EXHIBIT 10.5
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CREDIT AGREEMENT
dated as of March 25, 1999
by and among
EDUTREK INTERNATIONAL, INC.,
as Borrower,
and
FIRST UNION NATIONAL BANK
as Lender
TABLE OF CONTENTS
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ARTICLE 1 DEFINITION............................................................................................ 1
SECTION 1.1 Definitions................................................................................ 1
SECTION 1.2 General.................................................................................... 12
SECTION 1.3 Other Definitions and Provisions........................................................... 13
ARTICLE 2 REVOLVING CREDIT FACILITY............................................................................. 13
SECTION 2.1 Revolving Credit Loans..................................................................... 13
SECTION 2.2 Procedure for Advances of Loans............................................................ 13
SECTION 2.3 Repayment of Loans......................................................................... 14
SECTION 2.4 Note....................................................................................... 14
SECTION 2.5 Permanent Reduction of the Commitment..................................................... 14
SECTION 2.6 Use of Proceeds............................................................................ 14
ARTICLE 3 LETTER OF CREDIT FACILITY............................................................................. 15
SECTION 3.1 L/C Commitment............................................................................. 15
SECTION 3.2 Procedure for Issuance of Letters of Credit................................................ 15
SECTION 3.3 Commissions and Other Charges.............................................................. 15
SECTION 3.4 Reimbursement Obligation of the Borrower................................................... 16
SECTION 3.5 Obligations Absolute....................................................................... 16
SECTION 3.6 Effect of Application...................................................................... 17
ARTICLE 4 GENERAL LOAN PROVISIONS............................................................................... 17
SECTION 4.1 Interest................................................................................... 17
SECTION 4.2 Fees....................................................................................... 18
SECTION 4.3 Manner of Payment.......................................................................... 18
SECTION 4.4 Crediting of Payments and Proceeds......................................................... 18
SECTION 4.5 Changed Circumstances...................................................................... 19
SECTION 4.6 Capital Requirements....................................................................... 19
SECTION 4.7 Taxes...................................................................................... 20
ARTICLE 5 CLOSING; CONDITIONS OF CLOSING AND BORROWING.......................................................... 21
SECTION 5.1 Closing.................................................................................... 21
SECTION 5.2 Conditions to Closing and Initial Extensions of Credit..................................... 21
SECTION 5.3 Conditions to All Loans and Letters of Credit.............................................. 23
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF THE BORROWER........................................................ 24
SECTION 6.1 Representations and Warranties............................................................. 24
SECTION 6.2 Survival of Representations and Warranties Etc............................................. 30
ARTICLE 7 FINANCIAL INFORMATION AND NOTICES..................................................................... 31
SECTION 7.1 Financial Statements and Projections........................................................31
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SECTION 7.2 Officer's Compliance Certificate........................................................... 32
SECTION 7.3 Accountants' Certificate................................................................... 32
SECTION 7.4 Other Reports.............................................................................. 32
SECTION 7.5 Notice of Litigation and Other Matters..................................................... 32
SECTION 7.6 Accuracy of Information.................................................................... 33
ARTICLE 8 AFFIRMATIVE COVENANTS................................................................................. 34
SECTION 8.1 Preservation of Corporate Existence and Related Matters.................................... 34
SECTION 8.2 Maintenance of Property.................................................................... 34
SECTION 8.3 Insurance.................................................................................. 34
SECTION 8.4 Accounting Methods and Financial Records................................................... 34
SECTION 8.5 Payment and Performance of Obligations..................................................... 34
SECTION 8.6 Compliance With Laws and Approvals......................................................... 35
SECTION 8.7 Environmental Laws......................................................................... 35
SECTION 8.8 Compliance with ERISA...................................................................... 35
SECTION 8.9 Compliance With Agreements................................................................. 35
SECTION 8.10 Conduct of Business....................................................................... 35
SECTION 8.11 Visits and Inspections.................................................................... 35
SECTION 8.12 Additional Guarantors..................................................................... 36
SECTION 8.13 Year 2000 Compliance...................................................................... 36
SECTION 8.14 Further Assurances........................................................................ 36
ARTICLE 9 FINANCIAL COVENANTS................................................................................... 36
SECTION 9.1. Net Worth................................................................................. 36
SECTION 9.2. Fixed Charge Coverage Ratio............................................................... 37
SECTION 9.3. Leverage Ratio............................................................................ 37
SECTION 9.4. Rent Expense Ratio........................................................................ 37
SECTION 9.5. Ratio of Actual to Budgeted Revenues...................................................... 37
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SECTION 9.6. Quarterly Rent Expense Ratio.............................................................. 37
ARTICLE 10 NEGATIVE COVENANTS................................................................................... 37
SECTION 10.1 Limitations on Debt....................................................................... 37
SECTION 10.2 Limitations on Liens...................................................................... 38
SECTION 10.3 Limitations on Loans. Advances. Investments and Acquisitions.............................. 39
SECTION 10.4 Limitations on Mergers and Liquidation.................................................... 39
SECTION 10.5 Limitations on Sale of Assets............................................................. 40
SECTION 10.6 Limitations on Dividends and Distributions................................................ 40
SECTION 10.7 Limitations on Exchange and Issuance of Capital Stock..................................... 40
SECTION 10.8 Transactions with Affiliates.............................................................. 41
SECTION 10.9 Certain Accounting Changes................................................................ 41
SECTION 10.10 Restrictive Agreements................................................................... 41
SECTION 10.11 Flight Enterprises....................................................................... 41
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ARTICLE 11 DEFAULT AND REMEDIES................................................................................ 41
SECTION 11.1 Events of Default........................................................................ 41
SECTION 11.2 Remedies................................................................................. 43
SECTION 11.3 Rights and Remedies Cumulative; Non-Waiver; etc.......................................... 44
ARTICLE 12 MISCELLANEOUS....................................................................................... 45
SECTION 12.1 Notices.................................................................................. 45
SECTION 12.2 Expenses; Indemnity...................................................................... 46
SECTION 12.3 Set-off.................................................................................. 46
SECTION 12.4 Governing Law............................................................................ 47
SECTION 12.5 Consent to Jurisdiction.................................................................. 47
SECTION 12.6 Binding Arbitration: Waiver of Jury Trial................................................ 47
SECTION 12.7 Reversal of Payments..................................................................... 48
SECTION 12.8 Injunctive Relief; Punitive Damages...................................................... 48
SECTION 12.9 Accounting Matters....................................................................... 49
SECTION 12.10 Successors and Assigns: Confidentiality................................................. 49
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SECTION 12.11 Amendments, Waivers and Consents........................................................ 49
SECTION 12.12 Performance of Duties................................................................... 50
SECTION 12.13 All Powers Coupled with Interest........................................................ 50
SECTION 12.14 Survival of Indemnities................................................................. 50
SECTION 12.15 Titles and Captions..................................................................... 50
SECTION 12.16 Severability of Provisions.............................................................. 50
SECTION 12.17 Counterparts............................................................................ 50
SECTION 12.18 Term of Agreement....................................................................... 50
EXHIBITS
Exhibit A - Form of Note
Exhibit B - Form of Notice of Borrowing
Exhibit C - Form of Notice of Account Designation
Exhibit D - Form of Notice of Prepayment
Exhibit E - Form of Officer's Certificate
SCHEDULES
Schedule 6.1(a) - Jurisdictions of Organization and Qualification
Schedule 6.1(b) - Subsidiaries and Capitalization
Schedule 6.1(f) - Taxes
Schedule 6.1(g) - Intellectual Property
Schedule 6.1(i) - ERISA Plans
Schedule 6.1(l) - Material Contracts
Schedule 6.1(m) - Labor and Collective Bargaining Agreements
Schedule 6.1(u) - Debt and Contingent Obligations
Schedule 6.1(v) - Litigation
Schedule 9.5 - Budget
Schedule 10.2 - Existing Liens
Schedule 10.3 - Existing Loans, Advances and Investments
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CREDIT AGREEMENT
CREDIT AGREEMENT, dated as of the 25/th/ day of March, 1999, by and among
EDUTREK INTERNATIONAL, INC., a corporation organized under the laws of Georgia
(the "Borrower") and FIRST UNION NATIONAL BANK, as the lender (the "Lender").
STATEMENT OF PURPOSE
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The Borrower has requested, and the Lender has agreed, to extend a
revolving credit facility to the Borrower on the terms and conditions of this
Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, such parties
hereby agree as follows:
ARTICLE 1.
DEFINITIONS
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SECTION 1.1 Definitions. The following terms when used in this
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Agreement shall have the meanings assigned to them below:
"Adjusted Funded Debt" means the sum of (a) principal amount of Funded Debt
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outstanding on such date plus (b) the product of (i) Scheduled Real Property
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Rental Expense payable during the twelve (12) month period commencing with the
first day of the month in which calculation date falls multiplied by (ii) six
(6).
"Affiliate" means, with respect to any Person, any other Person (other than
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a Subsidiary) which directly or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, such first
Person or any of its Subsidiaries. The term "control" means (a) the power to
vote five percent (5%) or more of the securities or other equity interests of a
Person having ordinary voting power, or (b) the possession, directly or
indirectly, of any other power to direct or cause the direction of the
management and policies of a Person, whether through ownership of voting
securities, by contract or otherwise.
"Agreement" means this Credit Agreement, as amended or modified from time
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to time.
"Applicable Law" means all applicable provisions of constitutions,
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statutes, laws, rules, treaties, regulations and orders of all Governmental
Authorities and all orders and decrees of all courts and arbitrators.
"Application" means an application, in the form specified by the Lender
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from time to time, requesting the Lender to issue a Letter of Credit.
"Available Commitment" means at any time, an amount equal to the excess, if
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any, of (a) the Commitment over (b) the sum of (i) the outstanding principal
amount of the Loans plus (ii) the outstanding principal or face amount of the
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L/C Obligations.
"Base Rate" means, at any time, the higher of (a) the Prime Rate or (b) the
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Federal Funds Rate plus 1/2 of 1%; each change in the Base Rate shall take
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effect simultaneously with the corresponding change or changes in the Prime Rate
or the Federal Funds Rate.
"Base Rate Loan" means any Loan bearing interest at a rate based upon the
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Base Rate as provided in Section 4.1(a).
"Business Day" means (a) for all purposes other than as set forth in clause
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(b) below, any day other than a Saturday, Sunday or legal holiday on which banks
in Atlanta, Georgia and New York, New York, are open for the conduct of their
commercial banking business, and (b) with respect to all notices and
determinations in connection with, and payments of principal and interest on,
any LIBOR Rate Loan, any day that is a Business Day described in clause (a) and
that is also a day for trading by and between banks in Dollar deposits in the
London interbank market.
"Capital Asset" means, with respect to the Borrower and its Subsidiaries,
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any asset that should, in accordance with GAAP, be classified and accounted for
as a capital asset on a consolidated balance sheet of the Borrower and its
Subsidiaries.
"Capital Lease" means, with respect to the Borrower and its Subsidiaries,
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any lease of any property that should, in accordance with GAAP, be classified
and accounted for as a capital lease on a consolidated balance sheet of the
Borrower and its Subsidiaries.
"Capital Stock" means (a) in the case of a corporation, corporate stock;
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(b) in the case of an association or business entity, any and all shares,
interest, participations, rights or other equivalents (however designated) of
equity interests; (c) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited); (d) any other
interest or participation that confers on a Person the right to receive a share
of the profits and losses of, or distributions of assets of, the issuing Person;
and (e) any securities convertible into or exchangeable for any of the foregoing
or any warrants, rights or options to acquire any of the foregoing.
"Closing Date" means the date of this Agreement or such later Business Day
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upon which each condition described in Article 5 shall be satisfied or waived in
all respects in a manner acceptable to the Lender, in its sole discretion.
"Code" means the Internal Revenue Code of 1986, and the rules and
----
regulations thereunder, each as amended or supplemented from time to time.
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"Commitment" means the obligation of the Lender to make Loans to, or to
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issue Letters of Credit for the account of, the Borrower hereunder in an
aggregate principal at any time outstanding not to exceed $10,000,000, as the
same may be reduced or modified at any time or from time to time pursuant to the
terms hereof.
"Contingent Obligation" means, with respect to the Borrower and its
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Subsidiaries, without duplication, any obligation, contingent or otherwise, of
any such Person pursuant to which such Person has directly or indirectly
guaranteed any Debt or other obligation of any other Person and, without
limiting the generality of the foregoing, any obligation, direct or indirect,
contingent or otherwise, of any such Person (a) to purchase or pay (or advance
or supply funds for the purchase or payment of) such Debt or other obligation
(whether arising by virtue of partnership arrangements, by agreement to keep
well, to purchase assets, goods, securities or services, to take-or-pay, or to
maintain financial statement condition or otherwise) or (b) entered into for the
purpose of assuring in any other manner the obligee of such Debt or other
obligation of the payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part); provided, that the term Contingent
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Obligation shall not include endorsements for collection or deposit in the
ordinary course of business.
"Credit Facility" means the revolving credit facility established pursuant
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to Article 2 hereof and the and the letter of credit facility established
pursuant to Article 3 hereof.
"Debt" means, with respect to the Borrower and its Subsidiaries at any date
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and without duplication, the sum of the following calculated in accordance with
GAAP: (a) all liabilities, obligations and indebtedness for borrowed money
including but not limited to obligations evidenced by bonds, debentures, notes
or other similar instruments of any such Person, (b) all obligations to pay the
deferred purchase price of property or services of any such Person, except trade
payables or operating leases arising in the ordinary course of business , (c)
all obligations of any such Person as lessee under Capital Leases, (d) all Debt
of any other Person secured by a Lien on any asset of any such Person, (e) all
Contingent Obligations of any such Person, (f) all obligations, contingent or
otherwise, of any such Person relative to the face amount of letters of credit,
whether or not drawn, and banker's acceptances issued for the account of any
such Person and (g) all obligations incurred by any such Person pursuant to
Hedging Agreements.
"Default" means any of the events specified in Section 11.1 which with the
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passage of time, the giving of notice or any other condition, would constitute
an Event of Default.
"Dollars" or "$" means, unless otherwise qualified, dollars in lawful
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currency of the United States.
"EBITDA" means, with respect to Borrower and its consolidated Subsidiaries,
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for any period of calculation and without duplication, the sum of (i) Net Income
of Borrower and its consolidated Subsidiaries for such period, plus (ii)
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Interest Expense paid or accrued during such period, plus (iii) depreciation and
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amortization expense deducted during such period in calculating Net Income of
Borrower and its consolidated Subsidiaries, plus (iv) the income taxes
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paid or payable in cash by Borrower and its consolidated Subsidiaries in respect
of such period, calculated in each case on a consolidated basis for Borrower and
its Subsidiaries in accordance with GAAP.
"EBITDAR" means, with respect to Borrower and its consolidated
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Subsidiaries, for any period of calculation, the sum of EBITDA of Borrower and
its consolidated Subsidiaries plus all Total Real Property Rental Expense paid
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or accrued during such period, calculated in each case on a consolidated basis
for Borrower and its Subsidiaries in accordance with GAAP.
"Employee Benefit Plan" means any employee benefit plan within the meaning
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of Section 3(3) of ERISA which (a) is maintained for employees of the Borrower
or any ERISA Affiliate or (b) has at any time within the preceding six years
been maintained for the employees of the Borrower or any current or former ERISA
Affiliate.
"Environmental Laws" means any and all federal, state and local laws,
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statutes, ordinances, rules, regulations, permits, licenses, approvals,
interpretations and orders of courts or Governmental Authorities, relating to
the protection of human health or the environment, including, but not limited
to, requirements pertaining to the manufacture, processing, distribution, use,
treatment, storage, disposal, transportation, handling, reporting, licensing,
permitting, investigation or remediation of Hazardous Materials.
"ERISA" means the Employee Retirement Income Security Act of 1974, and the
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rules and regulations thereunder, each as amended or modified from time to time.
"ERISA Affiliate" means any Person who together with the Borrower is
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treated as a single employer within the meaning of Section 414(b), (c), (m) or
(o) of the Code or Section 4001(b) of ERISA.
"Event of Default" means any of the events specified in Section 11.1,
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provided that any requirement for passage of time, giving of notice, or any
other condition, has been satisfied.
"FDIC" means the Federal Deposit Insurance Corporation, or any successor
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thereto.
"Federal Funds Rate" means, the rate per annum (rounded upwards, if
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necessary, to the next higher 1/100th of 1%) representing the daily effective
federal funds rate as quoted by the Lender and confirmed in Federal Reserve
Board Statistical Release H.15 (519) or any successor or substitute publication
selected by the Lender. If, for any reason, such rate is not available, then
"Federal Funds Rate" shall mean a daily rate which is determined, in the opinion
of the Lender, to be the rate at which federal funds are being offered for sale
in the national federal funds market at 9:00 a.m. (Atlanta time). Rates for
weekends or holidays shall be the same as the rate for the most immediate
preceding Business Day.
"Fiscal Year" means the fiscal year of the Borrower and its Subsidiaries
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ending on December 31 of each year.
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"Fixed Charges" means, with respect to Borrower and its consolidated
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Subsidiaries, as of any calculation date and without duplication, the sum of (a)
consolidated Interest Expense of Borrower and its consolidated Subsidiaries paid
or payable during the twelve (12) month period ending on or most recently ended
prior to such date plus (b) consolidated Scheduled Real Property Rental Expense
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payable during the twelve (12) month period commencing with the first day of the
month in which calculation date falls plus (c) principal payments on Funded Debt
----
of Borrower or of its Subsidiaries scheduled to be made during the twelve (12)
month period commencing with the first day of the month in which calculation
date falls, plus (d) an amount equal to twenty percent (20%) of the outstanding
----
balance of the Loans, in each case calculated on a consolidated basis for
Borrower and its Subsidiaries in accordance with GAAP.
"Fixed Charge Coverage Ratio" means, at any date of determination thereof,
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the ratio of (a) an amount equal to (i) consolidated EBITDAR of Borrower and its
consolidated Subsidiaries for the twelve (12) month period ending on or most
recently ended prior to such date, less (ii) dividend and other distributions
----
made to shareholders made during the twelve (12) month period ending on or most
recently ended prior to such date, less (iii) the income tax expense of Borrower
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and its consolidated Subsidiaries for the twelve (12) month period ending on or
most recently ended prior to such date less (iv) all cost and expense to
----
repurchase, redeem or otherwise acquire or retire Capital Stock of Borrower
incurred by Borrower or any of its consolidated Subsidiaries during the twelve
(12) month period ending on or most recently ended prior to such date
(including, but not limited to, any such repurchases, redemptions or
acquisitions made pursuant to Section 10.6(c)hereof) to (b) Fixed Charges as of
such date.
"Flight Enterprises" means Flight Enterprises, LLC, a North Carolina
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limited liability company and Subsidiary of Borrower.
"Funded Debt" shall mean, for any Person, collectively, (a) the aggregate
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principal amount of Debt for borrowed money which would, in accordance with
GAAP, be classified as long-term debt, together with the current maturities
thereof; (b) all Debt outstanding under any revolving credit, line of credit or
similar agreement providing for borrowings (and any extensions or renewals
thereof), notwithstanding that any such Debt is created within one year of the
expiration of such agreement; (c) all obligations of such Person as lessee under
Capital Leases; (d) all debt, obligations or other liabilities of such Person
with respect to letters of credit issued for such Person's account; (e) Debt
that is such by virtue of clause (e) of the definition thereof, but only to the
extent that the obligations Guaranteed are obligations that would constitute
Debt for Money Borrowed; and (f) Debt that is such by virtue of clause (g) of
the definition thereof, and (g) any other Debt bearing interest or carrying a
similar payment requirement (including any Debt issued at a discount to its face
amount), calculated in all cases for such Person and its Subsidiaries on a
consolidated basis in accordance with GAAP.
"GAAP" means generally accepted accounting principles, as recognized by the
----
American Institute of Certified Public Accountants and the Financial Accounting
Standards Board, consistently applied and maintained on a consistent basis for
the Borrower and its Subsidiaries
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throughout the period indicated and consistent with the prior financial practice
of the Borrower and its Subsidiaries.
"Governmental Approvals" means all authorizations, consents, approvals,
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licenses and exemptions of, registrations and filings with, and reports to, all
Governmental Authorities.
"Governmental Authority" means any nation, province, state or political
----------------------
subdivision thereof, and any government or any Person exercising executive,
legislative, regulatory or administrative functions of or pertaining to
government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.
"Guarantors" means each of Borrower's Subsidiaries which is organized or
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formed under the laws of the United States or of any political subdivision
thereof or any territory thereof.
"Guaranty" means that certain Guaranty executed and delivered by each of
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the Guarantors in favor of Lender guaranteeing the payment and performance of
the Obligations.
"Hazardous Materials" means any substances or materials (a) which are or
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become defined as hazardous wastes, hazardous substances, pollutants,
contaminants, chemical substances or mixtures or toxic substances under any
Environmental Law, (b) which are toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic or otherwise harmful to human
health or the environment and are or become regulated by any Governmental
Authority, (c) the presence of which require investigation or remediation under
any Environmental Law or common law, (d) the discharge or emission or release of
which requires a permit or license under any Environmental Law or other
Governmental Approval, (e) which are deemed to constitute a nuisance, a trespass
or pose a health or safety hazard to persons or neighboring properties, (f)
which are materials consisting of underground or aboveground storage tanks,
whether empty, filled or partially filled with any substance, or (g) which
contain, without limitation, asbestos, polychlorinated biphenyls, urea
formaldehyde foam insulation, petroleum hydrocarbons, petroleum derived
substances or waste, crude oil, nuclear fuel, natural gas or synthetic gas.
"Hedging Agreement" means any agreement with respect to an interest rate
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swap, collar, cap, floor or a forward rate agreement or other agreement
regarding the hedging of interest rate risk exposure executed in connection with
hedging the interest rate exposure of the Borrower under this Agreement, and any
confirming letter executed pursuant to such hedging agreement, all as amended,
restated or otherwise modified.
"Interest Expense" means, for any period and without duplication, the
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aggregate of all interest expense deducted in computing Net Income of Borrower
and its consolidated Subsidiaries for such period.
"L/C Commitment" means Four Million Dollars ($4,000,000).
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6
"L/C Obligations" means at any time, an amount equal to the sum of (a) the
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aggregate undrawn and unexpired amount of the then outstanding Letters of Credit
and (b) the aggregate amount of drawings under Letters of Credit which have not
then been reimbursed pursuant to Section 3.4.
"Lender" means First Union National Bank, a national banking association,
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and its successors and assigns.
"Lender's Office" means the office of the Lender specified in or determined
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in accordance with the provisions of Section 12.1.
"Letters of Credit" shall have the meaning assigned thereto in Section
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3.1(a).
"Leverage Ratio" means, for Borrower and its consolidated Subsidiaries at
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any date of determination thereof, the ratio of (a) Adjusted Funded Debt of
Borrower and its consolidated Subsidiaries as of such date of determination, to
(b) EBITDAR of Borrower and its consolidated Subsidiaries for the twelve (12)
month period ending on or most recently ended prior to such date, determined in
each case on a consolidated basis for Borrower and its Subsidiaries in
accordance with GAAP.
"LIBOR Market Index Rate" means, for any day, the rate for 1-month U.S.
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dollar deposits as reported on Telerate page 3750 of the Telerate Service as of
11:00 a.m., London time, on such day, or if such day is not a Business Day, then
the immediately preceding Business Day (or if not so reported, then as
determined by Lender from another recognized source or interbank quotation).
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
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charge, security interest or encumbrance of any kind in respect of such asset.
For the purposes of this Agreement, a Person shall be deemed to own subject to a
Lien any asset which it has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, Capital Lease or other
title retention agreement relating to such asset.
"Loan" means any revolving loan made to the Borrower pursuant to Section
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2.1, and all such Loans collectively as the context requires.
"Loan Documents" means, collectively, this Agreement, the Note, any Hedging
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Agreement executed by Lender or any of its Affiliates, the Applications, the
Security Documents and each other document, instrument and agreement executed
and delivered by the Borrower, its Subsidiaries or their counsel in connection
with this Agreement or otherwise referred to herein or contemplated hereby, all
as may be amended, restated or otherwise modified.
"Material Adverse Effect" means, with respect to the Borrower or any of its
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Subsidiaries, a material adverse effect on the properties, business, prospects,
operations or condition (financial or otherwise) of any such Person or the
ability of any such Person to perform its obligations under the Loan Documents
or Material Contracts, in each case to which it is a party.
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"Material Contract" means (a) any contract or other agreement, written or
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oral, of the Borrower or any of its Subsidiaries involving monetary liability of
or to any such Person in an amount in excess of $1,000,000 per annum, or (b) any
other contract or agreement, written or oral, of the Borrower or any of its
Subsidiaries the failure to comply with which could reasonably be expected to
have a Material Adverse Effect.
"Multiemployer Plan" means a "multiemployer plan" as defined in Section
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4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate is making, or
is accruing an obligation to make, contributions within the preceding six years.
"Net Income" means, for Borrower and its consolidated Subsidiaries, the net
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income (or loss) of Borrower and its Subsidiaries for the period in question
after giving effect to deduction of or provision for all operating expenses, all
taxes and reserves and all other proper deductions, in each case calculated on a
consolidated basis for Borrower and its Subsidiaries in accordance with GAAP,
provided that there shall be excluded:
(a) the net income (or net loss) of any Person accrued prior to the
date it becomes a Subsidiary of, or is merged into or consolidated with,
the Borrower or any Subsidiary of the Borrower;
(b) the net income (or net loss) of any Person not a Subsidiary of
Borrower in which the Borrower or any of its Subsidiaries has an ownership
interest, except to the extent that any such net income has actually been
received by Borrower or such Subsidiary in the form of cash dividends or
similar distributions;
(c) any restoration of any contingency reserve, except to the extent
that provision for such reserve was made out of income during such period;
(d) any net gains or losses on the sale or other disposition, not in
the ordinary course of business, of any Capital Assets, provided that there
shall also be excluded any related charges for taxes thereon;
(e) any net gain arising from the collection of the proceeds of any
insurance policy;
(f) any write-up of any asset or non-recurring write-down of any
asset; and
(g) any other extraordinary item.
"Net Worth" shall mean total stockholders' equity for the Borrower and its
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Subsidiaries, calculated on a consolidated basis for Borrower and its
Subsidiaries in accordance with GAAP.
8
"Note" means the Revolving Credit Note made by the Borrower payable to the
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order of the Lender, substantially in the form of Exhibit A hereto, evidencing
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the Revolving Credit Facility, and any amendments and modifications thereto, any
substitutes therefor, and any replacements, restatements, renewals or extension
thereof, in whole or in part.
"Notice of Account Designation" shall have the meaning assigned thereto in
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Section 2.2(b).
"Notice of Borrowing" shall have the meaning assigned thereto in Section
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2.2(a).
"Notice of Prepayment" shall have the meaning assigned thereto in Section
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2.3(b).
"Obligations" means, in each case, whether now in existence or hereafter
-----------
arising: (a) the principal of and interest on (including interest accruing
after the filing of any bankruptcy or similar petition) the Loans, (b) the L/C
Obligations, (c) all payment and other obligations owing by the Borrower to the
Lender or any Affiliate of the Lender under any Hedging Agreement and (d) all
other fees and commissions (including attorney's fees), charges, indebtedness,
loans, liabilities, financial accommodations, obligations, covenants and duties
owing by the Borrower to the Lender, of every kind, nature and description,
direct or indirect, absolute or contingent, due or to become due, contractual or
tortious, liquidated or unliquidated, and whether or not evidenced by any note,
and whether or not for the payment of money under or in respect of this
Agreement, the Note, any Letter of Credit or any of the other Loan Documents.
"Officer's Compliance Certificate" shall have the meaning assigned thereto
--------------------------------
in Section 7.2.
"Other Taxes" shall have the meaning assigned thereto in Section 4.7(b).
-----------
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
----
agency.
"Pension Plan" means any Employee Benefit Plan, other than a Multiemployer
------------
Plan, which is subject to the provisions of Title IV of ERISA or Section 412 of
the Code and which (a) is maintained for employees of the Borrower or any ERISA
Affiliates or (b) has at any time within the preceding six years been maintained
for the employees of the Borrower or any of their current or former ERISA
Affiliates.
"Person" means an individual, corporation, partnership, association, trust,
------
business trust, joint venture, joint stock company, pool, syndicate, sole
proprietorship, limited liability company, unincorporated organization,
Governmental Authority or any other form of entity or group thereof.
"Pledge Agreement" means that certain Stock Pledge Agreement executed and
----------------
delivered by Borrower and certain of the Guarantors in favor of Lender as
security for the Obligations and granting to Lender a first priority Lien on
100% of the shares of Capital Stock of each domestic
9
Subsidiary of Borrower and in 66% of the shares of Capital Stock of each foreign
Subsidiary of Borrower.
"Prime Rate" means, at any time, the rate of interest per annum publicly
----------
announced from time to time by First Union, as its prime rate. Each change in
the Prime Rate shall be effective as of the opening of business on the day such
change in the Prime Rate occurs. The parties hereto acknowledge that the rate
announced publicly by First Union as its Prime Rate is an index or base rate and
shall not necessarily be its lowest or best rate charged to its customers or
other banks.
"Projections" shall have the meaning given such term is Section 6.1(p)
-----------
hereof.
"Reimbursement Obligation" means the obligation of the Borrower to
------------------------
reimburse the Lender pursuant to Section 3.4 for amounts drawn under Letters of
Credit.
"Revenues" shall mean, for any period, the net revenues of Borrower and its
--------
Subsidiaries for such period, prior to the deduction of costs and expenses for
such period, calculated for Borrower and its Subsidiaries on a consolidated
basis in accordance with GAAP.
"Scheduled Real Property Rental Expense" means, with respect to Borrower
--------------------------------------
and its consolidated Subsidiaries, as of any calculation date therefor and for
any period of calculation, all amounts, whether or not denominated as "rent,"
scheduled to be payable by Borrower or any of its consolidated Subsidiaries
during such period to the lessor under a lease for offices, classrooms, real
property or other premises, including, without limitation, base rent, percentage
rent and operating cost escalation.
"Security Agreement" means that certain Security Agreement executed and
------------------
delivered by Borrower and each Guarantor in favor of Lender as security for the
Obligations and granting to Lender a first priority Lien on substantially all of
the assets of the Borrower and the Guarantors.
"Security Documents" means the collective reference to the Guaranty, the
------------------
Security Agreement, the Pledge Agreement, and each other agreement or writing
pursuant to which the Borrower or any Subsidiary thereof pledges or grants a
security interest in any property or assets securing the Obligations or any such
Person guaranties the payment and/or performance of the Obligations.
"Solvent" means, as to the Borrower and its Subsidiaries on a particular
-------
date, that any such Person (a) has capital sufficient to carry on its business
and transactions and all business and transactions in which it is about to
engage and is able to pay its debts as they mature, (b) owns property having a
value, both at fair valuation and at present fair saleable value, greater than
the amount required to pay its probable liabilities (including contingencies),
and (c) does not believe that it will incur debts or liabilities beyond its
ability to pay such debts or liabilities as they mature.
10
"Subsidiary" means as to any Person, any corporation, partnership or other
----------
entity of which more than fifty percent (50%) of the outstanding Capital Stock
having ordinary voting power to elect a majority of the board of directors or
other managers of such corporation, partnership or other entity is at the time,
directly or indirectly, owned by or the management is otherwise controlled by
such Person (irrespective of whether, at the time, Capital Stock of any other
class or classes of such corporation shall have or might have voting power by
reason of the happening of any contingency); provided, however, that Middle East
-------- -------
Colleges, Ltd. shall be deemed a Subsidiary for purposes of this Agreement.
Unless otherwise qualified references to "Subsidiary" or "Subsidiaries" herein
shall refer to those of the Borrower.
"Taxes" shall have the meaning assigned thereto in Section 4.7(a).
-----
"Termination Date" means the earliest of (a) ▇▇▇▇▇ ▇▇, ▇▇▇▇, (▇) the date
----------------
of termination by the Borrower pursuant to Section 2.5(a), and (c) the date of
termination by the Lender pursuant to Section 11.2(a).
"Termination Event" means: (a) a "Reportable Event" described in Section
-----------------
4043 of ERISA, or (b) the withdrawal of the Borrower or any ERISA Affiliate from
a Pension Plan during a plan year in which it was a "substantial employer" as
defined in Section 4001(a)(2) of ERISA, or (c) the termination of a Pension
Plan, the filing of a notice of intent to terminate a Pension Plan or the
treatment of a Pension Plan amendment as a termination under Section 4041 of
ERISA, or (d) the institution of proceedings to terminate, or the appointment of
a trustee with respect to, any Pension Plan by the PBGC, or (e) any other event
or condition which would constitute grounds under Section 4042(a) of ERISA for
the termination of, or the appointment of a trustee to administer, any Pension
Plan, or (f) the partial or complete withdrawal of the Borrower or any ERISA
Affiliate from a Multiemployer Plan, or (g) the imposition of a Lien pursuant to
Section 412 of the Code or Section 302 of ERISA, or (h) any event or condition
which results in the reorganization or insolvency of a Multiemployer Plan under
Sections 4241 or 4245 of ERISA, or (i) any event or condition which results in
the termination of a Multiemployer Plan under Section 4041A of ERISA or the
institution by PBGC of proceedings to terminate a Multiemployer Plan under
Section 4042 of ERISA.
"Total Real Property Rental Expense" means, with respect to Borrower and
----------------------------------
its Consolidated Subsidiaries, for any period of calculation, all amounts,
whether or not denominated as "rent," payable by Borrower or any of its
consolidated Subsidiaries to the lessor under a lease for offices, classrooms,
real property or other premises, including, without limitation, base rent,
percentage rent and operating cost escalation, during such period.
"Uniform Customs" the Uniform Customs and Practice for Documentary Credits
---------------
(1994 Revision), International Chamber of Commerce Publication No. 500.
"UCC" means the Uniform Commercial Code as in effect in the State of
---
Georgia.
"United States" means the United States of America.
-------------
11
"Wholly-Owned" means, with respect to a Subsidiary, a Subsidiary all of the
------------
shares of Capital Stock of which are, directly or indirectly, owned or
controlled by the Borrower and/or one or more of its Wholly-Owned Subsidiaries.
"Year 2000 Compliant" shall mean, as to any computer software or other
-------------------
processing device, that such software or devices:
(a) are able, without delay, error, invalid or incorrect results,
premature endings or interruption, to consistently and correctly recognize,
handle, accept, sort, manipulate, calculate, display, store, retrieve, access,
compare and process date, year and time data and information before, between,
during and after January 1, 1999, September 9, 1999, December 31, 1999, January
1, 2000, February 29, 2000, March 1, 2000 and any other date after December 31,
1999 (all of the foregoing being collectively defined as the "Relevant Dates"),
including, but not limited to, accepting any date, year or time data, and
performing calculations or other operations or functions on dates, years or
times or portions of dates, years or times and without delay, error, invalid or
incorrect results, premature endings or interruption;
(b) before, between, during and after any of the Relevant Dates,
function accurately in accordance with any applicable documentation or other
materials and without delay, interruption, premature endings, error, incorrect
or invalid results or changes in operations associated with the occurrence of
any of the Relevant Dates or the advent of any new century, year, leap year or
any other date, year or time related matter;
(c) consistently and accurately responds to, stores and provides
output of two-digit year data or six-digit date data, and properly resolves any
ambiguity as to century or year in a disclosed, defined and predetermined
manner;
(d) will not be adversely affected in any manner by the advent of the
year 2000 A.D. or the passing or transition of any year, century or other
Relevant Date; and,
(e) consistently, correctly, accurately, unambiguously and without
delay, error, invalid or incorrect results, premature endings or interruption,
receives, provides, processes and interfaces date, year and time data between
software, applications, hardware, firmware, equipment, embedded chips or other
applicable items, in a disclosed, defined and predetermined manner.
SECTION 1.2 General. Unless otherwise specified, a reference in this
-------
Agreement to a particular section, subsection, Schedule or Exhibit is a
reference to that section, subsection, Schedule or Exhibit of this Agreement.
Wherever from the context it appears appropriate, each term stated in either the
singular or plural shall include the singular and plural, and pronouns stated in
the masculine, feminine or neuter gender shall include the masculine, the
feminine and the neuter. Any reference herein to "Atlanta time" shall refer to
the applicable time of day in Atlanta, Georgia.
12
SECTION 1.3 Other Definitions and Provisions.
--------------------------------
(f) Use of Capitalized Terms. Unless otherwise defined therein, all
------------------------
capitalized terms defined in this Agreement shall have the defined meanings when
used in this Agreement, the Note and the other Loan Documents or any
certificate, report or other document made or delivered pursuant to this
Agreement.
(g) Miscellaneous. 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.
ARTICLE 2.
REVOLVING CREDIT FACILITY
-------------------------
SECTION 2.1 Revolving Credit Loans. Subject to the terms and conditions
----------------------
of this Agreement, Lender agrees to make Loans to the Borrower from time to time
from the Closing Date through the Termination Date as requested by the Borrower
in accordance with the terms of Section 2.2 provided, that the aggregate
--------
principal amount of all outstanding Loans (after giving effect to any amount
requested), when aggregated with the outstanding principal amount of the L/C
Obligations, shall not exceed the Commitment. Subject to the terms and
conditions hereof, the Borrower may borrow, repay and reborrow Loans hereunder
until the Termination Date.
SECTION 2.2 Procedure for Advances of Loans.
-------------------------------
(a) Requests for Borrowing. The Borrower shall give the Lender irrevocable
----------------------
prior written notice in the form attached hereto as Exhibit B (a "Notice of
---------
Borrowing") not later than 11:00 a.m. (Atlanta time) on the same Business Day as
each Loan, of its intention to borrow, specifying (i) the date of such
borrowing, which shall be a Business Day, (ii) the amount of such borrowing,
which shall be in an aggregate principal amount of at least $100,000 or a whole
multiple of $10,000 in excess thereof. Notices received after 11:00 a.m.
(Atlanta time) shall be deemed received on the next Business Day.
(b) Disbursement of Loans. Not later than 2:00 p.m. (Atlanta time) on the
---------------------
proposed borrowing date, Lender will make available to the Borrower the proceeds
of the Loan. The Borrower hereby irrevocably authorizes the Lender to disburse
the proceeds of each borrowing requested pursuant to this Section 2.2 in
immediately available funds by crediting or wiring such proceeds to the deposit
account of the Borrower identified in the most recent Notice of Account
Designation substantially in the form of Exhibit C hereto (a "Notice of Account
---------
Designation") delivered by the Borrower to the Lender or may be otherwise agreed
upon by the Borrower and the Lender from time to time.
13
SECTION 2.3 Repayment of Loans.
------------------
(a) Repayment on Termination Date. The Borrower shall repay the
-----------------------------
outstanding principal amount of all Loans in full, together with all accrued but
unpaid interest thereon, on the Termination Date.
(b) Optional Repayments. The Borrower may at any time and from time to
-------------------
time repay the Loans, in whole or in part, upon delivery of notice, in the form
attached hereto as Exhibit D (a "Notice of Prepayment") specifying the date and
---------
amount of repayment. If any such notice is given, the amount specified in such
notice shall be due and payable on the date set forth in such notice. Partial
repayments shall be in an aggregate amount of at least $100,000 or a whole
multiple of $10,000 in excess thereof.
SECTION 2.4 Note. The Loans and the obligation of the Borrower to repay
----
the Loans shall be evidenced by a Note executed by the Borrower payable to the
order of the Lender representing the Borrower's obligation to pay the Commitment
or, if less, the aggregate unpaid principal amount of all Loans made and to be
made to the Borrower hereunder, plus interest and all other fees, charges and
----
other amounts due thereon. The Note shall be dated the date hereof and shall
bear interest on the unpaid principal amount thereof at the applicable interest
rate per annum specified in Section 4.1.
SECTION 2.5 Permanent Reduction of the Commitment.
-------------------------------------
(a) The Borrower shall have the right at any time and from time to time,
upon at least five (5) Business Days prior written notice to the Lender, to
permanently reduce, in whole at any tune or in part from time to time, without
premium or penalty, the Commitment in an aggregate principal amount not less
than $100,000 or any whole multiple of $10,000 in excess thereof.
(b) Each permanent reduction permitted or required pursuant to this
Section 2.5 shall be accompanied by a payment of principal sufficient to reduce
the sum of the aggregate outstanding Loans plus the outstanding L/C Obligations
after such reduction to the Commitment as so reduced. Any reduction of the
Commitment to zero shall be accompanied by payment of all outstanding
Obligations (and furnishing of cash collateral satisfactory to the Lender for
all L/C Obligations).
SECTION 2.6 Use of Proceeds. The Borrower shall use the proceeds of the
---------------
Loans (a) to finance the acquisition of Capital Assets, (b) repayment of the
existing Debt of Borrower owed to NationsBank, N.A., and (c) for working capital
and general corporate requirements of the Borrower and its Subsidiaries,
including the payment of certain fees and expenses incurred in connection with
the transactions.
14
ARTICLE 3.
LETTER OF CREDIT FACILITY
-------------------------
SECTION 3.1 L/C Commitment. Subject to the terms and conditions
--------------
hereof, the Lender agrees to issue standby letters of credit ("Letters of
Credit") for the account of the Borrower on any Business Day from the Closing
Date through but not including the Termination Date in such form as may be
approved from time to time by the Lender; provided, that the Lender shall have
--------
no obligation to issue any Letter of Credit if, after giving effect to such
issuance, (a) the L/C Obligations would exceed the L/C Commitment or (b) the
Available Commitment would be less than zero. Each Letter of Credit shall (i)
be denominated in Dollars in a minimum amount of $10,000, (ii) be a standby
letter of credit issued to support obligations of the Borrower or any of its
Subsidiaries, contingent or otherwise, incurred in the ordinary course of
business, (iii) expire on a date satisfactory to the Lender, which date shall be
no later than the Termination Date and (iv) be subject to the Uniform Customs
and, to the extent not inconsistent therewith, the laws of the State of Georgia.
The Lender shall not at any time be obligated to issue any Letter of Credit
hereunder if such issuance would conflict with, or cause the Lender to exceed
any limits imposed by, any Applicable Law. References herein to "issue" and
derivations thereof with respect to Letters of Credit shall also include
extensions or modifications of any existing Letters of Credit, unless the
context otherwise requires.
SECTION 3.2 Procedure for Issuance of Letters of Credit. The Borrower
-------------------------------------------
may from time to time request that the Lender issue a Letter of Credit by
delivering to the Lender at the Lender's Office an Application therefor,
completed to the satisfaction of the Lender, and such other certificates,
documents and other papers and information as the Lender may request. Upon
receipt of any Application, the Lender shall process such Application and the
certificates, documents and other papers and information delivered to it in
connection therewith in accordance with its customary procedures and shall,
subject to Section 3.1 and Article 5 hereof, promptly issue the Letter of Credit
requested thereby (but in no event shall the Lender be required to issue any
Letter of Credit earlier than three Business Days after its receipt of the
Application therefor and all such other certificates, documents and other papers
and information relating thereto) by issuing the original of such Letter of
Credit to the beneficiary thereof or as otherwise may be agreed by the Lender
and the Borrower. The Lender shall furnish to the Borrower a copy such Letter of
Credit promptly following the issuance of such Letter of Credit.
SECTION 3.3 Commissions and Other Charges.
-----------------------------
(a) The Borrower shall pay to the Lender a letter of credit commission
with respect to each Letter of Credit in an amount equal to two and three-
fourths percent (2.75%) per annum on the face amount of such Letter of Credit.
Such commission shall be payable quarterly in arrears on the last Business Day
of each fiscal quarter of the Borrower and on the Termination Date.
(b) In addition to the foregoing commission, the Borrower shall pay the
Lender any and all processing, administrative and similar fees charged generally
by the Lender in connection with the issuance of Letters of Credit.
15
SECTION 3.4 Reimbursement Obligation of the Borrower. The Borrower
----------------------------------------
agrees to reimburse the Lender within 24 hours each date on which the Lender
notifies the Borrower of the date and amount of a draft paid under any Letter of
Credit for the amount of (a) such draft so paid and (b) any taxes, fees, charges
or other costs or expenses incurred by the Lender in connection with such
payment. Each such payment shall be made to the Lender at its address for
notices specified herein in lawful money of the United States and in immediately
available funds. Interest shall be payable on any and all amounts remaining
unpaid by the Borrower under this Article 3 from the date such amounts accrue or
are drawn at the rate payable on the Loans pursuant to Section 4.1 hereof and on
all such amounts which are not paid when due (whether at stated maturity, by
acceleration or otherwise) at the rate which would be payable on any outstanding
Loans which were then overdue. If the Borrower fails to timely reimburse the
Lender on the date the Borrower receives the notice referred to in this Section
3.4, the Borrower shall be deemed to have timely given a Notice of Borrowing
hereunder to the Lender requesting a Loan on such date in an amount equal to the
amount of such drawing and, subject to the satisfaction or waiver of the
conditions precedent specified in Article 5, the Lender shall make a Loan in
such amount, the proceeds of which shall be applied to reimburse the Lender for
the amount of the related drawing and costs and expenses.
SECTION 3.5 Obligations Absolute. The Borrower's obligations under
--------------------
this Article 3 (including without limitation the Reimbursement Obligation) shall
be absolute and unconditional under any and all circumstances and irrespective
of any set-off, counterclaim or defense to payment which the Borrower may have
or have had against the Lender or any beneficiary of a Letter of Credit. The
Borrower also agrees with the Lender that the Lender shall not be responsible
for, and the Borrower's Reimbursement Obligation under Section 3.4 shall not be
affected by, among other things, the validity or genuineness of documents or of
any endorsements thereon, even though such documents shall in fact prove to be
invalid, fraudulent or forged, or any dispute between or among the Borrower and
any beneficiary of any Letter of Credit or any other party to which such Letter
of Credit may be transferred or any claims whatsoever of a Borrower against any
beneficiary of such Letter of Credit or any such transferee. The Lender shall
not be liable for any error, omission, interruption or delay in transmission,
dispatch or delivery of any message or advice, however transmitted, in
connection with any Letter of Credit, except for errors or omissions caused by
the Lender's gross negligence or willful misconduct. The Borrower agrees that
any action taken or omitted by the Lender under or in connection with any Letter
of Credit or the related drafts or documents, if done in the absence of gross
negligence or willful misconduct and in accordance with the standards of care
specified in the Uniform Customs and, to the extent not inconsistent therewith,
the UCC shall be binding on the Borrower and shall not result in any liability
of the Lender to the Borrower. The responsibility of the Lender to the Borrower
in connection with any draft presented for payment under any Letter of Credit
shall, in addition to any payment obligation expressly provided for in such
Letter of Credit, be limited to determining that the documents (including each
draft) delivered under such Letter of Credit in connection with such presentment
are in conformity with such Letter of Credit.
16
SECTION 3.6 Effect of Application. To the extent that any provision
---------------------
of any Application related to any Letter of Credit is inconsistent with the
provisions of this Article 3, the provisions of this Article 3 shall apply.
ARTICLE 4.
GENERAL LOAN PROVISIONS
-----------------------
SECTION 4.1 Interest.
--------
(a) Interest Rate. Subject to the provisions of this Section 4.1, the
-------------
aggregate principal amount of the Loans or any portion thereof shall bear
interest at the LIBOR Market Index Rate plus 2.75%, as that rate may change from
----
day to day in accordance with changes in the LIBOR Market Index Rate.
(b) Circumstances Affecting LIBOR Market Index Rate Availability. If the
------------------------------------------------------------
Lender shall determine that, by reason of circumstances affecting the foreign
exchange and interbank markets generally, deposits in eurodollars, in the
applicable amounts are not being quoted via Telerate Page 3750 or offered to the
Lender, then the Lender shall forthwith give notice thereof to the Borrower.
Thereafter, until the Lender notifies the Borrower that such circumstances no
longer exist, the aggregate principal amounts of the Loan or any portion
thereof, shall bear interest at the Base Rate.
(c) Laws Affecting LIBOR Market Index Rate Availability. If, after the
---------------------------------------------------
date hereof, the introduction of, or any change in, any Applicable Law or any
change in the interpretation or administration thereof by any Governmental
Authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by the Lender with any request or
directive (whether or not having the force of law) of any such Authority,
central bank or comparable agency, shall make it unlawful or impossible for the
Lender to quote or maintain Loans based on the LIBOR Market Index Rate, the
Lender shall promptly give notice thereof to the Borrower. Thereafter, until the
Lender notifies the Borrower that such circumstances no longer exist, the
aggregate principal amounts of the Loan or any portion thereof, shall bear
interest at the Base Rate.
(d) Default Rate. Upon the occurrence and during the continuance of an
------------
Event of Default, all outstanding Loans shall bear interest at a rate per annum
two percent (2%) in excess of the rate then applicable. Interest shall continue
to accrue on the Note after the filing by or against the Borrower of any
petition seeking any relief in bankruptcy or under any act or law pertaining to
insolvency or debtor relief, whether state, federal or foreign.
(e) Interest Payment and Computation. Interest shall be payable in arrears
--------------------------------
on the last Business Day of each month commencing March 31, 1999. All interest
rates, fees and commissions provided hereunder shall be computed on the basis of
a 360-day year and assessed for the actual number of days elapsed.
17
(f) Maximum Rate. In no contingency or event whatsoever shall the aggregate
------------
of all amounts deemed interest hereunder or under the Note charged or collected
pursuant to the terms of this Agreement or pursuant to the Note exceed the
highest rate permissible under any Applicable Law which a court of competent
jurisdiction shall, in a final determination, deem applicable hereto. In the
event that such a court determines that the Lender has charged or received
interest hereunder in excess of the highest applicable rate, the rate in effect
hereunder shall automatically be reduced to the maximum rate permitted by
Applicable Law and the Lender shall, at the Lender's option, promptly refund to
the Borrower any interest received by Lender in excess of the maximum lawful
rate or shall apply such excess to the principal balance of the Obligations. It
is the intent hereof that the Borrower not pay or contract to pay, and that the
Lender not receive or contract to receive, directly or indirectly in any manner
whatsoever, interest in excess of that which may be paid by the Borrower under
Applicable Law.
SECTION 4.2 Fees.
----
(a) Unused Fee. Commencing on the Closing Date, the Borrower shall pay to
----------
the Lender a non-refundable unused fee at a rate per annum equal to one-half of
one percent ( 1/2 of 1%) on the average daily Available Commitment. The unused
fee shall be payable in arrears on the last Business Day of each calendar
quarter during the term of this Agreement commencing March 31, 1999, and on the
Termination Date.
(b) Closing Fee. The Borrower shall pay to the Lender a non-refundable
-----------
closing fee equal to $100,000, payable at closing. Such fee is to compensate
Lender for the costs associated with the organization, structuring, processing,
approving and closing of the transactions contemplated by this Agreement. Such
fee shall be fully earned upon payment and shall not be subject to proration or
rebate for any reason whatsoever.
SECTION 4.3 Manner of Payment. Each payment by the Borrower on account
-----------------
of the principal of or interest on the Loans or of any fee, commission or other
amounts payable to the Lender under this Agreement or any Note shall be made not
later than 1:00 p.m. (Atlanta time) on the date specified for payment under this
Agreement to the Lender at the Lender's Office, in Dollars, in immediately
available funds and shall be made without any set-off, counterclaim or deduction
whatsoever. Any payment received after such time but before 2:00 p.m. (Atlanta
time) on such day shall be deemed a payment on such date for the purposes of
Section 11.1, but for all other purposes shall be deemed to have been made on
the next succeeding Business Day. Any payment received after 2:00 p.m. (Atlanta
time) shall be deemed to have been made on the next succeeding Business Day for
all purposes.
SECTION 4.4 Crediting of Payments and Proceeds. In the event that the
----------------------------------
Borrower shall fail to pay any of the Obligations when due and the Obligations
have been accelerated pursuant to Section 11.2, all payments received by the
Lender upon the Note and the other Obligations and all net proceeds from the
enforcement of the Obligations shall be applied first to all expenses then due
and payable by the Borrower hereunder, then to all indemnity obligations then
due and payable by the Borrower hereunder, then to all fees then due and
18
payable, then to all commitment and other fees and commissions then due and
payable, then to accrued and unpaid interest on the Note and any termination
payments due in respect of a Hedging Agreement with Lender or any of its
Affiliates, then to the principal amount of the Note and Reimbursement
Obligations and then to the cash collateral account described in Section 11.2(b)
hereof to the extent of any L/C Obligations then outstanding, in that order.
SECTION 4.5 Increased Costs. If, after the date hereof, the
---------------
introduction of, or any change in, any Applicable Law, or in the interpretation
or administration thereof by any Governmental Authority, central bank or
comparable agency charged with the interpretation or administration thereof, or
compliance by the Lender with any request or directive (whether or not having
the force of law) of such Authority, central bank or comparable agency:
(a) shall subject the Lender to any tax, duty or other charge with
respect to the Note, Letter of Credit or Application or shall change the basis
of taxation of payments to the Lender of the principal of or interest on the
Note, Letter of Credit or Application, any Loan or any other amounts due under
this Agreement in respect thereof (except for changes in the rate of tax on the
overall net income of the Lender or of Lender's Office imposed by the
jurisdiction in which the Lender is organized or is or should be qualified to do
business or where Lender's Office is located); or
(b) shall impose, modify or deem applicable any reserve (including,
without limitation, any imposed by the Board of Governors of the Federal Reserve
System), special deposit, insurance or capital or similar requirement against
assets of, deposits with or for the account of, or credit extended by the Lender
or shall impose on the Lender or the foreign exchange and interbank markets any
other condition affecting the Note, any Loan, Letter of Credit or Application;
and the result of any of the foregoing is to increase the costs to the Lender of
maintaining any Loan or issuing any Letter of Credit or to reduce the yield or
amount of any sum received or receivable by the Lender under this Agreement or
under the Note in respect of a Loan or Letter of Credit or Application, then the
Lender shall promptly notify the Borrower of such fact and demand compensation
therefor and, within fifteen (15) days after such notice by the Lender, the
Borrower shall pay to the Lender such additional amount or amounts as will
compensate the Lender for such increased cost or reduction. The Lender will
promptly notify the Borrower of any event of which it has knowledge which will
entitle the Lender to compensation pursuant to this Section 4.5; provided, that
--------
the Lender shall incur no liability whatsoever to the Borrower in the event it
fails to do so. The amount of such compensation shall be determined, in the
Lender's sole discretion, based upon the LIBOR Market Index Rate, and using any
reasonable attribution or averaging methods which the Lender deems appropriate
and practical. A certificate of the Lender setting forth the basis for
determining such amount or amounts necessary to compensate the Lender shall be
forwarded to the Borrower and shall be conclusively presumed to be correct save
for manifest error.
SECTION 4.6 Capital Requirements. If either (a) the introduction of,
--------------------
or any change in, or in the interpretation of, any Applicable Law or (b)
compliance with any guideline or request from
19
any central bank or comparable agency or other Governmental Authority (whether
or not having the force of law), has or would have the effect of reducing the
rate of return on the capital of, or has affected or would affect the amount of
capital required to be maintained by, Lender or any corporation controlling the
Lender as a consequence of, or with reference to the Commitments and other
commitments of this type, below the rate which the Lender or such other
corporation could have achieved but for such introduction, change or compliance,
then within five (5) Business Days after written demand by the Lender, the
Borrower shall pay to the Lender from time to time as specified by the Lender
additional amounts sufficient to compensate the Lender or other corporation for
such reduction. A certificate as to such amounts submitted to the Borrower by
the Lender, shall, in the absence of manifest error, be presumed to be correct
and binding for all purposes.
SECTION 4.7 Taxes.
(a) Payments Free and Clear. Any and all payments by the Borrower
-----------------------
hereunder or under the Note or in respect of any Letter of Credit shall be made
free and clear of and without deduction for any and all present or future taxes,
levies, imposts, deductions, charges or withholding, and all liabilities with
respect thereto excluding, (i) income and franchise taxes imposed by the
jurisdiction under the laws of which the Lender is organized or is or should be
qualified to do business or any political subdivision thereof and (ii) income
and franchise taxes imposed by the jurisdiction of the Lender's Office or any
political subdivision thereof (all such non-excluded taxes, levies, imposts,
deductions, charges, withholdings and liabilities being hereinafter referred to
as "Taxes"). If the Borrower shall be required by law to deduct any Taxes from
or in respect of any sum payable hereunder or under the Note or any Letter of
Credit, (A) the sum payable shall be increased as may be necessary so that after
making all required deductions (including deductions applicable to additional
sums payable under this Section 4.7) the Lender receives an amount equal to the
amount it would have received had no such deductions been made, (B) the Borrower
shall make such deductions, (C) the Borrower shall pay the full amount deducted
to the relevant taxing authority or other authority in accordance with
applicable law, and (D) the Borrower shall deliver to the Lender evidence of
such payment to the relevant taxing authority or other authority in the manner
provided in Section 4.7(d).
(b) Stamp and Other Taxes. In addition, the Borrower shall pay any present
---------------------
or future stamp, registration, recordation or documentary taxes or any other
similar fees or charges or excise or property taxes, levies of the United States
or any state or political subdivision thereof or any applicable foreign
jurisdiction which arise from any payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement, the
Loans, the Letters of Credit, the other Loan Documents, or the perfection of any
rights or security interest in respect thereto (hereinafter referred to as
"Other Taxes").
(c) Indemnity. The Borrower shall indemnify the Lender for the full amount
---------
of Taxes and Other Taxes (including, without limitation, any Taxes and Other
Taxes imposed by any jurisdiction on amounts payable under this Section 4.7)
paid by the Lender and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto, whether or
20
not such Taxes or Other Taxes were correctly or legally asserted. Such
indemnification shall be made within thirty (30) days from the date the Lender
makes written demand therefor.
(d) Evidence of Payment. Within thirty (30) days after the date of any
-------------------
payment of Taxes or Other Taxes, the Borrower shall furnish to the Lender, at
its address referred to in Section 12.1, the original or a certified copy of a
receipt evidencing payment thereof or other evidence of payment satisfactory to
the Lender.
(e) Survival. Without prejudice to the survival of any other agreement of
--------
the Borrower hereunder, the agreements and obligations of the Borrower contained
in this Section 4.7 shall survive the payment in full of the Obligations and the
termination of the Commitments.
ARTICLE 5.
CLOSING; CONDITIONS OF CLOSING AND BORROWING
--------------------------------------------
SECTION 5.1 Closing. The closing shall take place at the offices of
-------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP at 9:00 a.m. on March 25, 1999, or on such other date as
the parties hereto shall mutually agree.
SECTION 5.2 Conditions to Closing and Initial Loan. The obligation
--------------------------------------
of the Lender to close this Agreement and to make the initial Loan or issue the
initial Letter of Credit is subject to the satisfaction of each of the following
conditions:
(a) Executed Loan Documents. This Agreement, the Note, the Security
-----------------------
Documents, and the Loan Documents, shall have been duly authorized, executed and
delivered to the Lender by the parties thereto, shall be in full force and
effect and no default shall exist thereunder, and the Borrower shall have
delivered original counterparts thereof to the Lender.
(b) Closing Certificates; etc.
-------------------------
(i) Officer's Certificate of the Borrower. The Lender shall have
-------------------------------------
received a certificate from the chief executive officer or chief financial
officer of the Borrower, in form and substance satisfactory to the Lender, to
the effect that all representations and warranties of the Borrower contained in
this Agreement and the other Loan Documents are true, correct and complete; that
the Borrower is not in violation of any of the covenants contained in this
Agreement and the other Loan Documents; that, after giving effect to the
transactions contemplated by this Agreement, no Default or Event of Default has
occurred and is continuing; and that the Borrower has satisfied each of the
closing conditions.
(ii) Certificate of Secretary of the Borrower. The Lender shall have
----------------------------------------
received a certificate of the secretary or assistant secretary of the Borrower
certifying that attached thereto is a true and complete copy of the articles of
incorporation of the Borrower and all amendments thereto, certified as of a
recent date by the appropriate Governmental Authority in its jurisdiction
21
of incorporation; that attached thereto is a true and complete copy of the
bylaws of the Borrower as in effect on the date of such certification; that
attached thereto is a true and complete copy of resolutions duly adopted by the
Board of Directors of the Borrower authorizing the borrowings contemplated
hereunder and the execution, delivery and performance of this Agreement and the
other Loan Documents to which it is a party; and as to the incumbency and
genuineness of the signature of each officer of the Borrower executing Loan
Documents to which it is a party.
(iii) Certificate of Secretary of Guarantors. The Lender shall have
--------------------------------------
received a certificate of the secretary or assistant secretary of each Guarantor
certifying that attached thereto is a true and complete copy of the certificate
or articles of incorporation, articles of organization or comparable document of
such Guarantor and all amendments thereto, certified as of a recent date by the
appropriate Governmental Authority in its jurisdiction of incorporation or
formation; that attached thereto is a true and complete copy of the bylaws,
operating agreement or similar document or agreement of such Guarantor as in
effect on the date of such certification; that attached thereto is a true and
complete copy of resolutions duly adopted by the Board of Directors, managers,
members or comparable body of such Guarantor authorizing the execution, delivery
and performance of the Loan Documents to which it is a party; and as to the
incumbency and genuineness of the signature of each officer of such Guarantor
executing Loan Documents to which it is a party.
(iv) Certificates of Good Standing. The Lender shall have received
--------------- -------------
certificates (long-form, where available) as of a recent date of the good
standing of the Borrower and each Guarantor under the laws of its jurisdiction
of organization and each other jurisdiction where the Borrower or such Guarantor
is qualified to do business and a certificate of the relevant taxing authorities
of such jurisdictions certifying that such Person has filed required tax returns
and owes no delinquent taxes.
(v) Opinions of Counsel. The Lender shall have received favorable
-------------------
opinions of counsel to the Borrower and the Guarantor addressed to the Lender
with respect to the Borrower, the Loan Documents and such other matters as the
Lender shall request.
(c) Consents; Defaults.
------------------
(i) Governmental and Third Party Approvals. All necessary approvals,
--------------------------------------
authorizations and consents, if any be required, of any Person and of all
Governmental Authorities and courts having jurisdiction with respect to the
transactions contemplated by this Agreement and the other Loan Documents shall
have been obtained.
(ii) No Injunction. Etc. No action, proceeding, investigation,
------------------
regulation or legislation shall have been instituted, threatened or proposed
before any Governmental Authority to enjoin, restrain, or prohibit, or to obtain
substantial damages in respect of, or which is related to or arises out of this
Agreement or the other Loan Documents or the consummation of the transactions
contemplated hereby or thereby, or which, in the Lender's discretion, would make
it inadvisable to consummate the transactions contemplated by this Agreement and
such other Loan Documents.
22
(iii) No Event of Default. No Default or Event of Default shall have
-------------------
occurred and be continuing.
(d) Financial Matters.
-----------------
(i) Financial Statements. The Lender shall have received the most
--------------------
recent audited consolidated and consolidating financial statements of the
Borrower and its Subsidiaries and the most recent unaudited consolidated and
consolidating financial statements of Borrower and its Subsidiaries, all in form
and substance satisfactory to the Lender.
(ii) Payment at Closing. There shall have been paid by the Borrower
------------------
to the Lender the fees set forth or referenced in Section 4.2 and any other
accrued and unpaid fees or commissions due hereunder (including, without
limitation, legal fees and expenses), and to any other Person such amount as may
be due thereto in connection with the transactions contemplated hereby,
including all taxes, fees and other charges in connection with the execution,
delivery, recording, filing and registration of any of the Loan Documents.
(e) Miscellaneous.
(i) Notice of Borrowing. The Lender shall have received a Notice of
-------------------
Borrowing from the Borrower in accordance with Section 2.2(a), and a Notice of
Account Designation specifying the account or accounts to which the proceeds of
any loans made after the Closing Date are to be disbursed.
(ii) Proceedings and Documents. All opinions, certificates and other
-------------------------
instruments and all proceedings in connection with the transactions contemplated
by this Agreement shall be satisfactory in form and substance to the Lender. The
Lender shall have received copies of all other instruments and other evidence as
the Lender may reasonably request, in form and substance satisfactory to the
Lender, with respect to the transactions contemplated by this Agreement and the
taking of all actions in connection therewith.
(iii) Due Diligence and Other Documents. The Borrower shall have
---------------------------------
delivered to the Lender such other documents, certificates and opinions as the
Lender reasonably requests.
SECTION 5.3 Conditions to All Loans and All Letters of Credit.
-------------------------------------------------
The obligations of the Lender to make any Loan or to issue any Letter of Credit
is subject to the satisfaction of the following conditions precedent on the
relevant borrowing or issue date, as applicable:
(a) Continuation of Representations and Warranties. The representations
----------------------------------------------
and warranties contained in Article 6 shall be true and correct on and as of
such borrowing or issuance date with the same effect as if made on and as of
such date.
(b) No Existing Default. No Default or Event of Default shall have
-------------------
occurred and be continuing hereunder (i) on the borrowing date with respect to
such Loan or after giving effect to
23
the Loans to be made on such date or (ii) or the issue date with respect to such
Letter of Credit or after giving affect to such Letters of Credit on such date.
(c) No Material Adverse Change. Since November 30, 1998, there shall not
--------------------------
have occurred any material adverse change in the assets, liabilities, business,
operations or condition (financial or otherwise) of Borrower or its
Subsidiaries, or any event, condition, or state of facts which would be expected
materially and adversely to affect the prospects of Borrower or any of its
Subsidiaries subsequent to the making of such Loan to Borrower.
ARTICLE 6.
REPRESENTATIONS AND WARRANTIES OF THE BORROWER
----------------------------------------------
SECTION 6.1 Representations and Warranties. To induce the Lender to
------------------------------
enter into this Agreement, to make the Loans and to issue Letters of Credit, the
Borrower hereby represents and warrants to the Lender that:
(a) Organization; Power; Qualification. Each of the Borrower and its
----------------------------------
Subsidiaries is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation or formation, has the power and
authority to own its properties and to carry on its business as now being and
hereafter proposed to be conducted and is duly qualified and authorized to do
business in each jurisdiction in which the character of its properties or the
nature of its business requires such qualification and authorization. The
jurisdictions in which the Borrower and its Subsidiaries are organized and
qualified to do business are described on Schedule 6.1(a).
---------------
(b) Ownership. Each Subsidiary of the Borrower is listed on Schedule
--------- --------
6.1(b). The capitalization of the Borrower and its Subsidiaries consists of the
------
number of shares, authorized, issued and outstanding, of such classes and
series, with or without par value, described on Schedule 6.1(b). All outstanding
---------------
shares have been duly authorized and validly issued and are fully paid and
nonassessable. The shareholders of the Subsidiaries of the Borrower and the
number of shares owned by each are described on Schedule 6.1(b). There are no
---------------
outstanding stock purchase warrants, subscriptions, options, securities,
instruments or other rights of any type or nature whatsoever, which are
convertible into, exchangeable for or otherwise provide for or permit the
issuance of Capital Stock of the Borrower or its Subsidiaries, except as
described on Schedule 6.1(b).
---------------
(c) Authorization of Agreement, Loan Documents and Borrowing. Each of the
--------------------------------------------------------
Borrower and its Subsidiaries has the right, power and authority and has taken
all necessary corporate and other action to authorize the execution, delivery
and performance of this Agreement and each of the other Loan Documents to which
it is a party in accordance with their respective terms. This Agreement and
each of the other Loan Documents have been duly executed and delivered by the
duly authorized officers of the Borrower and each of its Subsidiaries party
thereto, and each such document constitutes the legal, valid and binding
24
obligation of the Borrower or its Subsidiary party thereto, enforceable in
accordance with its terms, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar state or federal
debtor relief laws from time to time in effect which affect the enforcement of
creditors' rights in general and the availability of equitable remedies.
(d) Compliance of Agreement, Loan Documents and Borrowing with Laws, Etc.
--------------------------------------------------------------------
The execution, delivery and performance by the Borrower and its Subsidiaries of
the Loan Documents to which each such Person is a party, in accordance with
their respective terms, the borrowings hereunder and the transactions
contemplated hereby do not and will not, by the passage of time, the giving of
notice or otherwise, (i) require any Governmental Approval or violate any
Applicable Law relating to the Borrower or any of its Subsidiaries, (ii)
conflict with, result in a breach of or constitute a default under the
certificate or articles of incorporation, bylaws or other organizational
documents of the Borrower or any of its Subsidiaries or any indenture, agreement
or other instrument to which such Person is a party or by which any of its
properties may be bound or any Governmental Approval relating to such Person, or
(iii) result in or require the creation or imposition of any Lien upon or with
respect to any property now owned or hereafter acquired by such Person other
than Liens arising under the Loan Documents.
(e) Compliance with Law; Governmental Approvals. Each of the Borrower and
-------------------------------------------
its Subsidiaries (i) has all material Governmental Approvals required by any
Applicable Law for it to conduct its business, each of which is in full force
and effect, is final and not subject to review on appeal and is not the subject
of any pending or, to the best of its knowledge, threatened attack by direct or
collateral proceeding, and (ii) is in material compliance with each Governmental
Approval applicable to it and in material compliance with all other Applicable
Laws relating to it or any of its respective properties.
(f) Tax Returns and Payments. Except as set forth on Schedule 6.1(f)
------------------------
hereto, each of the Borrower and its Subsidiaries has duly filed or caused to be
filed all federal, state, local and other tax returns required by Applicable Law
to be filed, and has paid, or made adequate provision for the payment of, all
federal, state, local and other taxes, assessments and governmental charges or
levies upon it and its property, income, profits and assets which are due and
payable. No Governmental Authority has asserted any Lien or other claim against
the Borrower or Subsidiary thereof with respect to unpaid taxes which has not
been discharged or resolved. The charges, accruals and reserves on the books of
the Borrower and any of its Subsidiaries in respect of federal, state, local and
other taxes for all Fiscal Years and portions thereof since the organization of
the Borrower and any of its Subsidiaries are in the judgment of the Borrower
adequate, and the Borrower does not anticipate any additional taxes or
assessments for any of such years.
(g) Intellectual Property Matters. Schedule 6.1(g) attached hereto
----------------------------- ---------------
contains a true, complete and current listing of all copyrights, copyright
applications, trademarks, trademark rights, trade names, patents, patent rights
or licenses, patent applications and other intellectual property rights of the
Borrower and its Subsidiaries that are registered with any Governmental
Authority as of the Closing Date. Each of the Borrower and its Subsidiaries owns
or possesses rights to use all franchises, licenses, copyrights, copyright
applications, patents, patent rights or
25
licenses, patent applications, trademarks, trademark rights, trade names, trade
name rights, copyrights and rights with respect to the foregoing which are
required to conduct its business. No event has occurred which permits, or after
notice or lapse of time or both would permit, the revocation or termination of
any such rights, and neither the Borrower nor any Subsidiary thereof is liable
to any Person for infringement under Applicable Law with respect to any such
rights as a result of its business operations.
(h) Environmental Matters
---------------------
(i) The properties of the Borrower and its Subsidiaries do not
contain, and to their knowledge have not previously contained, any Hazardous
Materials in amounts or concentrations which (A) constitute or constituted a
violation of, and (B) could give rise to material liability to Borrower or any
of its Subsidiaries under, applicable Environmental Laws;
(ii) Such properties and all operations conducted by Borrower and its
Subsidiaries in connection therewith are in compliance in all material respects,
and have been in compliance in all material respects, with all applicable
Environmental Laws, and there is no contamination at, under or about such
properties or such operations which could interfere with the continued operation
of such properties or which would give rise to material liability to Borrower or
any of its Subsidiaries under applicable Environmental Laws;
(iii) Neither the Borrower nor any Subsidiary thereof has received
any notice of violation, alleged violation, non-compliance, liability or
potential liability regarding environmental matters or compliance with
Environmental Laws with regard to any of their properties or the operations
conducted in connection therewith, nor does the Borrower or any Subsidiary
thereof have knowledge or reason to believe that any such notice will be
received or is being threatened;
(iv) Hazardous Materials have not been transported or disposed of by
or on behalf of Borrower or its Subsidiaries from the properties of the Borrower
and its Subsidiaries in violation of, or in a manner or to a location which
could give rise to, liability under, Environmental Laws, nor have any Hazardous
Materials been generated, treated, stored or disposed of at, on or under any of
such properties in violation of, or in a manner that could give rise to
liability under, any applicable Environmental Laws;
(v) No judicial proceedings or governmental or administrative action
is pending, or, to the knowledge of the Borrower, threatened, under any
Environmental Law to which the Borrower or any Subsidiary thereof is or will be
named as a party with respect to such properties or operations conducted in
connection therewith, nor are there any consent decrees or other decrees,
consent orders, administrative orders or other orders, or other administrative
or judicial requirements outstanding under any Environmental Law with respect to
such properties or such operations; and
(vi) There has been no release, or to the best of the Borrower's
knowledge, no threat of release, of Hazardous Materials at or from such
properties, in violation of or in amounts
26
or in a manner that could give rise to a material liability to Borrower or any
of its Subsidiaries under Environmental Laws.
(i) ERISA.
-----
(i) Neither the Borrower nor any ERISA Affiliate maintains or
contributes to, or has any obligation under, any Employee Benefit Plans other
than those identified on Schedule 6.1(i);
---------------
(ii) the Borrower and each ERISA Affiliate is in material compliance
with all applicable provisions of ERISA and the regulations and published
interpretations thereunder with respect to all Employee Benefit Plans except for
any required amendments for which the remedial amendment period as defined in
Section 401(b) of the Code has not yet expired. Each Employee Benefit Plan that
is intended to be qualified under Section 401(a) of the Code has been determined
by the Internal Revenue Service to be so qualified, and each trust related to
such plan has been determined to be exempt under Section 501(a) of the Code. No
liability has been incurred by the Borrower or any ERISA Affiliate which remains
unsatisfied for any taxes or penalties with respect to any Employee Benefit Plan
or any Multiemployer Plan;
(iii) No Pension Plan has been terminated, nor has any accumulated
funding deficiency (as defined in Section 412 of the Code) been incurred
(without regard to any waiver granted under Section 412 of the Code), nor has
any funding waiver from the Internal Revenue Service been received or requested
with respect to any Pension Plan, nor has the Borrower or any ERISA Affiliate
failed to make any contributions or to pay any amounts due and owing as required
by Section 412 of the Code, Section 302 of ERISA or the terms of any Pension
Plan prior to the due dates of such contributions under Section 412 of the Code
or Section 302 of ERISA, nor has there been any event requiring any disclosure
under Section 4041(c)(3)(C) or 4063(a) of ERISA with respect to any Pension
Plan;
(iv) Neither the Borrower nor any ERISA Affiliate has: (A) engaged in
a nonexempt prohibited transaction described in Section 406 of the ERISA or
Section 4975 of the Code, (B) incurred any liability to the PBGC which remains
outstanding other than the payment of premiums and there are no premium payments
which are due and unpaid, (C) failed to make a required contribution or payment
to a Multiemployer Plan, or (D) failed to make a required installment or other
required payment under Section 412 of the Code;
(v) No Termination Event has occurred or is reasonably expected to
occur; and
(vi) No proceeding, claim, lawsuit and/or investigation is existing
or, to the best knowledge of the Borrower after due inquiry, threatened
concerning or involving any (A) employee welfare benefit plan (as defined in
Section 3(1) of ERISA) currently maintained or contributed to by the Borrower or
any ERISA Affiliate, (B) Pension Plan or (C) Multiemployer Plan.
27
(j) Margin Stock. Neither the Borrower nor any Subsidiary thereof is
------------
engaged principally or as one of its activities in the business of extending
credit for the purpose of "purchasing" or "carrying" any "margin stock" (as each
such term is defined or used in Regulation U of the Board of Governors of the
Federal Reserve System). No part of the proceeds of any of the Loans or of the
Letters of Credit will be used for purchasing or carrying margin stock or for
any purpose which violates, or which would be inconsistent with, the provisions
of Regulation T, U or X of such Board of Governors.
(k) Government Regulation. Neither the Borrower nor any Subsidiary
---------------------
thereof is an "investment company" or a company "controlled" by an "investment
company" (as each such term is defined or used in the Investment Company Act of
1940, as amended) and neither the Borrower nor any Subsidiary thereof is, or
after giving effect to any Loan will be, subject to regulation under the Public
Utility Holding Company Act of 1935 Act, as amended, or any other Applicable Law
which limits its ability to incur or consummate the transactions contemplated
hereby.
(l) Material Contracts. Schedule 6.1(l) sets forth a complete and
------------------ ---------------
accurate list of all Material Contracts of the Borrower and its Subsidiaries in
effect as of the Closing Date not listed on any other Schedule hereto; other
than as set forth in Schedule 6.1(l), each such Material Contract is, and after
---------------
giving effect to the consummation of the transactions contemplated by the Loan
Documents will be, in full force and effect in accordance with the terms
thereof. The Borrower and its Subsidiaries have delivered to the Lender a true
and complete copy of each Material Contract requested by Lender or its counsel.
(m) Employee Relations. Each of the Borrower and its Subsidiaries has a
------------------
stable work force in place and is not, except as set forth on Schedule 6.1(m),
---------------
party to any collective bargaining agreement nor has any labor union been
recognized as the representative of its employees. The Borrower knows of no
pending, threatened or contemplated strikes, work stoppage or other collective
labor disputes involving its employees or those of its Subsidiaries.
(n) Burdensome Provisions. Neither the Borrower nor any Subsidiary
---------------------
thereof is a party to any indenture, agreement, lease or other instrument, or
subject to any corporate or partnership restriction, Governmental Approval or
Applicable Law which is so unusual or burdensome as in the foreseeable future
could be reasonably expected to have a Material Adverse Effect. The Borrower and
its Subsidiaries do not presently anticipate that future expenditures needed to
meet the provisions of any statutes, orders, rules or regulations of a
Governmental Authority will be so burdensome as to have a Material Adverse
Effect.
(o) Financial Statements. The (i) consolidated balance sheets of the
--------------------
Borrower and its Subsidiaries as of May 31, 1998 and the related statements of
income and retained earnings and cash flows for the Fiscal Years then ended and
(ii) unaudited consolidated balance sheet of the Borrower and its Subsidiaries
as of November 30, 1998 and related unaudited interim statements of revenue and
retained earnings, copies of which have been furnished to the Lender, are
complete and correct and fairly present the assets, liabilities and financial
position of the Borrower and its Subsidiaries as at such dates, and the results
of the operations and changes of
28
financial position for the periods then ended. All such financial statements,
including the related schedules and notes thereto, have been prepared in
accordance with GAAP. The Borrower and its Subsidiaries have no Debt, obligation
or other unusual forward or long-term commitment which is not fairly reflected
in the foregoing financial statements or in the notes thereto.
(p) Projections. The forecasted consolidated and consolidating financial
-----------
statements of Borrower and its Subsidiaries, consisting of consolidated and
consolidating balance sheets, income statements and cash flow statements for
Borrower and its Subsidiaries, giving effect to the consummation of the
transactions contemplated by this Agreement, covering the two-year period
commencing on the date hereof and prepared on a quarterly basis for the first
year and on an annual basis thereafter (the "Projections"): (i) are based on
reasonable estimates and assumptions; and (ii) reflected, as of the date
prepared, and continue to reflect, as of the date of this Agreement, the
reasonable estimate of Borrower of the results of operations and other
information projected therein for the periods covered thereby.
(q) No Material Adverse Change. Since December 31, 1998, there has been
--------------------------
no material adverse change in the properties, business, operations, prospects,
or condition (financial or otherwise) of the Borrower and its Subsidiaries and
no event has occurred or condition arisen that could reasonably be expected to
have a Material Adverse Effect.
(r) Solvency. As of the Closing Date and after giving effect to each Loan
--------
made hereunder, the Borrower and each of its Subsidiaries will be Solvent.
(s) Titles to Properties. Each of the Borrower and its Subsidiaries has
--------------------
such leasehold title to the real property leased by it as is necessary or
desirable to the conduct of its business and valid and legal title to all of its
personal property and assets, including, but not limited to, those reflected on
the balance sheets of the Borrower and its Subsidiaries delivered pursuant to
Section 6.1(o), except those which have been disposed of by the Borrower or its
Subsidiaries subsequent to such date which dispositions have been in the
ordinary course of business or as otherwise expressly permitted hereunder.
Neither the Borrower nor any of its Subsidiaries owns any real property.
(t) Liens. None of the properties and assets of the Borrower or any
-----
Subsidiary thereof is subject to any Lien, except Liens permitted pursuant to
Section 10.2. No financing statement under the Uniform Commercial Code of any
state which names the Borrower or any Subsidiary thereof or any of their
respective trade names or divisions as debtor and which has not been terminated,
has been filed in any state or other jurisdiction and neither the Borrower nor
any Subsidiary thereof has signed any such financing statement or any security
agreement authorizing any secured party thereunder to file any such financing
statement, except to perfect those Liens permitted by Section 10.2 hereof.
(u) Debt and Contingent Obligations. Schedule 6.1(u) is a complete and
------------------------------- ---------------
correct listing of all Debt and Contingent Obligations of the Borrower and its
Subsidiaries in excess of $1,000,000. The Borrower and its Subsidiaries have
performed and are in compliance with all of the terms of such Debt and
Contingent Obligations and all instruments and agreements relating
29
thereto, and no default or event of default, or event or condition which with
notice or lapse of time or both would constitute such a default or event of
default on the part of the Borrower or its Subsidiaries exists with respect to
any such Debt or Contingent Obligation.
(v) Litigation. Except as set forth on Schedule 6.1(v), there are no
---------- ---------------
actions, suits or proceedings pending nor, to the knowledge of the Borrower,
threatened against or in any other way relating adversely to or affecting the
Borrower or any Subsidiary thereof or any of their respective properties in any
court or before any arbitrator of any kind or before or by any Governmental
Authority.
(w) Absence of Defaults. No event has occurred or is continuing which
-------------------
constitutes a Default or an Event of Default, or which constitutes, or which
with the passage of time or giving of notice or both would constitute, a default
or event of default by the Borrower or any Subsidiary thereof under any Material
Contract or judgment, decree or order to which the Borrower or its Subsidiaries
is a party or by which the Borrower or its Subsidiaries or any of their
respective properties may be bound or which would require the Borrower or its
Subsidiaries to make any payment thereunder prior to the scheduled maturity date
therefor.
(x) Year 2000 Compliance. Borrower and its Subsidiaries have adopted and
--------------------
implemented a plan which, no later than October 31, 1999, in the case of the
billing system for the Los Angeles campus, and not later than August 31, 1999,
in all other cases, and at all times thereafter, will cause all software and
other processing capabilities of Borrower and each of its Subsidiaries to be
Year 2000 Compliant.
(y) Flight Enterprises. The aggregate value of the assets of Flight
------------------
Enterprises is less than $1,000 and Flight Enterprises is not engaged in the
active conduct of any business.
(z) Accuracy and Completeness of Information. All written information,
----------------------------------------
reports and other papers and data produced by or on behalf of the Borrower or
any Subsidiary thereof and furnished to the Lender were, at the time the same
were so furnished, complete and correct in all respects to the extent necessary
to give the recipient a true and accurate knowledge of the subject matter. No
document furnished or written statement made to the Lender by the Borrower or
any Subsidiary thereof in connection with the negotiation, preparation or
execution of this Agreement or any of the Loan Documents contains or will
contain any untrue statement of a fact material to the creditworthiness of the
Borrower or its Subsidiaries or omits or will omit to state a fact necessary in
order to make the statements contained therein not misleading. The Borrower is
not aware of any facts which it has not disclosed in writing to the Lender
having a Material Adverse Effect, or insofar as the Borrower can now foresee,
could reasonably be expected to have a Material Adverse Effect.
SECTION 6.2 Survival of Representations and Warranties Etc. All
----------------------------------------------
representations and warranties set forth in this Article 6 and all
representations and warranties contained in any certificate, or any of the Loan
Documents (including but not limited to any such representation or warranty made
in or in connection with any amendment thereto) shall constitute representations
and warranties made under this Agreement. All representations and warranties
30
made under this Agreement shall be made or deemed to be made at and as of the
Closing Date, shall survive the Closing Date and shall not be waived by the
execution and delivery of this Agreement, any investigation made by or on behalf
of the Lender or any borrowing hereunder.
ARTICLE 7.
FINANCIAL INFORMATION AND NOTICES
---------------------------------
Until all the Obligations have been paid and satisfied in full, all Letters
of Credit have expired or been terminated and the Commitment has been
terminated, unless the prior written consent of the Lender has been obtained,
the Borrower will furnish or cause to be furnished to the Lender at Lender's
Office or such other office as may be designated by the Lender from time to
time:
SECTION 7.1 Financial Statements and Projections.
------------------------------------
(a) Quarterly Financial Statements. As soon as practicable and in any
------------------------------
event within forty-five (45) days after the end of each fiscal quarter,
unaudited consolidated and consolidating balance sheets of the Borrower and its
Subsidiaries as of the close of such fiscal quarter and unaudited consolidated
and consolidating statements of operations and cash flows for the fiscal quarter
then ended and that portion of the Fiscal Year then ended, including the notes
thereto, all in reasonable detail setting forth in comparative form the
corresponding figures for the preceding Fiscal Year and prepared by the Borrower
in accordance with GAAP (except as to the absence of footnotes) and, if
applicable, containing disclosure of the effect on the financial position or
results of operations of any change in the application of accounting principles
and practices during the period, and certified by the chief financial officer of
the Borrower to present fairly in all material respects the financial condition
of the Borrower and its Subsidiaries as of their respective dates and the
results of operations of the Borrower and its Subsidiaries for the respective
periods then ended, subject to normal year end adjustments.
(b) Annual Financial Statements. As soon as practicable and in any event
---------------------------
within one hundred and five (105) days after the end of each Fiscal Year,
audited consolidated and consolidating balance sheets of the Borrower and its
Subsidiaries as of the close of such Fiscal Year and audited consolidated and
consolidating statements of operations and cash flows for the Fiscal Year then
ended, including the notes thereto, all in reasonable detail setting forth in
comparative form the corresponding figures for the preceding Fiscal Year and
prepared by an independent certified public accounting firm acceptable to the
Lender in accordance with GAAP and, if applicable, containing disclosure of the
effect on the financial position or results of operation of any change in the
application of accounting principles and practices during the year, and
accompanied by a report thereon by such certified public accountants that is not
qualified with respect to scope limitations imposed by the Borrower or any of
its Subsidiaries or with respect to accounting principles followed by the
Borrower or any of its Subsidiaries not in accordance with GAAP.
31
(c) Annual Business Plan and Financial Projections. As soon as
----------------------------------------------
practicable and in any event prior to the beginning of each Fiscal Year, a
business plan of the Borrower and its Subsidiaries for the ensuing four (4)
fiscal quarters, such plan to be prepared in accordance with GAAP and to
include, on a quarterly basis, the following: a quarterly operating and capital
budget, a projected income statements, statements of cash flows and balance
sheets and a report containing management's discussion and analysis of such
projections, accompanied by a certificate from the chief financial officer of
the Borrower to the effect that, to the best of such officer's knowledge, such
projections are good faith estimates of the financial condition and operations
of the Borrower and its Subsidiaries for such four (4) quarter period.
SECTION 7.2 Officer's Compliance Certificate. At each time
--------------------------------
financial statements are delivered pursuant to Sections 7.1(a) or (b) and at
such other times as the Lender shall reasonably request, a certificate of the
chief financial officer or the treasurer of the Borrower in the form of Exhibit
-------
E attached hereto (an "Officer's Compliance Certificate").
-
SECTION 7.3 Accountants' Certificate. At each time financial
------------------------
statements are delivered pursuant to Section 7.1(b), a certificate of the
independent public accountants certifying such financial statements addressed to
the Lender:
(a) stating that in making the examination necessary for the certification
of such financial statements, they obtained no knowledge of any Default or Event
of Default or, if such is not the case, specifying such Default or Event of
Default and its nature and period of existence; and
(b) including the calculations prepared by such accountants required to
establish whether or not the Borrower and its Subsidiaries are in compliance
with the financial covenants set forth in Article 9 hereof as at the end of each
respective period.
SECTION 7.4 Other Reports.
-------------
(a) Promptly upon receipt thereof, copies of all reports, if any,
submitted to the Borrower or its Board of Directors by its independent public
accountants in connection with their auditing function, including, without
limitation, any management report and any management responses thereto; and
(b) Such other information regarding the operations, business affairs and
financial condition of the Borrower or any of its Subsidiaries as the Lender may
reasonably request.
SECTION 7.5 Notice of Litigation and Other Matters. Prompt (but
--------------------------------------
in no event later than ten (10) days after an officer of the Borrower obtains
knowledge thereof) telephonic and written notice of:
(a) the commencement of all proceedings and investigations by or before
any Governmental Authority and all actions and proceedings in any court or
before any arbitrator against or involving the Borrower or any Subsidiary
thereof or any of their respective properties,
32
assets or businesses which, if adversely decided, could reasonably be expected
to have a Material Adverse Effect;
(b) any notice of any violation received by the Borrower or any Subsidiary
thereof from any Governmental Authority including, without limitation, any
notice of violation of Environmental Laws which in any such case could
reasonably be expected to have a Material Adverse Effect;
(c) any labor controversy that has resulted in, or threatens to result in,
a strike or other work action against the Borrower or any Subsidiary thereof:
(d) any attachment, judgment, lien, levy or order exceeding $250,000 that
may be assessed against or threatened against the Borrower or any Subsidiary
thereof;
(e) any Default or Event of Default, or any event which constitutes or
which with the passage of time or giving of notice or both would constitute a
default or event of default under any Material Contract to which the Borrower or
any of its Subsidiaries is a party or by which the Borrower or any Subsidiary
thereof or any of their respective properties may be bound;
(f) (i) any unfavorable determination letter from the Internal Revenue
Service regarding the qualification of an Employee Benefit Plan under Section
401(a) of the Code (along with a copy thereof), (ii) all notices received by the
Borrower or any ERISA Affiliate of the PBGC's intent to terminate any Pension
Plan or to have a trustee appointed to administer any Pension Plan, (iii) all
notices received by the Borrower or any ERISA Affiliate from a Multiemployer
Plan sponsor concerning the imposition or amount of withdrawal liability
pursuant to Section 4202 of ERISA and (iv) the Borrower obtaining knowledge or
reason to know that the Borrower or any ERISA Affiliate has filed or intends to
file a notice of intent to terminate any Pension Plan under a distress
termination within the meaning of Section 4041(c) of ERISA; and
(g) any event which makes any of the representations set forth in Section
6.1 inaccurate in any material respect.
SECTION 7.6 Accuracy of Information. All written information, reports
-----------------------
statements and other papers and data furnished by or on behalf of the Borrower
to the Lender (other than financial forecasts) whether pursuant to this Article
7 or any other provision of this Agreement, or any of the Security Documents,
shall be, at the time the same is so furnished, complete and correct in all
material respects to the extent necessary to give the Lender complete, true and
accurate knowledge of the subject matter based on the Borrower's knowledge
thereof.
33
ARTICLE 8.
AFFIRMATIVE COVENANTS
---------------------
Until all the Obligations have been finally and indefeasibly paid and
satisfied in full, all Letters of Credit have expired or been terminated and the
Commitment has been terminated, unless the prior written consent of the Lender
has been obtained, the Borrower will, and will cause each of its Subsidiaries
to:
SECTION 8.1 Preservation of Corporate Existence and Related Matters.
-------------------------------------------------------
Except as permitted by Section 10.4, preserve and maintain its separate
corporate existence and all rights, franchises, licenses and privileges
necessary to the conduct of its business, and qualify and remain qualified as a
foreign corporation and authorized to do business in each jurisdiction in which
the failure to so qualify would have a Material Adverse Effect.
SECTION 8.2 Maintenance of Property. Protect and preserve all
-----------------------
properties useful in and material to its business, including copyrights,
patents, trade names and trademarks; maintain in good working order and
condition all buildings, equipment and other tangible real and personal
property; and from time to time make or cause to be made all renewals,
replacements and additions to such property necessary for the conduct of its
business, so that the business carried on in connection therewith may be
properly and advantageously conducted at all times.
SECTION 8.3 Insurance. Maintain insurance with financially sound
---------
and reputable insurance companies against such risks and in such amounts as are
customarily maintained by similar businesses and as may be required by
Applicable Law, and on the Closing Date and from time to time thereafter deliver
to the Lender upon its request a detailed list of the insurance then in effect,
stating the names of the insurance companies, the amounts and rates of the
insurance, the dates of the expiration thereof and the properties and risks
covered thereby.
SECTION 8.4 Accounting Methods and Financial Records. Maintain a
----------------------------------------
system of accounting, and keep such books, records and accounts (which shall be
true and complete in all material respects) as may be required or as may be
necessary to permit the preparation of financial statements in accordance with
GAAP and in compliance with the regulations of any Governmental Authority having
jurisdiction over it or any of its properties.
SECTION 8.5 Payment and Performance of Obligations. Pay and perform
--------------------------------------
all Obligations under this Agreement and the other Loan Documents, and pay or
perform (a) all taxes, assessments and other governmental charges that may be
levied or assessed upon it or any of its property, and (b) all other
indebtedness, obligations and liabilities in accordance with customary trade
practices; provided, that the Borrower or such Subsidiary may contest any item
--------
described in the foregoing clauses (a) or (b) in good faith so long as adequate
reserves are maintained with respect thereto in accordance with GAAP.
34
SECTION 8.6 Compliance With Laws and Approvals. Observe and remain in
----------------------------------
compliance with all Applicable Laws in all material respects and maintain in
full force and effect all Governmental Approvals, in each case applicable to the
conduct of its business.
SECTION 8.7 Environmental Laws. In addition to and without limiting the
------------------
generality of Section 8.6, (a) comply with, and ensure such compliance by all
tenants and subtenants, if any, with, all applicable Environmental Laws and
obtain and comply with and maintain, and ensure that all tenants and subtenants
obtain and comply with and maintain, any and all licenses, approvals,
notifications, registrations or permits required by applicable Environmental
Laws, (b) conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under
Environmental Laws, and promptly comply with all lawful orders and directives of
any Governmental Authority regarding Environmental Laws, and (c) defend,
indemnify and hold harmless the Lender, and its parents, Subsidiaries,
Affiliates, employees, agents, officers and directors, from and against any
claims, demands, penalties, fines, liabilities, settlements, damages, costs and
expenses of whatever kind or nature known or unknown, contingent or otherwise,
arising out of, or in any way relating to the violation of, noncompliance with
or liability under any Environmental Laws applicable to the operations of the
Borrower or such Subsidiary, or any orders, requirements or demands of
Governmental Authorities related thereto, including, without limitation,
reasonable attorney 's and consultant's fees, investigation and laboratory fees,
response costs, court costs and litigation expenses, except to the extent that
any of the foregoing directly result from the gross negligence or willful
misconduct of the party seeking indemnification therefor.
SECTION 8.8 Compliance with ERISA. In addition to and without limiting
---------------------
the generality of Section 8.6, (a) comply with all applicable provisions of
ERISA and the regulations and published interpretations thereunder with respect
to all Employee Benefit Plans, (b) not take any action or fail to take action
the result of which could be a liability to the PBGC or to a Multiemployer Plan,
(c) not participate in any prohibited transaction that could result in any civil
penalty under ERISA or tax under the Code, (d) operate each Employee Benefit
Plan in such a manner that will not incur any tax liability under Section 4980B
of the Code or any liability to any qualified beneficiary as defined in Section
4980B of the Code and (e) furnish to the Lender upon the Lender's request such
additional information about any Employee Benefit Plan as may be reasonably
requested by the Lender.
SECTION 8.9 Compliance With Agreements. Comply in all respects with each
--------------------------
term, condition and provision of all material leases, agreements and other
instruments entered into in the conduct of its business including, without
limitation, any Material Contract.
SECTION 8.10 Conduct of Business. Engage only in businesses in
-------------------
substantially the same fields as the businesses conducted on the Closing Date
and in lines of business reasonably related thereto.
SECTION 8.11 Visits and Inspections. Permit representatives of the
----------------------
Lender, from time to time during normal business hours, to visit and inspect its
properties; inspect, audit and make extracts from its books, records and files,
including, but not limited to, management letters
35
prepared by independent accountants; and discuss with its principal officers,
and its independent accountants, its business, assets, liabilities, financial
condition, results of operations and business prospects.
SECTION 8.12 Additional Guarantors. Cause each Person which becomes
---------------------
a Subsidiary of Borrower after the Closing Date, promptly following such
Person's becoming a Subsidiary, to execute a joinder agreement, in form and
substance satisfactory to Lender (a "Joinder Agreement"), pursuant to which such
new Subsidiary shall become a party to the Guaranty, the Security Agreement, and
the Pledge Agreement, and to execute such other agreements, documents,
instruments and financing statements as the Lender shall require to ensure that
such new Subsidiary has guaranteed the Obligations hereunder and to ensure that
the Lender has a perfected, first priority security interest in all of the
assets, whether real or personal, tangible or intangible, of such new
Subsidiary, and cause the Borrower and its other Subsidiaries to execute such
consents and acknowledgments as the Lender may require in connection therewith.
SECTION 8.13 Year 2000 Compliance. Cause, on or prior to October 31,
--------------------
1999, in the case of the billing system for the Los Angeles, California campus,
and on or prior to August 31, 1999, in all other case, and in all cases at all
times thereafter, all software and other processing capabilities of Borrower and
its Subsidiaries to be Year 2000 Compliant.
SECTION 8.14 Further Assurances. Make, execute and deliver all such
------------------
additional and further acts, things, deeds and instruments as the Lender may
reasonably require to document and consummate the transactions contemplated
hereby and to vest completely in and insure the Lender its rights under this
Agreement, the Note, the Letters of Credit and the other Loan Documents.
ARTICLE 9.
FINANCIAL COVENANTS
-------------------
Until all the Obligations have been finally and indefeasibly paid and
satisfied in full, all Letters of Credit have expired or been terminated and the
Commitment has been terminated, unless the prior written consent of the Lender
has been obtained, the Borrower and its Subsidiaries on a consolidated basis
will not:
SECTION 9.1. Net Worth. Permit at any time its Net Worth to be less
---------
than an amount equal to (a) in the case of the fiscal quarter of Borrower ending
March 31, 1999, $36,000,000; or (b) for any subsequent fiscal quarter, an amount
equal to the sum of (i) the Net Worth required pursuant to this Section 9.1 as
of the last day of the immediately preceding fiscal quarter of Borrower plus
----
(ii) 50% of the Borrower's Net Income (if positive) for such fiscal quarter plus
----
(iii) 75% of the net proceeds received by Borrower from the issuance of its
Capital Stock during such fiscal quarter, calculated in each case on a
consolidated basis for Borrower and its consolidated Subsidiaries in accordance
with GAAP.
36
SECTION 9.2. Fixed Charge Coverage Ratio. As of any fiscal quarter end,
---------------------------
commencing with the fiscal quarter ending March 31, 2000, permit the Fixed
Charge Coverage Ratio to be less than 1.00 to 1.00.
SECTION 9.3. Leverage Ratio. As of any fiscal quarter end, commencing
--------------
with the fiscal quarter ending March 31, 2000, permit Borrower's Leverage Ratio
to be more than 5.00 to 1.00.
SECTION 9.4. Rent Expense Ratio. As of the last day of any fiscal
------------------
quarter, commencing with the fiscal quarter ending March 31, 2000, permit the
ratio of (a) Borrower's Scheduled Real Property Rent Expense for the next
succeeding twelve (12) month period to (b) Borrower's Revenues for the twelve
month period then ending, to be greater than 0.120 to 1.000.
SECTION 9.5. Ratio of Actual to Budgeted Revenues. For the period from
------------------------------------
the Closing Date to and including Decenber 31, 1999, permit Borrower's Revenues
for each fiscal quarter to be less than ninety percent (90%) of the revenues
budgeted by Borrower for such fiscal quarter in the budget set forth on SCHEDULE
9.5 hereto.
SECTION 9.6. Quarterly Rent Expense Ratio. As of the last day of any
----------------------------
fiscal quarter ending on or after the Closing Date but prior to January 1, 2000,
permit the ratio of (a) Borrower's Scheduled Real Property Rent Expense for the
next succeeding fiscal quarter to (b) Borrower's Revenues for the fiscal quarter
then ending, to be greater than 0.135 to 1.000.
ARTICLE 10.
NEGATIVE COVENANTS
------------------
Until all the Obligations have been finally and indefeasibly paid and
satisfied in full, all Letters of Credit have expired or been terminated and the
Commitment has been terminated, unless the prior written consent of the Lender
has been obtained, the Borrower has not and will not permit any of its
Subsidiaries to:
SECTION 10.1 Limitations on Debt. Create, incur, assume or suffer to
-------------------
exist any Debt or Contingent Obligations except:
(a) the Obligations;
(b) Debt incurred in connection with a Hedging Agreement with a
counterparty and upon terms and conditions reasonably satisfactory to the
Lender;
(c) Debt (i) existing on the Closing Date and not otherwise permitted under
this Section 10.1, as set forth on Schedule 6.1(u) and the renewal and
---------------
refinancing (but not the increase) thereof plus (ii) additional purchase money
----
Debt of the Borrower and its Subsidiaries or Debt incurred in connection with
Capital Lease in an aggregate outstanding amount not to
37
exceed, in the case of this clause (ii), $4,000,000, during the Fiscal Year of
Borrower ending December 31, 1999, and $8,000,000 in the aggregate during the
term of this Agreement; and
(d) intercompany Debt between the Borrower and any Guarantor or between
Guarantors;
provided, that none of the Debt permitted to be incurred by this Section shall
--------
restrict, limit or otherwise encumber (by covenant or otherwise) the ability of
any Subsidiary of the Borrower to make any payment to the Borrower or any of its
Subsidiaries (in the form of dividends, intercompany advances or otherwise) for
the purpose of enabling the Borrower to pay the Obligations.
SECTION 10.2 Limitations on Liens. Create, incur, assume or suffer to
--------------------
exist, any Lien on or with respect to any of its assets or properties (including
without limitation shares of Capital Stock), real or personal, whether now owned
or hereafter acquired, except:
(a) Liens for taxes, assessments and other governmental charges or levies
(excluding any Lien imposed pursuant to any of the provisions of ERISA or
Environmental Laws) not yet due or as to which the period of grace (not to
exceed thirty (30) days), if any, related thereto has not expired;
(b) the claims of materialmen, mechanics, carriers, warehousemen,
processors or landlords for labor, materials, supplies or rentals or similar
Liens imposed by law incurred in the ordinary course of business (i) which are
not overdue for a period of more than thirty (30) days or (ii) which are being
contested in good faith and by appropriate proceedings;
(c) Liens consisting of deposits or pledges made in the ordinary course of
business in connection with, or to secure payment of, obligations under workers'
compensation, unemployment insurance or similar legislation or obligations and
deposits made in the ordinary course of business in connection with, or to
secure payment of, obligations under insurance policies;
(d) Liens of the Lender;
(e) Liens not otherwise permitted by this Section 10.2 and in existence on
the Closing Date and described on Schedule 10.2; and
-------------
(f) Liens securing Debt permitted under Section 10.1(c)(ii); provided that
--------
(i) such Liens shall be created substantially simultaneously with the
acquisition of the related asset, (ii) such Liens do not at any time encumber
any property other than the property financed by such Debt, (iii) the amount of
Debt secured thereby is not increased and (iv) the principal amount of Debt
secured by any such Lien shall at no time exceed ninety percent (90%) of the
original purchase price of such property at the time it was acquired.
38
SECTION 10.3 Limitations on Loans. Advances, Investments and Acquisitions.
------------------------------------------------------------
Purchase, own, invest in or otherwise acquire, directly or indirectly, any
Capital Stock, interests in any partnership or joint venture (including without
limitation the creation or capitalization of any Subsidiary), evidence of Debt
or other obligation or security, substantially all or a portion of the business
or assets of any other Person or any other investment or interest whatsoever in
any other Person, or make or permit to exist, directly or indirectly, any loans,
advances or extensions of credit to, or any investment in cash or by delivery of
property in, any Person, or enter into, directly or indirectly, any commitment
or option in respect of the foregoing except:
(a) investments in Subsidiaries existing on the Closing Date and the other
existing loans, advances and investments described on Schedule 10.3;
-------------
(b) investments in (i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any agency thereof
maturing within 120 days from the date of acquisition thereof, (ii) commercial
paper maturing no more than 120 days from the date of creation thereof and
currently having the highest rating obtainable from either Standard & Poor's
Ratings Services, a division of The ▇▇▇▇▇▇-▇▇▇▇ Companies, Inc. or ▇▇▇▇▇'▇
Investors Service, Inc., (iii) certificates of deposit maturing no more than 120
days from the date of creation thereof issued by commercial banks incorporated
under the laws of the United States of America, each having combined capital,
surplus and undivided profits of not less than $500,000,000 and having a rating
of "A" or better by a nationally recognized rating agency; provided, that the
--------
aggregate amount invested in such certificates of deposit shall not at any time
exceed $5,000,000 for any one such certificate of deposit and $10,000,000 for
any one such bank, or (iv) time deposits maturing no more than 30 days from the
date of creation thereof with commercial banks or savings banks or savings and
loan associations each having membership either in the FDIC or the deposits of
which are insured by the FDIC and in amounts not exceeding the maximum amounts
of insurance thereunder;
(c) investments made by Borrower or any Subsidiary in any Guarantor; and
(d) loans and advances made to employees in an aggregate principal amount
not to exceed $100,000 at any one time outstanding.
SECTION 10.4 Limitations on Mergers and Liquidation. Merge, consolidate or
--------------------------------------
enter into any similar combination with any other Person or liquidate, wind-up
or dissolve itself (or suffer any liquidation or dissolution) except:
(a) any Wholly-Owned Subsidiary of the Borrower may merge with any other
Wholly-Owned Subsidiary of the Borrower which is also a Guarantor;
(b) any Wholly-Owned Subsidiary may merge into the Person in connection
with an acquisition consented by Lender in accordance with Section 10.3;
provided that the Person surviving such merger (i) is a Wholly-Owned Subsidiary
--------
and (ii) executes and delivers all instruments, documents and agreements
required by Section 8.12 hereof; and
39
(c) any Wholly-Owned Subsidiary of the Borrower may wind-up into the
Borrower or any other Wholly-Owned Subsidiary of the Borrower which is a
Guarantor.
SECTION 10.5 Limitations on Sale of Assets. Convey, sell, lease, assign,
-----------------------------
transfer or otherwise dispose of any of its property, business or assets
(including, without limitation, the sale of any receivables and leasehold
interests and any sale-leaseback or similar transaction), whether now owned or
hereafter acquired except:
(a) the sale of inventory in the ordinary course of business;
(b) the sale of obsolete assets no longer used or usable in the business of
the Borrower which is a Guarantor or any of its Subsidiaries and having an
aggregate value of not greater than $750,000;
(c) the transfer of assets to the Borrower or any Wholly-Owned Subsidiary
of the Borrower pursuant to Section 10.4(c); and
(d) the sale or discount without recourse of accounts receivable arising in
the ordinary course of business in connection with the compromise or collection
thereof.
SECTION 10.6 Limitations on Dividends and Distributions. Declare or pay
------------------------------------------
any dividends upon any of its Capital Stock; purchase, redeem, retire or
otherwise acquire, directly or indirectly, any shares of its Capital Stock, or
make any distribution of cash, property or assets among the holders of shares of
its Capital Stock, or make any change in its capital structure; provided that:
--------
(a) the Borrower or any Subsidiary may pay dividends in shares of its own
Capital Stock;
(b) any Subsidiary may pay cash dividends to the Borrower or to any Wholly-
Owned Subsidiary of Borrower; and
(c) the Borrower may purchase up to one million shares of its common stock
for an aggregate purchase price not to exceed $1,000,000 during the Fiscal Year
ending December 31, 1999 and not to exceed $5,000,000 in the aggregate during
the term of this Agreement; provided, however, that at the time of such
-------- -------
purchase, and giving effect thereto, there does not exist a Default or Event of
Default.
SECTION 10.7 Limitations on Exchange and Issuance of Capital Stock.
-----------------------------------------------------
Issue, sell or otherwise dispose of any class or series of Capital Stock that,
by its terms or by the terms of any security into which it is convertible or
exchangeable, is, or upon the happening of an event or passage of time would be,
(a) convertible or exchangeable into Debt or (b) required to be redeemed or
repurchased, including at the option of the holder, in whole or in part, or has,
or
40
upon the happening of an event or passage of time would have, a redemption or
similar payment due.
SECTION 10.8 Transactions with Affiliates. Directly or indirectly: (a)
----------------------------
make any loan or advance to, or purchase or assume any note or other obligation
to or from, any of its officers, directors, shareholders or other Affiliates, or
to or from any member of the immediate family of any of its officers, directors,
shareholders or other Affiliates, or subcontract any operations to any of its
Affiliates, or (b) enter into, or be a party to, any transaction with any of its
Affiliates, except pursuant to the reasonable requirements of its business and
upon fair and reasonable terms that are fully disclosed to the Lender (which
disclosure may be made by the delivery to Lender of reports or other documents
disclosing such transactions which are filed by the Borrower with the Securities
and Exchange Commission) and are no less favorable to it than it would obtain in
a comparable arm's length transaction with a Person not its Affiliate.
SECTION 10.9 Certain Accounting Changes. Change its Fiscal Year end, or
--------------------------
make any change in its accounting treatment and reporting practices except as
required by GAAP.
SECTION 10.10 Restrictive Agreements. Enter into any Debt which contains
----------------------
any negative pledge on assets or any covenants more restrictive than the
provisions of Articles 8, 9 and 10 hereof, or which restricts, limits or
otherwise encumbers its ability to incur Liens on or with respect to any of its
assets or properties other than the assets or properties securing such Debt.
SECTION 10.11 Flight Enterprises. Permit Flight Enterprises to own
------------------
any material assets or conduct any business.
ARTICLE 11.
DEFAULT AND REMEDIES
--------------------
SECTION 11.1 Events of Default. Each of the following shall constitute
-----------------
an Event of Default, whatever the reason for such event and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment or order of any court or any order, rule or regulation of any
Governmental Authority or otherwise:
(a) Default in Payment of Principal of Loans. The Borrower shall default in
----------------------------------------
any payment of principal of any Loan or the Note when and as due (whether at
maturity, by reason of acceleration or otherwise).
(b) Other Payment Default. The Borrower shall default in the payment when
---------------------
and as due (whether at maturity, by reason of acceleration or otherwise) of
interest on any Loan or Note or the payment of any other Obligation, and such
default shall continue unremedied for five (5) Business Days.
41
(c) Misrepresentation. Any representation or warranty made or deemed to be
-----------------
made by the Borrower or any of its Subsidiaries under this Agreement, any Loan
Document or any amendment hereto or thereto, shall at any time prove to have
been incorrect or misleading in any material respect when made or deemed made.
(d) Default in Performance of Covenants and Conditions. The Borrower or any
--------------------------------------------------
Subsidiary thereof shall default in the performance or observance of (i) any
term, covenant, condition or agreement contained in Article 7 or 8 hereof
(excluding Section 7.5 hereof) and such default shall continued unremedied for
thirty (30) days or (ii) any other term, covenant, condition or agreement
contained in this Agreement (other than as specifically provided for otherwise
in this Section 11.1) or any other Loan Document.
(e) Hedging Agreement. Any termination payment shall be due by the Borrower
-----------------
under any Hedging Agreement and such amount is not paid within three (3)
Business Days of the due date thereof.
(f) Debt Cross-Default. The Borrower or any of its Subsidiaries shall (i)
------------------
default in the payment of any Debt (other than the Obligations) which is
outstanding in a principal amount of at least $200,000 beyond the period of
grace if any, provided in the instrument or agreement under which such Debt was
created, or (ii) default in the observance or performance of any other agreement
or condition relating to any Debt (other than the Obligations) which is
outstanding in a principal amount of at least $200,000 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 Debt (or a
trustee or agent on behalf of such holder or holders) to cause with the giving
of notice if required, any such Debt to become due prior to its stated maturity
(any applicable grace period having expired).
(g) Other Cross-Defaults. The Borrower or any of its Subsidiaries shall
--------------------
default in the payment when due, or in the performance or observance, of any
obligation or condition of any Material Contract beyond the period of grace if
any, provided in such Material Contract.
(h) Change in Control. ▇▇▇▇▇ ▇▇▇▇▇▇ shall fail to beneficially own (within
-----------------
the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as amended,
as in effect on the date hereof) shares of Capital Stock with the power to vote
at least a majority of the votes entitled to be cast for the election of
directors of the Borrower (it being understood that the shares of Capital Stock
so owned by ▇▇▇▇▇ ▇▇▇▇▇▇ need only represent a majority of the voting power of
the Borrower and need not be a majority of the issued and outstanding shares of
Capital Stock of the Borrower).
(i) Voluntary Bankruptcy Proceeding. The Borrower or any Subsidiary thereof
-------------------------------
shall (i) commence a voluntary case under the federal bankruptcy laws (as now or
hereafter in effect), (ii) file a petition seeking to take advantage of any
other laws, domestic or foreign, relating to bankruptcy, insolvency,
reorganization, winding up or composition for adjustment of debts, (iii) consent
to or fail to contest in a timely and appropriate manner any petition filed
against it in an
42
involuntary case under such bankruptcy laws or other laws, (iv) apply for or
consent to, or fail to contest in a timely and appropriate manner, the
appointment of, or the taking of possession by, a receiver, custodian, trustee,
or liquidator of itself or of a substantial part of its property, domestic or
foreign, (v) admit in writing its inability to pay its debts as they become due,
(vi) make a general assignment for the benefit of creditors, or (vii) take any
corporate action for the purpose of authorizing any of the foregoing.
(j) Involuntary Bankruptcy Proceeding. A case or other proceeding shall be
---------------------------------
commenced against the Borrower or any Subsidiary thereof in any court of
competent jurisdiction seeking (i) relief under the federal bankruptcy laws (as
now or hereafter in effect) or under any other laws, domestic or foreign,
relating to bankruptcy, insolvency, reorganization, winding up or adjustment of
debts, or (ii) the appointment of a trustee, receiver, custodian, liquidator or
the like for the Borrower or any Subsidiary thereof or for all or any
substantial part of their respective assets, domestic or foreign, and such case
or proceeding shall continue undismissed or unstayed for a period of sixty (60)
consecutive days, or an order granting the relief requested in such case or
proceeding (including, but not limited to, an order for relief under such
federal bankruptcy laws) shall be entered.
(k) Failure of Agreements. This Agreement or of any other Loan Document
---------------------
shall for any reason cease to be valid and binding on the Borrower or Subsidiary
party thereto or any such Person shall so state in writing, or any Security
Document shall for any reason cease to create a valid and perfected first
priority Lien on, or security interest in, any of the collateral purported to be
covered thereby, in each case other than in accordance with the express terms
hereof or thereof.
(l) Termination Event. The occurrence of any of the following events: (i)
-----------------
the Borrower or any ERISA Affiliate fails to make full payment when due of all
amounts which, under the provisions of any Pension Plan or Section 412 of the
Code, the Borrower or any ERISA Affiliate is required to pay as contributions
thereto, (ii) an accumulated funding deficiency in excess of $100,000 occurs or
exists, whether or not waived, with respect to any Pension Plan, (iii) a
Termination Event or (iv) the Borrower or any ERISA Affiliate as employers under
one or more Multiemployer Plan makes a complete or partial withdrawal from any
such Multiemployer Plan and the plan sponsor of such Multiemployer Plans
notifies such withdrawing employer that such employer has incurred a withdrawal
liability requiring payments in an amount exceeding $100,000.
(m) Judgment. A judgment or order for the payment of money which causes the
--------
aggregate amount of all such judgments to exceed $250,000 in any Fiscal Year
shall be entered against the Borrower or any of its Subsidiaries by any court
and such judgment or order shall continue undischarged or unstayed for a period
of thirty (30) days.
SECTION 11.2 Remedies. Upon the occurrence of an Event of Default, the
--------
Lender may, by notice to the Borrower:
43
(a) Acceleration; Termination of Facilities. Declare the principal of and
---------------------------------------
interest on the Loans, the Note, the Reimbursement Obligations and the other
Obligations at the time outstanding, and all other amounts owed to the Lender
under this Agreement or any of the other Loan Documents (including, without
limitation, all L/C Obligations, whether or not the beneficiaries of the then
outstanding Letters of Credit shall have presented the documents required
thereunder), to be forthwith due and payable, whereupon the same shall
immediately become due and payable without presentment, demand, protest or other
notice of any kind, all of which are expressly waived, anything in this
Agreement or the other Loan Documents to the contrary notwithstanding, and
terminate the Credit Facility and any right of the Borrower to request
borrowings or Letters of Credit thereunder; provided, that upon the occurrence
--------
of an Event of Default specified in Section 11.1(i) or (j), the Credit Facility
shall be automatically terminated and all Obligations shall automatically become
due and payable.
(b) Letters of Credit. With respect to all Letters of Credit with respect
-----------------
to which presentment for honor shall not have occurred at the time of an
acceleration pursuant to the preceding paragraph, require the Borrower at such
time to deposit in a cash collateral account opened by the Lender an amount
equal to the aggregate then undrawn and unexpired amount of such Letters of
Credit. Amounts held in such cash collateral account shall be applied by the
Lender to the payment of drafts drawn under such Letters of Credit, and the
unused portion thereof after all such Letters of Credit shall have expired, been
terminated or been fully drawn upon, if any, shall be applied to repay the other
Obligations. After all such Letters of Credit shall have expired, been
terminated or been fully drawn upon, the Reimbursement Obligations shall have
been satisfied and all other Obligations shall have been paid in full, the
balance, if any, in such cash collateral account shall be returned to the
Borrower.
(c) Rights of Collection. Exercise all of its other rights and remedies
--------------------
under this Agreement, the other Loan Documents and Applicable Law, in order to
satisfy all of the Borrower's Obligations.
SECTION 11.3 Rights and Remedies Cumulative; Non-Waiver; etc.. The
------------------------------------------------
enumeration of the rights and remedies of the Lender set forth in this Agreement
is not intended to be exhaustive and the exercise by the Lender of any right or
remedy shall not preclude the exercise of any other rights or remedies, all of
which shall be cumulative, and shall be in addition to any other right or remedy
given hereunder or under the Loan Documents or that may now or hereafter exist
in law or in equity or by suit or otherwise. No delay or failure to take action
on the part of the Lender in exercising any right, power or privilege shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right, power or privilege preclude other or further exercise thereof or the
exercise of any other right, power or privilege or shall be construed to be a
waiver of any Event of Default. No course of dealing between the Borrower, the
Lender or its agents or employees shall be effective to change, modify or
discharge any provision of this Agreement or any of the other Loan Documents or
to constitute a waiver of any Event of Default.
44
ARTICLE 12.
MISCELLANEOUS
-------------
SECTION 12.1 Notices.
-------
(a) Method of Communication. Except as otherwise provided in this
-----------------------
Agreement, all notices and communications hereunder shall be in writing, or by
telephone subsequently confirmed in writing. Any notice shall be effective if
delivered by hand delivery or sent via telecopy, recognized overnight courier
service or certified mail, return receipt requested, and shall be presumed to be
received by a party hereto (i) on the date of delivery if delivered by hand or
sent by telecopy, (ii) on the next Business Day if sent by recognized overnight
courier service and (iii) on the third Business Day following the date sent by
certified mail, return receipt requested. A telephonic notice to the Lender as
understood by the Lender will be deemed to be the controlling and proper notice
in the event of a discrepancy with or failure to receive a confirming written
notice.
(b) Addresses for Notices. Notices to any party shall be sent to it at the
---------------------
following addresses, or any other address as to which all the other parties are
notified in writing.
If to the Borrower: Edutrek International Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
With copies to: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇.▇.
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to Lender: First Union National Bank
▇.▇. ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇
Telephone No. (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
45
With copies to: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇.▇.
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
(c) Lender's Office. The Lender hereby designates its office located at the
---------------
address set forth above, or any subsequent office which shall have been
specified for such purpose by written notice to the Borrower, as the Lender's
Office referred to herein, to which payments due are to be made and at which
Loans will be disbursed and Letters of Credit will be issued.
SECTION 12.2 Expenses; Indemnity. The Borrower will (a) pay all out-of-
-------------------
pocket expenses of the Lender in connection with: (i) the preparation, execution
and delivery of this Agreement and each other Loan Document, whenever the same
shall be executed and delivered, including without limitation all due diligence
expenses and reasonable fees and disbursements of counsel for the Lender, (ii)
the preparation, execution and delivery of any waiver, amendment or consent by
the Lender relating to this Agreement or any other Loan Document, including
without limitation reasonable fees and disbursements of counsel for the Lender
and (iii) the administration and enforcement of any rights and remedies of the
Lender under the Credit Facility, including consulting with appraisers,
accountants, engineers, attorneys and other Persons concerning the nature, scope
or value of any right or remedy of the Lender hereunder or under any other Loan
Document or any factual matters in connection therewith, which expenses shall
include without limitation the reasonable fees and disbursements of such
Persons, and (b) defend, indemnify and hold harmless the Lender, and its parent,
Subsidiaries, Affiliates, employees, agents, officers and directors, from and
against any losses, penalties, fines, liabilities, settlements, damages, costs
and expenses, suffered by any such Person in connection with any claim,
investigation, litigation or other proceeding (whether or not the Lender is a
party thereto) and the prosecution and defense thereof, arising out of or in any
way connected with the Agreement, any other Loan Document or the Loans,
including without limitation reasonable attorneys' and consultants' fees, except
to the extent that any of the foregoing directly result from the gross
negligence or willful misconduct of the party seeking indemnification therefor.
SECTION 12.3 Set-off. In addition to any rights now or hereafter granted
-------
under Applicable Law and not by way of limitation of any such rights, upon and
after the occurrence of any Event of Default and during the continuance thereof,
the Lender in accordance with Section 12.10 is hereby authorized by the Borrower
at any time or from time to time, without notice to the Borrower or to any other
Person, any such notice being hereby expressly waived, to set off and to
appropriate and to apply any and all deposits (general or special, time or
demand, including, but not limited to, indebtedness evidenced by certificates of
deposit, whether matured or unmatured) and any other indebtedness at any time
held or owing by the Lender to or for the credit or the account of the Borrower
against and on account of the Obligations irrespective of whether or not (a) the
Lender shall have made any demand under this Agreement or any of the other Loan
Documents or (b) the Lender shall have declared any or all of the Obligations to
be
46
due and payable as permitted by Section 11.2 and although such Obligations shall
be contingent or unmatured.
SECTION 12.4 Governing Law. This Agreement, the Note and the other Loan
-------------
Documents, unless otherwise expressly set forth therein, shall be governed by,
construed and enforced in accordance with the laws of the State of Georgia,
without reference to the conflicts or choice of law principles thereof.
SECTION 12.5 Consent to Jurisdiction. The Borrower hereby irrevocably
-----------------------
consents to the personal jurisdiction of the state and federal courts located in
▇▇▇▇▇▇ County, Georgia, in any action, claim or other proceeding arising out of
any dispute in connection with this Agreement, the Note and the other Loan
Documents, any rights or obligations hereunder or thereunder, or the performance
of such rights and obligations. The Borrower hereby irrevocably consents to the
service of a summons and complaint and other process in any action, claim or
proceeding brought by the Lender in connection with this Agreement, the Note or
the other Loan Documents, any rights or obligations hereunder or thereunder, or
the performance of such rights and obligations, on behalf of itself or its
property in the manner specified in Section 12.1. Nothing in this Section 12.5
shall affect the right of the Lender to serve legal process in any other manner
permitted by Applicable Law or affect the right of the Lender to bring any
action or proceeding against the Borrower or its properties in the courts of any
other jurisdictions.
SECTION 12.6 Binding Arbitration; Waiver of Jury Trial.
-----------------------------------------
(a) Binding Arbitration. Upon demand of any party, whether made before or
-------------------
after institution of any judicial proceeding, any dispute, claim or controversy
arising out of, connected with or relating to the Note or any other Loan
Documents ("Disputes"), between or among parties to the Note or any other Loan
Document shall be resolved by binding arbitration as provided herein.
Institution of a judicial proceeding by a party does not waive the right of that
party to demand arbitration hereunder. Disputes may include, without
limitation, tort claims, counterclaims, claims brought as class actions, claims
arising from Loan Documents executed in the future, or claims concerning any
aspect of the past, present or future relationships arising out of or connected
with the Loan Documents. Arbitration shall be conducted under and governed by
the Commercial Financial Disputes Arbitration Rules (the "Arbitration Rules") of
the American Arbitration Association and Title 9 of the U.S. Code. All
arbitration hearings shall be conducted in Atlanta, Georgia. The expedited
procedures set forth in Rule 51, et seq. of the Arbitration Rules shall be
-- ---
applicable to claims of less than $250,000. All applicable statutes of
limitation shall apply to any Dispute. A judgment upon the award may be entered
in any court having jurisdiction. The panel from which all arbitrators are
selected shall be comprised of licensed attorneys. The single arbitrator
selected for expedited procedure shall be a retired judge from the highest court
of general jurisdiction, state or federal, of the state where the hearing will
be conducted. Notwithstanding the foregoing, this paragraph shall not apply to
any Hedging Agreement that is a Loan Document.
(b) Jury Trial. TO THE EXTENT PERMITTED BY LAW, THE LENDER AND THE BORROWER
----------
HEREBY IRREVOCABLY WAIVE THEIR RESPECTIVE RIGHTS
47
TO A JURY TRIAL WITH RESPECT TO ANY ACTION, CLAIM OR OTHER PROCEEDING ARISING
OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, THE NOTE OR THE OTHER LOAN
DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER, OR THE PERFORMANCE
OF SUCH RIGHTS AND OBLIGATIONS.
(c) Preservation of Certain Remedies. Notwithstanding the preceding
--------------------------------
binding arbitration provisions, the parties hereto and the other Loan Documents
preserve, without diminution, certain remedies that such Persons may employ or
exercise freely, either alone, in conjunction with or during a Dispute. Each
such Person shall have and hereby reserves the right to proceed in any court of
proper jurisdiction or by self help to exercise or prosecute the following
remedies: (i) all rights to foreclose against any real or personal property or
other security by exercising a power of sale granted in the Loan Documents or
under applicable law or by judicial foreclosure and sale, (ii) all rights of
self help including peaceful occupation of property and collection of rents, set
off, and peaceful possession of property, (iii) obtaining provisional or
ancillary remedies including injunctive relief, sequestration, garnishment,
attachment, appointment of receiver and in filing an involuntary bankruptcy
proceeding, and (iv) when applicable, a judgment by confession of judgment.
Preservation of these remedies does not limit the power of an arbitrator to
grant similar remedies that may be requested by a party in a Dispute.
SECTION 12.7 Reversal of Payments. To the extent the Borrower makes a
--------------------
payment or payments to the Lender or the Lender receives any payment or proceeds
of the collateral which payments or proceeds or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
and/or required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law or equitable cause, then, to
the extent of such payment or proceeds repaid, the Obligations or part thereof
intended to be satisfied shall be revived and continued in full force and effect
as if such payment or proceeds had not been received by the Lender.
SECTION 12.8 Injunctive Relief; Punitive Damages.
-----------------------------------
(a) The Borrower recognizes that, in the event the Borrower fails to
perform, observe or discharge any of its obligations or liabilities under this
Agreement, any remedy of law may prove to be inadequate relief to the Lender.
Therefore, the Borrower agrees that the Lender, at its option, shall be entitled
to temporary and permanent injunctive relief in any such case without the
necessity of proving actual damages.
(b) The Lender and Borrower (on behalf of itself and its Subsidiaries)
hereby agree that no such Person shall have a remedy of punitive or exemplary
damages against any other party to a Loan Document and each such Person hereby
waives any right or claim to punitive or exemplary damages that they may now
have or may arise in the future in connection with any Dispute, whether such
Dispute is resolved through arbitration or judicially.
48
(c) The parties agree that they shall not have a remedy of punitive or
exemplary damages against any other party in any Dispute and hereby waive any
right or claim to punitive or exemplary damages they have now or which may arise
in the future in connection with any Dispute whether the Dispute is resolved by
arbitration or judicially.
SECTION 12.9 Accounting Matters. All financial and accounting
------------------
calculations, measurements and computations made for any purpose relating to
this Agreement, including, without limitation, all computations utilized by the
Borrower or any Subsidiary thereof to determine compliance with any covenant
contained herein, shall, except as otherwise expressly contemplated hereby or
unless there is an express written direction by the Lender to the contrary
agreed to by the Borrower, be performed in accordance with GAAP as in effect on
the Closing Date. In the event that changes in GAAP shall be mandated by the
Financial Accounting Standards Board, or any similar accounting body of
comparable standing, or shall be recommended by the Borrower's certified public
accountants, to the extent that such changes would modify such accounting terms
or the interpretation or computation thereof, such changes shall be followed in
defining such accounting terms only from and after the date the Borrower and the
Lender shall have amended this Agreement to the extent necessary to reflect any
such changes in the financial covenants and other terms and conditions of this
Agreement.
SECTION 12.10 Successors and Assigns; Confidentiality.
---------------------------------------
(a) Benefit of Agreement. 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 shall not
assign or transfer any of its rights or obligations under this Agreement without
the prior written consent of the Lender.
(b) Disclosure of Information; Confidentiality. The Lender shall hold all
------------------------------------------
non-public information with respect to the Borrower obtained pursuant to the
Loan Documents in accordance with its customary procedures for handling
confidential information. Lender may, in connection with any assignment,
proposed assignment, participation or proposed participation of the Obligations
or this Agreement, disclose to the assignee, participant. proposed assignee or
proposed participant, any information relating to the Borrower furnished to the
Lender by or on behalf of the Borrower; provided, that prior to any such
--------
disclosure, each such assignee, proposed assignee, participant or proposed
participant shall agree with the Borrower or the Lender to preserve the
confidentiality of any confidential information relating to the Borrower
received from the Lender.
SECTION 12.11 Amendments, Waivers and Consents. Any term, covenant,
--------------------------------
agreement or condition of this Agreement or any of the other Loan Documents may
be amended or waived by the Lender, and any consent given by the Lender, if, but
only if, such amendment, waiver or consent is in writing signed by the Lender
and, in the case of an amendment, signed by the Borrower.
49
SECTION 12.12 Performance of Duties. The Borrower's obligations under
---------------------
this Agreement and each of the Loan Documents shall be performed by the Borrower
at its sole cost and expense.
SECTION 12.13 All Powers Coupled with Interest. All powers of attorney
--------------------------------
and other authorizations granted to the Lender and any Persons designated by the
Lender pursuant to any provisions of this Agreement or any of the other Loan
Documents shall be deemed coupled with an interest and shall be irrevocable so
long as any of the Obligations remain unpaid or unsatisfied or the Credit
Facility has not been terminated.
SECTION 12.14 Survival of Indemnities. Notwithstanding any termination
-----------------------
of this Agreement, the indemnities to which the Lender is entitled under the
provisions of this Article 12 and any other provision of this Agreement and the
Loan Documents shall continue in full force and effect and shall protect the
Lender against events arising after such termination as well as before.
SECTION 12.15 Titles and Captions. Titles and captions of Articles,
-------------------
Sections and subsections in this Agreement are for convenience only, and neither
limit nor amplify the provisions of this Agreement.
SECTION 12.16 Severability of Provisions Any provision of this Agreement
--------------------------
or any other Loan Document which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective only to the extent
of such prohibition or unenforceability without invalidating the remainder of
such provision or the remaining provisions hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdiction.
SECTION 12.17 Counterparts. This Agreement may be executed in any number
------------
of counterparts and by different parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and shall be binding
upon all parties, their successors and assigns, and all of which taken together
shall constitute one and the same agreement.
SECTION 12.18 Term of Agreement. This Agreement shall remain in effect
-----------------
from the Closing Date through and including the date upon which all Obligations
shall have been indefeasibly and irrevocably paid and satisfied in full. No
termination of this Agreement shall affect the rights and obligations of the
parties hereto arising prior to such termination.
[Signature pages to follow]
50
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed under seal by their duly authorized officers, all as of the day and
year first written above
[CORPORATE SEAL] EDUTREK INTERNATIONAL, INC.
By:_________________________
R. ▇▇▇▇▇▇ ▇▇▇▇▇▇:
Chairman of the Board and CEO
Attest:_____________________
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Secretary
FIRST UNION NATIONAL BANK
By:_________________________
Name:______________________
Title:_____________________
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