<PAGE> 1
EXHIBIT 10.1
THIRD
AMENDED AND RESTATED
CREDIT AGREEMENT
between
COMPUTER LEARNING CENTERS, INC.,
and
FIRST UNION NATIONAL BANK,
as successor-by-merger to
CORESTATES BANK, N.A.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
SECTION 1. CONSTRUCTION AND DEFINITIONS 2
1.1 Defined Terms 2
1.2 Other Definitional Provisions 14
SECTION 2. AMOUNT AND TERMS OF LOAN COMMITMENTS 15
2.1 Revolving Credit Commitment 15
2.2 Revolving Credit Note 15
2.3 Procedure for Revolving Credit Borrowing 16
2.4 Facility Fee 17
2.5 Default Fees 17
2.6 Payment at Revolving Credit Termination Date 17
2.7 Conversion of Revolving Credit Loans to Convertible Term
Loans 17
2.8 Convertible Term Loan Units 17
2.9 Convertible Term Loan Note 17
2.10 Principal Prepayments 17
2.11 Interest Rate Conversion Options; Minimum Amount of Loans 17
2.12 Number and Amounts of Eurodollar Tranches 17
2.13 Interest Rates and Payment Dates 18
2.14 Computation of Interest and Fees 18
2.15 Inability to Determine Interest Rate 18
2.16 Payments 18
2.17 Illegality 19
2.18 Requirements of Law 19
2.19 Taxes 20
2.20 Indemnity 20
2.21 Certain Calculations 20
2.22 Revolving Credit Cash Collateral Account 21
SECTION 3. LETTERS OF CREDIT 21
3.1 Letter of Credit Commitment 21
3.2 Procedure for Issuance and Renewal of Letters of Credit 21
3.3 Reimbursement of the Lender 22
3.4 Commissions, Fees and Charges 23
3.5 Interest on Amounts Disbursed under Letters of Credit 23
3.6 Computation of Interest and Fees; Payment not on Business
Days 23
3.7 Increased Costs 23
3.8 Nature of Obligations and Indemnities 23
3.9 Inconsistency in Documents 25
3.10 Cash Collateral for Letters of Credit 26
SECTION 4. REPRESENTATIONS AND WARRANTIES 26
4.1 Financial Condition 26
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<TABLE>
<S> <C>
4.2 No Change 26
4.3 Organization and Good Standing; Compliance with Law 26
4.4 Authorization; Enforceable Obligations 27
4.5 No Legal Bar 27
4.6 No Material Litigation; Labor Matters 27
4.7 No Default 27
4.8 Ownership of Property; Liens 28
4.9 Business Premises 28
4.10 Subsidiaries 28
4.11 Environmental 28
4.12 Solvency 29
4.13 Taxes 29
4.14 Federal Regulations 29
4.15 Employee Matters 29
4.16 Investment Company Act; Other Regulations 32
4.17 Accuracy and Completeness of Information 32
4.18 Purpose of Loans 33
4.19 CLCQ and Delta College 33
4.20 No Intent to File Bankruptcy 33
SECTION 5. CONDITIONS PRECEDENT 33
5.1 Documents and Other Deliveries at Closing 33
(a) Credit Documents 33
(b) Borrowing Certificate 33
(c) Borrower Proceedings 33
(d) Borrower Incumbency Certificate 34
(e) Filings, Registrations and Recordings 34
(f) Other Documents 34
(g) Payment of Expenses 34
5.2 Conditions to Each Loan 34
(a) Representations and Warranties 34
(b) No Default 34
(c) No Material Litigation 34
(d) No Material Adverse Changes 35
(e) Additional Matters 35
SECTION 6. AFFIRMATIVE COVENANTS 35
6.1 Financial Information 35
6.2 Payment of Obligations 37
6.3 Conduct of Business and Maintenance of Existence 37
6.4 Maintenance of Property; Insurance 38
6.5 Inspection of Property and Books and Records 38
6.6 Notices 38
6.7 Government Regulations 39
6.8 Employee Benefit Plans 39
6.9 Environmental 39
</TABLE>
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<TABLE>
<S> <C>
6.10 Perfection of Security Interest 41
6.11 Year 2000 Compatibility 41
6.12 Primary Bank Accounts 41
6.13 Weekly Cash Flow Projections 41
6.14 Delivery of Original Retail Installment
Contracts 41
6.15 Business Consultant 42
6.16 Business Plan 42
6.17 Tax Refunds 42
6.18 Borrowing Base 42
6.19 Monthly Meeting 42
6.20 Correspondence from Department of Education 43
6.21 HCM2 Information 43
6.22 Financial Covenants 43
6.23 Landlord Waivers. 45
SECTION 7. NEGATIVE COVENANTS 45
7.1 Limitation on Factoring 45
7.2 Limitation on Indebtedness 45
7.3 Limitation on Liens 45
7.4 Limitation on Negative Pledge Clauses 46
7.5 Limitation on Contingent Obligations 46
7.6 Limitations on Fundamental Changes 46
7.7 Limitation on Acquisitions 46
7.8 Limitation on Sale of Assets 46
7.9 Limitation on Restricted Payments 47
7.10 Limitation on Transactions with Affiliates 47
7.11 Limitation on Subsidiaries 47
7.12 Limitation on Investments, Loans and Advances 47
7.13 Limitation on Optional Payments and Modifications 47
7.14 Limitation on Sale and Leaseback 48
7.15 Fiscal Year 48
7.16 Places of Business 48
7.17 Change of Name 48
7.18 ERISA 48
7.19 Environmental 49
7.20 Limitation on Inconsistent Agreements 49
7.21 Limitation on Capital Expenditures 49
SECTION 8. EVENTS OF DEFAULT 50
SECTION 9. MISCELLANEOUS 53
9.1 Amendments and Waivers 53
9.2 More Restrictive Provisions 53
9.3 Notices 54
9.4 No Waiver; Cumulative Remedies 54
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<TABLE>
<S> <C>
9.5 Survival of Representations and Warranties 55
9.6 Payment of Expenses and Taxes 55
9.7 Further Assurances, Power of Attorney 55
9.8 Unenforceability 56
9.9 Indemnification Concerning Fees 56
9.10 Waiver of Trial by Jury 56
9.11 Additional Waivers 57
9.12 Successors and Assigns; Transfers of Interests 57
9.13 Counterparts 57
9.14 Governing Law 57
9.15 Submission To Jurisdiction 57
9.16 Release 58
9.17 Consent to Relief from Stay 58
9.18 Other Bankruptcy Relief 58
9.19 Forbearance by Lender 59
Schedule I Borrower Business Premises
Schedule 4.6 Litigation
Schedule 4.11 Environmental Matters
Schedule 7.3 Permitted Liens
Exhibit A Form of Officer Default Certificate
Exhibit B Form of Officer Financial Covenant Certificate
Exhibit C Sweep Plus Loan and Investment Services Description
Sweep Plus Loan and Investment Services Agreement
Exhibit D Form of Borrowing Certificate
Exhibit E Form of Projections
Exhibit F Form of Borrowing Base Certificate
</TABLE>
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THIRD
AMENDED AND RESTATED
CREDIT AGREEMENT
This THIRD AMENDED AND RESTATED CREDIT AGREEMENT is made as of
the 15th day of December, 2000, by and between COMPUTER LEARNING CENTERS,
INC., a Delaware corporation (the "Borrower"), and FIRST UNION NATIONAL BANK,
as successor by merger to CORESTATES BANK, N.A. (the "Lender").
RECITALS
1. The Lender and the Borrower are parties to a Second
Amended and Restated Credit Agreement dated as of May 15, 2000, which sets
forth the terms and conditions of a credit facility for advances under a line
of credit for working capital, and for the issuance of letters of credit for
the account of the Borrower.
2. The debt under the credit facility is evidenced by a Third
Amended and Restated Revolving Credit Note dated May 15, 2000, in the face
amount of $9,200,000.
3. Payment of the Third Amended and Restated Revolving Credit
Note is secured by a security interest in the personal property collateral
described in a Second Amended and Restated Security Agreement dated May 15,
2000.
4. As of December 11, 2000, there were no sums due under the
Third Amended and Restated Revolving Credit Note. In addition, the following
letters of credit issued by the Lender under the credit facility for the
account of the Borrower are still in effect:
<TABLE>
<CAPTION>
Letter of Credit Number Amount
----------------------- ------
<S> <C>
M 409947 $ 151,000.00
406477 $ 1,635,000.00
400152P $ 91,128.50
400153 $ 261,500.00
---------------
$ 2,138,628.50
</TABLE>
5. The Borrower has failed to comply with the Fixed Charge
Coverage Ratio covenant (Subsection 6.22(a)), the Tangible Net Worth covenant
(Subsection 6.22(b)) and the Capital Expenditure covenant (Subsection 7.21) of
the Second Amended and Restated Credit Agreement. The Borrower has also failed
to comply with other terms and conditions of the Second Amended and Restated
Credit Agreement by reason of the issuance of the Final Program Review
Determination by the DOED. The Lender is agreeable to curing certain of these
failures by retroactively modifying certain terms and conditions of the Second
Amended and Restated Credit Agreement. The Lender is also agreeable to
forbearing from taking action with respect to the Borrower's failure to comply
with terms of the Second Amended and Restated Credit
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Agreement by reason of the issuance of the Final Program Review Determination
by the DOED. The Lender's agreements are set forth below and in documents
executed contemporaneously with this Agreement.
In consideration of the foregoing, the Lender and the Borrower
agree as follows:
SECTION 1. CONSTRUCTION AND DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following
terms have the following meanings:
"Accountant Default Certificate": a certificate, in form and
content satisfactory to the Lender, of the independent certified public
accountants who reviewed the annual financial statements of the Borrower and
its Subsidiaries (a) certifying to the Lender whether, in the course of such
review, any information came to their attention causing them to know or
believe that any Default or Event of Default existed and, if so, setting forth
the facts relevant thereto, and (b) certifying to the Lender that they
reviewed the Officer Financial Covenant Certificate accompanying such
financial statements and certifying to the Lender whether they have any reason
to know or believe that any of the calculations contained in the Officer
Financial Covenant Certificate are not accurate in any material respect and,
if so, setting forth the facts relevant thereto.
"Adjusted Net Income": for a particular period, the consolidated
net income of the Borrower and its Subsidiaries for such period determined in
conformity with GAAP consistently applied, plus, to the extent deducted in
determining such net income for such period, (a) the provision for taxes
applicable to such period, (b) the amount of all depreciation, amortization
and other noncash charges applicable to such period, (c) the amount of
Interest Expense applicable to such period, and (d) the amount of all payments
required to be made by the Borrower and its Subsidiaries (whether or not
actually made) during such period on account of Operating Leases.
"Affiliate": as to any Person: (a) any Person in which such
Person legally or beneficially owns or holds, directly or indirectly,
twenty-five percent (25%) or more of the capital stock, partnership interests,
joint venture interests, membership interests or other equity interests; (b)
any partnership in which such Person is a general partner or any joint venture
in which such Person is a joint venturer; and (c) any Person that is a
director, officer or employee of any of the foregoing or of such Person or
that legally or beneficially owns or holds, directly or indirectly,
twenty-five percent (25%) or more of the capital stock, partnership interests,
joint venture interests, membership interests or other equity interests in any
of the foregoing or in such Person.
"Agreement": this Third Amended and Restated Credit Agreement, as
amended, modified, extended, renewed, supplemented or replaced from time to
time.
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"Authorized Officer": in the case of any Person, the President or
any Vice President of such Person whose name and title appears on a
certificate of incumbency of the authorized officers of such Person delivered
concurrently with the execution of this Agreement, as such certificate of
incumbency may be amended from time to time.
"Borrower": Computer Learning Centers, Inc., a Delaware
corporation.
"Borrower Business Premises": the collective reference to the
Borrower Chief Executive Office and the other premises of the Borrower
identified in Schedule I.
"Borrower Chief Executive Office": the real property and
improvements leased by the Borrower known as 10021 Balls Ford Road, Manassas,
Virginia 20109.
"Borrower Institution": any campus or institution of the
Borrower, or any branch or location of any thereof, engaged or created or
intended to be engaged, directly or indirectly, in any business or business
operations of the Borrower, including the provision of information technology
training or services, computer-related training or services or other
educational training or services.
"Borrower Security Agreement": as amended, modified, extended,
renewed, supplemented or replaced from time to time, the Third Amended and
Restated Pledge and Security Agreement dated of even date herewith, by the
Borrower in favor of the Lender.
"Borrowing Base": at any time during the time period noted below,
the sum of (i) the percent (as shown) of the total account balances (principal
and interest only) of Graduate RICs in the possession of the Lender, plus (ii)
the percent (as shown) of the total account balances (principal and interest
only) of Drop RICs in the possession of the Lender, plus (iii) the actual
balance of the Revolving Credit Cash Collateral Account:
<TABLE>
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ADVANCE RATE ADVANCE RATE
DATE BEGINNING DATE ENDING GRADUATE RICS DROP RICS
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<S> <C> <C> <C>
December 15, 2000 December 27, 2000 38% 10%
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December 28, 2000 January 30, 2001 25% 0%
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January 31, 2001 February 27, 2001 20% 0%
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February 28, 2001 March 30 2001 15% 0%
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March 31, 2001 Thereafter 0% 0%
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</TABLE>
"Borrowing Date": any Business Day specified in a notice pursuant
to Subsection 2.3 as a date on which the Borrower requests the Lender to make
a Revolving Credit Loan hereunder.
"Business Day": a day other than a Saturday, Sunday or other day
on which commercial banks in McLean, Virginia are authorized or required by
law to close.
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"Capital Expenditures": for a particular period, the aggregate
amount of expenditures made or accrued by the Borrower and its Subsidiaries
during such period (including expenditures made with respect to Capital
Leases) which, in conformity with GAAP, are required to be included in a
property, plant, equipment or comparable fixed asset account reflected in a
consolidated balance sheet of the Borrower and its Subsidiaries, but excluding
expenditures made in connection with the replacement or restoration of assets
to the extent reimbursed or financed from insurance proceeds paid on account
of loss of or damage to the assets being replaced or restored or from awards
of compensation arising from the taking by condemnation or eminent domain of
the assets being replaced or restored.
"Capital Lease": in the case of any Person, any lease of any
property (real, personal or mixed) by such Person as lessee which, in
conformity with GAAP, would be required to be capitalized on a balance sheet
of such Person.
"Cash Equivalents": (a) securities issued or directly and fully
guaranteed or insured by the United States of America, or any agency or
instrumentality thereof, having maturities of not more than 12 months from the
date of acquisition; (b) time deposits with the Lender and certificates of
deposit issued by the Lender; (c) repurchase obligations with a term of not
more than 7 days underlying securities of the types described in clauses (a)
and (b) above entered into with the Lender; and (d) commercial paper of the
Lender or the holding company controlling the Lender.
"Certified": the information, statement, schedule, report or
other document required to be "Certified" contains a representation by the
Borrower that to the Borrower's knowledge and belief after diligent inquiry,
such information, statement, schedule, report or other document is true and
complete in all material respects.
"Change of Control": (a) any Person, or two or more Persons
acting in concert, shall directly or indirectly acquire, after the date of
this Agreement, beneficial ownership (within the meaning of Rule 13d-3 of the
Securities and Exchange Commission under the Securities Exchange Act of 1934)
of thirty percent (30%) or more of the issued and outstanding voting capital
stock of the Borrower on a fully-diluted basis; or (b) individuals who, as of
the date of this Agreement, constitute the Board of Directors of the Borrower
(together with any new director whose election by or whose nomination for
election was approved by a vote of at least two-thirds (2/3) of the directors
then still in office who either were directors as of such time or whose
election or nomination for election was previously so approved) and shall for
any reason cease to constitute a majority of the Board of Directors of the
Borrower.
"Closing Date": the date on which this Agreement and all other
documents as set forth in Section 5 are executed by the Borrower and the
Subsidiaries (as applicable) and delivered to the Lender, and all other
closing conditions set forth in Section 5 are satisfied.
"Code": the Internal Revenue Code of 1986, as amended from time
to time.
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"Collateral": all property, interests and rights, and the
products and proceeds thereof, now or hereafter directly or indirectly
securing any of the Obligations pursuant to the Borrower Security Agreement.
"Commitments": the collective reference to the Revolving Credit
Commitment and the L/C Commitment.
"Commonly Controlled Entity": a Person, whether or not
incorporated, which is part of a controlled group including the Borrower or
which is under common control with the Borrower, as defined in Sections 414(b)
and (c) of the Code.
"Contingent Obligation": as to any Person, any obligation of such
Person guaranteeing or in effect guaranteeing any Indebtedness, leases,
dividends, letters of credit or other obligations (the "primary obligations")
of any other Person (the "primary obligor") in any manner, whether directly or
indirectly, including, without limitation, any obligation of such Person,
whether or not contingent (a) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (b) to advance or
supply funds (i) for the purchase or payment of any such primary obligation or
(ii) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor, (c) to
purchase property, securities or services primarily for the purpose of
assuring the owner of any such primary obligation of the ability of the
primary obligor to make payment of such primary obligation or (d) otherwise to
assure or hold harmless the owner of any such primary obligation against loss
in respect thereof.
"Contractual Obligation": as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or undertaking
to which such Person is a party or by which it or any of its property is
bound.
"Credit Documents": the collective reference to this Agreement,
the Note, the Borrower Security Agreement, the L/C Agreements and each other
agreement, contract, promissory note or other instrument, security agreement,
assignment, pledge agreement, indemnification agreement, subordination
agreement, mortgage, deed of trust, guaranty and other document now or
hereafter evidencing, guaranteeing, securing (directly or indirectly),
subordinating other obligations of the Borrower or any Other Obligor to, or
containing any warranties, covenants, agreements or representations of any
Person relating to, any Indebtedness, liability or obligation of the Borrower
or any Other Obligor to the Lender, as each of the documents referred to in
this definition may be amended, modified, extended, renewed, supplemented or
replaced from time to time.
"Credit Facilities": the Revolving Credit Facility and the L/C
Facility.
"Default": the occurrence of any event which, with the giving of
notice or the lapse of time, or both, would constitute an Event of Default.
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"Disqualified": the certification, eligibility, authorization or
accreditation (provisional or otherwise) of the Borrower or any Borrower
Institution, or any educational program of any thereof, to receive, commit or
disburse funds under, or to administer or participate in, any Student
Financial Aid Program, or the participation therein of any thereof, shall for
any reason expire or be revoked, suspended, terminated or determined to be
invalid, in whole or in part, retroactively or prospectively.
"DOED": United States Department of Education.
"DOJ": United States Department of Justice.
"Dollars" and "$": dollars in lawful currency of the United
States of America.
"Drop RICs": RICs executed by students who have dropped out of
classes given by the Borrower.
"Environmental Assessment": an environmental site assessment,
including such audits, tests and procedures as the Lender or the contractor
performing the same may deem necessary, together with a written report
thereon, performed and prepared by an experienced, responsible and reputable
contractor satisfactory to the Lender relating to past or current presence,
manufacture, generation, production, processing, use, handling, treatment,
storage or disposal of Hazardous Substances on Obligor Use Property, past or
current Hazardous Substance Contamination, or compliance with Environmental
Laws of Obligor Use Property and past or current operations conducted on
Obligor Use Property.
"Environmental Claim": any letter, notice, claim, demand,
summons, citation, directive or other written communication and any
investigation, action, suit, proceeding, litigation, judgment or decree by or
from the United States Environmental Protection Agency or any other Person
alleging, establishing or otherwise relating to any Hazardous Substance
Contamination or any violation of any Environmental Law.
"Environmental Laws": the Resource Conservation and Recovery Act,
the Comprehensive Environmental Response, Compensation and Liability Act, the
Toxic Substances Control Act, the Federal Insecticide, Fungicide, and
Rodenticide Act, the Federal Water Pollution Control Act, the Safe Drinking
Water Act, the Clean Air Act, the Solid Waste Disposal Act, the Emergency
Planning and Community Right-To-Know Act, as each of the foregoing may be
amended from time to time, and all rules, regulations, codes, orders, decrees,
judgments, injunctions, notices and demand letters now or hereafter enacted,
promulgated, approved, issued or entered thereunder, as the same may be
amended from time to time, and all other federal, state, local and foreign
laws, rules, regulations, codes, permits, directives, orders, decrees,
judgments, injunctions, notices and demand letters now or hereafter enacted,
promulgated, approved, issued or entered, and as amended from time to time,
relating to the protection of the health of human beings or other living
things or relating to pollution or protection of air, water, land or any other
aspect of the environment, including, without limitation, all of the same
relating to the presence, manufacture, generation, production, processing,
use, handling,
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treatment, storage, disposal, importation, transportation, distribution or
registration, or the release, emission, discharge or spilling into air, water,
land or any other aspect of the environment, of any Hazardous Substance.
"ERISA": the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Event of Default": any of the events specified in Section 8.
"Existing Credit Facility": the credit facility made available by
the Lender to the Borrower and evidenced by the Third Amended and Restated
Revolving Credit Note, the Second Amended and Restated Credit Agreement and
the Second Amended and Restated Pledge and Security Agreement as described in
the recitals of this Agreement.
"Existing L/Cs": the Letters of Credit listed in paragraph 4 of
the Recitals.
"Final Program Review Determination": the Final Program Review
Determination of the DOED dated December 8, 2000 with respect to the
Borrower's failure to comply with certain provisions of the Higher Education
Act of 1965 as amended, in which the DOED claimed a liability of the Borrower
to DOED of $187,497,434.
"Fixed Charge Coverage Ratio": for a particular period, the ratio
of (a) Adjusted Net Income for such period, to (b) Fixed Charges for such
period.
"Fixed Charges": for a particular period, the sum of (a) the
amount of all payments required to be made by the Borrower and its
Subsidiaries (whether or not actually made) on account of Operating Leases
during such period, (b) the amount of Interest Expense applicable to such
period, and (c) the amounts required to be deposited into the Cash Collateral
Account in the next twelve months.
"GAAP": generally accepted accounting principles in the United
States of America in effect from time to time. In the event of a change in
GAAP affecting any of the covenants contained in Section 7 or definitions
contained in Section 1 relating to such covenants, such covenants and
definitions shall continue to be applied as though such change in GAAP had not
occurred unless and until the Borrower and the Lender shall agree in writing
to amend or adjust such covenants or definitions as deemed necessary as a
result of such change in GAAP.
"good faith": with respect to any determination, request or other
action to be made or taken by any party hereto "in good faith," that such
party shall make or take such determination, request or other action honestly
and not maliciously.
"Governmental Authority": any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, and any Person owned or controlled directly or indirectly by
any of the foregoing, whether domestic or foreign.
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"Graduate RICs": RICs executed by students who have graduated
from classes given by the Borrower.
"Hazardous Substance": any hazardous substance, hazardous
material, hazardous waste, toxic substance, toxic material, toxic waste,
industrial waste, medical waste, infectious waste, biomedical waste,
biohazardous waste, pollutant, contaminant, chemical, acid, solvent, caustic,
oil, petroleum, petroleum-based product, asbestos, asbestos-containing
substance or material, flammable substance, flammable material, explosive
substance, explosive material, radon, radioactive substance, radioactive
material, urea formaldehyde foam insulation, polychlorinated biphenyls,
methane and any other substance or material the presence, manufacture,
generation, production, processing, use, handling, treatment, storage,
disposal, release, emission, discharge, spilling, importation, transportation,
distribution or registration of which is prohibited or regulated by any
Environmental Law. The meaning of each term used in this definition shall
include, without limitation, the meaning or meanings assigned to such term by
any Environmental Laws.
"Hazardous Substance Contamination": (a) the contamination, as a
result of any Hazardous Substance, of any Obligor Use Property; or (b) the
contamination, as a result of any manufacture, generation, production,
processing, use, handling, treatment, storage, disposal, release, emission,
discharge or spilling of any Hazardous Substance on or from any Obligor Use
Property, of any surrounding, adjacent or nearby air, water, land or other
property or other aspect of the environment which requires remedial action
under any Environmental Law.
"HCM2": Heightened Cash Monitoring 2 status imposed by the DOED
with respect to Title IV loan fundings to an educational institution.
"HCM2 Prepayments": cash paid to the Borrower as a result of the
termination or modification of the Borrower's Heightened Cash Monitoring 2
status by the DOED, representing deferred Title IV loan fundings owing to the
Borrower.
"Indebtedness": as to any Person, without duplication: (a) any
obligation, indebtedness or liability of such Person for the payment of money
or any other item, which, in conformity with GAAP, would be required to be
included in the liability section of a balance sheet of such Person or in a
note to the liability section of a balance sheet of such Person, excluding
reserves to the extent that such reserves do not constitute obligations; (b)
any obligation, indebtedness or liability of such Person arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person, notwithstanding that the remedies of the seller,
lender or lessor under such agreement in case of default are limited to
repossession or sale of property; (c) any obligation, indebtedness or
liability of any Person secured directly or indirectly by any contingent or
noncontingent security interest or other Lien in or upon any present or future
property of such Person, whether or not such Person is personally liable for
such obligation, indebtedness or liability; and (d) any obligation,
indebtedness or liability of such Person in connection with any Capital Lease.
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"Insolvency": at any particular time in respect of a
Multiemployer Plan, insolvency of such Multiemployer Plan within the meaning
of Section 4245 of ERISA.
"Interest Expense": for a particular period, the total interest
expense of the Borrower and its Subsidiaries for such period on a consolidated
basis.
"Interest Payment Date": the last day of each month, for
interest due for the month, commencing on December 31, 2000.
"Investment": legal or beneficial ownership of any capital stock,
partnership interest, joint venture interest, membership interest or other
equity interest in, or any promissory note, bond, debenture or other
Indebtedness of or issued by, or any capital contribution to, or any other
investment in or security (as defined in the Securities Act of 1933 or the
Securities Exchange Act of 1934, or any successor legislation, as amended from
time to time) of or issued by, any corporation, limited liability company,
partnership, joint venture or other Person.
"L/C Aggregate Undrawn Amount": at a particular date, the
aggregate undrawn amount, as of such date, of all Letters of Credit issued and
outstanding.
"L/C Agreements": as amended, modified, extended, renewed,
supplemented or replaced from time to time, such applications, reimbursement
agreements and other agreements in form and content satisfactory to the Lender
requesting issuance of one or more Letters of Credit and setting forth
reimbursement obligations and other terms and conditions relating thereto.
"L/C Cash Collateral Account": the interest-bearing account owned
by the Borrower and pledged to the Lender, which the Borrower shall have no
access to or be permitted to make withdrawals from unless the balance exceeds
110% of the L/C Exposure and the balance in the Revolving Credit Cash
Collateral Account exceeds 110% of the Revolving Credit Facility Ceiling.
"L/C Commission Rate": two percent (2.00%) per annum.
"L/C Commitment": as defined in Subsection 3.1.
"L/C Exposure": at a particular time, the sum of (a) the L/C
Aggregate Undrawn Amount as of such time and (b) L/C Reimbursement Obligations
as of such time.
"L/C Facility": the facility for the issuance of Letters of
Credit by the Lender for the Borrower.
"L/C Reimbursement Obligations": at a particular time, the
aggregate amount of all drawings made under Letters of Credit which, as of
such time, have not been reimbursed by the Borrower to the Lender.
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"Lender": First Union National Bank, a North Carolina banking
corporation.
"Letters of Credit": as defined in Subsection 3.1.
"Leverage Ratio": at a particular time, the ratio of (a) Total
Liabilities as of such time, to (b) Tangible Net Worth as of such time.
"Lien": any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other) or preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever (including, without limitation, any conditional sale or other title
retention agreement, any Capital Lease having substantially the same economic
effect as any of the foregoing, and the filing of any financing statement
under the Uniform Commercial Code or comparable law of any jurisdiction in
respect of any of the foregoing).
"Loans": the Revolving Credit Loans.
"Long-Term Debt": all Indebtedness of the Borrower and its
Subsidiaries which matures more than one (1) year from the date of the
financial statement reflecting such Indebtedness (excluding reserves for
deferred income taxes and other reserves to the extent that such reserves do
not constitute obligations).
"Material Adverse Effect": a material adverse effect with respect
to the business, assets, operations, business prospects or financial condition
of the Borrower, any of its Subsidiaries or any Other Obligor, or a material
adverse effect with respect to the risks to the Lender attending the
Collateral, with respect to the risks to the Lender attending any commitments
of the Lender which could give rise to any Obligations, or with respect to the
prospect for payment or collection in full of the Obligations.
"Material Litigation": in the case of any Person, any litigation,
action, suit, proceeding or investigation pending or overtly threatened in
writing against such Person or any Subsidiary of such Person, or any of their
property, at law or in equity, which, if determined adversely to such Person
or such Subsidiary, as the case may be, could reasonably be expected to have a
material adverse effect on the business, assets, operations, business
prospects or financial condition of such Person or any Subsidiary of such
Person, or a material adverse effect with respect to the risks to the Lender
attending the Collateral, with respect to the risks to the Lender attending
any commitments of the Lender which could give rise to any Obligations, or
with respect to the prospect for payment or collection in full of the
Obligations.
"Multiemployer Plan": a Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
"Note": the Revolving Credit Note.
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"Obligations": as amended, modified, extended, renewed,
supplemented, increased, refinanced, consolidated or replaced from time to
time, all present and future Loans and other Indebtedness, liabilities and
obligations of the Borrower to the Lender of every kind and nature, whether
arising under or in connection with this Agreement, the other Credit Documents
or otherwise (including, without limitation, all principal amounts, including
future advances, interest charges, fees and all other charges and sums, as
well as all costs and expenses, including attorneys' fees and expenses,
payable or reimbursable by the Borrower under or pursuant to this Agreement,
the other Credit Documents and otherwise), whether direct or indirect,
contingent or noncontingent, matured or unmatured, accrued or not accrued,
liquidated or unliquidated, secured or unsecured, related or unrelated to this
Agreement, whether or not now contemplated, whether arising in contract, tort,
equity or otherwise, whether the liability of the Borrower with respect
thereto is joint or several or both, and whether or not any instrument or
agreement relating thereto specifically refers to this Agreement, including,
without limitation, all present and future obligations of the Borrower in
connection with overdrafts in any checking or other account now or hereafter
maintained by the Borrower with the Lender, and all claims against the
Borrower arising or re-arising on account of or as a result of any payment
made by the Borrower or any Other Obligor with respect to any obligations
included in this definition which is rescinded or recovered from or restored
or returned under authority of any law, rule, regulation, order of court or
Governmental Authority, or in connection with any compromise or settlement
relating thereto or relating to any pending or threatened action, suit or
proceeding relating thereto, whether arising out of any proceedings under the
United States Bankruptcy Code or otherwise.
"Obligor Use Property": the collective reference to any real
property or improvements (or portion thereof) owned, leased, subleased,
occupied, used or operated by the Borrower, any of its Subsidiaries or any
Other Obligor.
"Officer Default Certificate": an appropriately completed
certificate in form substantially similar to Exhibit A, but in form and
content satisfactory to the Lender, signed by the chief financial officer of
the Borrower certifying whether, as of a particular date and to the knowledge
and belief of such officer after diligent inquiry, any Default or Event of
Default existed and, if so, setting forth all relevant facts with respect
thereto.
"Officer Financial Aid Program Certificate": a certificate in
form and content satisfactory to the Lender, signed by the chief financial
officer of the Borrower and certifying, as of and for a particular time and to
the knowledge and belief of such officer after diligent inquiry (a) for the
Borrower and each Borrower Institution, the Student Financial Aid Programs
with respect to which the Borrower, or such Borrower Institution, or its
educational programs, is authorized, accredited, certified and eligible
(provisionally or otherwise) to participate and is not Disqualified, (b) for
the Borrower, and each Borrower Institution, default rates with respect to
Student Financial Aid Programs, and (c) a summary of the current status of any
actions, proceedings, investigations or reviews of which the Borrower was
required to notify the Lender pursuant to clause (ii) of Subsection 6.6(b) of
this Agreement.
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"Officer Financial Covenant Certificate": an appropriately
completed certificate substantially similar to Exhibit B, but in form and
content satisfactory to the Lender, signed by the chief financial officer of
the Borrower setting forth calculations of the covenants contained in
Subsection 6.22 as of a particular time or for a particular period.
"Operating Account": the demand deposit account, no.
2014139511328, maintained with the Lender.
"Operating Lease": as to any Person, any lease of any property
(real, personal or mixed) by such Person as lessee which is not a Capital
Lease.
"Other Obligor": each Person other than the Borrower that is now
or hereafter primarily or secondarily, or contingently or noncontingently,
liable for or obligated upon or in connection with any of the Obligations, or,
whether or not so liable, that has granted any lien or security interest to or
for the benefit of the Lender as security for any of the Obligations or any
obligations of any other Person in connection with any of the Obligations, or
that has subordinated to any of the Obligations any Indebtedness or
obligations to such Person of any other Person.
"PBGC": the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA.
"Person": an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust, unincorporated
association, joint venture, Governmental Authority or other entity of whatever
nature.
"Plan": at a particular time, any employee benefit plan which is
covered by ERISA and in respect of which the Borrower, any Subsidiary of the
Borrower or a Commonly Controlled Entity is (or, if such plan were terminated
at such time, would under Section 4069 of ERISA be deemed to be) an "employer"
as defined in Section 3(5) of ERISA.
"Prime Rate": the rate which the Lender announces from time to
time as its prime lending rate, as in effect from time to time. The Prime Rate
is a reference rate and does not necessarily represent the lowest or best rate
actually charged to any customer. The Lender may make commercial loans or
other loans at rates of interest at, above or below the Prime Rate.
"Reorganization": with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of such term
as used in Section 4241 of ERISA.
"Requirement of Law": as to any Person, the certificate of
incorporation and by-laws or other organizational or governing documents of
such Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person
or any of its property is subject.
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"Restricted Payment": any payment or other transfer of money or
other tangible or intangible property of any kind of the Borrower or any of
its Subsidiaries to any Affiliate of any of them which is not expressly
permitted by this Agreement, including, without limitation, any dividend or
other distribution on account of capital stock or other securities, any loan,
advance or capital contribution, any repayment of any loan, advance or capital
contribution, any redemption or other repurchase of any securities, and any
payment for services.
"Revolving Credit Cash Collateral Account": the interest-bearing
account owned by the Borrower and pledged to the Lender, in connection with
the Revolving Credit Facility, which the Borrower shall have no access to or
be permitted to make withdrawals from unless the balance in the Revolving
Credit Cash Collateral Account exceeds 110% of the Revolving Credit Facility
Ceiling, and the balance in the L/C Cash Collateral Account exceeds 110% of
the L/C Exposure.
"Revolving Credit Commitment": as defined in Subsection 2.1.
"Revolving Credit Commitment Period": the period from and
including the date of this Agreement to but not including the Revolving Credit
Termination Date or such earlier date as the Revolving Credit Commitment shall
terminate as provided herein.
"Revolving Credit Facility": the Revolving Credit loans by the
Lender to the Borrower.
"Revolving Credit Facility Ceiling": $2,000,000 through and
including March 31, 2001, and $1,500,000 thereafter.
"Revolving Credit Loan": as defined in Subsection 2.1.
"Revolving Credit Loan Balance": at a particular time, the
aggregate principal amount of Revolving Credit Loans made and outstanding.
"Revolving Credit Maximum Amount": the lesser of (a) the
Revolving Credit Facility Ceiling or (b) the applicable Borrowing Base.
"Revolving Credit Note": as defined in Subsection 2.2.
"Revolving Credit Termination Date": February 28, 2002.
"RICs": Retail Installment Contracts executed by students who
have graduated from or dropped out of classes given by the Borrower from all
states except Illinois.
"Student Financial Aid Program": any program under Title IV of
the Higher Education Act of 1965, under which financial aid or financial
assistance is provided to or for
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students by the United States of America or any Governmental Authority of the
United States of America.
"Subsidiary": as to any Person, (a) a corporation of which shares
of capital stock having voting power to elect a majority of the board of
directors or other managers of such corporation are owned, or the management
of which is otherwise controlled, directly or indirectly, or both, through one
or more intermediaries, by such Person, and (b) any partnership, limited
liability company, association, joint venture or other business entity of
which more than fifty percent (50%) of the voting equity interests is owned,
or the management of which is otherwise controlled, directly or indirectly, or
both, through one or more intermediaries, by such Person.
"Sweep Plus": the cash management product of the Lender which
monitors the Operating Account and triggers advances under the Revolving
Credit Loan to fund the Operating Account to maintain a target level, to cover
checks presented on the Operating Account, and to sweep excess cash above the
target level to minimize the Revolving Credit Loan balance, all as further
described in the Sweep Plus Loan and Investment Services Description attached
as Exhibit C.
"Tangible Net Worth": at a particular date, the amount, if any,
by which (a) Total Assets as of such date, exclusive of goodwill, trademarks,
trade names, licenses and such other assets as are properly classified as
intangible assets in conformity with GAAP, exceeds (b) Total Liabilities as of
such time.
"Total Assets": at a particular date, the aggregate amount which,
in conformity with GAAP, would be included in a total assets or comparable
account reflected in a consolidated balance sheet of the Borrower and its
Subsidiaries as of such date.
"Total Liabilities": at a particular date, the aggregate amount
which, in conformity with GAAP, would be included in a total liabilities or
comparable account reflected in a consolidated balance sheet of the Borrower
and its Subsidiaries as of such date.
1.2 Other Definitional Provisions.
(a) Unless otherwise specified therein, all terms
defined in this Agreement shall have the defined meanings when used in the
Note, the Borrower Security Agreement or any other Credit Document.
(b) As used herein, in the Note, in the Borrower
Security Agreement and in any other Credit Document, accounting terms not
defined in Subsection 1.1 and accounting terms partly defined in Subsection
1.1, to the extent not defined, shall have the respective meanings given to
them under GAAP.
(c) As used herein, in the Note, in the Borrower
Security Agreement and in any other Credit Document, terms defined by the
Uniform Commercial Code as in effect
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in the Commonwealth of Virginia on the date hereof shall, except to the extent
that the context otherwise requires, have the respective meanings given to
them under such Uniform Commercial Code.
(d) Unless the context otherwise requires, each
reference in this Agreement, the Note, the Borrower Security Agreement or any
other Credit Document to this Agreement, the Note, the Borrower Security
Agreement or any other Credit Document shall be deemed to refer to this
Agreement, the Note, the Borrower Security Agreement or such other Credit
Document as the same may be amended, modified, extended, renewed, supplemented
or replaced from time to time.
(e) The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement,
and Section, Subsection, Schedule and Exhibit references are to this Agreement
unless otherwise specified.
(f) The use of the singular in this Agreement shall
also refer to the plural and vice versa, and the use of any gender, including
the neuter, shall also refer to each of the other genders, including the
neuter.
(g) The captions and headings contained in this
Agreement are for convenience of reference only and shall not affect the
meaning, or the construction or interpretation, of this Agreement.
(h) The phrases "satisfactory to the Lender,"
"acceptable to the Lender" and similar phrases shall mean reasonably
satisfactory or reasonably acceptable to the Lender in its reasonable judgment
exercised in good faith.
(i) In the event of any inconsistency between any
provision of this Agreement and any provision of any other Credit Document, or
in the event of the need in any context for the construction or interpretation
of any provision of this Agreement or any other Credit Document, no such
inconsistency and no such provision shall be construed or interpreted against
the Lender on the one hand, and in favor of the Borrower or any Other Obligor
on the other hand.
SECTION 2. AMOUNT AND TERMS OF LOAN COMMITMENTS
2.1 Revolving Credit Commitment. Subject to the terms and
conditions hereof, the Lender agrees to make revolving credit loans
(individually, a "Revolving Credit Loan" and, collectively, the "Revolving
Credit Loans") to the Borrower from time to time during the Revolving Credit
Commitment Period in an aggregate principal amount at any one time outstanding
not to exceed the Revolving Credit Maximum Amount (the "Revolving Credit
Commitment"). During the Revolving Credit Commitment Period, the Borrower may
use the Revolving Credit Commitment by borrowing, paying the Revolving Credit
Loans in whole or in
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part, and reborrowing, all in accordance with and subject to the terms and
conditions of this Agreement, including Subsection 2.10.
2.2 Revolving Credit Note. The Revolving Credit Loans made by
the Lender shall be evidenced by, and payable with interest in accordance
with, the Fourth Amended and Restated Revolving Credit Note dated December 15,
2000 (as amended, modified, extended, renewed, supplemented or replaced from
time to time, the "Revolving Credit Note"), payable to the order of the
Lender. The date and amount of each Revolving Credit Loan made by the Lender,
and the date and amount of each payment or prepayment of principal thereof, as
reflected on the Lender's books and records with respect to the Revolving
Credit Note, shall constitute prima facie evidence, absent manifest error, of
the accuracy of the information so reflected. The Revolving Credit Note shall
(a) be stated to mature on the Revolving Credit Termination Date and (b) bear
interest on the unpaid principal amount thereof from time to time outstanding
at the applicable interest rate per annum determined as provided in
Subsections 2.13 and 2.14. Interest on the Revolving Credit Note shall be
payable on the dates specified in Subsection 2.13(f).
2.3 Procedure for Revolving Credit Borrowing.
(a) Unless otherwise determined by the Lender, the
terms of the Lender's Sweep Plus product shall control the manner in which
funds are transferred between the Operating Account and the Revolving Credit
Loan for credit or debit to the Revolving Credit Loan.
(b) If the Lender determines that the Lender's Sweep
Plus product shall no longer be used for Revolving Credit Loans, the procedure
for borrowing set forth in this Subsection 2.3(b) shall apply. The Lender may
withdraw the Sweep Plus product at any time in the sole and absolute
discretion of the Lender. The Borrower may borrow under the Revolving Credit
Commitment during the Revolving Credit Commitment Period on any Business Day,
provided that the Borrower shall give the Lender irrevocable notice (which
must be received by the Lender prior to 11:00 a.m., McLean, Virginia time) two
Business Days prior to the requested Borrowing Date, specifying (i) the amount
to be borrowed, and (ii) the requested Borrowing Date. Each borrowing pursuant
to the Revolving Credit Commitment shall be in an aggregate principal amount
of One Thousand Dollars ($1,000.00) or a whole multiple thereof. The proceeds
of all Revolving Credit Loans will be made available to the Borrower by the
Lender by transfer of such proceeds in immediately available funds to a
deposit account of the Borrower at the Lender designated for such purpose.
(c) Availability under the Revolving Credit Facility
shall be subject to the delivery to the Lender of a Borrowing Base Certificate
and updated information pertaining to all RICs in the Lender's possession.
Without limiting in any way the provisions of Section 5.2, in no event shall
the Lender be obligated to make a Revolving Credit Loan if the Revolving
Credit Loan would cause the total principal amount of Revolving Credit Loans
made and outstanding to exceed the Revolving Credit Maximum Amount. Even if
the total principal amount of Revolving Credit Loans outstanding shall at any
time and for any reason exceed the
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Revolving Credit Maximum Amount, the Borrower shall nonetheless be liable for
the entire principal amount of Revolving Credit Loans outstanding, with
interest and other charges, as provided in this Agreement. If the total
principal amount of Revolving Credit Loans shall at any time exceed the
Revolving Credit Maximum Amount, the Borrower shall immediately pay to the
Lender upon demand the amount of such excess, with interest as provided in
this Agreement.
2.4 Facility Fee. For the months of December, 2000 and January
through August, 2001 the Borrower shall pay to the Lender a Revolving Credit
Facility Fee of 1% per annum of the Revolving Credit Facility Ceiling.
Beginning on September 1, 2001, the Borrower shall pay to the Lender a
Revolving Credit Facility Fee of 2% per annum of the Revolving Credit Facility
Ceiling. Each Revolving Credit Facility Fee shall be payable on the last day
of each month, and shall be calculated based on the highest level of the
Revolving Credit Facility Ceiling during the month.
2.5 Default Fees. For each Default of which the Lender gives
notice to the Borrower, the Borrower shall pay on demand to the Lender a
$5,000 default fee. For each Default that becomes an Event of Default, the
Borrower shall pay on demand to the Lender a $10,000 default fee. For each
Event of Default for which no cure period is applicable, the Borrower shall
pay to the Lender and immediately be liable for a $15,000 default fee.
2.6 Payment at Revolving Credit Termination Date. On the
Revolving Credit Termination Date, the Borrower shall pay to the Lender in
full the Revolving Credit Loan Balance, together with all accrued and unpaid
interest thereon.
2.7 Conversion of Revolving Credit Loans to Convertible Term
Loans. (intentionally deleted).
2.8 Convertible Term Loan Units. (intentionally deleted).
2.9 Convertible Term Loan Note. (intentionally deleted).
2.10 Principal Payments.
(a) Unless otherwise determined by the Lender, the
terms of the Lender's Sweep Plus Product shall control the manner in which
funds are transferred between the Operating Account and the Revolving Credit
Loan for credit or debit to the Revolving Credit Loan.
(b) If the Lender determines that the Lender's Sweep
Plus Product shall no longer be used for Revolving Credit Loans, the procedure
for borrowing set forth in this Subsection 2.10(b) shall apply. The Borrower
may at any time from time to time pay the principal of Revolving Credit Loans
in whole or in part, upon irrevocable notice to the Lender at least one (1)
Business Day in advance, specifying the date and amount of payment. If any
such payment notice is given by the Borrower, the payment amount specified in
such notice shall be due and payable on the date specified therein.
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2.11 Interest Rate Conversion Options: Minimum Amount of Loans.
(intentionally deleted).
2.12 Number and Amounts of Eurodollar Tranches. (intentionally
deleted).
2.13 Interest Rates and Payment Dates.
(a) Revolving Credit Loans shall bear interest for the
period from and after the Closing Date on the unpaid principal amount at a
rate per annum equal to the Prime Rate plus 2%.
(b) (intentionally deleted)
(c) (intentionally deleted)
(d) If an Event of Default shall occur, all Revolving
Credit Loans shall, at the Lender's option, bear interest on the unpaid
principal amount thereof at a rate per annum equal to the Prime Rate plus five
percent (5%) per annum.
(e) Except to the extent prohibited by applicable law,
any judgment or order of any Governmental Authority entered for payment of
principal or any other amounts bearing interest under this Agreement shall
bear interest at the rates and calculated in the manner applicable under this
Agreement to such amounts.
(f) Interest shall be payable in arrears on each
Interest Payment Date, and the Borrower authorizes the Lender to debit the
Operating Account for all such interest payments.
2.14 Computation of Interest and Fees. (a) Facility fees under
Subsection 2.4 and interest in respect of the Loans shall be calculated on the
basis of a 360 day year for the actual days elapsed (including the first but
excluding the last day of the relevant period). Any change in the interest
rate on Loans resulting from a change in the Prime Rate (as a result of a
change in the Prime Rate) shall become effective as of the opening of business
on the day on which such change in the Prime Rate shall become effective.
(b) Each determination of an interest rate by the
Lender pursuant to any provision of this Agreement shall be conclusive and
binding on the Borrower in the absence of manifest error.
2.15 Inability to Determine Interest Rate. (intentionally
deleted).
2.16 Payments. All payments (including prepayments) to be made
by the Borrower under this Agreement, the Note or any other Credit Document,
whether on account of principal, interest, fees, expenses or other amounts,
shall be made without deduction, setoff or
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counterclaim and shall be made at the Lender's office set forth in Subsection
9.3, in lawful money of the United States of America and in immediately
available funds. If any payment hereunder becomes due and payable on a day
other than a Business Day, such payment shall be extended to the next
succeeding Business Day, and, with respect to payments of principal, interest
thereon shall be payable during such extension. The Lender may charge and
deduct from any deposit account of the Borrower at the Lender any amounts
credited to such account and apply the same to pay principal, interest,
service charges, fees (including Default Fees and Facility Fees), expenses or
any other sums or charges due and unpaid under this Agreement, the Note or any
other Credit Documents. The Lender may, in addition to all other rights and
remedies available to it, set off against any Obligations due and unpaid any
sums or property owing to the Borrower by the Lender or held or controlled by
the Lender for the Borrower. The Borrower confirms the Lender's right to a
banker's lien and setoff, and nothing in this Agreement or any other Credit
Document shall be deemed to replace, supercede, limit, waive or prohibit the
Lender's right of banker's lien and setoff.
2.17 Illegality. (intentionally deleted).
2.18 Requirements of Law.
(a) If any generally applicable Requirement of Law or
any change therein or in the interpretation or application thereof or
compliance by the Lender with any request or directive (whether or not having
the force of law) from any central bank or other Governmental Authority
arising from and after the Closing Date:
(i) does or shall subject the Lender to any
additional tax of any kind whatsoever with respect to this Agreement or the
Note, or change the basis of taxation of payments to the Lender of principal,
fees, interest or any other amount payable hereunder (except for changes in
the rate of tax on the overall net income of the Lender);
(ii) does or shall impose, modify or hold
applicable any reserve, special deposit, assessment, capital adequacy,
compulsory loan or similar requirement against assets held by, or deposits or
other liabilities in or for the account of, advances or loans by, or other
credit extended by, or any other acquisition of funds by, any office of the
Lender; or
(iii) does or shall impose on the Lender any other
condition;
and the result of any of the foregoing is to increase the cost to the Lender,
by any amount which the Lender deems to be material, of making, renewing or
maintaining advances or extensions of credit or to reduce any amount
receivable hereunder, then, in any such case, the Borrower shall promptly pay
the Lender upon demand any additional amounts necessary to compensate the
Lender for such additional cost or reduced amount receivable reasonably
allocable to this Agreement, together with interest on such additional amounts
from the date demand is made until payment in full thereof at the rate
applicable to Revolving Credit Loans. If the Lender becomes entitled to claim
any additional amounts pursuant to this Subsection, it shall promptly notify
the Borrower of the event by reason of which it has become so entitled. A
certificate as to
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any additional amounts payable pursuant to the foregoing sentence submitted by
the Lender to the Borrower shall show the means by which such additional
amounts have been calculated and shall be conclusive in the absence of
manifest error. This covenant shall survive the termination of this Agreement
and payment of the Note for a period of 1 year.
(b) If the Lender shall have determined that the
adoption from and after the Closing Date of any generally applicable law,
rule, regulation or guideline regarding capital adequacy, or any change
therein from and after the Closing Date or in the interpretation or
application thereof or compliance by the Lender or any corporation controlling
the Lender with any request or directive regarding capital adequacy (whether
or not having the force of law) from any central bank or Governmental
Authority, including, without limitation, the issuance of any final rule,
regulation or guideline, does or shall have the effect of reducing the rate of
return on the Lender's or such corporation's capital as a consequence of its
obligations hereunder to a level below that which the Lender or such
corporation could have achieved but for such adoption, change or compliance
(taking into consideration the Lender's or such corporation's policies with
respect to capital adequacy) by an amount deemed by the Lender to be material,
then from time to time, within 2 Business Days after submission by the Lender
to the Borrower of a written request therefor showing the means by which such
additional amounts have been calculated and stating in reasonable detail the
reasons therefor, the Borrower shall pay to the Lender such additional amount
or amounts reasonably allocable to this Agreement as will compensate the
Lender for such reduction.
2.19 Taxes.
(a) All payments made by the Borrower under this
Agreement shall be made free and clear of, and without reduction or
withholding for or on account of, any present or future income, stamp or other
taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now
or hereafter imposed, levied, collected, withheld or assessed by any
Governmental Authority excluding, in the case of the Lender, net income and
franchise taxes imposed on the Lender by the jurisdiction under the laws of
which the Lender is organized or any political subdivision or taxing authority
thereof or therein (all such non-excluded taxes, levies, imposts, deductions,
charges or withholdings being hereinafter called "Taxes"). If any Taxes are
required to be withheld from any amounts payable to the Lender hereunder,
under the Note or under any other Credit Document, the amounts so payable to
the Lender shall be increased to the extent necessary to yield to the Lender
(after payment of all Taxes, including those payable on additional amounts
paid pursuant to this Subsection) interest or other amounts payable hereunder
at the rates or in the amounts specified in this Agreement, the Note or any
other Credit Document. If the Borrower fails to pay any Taxes when due to the
appropriate taxing authority, the Borrower shall indemnify the Lender for any
incremental taxes, interest or penalties that may become payable by the Lender
as a result of any such failure.
(b) The agreements in this Subsection shall survive the
termination of this Agreement and the payment of the Note and all other
amounts payable hereunder and under the other Credit Documents for a period of
1 year.
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2.20 Indemnity. (intentionally deleted).
2.21 Certain Calculations (intentionally deleted).
2.22 Revolving Credit Cash Collateral Account. On December 28,
2000, the Borrower shall deposit $400,000 into the Revolving Credit Cash
Collateral Account. On January 31, 2001, and on February 28, 2001, the
Borrower shall deposit $400,000 into the Revolving Credit Cash Collateral
Account, or the amount necessary to make the amount on deposit in the
Revolving Credit Cash Collateral Account equal 110% of the Revolving Credit
Facility Ceiling, whichever is less. On March 31, 2001, the Borrower shall
deposit into the Revolving Credit Cash Collateral Account the amount necessary
to make the amount on deposit in the account equal to 110% of the Revolving
Credit Facility Ceiling. In addition, if the DOED releases the Borrower from
HCM2 restrictions and thereby releases funds and allows processing of student
loans now pending HCM2 approval, the Borrower shall deposit all such released
funds into the Revolving Credit Cash Collateral Account until the balance
equals 110% of the Revolving Credit Facility Ceiling.
SECTION 3. LETTERS OF CREDIT
3.1 Letter of Credit Commitment. Subject to the terms and
conditions hereof, the Lender agrees to issue for the account of the Borrower
standby letters of credit for such purposes, in such amounts, for the benefit
of such Persons and subject to such terms and conditions as may be acceptable
to the Lender in its discretion (individually, as amended, modified, extended,
renewed, supplemented or replaced from time to time, a "Letter of Credit,"
and, collectively, the "Letters of Credit"), from and including the date of
this Agreement to but not including the Revolving Credit Termination Date (the
"L/C Commitment"); provided that the L/C Exposure shall not on any date exceed
$2,138,628.50, less the amount of any Existing L/Cs which are canceled (which
shall occur when the original Letter of Credit is surrendered by the
beneficiary to the Lender with a statement from the beneficiary confirming
that the Letter of Credit is no longer in effect). No Letter of Credit
(including any renewal or extension thereof, whether or not automatic) shall
have an expiry date which is later than the date which is one year after the
date of issuance, renewal or extension of such Letter of Credit; and provided
further that, no Letter of Credit (including any renewal or extension thereof,
whether or not automatic) shall have an expiry date which is later than
September 5, 2002; and provided further that the Lender shall be under no
obligation to issue a new Letter of Credit unless all existing Letters of
Credit shall be cash secured to the extent of 110% of their face amount, and
the new Letter of Credit to be issued would be cash secured to the extent of
110% of its face amount.
3.2 Procedure for Issuance and Renewal of Letters of Credit.
(a) The Borrower may request the Lender to issue a
Letter of Credit by delivering to the Lender at its office specified in
Subsection 9.3 (i) such L/C Agreements as the Lender may require, completed to
the satisfaction of the Lender, (ii) the proposed form of such Letter of
Credit (which shall comply with the applicable requirements set forth herein)
and (iii) such other certificates and documents and information as the Lender
may reasonably request.
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(b) The Borrower may request the extension or renewal
of a Letter of Credit issued hereunder which is not automatically renewed in
accordance with the terms contained therein, by giving written notice to the
Lender at least forty-five calendar days prior to the then current expiry date
of such Letter of Credit (provided that the Lender may accommodate notices on
shorter notice in its sole discretion).
3.3 Reimbursement of the Lender. In the case of each drawing
paid under any Letter of Credit, the Lender shall promptly notify the Borrower
of such drawing and of the amount thereof, and the Borrower (i) shall
reimburse the Lender for the amount of such drawing not later than the close
of business on the first Business Day following the day on which the Borrower
receives notice of such drawing, and (ii) shall pay (A) all charges and
expenses relating to such drawing as may be payable in accordance with
Subsection 3.4 or the applicable L/C Agreements and (B) interest at the rate
specified in Subsection 3.5 on the amount of such drawing for the period
commencing on and including the date of payment of such drawing and ending on
and including the date the Borrower reimburses the Lender for such drawing.
The Borrower authorizes the Lender to debit the L/C Cash Collateral Account
for the amount of any reimbursement or payment obligation under this
Subsection 3.3. Notwithstanding any other provision of this Agreement, the
payment by the Lender of each drawing under a Letter of Credit shall be deemed
to constitute an irrevocable notice of borrowing by the Borrower under
Subsection 2.3 and, at any time after such request, the Lender is irrevocably
authorized by the Borrower to, and the Lender may, make Revolving Credit Loans
to the Borrower in an amount equal to the amount of such payment and any
charges, expenses or interest referred to in the foregoing clauses (A) and
(B), notwithstanding any limitations set forth in Subsection 2.3, and apply
the proceeds of such Revolving Credit Loans in payment of the Borrower's L/C
Reimbursement Obligations and other obligations in connection with such
payment.
3.4 Commissions, Fees and Charges.
(a) In the case of each issuance, renewal or extension
of any Letter of Credit, the Borrower agrees to pay to the Lender (i) an
issuance fee equal to Five Hundred Dollars ($500.00), and (ii) a commission on
the face amount of such Letter of Credit calculated at the L/C Commission
Rate, based upon a year of 360 days and payable for the actual number of days
in the original term, the renewal term or the extended term of such Letter of
Credit, provided that the amount of such commission shall not be less than Two
Hundred Fifty Dollars ($250.00) per quarter annum (or a portion thereof). The
Borrower shall not be entitled to receive a refund or rebate of any such fees
or commissions in the event of early termination of a Letter of Credit.
(b) Payment of the fees set forth in this Subsection
shall be a condition to the issuance of each Letter of Credit; provided that,
in the case of any automatic renewal or automatic extension of any Letter of
Credit in accordance with the terms thereof, the Borrower shall pay such fees
before the date of such automatic renewal or automatic extension.
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(c) In addition to the fees referred to above in this
Subsection, the Borrower agrees to pay or reimburse the Lender for such normal
and customary fees, costs and expenses as are incurred or charged by the
Lender or any correspondents of the Lender in issuing, effecting payment
under, maintaining or administering any Letter of Credit (including, without
limitation, amendment fees, correspondent bank fees, reissuance costs and
cancellation fees) upon notice and invoice by the Lender to the Borrower of
such costs and expenses.
3.5 Interest on Amounts Disbursed under Letters of Credit. The
Borrower agrees to pay to the Lender interest on any and all amounts drawn
under any Letter of Credit until reimbursed in full at a fluctuating rate per
annum equal to the rate applicable to Revolving Credit Loans. Interest accrued
hereunder shall be payable on demand. All payments by the Borrower to the
Lender shall be made in lawful currency of the United States and in
immediately available funds without setoff or counterclaim to the Lender at
its office specified in Subsection 9.3.
3.6 Computation of Interest and Fees; Payment not on Business
Days.
(a) Any change in any interest rate under this Section
3 resulting from a change in the Prime Rate shall become effective as of the
opening of business on the day on which such change in the Prime Rate becomes
effective.
(b) If any payment under this Section 3 becomes due and
payable on a day which is not a Business Day, the maturity thereof shall be
extended to the next succeeding Business Day, and, in the case of any amount
drawn under a Letter of Credit, interest thereon shall be payable at the then
applicable rate during such extension.
3.7 Increased Costs. If any generally applicable law or
regulation or other Requirement of Law, or any change in the interpretation or
application thereof by any Governmental Authority charged with the
administration thereof, shall either (a) impose, modify, assess or deem
applicable any reserve, special deposit, assessment, capital adequacy or
similar requirement against letters of credit issued by the Lender or (b)
impose on the Lender any other condition regarding any Letter of Credit, and
the result of any event referred to in clauses (a) or (b) above shall be to
increase the cost to the Lender of issuing or maintaining such Letter of
Credit, then, within ten (10) Business Days after delivery to the Borrower by
the Lender of a certificate as to the fact and amount of such increased cost,
the Borrower shall pay to the Lender such additional amounts reasonably
allocable to this Agreement which shall be sufficient to compensate the Lender
for such increased cost, together with interest on each such amount from the
date such certificate is received by the Borrower until payment in full
thereof at the rate provided in Subsection 3.5. A certificate as to the fact
and amount of such increased cost incurred by the Lender as a result of any
event mentioned in clauses (a) or (b) above, submitted by the Lender to the
Borrower, shall show the means by which such additional amounts have been
calculated and shall be conclusive, absent manifest error. This covenant shall
survive the termination of this Agreement and payment of the Note for a period
of one (1) year.
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3.8 Nature of Obligations; Indemnities.
(a) The obligations of the Borrower under this Section
3 shall be absolute and unconditional under any and all circumstances and
irrespective of any setoff, counterclaim or defense to payment which the
Borrower may have or have had against the Lender, any correspondents of the
Lender or any beneficiary of a Letter of Credit; provided that this provision
shall not be deemed a waiver by the Borrower of the assertion of any
compulsory counterclaim. The Borrower assumes all risks of the acts or
omissions of the users of the Letters of Credit and all risks of the misuse of
the Letters of Credit. None of the Lender or any of its correspondents shall
be responsible:
(i) for the form, validity, sufficiency,
accuracy, genuineness or legal effect of any draft drawn under any Letter of
Credit or any document specified in any applications for any of the Letters of
Credit, even if it should in fact prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent, or forged and even if the Borrower shall
have notified the Lender or any of its correspondents thereof;
(ii) for the validity or sufficiency of any
instrument transferring or assigning or purporting to transfer or assign any
of the Letters of Credit or any of the rights or benefits thereunder or
proceeds thereof in whole or in part, which may prove to be invalid or
ineffective for any reason;
(iii) for failure of any draft to bear any
reference or adequate reference to any of the Letters of Credit, or failure of
any Person to note the amount of any draft on the reverse of any of the
Letters of Credit or to surrender or to take up any of the Letters of Credit
or to send forward any such document apart from drafts as required by the
terms of any of the Letters of Credit, each of which provisions, if contained
in a Letter of Credit itself, it is agreed, may be waived by the Lender;
(iv) for errors, omissions, interruptions or
delays in transmission or delivery of any messages, by mail, cable, telegraph,
telex or otherwise, whether or not in cipher;
(v) for any error, neglect, default, suspension
or insolvency of any correspondents of the Lender;
(vi) for errors in translation or for errors in
interpretation of technical terms;
(vii) for any loss or delay, in the transmission
or otherwise, of any such document or draft or of proceeds thereof;
(viii) for any failure of any draft or document
presented under a Letter of Credit to comply with, or for any determination by
the Lender whether the same complies with, the terms of such Letter of Credit;
or
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(ix) for any other circumstances whatsoever in
making or failing to make payment under a Letter of Credit; provided that the
Borrower shall have a claim against the Lender, and the Lender shall be liable
to the Borrower, to the extent, but only to the extent, of any direct, as
opposed to consequential, damages suffered by the Borrower which the Borrower
proves were caused by the Lender's willful misconduct or gross negligence.
None of the above shall affect, impair or prevent the vesting of any of the
rights or powers of the Lender. The Lender shall have the right to transmit
the terms of the Letter of Credit as requested without translating them.
(b) In furtherance and extension and not in limitation
of the specific provisions in this Section 3, (i) any action taken or omitted
by the Lender or by any of its correspondents under or in connection with any
of the Letters of Credit, if taken or omitted in good faith or pursuant to
instructions of the Borrower, shall be binding upon the Borrower and shall not
put the Lender or any of its correspondents under any resulting liability to
the Borrower and (ii) the Lender may accept documents that appear on their
face to be in order, without responsibility for further investigation,
regardless of any notice or information to the contrary.
(c) The Borrower hereby agrees at all times to protect,
indemnify and save harmless the Lender and its correspondents from and against
any and all claims, actions, suits and other legal proceedings, and from and
against any and all losses, claims, demands, liabilities, damages, costs,
charges, reasonable counsel fees and other expenses which they or any of them
may, at any time, sustain or incur by reason of or in consequence of or
arising out of the issuance of any of the Letters of Credit unless caused by
the Lender's gross negligence or willful misconduct; it being the intention of
the parties that this Agreement shall be construed and applied to protect and
indemnify the Lender and its correspondents against any and all risks involved
in the issuance of all of the Letters of Credit unless caused by the Lender's
gross negligence or willful misconduct, all of which risks, whether or not
foreseeable, being hereby assumed by the Borrower, including, without
limitation, any and all risks of all acts by any Governmental Authority,
domestic or foreign. The Lender and its correspondents shall not in any way be
liable for any failure by any of them or any other Person to pay a draft drawn
under any of the Letters of Credit as a result of any acts, whether rightful
or wrongful, of any Governmental Authority, or any other cause not readily
within their control or the control of their respective correspondents, agents
or sub-agents. Without limiting the generality of the foregoing, the Borrower
shall reimburse the Lender and its correspondents, and shall pay and indemnify
the Lender and its correspondents, against payment of, out-of-pocket costs and
expenses, withholding taxes, liabilities and damages, including, without
limitation, attorneys' fees, incurred or sustained by any of them in
connection with any of the Letters of Credit or by reason of any such failure
to pay. Also, without limiting the generality of the foregoing, the Borrower
shall be responsible for, and shall reimburse the Lender upon demand for, any
and all commissions, fees and other charges paid or payable by the Lender to
any bank which shall be an advising bank or a beneficiary of a Letter of
Credit which shall, in reliance thereon, have issued its own letter of credit
in respect of obligations of the Borrower.
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3.9 Inconsistency in Documents. In the event of any conflict
or inconsistency between any provision of any L/C Agreement, or the
interpretation or construction thereof, and any provision of this Agreement,
or the interpretation or construction thereof, then the provision of this
Agreement, or the interpretation or construction thereof, shall control.
3.10 Cash Collateral for Letters of Credit. On December 15,
2000, the Borrower shall deposit $1,000,000 into the L/C Cash Collateral
Account. On December 28, 2000, the Borrower shall deposit into the L/C Cash
Collateral Account the amount necessary to make the amount on deposit in the
L/C Cash Collateral Account equal 110% of the L/C Exposure.
SECTION 4. REPRESENTATIONS AND WARRANTIES
To induce the Lender to enter into this Agreement and to make the
Revolving Credit Loans and to issue Letters of Credit, the Borrower hereby
represents and warrants to the Lender that:
4.1 Financial Condition. The following financial statements of
the Borrower have been delivered to the Lender:
(a) the audited consolidated statement of income and
retained earnings of the Borrower for the fiscal year of the Borrower ended
January 31, 2000, and the audited consolidated statement of cash flows of the
Borrower for such fiscal year, and the audited consolidated balance sheet of
the Borrower as at the end of such fiscal year; and
(b) the statement of income and retained earnings of
the Borrower for the quarterly accounting period of the Borrower ended October
31, 2000, and for the current fiscal year of the Borrower through the end of
such quarterly accounting period, and the statement of cash flows of the
Borrower for such quarterly accounting period and for the current fiscal year
of the Borrower through the end of such quarterly accounting period, and the
balance sheet of the Borrower as at the end of such quarterly accounting
period.
The documents listed in this Subsection 4.1 have been prepared in conformity
with GAAP consistently applied, are correct and complete in all material
respects and present fairly the financial position of the Borrower as of the
dates of such statements and the results of operations of the Borrower for the
periods covered by such statements.
4.2 No Change. As of the Closing Date, there shall not have
been any material adverse change in the business, operations, property or
financial or other condition of the Borrower from the date of the most recent
financial statements referred to in Subsection 4.1 hereof.
4.3 Organization and Good Standing; Compliance with Law. The
Borrower (a) is a corporation duly organized, validly existing and in good
standing under the laws of the
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State of Delaware, (b) has the legal right to own and operate its property, to
lease the property it operates as lessee and to conduct the business in which
it is currently engaged, (c) is duly qualified to conduct business and is in
good standing under the laws of the State of Delaware, the Commonwealth of
Virginia, the Commonwealth of Pennsylvania, the State of Texas, the State of
Illinois, the State of California and each other jurisdiction in which such
qualification is required by applicable law, and (d) is in compliance with all
Requirements of Law except to the extent that the failure to comply therewith
could not, in the aggregate, reasonably be expected to have a Material Adverse
Effect.
4.4 Authorization; Enforceable Obligations. The Borrower has
the legal right to make, deliver and perform the Credit Documents to which it
is a party and to borrow hereunder and has taken all necessary action to
authorize the borrowings on the terms and conditions of this Agreement and the
Note and to authorize the execution, delivery and performance of the Credit
Documents to which it is a party. No consent or authorization of, filing with
or other act by or in respect of any Governmental Authority is required in
connection with the borrowings hereunder or with the execution, delivery,
performance, validity or enforceability of the Credit Documents to which the
Borrower is a party except those which have been obtained or performed and are
in full force and effect. This Agreement has been, and each other Credit
Document to which it is a party will be, duly executed and delivered on behalf
of the Borrower. This Agreement constitutes, and each other Credit Document to
which it is a party when executed and delivered will constitute, a legal,
valid and binding obligation of the Borrower enforceable against the Borrower
in accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles (whether enforcement is sought by proceedings in equity
or at law).
4.5 No Legal Bar. The execution, delivery and performance of
the Credit Documents to which the Borrower is a party, the borrowings
hereunder and the use of the proceeds thereof, will not violate any
Requirement of Law or any Contractual Obligation of the Borrower, and will not
result in, or require, the creation or imposition of any Lien on any of its
properties or revenues pursuant to any Requirement of Law or Contractual
Obligation, except as contemplated by the Credit Documents.
4.6 No Material Litigation; Labor Matters. Except as set forth
in Schedule 4.6, no litigation, proceeding or, to the Borrower's actual
knowledge, investigation of or before any arbitrator or Governmental Authority
is pending or, to the knowledge of the Borrower, threatened by or against the
Borrower or against any of its properties or revenues (a) with respect to any
of the Credit Documents or any of the transactions contemplated hereby or
thereby, or (b) which, if determined adversely to the Borrower, could
reasonably be expected to have a Material Adverse Effect. There are no
strikes, work stoppages, grievance proceedings or other controversies pending
or, to the knowledge and belief of the Borrower, imminent or threatened
between the Borrower and any employees of the Borrower or between the Borrower
and any union or other collective bargaining unit representing employees of
the Borrower which could reasonably be expected to have a Material Adverse
Effect.
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4.7 No Default. Except as noted in Recital No. 5, the
Borrower is not in default under or with respect to any Contractual Obligation
in any respect which could reasonably be expected to have a Material Adverse
Effect.
4.8 Ownership of Property; Liens. The Borrower has good title
to all of its property, and none of its property is subject to any Lien,
except as permitted by Subsection 7.3. The Borrower is not the taxpayer
against whom the State of Texas filed in Dallas County, Texas, on July 5,
1990, a state tax lien in the amount of $23,341.01, no. 90130-2027.
4.9 Business Premises. The Borrower does not own, lease,
sublease, occupy, use or operate any real property or improvements other than
the Borrower Business Premises. The Borrower's chief executive office (within
the meaning of Section 9-103 of the Virginia Uniform Commercial Code) is
located at the Borrower Chief Executive Office. All financial books and
records of the Borrower are located at the Borrower Business Premises.
4.10 Subsidiaries. The Borrower has no Subsidiaries.
4.11 Environmental. To the Borrower's knowledge and except as
set forth in Schedule 4.11:
(a) no Hazardous Substance has been released,
discharged, spilled, emitted or disposed of on any Obligor Use Property by the
Borrower or under circumstances as a result of which the Borrower would be
liable or financially responsible for damages or the cost of remediation or
clean-up;
(b) there is no existing Hazardous Substance
Contamination of any Obligor Use Property which was caused by the Borrower or
under circumstances as a result of which the Borrower would be liable or
financially responsible for damages or the cost of remediation or clean-up;
(c) all operations now or previously conducted on
Obligor Use Property by the Borrower comply with all Environmental Laws;
(d) no underground storage tanks have been installed on
any Obligor Use Property by the Borrower or under circumstances as a result of
which the Borrower would be liable or financially responsible for damages or
the cost of removal, remediation or cleanup; and
(e) except as set forth in Schedule 4.11, the Borrower
has not received, and is not aware of, any Environmental Claim against,
relating to or affecting in any way the Borrower or the Borrower's use of any
Obligor Use Property or any operations conducted on any Obligor Use Property
by the Borrower.
4.12 Solvency. On the Closing Date and after giving effect to
the borrowings hereunder on such date and to all other Indebtedness being
incurred on such date in connection therewith (a) the sum of the assets, at a
fair valuation, of the Borrower will, as of such date,
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exceed the Borrower's debts as reflected in its most current balance sheet,
(b) the present fair saleable value of the assets of the Borrower will, as of
such date, be greater than the amount that will be required to pay the
Borrower's liability on its debts as such debts become absolute and matured,
and (c) the Borrower will have, as of such date, sufficient capital with which
to conduct its business. For purposes of this Subsection, "debt" means
"liability on a claim" and "claim" means any (i) right to payment, whether or
not such right is reduced to judgment, liquidated, unliquidated, fixed,
contingent, matured, unmatured, disputed, undisputed, legal, equitable,
secured or unsecured, or (ii) right to an equitable remedy for breach of
performance if such breach gives rise to a right to payment, whether or not
such right to an equitable remedy is reduced to judgment, fixed, contingent,
matured, unmatured, disputed, undisputed, secured or unsecured.
4.13 Taxes. The Borrower has filed or caused to be filed all
tax returns which are required to be filed by the Borrower, and the Borrower
has paid all taxes shown to be due and payable on said returns or on any
assessments made against it or any of its property and all other taxes, fees
or other charges imposed on it or any of its property by any Governmental
Authority (other than any taxes the amount or validity of which are currently
being contested in good faith by appropriate proceedings and with respect to
which reserves in conformity with GAAP have been provided on the books of the
Borrower); and no tax lien has been filed and, to the knowledge of the
Borrower, no claim is being asserted with respect to any such tax, fee or
other charge.
4.14 Federal Regulations.
(a) No part of the proceeds of any of the Loans will be
used for "purchasing" or "carrying" any "margin stock" within the respective
meanings of each of the quoted terms under Regulation U of the Board of
Governors of the Federal Reserve System as now and from time to time hereafter
in effect or for any purpose which violates the provisions of any Regulations
of the Board of Governors; and
(b) if requested by the Lender, the Borrower will
furnish to the Lender a statement to the foregoing effect in conformity with
the requirements of FR Form U-I referred to in Regulation U.
4.15 Employee Matters.
(a) With respect to each employee pension benefit plan,
as defined in Section 3(2) of the ERISA (a "Retirement Plan"), established or
maintained or to which contributions have been made by or for the Borrower, or
any Subsidiary of the Borrower (including, for purposes of this Section, any
Commonly Controlled Entity):
(i) each Retirement Plan, including all
amendments, that is intended to be a qualified plan under Section 401 of the
Code (a "Qualified Plan"), is the subject of a favorable determination letter
from the Internal Revenue Service (or an application for such a letter is
presently pending);
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(ii) each Qualified Plan is and has at all times
been qualified, in form and operation, under Section 401(a) of the Code;
(iii) the Retirement Plan is and has at all times
been administered, maintained and operated in compliance with its terms and
with all applicable provisions of the Code, ERISA and all other applicable
Requirements of Law;
(iv) neither the Borrower nor any Subsidiary of
the Borrower, nor, to the actual knowledge of any director or officer of the
Borrower or any Subsidiary of the Borrower, any other Person who or which is a
"party in interest" (as defined in Section 3(14) of ERISA), or a "disqualified
person" (as defined in Section 4975(e)(2) of the Code), has acted or failed to
act with respect to the Retirement Plan in any manner which constitutes a
breach of fiduciary responsibility within the meaning of Title I, Subtitle B,
Part 4 of ERISA, a prohibited transaction within the meaning of Section 4975
of the Code or Sections 406 through 408 of ERISA, or any other material
violation of ERISA;
(v) no contributions to or benefits payable
under the Retirement Plan are past due;
(vi) no proceedings or investigations are pending
before the Internal Revenue Service, the Department of Labor or any court with
respect to the Retirement Plan or the operation thereof;
(vii) if the Retirement Plan is a multiemployer
plan, as defined in Sections 3(37) or 4001(a)(3) of ERISA, neither the
Borrower nor any Subsidiary of the Borrower has incurred, and neither the
Borrower nor any Subsidiary of the Borrower expects to incur, any withdrawal
liability which has not been satisfied in connection with any complete or
partial withdrawal from the Retirement Plan occurring on or before the date
hereof; and
(viii) if subject thereto, the Retirement Plan has
been funded in accordance with the minimum funding standards described in
Section 412 of the Code and Title I, Subtitle B, Part 3 of ERISA (for which
purpose there is no "accumulated funding deficiency," whether or not waived),
and in accordance with principles that are actuarially sound for such
Retirement Plan.
(b) With respect to each Retirement Plan which is a
defined benefit plan, as defined in Section 3(35) of ERISA:
(i) no event has occurred within the twelve
(12)-month period preceding the date hereof, or, to the knowledge of any
director or officer of the Borrower or any Subsidiary of the Borrower, is
threatened or about to occur, which would materially adversely affect the
actuarial status of the Retirement Plan;
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(ii) no fact exists in connection with the
Retirement Plan (or with respect to any other defined benefit plan maintained
by the Borrower or any Subsidiary of the Borrower at any time after September
2, 1974) which constitutes a reportable event (other than those for which
notice has been waived by the PBGC) under Section 4043(b) of ERISA or which
constitutes grounds for termination by, or other liability to, the PBGC
pursuant to Title IV of ERISA;
(iii) all premiums due the PBGC have been timely
paid; and
(iv) if the Retirement Plan were terminated, the
termination would qualify under the standard termination procedure, as
described in Section 4041(b) of ERISA (and Part 2617 of the PBGC regulations),
without payment of any additional contributions by the Borrower or any
Subsidiary of the Borrower.
(c) With respect to each employee welfare benefit plan,
as defined in Section 3(1) of ERISA (a "Welfare Plan"), established or
maintained or to which contributions have been made by or for the Borrower or
any Subsidiary of the Borrower:
(i) the Welfare Plan is and has at all times
been administered, maintained and operated in substantial compliance with its
terms and with all applicable provisions of ERISA and the Code (including the
continuation coverage requirements for group health plans, commonly known as
"COBRA requirements," under former Sections 106(b), 162(i)(2) and (3), and
162(k) of the Code, Section 4980B of the Code and Sections 601-608 of ERISA)
and all other applicable Requirements of Law;
(ii) neither the Borrower nor any Subsidiary of
the Borrower nor, to the actual knowledge of any director or officer of the
Borrower or any Subsidiary of the Borrower, any other Person who or which is a
party in interest as defined in Section 3(14) of ERISA, has acted or failed to
act with respect to the Welfare Plan in any manner which constitutes a breach
of fiduciary responsibility within the meaning of Title I, Subtitle B, Part 4
of ERISA, a prohibited transaction within the meaning of Sections 406 through
408 of ERISA, or any other violation of ERISA;
(iii) no contributions to or benefits payable
under the Welfare Plan are past due;
(iv) no proceedings, investigations, filings or
other matters are pending before the Department of Labor or any court, with
respect to the Welfare Plan or the operation thereof; and
(v) the Welfare Plan is either unfunded or is
funded solely through insurance contracts.
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(d) All Retirement Plans and Welfare Plans (jointly
"Benefit Plans") are in substantial compliance with all applicable reporting,
disclosure and other requirements of the Code and ERISA.
(e) There are no actions, suits or claims pending or,
to the best knowledge of the Borrower or any Subsidiary of the Borrower,
threatened with respect to any Benefit Plan, or any administrator or fiduciary
thereof, other than routine claims for benefits under such Plan.
4.16 Investment Company Act; Other Regulations. The Borrower is
not an "investment company", or a company "controlled" by an "investment
company", within the meaning of the Investment Company Act of 1940, as
amended.
4.17 Accuracy and Completeness of Information. All information
and reports with respect to the Borrower (other than projections) furnished to
the Lender by the Borrower or on behalf of the Borrower were, at the time the
same were so furnished, complete and correct in all material respects, or have
been subsequently supplemented by other information and reports to the extent
necessary to give the Lender a fair and accurate knowledge of the subject
matter in all material respects. All projections with respect to the Borrower
so furnished by the Borrower, as supplemented, were prepared and presented in
good faith, it being recognized by the Lender that such projections as to
future events are not to be viewed as facts and that actual results during the
period or periods covered by any such projections may differ from the
projected results. No fact is known to the Borrower which materially and
adversely affects or in the future may (so far as the Borrower can reasonably
foresee) materially and adversely affect the business, assets or liabilities,
financial condition, results of operations or business prospects of the
Borrower which has not been set forth in the financial statements referred to
in Subsection 4.1 or in such information and reports disclosed in writing to
the Lender prior to the date hereof. No document furnished or statement made
in writing to the Lender by the Borrower in connection with the negotiation,
preparation or execution of this Agreement contains any untrue statement of a
material fact, or omits to state any such material fact necessary in order to
make the statements contained therein not misleading, in either case which has
not been corrected, supplemented or remedied by subsequent documents furnished
or statements made in writing to the Lender.
4.18 Purpose of Loans. The Borrower shall use the proceeds of
all Revolving Credit Loans only (a) for working capital, (b) to fund Capital
Expenditures, or (c) to make payments to the Lender required by this
Agreement.
4.19 CLCQ and Delta College. (intentionally deleted)
4.20 No Intent to File Bankruptcy. The Borrower does not have
any present intent (i) to file any voluntary petition in bankruptcy under any
chapter of the Bankruptcy Code or to have any involuntary petition in
bankruptcy filed against it under any chapter of the Bankruptcy Code or (ii)
in any manner directly or indirectly to seek relief, protection,
reorganization, liquidation, dissolution, or similar relief for debtors under
any federal, state or local law, or in equity, or (iii) in any manner directly
or indirectly to cause any part of the
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Collateral to be the subject of any bankruptcy or insolvency proceedings or
the property of any bankruptcy or insolvency estate; and the Borrower
acknowledges and agrees that the filing of any such petition or any action
taken by the Borrower to cause the filing of any such petition would be in bad
faith, contrary to the purposes of the Bankruptcy Code, and solely for
purposes of delaying, inhibiting, or interfering with the exercise by the
Lender of its rights and remedies with respect to the Collateral and the
Credit Facilities.
SECTION 5. CONDITIONS PRECEDENT
5.1 Documents and Other Deliveries at Closing. No waiver or
other agreement of the Lender as set forth in this Agreement or any other
document executed contemporaneously with this Agreement shall be effective or
binding on the Lender until and unless the Lender shall have received:
(a) Credit Documents. In form and content satisfactory
to the Lender: (i) this Agreement, duly executed and delivered by an
Authorized Officer of the Borrower; (ii) the Fourth Amended and Restated
Revolving Credit Note, conforming to the requirements hereof and duly executed
and delivered by an Authorized Officer of the Borrower; (iii) the Third
Amended and Restated Pledge and Security Agreement duly executed and delivered
by an Authorized Officer of the Borrower; and (iv) such financing statements
executed by the Borrower as the Lender may require to further evidence or
perfect the rights and interests granted or contemplated to be granted to or
for the benefit of the Lender pursuant to the Credit Documents.
(b) Borrowing Certificate. A Borrowing Certificate of
the Borrower dated the Closing Date, substantially in the form of Exhibit D,
with appropriate insertions and attachments, satisfactory in form and
substance to the Lender and its counsel, duly executed by an Authorized
Officer of the Borrower.
(c) Borrower Proceedings. Copies of all corporate
proceedings undertaken by the Borrower, in form and substance satisfactory to
the Lender, authorizing (i) the execution, delivery and performance of this
Agreement and the other Credit Documents as described in subparagraph (a)
above, (ii) the borrowings contemplated thereunder and (iii) the granting by
it of the security interests and other Liens granted or to be granted by it
pursuant to the Credit Documents, Certified as to authenticity by an
Authorized Officer of the Borrower, as of the Closing Date, which certificate
shall state that the proceedings thereby Certified are in full force and
effect and have not been amended, modified, revoked or rescinded as of the
date of such certificate.
(d) Borrower Incumbency Certificate. Certificate of an
Authorized Officer of the Borrower, dated the Closing Date, as to the
incumbency and signature of the Authorized Officers of the Borrower executing
any Credit Document, satisfactory in form and substance to the Lender and its
counsel, duly executed by the Authorized Officers of the Borrower.
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(e) Filings, Registrations and Recordings. All filings,
registrations and recordings necessary, in the judgment of the Lender, to
perfect, make enforceable or give first priority to any security interest or
other Lien granted to or for the benefit of the Lender pursuant to the Credit
Documents, with the payment of any necessary fee, tax or expense relating
thereto.
(f) Other Documents. Such other documents as the
Lender or its counsel shall reasonably require.
(g) Payment of Expenses. Payment of all expenses of
the Lender then incurred, pursuant to Section 9.6 below.
(h) Payment of Restructure Fee. Payment to the Lender
of a restructure fee of $10,000 (equal to 1/2% of the Revolving Credit
Facility Ceiling).
5.2 Conditions to Each Loan. The agreement of the Lender to
make any Revolving Credit Loan requested to be made by it on any date, or to
issue any Letter of Credit requested to be issued by it on any date, is
subject to the satisfaction of the following conditions precedent as of the
date such Revolving Credit Loan is requested to be made or such Letter of
Credit is requested to be issued:
(a) Representations and Warranties. Each of the
representations and warranties made by the Borrower in or pursuant to the
Credit Documents shall be true and complete in all material respects on and as
of such date as if made on and as of such date.
(b) No Default. No Default or Event of Default shall be
continuing on such date.
(c) No Material Litigation. No Material Litigation
shall be pending or, to the Borrower's knowledge, overtly threatened in
writing against the Borrower or any Subsidiary of the Borrower.
(d) No Material Adverse Change. There shall not have
occurred any event or change since the date of the financial statements
referred to in Subsection 4.1 which has had a Material Adverse Effect.
(e) Additional Matters. All corporate and other
proceedings, and all documents, instruments and other legal matters in
connection with the transactions contemplated by this Agreement and the other
Credit Documents shall be satisfactory in form and substance to the Lender,
and the Lender shall have received such other instruments, legal opinions and
other documents in respect of any aspect or consequence of the transactions
contemplated hereby or thereby as the Lender shall reasonably request. Each
borrowing by the Borrower hereunder shall constitute a representation and
warranty by the Borrower as of the date of such borrowing that the conditions
contained in this Subsection 5.2 have been satisfied.
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SECTION 6. AFFIRMATIVE COVENANTS
The Borrower agrees that, until all of the Obligations have been
paid in full and there exists no contingent or non-contingent commitment by
the Lender which could give rise to any Obligations, the Borrower shall:
6.1 Financial Information. Furnish to the Lender by mail at
1970 Chain Bridge Road, VA-1954, McLean, Virginia 22102-4099, attention J.
David Linthicum, or by facsimile to J. David Linthicum at 703-760-5817:
(a) as soon as available, but in no event more than 35
days after the end of each month of February, March, May, June, August,
September, November and December, a statement of income and retained earnings
of the Borrower and its Subsidiaries for the month, a balance sheet of the
Borrower and its Subsidiaries as of the end of the month, and a statement of
cash flows for the Borrower and its Subsidiaries for the month, all with
supporting schedules, and all in detail and scope satisfactory to the Lender,
including sufficient detail showing the calculation of each component of each
financial covenant set forth in Subsection 7.1 below, and Certified by the
chief financial officer of the Borrower;
(b) as soon as available, but in no event more than 45
days after the end of each fiscal quarter ending on April 30, July 31 and
October 31, a statement of income and retained earnings of the Borrower and
its Subsidiaries for the quarter, a balance sheet of the Borrower and its
Subsidiaries as of the end of the quarter, and a statement of cash flows for
the Borrower and its Subsidiaries for the quarter, all with supporting
schedules, and all in detail and scope satisfactory to the Lender, including
sufficient detail showing the calculation of each component of each financial
covenant set forth in Subsection 7.1 below, and Certified by the chief
financial officer of the Borrower;
(c) as soon as available but in no event more than 60
days after the end of each fiscal year, a statement of income and retained
earnings for the Borrower and its Subsidiaries for the fiscal year, a balance
sheet of the Borrower and its Subsidiaries as of the end of the fiscal year,
and a statement of cash flows for the Borrower and its Subsidiaries for the
fiscal year, all with supporting schedules, and all in detail and scope
satisfactory to the Lender, including sufficient detail showing the
calculation of each component of each financial covenant set forth in
Subsection 7.1 below, and Certified by the chief financial officer of the
Borrower;
(d) not later than the earlier of (i) 24 hours after
filing with the Securities and Exchange Commission or (ii) 55 days after the
end of each quarterly accounting period of the Borrower (A) a copy of the
Borrower's Securities and Exchange Commission Form l0-Q containing a
consolidated statement of income and retained earnings of the Borrower and its
Subsidiaries for such quarterly accounting period and for the current fiscal
year of the Borrower through the end of such quarterly accounting period, and
a consolidated statement of cash flows of the Borrower and its Subsidiaries
for the current fiscal year of the Borrower through the end of such quarterly
accounting period, and a consolidated balance sheet of the Borrower and its
Subsidiaries as of the end of such quarterly accounting period, all prepared
in accordance with
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GAAP consistently applied, and accompanied by (x) an Officer Default
Certificate as of the end of such quarterly accounting period, and (y) an
Officer Financial Covenant Certificate as of the end of such quarterly
accounting period, and, if applicable, (B) a consolidating statement of income
and retained earnings of the Borrower and its Subsidiaries for such quarterly
accounting period and for the current fiscal year of the Borrower through the
end of such quarterly accounting period, and a consolidating statement of cash
flows of the Borrower and its Subsidiaries for such quarterly accounting
period and for the current fiscal year of the Borrower through the end of such
quarterly accounting period, and a consolidating balance sheet of the Borrower
and its Subsidiaries as of the end of such quarterly accounting period, all
prepared in accordance with GAAP consistently applied;
(e) not later than 55 days after the end of each
quarterly accounting period of the Borrower and in form and content
satisfactory to Lender, a schedule and aging of student account receivables
(including in-school and out-of-school receivables) of the Borrower and its
Subsidiaries as of the end of such quarterly accounting period;
(f) not later than the earlier of (i) 24 hours after
filing with the Securities and Exchange Commission or (ii) 100 days after the
end of each fiscal year of the Borrower (A) a copy of the Borrower's
Securities and Exchange Commission Form 10-K containing a consolidated
statement of income and retained earnings of the Borrower and its Subsidiaries
for such fiscal year, and a consolidated statement of cash flows of the
Borrower and its Subsidiaries for such fiscal year, and a consolidated balance
sheet of the Borrower and its Subsidiaries as at the end of such fiscal year,
setting forth in each case in comparative form corresponding figures for the
preceding fiscal year of the Borrower, all prepared in accordance with GAAP
consistently applied and examined and audited by independent certified public
accountants satisfactory to the Lender, in the discretion of the Lender
exercised in good faith, and accompanied by (w) a report of such independent
certified public accountants with respect to such financial statements and
examination which is satisfactory to the Lender, (x) an Accountant Default
Certificate, (y) an Officer Financial Covenant Certificate as at the end of
such fiscal year, and (z) an Officer Default Certificate as at the end of such
fiscal year, and (zz) an Officer Financial Aid Program Certificate for each
fiscal year, and, if applicable, (B) a consolidating statement of income and
retained earnings of the Borrower and its Subsidiaries for such fiscal year,
and a consolidating statement of cash flows of the Borrower and its
Subsidiaries for such fiscal year, and a consolidating balance sheet of the
Borrower and its Subsidiaries as at the end of such fiscal year, setting forth
in each case in comparative form corresponding figures for the preceding
fiscal year of the Borrower, all prepared in accordance with GAAP consistently
applied by independent certified public accountants satisfactory to the
Lender, in the discretion of the Lender exercised in good faith;
(g) as soon as available but not later than April 30 of
each year, a copy of projections by the Borrower of the operating budget and
cash flow of the Borrower and its Subsidiaries for the fiscal year of the
Borrower and its Subsidiaries, in substantially the form attached as Exhibit
E; and (ii) as soon as available but not later than one (1) week after its
submission to the U.S. Department of Education, a copy of a compliance audit
of the administration by the Borrower and its Domestic Subsidiaries of Student
Financial Aid Programs
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under Title IV of the Higher Education Act of 1965 conducted by independent
certified public accountants or a government auditor and complying with all
Requirements of Law;
(h) promptly after transmission thereof, copies of all
registration statements and all final regular, special or periodic reports
which the Borrower or any of its Subsidiaries files with the United States
Securities and Exchange Commission (or any successor thereto) or with any
stock exchange; and
(i) promptly after transmission thereof, but in no
event less than once each year, a copy of the Management Letter or Internal
Control Letter prepared by the Borrower's CPA firm and delivered to the
Borrower; and
(j) promptly after transmission thereof, all written
information submitted to the Board of Directors, and all minutes of Board of
Director and Committee meetings; and
(k) promptly, such additional financial and other
information as the Lender may from time to time reasonably request.
6.2 Payment of Obligations. Pay, discharge or otherwise
satisfy at or before maturity or before they become delinquent, as the case
may be, all of its obligations of whatever nature; and cause each of its
Subsidiaries to pay, discharge or otherwise satisfy at or before maturity or
before they become delinquent, as the case may be, all of its obligations of
whatever nature.
6.3. Conduct of Business and Maintenance of Existence. (a)
Continue, and cause each of its Subsidiaries to continue, to engage in the
business of information technology education; (b) preserve, renew and keep in
full force and effect, and cause each of its Subsidiaries to preserve, renew
and keep in full force and effect, its organizational existence; (c) take, and
cause each of its Subsidiaries to take, all reasonable action to maintain all
rights, privileges and franchises necessary or desirable in the normal conduct
of its business; and (d) comply with, and cause each of its Subsidiaries to
comply with, all Contractual Obligations and Requirements of Law except to the
extent that failure to comply therewith could not, in the aggregate,
reasonably be expected to have a Material Adverse Effect.
6.4 Maintenance of Property; Insurance. (a) Keep, and cause
each of its Subsidiaries to keep, all property useful and necessary in its
business in good working order and condition; and (b) maintain, and cause each
of its Subsidiaries to maintain, with financially sound and reputable
insurance companies such insurance in at least such amounts and against at
least such risks (but including in any event property casualty, liability,
product liability and business interruption) as is reasonably prudent, such
insurance being acceptable to the Lender; and furnish to the Lender, upon
written request, full information as to the insurance carried.
6.5 Inspection of Property and Books and Records. (a) Keep,
and cause each of its Subsidiaries to keep, proper books and records in which
true and complete entries in
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conformity with GAAP and all Requirements of Law shall be made of all dealings
and transactions in relation to its business and activities; and (b) permit
representatives of the Lender to visit and inspect any of its properties to
review, audit, check and inspect the Borrower's books and records at any time
with or without notice and to make abstracts and photocopies thereof, and to
discuss the affairs, finances and accounts of the Borrower with the officers,
directors, and other representatives of the Borrower and its accountant all at
such times during normal business hours and other reasonable times and as
often as the Lender may request. The Borrower shall pay to the Lender, upon
demand, a cost of all such audits, field examinations, reviews, verifications
and inspections.
6.6 Notices. Promptly give notice to the Lender:
(a) of the occurrence of any Default or Event of
Default;
(b) (i) of receipt of any written notice of any default
or event of default under or as defined in any Contractual Obligation of the
Borrower or any of its Subsidiaries which could reasonably be expected to have
a Material Adverse Effect; (ii) of any notice or knowledge that the Borrower
or any Borrower Institution, or any educational program of any thereof, has
been Disqualified, and (iii) of any notice or knowledge of any action or
proceeding against, or any investigation or review of, the Borrower, any of
its Subsidiaries or any Borrower Institution, or any educational program
conducted by any thereof, by or on behalf of any accrediting agency, the
Department of Education or any State of the United States of America or any
other Governmental Authority;
(c) of Material Litigation pending or overtly
threatened in writing against the Borrower or any of its Subsidiaries;
(d) of any litigation or proceeding pending against the
Borrower or any of its Subsidiaries involving an uninsured amount of One
Hundred Thousand Dollars ($100,000.00) or more or in which injunctive or
similar relief is sought; and
(e) of the occurrence of any event which could
reasonably be expected to have a Material Adverse Effect.
Each notice pursuant to this Subsection 6.6 shall be accompanied by a
statement of an Authorized Officer setting forth details of the occurrence
referred to therein and stating what action the Borrower proposes to take with
respect thereto.
6.7 Government Regulations. Subject to any other more specific
provisions of this Agreement, comply with, and cause each of its Subsidiaries
to comply with, all applicable Requirements of Law relating to the conduct of
its business.
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6.8 Employee Benefit Plans.
(a) At all times administer, maintain and operate, and
cause each Subsidiary of the Borrower at all times to administer, maintain and
operate, each of its Benefit Plans in conformity in all material respects with
all applicable provisions of ERISA and other federal and state statutes
relating to employee benefit plans (including the continuation coverage
requirements of ERISA and the Code for group health plans under Section 4980B
of the Code and Sections 601-608 of ERISA);
(b) at all times make, and cause each such Subsidiary
of the Borrower at all times to make, all required contributions and premium
payments under each Benefit Plan for all periods after the date hereof;
(c) comply in all material respects with, and cause
each Subsidiary of the Borrower to comply in all material respects with, all
applicable reporting, disclosure and other requirements of ERISA and the Code
as they relate to Benefit Plans, and, if reasonably requested by the Lender,
furnish the Lender with copies of all reports filed in connection therewith
promptly after the filing thereof;
(d) notify the Lender promptly of any fact, including,
without limitation, any reportable event under Section 4043(b) of ERISA,
arising in connection with any Retirement Plan which might constitute grounds
for the termination thereof by the PBGC; and
(e) furnish to the Lender, promptly upon its reasonable
request therefor, such additional information concerning any Benefit Plan as
the Lender may request.
6.9 Environmental.
(a) Cause all operations of the Borrower and its
Subsidiaries to be conducted in compliance in all material respects with all
applicable Environmental Laws;
(b) promptly deliver to the Lender copies of all
reports prepared by any Governmental Authority, any environmental auditor or
engineer, or any other Person, relating to or in connection with any
Environmental Claim against the Borrower or any of its Subsidiaries, unless
the Borrower cannot obtain such reports or copies thereof;
(c) notify the Lender in writing within 10 Business
Days after the Borrower or any of its Subsidiaries shall have become aware of
any Environmental Claim against the Borrower or any of its Subsidiaries or
caused by any operations conducted by the Borrower or any of its Subsidiaries;
(d) in the event that, to the knowledge of the Borrower
or any of its Subsidiaries, any Hazardous Substance Contamination shall occur
which was caused by the Borrower or any of its Subsidiaries or under
circumstances as a result of which the Borrower or any of its Subsidiaries
would be liable or financially responsible for damages or the cost of
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remediation or clean-up, or the Borrower or any of its Subsidiaries shall
become aware of any non-compliance in any material respect of any Obligor Use
Property with any Environmental Law by the Borrower or any of its Subsidiaries
which occurred previously, exists now or shall exist hereafter (i) notify the
Lender thereof in writing within 10 Business Days, (ii) if requested by the
Lender, engage, at the Borrower's expense, and deliver to the Lender as
promptly as feasible an Environmental Assessment with respect thereto
containing or accompanied by a plan and budget in form and content reasonably
satisfactory to the Lender for the remediation or cure thereof, (iii) as
promptly as feasible, commence and diligently pursue to completion, or cause
to be promptly commenced and diligently pursued to completion, all actions
which are necessary to remediate or cure the same, all contractors to perform
any work in connection therewith to be reasonably satisfactory to the Lender,
and (iv) if requested by the Lender, deliver to the Lender, within 15 days
after request therefor by the Lender, a bond, letter of credit or similar
financial assurance reasonably satisfactory to the Lender evidencing that the
funds necessary are available to pay the cost of such cure or remediation; and
(e) indemnify, protect and defend the Lender, and its
officers, directors, employees, attorneys and agents, and save harmless the
Lender, and its officers, directors, employees, attorneys and agents, from and
against any and all claims, demands, damages, losses, liabilities,
obligations, penalties, litigation, defenses, judgments, decrees, orders,
directives, suits, actions, proceedings, costs and expenses (including,
without limitation, counsel fees and expenses and experts' fees and expenses)
of any kind or nature whatsoever which may at any time be imposed upon, paid
or incurred by or asserted or awarded against any of them relating to,
resulting from or arising out of (i) the presence, manufacture, generation,
production, processing, use, handling, treatment, storage, disposal,
transportation or distribution on or about any Obligor Use Property of any
Hazardous Substance by the Borrower or under any circumstances as a result of
which the Borrower or any of its Subsidiaries would be liable or financially
responsible for damages or the cost of remediation or clean-up, (ii) any
Hazardous Substance Contamination by the Borrower or any of its Subsidiaries
or under circumstances as a result of which the Borrower or any of its
Subsidiaries would be liable or financially responsible for damages or the
cost of remediation or clean-up, (iii) any non-compliance in any material
respect of any Obligor Use Property with any Environmental Law by the Borrower
or any of its Subsidiaries which occurred previously, now exists or shall
exist hereafter, or (iv) any costs associated with any remedial or curative
action relating to any Hazardous Substances, any Hazardous Substance
Contamination or any violation of any applicable Environmental Laws by the
Borrower or any of its Subsidiaries. The indemnification obligations of the
Borrower under this Subsection shall survive the termination of this Agreement
and payment of the outstanding Note for a period of 3 years. The Lender agrees
not to delay release of Collateral in accordance with the last sentence of
Subsection 2.2 of the Borrower Security Agreement on account of any contingent
obligation of the Borrower under the preceding sentence.
6.10 Perfection of Security Interest. Cause the security
interest granted to the Lender pursuant to the Borrower Security Agreement and
any other documents executed contemporaneously with this Agreement to be duly
perfected in accordance with applicable law with respect to all of the
Collateral.
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6.11 Year 2000 Compatibility. (intentionally deleted).
6.12 Primary Bank Accounts. Maintain all primary depository
accounts at the Lender. The Borrower shall either deposit or (to the extent
cash receipts are deposited into a non-Lender bank account because the Lender
does not have a branch near the Borrower Institution) transfer daily all cash
receipts into the Operating Account. Upon the occurrence of an Event of
Default, and immediately upon demand by the Lender, the Borrower shall deposit
all cash receipts directly into the Operating Account, and shall make all
disbursements (except for tuition refunds) from the Operating Account.
6.13 Weekly Cash Flow Projections. Furnish to the Lender by
facsimile to Mr. J. David Linthicum at 703-760-5817, each Tuesday beginning on
December 19, 2000, the Borrower's cash flow projection (of expected cash
inflows and outflows and of expected borrowing requirements) for each of the
next six weekly periods, together with the actual cash flow data for the prior
week ending the previous Friday, in detail and scope satisfactory to the
Lender in the Lender's sole and absolute discretion, certified by the Chief
Financial Officer of the Borrower.
6.14 Delivery of Original Retail Installment Contracts.
(a) Deliver by the 25th day of each month physical
possession to the Lender of originals (with original signatures) of all RICs
(except those relating to Borrower Institutions located in Illinois), with
respect to which the obligor/payor is no longer attending any classes being
given by the Borrower, having either dropped the program or graduated from the
program, and on which payments are due and owing to the Borrower, which are in
the Borrower's possession and which the Borrower has failed to deliver to the
Lender. The Lender acknowledges that the original RICs will be delivered to
the Lender in a sealed envelope. The Borrower shall deliver with the originals
of the RICs copies of the Borrower's business records setting forth payments
received on the RIC and the current balance owing on the RIC, a certificate of
the Borrower's CPA firm confirming that the CPA firm has reviewed the contents
of the package of RICs delivered to the Lender and that the list prepared by
the Borrower setting forth the contents of the package of RICs is true,
accurate and complete, and, promptly upon the Lender's request, an assignment
(subject to the terms of the Borrower Security Agreement) executed by the
Borrower covering each original RIC (on a form to be supplied by the Lender).
The Borrower shall deliver to the Lender within twenty-five (25) days after
the end of each month a report showing payments and current balances on each
original RIC, possession of which the Borrower has delivered to the Lender.
(b) Notwithstanding the provisions of Subsection
6.14(a), when the balance in the L/C Cash Collateral Account is equal to or
greater than 110% of the L/C Exposure, and when the balance in the Revolving
Credit Cash Collateral Account is equal to or greater than 110% of the
Revolving Credit Facility Ceiling, and as long as the Borrower maintains such
balance levels in both accounts, the Borrower shall no longer have to comply
with Subsection 6.14(a).
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6.15 Business Consultant. (intentionally deleted)
6.16 Business Plan. (intentionally deleted)
6.17 Tax Refunds. (intentionally deleted)
6.18 Borrowing Base.
(a) Deliver to the Lender on November 1, 2000 and on or
before the 25th day of each month, commencing on November 25, 2000, a
Borrowing Base Certificate as of the end of the preceding month, in the form
attached as Exhibit F accompanied by a schedule listing all RICs in the
Borrower's possession, including those RICs delivered with the Borrowing Base
Certificate.
(b) Notwithstanding the provisions of Subsection
6.18(a), when the balance in the L/C Cash Collateral Account is equal to or
greater than 110% of the L/C Exposure, and when the balance in the Revolving
Credit Cash Collateral Account is equal to or greater than 110% of the
Revolving Credit Facility Ceiling, and as long as the Borrower maintains such
balance levels in both accounts, the Borrower shall no longer have to comply
with Subsection 6.18(a).
6.19 Monthly Meeting.
(a) Hold a meeting at least once every month (face to
face meetings once each quarter and all other meetings to be by telephone) to
discuss the Borrower's financial condition, between the Lender, the Borrower's
management, and the Chairman of the Board of Directors of the Borrower or,
with prior Lender approval, the Chairman of the Audit Committee.
(b) Notwithstanding the provisions of Subsection
6.19(a), when the balance in the L/C Cash Collateral Account is equal to or
greater than 110% of the L/C Exposure, and when the balance in the Revolving
Credit Cash Collateral Account is equal to or greater than 110% of the
Revolving Credit Facility Ceiling, and as long as the Borrower maintains such
balance levels in both accounts, the Borrower shall no longer have to comply
with Subsection 6.19(a).
6.20 Correspondence from Department of Education. Deliver to
the Lender immediately upon receipt all correspondence or other written
documents received with respect to the Borrower from the Department of
Education.
6.21 HCM2 Information. Deliver to the Lender each month by the
25th day of the month a running tally of all deferred payments owing to the
Borrower by the DOED on account of or as a result of the Borrower's HCM2
status. Immediately upon the DOED's modification of the Borrower's HCM2
status, the Borrower shall notify the Lender in writing of such change in
status and of what the Borrower expects to collect from the DOED as a result
of such modification. The Borrower agrees to immediately bill for and collect
all such deferred
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<PAGE> 48
payments becoming due as a result of such modification within 30 days
following such notice to the Lender.
6.22 Financial Covenants. Comply with the following financial
covenants:
(a) Fixed Charge Coverage Ratio. As of the end of each
of the following quarterly accounting periods, achieve at least the following
Fixed Charge Coverage Ratio for the 12-month period then ending, calculated on
a rolling four quarter basis:
<TABLE>
<CAPTION>
Quarter Ending Ratio
-------------- -----
<S> <C>
October 31, 2000 .90 to 1.00
January 31, 2001 .95 to 1.00
April 30, 2001 1.15 to 1.00
July 31, 2001 1.35 to 1.00
October 31, 2001 1.20 to 1.00
January 31, 2002 1.40 to 1.00
</TABLE>
There shall not be taken into account, in determining compliance with
the Fixed Charge Coverage Ratio covenant, the Borrower's liability to the DOED
as more fully described in the Final Program Review Determination, or under
any settlement of the liability.
(b) Tangible Net Worth. As of the following dates,
achieve at least the Tangible Net Worth as follows:
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<PAGE> 49
<TABLE>
<CAPTION>
Date Amount
---- ------
<S> <C>
October 31, 2000 $37,200,000
January 31, 2001 $35,000,000
April 30, 2001 $34,000,000
July 31, 2001 $33,000,000
October 31, 2001 $34,000,000
January 31, 2002 $35,000,000
</TABLE>
There shall not be taken into account, in determining compliance with
the Tangible Net Worth covenant for the quarter ended January 31, 2001, and
each quarter thereafter, the Borrower's valuation allowance for deferred tax
purposes, rounded to the nearest $100,000.
There shall not be taken into account, in determining compliance with
the Tangible Net Worth covenant, the Borrower's liability to the DOED as more
fully described in the Final Program Review Determination, or under any
settlement of the liability.
(c) Net Profit After Taxes. For each quarter,
beginning with the quarter ending on October 31, 2001, generate a net profit
after taxes.
(d) Accounts Receivable. Beginning October 1, 2000,
and continuing at all times thereafter, achieve total Accounts Receivable
(short term and long term) of at least $50,000,000, except that, for December,
2000 the required level of Accounts Receivable shall be $48,000,000 and for
the months of March, 2001, April, 2001 and May, 2001, the required level of
Accounts Receivable shall be $46,000,000. If the Borrower fails to comply with
this financial covenant, the Borrower shall immediately deposit into the Cash
Collateral Account an amount sufficient to equal 110% of the L/C Exposure and
shall also immediately deposit into the Revolving Credit Cash Collateral
Account an amount sufficient to equal 110% of the Revolving Credit Facility
Ceiling.
(e) Notwithstanding the provisions of Subsections
6.22(a),(b),(c) and (d), when the balance in the L/C Cash Collateral Account is
equal to or greater than 110% of the L/C Exposure, and when the balance in the
Revolving Credit Cash Collateral Account is equal to or greater than 110% of the
Revolving Credit Facility Ceiling, and as long as the Borrower maintains such
balance levels in both accounts, the Borrower shall no longer have to comply
with Subsections 6.22(a),(b),(c) and (d).
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<PAGE> 50
6.23 Landlord Waivers. The Borrower shall make its best,
diligent effort to deliver to the Lender as soon as practicable (and to the
extent not previously delivered pursuant to the Second Amended and Restated
Credit Agreement) a written agreement of (i) the owners of the Borrower
Institutions located in Virginia, (ii) the owners of the Borrower Institutions
located in Pennsylvania, and (iii) the owners of the Borrower Institutions
located in Texas, consenting to enforcement of the Lender's rights in
connection therewith, shall deliver to the Lender promptly upon delivery to a
landlord a copy of each piece of correspondence directed to the landlord by
the Borrower requesting or with respect to such consent, and shall deliver to
the Lender promptly upon receipt copies of all correspondence received from
any landlord with respect to such consent. The Borrower authorizes the Lender
to communicate directly with any landlord to resolve any issues regarding the
landlord's consent to the Lender's enforcement of its rights in the Borrower's
property located at the landlord's premises.
SECTION 7. NEGATIVE COVENANTS
The Borrower agrees that, until all of the Obligations have been
paid in full and there exists no contingent or non-contingent commitment by
the Lender which could give rise to any Obligations, the Borrower shall not,
directly or indirectly:
7.1 Limitation on Factoring. Factor Accounts Receivable, notes
receivable or instruments, except for the Sallie Mae alternative financing
program in effect on the date of this Agreement.
7.2 Limitation on Indebtedness. Create, incur, assume or
suffer to exist any Indebtedness, or permit any of its Subsidiaries to create,
incur, assume or suffer to exist any Indebtedness, except for:
(a) Indebtedness of the Borrower or any of its
Subsidiaries under this Agreement and the other Credit Documents; and
(b) current Indebtedness of the Borrower and its
Subsidiaries in connection with trade accounts payable incurred in the
ordinary course of business (including payment obligations under Operating
Leases of the Borrower and its Subsidiaries which the Lender acknowledges the
Borrower enters into in connection with its business).
7.3 Limitation on Liens. Create, incur, assume or suffer to
exist, or permit any of its Subsidiaries to create, incur, assume or suffer to
exist, any Lien upon any of its property, assets or revenues, whether now
owned or hereafter acquired, except for:
(a) Liens for taxes not yet due or which are being
contested in good faith by appropriate proceedings, provided that adequate
reserves with respect thereto are maintained on the books of the Borrower or
the Subsidiary, as the case may be, in conformity with GAAP and that no notice
of lien with respect thereto is filed in any recording office;
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<PAGE> 51
(b) landlords', carriers', warehousemen's, mechanics',
materialmen's, repairmen's, or other like Liens arising in the ordinary course
of business with respect to obligations which are not due or which are being
contested in good faith by appropriate proceedings in a manner which will not
jeopardize or diminish in any material respect any interest of the Lender;
(c) pledges or deposits in connection with workers'
compensation, unemployment insurance and other social security legislation and
deposits securing liability to insurance carriers under insurance or
self-insurance arrangements; and
(d) Liens in favor of the Lender created pursuant to
the Credit Documents;
7.4 Limitation on Negative Pledge Clauses. Enter into, or
permit any of its Subsidiaries to enter into, any covenant or other agreement
with or for the benefit of any other Person, other than pursuant to this
Agreement or the other Credit Documents, which prohibits or limits the right,
power, authority or ability of the Borrower or the Subsidiary to create,
incur, assume or suffer to exist any security interest or other Lien upon any
of its assets, whether now owned or hereafter acquired.
7.5 Limitation on Contingent Obligations. Create, incur,
assume or suffer to exist, or permit any of its Subsidiaries to create, incur,
assume or suffer to exist, any Contingent Obligation except for:
(a) Contingent Obligations arising in connection with
Letters of Credit or otherwise arising under or in connection with the Credit
Documents; and
(b) Contingent Obligations in the nature of performance
bonds and performance guaranties arising in the ordinary course of business.
7.6 Limitations on Fundamental Changes. Enter into, or permit
any of its Subsidiaries to enter into, any merger, consolidation, amalgamation
or share exchange, or, suffer or permit any business, assets, operations or
books and records of the Borrower or any of its Subsidiaries to be merged,
consolidated or commingled with any business, assets, operations or books and
records of any other Person, or make any material change in the present method
of conducting business.
7.7 Limitation on Acquisitions. Purchase or otherwise acquire,
or permit any of its Subsidiaries to purchase or otherwise acquire, any assets
of any other Person.
7.8 Limitation on Sale of Assets. Convey, sell, assign,
transfer, lease or otherwise dispose of, or permit any of its Subsidiaries to
convey, sell, assign, transfer, lease or otherwise dispose of, any of the
Collateral or any of its assets, whether now owned or hereafter acquired,
except:
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<PAGE> 52
(a) obsolete or worn-out equipment or inventory
disposed of in the ordinary course of business; and
(b) the sale of inventory in the ordinary course of
business.
7.9 Limitation on Restricted Payments. Make or commit to make,
or permit any of its Subsidiaries to make or commit to make, any Restricted
Payments except:
(a) payments to the Borrower by any Subsidiary of the
Borrower;
(b) payments of compensation, stock options, bonuses,
insurance, fringe benefits and reimbursement of expenses to employees of the
Borrower in the ordinary course of business;
(c) payments of dividends in the form of capital stock
of the Borrower by the Borrower to stockholders of the Borrower;
(d) payments made by the Borrower to repurchase
securities of the Borrower, to the extent that such payments are made with
proceeds of a public offering of securities of the Borrower.
7.10 Limitation on Transactions with Affiliates. Except as
permitted by other provisions of this Agreement, enter into, or permit any of
its Subsidiaries to enter into, any transaction with any Affiliate except for
transactions with Affiliates entered into in the ordinary course of business
on terms no less favorable than would apply in a comparable arm's-length
transaction with a Person that is not an Affiliate.
7.11 Limitation on Subsidiaries. Form or acquire, or permit any
of its Subsidiaries to form or acquire, any Subsidiary.
7.12 Limitation on Investments, Loans and Advances. Purchase
any Investment or make any advance, loan or extension of credit to any Person,
or permit any of its Subsidiaries to purchase any Investment or make any
advance, loan or extension of credit to any Person, except for:
(a) extensions of trade credit in the ordinary course
of business;
(b) Investments in Cash Equivalents; and
(c) other Investments approved by the Lender in
writing.
7.13 Limitation on Optional Payments and Modifications. (a)
Make, or permit any of its Subsidiaries to make, any optional payment or
prepayment on or redemption of any Indebtedness (other than Indebtedness
pursuant to this Agreement), or (b) unless commercially reasonable to do so,
amend, modify or change, or consent or agree to any amendment,
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<PAGE> 53
modification or change to, any of the terms of any Indebtedness (other than any
such amendment, modification or change which would extend the maturity or reduce
the amount of any payment of principal thereof or which would reduce the rate or
extend the date for payment of interest thereon).
7.14 Limitation on Sale and Leaseback. Enter into, or permit
any of its Subsidiaries to enter into, any arrangement with any Person
providing for the leasing by the Borrower or such Subsidiary of real or
personal property which has been or is to be sold or transferred by the
Borrower or such Subsidiary to such Person or to any other Person to whom
funds have been or are to be advanced by such Person on the security of such
property or rental obligations of the Borrower or such Subsidiary.
7.15 Fiscal Year. Permit the fiscal year of the Borrower or any
of its Subsidiaries to end on a day other than January 31.
7.16 Places of Business. Change, or suffer or permit to be
changed, the location of the Borrower Chief Executive Office or the location
of the Borrower's books and records, or have or maintain, other than the
Borrower Business Premises, any business, office or storage location unless
the Lender shall have received 60 days prior written notice of the new
location.
7.17 Change of Name. Without giving the Lender at least 60 days
prior written notice and executing and delivering to the Lender such financing
statements and other documents as the Lender may reasonably require after
receipt of such notice, change, or suffer or permit to be changed, the name of
the Borrower or any of its Subsidiaries, or use any trade name, or permit any
of its Subsidiaries to use any trade name, other than its true corporate name
and "Advantec Institutes."
7.18 ERISA.
(a) With respect to any Retirement Plan, engage, or
knowingly permit any "party in interest" (as defined in Section 3(14) of
ERISA) or any "disqualified person" (as defined in Section 4975(e)(2) of the
Code) to engage, in any "prohibited transaction" within the meaning of Section
4925 of the Code or Sections 406 through 408 of ERISA;
(b) with respect to any Retirement Plan, knowingly
incur, or permit any Subsidiary of the Borrower to knowingly incur, any
"accumulated funding deficiency" under Section 302 of ERISA or Section 412 of
the Code, whether or not waived;
(c) terminate any Retirement Plan in a manner which
could result in the imposition of a lien on any of its property pursuant to
Section 4068 of ERISA; or
(d) take any action which materially adversely affects
the qualification of any Qualified Plan.
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<PAGE> 54
7.19 Environmental.
(a) Permit any Hazardous Substance to be present,
manufactured, generated, produced, processed, used, handled, treated, stored
or disposed of on any Obligor Use Property in violation of any applicable
Environmental Law by the Borrower or any of its Subsidiaries or under
circumstances as a result of which the Borrower or any of its Subsidiaries
would be liable or financially responsible for damages or the cost of
remediation or clean-up;
(b) permit to occur any Hazardous Substance
Contamination by the Borrower or any of its Subsidiaries or under
circumstances as a result of which the Borrower or any of its Subsidiaries
would be liable or financially responsible for damages or the cost of
remediation or clean-up; or
(c) permit any underground storage tanks to be
installed on any Obligor Use Property by the Borrower or any of its
Subsidiaries or under circumstances as a result of which the Borrower or any
of its Subsidiaries would be liable or financially responsible for damages or
the cost of removal, remediation or clean-up.
7.20 Limitation on Inconsistent Agreements. Enter into, or
permit any of its Subsidiaries to enter into, any agreement which is
inconsistent with any obligations of the Borrower or any of its Subsidiaries
under this Agreement or any of the other Credit Documents.
7.21 Limitation on Capital Expenditures.
(a) For any rolling twelve month period, calculated
quarterly beginning and retroactive to October 31, 2000, permit the level of
Capital Expenditures to exceed the following:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
DATE 12 MONTH ROLLING MAXIMUM CAPITAL EXPENDITURE
--------------------------------------------------------------------------------------
<S> <C>
October 31, 2000 $4,000,000
--------------------------------------------------------------------------------------
January 31, 2001 $3,600,000
--------------------------------------------------------------------------------------
April 30, 2001 $4,400,000
--------------------------------------------------------------------------------------
July 31, 2001 $4,800,000
--------------------------------------------------------------------------------------
October 31, 2001 $4,700,000
--------------------------------------------------------------------------------------
January 31, 2002 $5,000,000
--------------------------------------------------------------------------------------
</TABLE>
(b) Notwithstanding the provisions of Subsection
7.21(a), when the balance in the L/C Cash Collateral Account is equal to or
greater than 110% of the L/C Exposure, and when the balance in the Revolving
Credit Cash Collateral Account is equal to or greater than 110% of the
Revolving Credit Facility Ceiling, and as long as the Borrower maintains such
balance levels in both accounts, the Borrower shall no longer have to comply
with Subsection 7.21(a).
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SECTION 8. EVENTS OF DEFAULT
Upon the occurrence of any of the following events:
(a) The Borrower or any Other Obligor shall fail to pay
when and as due, whether by demand, stated maturity, acceleration or
otherwise, any of the Obligations, including, without limitation, principal
and interest on the Note, L/C Reimbursement Obligations, fees or expenses; or
(b) Any representation or warranty made or deemed made
by the Borrower or any Other Obligor herein or in the other Credit Documents
or which is contained in any certificate, document or financial or other
statement furnished at any time under or in connection with this Agreement or
any such other Credit Document shall prove to have been incorrect in any
material respect on or as of the date made or deemed made; or
(c) The Borrower or any Other Obligor shall fail to
observe, perform or comply with any covenant or agreement contained in this
Agreement or any of the other Credit Documents (other than as provided in (a)
above), and, in the case of any failure of the Borrower or any Other Obligor
to observe, perform or comply with any covenant or agreement to be observed,
performed or complied with, other than as provided in Section 8(a), and except
in the case of any failure of the Borrower or any Other Obligor to observe,
perform or comply with any covenant or agreement to be observed, performed or
complied with under Subsection 4.14(a)(Regulation U), 4.18(Use of Loan
Proceeds), 6.3(a)(Type of Business), 6.6(Inspection), 6.8(d)(Reportable Event
Under ERISA), 6.22(Financial Covenants), 7.4(Negative Pledge), 7.6 through
7.11, inclusive (Limitations on Corporate Transactions), or 7.13 through 7.18,
inclusive (Additional Limitations on Corporate Transactions), 7.21 (Capital
Expenditures), or Subsection 2.3(b) and 2.3(d) of the Borrower Security
Agreement, such failure shall continue for five Business Days following notice
; or
(d) (i) This Agreement or any of the other Credit
Documents shall be, or shall be held by a court of competent jurisdiction to
be, invalid or unenforceable in any respect reasonably deemed material by the
Lender, or (ii) the security interests and other Liens created in favor of or
for the benefit of the Lender shall cease to be enforceable in any respect
deemed material by the Lender and of the same effect and priority purported to
be created thereby; or
(e) The Borrower or any Other Obligor shall revoke or
terminate, or attempt to revoke or terminate, or notify the Lender of
revocation or termination of, any continuing obligations or agreements of the
Borrower or such Other Obligor relating in any way to this Agreement or any of
the other Credit Documents; or
(f) The Borrower, any of its Subsidiaries or any Other
Obligor shall (i) default in any payment of any Indebtedness (other than
Indebtedness referred to in paragraph (a) above) or in the payment of any
Contingent Obligation deemed material by the Lender, beyond any period of
grace but whether or not any required notice has been given, or (ii) default
in the observance or performance of any other agreement or condition otherwise
relating to any such
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<PAGE> 56
Indebtedness or Contingent Obligation or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other event shall
occur or condition exist, the effect of which default or other event or
condition is to cause, or to permit the holder or holders of such Indebtedness
or beneficiary or beneficiaries of such Contingent Obligation (or a trustee or
agent on behalf of such holder or holders or beneficiary or beneficiaries) to
cause, with the giving of notice if required and expiration of any applicable
grace period, such Indebtedness to become due prior to its stated maturity or
such Contingent Obligation to become payable; or
(g) (i) The Borrower, any of its Subsidiaries or any
Other Obligor shall commence any case, proceeding or other action (A) under
any existing or future law of any jurisdiction, domestic or foreign, relating
to bankruptcy, insolvency, reorganization or relief of debtors, seeking to
have an order for relief entered with respect to it or seeking to adjudicate
it a bankrupt or insolvent, or seeking reorganization, arrangement,
adjustment, winding-up, liquidation, dissolution, composition or other relief
with respect to it or its debts, or (B) seeking appointment of a receiver,
trustee, custodian or other similar official for it or for all or any part of
its assets, or the Borrower, any of its Subsidiaries or any Other Obligor
shall make a general assignment for the benefit of its creditors, whether or
not any court assumes jurisdiction thereof; or (ii) there shall be commenced
against the Borrower, any of its Subsidiaries or any Other Obligor any case,
proceeding or other action of a nature referred to in clause (i) above; or
(iii) there shall be commenced against the Borrower, any of its Subsidiaries
or any Other Obligor any case, proceeding or other action seeking issuance of
a warrant of attachment, execution, distraint or similar process against all
or any part of its assets which results in the entry of an order for any such
relief; or (iv) the Borrower, any of its Subsidiaries or any Other Obligor
shall take any action in furtherance of, or indicating its consent to,
approval of, or acquiescence in, any of the acts set forth in clause (i), (ii)
For (iii) above; or (v) the Borrower, any of its Subsidiaries or any Other
Obligor shall be insolvent (as defined in Section 101(32) of the United States
Bankruptcy Code, or any successor legislation), or generally not able to, or
shall be unable to, or shall admit in writing its inability to, pay its debts
as they become due; or
(h) Dissolution or liquidation of, or the entry of any
unstayed judgment, order, award or decree for the dissolution or liquidation
of, the Borrower or any Other Obligor; or
(i) Injunction or restraint of the Borrower or any
Other Obligor in any manner from conducting its business in whole or in part
deemed material by the Lender in good faith; or
(j) Any material assets of the Borrower or any
Subsidiary of the Borrower shall be attached, levied upon, seized or
repossessed; or
(k) There shall occur any event or condition which the
Lender determines has or will have a Material Adverse Effect, whether or not
such event or condition otherwise constitutes an Event of Default; or
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<PAGE> 57
(l) (i) The Borrower or any Commonly Controlled Entity shall,
or, in the judgment of the Lender exercised in good faith, is likely to, incur
any liability in connection with a withdrawal from, or the Insolvency or
Reorganization of, a Multiemployer Plan, or (ii) any other event or condition
shall occur or exist, with respect to a Plan, and in each case in clauses (i)
and (ii) above, such event or condition, together with all other such events or
conditions, if any, could reasonably be expected, in the aggregate, to subject
the Borrower or any Other Obligor to any tax, penalty or other liabilities
deemed material by the Lender in good faith; or
(m) One or more judgments or decrees shall be entered against
the Borrower, any of its Subsidiaries or any Other Obligor involving in the
aggregate liabilities (not paid or fully covered by insurance) equal to or
exceeding One Hundred Thousand Dollars ($100,000.00) and all such judgments or
decrees shall not have been vacated, discharged or stayed pending appeal; or
(n) The Borrower, any of its Subsidiaries or any Other Obligor
shall be convicted of an offense (other than traffic violations) punishable
under any domestic or foreign criminal statute or law;
(o) There shall occur a Change of Control;
(p) The Borrower or any Borrower Institution, or any educational
program of any thereof, is Disqualified;
(q) The Borrower shall fail to enter into a written settlement
agreement (which the Borrower shall, upon execution, deliver to the Lender and
its counsel) with the DOED and the DOJ on or before January 19, 2001, with
respect to the Final Program Review Determination, acceptable to the Lender in
the Lender's sole and absolute discretion, or
(r) The DOED shall exercise at any time any setoff or
enforcement action against or with respect to the Borrower, relating to the
Final Program Review Determination.
then, and in any such event, (A) if such event is an Event of Default specified
in paragraph (h) or in clause (i) or (ii) of paragraph (g) above automatically
the Commitments shall immediately terminate and all of the Obligations (with
accrued interest thereon) shall immediately become due and payable, and (B) if
such event is any other Event of Default, either or both of the following
actions may be taken: (i) the Lender may by notice to the Borrower declare the
Commitments to be terminated forthwith, whereupon the Commitments shall
immediately terminate; and (ii) the Lender may, with or without notice to the
Borrower, declare all of the Obligations (with accrued interest thereon) to be
due and payable, whereupon the same shall immediately become due and payable.
Except as expressly provided above in this Agreement, presentment, demand,
protest and all other notices of any kind are hereby expressly waived.
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<PAGE> 58
SECTION 9. MISCELLANEOUS
9.1 Amendments and Waivers. Neither this Agreement, the Note or
any other Credit Document, nor any terms hereof or thereof may be amended,
modified, extended, renewed, supplemented or replaced except in accordance with
the provisions of this Subsection. The Lender and the Borrower may from time to
time enter into written amendments, modifications, extensions, renewals,
supplements or replacements for the purpose of amending, modifying, extending,
renewing, supplementing or replacing any provisions of this Agreement or the
other Credit Documents or changing in any manner the rights of the parties
hereunder or thereunder or waiving, on such terms and conditions as the Lender
may specify in such instrument, any of the requirements of this Agreement or the
other Credit Documents or any Default or Event of Default and its consequences.
In the case of any waiver, the Borrower and the Lender shall be restored to
their former positions and rights hereunder and under the Note, and any Default
or Event of Default waived shall be deemed to be cured; but no such waiver shall
extend to any subsequent or other Default or Event of Default, or impair any
right consequent thereupon.
9.2 More Restrictive Provisions. If the Borrower enters into or
becomes bound by any credit agreement, purchase agreement or other agreement,
document or instrument (but not including any statutory requirement or any
requirement imposed by regulatory authorities), or any amendment, modification,
supplement or restatement thereof, which requires the Borrower to comply with
any financial covenants which are in addition to or more restrictive (the
"Additional/More Restrictive Provisions") than the covenants contained in
Section 7, this Agreement shall be deemed to be automatically and immediately
amended to include such Additional/More Restrictive Provisions. If such credit
agreement, purchase agreement or other agreement or document which contains the
Additional/More Restrictive Provisions, or the Additional/More Restrictive
Provisions, are terminated and of no further force or effect, then any amendment
of this Agreement effected as a result of the provisions of this Subsection 9.2
shall be of no further force or effect and this Agreement shall be deemed to be
automatically and immediately amended to conform to the terms of this Agreement
prior to the amendment of this Agreement effected pursuant to this Subsection
9.2 as a result of such Additional/More Restrictive Provisions. If, after an
amendment of this Agreement effected pursuant to this Subsection 9.2 as a result
of Additional/More Restrictive Provisions, such Additional/More Restrictive
Provisions shall be amended or modified and the result of such amendment or
modification is to cause some or all of such Additional/More Restrictive
Provisions to be more restrictive or less restrictive, but in any event more
restrictive than the financial covenants contained in Section 7 prior to such
amendment of this Agreement, then this Agreement shall be deemed to be
automatically and immediately amended to conform to such Additional/More
Restrictive Provisions, as so amended or modified. Upon request of the Lender at
any time or from time to time, the Borrower shall promptly execute and deliver
to the Lender such amendments of this Agreement, and such other agreements,
instruments and documents, as the Lender may request to further memorialize
amendments of this Agreement pursuant to this Subsection 9.2.
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9.3 Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
facsimile transmission), and, shall be deemed to have been given when hand
delivered to the party to whom directed, or, if transmitted by facsimile
transmission or by mail whether or not registered or certified, when transmitted
by facsimile transmission or deposited in the mail postage prepaid,
respectively, addressed as follows (or to such other address as may be hereafter
notified by the respective parties hereto and any future holder of the Note):
The Borrower: 10021 Balls Ford Road
Manassas, Virginia 20109
Attention: Mark Nasser, Vice President
and Chief Financial Officer
Fax: (703) 352-4558
with a copy to: Shaw Pittman
1675 International Drive
McLean, Virginia 22102
Attention: Jack L. Lewis, Esquire
Fax: (703) 790-7901
The Lender: First Union National Bank
1970 Chain Bridge Road
7th Floor South - VA 1954
McLean, Virginia 22102
Attention: J. David Linthicum, Vice President
Fax: (703) 760-5549
with a copy to: Piper Marbury Rudnick & Wolfe LLP
6225 Smith Avenue
Baltimore, Maryland 21209-3600
Attention: David S. Musgrave, Esquire
Fax: (410) 580-3222
provided that any notice, request or demand to or upon the Lender pursuant to
Subsections 2.3, 2.7, 2.10, and 2.11 shall not be effective until received. No
failure of any party hereto to provide a copy of any notice, request or demand
to Shaw Pittman or Piper Marbury Rudnick & Wolfe LLP as provided above shall
impair in any way the effectiveness of any such notice, request or demand.
9.4 No Waiver; Cumulative Remedies. No failure to exercise and
no delay in exercising, on the part of the Lender, any right, remedy, power or
privilege hereunder or under the Credit Documents, shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, remedy, power or
privilege hereunder or thereunder preclude any other or further exercise thereof
or the exercise of any other right, remedy, power or privilege. The rights,
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<PAGE> 60
remedies, powers and privileges herein provided or provided in the other Credit
Documents are cumulative and not exclusive of any rights, remedies, powers and
privileges provided by law.
9.5 Survival of Representations and Warranties. All
representations and warranties made hereunder, in the other Credit Documents and
in any document, certificate or statement delivered pursuant hereto or in
connection herewith shall survive the execution and delivery of this Agreement
and the Note.
9.6 Payment of Expenses and Taxes. The Borrower agrees (a) to
pay or reimburse the Lender for all of its costs and expenses incurred in
connection with the development, preparation and execution of, and any
administration, amendment, modification, extension, renewal, supplement or
replacement of, this Agreement, the other Credit Documents and any other
documents prepared in connection herewith or therewith, and the consummation of
the transactions contemplated hereby and thereby, including, without limitation,
the fees and disbursements of counsel to the Lender, (b) to pay or reimburse the
Lender for all of its costs and expenses incurred in connection with the legal
interpretation, enforcement or preservation of any rights under this Agreement,
the other Credit Documents and any such other documents, including, without
limitation, the fees and disbursements of counsel to the Lender, (c) to pay,
indemnify and hold the Lender harmless from, any and all recording and filing
fees and any and all liabilities with respect to, or resulting from any delay in
paying, stamp, excise and other taxes, if any, which may be payable or
determined to be payable in connection with the execution and delivery of, or
consummation of any of the transactions contemplated by, or any amendment,
modification, extension, renewal, supplement or replacement of, or any waiver or
consent under or in respect of, this Agreement, the other Credit Documents and
any such other documents, and (d) to pay, indemnify and hold the Lender harmless
from, any and all other liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of this Agreement, the other Credit Documents and
any such other documents (all of the foregoing, collectively, the "indemnified
liabilities"); provided that the Borrower shall have no obligation hereunder to
the Lender with respect to indemnified liabilities arising from (i) the gross
negligence or willful misconduct of the Lender, or (ii) legal proceedings
commenced against the Lender by any security holder or creditor thereof arising
out of and based upon rights afforded any such security holder or creditor
solely in its capacity as such. The agreements in this Subsection shall survive
the termination of this Agreement and payment of the Note for a period of 2
years. The Borrower authorizes the Lender to debit from the Operating Account
all such payments or reimbursements which the Borrower is required to make under
this Subsection 9.6.
9.7 Further Assurances, Power of Attorney. The Borrower agrees
promptly to do, make, execute and deliver all such additional and further acts,
things, deeds, assurances, instruments and documents as the Lender may
reasonably request to vest in and assure to the Lender its rights under this
Agreement or any of the other Credit Documents. Borrower hereby appoints Lender
and its designees as attorney-in-fact of Borrower, irrevocably and with power of
substitution, with authority to execute and
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<PAGE> 61
deliver from time to time, in the name and stead of the Borrower, all documents
which Borrower is required to, but has failed or refused to, execute and deliver
to Lender pursuant to this Agreement or any of the Credit Documents, and with
authority to take all of the actions from time to time on behalf of the
Borrower, and in the name and stead of the Borrower, which Lender is authorized
to take under this Agreement and the Credit Documents or which Lender in its
good faith discretion deems necessary or advisable to cause Borrower to be in
compliance with any of the terms of this Agreement or any of the Credit
Documents or to carry out and enforce this Agreement and the Credit Documents.
The attorney or designee shall not be liable for any acts of commission or
omission nor for any error of judgment or mistake of fact or law which does not
arise from its gross negligence or willful misconduct. This power of attorney is
coupled with an interest and is irrevocable so long as any of the Obligations
remain unpaid or unperformed or there exists any commitment by the Lender which
could give rise to any Obligations.
9.8 Unenforceability. If any term, provision or condition, or
any part thereof, of this Agreement or any of the other Credit Documents shall
for any reason be found or held invalid or unenforceable by any court or
Governmental Authority, such invalidity or unenforceability shall not affect the
remainder of such term, provision or condition, nor any other term, provision or
condition, and this Agreement and the other Credit Documents shall survive and
be construed as if such invalid or unenforceable term, provision or condition
had not been contained herein or therein; provided, however, that if any rate of
interest provided under this Agreement or any of the other Credit Documents does
or shall exceed the maximum interest rate permitted by law, then such rate of
interest shall immediately be deemed to be reduced to such maximum rate and all
previous payments of interest in excess of the maximum rate shall be deemed to
have been payments in reduction of principal and not of interest.
9.9 Indemnification Concerning Fees. The Borrower agrees to
indemnify, protect and defend the Lender, and save the Lender harmless, from and
against any and all claims, demands, damages, losses, liabilities, obligations,
penalties, litigation, judgments, suits, actions, proceedings, costs and
expenses (including, without limitation, counsel fees and expenses) of any kind
or nature whatsoever which may at any time be imposed upon, paid or incurred by
or asserted or awarded against the Lender relating to, resulting from or arising
out of any broker's or finder's fee or commission which the Lender did not
directly contract to pay.
9.10 Waiver of Trial by Jury. Each of the Borrower and the Lender
agrees that any action, suit or proceeding involving any claim, counterclaim or
cross-claim arising out of or in any way relating, directly or indirectly, to
this Agreement or any of the other Credit Documents, or any liabilities, rights
or interests of the Borrower, the Lender or any other Person arising out of or
in any way relating, directly or indirectly, to any of the foregoing, shall be
tried by a court and not by a jury. Each of the Borrower and the Lender hereby
waives any right to trial by jury in any such action, suit or proceeding, with
the understanding and agreement that this waiver constitutes a waiver of trial
by jury of all claims, counterclaims and cross-claims against all parties to
such actions, suits or proceedings, including claims, counterclaims and
cross-claims against parties who are not parties to this Agreement or the other
Credit Documents. This waiver is knowingly, willingly and voluntarily made by
each of the parties hereto, and each of the parties hereto acknowledges and
agrees that this waiver of trial by jury is a material aspect
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<PAGE> 62
of the agreements among them and that no representations of fact or opinion have
been made by any Person to induce this waiver of trial by jury or to modify,
limit or nullify its effect.
9.11 Additional Waivers. The Borrower hereby waives, to the
extent the same may be waived under applicable law: (a) notice of acceptance of
this Agreement or any of the other Credit Documents by any other party hereto;
and (b) all claims and causes of action of the Borrower against the Lender for
punitive, exemplary, consequential, special or other indirect or
non-compensatory damages.
9.12 Successors and Assigns; Transfers of Interests.
(a) This Agreement shall be binding upon and inure to the
benefit of the Borrower, the Lender, all future holders of the Note and their
respective successors and assigns, except that the Borrower may not assign or
transfer any of its rights or obligations under this Agreement without the prior
written consent of the Lender.
(b) The Lender may at any time, in its discretion,
assign, transfer or pledge to any Person, or grant to any Person a security
interest in, this Agreement, any of the other Credit Documents or any of its
rights hereunder or thereunder. In addition, the Lender may sell, in such
amounts, upon such terms and to such Persons as the Lender may determine,
participation in its interests under this Agreement or any of the other Credit
Documents. In the case of each such assignment, transfer, pledge, grant or sale
(i) the Lender may from time to time provide to the assignee, transferee,
pledgee, secured party or participant, any information and documents (or copies
thereof) relating to this Agreement and the other Credit Documents and related
transactions, and relating to the business, assets, operations, business
prospects or financial condition of the Borrower, Subsidiaries of the Borrower
and Other Obligors, and (ii) subject to Requirements of Law, the Lender agrees
to continue to administer this Agreement and the other Credit Documents subject
to compensation of the Lender by such assignees, transferees, pledgees, secured
parties or participants.
9.13 Counterparts. This Agreement may be executed by one or more
of the parties to this Agreement on any number of separate counterparts and all
of said counterparts taken together shall be deemed to constitute one and the
same instrument.
9.14 Governing Law. This Agreement, the Note and the other Credit
Documents, and the rights and obligations of the parties hereunder and
thereunder, shall be governed by and construed and interpreted in accordance
with the internal laws of the Commonwealth of Virginia, exclusive of principles
of conflicts of laws.
9.15 Submission To Jurisdiction. The Borrower hereby irrevocably
and unconditionally:
(a) submits for itself and its property in any legal
action or proceeding relating to this Agreement or any of the other Credit
Documents, or for recognition and enforcement of any judgment in respect
thereof, to the non-exclusive general jurisdiction of the
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<PAGE> 63
United States District Court for the Eastern District of Virginia or the
Circuit Court of Fairfax County, Virginia;
(b) consents that any such action or proceeding may be
brought in such courts, and waives any objection that it may now or hereafter
have to the venue of any such action or proceeding in any such court or that
such action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or certified
mail (or any substantially similar form of mail), postage prepaid, to the
Borrower at its address set forth in Subsection 9.3 or at such other address of
which the Lender shall have been notified pursuant thereto; and
(d) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or shall limit
the right to sue in any other jurisdiction.
9.16 Release. The Borrower releases and forever waives and
relinquishes all claims, demands, obligations, liabilities and causes of action
of whatsoever kind or nature, whether known or unknown, which it has, may have,
or might have or assert now or in the future against the Lender and its
directors, officers, employees, attorneys, agents, successors, predecessors and
assigns and any Affiliates, Subsidiaries or related entities of the Lender and
their directors, officers, employees, attorneys, agents, successors,
predecessors and assigns, directly or indirectly, arising out of, based upon, or
in any manner connected with any transaction, event, circumstance, action,
failure to act, or occurrence of any sort or type, whether known or unknown,
which occurred, existed, was taken, permitted, or begun before the execution of
this Agreement.
9.17 Consent to Relief from Stay. The Borrower acknowledges and
agrees that if the Collateral or any part thereof shall ever become the subject
of any bankruptcy or insolvency estate, then the Lender shall immediately become
entitled, among other relief to which the Lender may be entitled, to obtain upon
ex parte application therefor and without further notice of action of any kind,
(i) an order from the court prohibiting the use by the trustee in bankruptcy or
by the Borrower as debtor in possession of the Lender's "cash collateral" (as
such term is defined in Section 363 of the Bankruptcy Code) in connection with
the Loan, and (ii) an order from the Court granting immediate relief from the
automatic stay pursuant to Section 362 of the Bankruptcy Code so as to permit
the Lender to exercise all of its rights and remedies hereunder, under the other
Loan Documents and at law and in equity, and the Borrower further acknowledges
and agrees that the occurrence or existence of any Event of Default under this
Agreement shall, in and of itself, constitute "cause" for relief from the
automatic stay pursuant to the provisions of Section 362(d)(1) of the Bankruptcy
Code.
9.18 Other Bankruptcy Relief. The Borrower acknowledges and
agrees that in the event of the filing of any voluntary or involuntary petition
in bankruptcy by or against the Borrower, the Borrower shall not assert or
request any other party to assert that the automatic
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<PAGE> 64
stay provided by Section 362 of the Bankruptcy Code shall operate or be
interpreted to stay, interdict, condition, reduce, or inhibit the ability of the
Lender to enforce any rights it has by virtue of this Agreement or the other
Loan Documents, or any other rights the Lender has, whether now or hereafter
acquired, against any person or entity which is not a debtor in such bankruptcy
proceedings or against any property owned by any such non-debtor; and further
that, in the event of the filing of any voluntary or involuntary petition in
bankruptcy by or against the Borrower, the Borrower shall not seek a
supplemental stay or any other relief, whether injunctive or otherwise, pursuant
to Section 105 of the Bankruptcy Code or any other provision of the Bankruptcy
Code, to stay, interdict, condition, reduce, or inhibit the ability of the
Lender to enforce any rights it has by virtue of this Agreement or the other
Loan Documents, or at law or in equity, or any other rights the Lender has,
whether now or hereafter acquired, against any person or entity which is not a
debtor in such bankruptcy proceedings, or against any property owned by any such
non-debtor.
9.19 Forbearance by Lender. Subject to compliance with each and
every closing condition set forth in Section 5, the Lender agrees to forbear
from the exercise of its rights and remedies under the Credit Documents until
the earlier to occur of (a) January 19, 2001 or (b) the execution of the
settlement agreement described in Section 8(q).
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed under seal and delivered by their proper and duly authorized
officers as of the day and year first above written.
<TABLE>
<CAPTION>
<S> <C>
ATTEST/WITNESS: COMPUTER LEARNING CENTERS,
INC.
[SIG] By: /s/ JOHN CORSE (SEAL)
------------------------------- ---------------------------------
John Corse, President and Chief
Executive Officer
FIRST UNION NATIONAL BANK
By: (SEAL)
------------------------------- --------------------------------
J. David Linthicum, Vice President
</TABLE>
59
<PAGE> 65
Schedule I
to Credit Agreement
BORROWER BUSINESS PREMISES
222 South Harbor Boulevard
Anaheim, CA 92805
3580 Wilshire Boulevard
Suite 100
Los Angeles, CA 90010
667 Mission Street
San Francisco, CA 94105
111 North Market Street
Suite 105
San Jose, CA 95113
2359 Windy Hill Road #280
Marietta, GA 30076
200 South Michigan Avenue
Chicago, IL 60604
920 East Algonquin Road, #110
Schaumberg, IL 60173
312 Marshall Avenue
Laurel, MD 20707
211 South Plain Street
Lowell, MA 01852
5 Middlesex Avenue
Somerville, MA 02145
32500 Concord Drive
Madison Heights, MI 48071
The Plaza
2290 Corporate Circle, Suite 100
Henderson, NV 89014
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<PAGE> 66
2 Executive Campus #200
Cherry Hill, NJ 08002
160 East Route 4
Paramus, NJ 07652
50 Cragwood Road
1st Floor
South Plainfield, NJ 07080
3031-A Walton Road
Suite 301
Norristown, PA 19401
3600 Market Street
Philadelphia, PA 19104
Appletree Corporate Center
2180 Hornig Road, Building A
Philadelphia, PA 19116
777 Penn Center Boulevard
3rd Floor
Pittsburgh, PA 15235
One Plymouth Meeting
Suite 300
Plymouth Meeting, PA 19462
1500 Eastgate Drive
Suite 200
Garland, TX 75041
3030 South Gessner
Suite 150
Houston, TX 77063
301 NE Loop 820
Hurst, TX 76053
61
<PAGE> 67
6295 Edsall Road
Suite 210
Alexandria, VA 22312
5675 Jimmy Carter Boulevard
Suite 100
Norcross, Georgia 30071
10021 Balls Ford Road
Manassas, Virginia 20109
62
<PAGE> 68
Schedule 4.6
to Credit Agreement
On May 5, 1998, a class action lawsuit was filed against the Borrower in the
Superior Court of New Jersey in Bergen County, New Jersey. The complaint
alleges, among other things, that the Borrower, at its Learning Centers located
in the State of New Jersey, failed to provide certain educational services and
resources, misrepresented certain information respecting services, resources,
occupational opportunities and student outcomes and violated certain provisions
of the New Jersey Consumer Fraud Act. On November 19, 1999, the court certified
a class consisting of all persons who, during the six years immediately
preceding the commencement of this action, had enrolled in a course or courses
of study, education or training provided by the Borrower at its New Jersey
locations for which they incurred tuition expenses. On December 6, 1999, the
Borrower filed a motion with the Appellate Division of the Superior Court of New
Jersey to appeal the November 19, 1999 decision to certify a class. On January
19, 2000, that motion was denied. The Borrower is unable to estimate the outcome
of the matter or any potential liability.
On July 9, 1999, a class action lawsuit was filed against the Borrower in the
Court of Common Pleas in Philadelphia County, Pennsylvania, on behalf of all
students who attended the Learning Center located on Market Street in
Philadelphia within four years of July 9, 1999, who have not obtained employment
in a computer-related job through the Borrower's placement services. The
complaint alleges, among other things, that this Learning Center failed to
provide certain educational services and resources, misrepresented certain
information respecting services, resources, occupational opportunities and
student outcomes, and violated certain provisions of the Pennsylvania Unfair
Trade Practices and Consumer Protection Law. The Borrower is unable to estimate
the outcome of the matter or any potential liability.
Between June 1, 1998 and October 31, 1999, the Borrower was named as
defendant in four other lawsuits in Texas and New Jersey by individual students
or groups of students who formerly attended one of its Learning Centers. The
June 1, 1998 lawsuit has been settled. In two of the remaining lawsuits, various
present or former officers, directors and employees of the Borrower were also
named as defendants. In May of 2000, the officers and directors were dismissed
as defendants in these two lawsuits; however, those decisions have been
appealed. The complaints allege, among other things, that the Borrower, at the
affected Learning Centers, failed to provide plaintiffs with certain educational
services and resources and misrepresented certain information respecting
services, resources, and student outcomes and violated certain provisions of the
applicable state consumer laws. The Borrower is unable to estimate the outcome
of these matters or any potential liability.
In December 1999, the Borrower received a subpoena from the Office of
Inspector General of the Department of Education for the production of various
documents and
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<PAGE> 69
materials related to the compensation of its admissions representatives and the
calculation of its student loan cohort default rates. The Office of Inspector
General also served subpoenas on the accounting firm that had audited the
Borrower's financial statements and the accounting firm that had performed the
Borrower's Title IV Program compliance audits, for copies of certain of their
audits, work papers and other materials prepared in the course of their work on
the Borrower's behalf. In discussion with the responsible attorney at the U.S.
Department of Justice in December 1999 regarding the December subpoena, the
Borrower's attorney determined that the subpoena was issued with respect to a
qui tam lawsuit filed against the Borrower in Federal District Court in Texas
alleging that the Borrower's compensation of certain employees was not in
compliance with provisions of Title IV of the Higher Education Act. In July
2000, the Borrower received a second subpoena from the Office of Inspector
General seeking certain additional information. The Borrower has responded to
both subpoenas. The Borrower's management believes that the compensation plans
are in compliance with the Higher Education Act.
In addition to the lawsuits discussed above, the Borrower is a defendant in a
number of civil lawsuits involving current and former employees and other third
parties, which the Borrower considers incidental to its business and unlikely to
have a material effect on the Borrower's future operations. However, there can
be no assurance that these matters will not have a severe impact on the results
of operations of the Borrower in a future period, depending in part on the
results for such period.
The Borrower intends to defend itself vigorously in the lawsuits referred to
above; however, there can be no assurance that the Borrower will be successful
in defending itself in any of these proceedings. Even if the Borrower prevails
on the merits in such litigation, the Borrower has incurred and expects to
continue to incur significant legal and other defense costs as a result of such
proceedings. These proceedings have involved and could continue to involve
substantial diversion of the time of some members of management. An adverse
determination in, or settlement of, such litigation could involve payment of
significant amounts, or could include terms in addition to such payments, or
could lead to other adverse consequences, including the suspension or
termination of the Borrower's licenses to operate within the respective state,
which would have a severe impact on the Borrower's business, financial condition
and results of operations.
64
<PAGE> 70
Schedule 4.11
to Credit Agreement
ENVIRONMENTAL MATTERS
NONE
65
<PAGE> 71
Schedule 7.3
to Credit Agreement
PERMITTED LIENS
NONE
66
<PAGE> 72
EXHIBIT A
to Credit Agreement
OFFICER DEFAULT CERTIFICATE
I, _____________________, pursuant to the Third Amended and
Restated Credit Agreement (the "Credit Agreement") dated December 15, 2000,
between COMPUTER LEARNING CENTERS, INC., a Delaware corporation ("Borrower"),
and FIRST UNION NATIONAL BANK, as successor-by-merger to CORESTATES BANK, N.A.
("Lender"), hereby certify to Lender that:
1. I am the chief financial officer of Borrower.
2. I have conducted a diligent inquiry concerning whether, as of
____________________ _____, there existed any Default (as defined in the Credit
Agreement) or any Event of Default (as defined in the Credit Agreement).
3. Based upon such inquiry, to my actual knowledge and belief, as
of such date, [there existed no Default (as defined in the Credit Agreement) or
Event of Default (as defined in the Credit Agreement).] [the following
Default[s] (as defined in the Credit Agreement) and Event[s] of Default (as
defined in the Credit Agreement) existed and the relevant facts with respect
thereto are as follows:]
WITNESS my signature of this day of , .
------ ---------------- -----
----------------------------
Name:
Title:
67
<PAGE> 73
EXHIBIT B
to Credit Agreement
OFFICER FINANCIAL COVENANT CERTIFICATE
I, ______________________, pursuant to the Third Amended and Restated
Credit Agreement (the "Credit Agreement") dated December 15, 2000, between
COMPUTER LEARNING CENTERS, INC., a Delaware corporation ("Borrower"), and FIRST
UNION NATIONAL BANK, successor-by-merger to CORESTATES BANK, N.A. ("Lender"),
hereby certify to Lender, that:
1. I am the chief financial officer of Borrower.
2. As of __________________, ____ (all capitalized terms used
hereinafter without definition having the meanings assigned to such terms in the
Credit Agreement):
(a) TANGIBLE NET WORTH FOR Q_____ EQUALED $ ___________
<TABLE>
<S> <C> <C> <C> <C>
Q ____ Q _____ Q _____ Q _____
(i) Total Assets $______ $______ $______ $______
(ii) Less Intangible Assets ($______) ($______) ($______) ($______)
(iii)Equals Tangible Assets $______ $______ $______ $______
(iv) Total Liabilities $______ $______ $______ $______
(iv) Tangible Net Worth $______ $______ $______ $______
</TABLE>
(b) FIXED CHARGE COVERAGE RATIO FOR 12 MONTH ROLLING PERIOD EQUALED
________ TO 1.00
<TABLE>
<S> <C> <C> <C> <C> <C>
Q ____ Q ____ Q ____ Q ____ 12 Mo. Rolling
(i) Net Income before tax
for the quarterly periods ended $______ $______ $______ $______ $________
(ii) Depreciation, amortization $______ $______ $______ $______ $________
(iii)Other non-cash charges deducted
in determining such net income $______ $______ $______ $______ $________
</TABLE>
68
<PAGE> 74
<TABLE>
<S> <C> <C> <C> <C> <C>
(iv) Interest Expense for period $______ $______ $______ $______ $________
(v) Payments under Operating Leases
during the periods then ended $______ $______ $______ $______ $________
(vi) Less 50% of Capital Expenditures
during the periods then ended ($______) ($______) ($______) ($______) ($________)
(vii) ADJUSTED NET INCOME (NUMERATOR) $______ $______ $______ $______ $________
(viii) Payments under Operating Leases
during the periods then ended $______ $______ $______ $______ $________
(ix) Interest Expense for period $______ $______ $______ $______ $________
(x) Current portion of Long-Term
Debt for then ended periods $______ $______ $______ $______ $________
(xi) FIXED CHARGES (DENOMINATOR) $______ $______ $______ $______ $________
</TABLE>
WITNESS my signature of this day of ,
------ ----------------- -----
------------------------
Name:
Title:
69
<PAGE> 75
EXHIBIT C
to Credit Agreement
Sweep Plus Loan and Investment Services Description
Sweep Plus Loan and Investment Services Agreement
70
<PAGE> 76
EXHIBIT D
to Credit Agreement
BORROWING CERTIFICATE
This Certificate is made pursuant to Subsection 5.1(d) of the Third Amended and
Restated Credit Agreement dated December 15, 2000 (the "Credit Agreement")
between COMPUTER LEARNING CENTERS, INC., a Delaware corporation (the
"Borrower"), and FIRST UNION NATIONAL BANK, as successor-by-merger to CORESTATES
BANK, N.A. Capitalized terms used herein without definition shall have the
meanings assigned to such terms in the Credit Agreement. The undersigned hereby
certifies that, to his actual knowledge and belief:
1. The representations and warranties of the Borrower set forth
in the Credit Agreement and the other Credit Documents, or which are
contained in any certificate, document or financial or other statement
furnished pursuant to or in connection with the Credit Agreement, are
true and complete in all material respects on and as of the date hereof;
2. There are no bankruptcy, insolvency, reorganization,
liquidation or dissolution proceedings pending or, to my knowledge,
threatened against the Borrower, nor has any other event occurred
affecting or threatening the existence of the Borrower; and
3. As of the date of this Agreement, no Default or Event of
Default exists.
IN WITNESS WHEREOF, the undersigned has hereunto set his name as
of the day of
----- ------------------, ---------.
-----------------------------------
Name: Mark Nasser
Title: Vice President and Chief Financial
Officer
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<PAGE> 77
__________OF__________ _________________________, SS:
I HEREBY CERTIFY that on this _____________ day of
________________ 2000, before me, the undersigned, a Notary Public of said
State, personally appeared ___________________________, who acknowledged
himself to be the ______________ of Computer Learning Centers, Inc., and that
he, as such, being authorized so to do, executed the foregoing instrument on
behalf of the said Computer Learning Centers, Inc., for the purposes therein
contained.
WITNESS my hand and Notarial Seal.
---------------------------------
Notary Public
My Commission expires:
----------------------
72
<PAGE> 78
EXHIBIT E
to Credit Agreement
FORM OF PROJECTIONS
73
<PAGE> 79
EXHIBIT F
to Credit Agreement
BORROWING BASE CERTIFICATE
74
