
requirements;
(v) Encumbrances in connection with bids, tenders, performance
bonds, contracts or leases (including, without limitation, the posting of
collateral for any operating lease) to which the Borrower or any Subsidiary is a
party, or to secure public or statutory obligations in an amount of up to
$1,000,000 in the aggregate;
(vi) Encumbrances for landlords', mechanics', carriers',
workmen's, warehousemen's, materialmen's or repairmen's liens or other like
Encumbrances in the ordinary course of business;
(vii) Encumbrances upon tangible personal property securing
loans to any Subsidiary or Borrower or deferred payments by the Borrower or any
Subsidiary for the purchase
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of such tangible personal property, provided that the amount of the Indebtedness
for Borrowed Money secured by the Encumbrance does not exceed the purchase price
of such tangible personal property;
(viii) Encumbrances on particular parcels of real estate or
buildings that is given in connection with typical mortgage-type financings to
secure Indebtedness for Borrowed Money that is permitted under Section
6.5(c)(iv);
(ix) Encumbrances associated with Capital Leases that are
permitted as Indebtedness for Borrowed Money under Subsection 6.5(a)(x);
(x) Encumbrances to secure surety, replevin, attachment or
appeal bonds relating to legal proceedings to which the Borrower or any
Subsidiary is a party;
(xi) Encumbrances arising out of judgments or awards against
the Borrower or any Subsidiary with respect to which the Borrower is currently
engaged in proceedings for review or appeal and with respect to which the
Borrower shall have secured a stay of execution pending such proceedings for
review or appeal, provided, that the aggregate amount of the foregoing shall at
no time exceed $5,000,000;
(xii) minor survey exceptions, minor Encumbrances, easements
or reservations of, or rights of others for, rights of way, sewers, electric
lines, telegraph and telephone lines and other similar purposes, or zoning or
other restrictions as to the use of real properties or Encumbrances incidental
to the conduct of the business of the Borrower or its Subsidiaries or to the
ownership of their properties which were not incurred in connection with
Indebtedness for Borrowed Money or other extensions of credit and which do not
in the aggregate materially adversely affect the value of said properties or
materially impair their use in the operation of the business of the Borrower or
such Subsidiaries;
(xiii) Encumbrances to secure any extension, renewal or
replacement (or successive extensions, renewals or replacements) as a whole, or
in part, of any obligations secured by any Encumbrances referred to in the
foregoing clauses (i) through (xi) and clause (xiii), provided that (y) such
extended, renewed or replaced Encumbrances shall be limited to all or a part of
the same property that secured the Encumbrances extended, renewed or replaced
(plus improvements on such property) and (z) the obligations secured by such
Encumbrances at such time are not increased except in accordance with the terms
thereof; and
(xiv) Encumbrances not specifically enumerated in items (i)
through (xiii) above which were in existence on the date hereof and described on
Schedule 6.6 hereto;
(b) Agreements Restricting Encumbrances. Neither the Borrower,
nor any Subsidiary, shall enter into any agreement, with any Person
conditioning, restricting or in any way prohibiting the creation of a security
interest, pledge, lien or other Encumbrance on or against or with respect to any
of its now owned or hereafter acquired right, title or interest real or personal
property in favor of the Agent and the Banks, except for those agreements
specifically related to Encumbrances permitted in accordance with clause (A)
above.
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6.7 Advance of Funds and Investments.
(a) Advance of Funds. The Borrower will not, nor will it
permit any Subsidiary to, make any advance, loan or extension of credit to any
Person, except: (a) extension of trade credit and student loans in the ordinary
course of business; (b) Indebtedness for Borrowed Money permitted by Subsection
6.5(a) hereof; (c) advances to employees made by the Borrower or any Subsidiary
in the ordinary course of its business, and (d) other loans and advances made in
the ordinary course of business not to exceed $5,000,000 in the aggregate at any
one time outstanding.
(b) Investments. The Borrower will not, nor will it permit any
Subsidiary to, make any capital contribution to, purchase any stocks, bonds,
notes, debentures or other securities of, or make any other investment in any
other Person, except (a) existing Subsidiaries; (b) investments in prime
commercial paper and certificates of deposit in United States commercial banks
(having capital resources in excess of $500,000,000), in each case due within
one (1) year from the date of purchase and payable in the United States in
Dollars; obligations issued or unconditionally guaranteed by the United States
Government or any agency thereof, and repurchase agreements of such banks for
terms of less than one year in respect of the foregoing certificates and
obligations; (c) acquisitions permitted by Section 6.12 hereof and (d) up to
$5,000,000 of monies invested (or liabilities incurred) subsequent to the
Closing Date in joint ventures and strategic investments in the same line of
business as the Borrower and its Subsidiaries.
6.8 Dividend and Redemption Restrictions.
(a) Dividend Restrictions. The Borrower shall not pay cash
dividends or distributions on its capital stock while the Credit Facility is
outstanding except, that so long as no Event of Default is in existence or will
result therefrom, the Borrower may pay cash dividends or distributions in an
aggregate amount of up to 20% of the Borrower's after tax net income (if
positive), as determined in accordance with GAAP, for the immediately preceding
four Fiscal Quarters then ended, provided that, in the event that Borrower does
not make the distributions or pay the dividends permitted above, such
distributions shall not be accrued and paid or distributed at a later time.
(b) Redemption Restrictions. The Borrower shall not, nor shall
it permit any Subsidiary to, purchase the Borrower's capital stock while the
Credit Facility is outstanding, except, that so long as no Event of Default is
in existence or will result therefrom, the Borrower may repurchase subsequent to
the Closing Date its publicly traded securities in an aggregate amount of up to
(i) $40,000,000 plus (ii) $1,250,000 or such lesser amount as may not have been
used by, but was permitted, the Borrower for the repurchase of Borrower's
securities under the Borrower's previous agented credit agreement prior to the
Closing Date.
(c) Subsidiary Dividends. No Subsidiary shall enter into any
agreement or covenant that prohibits, conditions or limits such Subsidiary from
paying or declaring dividends or paying any inter-company obligations whether
now outstanding or hereafter arising.
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6.9 Merger.
(a) The Borrower shall not merge or consolidate with any other
Person unless (i) the Borrower is the surviving corporation, and (ii) no Event
of Default occurs or is reasonably likely to occur as a result of such a merger
or consolidation.
(b) The Borrower shall not permit any Subsidiary to merge or
consolidate with any Person (other than the Borrower or another Subsidiary)
unless (i) such Subsidiary is the surviving corporation or, if such Subsidiary
is not the surviving corporation, the surviving corporation is a domestic
corporation of the United States whose outstanding stock is owned, directly or
indirectly, by the Borrower and (ii) no Event of Default occurs or is reasonably
likely to occur as a result of such merger or consolidation.
6.10 Regulations G, X, T and U Compliance.
The Borrower will not, nor shall it permit any of its Subsidiaries to,
use, or permit the use of, the proceeds of any borrowings hereunder to purchase
or carry Margin Stock or otherwise act so as to cause the Banks, in extending
credit hereunder, to be in contravention of Regulations G, X, T and U.
6.11 Cohort Default Rates.
The Borrower will not permit any Active Subsidiary whose operating
income for the most recently completed Fiscal Year equals or exceeds seven and
one-half percent (7-1/2%) of the aggregate operating income of all Active
Subsidiaries for the same fiscal period to have a Cohort Default Rate in excess
of twenty-five percent (25%) per year for the two (2) previous years.
6.12 Permitted Acquisitions.
The Borrower will not, nor will it permit any Subsidiary to acquire all
or substantially all of the assets of any second Person or acquire the stock of
any second Person or make any other investment in any second Person other than
(i) Permitted Acquisitions in an aggregate amount of less than $25,000,000 in
any Fiscal Year and (ii) as otherwise permitted by Section 6.9 hereof.
6.13 Change Fiscal Year.
The Borrower will not, nor shall it permit any of its Subsidiaries to,
change its Fiscal Year.
6.14 Change of Business.
The Borrower shall not engage, and shall cause each Subsidiaries to
refrain from engaging, in any business other than its primary presently
conducted businesses and other related ancillary businesses.
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ARTICLE VII. CONDITIONS PRECEDENT
7.1 All Revolving Credit Loan, Swing Loan and Supplemental Swing Loan
Disbursements and All Letters of Credit.
The obligation to make each Revolving Credit Loan, Swing Loan,
Supplemental Swing Loan and to issue each Letter of Credit is subject to the
performance by the Borrower of its obligations under this Credit Agreement and
to the satisfaction of the following further conditions:
(a) Request for Revolving Credit Loan or Issuance of Letter of
Credit. (i) Except for a Revolving Credit Disbursement made simultaneously with
the execution of this Credit Agreement, receipt by the Agent, on behalf of the
Banks, of a Request for Revolving Credit Loan, Swing Loan Request or
Supplemental Swing Loan Request satisfying the requirements of this Agreement or
(ii) receipt by the Agent, on behalf of the Issuing Bank, of a fully-executed
and completed application and agreement for Letter of Credit.
(b) No Default or Event of Default. The fact that, at the time
of each Revolving Credit Disbursement, Swing Loan, Supplemental Swing Loan or
issuance of each Letter of Credit, no Default or Event of Default, shall have
occurred and be continuing.
(c) No Material Adverse Change. There shall not have occurred
and be continuing (i) any Material Adverse Change or (ii) any event which has
had, or could reasonably be expected to have, a Material Adverse Effect.
(d) Compliance With Covenants. The fact that, at the time of
each Revolving Credit Loan, Swing Loan, Supplemental Swing Loan or issuance of
each Letter of Credit (after giving effect to such Loan or Letter of Credit),
the Borrower shall be in compliance with the covenants contained in Sections 5
and 6 hereof.
(e) Representations Correct. The fact that the representations
and warranties contained in this Credit Agreement and the other Loan Documents
are true and correct on and as of the date of borrowing, except to the extent
that such representations and warranties relate solely to an earlier date (in
which case, such representations and warranties shall have been true and correct
on and as of such earlier date).
Each request for a Revolving Credit Disbursement, a Swing Loan, Supplemental
Swing Loan and each request for the issuance of a Letter of Credit, whether made
orally or in writing, by the Borrower shall be deemed to be, as of the date of
such request, a representation and warranty by the Borrower as to the facts
specified in Subsections 7.l(b), 7.l(c), 7.l(d) and 7.l(e).
7.2 Conditions Precedent to the Initial Revolving Credit Disbursement
and the Issuance of the Initial Letter of Credit.
The obligation of the Banks to make the initial Revolving Credit
Disbursement and of the Issuing Bank to issue the initial Letters of Credit are
subject to the satisfaction of each of the
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following conditions precedent in addition to the applicable conditions
precedent set forth in Section 7.1 above:
(a) Credit Agreement. Receipt by the Agent of a counterpart
original of this Credit Agreement duly executed by each initial Bank, the
Issuing Bank, the Borrower and the Agent.
(b) Revolving Credit Notes. Receipt by the Agent, for
redelivery to each Revolving Credit Bank, of a duly executed Revolving Credit
Note made payable to such Revolving Credit Bank in an amount equal to its
respective Commitment Amount.
(c) Swing Note. Receipt by the Agent, for redelivery to
National City Bank, of a duly executed Swing Note made payable to National City
Bank in an amount equal to its Swing Loan Commitment.
(d) Supplemental Swing Loan Notes. Receipt by the Agent, for
redelivery to each Supplemental Swing Loan Bank, of a duly executed Supplemental
Swing Loan Note made payable to such Supplemental Swing Loan Bank in an amount
equal to its respective Supplemental Swing Loan Commitment.
(e) Release of Liens and Security Interests. Receipt by the
Agent, on behalf of the Banks, of satisfactory evidence that all liens and
security interests of the Borrower and the Subsidiaries have been satisfied in
full and released of record, except for Permitted Encumbrances.
(f) Corporate Documents of the Borrower. Receipt by the Agent,
on behalf of the Banks, of a copy, duly certified as of the Closing Date by the
secretary or assistant secretary of the Borrower of (i) the By-Laws of the
Borrower, (ii) the resolutions of the Borrower's Board of Directors authorizing
the borrowings hereunder and the execution and delivery of the Loan Documents to
be executed by it, (iii) all documents evidencing all other necessary corporate
action and (iv) all approvals or consents, if any, with respect to this Credit
Agreement and the Notes to be executed by it.
(g) Incumbency Certificate of the Borrower. Receipt by the
Agent, on behalf of the Banks, of a certificate of the secretary or assistant
secretary of the Borrower, certifying the names and offices of the officers of
the Borrower authorized to sign this Credit Agreement, the Notes, and all other
documents or certificates to be delivered hereunder, together with the true
signatures of such officers.
(h) Good Standing Certificates. Receipt by the Agent, on
behalf of the Banks, of a certificate of good standing (i) for the Borrower
issued by the Secretary of State of its state of incorporation and (ii) for the
Borrower issued by the Secretary of State for each state in which the Borrower
is authorized to do business, in each case issued no more than thirty (30) days
prior to the Closing Date.
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(i) Certificates of Incorporation. Receipt by the Agent, on
behalf of the Banks, of a copy, duly certified by the appropriate governmental
official, of the Articles/Certificates of Incorporation of the Borrower.
(j) Closing Certificate. Receipt by the Agent, on behalf of
the Banks, of a certificate duly executed by an Authorized Officer of the
Borrower certifying that the conditions precedent set forth in Subsection
7.l(b), 7.l(c), 7.l(d) and 7.l(e) above have been satisfied as of the Closing
Date.
(k) Closing Fees. Receipt by the Agent, on behalf of the
Banks, of the Closing Fees.
(l) Opinion of Borrower's Counsel. Receipt by the Agent, on
behalf of the Banks, of a signed favorable opinion of Kirkpatrick & Lockhart
LLP, counsel to the Borrower and its Subsidiaries, substantially in the form of
Exhibit "G" attached hereto.
(m) Payoff of Existing Agented Credit Agreement. Receipt by
the Agent of evidence acceptable to the Agent that contemporaneously herewith
the Borrower shall have repaid all of its outstanding indebtedness under its
existing agented credit agreement and terminated its ability to make any further
borrowings thereunder.
(n) Proceedings Satisfactory. Receipt by the Agent, on behalf
of the Banks, of evidence that all proceedings taken in connection herewith and
the consummation of the transactions contemplated hereby and all documents and
papers relating hereto have been completed or duly executed, and receipt by the
Agent, on behalf of the Banks, of such documents and papers, all in form and
substance reasonably satisfactory to the Agent and the Agent's special counsel,
as the Agent or its special counsel may reasonably request in connection
therewith.
ARTICLE VIII. EVENTS OF DEFAULT
8.1 Payment Default.
(i) Default in the payment of principal of any of the Notes or
reimbursement obligations with respect to any Letter of Credit.
(ii) Default in the payment of any interest on or the payment
of the Facility Fee or the Agent's Fee or any other amount due under the Bank
Indebtedness and continuance of any such nonpayment for ten (10) days after due
date.
8.2 Cross Defaults.
Failure of the Borrower or any of its Subsidiaries to pay when due any
Indebtedness for Borrowed Money aggregating in excess of $5,000,000 ("Material
Indebtedness"); or the default by the Borrower or any of its Subsidiaries in the
performance (beyond the applicable grace period with respect thereto, if any) of
any term, provision or condition contained in any agreement under which any such
Material Indebtedness was created or is governed, or any other event shall occur
or condition exist, the effect of which default or event is to cause, or to
permit
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the holder or holders of such Material Indebtedness to cause, such Material
Indebtedness to become due prior to its stated maturity; or any Material
Indebtedness of the Borrower or any of its Subsidiaries shall be declared to be
due and payable or required to be prepaid or repurchased (other than by a
regularly scheduled payment) prior to the stated maturity thereof.
8.3 Insolvency.
(a) Involuntary Proceedings. A proceeding shall have been
instituted in a court having jurisdiction seeking a decree or order for relief
in respect of the Borrower or any Subsidiary in an involuntary case under the
Federal bankruptcy laws, or any other similar applicable Federal or state law,
now or hereafter in effect, or for the appointment of a receiver, liquidator,
trustee, sequestrator or similar official for the Borrower or any Subsidiary or
for a substantial part of its property, or for the winding up or liquidation of
its affairs, and such shall remain undismissed or unstayed and in effect for a
period of sixty (60) days.
(b) Voluntary Proceedings. The Borrower or any Subsidiary
shall institute proceedings to be adjudicated a voluntary bankrupt, or shall
consent to the filing of a bankruptcy proceeding against it, or shall file a
petition or answer or consent seeking reorganization under the Federal
bankruptcy laws, or any other similar applicable Federal or state law now or
hereinafter in effect, or shall consent or acquiesce in or to the filing of any
such petition or shall consent to or acquiesce in the appointment of a receiver,
liquidator, trustee, sequestrator or similar official for the Borrower or any
Subsidiary or for a substantial part of its property, or shall make an
assignment for the benefit of creditors, or shall admit in writing its inability
to pay its debts generally as they become due, or action shall be taken by the
Borrower or any Subsidiary in furtherance of any of the aforesaid purposes.
8.4 Dissolution.
The existence of the Borrower or any Active Subsidiary is terminated,
unless permitted in accordance with Section 6.9.
8.5 Adverse Judgments.
Any court shall render a final judgment or judgments against the
Borrower or any Subsidiary in an aggregate amount of $5,000,000 or more in
excess of any insurance protecting against such liability and such judgment or
judgments shall not be satisfactorily appealed, stayed, discharged, vacated or
set aside within thirty (30) days after entry; or any property of the Borrower
or any Subsidiary shall be attached under a claim or claims in an aggregate
amount of $5,000,000 or more in excess of any insurance protecting against the
liabilities on which such attachments are based and such attachments shall not
be released or provided for to the satisfaction of the Banks within thirty (30)
days.
8.6 Failure to Comply With Certain Covenants.
Default by the Borrower in the performance of any of the agreements and
covenants set forth in Article V or in Article VI hereof or default by any of
the Subsidiaries in the performance of the agreements and covenants set forth in
the other Loan Documents to which it is a party.
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8.7 Failure to Comply With Other Covenants.
Default by the Borrower in the performance of any of the agreements and
covenants set forth in Article V hereof or in any of the Loan Documents and not
constituting an Event of Default enumerated above and continuance thereof for
thirty (30) days after notice thereof to the Borrower from the Agent as directed
by the Required Banks.
8.8 Material Adverse Change.
The occurrence of any Material Adverse Change subsequent to the Closing
Date or subsequent to the delivery of the information provided by the Borrower
to the Agent and the Banks prior to the Closing Date.
8.9 Misrepresentation.
Any representation or warranty made by the Borrower in (i) this Credit
Agreement or (ii) any of the other Loan Documents is untrue in any material
respect, or any schedule, statement, report, notice or writing furnished by the
Borrower or on behalf of the Borrower to the Agent or the Banks is untrue in any
material respect on the date as of which the facts set forth are stated or
certified.
8.10 Consequences of an Event of Default.
(a) Consequence of an Event of Default Set Forth in Sections
8.3 and 8.4. Upon the occurrence of an Event of Default set forth in Section 8.3
or 8.4 hereof, the Revolving Credit Commitment, the Swing Loan Commitment and
the Supplemental Swing Loan Commitment shall automatically terminate and the
amounts outstanding under the Notes shall become immediately due and payable,
without necessity of demand, presentation, protest, notice of dishonor or notice
of default. Thereafter, the Banks shall have no further obligation to make any
additional Loans or issue any additional Letters of Credit hereunder. Upon the
occurrence of an Event of Default set forth in Section 8.3 or Section 8.4, the
Banks shall have the full panoply of rights and remedies granted to them under
this Credit Agreement and the other Loan Documents and all those rights and
remedies granted by law to creditors. No exercise of one right or remedy shall
be deemed a waiver of other rights or remedies.
(b) Consequences of Remaining Events of Default. During the
continuance of any Event of Default set forth in Sections 8.1, 8.2, 8.5, 8.6,
8.7, 8.8 or 8.9 hereof (unless remedied, waived or cured to the satisfaction of
the Banks required pursuant to Section 10.1), the Banks shall have no further
obligation to make any additional Loans or issue any additional Letters of
Credit hereunder; and the Agent may, and at the request of the Required Banks
shall, by written or telegraphic notice to the Borrower, declare the Revolving
Credit Commitment, the Swing Loan Commitment, and the Supplemental Swing Loan
Commitment terminated and the Notes then outstanding and interest accrued
thereon and all other liabilities of the Borrower hereunder to the Banks to be
forthwith due and payable. Thereupon the Revolving Credit Commitment, the Swing
Loan Commitment and the Supplemental Swing Loan Commitment shall be terminated
and all amounts due hereunder and under any Notes outstanding shall be due and
payable without presentment, demand, protest or other notice of any kind to the
Borrower,
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all of which are hereby expressly waived. Upon the occurrence of an Event of
Default set forth in Sections 8.1, 8.2, 8.5, 8.6, 8.7, 8.8 or 8.9 hereof, the
Banks shall have the full panoply of rights and remedies granted to them under
this Credit Agreement and the other Loan Documents and all those rights and
remedies granted by law to creditors. No exercise of one right or remedy shall
be deemed a waiver of other rights or remedies.
ARTICLE IX. AGREEMENT AMONG BANKS
9.1 Appointment and Grant of Authority.
Each of the Banks hereby appoints and designates National City Bank,
and National City Bank hereby agrees to act as, the initial Agent under this
Credit Agreement and the other Loan Documents. As such Agent, National City Bank
shall have and may exercise such powers under this Credit Agreement and the
other Loan Documents as are specifically delegated to the Agent, by the terms
hereof or thereof, together with such other powers as are incidental thereto.
Without limiting the foregoing, each Bank, and each holder of a Note by its
acceptance of such Note, hereby authorizes the Agent, on behalf of the Banks, to
execute all of the Loan Documents (other than this Credit Agreement) and to
accept all of the Loan Documents and all other agreements, documents or
instruments reasonably required to carry out the intent of the parties to this
Credit Agreement. The Agent may perform any of its duties hereunder or under the
Loan Documents by and through its officers, directors, agents, employees or
affiliates.
Each of the Banks hereby appoints and designates First Union National
Bank, and First Union National Bank hereby agrees to act as Co-Agent under this
Credit Agreement and the other Loan Documents. As Co-Agent, First Union National
Bank shall have and may exercise only such powers as are specifically delegated
to it by the Agent from time to time and which it agrees to exercise. First
Union National Bank shall not be deemed to have assumed any duties or
responsibilities under this Credit Agreement and the other Loan Documents by
reason of its designation as Co-Agent.
9.2 Non-Reliance on Agent.
Each Bank agrees that it has, independently and without reliance on the
Agent, based on such documents and information as it has deemed appropriate,
made its own credit analysis and evaluation (including but not limited to an
environmental review) of the Borrower and its operations, and decision to enter
into this Credit Agreement. Further, each Bank agrees that it will,
independently and without reliance upon the Agent, and based on such documents
and information as it shall deem reasonable and appropriate at the time,
continue to make its own analysis and decisions in taking or not taking action
under this Credit Agreement and the other Loan Documents. Each Bank acknowledges
that a copy of this Credit Agreement and the exhibits and schedules hereto have
been made available to it and to its legal counsel for review and each Bank
acknowledges that it is satisfied with the form and substance of this Credit
Agreement and the exhibits and schedules hereto. Except as otherwise provided
herein, the Agent shall have no duty or responsibility, either initially or on a
continuing basis, to keep any Bank or any holder of a Note informed as to the
performance or observance by the Borrower of this Credit Agreement or any other
document or instrument referred to or provided for herein or
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to inspect the properties or books of the Borrower. The Agent, in the absence of
gross negligence or willful misconduct, shall not be liable to any Bank for its
failure to relay or furnish to the Bank any information. The preceding
provisions of this Section 9.2 to the contrary notwithstanding, the Agent shall
use its best efforts to relay to each Bank any information pertaining to the
Borrower which comes into the possession of the Agent.
9.3 Responsibility of Agent and Other Matters.
(a) Ministerial Nature of Duties. As between the Banks and
themselves, the Agent shall have no duties or responsibilities except those
expressly set forth in this Credit Agreement or in the other Loan Documents, and
those duties and responsibilities shall be subject to the limitations and
qualifications set forth in this Article IX. The duties of the Agent shall be
ministerial and administrative in nature.
(b) Limitation of Liability. As between the Banks and Agent,
neither the Agent nor any of its directors, officers, employees, agents or
affiliates shall be liable for any action taken or omitted (whether or not such
action taken or omitted is within or without the Agent's responsibilities and
duties expressly set forth in this Credit Agreement) under or in connection with
this Credit Agreement or any other instrument or document executed or delivered
in connection herewith except for gross negligence or willful misconduct.
Without limiting the foregoing, neither the Agent nor any of its directors,
officers, employees, agents or affiliates shall be responsible for, or have any
duty to examine (i) the genuineness, execution, validity, effectiveness,
enforceability, collectibility, value or sufficiency of (A) this Credit
Agreement or any of the other Loan Documents or (B) any other document or
instrument furnished pursuant to or in connection with this Credit Agreement,
(ii) the collectibility of any amounts owed by the Borrower to the Banks, (iii)
the truthfulness of any recitals, statements, representations or warranties made
to the Agent or the Banks in connection with this Credit Agreement or any other
Loan Documents, (iv) any failure of any party to this Credit Agreement to
receive any communication sent, including any telegram, telex, teletype,
facsimile transmission or telephone message or any writing, application, notice,
report, statement, certificate, resolution, request, order, consent letter or
other instrument or paper or communication entrusted to the mails or to a
delivery service, or (v) the assets, liabilities, financial condition, results
of operations or business, or creditworthiness of the Borrower.
(c) Reliance. The Agent shall be entitled to act, and shall be
fully protected in acting upon, any telegram, facsimile transmission or any
writing, application, notice, report, statement, certificate, resolution,
request, order, consent, letter or other instrument, paper or communication
believed by the Agent in good faith to be genuine and correct and to have been
signed or sent or made by a proper Person. The Agent may consult counsel
(including counsel of the Borrower), independent public accountants and other
experts selected by it and shall be entitled to act, and shall be fully
protected in any action taken in good faith, in accordance with advice given by
such counsel, independent public accountants and other experts. The Agent may
employ agents and attorneys-in-fact and shall not be liable for the default or
misconduct of any such agents or attorneys-in-fact selected by the Agent with
reasonable care. The Agent shall not be bound to ascertain or inquire as to the
performance or observance of any of the terms,
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provisions or conditions of this Credit Agreement or any of the other Loan
Documents on the part of the Borrower, the other Loan Parties or any other party
thereto.
9.4 Action on Instructions.
As between the Agent and the Banks, the Agent shall be required to act
and shall be fully protected in so acting and shall be entitled to refrain from
acting, and shall be fully protected in refraining from so acting, under this
Credit Agreement, the other Loan Documents or any other instrument or document
executed or delivered in connection herewith or therewith, in accordance with
written instructions from the Required Banks or, in the case of the matters set
forth in items (A) through (G) of Section 10.l, from all of the Banks.
9.5 Action in Event of Default.
As between the Agent and the Banks, if an Event of Default has occurred
and is continuing, the Banks shall promptly consult with one another in an
attempt to agree upon a mutually acceptable course of conduct. Failing unanimous
agreement upon a course of conduct and if the Banks wish to exercise any of
their rights and remedies under the Credit Agreement or under any other Loan
Document, the Agent will exercise the rights of the Banks hereunder or
thereunder as directed by the Required Banks.
9.6 Indemnification.
To the extent the Borrower does not reimburse and save harmless the
Agent according to the terms of this Credit Agreement for and from all costs,
expenses and disbursements in connection herewith, such costs, expenses and
disbursements shall be borne by the Banks ratably. Each Bank hereby severally
agrees on such basis (i) to reimburse and indemnify the Agent for such Bank's
pro rata share of all such reasonable costs, expenses and disbursements on
request and (ii) to the extent of each such Bank's pro rata share, to indemnify
and save harmless the Agent against and from any and all liabilities, losses,
obligations, damages, penalties, claims, actions, judgments and suits and other
costs, expenses and disbursements of any kind or nature whatsoever which may be
imposed on, incurred by or asserted against the Agent, arising out of or in
connection with this Credit Agreement, the other Loan Documents or any other
agreement, instrument or document executed or delivered in connection herewith
or therewith, or any request of the Required Banks or all of the Banks, as the
case may be, including without limitation the reasonable costs, expenses and
disbursements in connection with defending themselves against any claim or
liability, or answering any subpoena or other process related to the exercise or
performance of any of its powers or duties under this Credit Agreement, the
other Loan Documents, or any of the other agreements, instruments or documents
executed or delivered in connection herewith. The foregoing notwithstanding, no
Bank shall be liable for any portion of such losses, obligations, damages,
penalties, claims, actions, judgments and suits, and other costs, expense and
disbursements resulting from or as a consequence of (A) the Agent's gross
negligence or willful misconduct, (B) a claim against the Agent or the Banks
with respect to which each Bank was not given notice and the opportunity to
participate (at its own expense) in the defense thereof or (C) a compromise and
settlement agreement entered into without the consent of all of the Banks.
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9.7 Agent's Rights as a Bank.
With respect to the commitment of the Agent as a Bank hereunder, the
other Loan Documents and any other agreements, instruments and documents
delivered pursuant hereto and any Loans of the Agent under this Credit
Agreement, and any other amounts due to the Agent under this Credit Agreement or
the other Loan Documents, the Agent shall have the same rights and powers,
duties and obligations under this Credit Agreement, the other Loan Documents or
other agreement, instrument or document as any Bank and may exercise such rights
and powers and shall perform such duties and fulfill such obligations as though
it were not the Agent. The terms "Banks", "Required Banks", "holder" or any
similar term shall, unless the context clearly indicates otherwise, include the
Agent in its individual capacity. The Agent may accept deposits from, lend money
to, and generally engage, and continue to engage, in any kind of banking, trust
or other business with the Borrower, any Subsidiary of the Borrower or any
Affiliate thereof as if it were not the Agent hereunder and may accept fees and
other consideration from the Borrower, any Subsidiary of the Borrower or any
Affiliate thereof for services in connection with the Credit Agreement or
otherwise without having to account for the same to the Banks.
9.8 Advances by Agent.
Unless the officers of the Agent responsible for administering this
Credit Agreement shall have been notified in writing by a Bank prior to the date
of any Disbursement that such Bank will not make the amount which would
constitute its pro rata share of such Disbursement available to the Agent on the
date of such Loan, the Agent may (but shall not be required to) assume that such
Bank has made such amount available to the Agent on the date of such Loan and
the Agent, in reliance upon such assumption, may make available to the Borrower
a corresponding amount. If such pro rata share is made available to the Agent on
a date after the date of such Disbursement, such Bank shall pay to the Agent on
demand an amount equal to the product of (i) during each day included in the
period referred to in (iii) below, the Federal Funds Rate during each day
included in such period, multiplied by (ii) the amount of such Bank's pro rata
share of such Disbursement, multiplied by (iii) a fraction, the numerator of
which is the number of days that elapse from and including the date of such Loan
to the date on which such pro rata share of such Disbursement shall become
immediately available to the Agent and the denominator of which is 360. A
statement of the Agent submitted to such Bank with respect to any amounts owing
under this Section 9.8 shall be prima facie evidence as to the amount owed by
such Bank to the Agent. If such Bank's pro rata share is not in fact made
available to the Agent by such Bank within three (3) Business Days of such
borrowing date, the Agent shall be entitled to recover such amount with interest
thereon at the rate per annum equal to the Base Rate during such period, on
demand, from such Bank.
9.9 Payment to Banks.
Promptly after receipt by the Agent from the Borrower of any principal
repayment of the Loans, interest due on the Loans, any fees or other amounts due
under any Loan Document (except for such amounts which are payable for the sole
account of any Bank or the Agent), the Agent shall distribute to each Bank that
Bank's pro rata share of the funds so received; provided that in the event
payments are received by 1:30 P.M., (Pittsburgh, Pennsylvania time) by the
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Agent with respect to the Loans and such payments are not distributed to the
Banks on the same day received by the Agent, the Agent shall pay the Banks the
Federal Funds Rate, with respect to the amount of such payments for each day
held by the Agent and not distributed to the Banks.
9.10 Pro Rata Sharing.
All interest and principal payments on the Loans, all Facility Fees,
the Closing Fee and any other Fees (specifically excluding the Agent's Fee and
the Fee payable to the Issuing Bank in connection with the issuance of any
Letter of Credit) are to be divided pro rata among the Banks; provided that, if
an Additional Bank shall join in this Agreement, the Additional Bank shall only
share pro rata from the date that such Additional Bank became a Bank hereunder.
Any sums obtained from the Borrower by any Bank by reason of the exercise of its
rights of setoff, banker's lien or in collection shall be shared (net of costs)
pro rata among the Banks. Nothing in this Section 9.10 shall be deemed to
require the sharing among the Banks of collections specifically relating to, or
of the proceeds of any collateral securing, any other Indebtedness of the
Borrower to any Bank.
9.11 Successor Agent.
(a) Resignation of the Agent. Subject to a successor Agent
being appointed and such Person accepting the duties and obligations of the
Agent hereunder and under the Loan Documents, the Agent may resign from the
performance of its functions and duties hereunder and under the other Loan
Documents at any time by giving at least sixty (60) days prior written notice to
the Banks and the Borrower. In the event that the Agent gives notice of its
desire to resign from the performance of its functions and duties hereunder and
under the Loan Documents, then the Borrower and the Agent shall use all
reasonable commercial efforts to identify, and the Required Banks shall appoint,
a successor who shall be reasonably satisfactory to the Required Banks and the
Borrower (provided that such approval of the Borrower shall not be unreasonably
withheld and that no such approval of the Borrower shall be required after the
occurrence and during the continuance of an Event of Default). If a successor
Agent shall not have been appointed within said sixty (60) day period, the
Required Banks shall, after consultation with the Borrower, appoint a successor
Agent from among the Banks. Any such successor agent shall succeed to the
rights, powers and duties of the Agent.
(b) Rights of the Former Agent. Upon the appointment of such
successor agent, the former Agent's rights, powers and duties as Agent shall be
terminated, without any other or further act or deed on the part of such former
Agent or any of the parties to this Credit Agreement. After any retiring Agent's
resignation hereunder as administrative agent for the Banks hereunder, the
provisions of this Article IX shall inure to the benefit of such retiring Agent
as to any actions taken or omitted to be taken by it while it was Agent under
this Credit Agreement.
9.12 Additional Banks.
Any bank becoming a party to this Agreement pursuant to Section 2.1(j)
hereof (each an "Additional Bank") shall execute and deliver to Agent a Bank
Joinder, in substantially the form
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attached hereto as Exhibit "J" and otherwise satisfactory to Banks and Borrower.
Upon execution and delivery of the Bank Joinder, such Additional Bank shall be a
party hereto, such Additional Bank's signature pages (including Revolving Credit
Commitments and, if any, Supplemental Swing Loan Commitments) shall be appended
hereto and such Additional Bank shall have the rights and obligations of a Bank
hereunder for all purposes except that such Additional Bank's rights shall be
limited as more fully set forth in the Bank Joinder, including without
limitation, such Additional Bank shall not participate in Letters of Credit (or
associated Letter of Credit Fees) until the last Business Day of March, June,
September or December following the effective date of the Bank Joinder. If
Revolving Credit Loans are bearing interest at the Eurodollar Rate Option, an
Additional Bank shall be included as a Bank on a date that coincides with the
end of the applicable Interest Period. Simultaneously with the execution and
delivery of any Bank Joinder, Borrower shall execute a Revolving Credit Note, a
Supplemental Swing Loan Note (if applicable) and deliver each of them to such
Additional Bank together with originals of such other documents as such
Additional Bank may reasonably require. If required by the Additional Bank as a
condition of it becoming a Bank, the Banks shall agree to a pro rata reduction
in their respective Supplemental Swing Loan Commitments to permit the Additional
Bank to share on a proportional basis in the Supplemental Swing Loans. Agent and
Borrower shall acknowledge any Bank Joinders delivered pursuant to this Section
9.12 and promptly provide copies thereof to each of the other Banks. All Bank
Joinders shall be effective and binding upon all Banks without any requirement
for the execution of such Bank Joinder by the Banks other than the Additional
Bank.
ARTICLE X. MISCELLANEOUS
10.1 Amendments and Waivers.
(a) Amendments to Credit Agreement or Any Loan Document.
Subject to the remaining provisions of this Section 10.1, the Agent, the Banks,
the Issuing Bank, the Borrower and the other Loan Parties may, from time to
time, enter into amendments, modifications, extensions, supplements and
replacements to and of this Credit Agreement or any other Loan Document and the
Banks or the Required Banks, as the case may be, may, from time to time, waive
compliance with a provision hereof or thereof. No amendment or waiver of any
provision of this Credit Agreement, the Notes or any other Loan Document, nor
any consent to any departure therefrom by the Borrower shall be effective unless
the same shall be in writing and signed by the Borrower or other Person,
whichever is the obligor of the document to be amended or the provisions of
which are being waived, and the Agent and the Required Banks, and then such
amendment, waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given.
The foregoing notwithstanding, no amendment, waiver or consent
shall do any of the following unless in writing and signed by all of the Banks
(or the Agent with the consent of all of the Banks):
(A) increase the Revolving Credit Commitment, the Commitment
Amount of any Bank, the Commitment Percentage of any Bank, the Swing Loan
Commitment, the Supplemental Swing Loan Commitment or the maximum aggregate
principal amount of any of the Notes,
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(B) except as contemplated in this Credit Agreement, reduce
the interest rate on the Loans or Letters of Credit or any fees in connection
therewith,
(C) postpone the Repayment Date or the date any payment of
principal, interest or fees are due in connection with the Loans, or any
reimbursement obligations are due in connection with the Letters of Credit.
(D) release any collateral securing the Bank Indebtedness;
(E) amend this Section 10.1; or
(F) amend the definition of "Required Banks".
In the case of any waiver or consent relating to any provision of this Credit
Agreement, the parties shall be restored to their former positions and rights
hereunder, and the Event of Default so waived or consented to shall be deemed to
be cured and not continuing; but no such waiver or consent shall extend to any
subsequent or other Event of Default or impair any right consequent thereon.
Any such supplemental agreement shall apply equally to the Borrower, the
affected party, if any, and each of the Banks and shall be binding upon the
Borrower, the Banks, the Agent and all future holders of the Notes.
(b) Waivers. No delay on the part of the Banks in the exercise
of any power or right shall operate as a waiver thereof, nor shall any single or
partial exercise of any power or right preclude other or further exercise
thereof, or the exercise of any other power or right. In the case of any waiver,
the Borrower, the Banks and the Agent shall be restored to their former
positions and rights, and any Event of Default waived shall be deemed to be
cured and not continuing, but no such waiver shall extend to any subsequent or
other Event of Default, or impair any right consequent thereon.
10.2 Notices.
(a) Notice to the Borrower. All notices required to be sent to
the Borrower shall be sent to the following address, by hand delivery, by
recognized national overnight courier service, by facsimile transmission or
other means of electronic data communication, or by the United States Mail,
first class, postage prepaid:
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<TABLE>
<CAPTION>
If by United States Mail: If by other means:
<S> <C>
Education Management Corporation Education Management Corporation
300 Sixth Avenue 300 Sixth Avenue
Suite 800 Suite 800
Pittsburgh, Pennsylvania 15222 Pittsburgh, Pennsylvania 15222
Attention: Chief Financial Officer Attention: Chief Financial Officer
Telecopier: (412) 562-0598
Telephone: (412) 562-0900
(b) Notice to the Agent. All notices required to be sent to
the Agent shall be sent to the following address, by hand delivery, by
recognized national overnight courier service, by facsimile transmission or
other means of electronic data communication, or by the United States Mail,
first class, postage prepaid:
If by United States Mail: If by other means:
National City Bank of Pennsylvania National City Bank of Pennsylvania
National City Center National City Center
1900 East Ninth Street 1900 East Ninth Street
Location Number 2083 Location Number 2083
Cleveland, OH 44114 Cleveland, OH 44114
Attention: Anita Anders Attention: Anita Anders
Funding Administrator Telephone: (216) 575-2242
Telecopier: (216) 222-0012
</TABLE>
(c) Notice to the Banks. All notices required to be delivered
to the Banks pursuant to this Credit Agreement and the other Loan Documents
shall be in writing and shall be sent to the address set forth on the signature
pages of the Credit Agreement, by hand delivery, by recognized national
overnight courier service, by facsimile transmission or other means of
electronic data communication, or by the United States mail, first class,
postage prepaid.
(d) Receipt of Notices. All such notices shall be effective
three (3) days after mailing, one (1) day after deposit with the courier
service, the date of electronic transmission (receipt confirmed) or when
received, whichever is earlier. The Borrower, the Banks and the Agent may each
change the address for service of notice upon it by a notice in writing to the
other parties hereto.
10.3 Holiday Payments.
If any payments to be made by the Borrower hereunder shall become due
on a date not a Business Day, such payments shall be made on the next succeeding
Business Day.
10.4 Tax Withholding.
At least five (5) Business Days prior to the first date on which
interest or fees are payable hereunder for the account of each Bank, each Bank
that is not incorporated under the laws of the
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United States of America or a state thereof agrees that it will deliver to the
Agent and the Borrower two (2) duly completed copies of either (i) IRS Form W-9,
1001 or 4224 or such other applicable form prescribed by the IRS, certifying in
each case that such Bank is entitled to receive payments under this Credit
Agreement or its Note(s), as the case may be, without deduction or withholding
of United States federal income taxes, or is subject to such tax at a reduced
rate under an applicable tax treaty or (ii) IRS Form W-8 or such other
applicable form prescribed by the IRS or a certificate of such Bank indicating
that no such exemption or reduced rate of taxation is allowable with respect to
such payments. Each Bank which delivers an IRS Form W-8, W-9, 4224 or 1001
further undertakes to deliver to the Agent and the Borrower two (2) additional
copies of any such form (or any successor form) on or before the date on which
that form expires or becomes obsolete or after the occurrence of any event
requiring a change in the most recent form so delivered by it, and such
amendments thereto or extensions or renewals thereof as may be reasonably
requested by the Borrower or the Agent, either certifying that such Bank is
entitled to receive payments under this Credit Agreement or its Note(s), as the
case may be, without deduction or withholding of any United States federal
income taxes or is subject to such tax at a reduced rate under an applicable tax
treaty or stating the date on which that no such exemption or reduced rate is
allowable. The Agent shall be entitled to withhold, from each payment made to
such Bank hereunder or under the Note(s) payable to it, United States federal
income taxes at the full withholding rate unless each Bank referred to in the
first sentence of this Section 10.4 establishes an exemption or at the
applicable reduced rate established pursuant to the above provisions.
10.5 Survival.
Until payment in full of the Bank Indebtedness and expiration of all
outstanding Letters of Credit, and the termination of the Revolving Credit
Commitment, the Swing Loan Commitment and the Supplemental Swing Loan
Commitment, all covenants, agreements, warranties and representations made
herein and in all certificates or other documents delivered in connection with
this Credit Agreement by or on behalf of the Borrower, shall survive the
advances of money made by the Banks to the Borrower hereunder and the delivery
of the Notes, and all such covenants, agreements, warranties and representations
shall inure to the benefit of the successors and assigns of the Banks and the
Agent whether or not so expressed.
10.6 Costs.
The Borrower shall pay:
(i) All reasonable costs and expenses of the Agent (including
without limitation the reasonable fees and disbursements of the Agent's
counsel), incurred in connection with the preparation, negotiation, execution
and delivery of this Credit Agreement and the other Loan Documents and any and
all other documents and instruments prepared in connection herewith, including
but not limited to all amendments, extensions, modifications, waivers, consents
and other documents and instruments prepared or entered into from time to time,
including after the Closing Date;
73
<PAGE> 81
(ii) All reasonable costs and expenses of the Agent and the
Banks (including without limitation the reasonable fees and disbursements of the
Agent's and each of the Bank's counsel) in connection with (A) the enforcement
of this Credit Agreement and the other Loan Documents (whether through
negotiations, legal proceedings or otherwise) arising pursuant to a breach by
the Borrower of any of the terms, conditions, representations, warranties or
covenants of any Loan Document to which it is a party, and (B) defending or
prosecuting any actions, suits or proceedings relating to any of the Loan
Documents.
All of such costs and expenses shall be payable by the Borrower to the Banks or
the Agent, as the case may be, upon demand or as otherwise agreed upon by the
Banks or the Agent and the Borrower, and shall constitute Bank Indebtedness
under this Credit Agreement. The Borrower's obligation to pay such costs and
expenses shall survive the termination of this Credit Agreement and the
satisfaction of all of the Borrower's obligations hereunder.
10.7 Certain Taxes.
The Borrower agrees to pay, and save the Banks harmless from, all
liability for any stamp or other taxes which may be payable with respect to the
execution or delivery of this Credit Agreement or the Loan Documents or the
issuance of the Notes, which obligation of the Borrower shall survive the
termination of this Credit Agreement.
10.8 Successors, Assigns and Participations.
(a) Benefit of Agreement. Subject to the remaining provisions
of this Section 10.8, this Credit Agreement shall be binding upon the Borrower,
the Agent and the Banks and their respective successors and assigns, and shall
inure to the benefit of the Borrower, the Agent and the Banks and the successors
and assigns of the Agent and the Banks; provided, however that the Borrower may
not assign its rights or duties hereunder or under any other Loan Document
without the prior written consent of the Banks and the Agent.
(b) Assignments. Subject to the remaining provisions of this
Subsection 10.8(b), any Bank, at any time, in the ordinary course of its
commercial banking business and in accordance with applicable law, may sell to
one or more Purchasing Banks (which Purchasing Banks may be Affiliates of the
Transferor Bank), a portion or all of its rights and obligations under this
Credit Agreement and the Note(s) then held by it pursuant to an Assignment and
Assumption Agreement substantially in the form of Exhibit "H" and executed by
the Transferor Bank and such Purchasing Bank and consented to by the Agent and
the Borrower which consent shall not be withheld without a good faith reason;
subject, however to the following requirements:
(i) The Borrower and the Agent must give their prior consent
to any such assignment (other than an assignment made by a Bank to an Affiliate
of such Bank) which consent shall not be unreasonably withheld;
(ii) Each such assignment must be in a minimum amount of
$10,000,000 or the remaining amount of the Transferor Bank's Revolving Credit
Commitment if less, or, if in excess thereof, in integral multiples of
$1,000,000, unless otherwise agreed by the Borrower and
74
<PAGE> 82
the Agent, and each such assignment shall include the same percentage of the
Supplemental Swing Loan Commitment of the Transferor Bank as the percentage of
the Revolving Credit Commitment being transferred by the Transferor Bank;
(iii) No Purchasing Bank which purchases a Revolving Credit
Commitment of less than or equal to $10,000,000 may sell Participations;
(iv) No Purchasing Bank may make assignments unless otherwise
agreed by the Borrower, such consent to not be unreasonably withheld by the
Borrower; and
(v) On the date such assignment is made, the Transferor Bank
shall pay to the Agent a $3,500 service fee for each assignment;
provided, however the restrictions set forth in Subsection 10.8(a)(i), (ii),
(iii) and (iv) above shall not apply in the case of any assignment by any
Transferor Bank upon the occurrence and during the continuation of an Event of
Default.
Upon the execution, delivery, acceptance and recording of any
such Assignment and Assumption Agreement, from and after the Transfer Effective
Date set forth in such Assignment and Assumption Agreement, (a) the Purchasing
Bank thereunder shall be a party hereto as a Bank and, to the extent provided in
such Assignment and Assumption Agreement, shall have the rights and obligations
of a Bank hereunder with a Commitment Amount and Commitment Percentage, and (b)
the Transferor Bank thereunder shall be released from its obligations as a Bank
under this Credit Agreement to the extent provided in such Assignment and
Assumption Agreement. Such Assignment and Assumption Agreement shall be deemed
to amend this Credit Agreement to the extent, and only to the extent, necessary
to reflect the addition of such Purchasing Bank as a Bank and the resulting
adjustment of Commitment Percentages arising from the purchase by such
Purchasing Bank of all or a portion of the rights and obligations of such
Transferor Bank under this Credit Agreement and its Note(s), as the case may be.
On or prior to the Transfer Effective Date, the Borrower shall execute and
deliver to the Agent, in exchange for the surrendered Note(s) held by the
Transferor Bank, a new Note(s) to the order of such Purchasing Bank in an amount
equal to the Commitment Amount assumed by it and purchased by it pursuant to
such Assignment and Assumption Agreement, and new Note(s) to the order of the
Transferor Bank in an amount equal to the Commitment Amount retained by it
hereunder, if any.
(c) Assignment Register. The Agent shall maintain, at its
address referred to in Subsection 10.2(b) hereof, a copy of each Assignment and
Assumption Agreement delivered to it and a register (the "Register") for the
recordation of the names and addresses of the Banks, and the amount of the
Commitment Amount of each Bank, if any, then in effect, and the amount of the
Loans owing to each Bank, from time to time. The entries in the Register shall
be conclusive, in the absence of manifest error, and the Borrower, the Agent and
the Banks may treat each Person whose name is recorded in the Register as the
owner of the Loans for all purposes of this Credit Agreement. The Register shall
be available at the office of the Agent set forth in Subsection 10.2(b) hereof
for inspection by the Borrower or any Bank at any reasonable time and from time
to time upon reasonable prior notice.
75
<PAGE> 83
(d) Participations. Any Bank, in the ordinary course of its
commercial banking business and in accordance with applicable law, may sell to
one or more Participants a Participation in any Loan owing to such Bank, the
interest of such Bank in (i) any Revolving Credit Note or (ii) the Commitment
Amount of such Bank. In the event of any such sale by a Bank of a Participation
to a Participant, such Bank's obligations under this Credit Agreement to the
other parties to this Credit Agreement shall remain unchanged, such Bank shall
remain solely responsible for the performance thereof, such Bank shall remain
the holder of its Note(s) for all purposes under this Credit Agreement
(including voting rights hereunder), and the Borrower, the other Banks and the
Agent shall continue to deal solely and directly with such Bank in connection
with such Bank's rights and obligations under this Credit Agreement or the other
Loan Documents; provided, however, that no Bank shall transfer or grant any
Participation under which the Participant shall have rights to approve any
amendment, modification or waiver of this Credit Agreement or any other Loan
Document except to the extent such amendment, modification or waiver would (i)
reduce or increase the principal amount of such Participant's Participation over
the amount then in effect, (ii) decrease the interest rate relating to the
Loans, (iii) reduce the Facility Fee or any other Fee payable to the
Participant, (iv) postpone any date fixed for any payment of principal of or
interest on the Loans, reimbursement obligations, the Facility Fee or any other
Fees or obligations of the Borrower set forth in Article II or (v) release any
collateral granted to the Agent, on behalf of the Bank, to secure the Bank
Indebtedness.
(e) Other Assignments. Notwithstanding the foregoing
provisions of this Section 10.8, any Bank may, at any time and from time to
time, assign all or any portion of its rights under this Credit Agreement and
its Note(s) to a Federal Reserve Bank in support of borrowings made by such Bank
from such Federal Reserve Bank. No such assignment shall release any assigning
Bank from its obligations hereunder.
(f) Disclosure. The Borrower authorizes each Bank to disclose
to any Participant or Purchasing Bank and any prospective Participant or
Purchasing Bank any and all financial information in such Bank's possession
concerning the Borrower and its Subsidiaries which has been delivered to such
Bank by or on behalf of the Borrower pursuant to this Credit Agreement or in
connection with such Bank's credit evaluation of the Borrower prior to becoming
a party to this Credit Agreement.
10.9 Confidentiality.
Unless otherwise agreed to in writing by the Borrower, the Agent and the
Banks hereby agree to keep all Proprietary Information confidential and not to
disclose or reveal any Proprietary Information to any Person other than the
Agent's or the Banks' directors, officers, employees, Affiliates and agents and
to actual or potential Purchasing Banks and Participants, and then only on a
confidential basis; provided, however, that the Agent or the Banks may disclose
Proprietary Information (i) as required by any Governmental Rule, (ii) to their
respective attorneys and accountants, (iii) as requested or required by any
state, federal or foreign authority or examiner regulating banks or banking; or
(iv) in connection with any litigation or enforcement proceedings; and further,
provided, that the Agent or the Banks may not disclose any confidential
information concerning identified students before giving the Borrower notice of
76
<PAGE> 84
such proposed disclosure and affording it a reasonable opportunity to obtain a
judicial protective order from a court of competent jurisdiction.
10.10 Indemnification.
The Borrower will indemnify and hold harmless the Agent and the Banks,
any of their respective directors, officers or employees and each Person, if
any, who controls the Agent or the Banks within the meaning of the Securities
Act of 1933 or the Securities and Exchange Act of 1934 (any and all of whom are
referred to as an "Indemnified Party") from and against any and all losses,
claims, damages and liabilities (including but not limited to any Environmental
Claim or the liability of any Bank thereon), joint or several (including but not
limited to all legal fees or other expenses reasonably incurred by any
Indemnified Party in connection with the preparation for or defense of any
pending or threatened claim, action or proceeding, whether or not resulting in
any liability), to which such Indemnified Party may become subject (whether or
not such Indemnified Party is a party thereto) under any applicable federal or
state law or otherwise caused by or arising out of, or allegedly caused by or
arising out of, this Credit Agreement or any transaction contemplated hereby,
other than losses, claims, damages or liabilities resulting from the transfer of
any of the Notes in violation of any applicable law or regulation; provided, the
Borrower shall not be liable where any action or failure to act was due to the
gross negligence or willful misconduct of the Indemnified Party.
Promptly after receipt by an Indemnified Party of notice of any claim, action or
proceeding with respect to which an Indemnified Party is entitled to indemnity
hereunder, such Indemnified Party will notify the Borrower of such claim or the
commencement of such action or proceeding, provided that the failure of an
Indemnified Party to give notice as provided herein shall not relieve the
Borrower of its obligations under this Section 10.10 with respect to such
Indemnified Party, except to the extent that the Borrower is actually prejudiced
by such failure. The Borrower will assume the defense of such claim, action or
proceeding and will employ counsel satisfactory to the Indemnified Party and
will pay the fees and expenses of such counsel. Notwithstanding the preceding
sentence, the Indemnified Party will be entitled, at the expense of the
Borrower, to employ counsel separate from counsel for the Borrower and for any
other party in such action if the Indemnified Party reasonably determines that a
conflict of interest or other reasonable basis exists which makes representation
by counsel chosen by the Borrower not advisable, provided that the Borrower
shall not be obligated to pay for the fees and expenses of more than one counsel
for all Indemnified Parties. In the event an Indemnified Party appears as a
witness in any action or proceeding brought against the Borrower (or any of its
officers, directors or employees) in which an Indemnified Party is not named as
a defendant, the Borrower agrees to reimburse such Indemnified Party for all
necessary, out-of-pocket expenses incurred by it (including fees and expenses of
counsel) in connection with its appearing as a witness.
The Borrower's obligations under this Section 10.10 shall survive the
termination of this Credit Agreement and repayment of the Bank Indebtedness.
77
<PAGE> 85
10.11 Integration.
This Credit Agreement together with the other Loan Documents
constitutes the entire agreement between the parties relating to this financing
transaction and its supersedes all prior understandings and agreements, whether
written or oral between the parties hereto concerning the transactions provided
for herein.
10.12 Severability.
Any provision of this Credit Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof or affecting the validity or enforceability of such
provision in any other jurisdiction.
10.13 APPLICABLE LAW.
THIS CREDIT AGREEMENT AND THE NOTES, SHALL BE CONTRACTS MADE UNDER AND
GOVERNED BY THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA WITHOUT REFERENCE TO
THE PROVISIONS THEREOF REGARDING CONFLICTS OF LAW.
10.14 CONSENT TO JURISDICTION.
THE PARTIES HERETO AGREE THAT ANY ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THIS CREDIT AGREEMENT, THE NOTES OR THE OTHER LOAN DOCUMENTS
SHALL BE COMMENCED IN THE COURT OF COMMON PLEAS OF ALLEGHENY COUNTY,
PENNSYLVANIA OR IN THE DISTRICT COURT OF THE UNITED STATES FOR THE WESTERN
DISTRICT OF PENNSYLVANIA AND EACH PARTY AGREES THAT A SUMMONS AND COMPLAINT
COMMENCING AN ACTION OR PROCEEDING IN EITHER OF SUCH COURTS SHALL BE PROPERLY
SERVED AND SHALL CONFER PERSONAL JURISDICTION IF SERVED PERSONALLY OR BY
CERTIFIED MAIL TO THE PARTY IN RESPECT OF THE BORROWER OR THE AGENT, AT ITS
ADDRESS SET FORTH IN SECTION 10.2 HEREOF AND IN RESPECT OF ANY BANK, AT ITS
ADDRESS SET FORTH ON ITS SIGNATURE PAGE TO THIS CREDIT AGREEMENT OR ON THE
ASSIGNMENT AND ASSUMPTION AGREEMENT TO WHICH SUCH BANK IS A PARTY, OR AS
OTHERWISE PROVIDED UNDER THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA. FURTHER,
THE BORROWER, THE AGENT AND THE BANKS HEREBY SPECIFICALLY CONSENT TO THE
PERSONAL JURISDICTION OF THE COURT OF COMMON PLEAS OF ALLEGHENY COUNTY,
PENNSYLVANIA AND THE DISTRICT COURT OF THE UNITED STATES FOR THE WESTERN
DISTRICT OF PENNSYLVANIA AND WAIVE AND HEREBY ACKNOWLEDGE THAT THE BORROWER, THE
AGENT AND THE BANKS ARE ESTOPPED FROM RAISING ANY CLAIM THAT EITHER SUCH COURT
LACKS PERSONAL JURISDICTION OVER THE BORROWER, THE AGENT OR THE BANKS SO AS TO
PROHIBIT EITHER SUCH COURT FROM ADJUDICATING ANY ISSUES RAISED
78
<PAGE> 86
IN A COMPLAINT FILED WITH EITHER SUCH COURT CONCERNING THIS CREDIT AGREEMENT OR
THE NOTES.
10.15 Counterparts.
This Credit Agreement may be executed in as many identical counterparts
as may be convenient and by the different parties hereto on separate
counterparts. This Credit Agreement shall become binding when the Agent, the
Banks and the Borrower have executed at least one counterpart. Immediately after
the execution of counterparts and solely for the convenience of the parties
hereto, the Borrower and the Banks will execute sufficient counterparts so that
Borrower shall have counterparts executed by it, and the Banks shall have
counterparts executed by it and the Borrower. All counterparts shall constitute
but one and the same instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
79
<PAGE> 87
Executed as of the day and year first above Written.
EDUCATION MANAGEMENT CORPORATION
By: /s/ Robert T. McDowell
---------------------------------------
Name: Robert T. McDowell
Title: Executive Vice President and CFO
NATIONAL CITY BANK OF PENNSYLVANIA, in
its capacity as the Agent
By: /s/ Vince J. Delie, Jr.
---------------------------------------
Name: Vince J. Delie, Jr.
-------------------------------------
Title: Vice President and Regional Manager
------------------------------------
80
<PAGE> 88
IN WITNESS WHEREOF, intending to be legally bound hereby, the
undersigned Bank has caused this Credit Agreement by and among EDUCATION
MANAGEMENT CORPORATION, the FINANCIAL INSTITUTIONS PARTY HERETO and NATIONAL
CITY BANK OF PENNSYLVANIA, as the Agent, to be executed by its duly authorized
officer as of the date first above written.
<TABLE>
<S> <C>
NATIONAL CITY BANK OF
PENNSYLVANIA, in its capacity as a Bank
and the Issuing Bank
Revolving Credit Commitment:
$35,000,000.00
By: /s/ Vince J. Delie, Jr.
------------------------------------------
Commitment Percentage: 43.75% Name: Vince J. Delie, Jr.
----------------------------------------
Title: Vice President and Regional Manager
---------------------------------------
Swing Loan Commitment:
$5,000,000.00
Supplemental Swing Loan Commitment:
$10,937,500.00
Addresses for notice purposes:
If by United States Mail: If by other means:
National City Bank of Pennsylvania National City Bank of Pennsylvania
National City Center National City Center
1900 East Ninth Street 1900 East Ninth Street
Location Number 2083 Location Number 2083
Cleveland, OH 44114 Cleveland, OH 44114
Attention: Anita Anders Attention: Anita Anders
Funding Administrator Telephone: (216) 575-2242
Telecopier: (216) 222-0012
Address for Eurodollar Rate Loan funding if different from above:
- ----------------------------------------------
- ----------------------------------------------
- ----------------------------------------------
Telephone:
------------------------------------
Telecopier:
-----------------------------------
</TABLE>
81
<PAGE> 89
IN WITNESS WHEREOF, intending to be legally bound hereby, the
undersigned Bank has caused this Credit Agreement by and among EDUCATION
MANAGEMENT CORPORATION, the FINANCIAL INSTITUTIONS PARTY HERETO and NATIONAL
CITY BANK OF PENNSYLVANIA, as the Agent, to be executed by its duly authorized
officer as of the date first above written.
<TABLE>
<S> <C>
Bank One, Michigan,
in its capacity as a Bank
Revolving Credit Commitment: By: /s/ Richard L. Janisse
$20,000,000.00 -------------------------------------
Name: Richard L. Janisse
-----------------------------------
Title: First Vice President
----------------------------------
Commitment Percentage: 25.00%
Supplemental Swing Loan Commitment:
$6,250,000.00
Addresses for notice purposes:
If by United States Mail: If by other means:
Bank One, Michigan ---------------------------------
611 Woodward Avenue
Detroit, MI 48226 ---------------------------------
---------------------------------
Attention: Richard Janisse Attention: Richard Janisse
First Vice President First Vice President
Telephone: (313) 225-2448
Telecopier: (313) 225-1212
with a copy to:
Address for Eurodollar Rate Loan funding if different from above:
- --------------------------------------
- --------------------------------------
- --------------------------------------
Telephone:
-----------------------------
Telecopier:
----------------------------
</TABLE>
<PAGE> 90
IN WITNESS WHEREOF, intending to be legally bound hereby, the
undersigned Bank has caused this Credit Agreement by and among EDUCATION
MANAGEMENT CORPORATION, the FINANCIAL INSTITUTIONS PARTY HERETO and NATIONAL
CITY BANK OF PENNSYLVANIA, as the Agent, to be executed by its duly authorized
officer as of the date first above written.
<TABLE>
<S> <C>
First Union National Bank,
in its capacity as a Bank and as Co-Agent
Revolving Credit Commitment: By: /s/ Karl F. Schultz
$25,000,000.00 ------------------------------------
Name: Karl F. Schultz
----------------------------------
Title: Vice President
---------------------------------
Commitment Percentage: 31.25%
Supplemental Swing Loan Commitment:
$7,812,500.00
Addresses for notice purposes:
If by United States Mail: If by other means:
First Union National Bank --------------------------------
2240 Butler Pike
Plymouth Meeting, PA 19462 --------------------------------
Attention: Patrick Kauffmann
--------------------------------
Attention: Patrick Kauffmann
Telephone: (610) 941-3161
Telecopier: (610) 941-3129
with a copy to:
Address for Eurodollar Rate Loan funding if different from above:
- -------------------------------------
- -------------------------------------
- -------------------------------------
Telephone:
---------------------------
Telecopier:
--------------------------
</TABLE>
<PAGE> 91
IN WITNESS WHEREOF, intending to be legally bound hereby, the
undersigned Bank has caused this Credit Agreement by and among EDUCATION
MANAGEMENT CORPORATION, the FINANCIAL INSTITUTIONS PARTY HERETO and NATIONAL
CITY BANK OF PENNSYLVANIA, as the Agent, to be executed by its duly authorized
officer as of the date first above written.
<TABLE>
<S> <C>
Chase Manhattan Bank,
in its capacity as a Bank
Revolving Credit Commitment: By
$10,000,000.00 ----------------------------------
Name:
-------------------------------
Title:
------------------------------
Commitment Percentage: 10.00%
Supplemental Swing Loan Commitment:
$2,500,000.00
Addresses for notice purposes:
If by United States Mail: If by other means:
Chase Manhattan Bank ------------------------------------
301 Grant Street
One Oxford Centre, Suite 1100 ------------------------------------
Pittsburgh, PA 15219
Attention: John Malone ------------------------------------
Vice President Attention: John Malone
Vice President
Telephone: (412) 291-2031
Telecopier: (412) 456-5565
with a copy to:
Address for Eurodollar Rate Loan funding if different from above:
- --------------------------------
- --------------------------------
- --------------------------------
Telephone:
----------------------
Telecopier:
---------------------
</TABLE>
<PAGE> 92
IN WITNESS WHEREOF, intending to be legally bound hereby, the
undersigned Bank has caused this Credit Agreement by and among EDUCATION
MANAGEMENT CORPORATION, the FINANCIAL INSTITUTIONS PARTY HERETO and NATIONAL
CITY BANK OF PENNSYLVANIA, as the Agent, to be executed by its duly authorized
officer as of the date first above written.
<TABLE>
<CAPTION>
SunTrust Bank
in its capacity as a Bank
<S> <C>
Revolving Credit Commitment: By
$15,000,000.00 ---------------------------------
Name:
------------------------------
Title:
-----------------------------
Commitment Percentage: 15.00%
Supplemental Swing Loan Commitment:
$3,750,000.00
Addresses for notice purposes:
If by United States Mail: If by other means:
SunTrust Banks, Inc. -----------------------------------
P.O. Box 305110
Nashville, TN 37230-5110 -----------------------------------
Attention: William H. Crawford
Assistant Vice President -----------------------------------
Attention: William H. Crawford
Assistant Vice President
Telephone: (615) 748-4629
Telecopier: (615) 748-5269
with a copy to:
Address for Eurodollar Rate Loan funding if different from above:
- ---------------------------------------
- ---------------------------------------
- ---------------------------------------
Telephone:
-----------------------------
Telecopier:
----------------------------
</TABLE>
<PAGE> 1
EXHIBIT 4.02
FIRST AMENDMENT TO CREDIT AGREEMENT
This First Amendment to Credit Agreement (the "Amendment") is dated as
of March 31, 2000 and is made by and among EDUCATION MANAGEMENT CORPORATION,
(the "Borrower"), the Banks under the Credit Agreement (as hereafter defined),
CHASE MANHATTAN BANK and SUNTRUST BANK as Additional Banks (hereinafter
sometimes collectively referred to as "Additional Banks" and individually as an
"Additional Bank"), NATIONAL CITY BANK OF PENNSYLVANIA as the Agent and FIRST
UNION NATIONAL BANK, as Co-Agent (NATIONAL CITY BANK OF PENNSYLVANIA and FIRST
UNION NATIONAL BANK are hereinafter collectively referred to as "Agents" in
their capacity as Agents for the Banks under the Credit Agreement).
RECITALS:
WHEREAS, the Borrower, the Banks and the Agents entered into that
certain Credit Agreement dated as of February 18, 2000 (as amended, the "Credit
Agreement"); and
WHEREAS, Chase Manhattan Bank and SunTrust Bank desire to become
parties to the Credit Agreement as Additional Banks; and
WHEREAS, the parties desire to increase the Revolving Credit
Commitments to an aggregate amount of One Hundred Million Dollars ($100,000,000)
pursuant to the terms of the Credit Agreement and to amend certain provisions of
the Credit Agreement, as hereinafter provided, and
WHEREAS, capitalized terms used herein and not otherwise defined shall
have the meanings given to them under the Credit Agreement.
NOW, THEREFORE, in consideration of the foregoing and intending to be
legally bound, the parties hereto agree as follows:
1. Permitted Acquisitions. The parties hereto hereby amend and
restate the definition of Permitted Acquisitions contained in Section 1.1 of the
Credit Agreement to read as follows:
"Permitted Acquisitions" means any acquisition by the Borrower
or any of its Subsidiaries of the assets or stock of a second Person
which complies with each of the following conditions: (i) such second
Person is engaged in the education or training business (whether profit
or non-profit); (ii) such acquisition
<PAGE> 2
is not hostile in nature (as determined promptly in the reasonable
discretion of each of the Banks); and (iii) with respect to any
acquisition or series of acquisitions involving assets valued (on a
going concern basis) at more than $2,000,000, the Borrower shall
demonstrate, on a pro forma basis and to the reasonable satisfaction of
the Required Banks, that no Default or Event of Default shall occur as
a result of such acquisition(s).
2. Amendments and Waivers.
(i) The parties hereto hereby amend and restate Clauses (E) and (F) of Section
10.1(a) of the Credit Agreement to read as follows:
(E) amend this Section 10.1;
(F) amend the definition of "Required Banks" or any other
provision of this Credit Agreement specifying the number or
percentage of Banks required to waive, amend or modify any
rights, make any determination or grant any consent
hereunder;
(ii) The parties hereto hereby amend Section 10.1(a) by adding new clauses (G)
and (H) to read as follows:
(G) amend clause (ii) of the definition of "Permitted
Acquisitions;" or
(H) waive compliance with clause (i) of Section 6.12 if the
acquisition for which the waiver is requested is hostile in
nature (as determined promptly in the reasonable discretion
of each of the Banks).
3. Joinders.
Pursuant to the procedures set forth in Section 9.12 of the Credit
Agreement, Chase Manhattan Bank and SunTrust Bank are becoming parties to the
Credit Agreement as of the date hereof by executing and delivering to the Agent,
Bank Joinders substantially in the form of Exhibit "J" to the Credit Agreement
(the "Joinders") and signature pages (including Revolving Credit Commitments and
Supplemental Swing Loan Commitments) to be appended to the Credit Agreement .
This Amendment is deemed to become effective immediately after such Joinders
become effective. The Revolving Credit Commitments, Commitment Percentages and
Supplemental Swing Loan Commitments for the Banks and Additional Banks are as
set forth on Schedule "1" hereto and the Revolving Credit Commitments,
Commitment Percentages and Supplemental Swing Loan Commitments of the Banks (as
referred to in the Credit Agreement) are hereby amended and restated to read as
set forth on Schedule 1.
4. Full Force and Effect. All provisions of the Credit
Agreement remain in full force and effect except as expressly amended hereby.
2
<PAGE> 3
5. Counterparts; Effective Date.
This Amendment may be signed in counterparts. This Amendment shall
become effective when (i) it has been executed by the Borrower, the Banks, the
Additional Banks and the Agents; (ii) the Additional Banks have delivered the
Joinders and signature pages to the Credit Agreement to the Agent and the
Joinders have been acknowledged and accepted by the Borrower and the Banks,
(iii) the Borrower has executed and delivered new Revolving Credit Notes and
Supplemental Swing Loan Notes to the Banks and Additional Banks in the amounts
of the Revolving Credit Commitments and Supplemental Swing Loan Commitments
respectively applicable to each Bank and Additional Bank, as set forth on
Schedule 1; and (iv) Borrower has paid to the Agent for the account of each
Additional Bank the Closing Fee provided in Section 2.8 of the Credit Agreement.
[SIGNATURES BEGIN ON NEXT PAGE]
3
<PAGE> 4
[SIGNATURE PAGE 1 OF 2 TO FIRST AMENDMENT
TO CREDIT AGREEMENT]
The undersigned have executed this Amendment as of the date first
written above.
EDUCATION MANAGEMENT CORPORATION
By: /s/ Robert T. McDowell
-------------------------------
Name: Robert T. McDowell
Title: Executive Vice President and CFO
NATIONAL CITY BANK OF PENNSYLVANIA,
in its capacity as a Bank, as the
Issuing Bank and as the Agent
By: /s/ Vince J. Delie, Jr.
---------------------------------------
Name: Vince J. Delie, Jr.
-------------------------------------
Title: Vice President and Regional Manager
------------------------------------
FIRST UNION NATIONAL BANK, in its
capacity as a Bank and as Co-Agent
By: /s/ Karl F. Schultz
---------------------------------------
Name: Karl F. Schultz
-------------------------------------
Title: Vice President
------------------------------------
4
<PAGE> 5
[SIGNATURE PAGE 2 OF 2 TO FIRST AMENDMENT
TO CREDIT AGREEMENT]
BANK ONE, MICHIGAN
By: /s/ Richard L. Janisse
------------------------------------
Name: Richard L. Janisse
----------------------------------
Title: First Vice President
---------------------------------
CHASE MANHATTAN BANK
By: /s/ John Malone
------------------------------------
Name: John Malone
----------------------------------
Title: Vice President
---------------------------------
SUNTRUST BANK
By: /s/ Alan K. Oakley
------------------------------------
Name: Alan K. Oakley
----------------------------------
Title: Managing Director
---------------------------------
5
<PAGE> 6
SCHEDULE 1
COMMITMENT OF BANKS
<TABLE>
<CAPTION>
REVOLVING CREDIT SUPPLEMENTAL SWING COMMITMENT
BANK COMMITMENT LOAN COMMITMENT PERCENTAGE
- ---- ---------- --------------- ----------
<S> <C> <C> <C>
National City Bank of Pennsylvania $30,000,000 $7,500,000 30%
First Union National Bank $25,000,000 6,250,000 25%
Bank One, Michigan $20,000,000 5,000,000 20%
Chase Manhattan Bank $10,000,000 2,500,000 10%
SunTrust Bank $15,000,000 3,750,000 15%
----------- ---------- ---
Total $100,000,00 $25,000,000 100%
=========== =========== ====
</TABLE>
<PAGE> 1
Exhibit 15
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Education Management Corporation and Subsidiaries:
We have reviewed the accompanying condensed consolidated balance sheets of
Education Management Corporation (a Pennsylvania corporation) and Subsidiaries
as of March 31, 2000 and 1999, the related condensed consolidated statements of
income for the three and nine-month periods ended March 31, 2000 and 1999 and
the condensed consolidated statements of cash flows for the nine-month periods
ended March 31, 2000 and 1999. These financial statements are the responsibility
of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the financial statements referred to above for them to be in
conformity with accounting principles generally accepted in the United States.
We have previously audited, in accordance with auditing standards generally
accepted in the United States, the consolidated balance sheet of Education
Management Corporation and Subsidiaries as of June 30, 1999 (not presented
herein), and, in our report dated July 28, 1999, we expressed an unqualified
opinion on that statement. In our opinion, the information set forth in the
accompanying condensed consolidated balance sheet as of June 30, 1999, is fairly
stated, in all material respects, in relation to the consolidated balance sheet
from which it has been derived.
Pittsburgh, Pennsylvania,
April 20, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AND CONDENSED CONSOLIDATED STATEMENT OF
INCOME AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 715
<SECURITIES> 0
<RECEIVABLES> 25,570
<ALLOWANCES> (13,839)
<INVENTORY> 2,479
<CURRENT-ASSETS> 22,041
<PP&E> 207,978
<DEPRECIATION> (87,801)
<TOTAL-ASSETS> 179,014
<CURRENT-LIABILITIES> 54,950
<BONDS> 14,637
0
0
<COMMON> 297
<OTHER-SE> 108,160
<TOTAL-LIABILITY-AND-EQUITY> 179,014
<SALES> 83,195
<TOTAL-REVENUES> 83,195
<CGS> 53,342
<TOTAL-COSTS> 71,227
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,420
<INTEREST-EXPENSE> 87
<INCOME-PRETAX> 11,881
<INCOME-TAX> 4,768
<INCOME-CONTINUING> 7,113
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,113
<EPS-BASIC> 0.25
<EPS-DILUTED> 0.24
</TABLE>
