EXHIBIT 10.42
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CORINTHIAN COLLEGES, INC.
NOTE PURCHASE AND REVOLVING CREDIT AGREEMENT
$22,500,000
10.27% SENIOR SECURED TERM NOTES DUE OCTOBER 17, 2003
$5,000,000
SENIOR SECURED REVOLVING CREDIT FACILITY
Dated as of October 17, 1996
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TABLE OF CONTENTS
PAGE
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1A. AUTHORIZATION OF ISSUE OF SENIOR SECURED TERM NOTES............................ 1
1B. AUTHORIZATION OF SENIOR SECURED REVOLVING NOTE................................. 1
2. PURCHASE AND SALE OF TERM NOTES; REVOLVING CREDIT FACILITY..................... 2
2A. PURCHASE AND SALE OF TERM NOTES; ORIGINAL ISSUE DISCOUNT.................. 2
2B. REVOLVING CREDIT FACILITY................................................. 2
2B(1). REVOLVING LOANS................................................. 2
2B(2). PREPAYMENT AT THE COMPANY'S OPTION.............................. 3
2B(3). PURCHASE UNDER PARAGRAPH 5E..................................... 3
2B(4). MANNER OF BORROWINGS............................................ 3
2B(5). NON-USAGE FEES.................................................. 4
2B(6). INTEREST AND NON-USAGE FEE PAYMENTS............................. 4
2B(7). ILLEGALITY...................................................... 4
2B(8). BREAKAGE COST INDEMNITY......................................... 5
2B(9). INTEREST RATE LIMITATION........................................ 6
2B(10). RESERVE REQUIREMENTS; CHANGE IN CIRCUMSTANCES................... 6
2B(11). INABILITY TO DETERMINE INTEREST RATE............................ 8
3A. CONDITIONS OF CLOSING..................................................... 8
3A(1). OPINION OF COMPANY'S COUNSEL.................................... 8
3A(2). OPINION OF PRUDENTIAL'S SPECIAL COUNSEL......................... 8
3A(3). REPRESENTATIONS AND WARRANTIES; NO DEFAULT...................... 8
3A(4). STRUCTURING FEE................................................. 8
3A(5). PURCHASE PERMITTED BY APPLICABLE LAWS; APPROVALS................ 9
3A(6). PROCEEDINGS..................................................... 9
3A(7). ACQUISITION OF ASSETS........................................... 9
3A(8). SALE OF SUBORDINATED DEBT; SUBORDINATION OF EXISTING
SECURITIES, RELEASE AND SUBORDINATION OF LIENS; AMENDMENT TO
PURCHASE AGREEMENT.............................................. 10
3A(9). DOCUMENTS....................................................... 10
3A(10). COMMON STOCK PURCHASE WARRANTS.................................. 12
3A(11). CERTIFICATES OF INSURANCE....................................... 12
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3A(12). NO MATERIAL ADVERSE CHANGE; OPENING BALANCE SHEET............... 12
3A(13). SCHEDULE OF RATES............................................... 13
3A(14). FEES AND EXPENSES............................................... 13
3B. CONDITIONS PRECEDENT TO EACH REVOLVING LOAN............................... 13
3B(1). REVOLVING LOAN REQUEST.......................................... 13
3B(2). REPRESENTATIONS AND WARRANTIES; NO DEFAULT...................... 13
3B(3). REVOLVING LOAN PERMITTED BY APPLICABLE LAWS..................... 13
3B(4). LEGAL MATTERS................................................... 14
3B(5). PROCEEDINGS..................................................... 14
3B(6). CHANGE IN THE COMPANY'S CONDITION............................... 14
3B(7). SUBSEQUENT OPINIONS, ETC........................................ 14
4. PREPAYMENTS OF TERM NOTES...................................................... 14
4A. REQUIRED PREPAYMENTS OF TERM NOTES........................................ 14
4B(1). OPTIONAL PREPAYMENT WITH YIELD-MAINTENANCE AMOUNT............... 14
4B(2). PREPAYMENT WITH KEY MAN INSURANCE PROCEEDS...................... 15
4C. NOTICE OF OPTIONAL PREPAYMENT............................................. 15
4D. PARTIAL PAYMENTS PRO RATA................................................. 15
4E. RETIREMENT OF NOTES....................................................... 16
5. AFFIRMATIVE COVENANTS.......................................................... 16
5A. FINANCIAL STATEMENTS...................................................... 16
5B. INFORMATION REQUIRED BY RULE 144A......................................... 20
5C. INSPECTION OF PROPERTY.................................................... 20
5D. COVENANT TO SECURE NOTE EQUALLY........................................... 20
5E CHANGE IN CONTROL PUT OPTION.............................................. 21
5F. KEY MAN LIFE INSURANCE.................................................... 21
5G. MAINTENANCE OF PROPERTY................................................... 21
5H. MAINTENANCE OF INSURANCE.................................................. 21
5I. PAYMENT OF TAXES; COMPLIANCE WITH LAWS.................................... 22
5J. COMPLIANCE WITH ENVIRONMENTAL LAWS........................................ 22
5K. MAINTENANCE OF WORKING CAPITAL FACILITY................................... 22
5L. NATURE OF BUSINESS........................................................ 22
5M. CORPORATE EXISTENCE; LICENSES; ACCREDITATION.............................. 22
5N. POST CLOSING ITEMS........................................................ 23
6. NEGATIVE COVENANTS............................................................. 23
6A. FINANCIAL COVENANTS....................................................... 23
6A(1). QUICK RATIO..................................................... 23
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6A(2). MAXIMUM RATIO OF SENIOR DEBT TO CASH FLOW....................... 23
6A(3). MAXIMUM RATIO OF SENIOR DEBT TO CAPITALIZATION.................. 23
6A(4). MINIMUM RATIO OF CASH FLOW AND OPERATING LEASE PAYMENTS TO
FIXED CHARGES................................................... 23
6A(5). MINIMUM RATIO OF EBIT AND OPERATING LEASE PAYMENTS TO INTEREST
EXPENSE AND OPERATING LEASE PAYMENTS............................ 23
6A(6). MINIMUM CONSOLIDATED CASH FLOW.................................. 24
6A(7). MAXIMUM RATIO OF DEBT TO CAPITALIZATION......................... 24
6B. RESTRICTED PAYMENTS....................................................... 24
6C. LIEN, DEBT AND OTHER RESTRICTIONS......................................... 25
6C(1). LIENS........................................................... 25
6C(2). DEBT............................................................ 26
6C(3). LOANS, ADVANCES AND INVESTMENTS................................. 27
6C(4). CAPITAL EXPENDITURES............................................ 28
6C(5). MERGER AND CONSOLIDATION........................................ 28
6C(6). TRANSFERS OF ASSETS............................................. 28
6C(7). RESTRICTIONS ON SUBSIDIARIES.................................... 29
6C(8). COMPENSATION OF SENIOR MANAGEMENT............................... 29
6C(9). RELATED PARTY TRANSACTIONS...................................... 29
6C(10). SALE OR DISCOUNT OF RECEIVABLES................................. 29
6C(11). SALE AND LEASE-BACK............................................. 29
6C(12). SALE OF STOCK AND DEBT OF SUBSIDIARIES.......................... 29
6C(13). LEASES.......................................................... 30
6D. HOSTILE TENDER OFFER...................................................... 30
6E. FISCAL YEAR............................................................... 30
6F. ISSUANCE OF STOCK BY SUBSIDIARIES......................................... 30
7. EVENTS OF DEFAULT.............................................................. 30
7A. ACCELERATION.............................................................. 30
7B. RESCISSION OF ACCELERATION................................................ 34
7C. NOTICE OF ACCELERATION OR RESCISSION...................................... 35
7D. OTHER REMEDIES............................................................ 35
8. REPRESENTATIONS, COVENANTS AND WARRANTIES...................................... 35
8A(1). ORGANIZATION; CAPITAL STOCK.......................................... 35
8A(2). POWER AND AUTHORITY.................................................. 36
8B. FINANCIAL STATEMENTS; RESTRICTED PAYMENTS................................. 37
8C. ACTIONS PENDING........................................................... 37
8D. OUTSTANDING DEBT.......................................................... 38
8E. TITLE TO PROPERTIES....................................................... 38
8F. COMPLIANCE WITH LAWS...................................................... 38
8G. TAXES..................................................................... 38
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8H. CONFLICTING AGREEMENTS AND OTHER MATTERS.................................. 38
8I. OFFERING OF NOTES......................................................... 39
8J. USE OF PROCEEDS........................................................... 39
8K. ERISA..................................................................... 40
8L. GOVERNMENTAL CONSENT...................................................... 40
8M. REGULATORY STATUS......................................................... 40
8N. SECTION 144A.............................................................. 41
8O. ABSENCE OF FINANCING STATEMENTS, ETC...................................... 41
8P. ESTABLISHMENT OF SECURITY INTEREST........................................ 41
8Q. POSSESSION OF INTELLECTUAL PROPERTY....................................... 41
8R. PERMITS AND OTHER OPERATING RIGHTS........................................ 41
8S. DISCLOSURE................................................................ 42
9. REPRESENTATIONS OF PRUDENTIAL.................................................. 42
9A. NATURE OF PURCHASE........................................................ 42
9B. SOURCE OF FUNDS........................................................... 42
10. DEFINITIONS; ACCOUNTING MATTERS................................................ 43
10A. YIELD-MAINTENANCE TERMS................................................... 43
10B. OTHER TERMS............................................................... 44
10C. ACCOUNTING AND LEGAL PRINCIPLES, TERMS AND DETERMINATIONS................. 56
11. MISCELLANEOUS.................................................................. 56
11A. NOTE PAYMENTS............................................................. 56
11B. EXPENSES.................................................................. 56
11C. CONSENT TO AMENDMENTS..................................................... 57
11D. FORM, REGISTRATION, TRANSFER AND EXCHANGE OF NOTES; LOST
NOTES; LIMITATION ON TRANSFER OF NOTES.................................... 58
11E. PERSONS DEEMED OWNERS; PARTICIPATIONS..................................... 58
11F. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.............. 59
11G. SUCCESSORS AND ASSIGNS.................................................... 59
11H. NOTICES................................................................... 59
11I. DESCRIPTIVE HEADINGS...................................................... 59
11J. SATISFACTION REQUIREMENT.................................................. 59
11K. PAYMENTS DUE ON NON-BUSINESS DAYS......................................... 60
11L. GOVERNING LAW............................................................. 60
11M. COUNTERPARTS.............................................................. 60
11N. INDEPENDENCE OF COVENANTS................................................. 60
11O. BINDING AGREEMENT......................................................... 60
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INFORMATION SCHEDULE
EXHIBIT A-1 -- FORM OF TERM NOTE
EXHIBIT A-2 -- FORM OF REVOLVING NOTE
EXHIBIT B -- FORM OF OPINION OF COMPANY'S COUNSEL
EXHIBIT C-1 -- FORM OF SUBORDINATION AGREEMENT
EXHIBIT C-2 -- FORM OF NEC SUBORDINATION AGREEMENT
EXHIBIT D-1 -- FORM OF SECURITY AGREEMENT
EXHIBIT D-2 -- FORM OF PLEDGE AGREEMENT
EXHIBIT E -- FORM OF REGISTRATION RIGHTS AGREEMENT
EXHIBIT F-1 -- FORM OF STOCK SUBSCRIPTION WARRANT
EXHIBIT F-2 -- FORM OF STOCK SUBSCRIPTION WARRANT (CONTINGENT)
EXHIBIT G -- FORM OF REVOLVING LOAN REQUEST
SCHEDULE 3A(5) -- REQUIRED APPROVALS
SCHEDULE 3A(13) -- SCHEDULE OF COHORT DEFAULT RATES AND "85/15" RATES
SCHEDULE 4A -- TERM NOTES PRINCIPAL PREPAYMENTS
SCHEDULE 5N -- POST CLOSING ITEMS
SCHEDULE 6B -- SUBORDINATED DEBT PAYMENTS
SCHEDULE 6C(1)(vi) -- MORTGAGE LIENS
SCHEDULE 6C(2) -- EXISTING SUBSIDIARY DEBT
SCHEDULE 8A(1)(a) -- SUBSIDIARIES
SCHEDULE 8A(1)(b) -- STOCKHOLDERS
SCHEDULE 8E -- LEASES
SCHEDULE 8H -- LIST OF AGREEMENTS RESTRICTING DEBT
SCHEDULE 8Q -- MATERIAL INTELLECTUAL PROPERTY
SCHEDULE 8R(1) -- ACCREDITATIONS
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SCHEDULE 8R(2) -- EXCEPTION FOR TEXAS STATE LICENSES
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CORINTHIAN COLLEGES, INC.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇
October 17, 1996
The Prudential Insurance Company
of America ("Prudential")
c/o Prudential Capital Group
Four ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Gentlemen:
The undersigned, Corinthian Colleges, Inc., a Delaware corporation
(herein called the "Company"), hereby agrees with you as set forth below.
Reference is made to paragraph 10 hereof for definitions of capitalized terms
used herein and not otherwise defined herein.
1A. AUTHORIZATION OF ISSUE OF SENIOR SECURED TERM NOTES.
The Company has authorized the issue of its senior secured promissory term notes
(herein called the "TERM NOTES") in the aggregate principal amount of
$22,500,000, to be dated the date of issue thereof, to mature October 17, 2003,
to bear interest on the unpaid balance thereof from the date thereof until the
principal thereof shall have become due and payable at the rate of 10.27% per
annum and on overdue principal, Yield-Maintenance Amount and interest at the
rate specified therein, and to be substantially in the form of Exhibit A-1
hereto. The terms "TERM NOTE" and "TERM NOTES" as used herein shall include
each Term Note delivered pursuant to any provision of this Agreement and each
Term Note delivered in substitution or exchange for any such Term Note pursuant
to any such provision.
1B. AUTHORIZATION OF SENIOR SECURED REVOLVING NOTE. The Company has
authorized the issue of its senior secured revolving promissory note in the
principal face amount of $5,000,000 to be dated the date hereof, to mature on or
before the Revolving Loans Termination Date, to bear interest on the principal
amount from time to time outstanding (x) from the date thereof until the
principal thereof shall have become due and payable (whether by acceleration or
otherwise) at the LIBOR Rate calculated as specified in paragraph 2B(6) and (y)
after such date until paid at a rate per annum which shall be 2% per annum in
excess of the LIBOR Rate, calculated as provided in paragraph 2B(6), and to be
substantially in the form of Exhibit A-2 hereto. The terms "REVOLVING NOTE" and
"REVOLVING NOTES" as used herein shall refer to each revolving note delivered
pursuant to any provision of this
Agreement and each revolving note delivered in substitution or exchange
therefor. The terms "NOTE" or "NOTES" as used herein shall include each Term
Note and each Revolving Note delivered pursuant to any provision of this
Agreement and each Note delivered in substitution or exchange for any such Note
pursuant to any such provision.
2. PURCHASE AND SALE OF TERM NOTES; REVOLVING CREDIT FACILITY.
2A. PURCHASE AND SALE OF TERM NOTES; ORIGINAL ISSUE DISCOUNT. The
Company hereby agrees to sell to Prudential and, subject to the terms and
conditions herein set forth, Prudential agrees to purchase from the Company,
$22,500,000 in aggregate principal amount of Term Notes at 100% of such
aggregate principal amount. The Company will deliver to Prudential at the
offices of O'Melveny & ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, one or more Term Notes (as specified in the Information
Schedule) registered in its name, evidencing the aggregate principal amount of
Term Notes to be purchased and in the denomination or denominations specified in
the Information Schedule attached hereto, against payment of the purchase price
thereof by transfer of immediately available funds to such banks and accounts as
the Company may direct in a writing delivered to Prudential on or before the
date of closing, which shall be October 17, 1996 or any other date prior to
October 18, 1996 upon which the Company and Prudential may mutually agree
(herein called the "CLOSING DAY"). Prudential and the Company agree that any
original issue discount attributable, as a result of the delivery of the
Warrants, to any Note issued by the Company in accordance with the terms and
conditions of this Agreement is less than the product of:
(i) one-quarter of one percent (0.25%) of the stated redemption price
at maturity (as such term is defined in Section 1273(a) of the Code) of
such Note;
(ii) the number of complete years to maturity of such Note.
Prudential and the Company agree to use the foregoing for all United States
federal, state and local income tax purposes with respect to the transactions
contemplated by this Agreement, the Warrants and the other Transaction
Documents. Prudential and the Company acknowledge that such original issue
discount represents the fair market value of such Warrants as of the Closing
Day.
2B. REVOLVING CREDIT FACILITY.
2B(1). REVOLVING LOANS. Subject to and upon the terms and conditions
herein set forth, during the period from the date hereof to the earliest to
occur (the "REVOLVING LOANS TERMINATION DATE")
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of (i) the date on which the Required Holders thereof require the repurchase of
the Revolving Notes pursuant to paragraph 5E or the Required Holders thereof
exercise the option pursuant to paragraph 5E to require the repurchase in their
entirety of the Term Notes, (ii) the date on which the Term Notes are otherwise
paid or prepaid in their entirety or required to be so paid or prepaid,
including, without limitation, by automatic acceleration or demand for payment
and (iii) the third anniversary of the date of this Agreement, Prudential shall
lend to the Company from time to time on any Business Day sums (each a
"REVOLVING LOAN" and collectively the "REVOLVING LOANS") which in the aggregate
principal amount outstanding shall not exceed at any one time $5,000,000 until
the first anniversary of the date of this Agreement, and $3,000,000 at all times
thereafter (such maximum aggregate amount being herein referred to as the
"REVOLVING COMMITMENT"). If the outstanding principal amount of the Revolving
Loans at any time exceeds the Revolving Commitment amount in effect from time to
time, the Company shall immediately prepay the Revolving Loans in the amount of
such excess. Within the limits of the Revolving Commitment and subject to the
terms and conditions herein set forth, the Company may borrow, prepay pursuant
to paragraph 2B(2) and reborrow under paragraph 2B(4). The principal amount of
each Revolving Loan shall be $100,000 or an integral multiple thereof. Revolving
Loans shall be evidenced by the Revolving Note. If necessary to evidence any
change in the provisions of this Agreement relating to the Revolving Note and
agreed to in writing by Prudential and the Company, the Company shall furnish a
replacement Revolving Note to Prudential in substitution for, but not in
discharge of the liability evidenced by, the prior Revolving Note. Upon issuance
of such replacement Revolving Note by the Company, Prudential shall return the
previously outstanding Revolving Note to the Company or certify in writing that
the replacement note supersedes such previous note.
2B(2). PREPAYMENT AT THE COMPANY'S OPTION. The Company shall have the
right, upon at least two Business Day's prior irrevocable written notice, to
prepay in whole or in part, in amounts of $100,000 or integral multiples
thereof, without premium or Yield- Maintenance Amount, prior to the express
maturity date thereof, any Revolving Note on the last day of any Rate Period.
Each notice of a prepayment under this paragraph 2B(2) shall specify the date
and the principal amount of the prepayment.
2B(3). PURCHASE UNDER PARAGRAPH 5E. The Revolving Note shall be subject
to purchase by the Company in whole as provided in paragraph 5E hereof.
2B(4). MANNER OF BORROWINGS. Unless otherwise specifically provided in
this Agreement, Prudential shall receive from the Company, by U.S. Mail,
telecopier or telegraphic notice, a Revolving Loan Request at least two Business
Days prior to the date on which the Company proposes to borrow (which shall be a
LIBOR
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Business Day). No later than 12:00 PM. (New York City local time) on the
Business Day prior to the date of the proposed Revolving Loan, the Company will
deliver to Prudential a Revolving Note (unless an appropriate Revolving Note has
been previously delivered), together with such other documents and papers as are
required under this Agreement, which materials shall be delivered to the address
set forth on the Information Schedule (or to such other place or in such other
manner as Prudential may by written notice to the Company designate from time to
time). Upon receipt of such Revolving Note (if required), the notice provided
for above, an Officer's Certificate as provided for in paragraph 3B(2) and such
other documentation as may be required, in form and substance satisfactory to
Prudential, Prudential shall make the proceeds of such Revolving Loan available
to the Company on the date of the proposed Revolving Loan designated in said
notice by wire transfer for credit to the Company's account no. 4601-652472 at
▇▇▇▇▇ Fargo Bank, Irvine, California, ABA no. ▇▇▇▇▇▇▇▇▇, or to such other
account or place as the Company may hereafter designate by written notice to
Prudential.
2B(5). NON-USAGE FEES. The Company shall pay to Prudential a non-usage
fee on the amount, if any, by which the average daily outstanding balance of
Revolving Loans during any full or partial calendar quarter from the date of
this Agreement to and including the Revolving Loans Termination Date is less
than the Revolving Commitment amount during such calendar quarter (which, during
the calendar quarter that includes the first anniversary of the date of this
Agreement, shall be calculated on an average daily commitment basis), at the
rate of (a) 1% per annum on the amount, if any, by which such average daily
outstanding balance is less than $3,000,000, plus (b) if the Revolving
Commitment amount is greater than $3,000,000, 2% per annum on the amount, if
any, by which the greater of (i) $3,000,000, or (ii) such average daily
outstanding balance is less than such Revolving Commitment amount.
2B(6). INTEREST AND NON-USAGE FEE PAYMENTS. Interest and non-usage fees
in connection with the Revolving Loans for any Rate Period shall be payable in
arrears on the last day of such Rate Period and shall be calculated on the basis
of actual days outstanding during the Rate Period and on the basis of a year of
360 days. If any interest or non-usage fee on any Revolving Loan is not paid
when due, interest thereon at the default rate applicable to such Revolving Loan
specified in paragraph 1B shall be payable from and including the due date until
paid.
2B(7). ILLEGALITY.
(i) Notwithstanding any other provision of this Agreement, if, after
the date hereof, any change in any law or regulation or in the interpretation
thereof by any governmental authority charged with the administration or
interpretation thereof shall make it unlawful for Prudential to make or maintain
any Revolving Loan or to
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give effect to its obligations as contemplated hereby with respect to any
Revolving Loan, then, by written notice to the Company:
(a) Prudential shall promptly give written notice of such
circumstances to the Company (which notice shall be withdrawn whenever such
circumstances no longer exist);
(b) the commitment of Prudential to make Revolving Loans and to
continue Revolving Loans as such shall forthwith be cancelled and, until such
time as it shall no longer be unlawful for Prudential to make or maintain
Revolving Loans based on the LIBOR Rate, Prudential shall then have a commitment
only to make a Revolving Loan that bears interest at the Adjusted Commercial
Paper Rate and
(c) Prudential may require that all outstanding Revolving Loans made
by it be converted to Revolving Loans that bear interest at the Adjusted
Commercial Paper Rate, in which event all such Revolving Loans shall be
automatically converted to Revolving Loans bearing interest at the Adjusted
Commercial Paper Rate as of the effective date of such notice as provided in
clause (a) above.
(ii) For purposes of this paragraph 2B(7), a notice to the Company by
Prudential shall be effective as to each Revolving Loan made by Prudential, if
lawful, on the last day of the Rate Period currently applicable to such
Revolving Loan; in all other cases such notice shall be effective on the date of
receipt by the Company. If any such conversion of a Revolving Loan occurs on a
day which is not the last day of the then current Rate Period with respect
thereto, the Company shall pay to Prudential such amounts, if any, as may be
required pursuant to paragraph 2B(8).
2B(8). BREAKAGE COST INDEMNITY. The Company agrees to indemnify
Prudential for, and to promptly pay to Prudential upon written request, any
amounts required to compensate Prudential for any losses, costs or expenses
sustained or incurred by Prudential as a consequence of:
(i) any event (including any acceleration of Revolving Loans and
Revolving Notes in accordance with paragraph 7A), which results in:
(a) Prudential receiving any amount on account of the principal of any
Revolving Loan
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prior to the end of the Rate Period in effect therefor, or
(b) any Revolving Loan not being made after the Revolving Loan Request
of which such Revolving Loan is a part shall have been given by the Company
hereunder, or
(ii) any default in the making of any payment or prepayment
required to be made hereunder,
including, without limitation, any loss (including loss of anticipated profits),
cost or expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by Prudential to fund or maintain such
Revolving Loan.
A certificate of Prudential setting forth any amount or amounts which
Prudential is entitled to receive pursuant to this paragraph 2B(8) shall be
delivered to the Company and shall be conclusive absent manifest error. The
provisions of this paragraph 2B(8) shall remain operative and in full force and
effect regardless of the expiration of the term of this Agreement, the
consummation of the transactions contemplated hereby, the repayment of any of
the Revolving Loans, the invalidity or unenforceability of any term or provision
of this Agreement or any other Transaction Document, or any investigation made
by or on behalf of Prudential.
2B(9). INTEREST RATE LIMITATION. Notwithstanding anything herein to the
contrary, if at any time the applicable interest rate, together with all fees
and charges which are treated as interest under applicable law (collectively,
the "CHARGES"), as provided for herein or in any other document executed in
connection herewith, or otherwise contracted for, charged, received, taken or
reserved by Prudential, shall exceed the maximum lawful rate (the "MAXIMUM
RATE") which may be contracted for, charged, taken received or reserved by
Prudential in accordance with applicable law, the rate of interest payable on
such Revolving Loan, together with all Charges payable to Prudential shall be
limited to the Maximum Rate.
2B(10). RESERVE REQUIREMENTS; CHANGE IN CIRCUMSTANCES.
(i) Notwithstanding any other provision of this Agreement, if after
the date of this Agreement any change in applicable law or regulation or in the
interpretation or administration thereof by any governmental authority charged
with the interpretation or administration thereof (whether or not having the
force of law) shall change the basis of taxation of payments to Prudential of
the principal of or interest on any Revolving Loan made by Prudential or any
fees, expenses or indemnities payable hereunder (other than changes in respect
of taxes imposed on the overall net income of Prudential by the
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jurisdiction in which Prudential has its principal office or by any political
subdivision or taxing authority therein), or shall impose, modify or deem
applicable any reserve, special deposit or similar requirement against assets
of, deposits with or for the account of or credit extended by Prudential or
shall impose on Prudential or the London interbank market any other condition
affecting this Agreement or Revolving Loans made by Prudential, and the result
of any of the foregoing shall be to increase the cost to Prudential of making or
maintaining any Revolving Loan or to reduce the amount of any sum received or
receivable by Prudential hereunder or under the Revolving Notes (whether of
principal, interest or otherwise) by an amount deemed by Prudential to be
material, then the Company will pay to Prudential upon demand such additional
amount or amounts as will compensate Prudential for such additional costs
incurred or reduction suffered.
(ii) If Prudential shall have determined that the adoption after the
date hereof of any law, rule, regulation, agreement or guideline regarding
capital adequacy, or any change after the date hereof in any such law, rule,
regulation, agreement or guideline (whether such law, rule, regulation,
agreement or guideline has been adopted before or after the date hereof) or in
the interpretation or administration thereof by any governmental authority
charged with the interpretation or administration thereof, or compliance by
Prudential with any request or directive regarding capital adequacy (whether or
not having the force of law) of any governmental authority has or would have the
effect of reducing the rate of return on Prudential's capital as a consequence
of Prudential's Revolving Loan Commitment made pursuant hereto to a level below
that which Prudential could have achieved but for such applicability, adoption,
change or compliance (taking into consideration Prudential's policies with
respect to capital adequacy) by an amount deemed by Prudential to be material,
then from time to time the Company agrees to pay to Prudential such additional
amount or amounts as will compensate Prudential for any such reduction suffered.
(iii) A certificate of Prudential setting forth the amount or amounts
necessary to compensate Prudential as specified in paragraph (i) or (ii) above
shall be delivered to the Company and shall be conclusive absent manifest error.
The Company agrees to pay Prudential the amount shown as due on any such
certificate delivered by it within 10 days after its receipt of the same.
(iv) Failure or delay on the part of Prudential to demand compensation
for any increased costs or reduction
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in amounts received or receivable or reduction in return on capital shall not
constitute a waiver of Prudential's right to demand such compensation with
respect to such period or any other period. The protection of this paragraph
shall be available to Prudential regardless of any possible contention of the
invalidity or inapplicability of the law, rule, regulation, agreement, guideline
or other change or condition that shall have incurred or been imposed.
2B(11). INABILITY TO DETERMINE INTEREST RATE. If prior to the first day
of any Rate Period, Prudential shall have determined in good faith (which
determination shall be conclusive and binding upon the Company) that, by reason
of circumstances affecting the relevant market, adequate and reasonable means do
not exist for ascertaining the LIBOR Rate for such Rate Period, Prudential shall
give telecopy or telephonic notice thereof to the Company as soon as practicable
thereafter. If such notice is given (x) any Revolving Loans requested to be
made on the first day of such Rate Period shall be made at the Adjusted
Commercial Paper Rate, (y) any Revolving Loans that were to have been continued
as Revolving Loans shall bear interest at the Adjusted Commercial Paper Rate and
(z) any outstanding Revolving Loans shall be converted, at the end of the then
applicable Rate Period, to Revolving Loans that bear interest at the Adjusted
Commercial Paper Rate. Until such notice has been withdrawn by Prudential, no
further Revolving Loans shall be made or continued that bear interest at the
LIBOR Rate.
3A. CONDITIONS OF CLOSING. Prudential's obligation to purchase the Term
Notes and make Revolving Loans available to the Company pursuant to paragraph 2B
is subject in each case to the satisfaction, on or before the Closing Day, of
the following conditions:
3A(1). OPINION OF COMPANY'S COUNSEL. On the Closing Day, Prudential
shall have received from O'Melveny & ▇▇▇▇▇, special counsel to the Company, an
opinion satisfactory to it and substantially in the form of Exhibit B attached
hereto. The Company hereby directs such counsel to deliver such opinion, and
agrees that the issuance and sale of any Notes will constitute a reconfirmation
of such direction.
3A(2). OPINION OF PRUDENTIAL'S SPECIAL COUNSEL. Prudential shall have
received from ▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇, who are acting as special counsel for
Prudential in connection with this transaction, an opinion satisfactory to
Prudential as to such matters incident to the matters herein contemplated as it
may reasonably request.
3A(3). REPRESENTATIONS AND WARRANTIES; NO DEFAULT. The representations
and warranties contained in paragraph 8 and in the other Transaction Documents
shall be true on, and as of the Closing Day, both before and after giving effect
to the consummation of the transaction contemplated by the Transaction
Documents; there shall
-8-
exist on such day no Default or Event of Default, both before and after giving
effect to the consummation of the transaction contemplated by the Transaction
Documents; and the Company shall have delivered to Prudential an Officer's
Certificate, dated the Closing Day, to both such effects.
3A(4). STRUCTURING FEE. The Company shall have paid to Prudential the
$337,500 remaining balance of a $412,500 nonrefundable structuring fee.
3A(5). PURCHASE PERMITTED BY APPLICABLE LAWS; APPROVALS. The purchase
of and payment for the Notes to be purchased on the Closing Day on the terms and
conditions herein provided (including the use of the proceeds of such Notes by
the Company) shall not violate any applicable law or governmental regulation
(including, without limitation, Section 5 of the Securities Act or Regulation G,
T or X of the Board of Governors of the Federal Reserve System) and shall not
subject Prudential to any tax, penalty, liability or other onerous condition
under or pursuant to any applicable law or governmental regulation, and
Prudential shall have received such certificates or other evidence it may
request to establish compliance with this condition. All necessary
authorizations, consents, approvals, exceptions or other action by or notices to
of filings with any court or administrative or governmental body or other Person
required in connection with the execution, delivery and performance of the
Agreement, the Notes and the other Transaction Documents, the issuance of the
Notes or the consummation of the transactions contemplated by the Transaction
Documents (other than approvals by the United States Department of Education and
applicable regulatory authorities set forth on Schedule 3A(5) of the acquisition
by the Company of certain of the assets of seventeen colleges from ▇▇▇▇▇▇▇▇)
shall have been issued or made, shall be final and in full force and effect and
shall be in form and substance satisfactory to Prudential.
3A(6). PROCEEDINGS. All corporate and other proceedings taken or to be
taken in connection with the transactions contemplated hereby and all documents
incident thereto shall be satisfactory in substance and form to Prudential, and
Prudential shall have received all such counterpart originals or certified or
other copies of such documents as it may reasonably request.
3A(7). ACQUISITION OF ASSETS. The Master Asset Purchase Agreement by
and among the Company and ▇▇▇▇▇▇▇▇ and certain of its subsidiaries (the "MASTER
AGREEMENT"), the Schools Acquisition Agreement by and among ▇▇▇▇▇▇ Colleges,
Inc., ▇▇▇▇▇▇ Business Group, Inc., Florida Metropolitan University, Inc. and
▇▇▇▇▇▇▇▇ and certain of its subsidiaries (the "SCHOOLS AGREEMENT") and the
Provisions Concerning Purchase and Sale of Real Estate, among the Company,
▇▇▇▇▇▇▇▇ and certain of its subsidiaries (the "REAL ESTATE ACQUISITION
AGREEMENT" and, together with the Master Agreement and the Schools Agreement,
the "ACQUISITION AGREEMENTS") shall be in
-9-
form and substance satisfactory to Prudential, shall have been duly executed and
delivered by the parties thereto and shall be in full force and effect, and,
concurrently with the purchase of the Term Notes and the making of the initial
Revolving Loan, all conditions precedent to the Company's obligations to acquire
the assets thereunder shall have been satisfied (except to the extent waived
with the consent of Prudential), the Company shall have delivered to Prudential
copies of all documents related to the acquisition of the assets to be acquired
thereunder, including, without limitation, all regulatory agreements and
inducements for such acquisition (including but not limited to documents from
the United States Department of Education relating to any default rate of
▇▇▇▇▇▇▇▇ or any ▇▇▇▇▇▇▇▇' College) and the Company shall have consummated the
acquisition of the assets to be acquired thereunder in accordance with the terms
thereof.
3A(8). SALE OF SUBORDINATED DEBT; SUBORDINATION OF EXISTING SECURITIES,
RELEASE AND SUBORDINATION OF LIENS; AMENDMENT TO PURCHASE AGREEMENT. On the
Closing Day, the Company shall have received not less than $5,000,000 from the
sale for cash of unsecured subordinated debt of the Company to BOCP II and
Primus pursuant to a Subordinated Note and Warrant Purchase Agreement in form
and substance satisfactory to Prudential (the "SUBORDINATED NOTE AND WARRANT
PURCHASE AGREEMENT"), $2,500,000 of the proceeds of which shall have been used
to repay in full the Company's Subordinated Secured Notes due June 30, 2000 and
a portion of the proceeds of which will be used to repay in full all of the
indebtedness outstanding under the Credit Facility Agreement, dated as of June
30, 1995, between Corinthian Schools, Inc. and LLC, which agreement shall have
been terminated, the Equity Sponsors and all other holders of Capital Stock of
the Company shall have entered into a subordination and standstill agreement
(the "SUBORDINATION AGREEMENT") for the benefit of the holders of the Notes in
the form of Exhibit C-1 hereto, and the Company shall have delivered to
Prudential copies of such Subordinated Note and Warrant Purchase Agreement and
all documents related thereto. All Liens securing any existing Debt of the
Company or its Subsidiaries (other than the NEC Obligations) shall have been
terminated and released pursuant to documentation satisfactory to Prudential,
termination statements with respect to all financing statements relating to any
such Liens shall have been executed and delivered, and all assets of the Company
or any Subsidiary held by any holder of any such existing Debt shall have been
delivered to Prudential. NEC shall have executed and delivered a Subordination
Agreement (the "NEC SUBORDINATION AGREEMENT") with respect to the Liens in the
NEC Collateral Securing the NEC Obligations in the form of Exhibit C-2 hereto.
The Purchase Agreement, dated as of June 30, 1995, between Corinthian Schools,
Inc., LLC and Primus shall have been amended to the satisfaction of Prudential
to change the covenants therein to be the same as the covenants in the
Subordinated Note and Warrant Purchase Agreement. The Board of Directors and
the stockholders of the Company each shall have
-10-
adopted by written consent an amendment (in form and substance acceptable to
Prudential) to the Restated Certificate of Incorporation of the Company to
change certain provisions thereof in a manner satisfactory to Prudential, and
such amendment shall have been signed by the Company and no other action
required for its effectiveness shall be required or necessary other than the
filing thereof with the Secretary of State of Delaware.
3A(9). DOCUMENTS. Prudential shall have received the following
documents, each duly executed and delivered by the party or parties thereto, in
form and substance satisfactory to Prudential, and on the Closing Day in full
force and effect with no event having occurred and being then continuing that
would constitute a default thereunder or constitute or provide the basis for the
termination thereof:
(i) the Term Note(s) and the Revolving Note(s);
(ii) the Security Agreement made by the Company and all of its
Subsidiaries in favor of Prudential in the form of Exhibit D-1 hereto (together
with any other security agreements entered into as contemplated by this
Agreement, as the same may be amended, modified, or supplemented from time to
time in accordance with the provisions thereof, collectively called the
"SECURITY AGREEMENTS" and individually called a "SECURITY AGREEMENT"), the
Pledge Agreement made by the Company and ▇▇▇▇▇▇ Colleges, Inc. in favor of
Prudential in the form of Exhibit D-2 hereto (together with any other pledge
agreements entered into as contemplated by this Agreement, as the same may be
amended, modified, or supplemented from time to time in accordance with the
provisions thereof, collectively called the "PLEDGE AGREEMENTS" and individually
called a "PLEDGE AGREEMENT", the Security Agreements and the Pledge Agreements
called the "COLLATERAL DOCUMENTS"), together with all certificates, chattel
paper, instruments and documents of title in which Prudential has been granted a
security interest under the Collateral Documents, together with the related
transfer documents executed in blank, all Uniform Commercial Code financing
statements perfecting the security interests and liens granted to Prudential,
duly filed in all offices that Prudential deems necessary or advisable, and all
such other certificates, documents, agreements, recordings and filings as
Prudential may deem necessary or appropriate to establish a valid and perfected
lien and security interest securing the Notes in favor of Prudential in all of
the Collateral;
(iii) the Registration Rights Agreement between the Company,
Prudential, the Equity Sponsors, ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇ St. Pierre, ▇▇▇▇▇ ▇.
▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇.
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Devereux and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ in the form of Exhibit E hereto (as amended,
modified or supplemented from time to time, the "REGISTRATION RIGHTS
AGREEMENT");
(iv) certified copies of the resolutions of the Board of Directors of
the Company and each of its Subsidiaries authorizing the execution and delivery
of this Agreement and any other Transaction Documents to which the Company or
any Subsidiary is a party and the issuance of the Notes, and of all documents
evidencing other necessary corporate action and governmental approvals, if any,
with respect to this Agreement, the Notes and the other Transaction Documents;
(v) a certificate of the Secretary or an Assistant Secretary and one
other officer of the Company and each of its Subsidiaries certifying the names
and true signatures of the officers of the Company authorized to sign this
Agreement, the Notes, the Collateral Documents and the other documents to be
delivered hereunder;
(vi) certified copies of the Certificate of Incorporation and By-
laws of the Company and each of its Subsidiaries;
(vii) a good standing certificate for the Company from the Secretary
of State of Delaware and California dated as of a recent date and such other
evidence of the status of the Company and each of its Subsidiaries as Prudential
may reasonably request;
(viii) certified copies of Requests for Information or Copies
(Form UCC-11) or equivalent reports listing all effective financing statements
which name the Company or any Subsidiary (under its present name and previous
names) as debtor and which are filed in the offices of the Secretaries of State
of each state in which the Company or any Subsidiary has its executive office or
property located therein together with copies of such financing statements; and
(ix) such other certificates, documents and agreements as you may
request.
3A(10). COMMON STOCK PURCHASE WARRANTS. The Company shall have sold to
Prudential, common stock purchase warrants for a purchase price of $10.00,
initially representing 4% of the common stock of the Company on a fully diluted
basis, which warrants shall be in the form of Exhibits F-1 and F-2 hereto
(collectively, the "WARRANTS") duly executed by the Company and delivered to
Prudential.
-12-
3A(11). CERTIFICATES OF INSURANCE. Prudential shall have received (i) a
certificate of insurance from an independent insurance broker dated as of the
Closing Day, identifying insurers, types of insurance, insurance limits, and
policy terms, and otherwise confirming that insurance, including, without
limitation, insurance required to be maintained by the Company in accordance
with paragraph 5F, has been obtained in accordance with the provisions of this
Agreement and the other Transaction Documents and (ii) certified copies of all
policies evidencing such insurance, or certificates therefor signed by the
insurer or an agent authorized to bind the insurer.
3A(12). NO MATERIAL ADVERSE CHANGE; OPENING BALANCE SHEET. No material
adverse change in the business, condition (financial or otherwise), operations
or prospects of the Company and its Subsidiaries shall have occurred or, to the
Company's best knowledge, be threatened since June 30, 1996, as determined by
Prudential.
3A(13). SCHEDULE OF RATES. The Company shall have delivered to
Prudential a schedule acceptable to Prudential (which shall be attached hereto
as Schedule 3A(13)) of all preliminary cohort default rates and "85/15" rates as
of September 30, 1996 (or, if such preliminary cohort default rates or "85/15"
rates are not yet available, a good faith estimate thereto) for all of the
Company's schools and the ▇▇▇▇▇▇▇▇ Schools.
3A(14). FEES AND EXPENSES. The Company shall have paid (i) such
reasonable fees and expenses of Prudential's special counsel and other
consultants as Prudential shall have required to have been paid on or before the
Closing Day, and (ii) all other fees, including, without limitation, all filing
fees related to Prudential's security interest in the Collateral, related to the
transactions consummated on the Closing Day.
3B. CONDITIONS PRECEDENT TO EACH REVOLVING LOAN. Prudential's obligation
to make each Revolving Loan to the Company is also subject to the satisfaction
of the following conditions:
3B(1). REVOLVING LOAN REQUEST. The Company shall have delivered to
Prudential a Revolving Loan Request in accordance with paragraph 2B(4).
3B(2). REPRESENTATIONS AND WARRANTIES; NO DEFAULT. The representations
and warranties contained in paragraph 8 shall be true on and as of the date of
such Revolving Loan, there shall exist on such day no Default or Event of
Default, and the Company shall have delivered to Prudential an Officer's
Certificate, dated the date of such Revolving Loan, to both such effects. Each
of the giving of the applicable notice of borrowings pursuant to paragraph 2B(4)
and the acceptance by the Company of the proceeds of such Revolving Loan shall
constitute a representation and warranty by
-13-
the Company to the effect that the conditions set forth in the first sentence of
this paragraph have been satisfied on the date of such Revolving Loan.
3B(3). REVOLVING LOAN PERMITTED BY APPLICABLE LAWS. The Revolving Loan
(including the use of the proceeds of such Revolving Loan by the Company) shall
not violate any applicable law or governmental regulation (including, without
limitation, section 5 of the Securities Act or Regulation G, T or X of the Board
of Governors of the Federal Reserve System) and shall not subject Prudential to
any tax, penalty, liability or other onerous condition under or pursuant to any
applicable law or governmental regulation, and Prudential shall have received
such certificates or other evidence as it may reasonably request to establish
compliance with this condition.
3B(4). LEGAL MATTERS. Prior to each Revolving Loan hereunder,
Prudential's counsel shall be satisfied as to all legal matters relating
thereto.
3B(5). PROCEEDINGS. Prior to the initial Revolving Loan hereunder, all
corporate and other proceedings taken or to be taken in connection with the
transactions contemplated hereby and all documents incident thereto, shall be
satisfactory in substance and form to Prudential, and Prudential shall have
received all such counterpart originals or certified or other copies of such
documents as it may reasonably request.
3B(6). CHANGE IN THE COMPANY'S CONDITION. There shall not have occurred
or, to the Company's best knowledge, be threatened (i) any material adverse
change in the business, condition (financial or otherwise), operations or
prospects of the Company or its Subsidiaries, or (ii) any condition, event or
act which would materially and adversely affect the Company's business or its
ability to repay any Note.
3B(7). SUBSEQUENT OPINIONS, ETC. If Prudential so requires as a
condition precedent to the making of any Revolving Loan, Prudential shall have
received (i) from O'Melveny & ▇▇▇▇▇, special counsel to the Company (or such
other counsel as shall be acceptable to Prudential), an opinion in form and
substance satisfactory to Prudential covering such matters incident to such
Revolving Loan as Prudential shall require, and (ii) such other approvals or
documents as Prudential may reasonably request.
4. PREPAYMENTS OF TERM NOTES. The Term Notes shall be subject to
prepayment with respect to the required prepayments specified in paragraph 4A
and also under the circumstances set forth in paragraph 4B. Any prepayment made
by the Company pursuant to any other provision of this paragraph 4 shall not
reduce or otherwise affect its obligation to make any prepayment as specified in
paragraph 4A.
-14-
4A. REQUIRED PREPAYMENTS OF TERM NOTES. Until the Term Notes shall be
paid in full, the Company shall apply to the prepayment of the Term Notes,
without Yield-Maintenance Amount, on each date specified in Schedule 4A hereto
the aggregate principal amount set forth opposite such date on Schedule 4A
hereto. The remaining unpaid principal amount of the Term Notes, together with
interest accrued thereon, shall become due on the maturity date of the Term
Notes.
4B(1). OPTIONAL PREPAYMENT WITH YIELD-MAINTENANCE AMOUNT. The Term Notes
shall be subject to prepayment, in whole or in part, at the option of the
Company, in multiples of $500,000 (or, if less, the then remaining principal
amount of all Term Notes), at 100% of the principal amount so prepaid plus
interest thereon to the prepayment date and the Yield-Maintenance Amount, if
any, with respect to each Note; provided, that upon any Qualified Equity
Offering prior to the second anniversary of this Agreement, the Company may
prepay (without Yield-Maintenance Amount) the Term Notes within 45 days of such
Qualified Equity Offering in an amount not in excess of $7,500,000 (less any
required prepayment made under paragraph 4A). Any partial prepayment of the
Term Notes pursuant to this paragraph 4B(1) shall be applied in satisfaction of
required payments of principal in inverse order of their scheduled due dates;
provided, that any prepayment of the Term Notes pursuant to the proviso in the
preceding sentence shall be applied in satisfaction of the required payments of
principal in the order of their scheduled due dates.
4B(2). PREPAYMENT WITH KEY MAN INSURANCE PROCEEDS. The Term Notes shall
be subject to prepayment with Yield-Maintenance Amount, at the option of the
Required Holders thereof, with the proceeds of key man life insurance carried as
required by paragraph 5F hereof. Within fifteen Business Days following receipt
thereof, such proceeds shall be delivered to the Company by the Required Holders
in the form received if such option is not exercised. Any partial prepayment of
the Term Notes pursuant to this paragraph 4B(2) shall be applied in satisfaction
of the required payments of principal in the inverse order of their scheduled
due dates.
4C. NOTICE OF OPTIONAL PREPAYMENT. The Company shall give the holder of
each Term Note irrevocable written notice of any optional prepayment pursuant to
paragraph 4B(1) not less than 20 days prior to the prepayment date, specifying
(i) such prepayment date, (ii) the aggregate principal amount of the Term Notes
to be prepaid on such date, (iii) the principal amount of the Term Notes of such
holder to be prepaid on that date, and (iv) such optional prepayment is to be
made pursuant to paragraph 4B(1). Notice of optional prepayment having been
given as aforesaid, the principal amount of the Term Notes specified in such
notice, together with interest thereon to the prepayment date and together with
the Yield-Maintenance Amount, if any, herein provided, shall become due and
payable on such prepayment date. The Company shall, on or before the day on
which it gives written notice of any prepayment
-15-
pursuant to paragraph 4B(1), give telephonic notice of the principal amount of
the Term Notes to be prepaid and the prepayment date to each Significant Holder
which shall have designated a recipient of such notices in the Information
Schedule attached hereto or by notice in writing to the Company.
4D. PARTIAL PAYMENTS PRO RATA. Upon any partial prepayment of the Term
Notes pursuant to paragraph 4A or 4B, the principal amount so prepaid shall be
allocated to all Term Notes at the time outstanding (including, for the purpose
of this paragraph 4D only with respect to prepayments pursuant to paragraph 4A,
all Notes prepaid or otherwise retired or purchased or otherwise acquired by the
Company or any of its Subsidiaries or Affiliates other than by prepayment
pursuant to paragraph 4A or 4B (but including all Notes prepaid pursuant to
paragraph 5E)) in proportion to the respective outstanding principal amounts
thereof.
4E. RETIREMENT OF NOTES. The Company shall not, and shall not permit any
of its Subsidiaries or Affiliates to, prepay or otherwise retire in whole or in
part prior to their stated final maturity (other than by prepayment pursuant to
paragraphs 4A or 4B, upon exercise of the put option pursuant to paragraph 5E,
or upon acceleration of such final maturity pursuant to paragraph 7A), or
purchase or otherwise acquire, directly or indirectly, Term Notes held by any
holder unless the Company or such Subsidiary or Affiliate shall have offered to
prepay or otherwise retire or purchase or otherwise acquire, as the case may be,
the same proportion of the aggregate principal amount of Term Notes held by each
other holder of Term Notes at the time outstanding upon the same terms and
conditions. Any Term Notes prepaid or otherwise retired or purchased or
otherwise acquired by the Company or any of its Subsidiaries or Affiliates shall
not be deemed to be outstanding for any purpose under this Agreement, except as
provided in paragraph 4D.
5. AFFIRMATIVE COVENANTS.
5A. FINANCIAL STATEMENTS. The Company covenants that it will deliver to
each Significant Holder in triplicate:
(i) as soon as practicable and in any event within 20 days after the
end of each calendar month in each fiscal year (but in no event later than upon
their dissemination to management of the Company), unaudited consolidated and
consolidating statements of income, stockholders' equity and cash flows of the
Company and its Subsidiaries for such calendar month and for the period from the
beginning of the current fiscal year to the end of such calendar month, and a
consolidated balance sheet of the Company and its Subsidiaries as at the end of
such calendar month, all in reasonable detail and satisfactory in form to the
Required Holders;
-16-
(ii) as soon as practicable and in any event within 45 days after the
end of each fiscal quarter (other than the fourth fiscal quarter) in each fiscal
year, unaudited consolidated and consolidating statements of income,
stockholders' equity and cash flows of the Company and its Subsidiaries for such
fiscal quarter and for the period from the beginning of the current fiscal year
to the end of such fiscal quarter, and a consolidated balance sheet of the
Company and its Subsidiaries as at the end of such fiscal quarter, setting forth
in each case in comparative form figures for the corresponding periods in the
preceding fiscal year, all in reasonable detail and satisfactory in form to the
Required Holder(s) and certified by an authorized financial officer of the
Company to the effect that (a) such financial statements (including any related
schedules and/or notes) are true and correct in all material respects (subject
to changes resulting from audits and normal year-end adjustments) and have been
prepared in accordance with GAAP consistently followed throughout the periods
involved, (b) the balance sheets fairly present the condition of the Company and
its Subsidiaries as at the dates thereof, and (c) the statements of income,
retained earnings and cash flows fairly present the results of the operations of
the Company and its Subsidiaries for the periods indicated; provided, however,
that delivery within such time period of the Company's Quarterly Report on Form
10-Q containing such financial statements and financial information prepared in
compliance with the requirements therefor and filed with the Securities and
Exchange Commission shall be deemed to satisfy the requirement of this clause
(ii) as to delivery of consolidated financial statements;
(iii) as soon as practicable and in any event within 90 days after
the end of each fiscal year, consolidated and consolidating statements of income
and cash flows and a consolidated and consolidating statement of stockholders'
equity of the Company and its Subsidiaries for such year, and a consolidated
balance sheet of the Company and its Subsidiaries as at the end of such year,
setting forth in each case in comparative form corresponding consolidated
figures from the preceding annual audit, all in reasonable detail and
satisfactory in form to the Required Holder(s) and, as to consolidated
statements, reported on by independent public accountants of recognized national
standing selected by the Company or other independent public accountants
reasonably acceptable to the Required Holders whose report shall be without
limitation as to the scope of the audit and satisfactory in substance to the
Required Holder(s), and as to consolidating statements certified by an
authorized financial officer of the Company to the effect that (a) such
financial statements
-17-
(including any related schedules and/or notes) are true and correct in all
material respects and have been prepared in accordance with GAAP consistently
followed throughout the periods involved, (b) the balance sheets fairly present
the condition of the Company and its Subsidiaries as at the dates thereof, and
(c) the statements of income, retained earnings and cash flows fairly present
the results of the operations of the Company and its Subsidiaries for the
periods indicated; provided, however, that delivery within such time period of
the Company's Annual Report on Form 10-K containing such financial statements
and financial information prepared in compliance with the requirements therefor
and filed with the Securities and Exchange Commission shall be deemed to satisfy
the requirements of this clause (iii) as to delivery of consolidated financial
statements;
(iv) promptly upon transmission thereof, copies of all such financial
statements, proxy statements, notices and reports as it shall send to its public
stockholders and copies of all registration statements (without exhibits) and
all reports (including reports on Form 8-K) which it files with the Securities
and Exchange Commission (or any governmental body or agency succeeding to the
functions of the Securities and Exchange Commission);
(v) promptly upon receipt thereof, a copy of each management letter
and other report submitted to the management or board of directors of the
Company or any Subsidiary by independent accountants in connection with any
annual, interim or special audit made by them of the books of the Company or any
Subsidiary;
(vi) as soon as practicable and in any event within 60 days after the
first day of each fiscal year, Company management's projected consolidated
statements of income and cash flows for each fiscal quarter of such fiscal year
and, to the extent prepared by the Company, subsequent projected fiscal years,
along with projected consolidated balance sheets as of the last day of each such
fiscal quarter, setting forth in each case in comparative form consolidated
figures from the corresponding period in the preceding fiscal year;
(vii) promptly after the preparation thereof, school-by-school
information with the content and in the form prepared by management for internal
review and use (which information can be in the form contained in the Private
Placement Memorandum), provided that the Company need not provide the
information under this clause (vii) more frequently than once each fiscal
quarter;
-18-
(viii) promptly after the Company's receipt thereof, copies of any
notice from the United States Department of Education or any other Federal,
state or local governmental body, agency or department alleging non-compliance
by the Company or any of its Subsidiaries with any material statute, law decree,
court or administrative order or regulation, including maximum cohort default
rates, the "85/15 Rule", denial of a requested change of control in connection
with acquisition of schools or threatened loss of school accreditation;
(ix) promptly after the Company or any Subsidiary becomes aware
thereof, notice of the occurrence of any other event which is material to the
Company or any of its Subsidiaries, including the initiation of any material
dispute, administrative proceeding, investigation or litigation or any material
development in any such dispute or litigation, condition that could result in a
material adverse change in the business, condition (financial or otherwise),
operations or prospects of the Company or any of its Subsidiaries, and changes
in GAAP or Company accounting practices (which notice shall describe such event
and the effect, if any, of such event or change on the Company's results of
operations, financial condition or compliance with this Agreement in reasonable
detail);
(x) promptly after the same have become final, copies of minutes
of meetings of the Board of Directors and shareholders of the Company and its
Subsidiaries and copies of any action taken by the Board of Directors or
shareholders of the Company or any Subsidiary by written consent;
(xi) promptly upon transmission thereof, copies of any reports,
statements or other information regularly provided to any other holder of any
Debt of the Company; and
(xii) with reasonable promptness, such other financial data or other
information as such Significant Holder may reasonably request.
Together with each delivery of financial statements required by clauses (ii) and
(iii) above, the Company will deliver to each Significant Holder an Officer's
Certificate (a) demonstrating (with computations in reasonable detail)
compliance by the Company and its Subsidiaries with the provisions of paragraphs
6A(1), 6A(2), 6A(3), 6A(4), 6A(5), 6A(6), 6B, 6C(3), 6C(4), 6C(6) and 6C(8) and
(b) stating that there exists no Event of Default or Default, or, if any Event
of Default or Default exists, specifying the nature and period of existence
thereof and what action the Company proposes to take with respect thereto.
Together with each delivery
-19-
of financial statements required by clause (iii) above (provided, that the
opinion specified in clause (a)(1) in the succeeding sentence shall be delivered
only with the financial statements required by clause (iii) above for the fiscal
year preceding the fiscal year in which any financing statement or other similar
filing filed with Prudential as secured party is scheduled to expire), the
Company will deliver to each Significant Holder (a) an opinion of O'Melveny &
▇▇▇▇▇, or other counsel satisfactory to the Required Holders, to the effect that
(1) all filings, recordings and other actions necessary since the Closing Day or
since the date of the last opinion delivered under this clause, as the case may
be, to preserve the creation and perfection of the Liens granted under the
Collateral Documents in the personal property included in the Collateral to
secure the Notes have been duly taken and (2) such Liens in such Collateral to
secure the Notes are duly created and perfected (subject to such qualifications
and limitations as are substantially the same as the qualifications and
limitations contained in the opinion of O'Melveny & ▇▇▇▇▇ delivered on the
Closing Day pursuant to paragraph 3A(1) hereof), and specifying the filings,
recordings and other actions, if any, that will be necessary during the period
until the next delivery of financial statements required by clause (iii) above
is to be made in order to preserve the creation and perfection of such Liens in
such Collateral, and (b) a certificate of such accountants stating that, in
making the audit necessary for their report on such financial statements, they
have obtained no knowledge of any Event of Default or Default, or, if they have
obtained knowledge of any Event of Default or Default, specifying the nature and
period of existence thereof. Such accountants, however, shall not be liable to
anyone by reason of their failure to obtain knowledge of any Event of Default or
Default which would not be disclosed in the course of an audit conducted in
accordance with generally accepted auditing standards. The Company also
covenants that immediately after any Authorized Officer obtains knowledge of an
Event of Default or Default, it will deliver to each Significant Holder an
Officer's Certificate specifying the nature and period of existence thereof and
what action the Company proposes to take with respect thereto.
5B. INFORMATION REQUIRED BY RULE 144A. The Company covenants that it
will, upon the request of the holder of any Note, provide such holder, and any
Institutional Investor designated by such holder, such financial and other
information as such holder may reasonably determine to be necessary in order to
permit the holder's compliance with the information requirements of Rule 144A
under the Securities Act in connection with the resale of Notes, except at such
times as the Company is subject to the reporting requirements of section 13 or
15(d) of the Exchange Act.
5C. INSPECTION OF PROPERTY. The Company covenants that it will permit any
Person designated by any Significant Holder in writing, at such Significant
Holder's expense (or, upon the occurrence and during the continuance of an Event
of Default, at the Company's expense), to visit and inspect any of the
properties
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of the Company and its Subsidiaries (including its headquarters, schools and
other facilities), to examine the corporate books and financial records of the
Company and its Subsidiaries and make copies thereof or extracts therefrom and
to discuss the affairs, finances and accounts of any of such corporations with
the principal officers of the Company and its independent public accountants,
all at such reasonable times and as often as such Significant Holder may
reasonably request. Each such visit and inspection shall be conducted during
normal business hours and in such manner as to minimize any disruption or
interference with the business of the Company and its Subsidiaries.
5D. COVENANT TO SECURE NOTE EQUALLY. The Company covenants that, if it or
any Subsidiary shall create or assume any Lien upon any of its property or
assets, whether now owned or hereafter acquired (unless prior written consent to
the creation or assumption thereof shall have been obtained pursuant to
paragraph 11C), other than Liens permitted by the provisions of paragraph 6C(1),
it will make or cause to be made effective provision whereby the Notes will be
secured by such Lien equally and ratably with any and all other Debt thereby
secured so long as any such other Debt shall be so secured.
5E CHANGE IN CONTROL PUT OPTION. The Company covenants that within three
Business Days after any Authorized Officer shall obtain knowledge of the
occurrence of a Change in Control Event, the Company shall provide each holder
of Notes written notice thereof, describing in reasonable detail the facts and
circumstances constituting such Change in Control Event and offering to prepay
all Notes held by each holder on the 2nd Business Day after the date of such
holder's written notice of its acceptance of such offer (or, if applicable, the
date upon which such holder is deemed to have accepted such offer as provided
below) (the "PREPAYMENT DATE"). If a holder accepts such offer, the Company
shall on the Prepayment Date purchase (and each such holder thereof shall sell)
all Notes of such holder at a purchase price equal to the aggregate outstanding
principal amount thereof, together with interest thereon to the date of purchase
and the Yield-Maintenance Amount, if any, with respect thereto; provided,
however, if a holder notifies the Company prior to the proposed Prepayment Date
that such holder is rejecting the Company's offer to prepay such holder's Notes,
the Company shall not be obligated to purchase, and such holder shall not be
obligated to sell, such Notes under this paragraph 5E. For purposes of this
paragraph 5E, a holder's failure to reject in writing any offer made by the
Company under this paragraph to purchase such holder's Notes prior to the 10th
day after such holder receives such offer shall be deemed an acceptance of such
offer. No holder of any such Note shall be required to make any representation
or warranty in connection with such sale, other than with respect to its
ownership of its Note.
-21-
5F. KEY MAN LIFE INSURANCE. The Company covenants that it shall carry, in
the aggregate, not less than $3,500,000 of "KEY MAN" life insurance on the lives
of ▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇ St. Pierre. Prudential (and, upon transfer of any Term
Notes, the then holder of the largest outstanding principal amount of the Term
Notes for the pro rata benefit of all of the holders of the Term Notes) shall be
named as an additional insured and as loss payee under such policy or policies.
5G. MAINTENANCE OF PROPERTY. The Company covenants that it will maintain
and cause its Subsidiaries to maintain their schools, labs and other equipment
and properties in good repair and order, subject to ordinary wear and tear.
5H. MAINTENANCE OF INSURANCE. The Company covenants that it and each
Subsidiary will maintain, with financially sound and reputable insurers,
insurance in such amounts and against such liabilities and hazards as
customarily is maintained by other companies operating similar businesses and,
in any event, such insurance as is required to be maintained by the other
Transaction Documents. Together with each delivery of financial statements
under clause (iii) of paragraph 5A, the Company will, upon the request of any
Significant Holder, deliver an Officer's Certificate specifying the details of
such insurance then in effect.
5I. PAYMENT OF TAXES; COMPLIANCE WITH LAWS. The Company covenants that it
will and will cause its Subsidiaries to pay or provide for the payment of all
taxes and other similar charges incurred prior to the time such payment is due
and comply with all material laws, statutes, decrees, orders and regulations
applicable to the Company, any of its Subsidiaries or any of their respective
properties, except for alleged non-payment or non-compliance that is subject to
a Good Faith Contest.
5J. COMPLIANCE WITH ENVIRONMENTAL LAWS. The Company covenants that it
will, and will cause each of its Subsidiaries to, comply in a timely fashion
with, or operate pursuant to valid waivers of the provisions of, all
Environmental Laws, except where noncompliance would not materially and
adversely affect the business, condition (financial or otherwise) or operations
of the Company and its Subsidiaries taken as a whole.
5K. MAINTENANCE OF WORKING CAPITAL FACILITY. The Company covenants that
it will maintain at all times after the expiration or termination of the
Revolving Credit Facility hereunder a credit or other facility similar to the
Revolving Credit Facility hereunder with a minimum aggregate commitment of
$2,500,000 on borrowing terms and conditions substantially similar to or more
favorable to the Company than those set forth in paragraph 2B and 3B hereof, and
with covenants and defaults generally no more restrictive than as set forth in
paragraphs 5 and 7 hereof. The Company shall notify the holders of the Notes if
it is unable to
-22-
renew such facility at least 90 days prior to the scheduled termination of such
facility.
5L. NATURE OF BUSINESS. The Company covenants that it will and will cause
its Subsidiaries to engage in the business of operating proprietary post-
secondary schools.
5M. CORPORATE EXISTENCE; LICENSES; ACCREDITATION. The Company will at all
times preserve and keep in full force and effect its corporate existence. The
Company will at all times preserve and keep in full force and effect the
corporate existence of each of its Subsidiaries (unless merged into the Company
or a Subsidiary). The Company will at all times preserve and keep, and will
cause its Subsidiaries at all times to preserve and keep, all material rights,
franchises, licenses, permits and other authorizations of any court or
administration or governmental body necessary to enable the Company and its
Subsidiaries to engage in their business and operate their assets. The Company
will maintain at all times, and will cause its Subsidiaries at all times to
maintain, the accreditation in effect on the Closing Day, or a comparable
accreditation, for each school owned or operated by the Company or any
Subsidiary.
5N. POST CLOSING ITEMS. The Company covenants that it shall take the
actions specified in Schedule 5N within the time periods specified therein.
6. NEGATIVE COVENANTS. So long as any Note or amount owing under this
Agreement shall remain unpaid or Prudential shall have any commitment hereunder:
6A. FINANCIAL COVENANTS. The Company covenants that it shall not permit:
6A(1). QUICK RATIO. The ratio (expressed as a percentage) of
Consolidated Quick Assets to Consolidated current liabilities to be less than
(i) 70% at any time from the Closing Day through June 30, 1997; (ii) 80% at any
time during the fiscal year ending June 30, 1998; (iii) 135% at any time during
the fiscal year ending June 30, 1999; and (iv) 150% at any time after June 30,
1999;
6A(2). MAXIMUM RATIO OF SENIOR DEBT TO CASH FLOW. The ratio (expressed
as a percentage) of Consolidated Senior Debt as at the end of any fiscal quarter
to Consolidated Cash Flow for the four fiscal quarter period ended at the end of
such fiscal quarter to exceed (i) 300% from the Closing Day through September
30, 1997; (ii) 200% from October 1, 1997 through September 30, 1998; (iii) 150%
from October 1, 1998 through September 30, 1999; and (iv) 125% after September
30, 1999;
6A(3). MAXIMUM RATIO OF SENIOR DEBT TO CAPITALIZATION. The ratio
(expressed as a percentage) of Consolidated Senior Debt
-23-
to Consolidated Capitalization to exceed (i) 80% at any time from the Closing
Day through March 31, 1997; (ii) 77% at any time from April 1, 1997 through
September 30, 1997; (iii) 76% at any time from October 1, 1997 through March 31,
1998; (iv) 71% at any time from April 1, 1998 through September 30, 1998; (v)
65% at any time from October 1, 1998 through March 31, 1999; (vi) 55% at any
time from April 1, 1999 through September 30, 1999; (vii) 45% at any time from
October 1, 1999 through September 30, 2000; and (viii) 40% at all times after
September 30, 2000;
6A(4). MINIMUM RATIO OF CASH FLOW AND OPERATING LEASE PAYMENTS TO FIXED
CHARGES. The ratio (expressed as a percentage) of (i) the sum of Consolidated
Cash Flow and Consolidated Operating Lease Payments to (ii) Consolidated Fixed
Charges, in each case for the four fiscal quarter period ending at the end of
any fiscal quarter, to be less than (a) 100% from the Closing Day through
September 30, 1998, (b) 150% from October 1, 1998 through September 30, 1999,
and (v) 175% at any time after September 30, 1999;
6A(5). MINIMUM RATIO OF EBIT AND OPERATING LEASE PAYMENTS TO INTEREST
EXPENSE AND OPERATING LEASE PAYMENTS. The ratio (expressed as a percentage) of
(i) the sum of Consolidated EBIT and Consolidated Operating Lease Payments to
(ii) Consolidated Interest Expense and Consolidated Operating Lease Payments, in
each case for the four fiscal quarter period ending at the end of any fiscal
quarter, to be less than (a) 120% from the Closing Day through September 30,
1997; (b) 140% from October 1, 1997 through September 30, 1998; (c) 160% from
October 1, 1998 through September 30, 1999; (d) 175% from October 1, 1999
through September 30, 2000; and (e) 200% after September 30, 2000;
6A(6). MINIMUM CONSOLIDATED CASH FLOW. Consolidated Cash Flow From
Operations for the fiscal year set forth below to be less than the amount set
forth in the table opposite such fiscal year:
Minimum Consolidated
Fiscal year Cash Flow From Operations
------------ ---------------------------
1997 $750,000
1998 $6,350,000
1999 $9,100,000
2000 $11,500,000
2001 and $12,500,000
each fiscal
year thereafter
For purposes of determining the Company's compliance with paragraphs 6A(2),
6A(4) and 6A(5), (i) the Company may include the financial results of the
▇▇▇▇▇▇▇▇ Schools as though the ▇▇▇▇▇▇▇▇ Schools had been acquired by the Company
on July 1, 1996 and (ii) prior to June 30, 1997, the Company may annualize the
financial results of the fiscal quarters ending prior to such date and after the
Closing Day;
-24-
6A(7). MAXIMUM RATIO OF DEBT TO CAPITALIZATION. The ratio (expressed as
a percentage) of Consolidated Debt to Consolidated Capitalization to exceed (i)
92% at any time from the Closing Day through March 31, 1997; (ii) 90% at any
time from April 1, 1997 through September 30, 1997; (iii) 85% at any time from
October 1, 1997 through March 31, 1998; (iv) 83% at any time from April 1, 1998
through September 30, 1998; (v) 65% at any time from October 1, 1998 through
September 30, 1999; (vi) 55% at any time from October 1, 1999 through September
30, 2000; (vii) 40% at any time from October 1, 2000 through September 30, 2001;
(viii) 30% at any time from October 1, 2001 through September 30, 2002; and (ix)
20% at any time thereafter.
6B. RESTRICTED PAYMENTS. The Company covenants that it shall not, and
shall not permit any Subsidiary to, make, pay or declare, or commit to make, pay
or declare, any Restricted Payment, other than:
(i) dividends paid in cash by the Company on the Class A Preferred,
provided that no proceeds of any Revolving Loan are used to make any such
payment and the dividend rate on the Class A Preferred shall not exceed 6%
(or, to the extent shares of Class A Preferred have not been optionally
redeemed by the Company on or prior to June 30, 2001, 12%);
(ii) interest paid in cash by the Company on the Subordinated Debt,
provided that no proceeds of any Revolving Loan are used to make any such
payment and the interest rate on the Subordinated Debt shall not exceed
12%;
(iii) principal payments made by the Company on the Subordinated Debt
in accordance with Schedule 6B;
(iv) optional redemption of the Class A Preferred on or after June 30,
2001;
(v) mandatory redemption of the Class A Preferred if the Company
completes an equity offering after the Closing Day that (a) yields net
proceeds to the Company in excess of $20,000,000 from investors other than
the Equity Sponsors (or their Affiliates), employees or directors of the
Company or its Subsidiaries, or Prudential and (b) values the equity on a
fully diluted basis (based on the offering price) held by BOCP, Primus,
Senior Management and Prudential, as a group, at an amount no less than
$35,000,000;
(vi) Restricted Payments made by any Subsidiary to the Company; and
(vii) purchases or other acquisitions of shares of Common Stock from
a former employee of the Company or a Subsidiary in connection with the
termination of the employment of such employee with the Company or any
Subsidiary;
-25-
provided, however, that the Restricted Payments described in (i) through (vii)
above shall not be declared, ordered, paid or made, or committed for, nor shall
any sum or Property be set aside for any Restricted Payment, unless at the time
thereof and immediately after giving effect thereto (i) no Default or Event of
Default is in existence and (ii) the sum of all Restricted Payments made after
June 30, 1996 does not exceed an amount equal to the sum of (a) 30% (or, in the
case of a loss or deficit, minus 100%) of Consolidated Net Income for each
fiscal quarter ending after June 30, 1996 and prior to the date of such proposed
Restricted Payment and (b) all interest paid on the Subordinated Debt after June
30, 1996 and prior to the date of such proposed Restricted Payment (including
the proposed Restricted Payment if it is an interest payment on the Subordinated
Debt).
6C. LIEN, DEBT AND OTHER RESTRICTIONS. The Company will not and will not
permit any Subsidiary to:
6C(1). LIENS. Create, assume or suffer to exist at any time any Lien
upon any of its properties or assets, whether now owned or hereafter acquired
(whether or not provision is made for the equal and ratable securing of the
Notes in accordance with the provisions of paragraph 5D), except:
(i) Liens arising under the Security Documents;
(ii) Liens for taxes, assessments or other governmental charges or
levies not yet due or payable or which are the subject of a Good Faith
Contest;
(iii) Liens imposed by law, such as materialmen's mechanics',
carriers', landlords', workmen's, and repairmen's Liens and other similar
Liens arising in the ordinary course of business securing obligations
(other than Debt) which are not due or which are the subject of a Good
Faith Contest;
(iv) Liens in favor of the Company on Property of a Subsidiary to
secure obligations of such Subsidiary to the Company;
(v) Liens (other than Liens imposed under ERISA), pledges or deposits
in connection with workmen's compensation, unemployment insurance or social
security obligations, provided in each case the obligation secured is not
overdue and the obligation is not Debt;
(vi) Liens consisting of mortgages on the real property on which the
▇▇▇▇▇▇▇▇ Schools are located and which are described on Schedule 6C(1)(vi),
provided, that the obligations secured by such mortgages are non-recourse
(on terms satisfactory to the holders of the Notes) to the Company or any
other obligor;
-26-
(vii) Liens on the NEC Collateral in favor of NEC to secure the NEC
Obligations so long as the NEC Subordination Agreement remains in effect;
(viii) Liens securing the working capital facility required to be
maintained pursuant to paragraph 5K, provided, however that an
intercreditor and collateral agency agreement in form and substance
satisfactory to Prudential and the holders of the Term Notes shall have
been entered into among Prudential, the holders of the Term Notes and the
persons providing such working capital facility, and such agreement shall
be in full force and effect; and
(ix) easements, rights of way, minor survey exceptions and other
encumbrances on title to real property that are necessary for the conduct
of the operations of the Company and its Subsidiaries and do not render
title to the property encumbered thereby unmarketable or materially
adversely affect the use of such property for its intended purposes;
6C(2). DEBT. Permit any Subsidiary to incur, assume or suffer to exist
at any time any Debt, except Debt owed to the Company or another Subsidiary and
the Debt listed on Schedule 6C(2);
6C(3). LOANS, ADVANCES AND INVESTMENTS. Make or permit to remain
outstanding any loan or advance to, or Guarantee, or own, purchase or acquire
any stock, obligations or securities of, or any other interest in, or make any
capital contribution to, any Person (collectively, "INVESTMENTS"), except:
(i) acquisitions of schools or Persons engaged principally in the
same business as the Company as of the date hereof, provided, that the
Purchase Price (as defined herein) with respect to any single acquisition
shall not exceed $250,000 and the aggregate amount of all Purchase Prices
for all such acquisitions consummated or committed to be consummated, or
with respect to which the Company or a Subsidiary has entered into an
agreement to make such acquisition, in any twelve consecutive month period
shall not exceed $1,000,000 (for purposes of this paragraph 6C(3)(i),
"PURCHASE PRICE" shall mean the total purchase price of any single
acquisition of assets or stock permitted by this clause (i) calculated as
the sum of (a) the amount of cash paid or payable by the Company in
connection with such acquisition, including, without limitation, amounts
paid or payable as the "earn out", deferred or other delayed or contingent
purchase price or under noncompete agreements, plus (b) the aggregate
amount of all liabilities and obligations assumed by the Company or any
Subsidiary in connection with such acquisition of assets);
-27-
(ii) Investments in direct obligations of the United States of
America, or Investments which are guaranteed by the full faith and credit
of the United States of America, in either case maturing within one year or
less from the date of acquisition thereof by the Company or any Subsidiary;
(iii) Investments in certificates of deposit maturing within one
year from the date of acquisition by the Company or a Subsidiary and issued
by a bank or trust company organized under the laws of the United States or
any state thereof, having capital, surplus and undivided profits
aggregating at least $750,000,000 and whose long-term certificates of
deposit are, at the time of acquisition thereof by the Company or a
Subsidiary, rated AA, or better, by Standard & Poor's Rating Services, a
division of ▇▇▇▇▇▇-▇▇▇▇ Companies, Inc., or Aa2, or better, by ▇▇▇▇▇'▇
Investors Service, Inc.;
(iv) Investments in commercial paper maturing within 270 days or
less from the date of acquisition by the Company or a Subsidiary which, at
the time of acquisition by the Company or any Subsidiary, is rated A-1, or
better, by Standard & Poor's Rating Services, a division of ▇▇▇▇▇▇-▇▇▇▇
Companies, Inc., or P-1, or better, by ▇▇▇▇▇'▇ Investors Service, Inc.;
(v) loans and advances by the Company to any Subsidiary
incorporated under the laws of any state of the United States (a "DOMESTIC
SUBSIDIARY") or loans and advances by a Domestic Subsidiary to any other
Domestic Subsidiary or the Company;
(vi) travel and other like advances made to officers and employees
of the Company or a Subsidiary in the ordinary course of business; and
(vii) other Investments, provided that the aggregate amount thereof,
at original cost, at no time exceeds $250,000;
6C(4). CAPITAL EXPENDITURES. Make capital expenditures in any fiscal
year in an aggregate amount in excess of (i) $2,200,000 for the fiscal years
ending June 30, 1997 and 1998 and (ii) for each fiscal year thereafter, 2% of
Consolidated gross revenues for the fiscal year immediately preceding the fiscal
year in which such capital expenditure is made;
6C(5). MERGER AND CONSOLIDATION. Merge or consolidate with or into any
other Person, except that (i) any Subsidiary may merge with the Company or
another Subsidiary so long as the Company or such other Subsidiary is the
surviving corporation and (ii) the Company may merge or consolidate with or into
any other Person so long as (a) the Company is the corporation surviving such
merger or consolidation, (b) at the time of such merger or consolidation and
-28-
immediately after giving effect thereto no Default or Event of Default is in
existence, (c) the Company is in compliance with paragraphs 6A(2) and 6A(4) as
of the end of the fiscal quarter immediately preceding the fiscal quarter in
which such merger or consolidation occurs, and is in compliance with paragraph
6C(3) as of the date of such merger or consolidation, on a pro forma basis as
though such Person had been merged or consolidated with the Company for the
periods, or as of the date, for which compliance is being tested and (d) there
shall have been delivered to the holders of the Notes such legal opinions,
certificates and other evidence as may be requested by the Required Holders to
evidence compliance with the foregoing conditions, each in form and substance
satisfactory to the Required Holders;
6C(6). TRANSFERS OF ASSETS. Transfer any Property (other than Transfers
by a Subsidiary to the Company or a Domestic Subsidiary) if at the time of such
Transfer and immediately after giving effect thereto:
(i) the greater of the aggregate net book value or fair market value
of all Property Transferred during the twelve month period prior to such
Transfer exceeds $250,000; or
(ii) the Twelve Month Percentage of Net Income Capacity Transferred
exceeds 5%;
6C(7). RESTRICTIONS ON SUBSIDIARIES. Enter into any contract (other
than this Agreement), agreement or business arrangement that restricts or limits
in any manner, or incur or permit to exist any restriction on, any Subsidiary's
ability to make Restricted Payments to the Company or its Subsidiaries, repay
obligations to the Company or any other Subsidiary or transfer Property to the
Company or any Subsidiary;
6C(8). COMPENSATION OF SENIOR MANAGEMENT. Make any payment (whether in
cash or other Property) to Senior Management (other than in Capital Stock of the
Company paid solely in connection with an incentive compensation plan approved
by the Board of Directors of the Company and advances and reimbursement for
travel, entertainment and other customary out-of-pocket expenses in reasonable
amounts) in an aggregate amount in excess of (i) $1,250,000 for the fiscal year
ending June 30, 1997 and (ii) for each fiscal year thereafter, an amount equal
to the product of (a) the amount permitted to be paid to Senior Management under
this paragraph 6C(8) for the immediately preceding fiscal year and (b) the
greater of 1.05 and the Inflation Factor for the immediately preceding calendar
year;
6C(9). RELATED PARTY TRANSACTIONS. Enter into directly or indirectly
any transaction (including, without limitation, the purchase, lease, sale or
exchange of Properties of any kind or the rendering of any service) with any
Related Party, except pursuant
-29-
to the reasonable requirements of the Company's or such Subsidiary's business
and upon fair and reasonable terms no less favorable to the Company or such
Subsidiary than would be obtainable in a comparable arm's-length transaction
with a Person not a Related Party of the Company;
6C(10). SALE OR DISCOUNT OF RECEIVABLES. Sell (with or without
recourse), or discount or otherwise sell for less than the face value thereof,
or subject to a Lien, any of its notes or accounts receivable other than the
sale or discount of receivables acquired from ▇▇▇▇▇▇▇▇ pursuant to the
Acquisition Agreements, provided that the aggregate face amount of such
receivables sold or discounted (determined as of the date such receivables are
sold or discounted) shall not exceed $500,000;
6C(11). SALE AND LEASE-BACK. Enter into any arrangement with any lender
or investor or to which such lender or investor is a party providing for the
leasing by the Company or any Subsidiary of real or personal property which has
been or is to be sold or transferred by the Company or any Subsidiary to such
lender or investor or to any Person to whom funds have been or are to be
advanced by such lender or investor on the security of such property or rental
obligations of the Company or any Subsidiary;
6C(12). SALE OF STOCK AND DEBT OF SUBSIDIARIES. Sell or otherwise
dispose of, or part with control of, any shares of stock or Debt of any
Subsidiary, except to the Company or a Domestic Subsidiary, and except that all
shares of stock and Debt of any Subsidiary at the time owned by or owed to the
Company and all Subsidiaries may be sold as an entirety for a cash consideration
which represents the fair value (as determined in good faith by the Board of
Directors of the Company) at the time of sale of the shares of stock and Debt so
sold; provided, that (i) such sale or other disposition, if treated as a
Transfer of Property of such Subsidiary, would be permitted by paragraph 6C(6)
and (ii) at the time of such sale, such Subsidiary shall not own, directly or
indirectly, any shares of stock or Debt of any other Subsidiary (unless all of
the shares of stock and Debt of such other Subsidiary owned, directly or
indirectly, by the Company and all Subsidiaries are simultaneously being sold as
permitted by this paragraph 6C(12)).
6C(13). LEASES. Except with respect to any lease of any real property,
enter into or permit to remain in effect any operating lease as lessee other
than operating leases the aggregate amount payable under which (i) for the
fiscal quarter ending December 31, 1996, shall not exceed $300,000; (ii) for the
two consecutive fiscal quarters ending March 31, 1997, shall not exceed
$600,000; (iii) for the three consecutive fiscal quarters ending June 30, 1997,
shall not exceed $900,000; (iv) for the four consecutive fiscal quarters ending
September 30, 1997, shall not exceed $1,200,000 and (v) for any four consecutive
fiscal quarters
-30-
ending after September 30, 1997, shall not exceed $1,200,000 multiplied by the
Inflation Factor for such four fiscal quarters.
6D. HOSTILE TENDER OFFER. The Company covenants that none of the proceeds
of any Revolving Loan will be used to finance directly or indirectly any Hostile
Tender Offer.
6E. FISCAL YEAR. The Company covenants that it will not change its fiscal
year or fiscal quarter.
6F. ISSUANCE OF STOCK BY SUBSIDIARIES. The Company covenants that it will
not permit any Subsidiary of the Company (either directly, or indirectly by the
issuance of rights or options for, or securities convertible into, such shares)
to issue, sell or otherwise dispose of any shares of any class of its stock
except to the Company or a Subsidiary of the Company.
7. EVENTS OF DEFAULT.
7A. ACCELERATION. If any of the following events shall occur and be
continuing for any reason whatsoever (and whether such occurrence shall be
voluntary or involuntary or come about or be effected by operation of law or
otherwise):
(i) the Company defaults in the payment of any principal of, interest
on, or non-usage fee or Yield-Maintenance Amount payable with respect to any
Note, or any other amount due under the Notes or this Agreement, when the same
shall become due, either by the terms thereof or otherwise as herein provided;
or
(ii) the Company or any Subsidiary defaults (whether as primary
obligor or as guarantor or other surety) in any payment of principal of or
interest on any Debt beyond any period of grace provided with respect thereto,
or the Company or any Subsidiary fails to perform or observe any other
agreement, term or condition contained in any agreement under which any Debt is
created (or if any other event thereunder or under any such agreement shall
occur and be continuing) and the effect of such failure or other event is to
cause, or to permit the holder or holders of such Debt (or a trustee on behalf
of such holder or holders) to cause, such Debt to become due (or to be
repurchased by the Company or any Subsidiary) prior to any stated maturity
provided that, if such Debt is other than Subordinated Debt, the aggregate
amount of all Debt as to which such a payment default shall occur and be
continuing or such a failure or other event causing or permitting acceleration
(or resale to the Company or any Subsidiary) shall occur and be continuing
exceeds $250,000; or
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(iii) any representation or warranty made by the Company in any of
the Transaction Documents or by the Company or any of its officers in any
writing furnished in connection with or pursuant to any of the Transaction
Documents shall be false in any material respect on the date as of which made;
or
(iv) the Company fails to perform or observe any agreement contained
in paragraph 5D, 5E, 5N or 6; or
(v) the Company fails to perform or observe any other agreement, term
or condition contained herein or in any other Transaction Document and such
failure shall not be remedied within 30 days after any Authorized Officer
obtains actual knowledge thereof; or
(vi) the Company or any Subsidiary makes an assignment for the
benefit of creditors or is generally not paying its debts as such debts become
due; or
(vii) any decree or order for relief in respect of the Company or any
Subsidiary is entered under any bankruptcy, reorganization, compromise,
arrangement, insolvency, readjustment of debt, dissolution or liquidation or
similar law, whether now or hereafter in effect (herein called the "BANKRUPTCY
LAW"), of any jurisdiction; or
(viii) the Company or any Subsidiary petitions or applies to any
tribunal for, or consents to, the appointment of, or taking possession by, a
trustee, receiver, custodian, liquidator or similar official of the Company or
any Subsidiary, or of any substantial part of the assets of the Company or any
Subsidiary, or commences a voluntary case under the Bankruptcy Law of the United
States or any proceedings (other than proceedings for the voluntary liquidation
and dissolution of a Subsidiary) relating to the Company or any Subsidiary under
the Bankruptcy Law of any other jurisdiction; or
(ix) any such petition or application is filed, or any such
proceedings are commenced, against the Company or any Subsidiary and the Company
or such Subsidiary by any act indicates its approval thereof, consent thereto or
acquiescence therein, or an order, judgment or decree is entered appointing any
such trustee, receiver, custodian, liquidator or similar official, or approving
the petition in any such proceedings, and such order, judgment or decree remains
unstayed and in effect for more than 60 days; or
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(x) any order, judgment or decree is entered in any proceedings
against the Company decreeing the dissolution of the Company and such order,
judgment or decree remains unstayed and in effect for more than 60 days; or
(xi) any order, judgment or decree is entered in any proceedings
against the Company or any Subsidiary decreeing a split-up of the Company or
such Subsidiary which requires the divestiture of assets representing a
substantial part, or the divestiture of the stock of a Subsidiary whose assets
represent a substantial part, of the consolidated assets of the Company and its
Subsidiaries or which requires the divestiture of assets, or stock of a
Subsidiary, which shall have contributed a substantial part of the consolidated
net income of the Company and its Subsidiaries for any of the three fiscal years
then most recently ended, and such order, judgment or decree remains unstayed
and in effect for more than 60 days (the term "substantial" for purposes of this
clause (xi) shall mean that amount of assets that would be prohibited from being
Transferred pursuant to paragraph 6C(6)); or
(xii) a final judgment in an amount in excess of $250,000 is rendered
against the Company or any Subsidiary and, within 60 days after entry thereof,
such judgment is not discharged or execution thereof stayed pending appeal, or
within 60 days after the expiration of any such stay, such judgment is not
discharged; or
(xiii) (A) any Plan shall fail to satisfy the minimum funding
standards of ERISA or the Code for any plan year or part thereof or a waiver of
such standards or extension of any amortization period is sought or granted
under Section 412 of the Code, (B) a notice of intent to terminate any Plan
shall have been or is reasonably expected to be filed with the PBGC or the PBGC
shall have instituted proceedings under ERISA Section 4042 to terminate or
appoint a trustee to administer any Plan or the PBGC shall have notified the
Company or any ERISA Affiliate that a Plan may become a subject of such
proceedings, (C) the aggregate "amount of unfunded benefit liabilities" (within
the meaning of Section 4001(a)(18) of ERISA) under all Plans, determined in
accordance with Title IV of ERISA, shall exceed $250,000, (D) the Company or any
ERISA Affiliate shall have incurred or is reasonably expected to incur any
liability pursuant to Title I or IV of ERISA or the penalty or excise tax
provisions of the Code relating to employee benefit plans, (E) the Company or
any ERISA Affiliate withdraws from any Multiemployer Plan, or (F) the Company or
any Subsidiary establishes or amends any employee welfare benefit plan that
provides post-employment welfare benefits in a manner that would materially
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increase the liability of the Company or any Subsidiary thereunder; and any such
event or events described in clauses (A) through (F) above, either individually
or together with any other such event or events, could reasonably be expected to
have a material adverse effect on the business, condition (financial or
otherwise), operations or prospects of the Company and its Subsidiaries taken as
a whole; or
(xiv) any of the Transaction Documents shall fail to be in full force
and effect or otherwise shall not be enforceable in accordance with its terms;
or the Company or any Subsidiary shall contest or deny the validity or
enforceability of, or deny that it has any liability or obligations under, any
agreement, term or condition contained in any Transaction Document; or
(xv) the holders of the Notes do not have or cease to have a duly
created and perfected first priority security interest in all of the Collateral,
subject only to the Liens permitted by clauses (ii), (iii) or (v) of paragraph
6C(1) hereof that by operation of law have a priority prior to the Lien arising
under the Collateral Documents, or such security interest for whatever reason
shall be unenforceable; or
(xvi) any court or administrative or governmental body shall take any
action which will have a material adverse effect on, or there is otherwise any
material adverse change in, the business, condition (financial or otherwise) or
operations of the Company or its Subsidiaries taken as a whole or on the ability
of the Company to perform its obligations under this Agreement, the Notes or any
other Transaction Document; or
(xvii) the Company fails to obtain, within 60 days after the Closing
Day, the United States Department of Education re-certification of the ▇▇▇▇▇▇▇▇
Schools as eligible for funding under Title IV of the Higher Education Act of
1965; or
(xviii) (A) the Company fails to obtain, within 90 days after the
Closing Day, any of the permits or approvals listed on Schedule 3A(5) hereto, or
(B) within 90 days after the Closing Day, all of the guaranty agencies which
have guaranteed Federal Family Education Loan loan programs for the ▇▇▇▇▇▇▇▇
Schools have not resumed such guaranty activities;
then (a) if such event is an Event of Default specified in clause (i) of this
paragraph 7A, the holder of any Note (other than the Company or any of its
Subsidiaries or Affiliates) may at its option, by notice in writing to the
Company, declare such Note to be, and such Note shall thereupon be and become,
immediately due
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and payable at par together with interest accrued thereon, without presentment,
demand, protest or additional notice of any kind, all of which are hereby waived
by the Company, (b) if such event is an Event of Default specified in clause
(vii), (viii) or (ix) of this paragraph 7A with respect to the Company, all of
the Notes at the time outstanding shall automatically become immediately due and
payable together with interest accrued thereon and together with the Yield-
Maintenance Amount, if any, with respect to each Note, without presentment,
demand, protest or notice of any kind, all of which are hereby waived by the
Company, and (c) with respect to any event constituting an Event of Default
hereunder other than as described in clause (b) (including an Event of Default
described in clause (i) of this paragraph 7A), the Required Holder(s) of the
Revolving Notes or of the Term Notes may at its or their option, by notice in
writing to the Company, declare all of the Revolving Notes or of the Term Notes
(as the case may be) to be, and all of such Notes shall thereupon be and become,
immediately due and payable together with interest accrued thereon and together
with the Yield-Maintenance Amount, if any, and any non-usage fees through the
date of such acceleration with respect to each such Note, without presentment,
demand, protest or additional notice of any kind, all of which are hereby waived
by the Company.
7B. RESCISSION OF ACCELERATION. At any time after any or all of the
Revolving Notes or the Term Notes shall have been declared immediately due and
payable pursuant to paragraph 7A, the Required Holder(s) of the Revolving Notes
or of the Term Notes (as the case may be) may, by notice in writing to the
Company, rescind and annul such declaration and its consequences if (i) the
Company shall have paid all overdue interest and non-usage fees (if any) on such
Notes, the principal of and Yield-Maintenance Amount, if any, payable with
respect to such Notes which have become due otherwise than by reason of such
declaration, and interest on such overdue interest, non-usage fees and overdue
principal and Yield-Maintenance Amount at the rate specified herein or in such
Notes, (ii) the Company shall not have paid any amounts which have become due
solely by reason of such declaration, (iii) all Events of Default and Defaults,
other than non-payment of amounts which have become due solely by reason of such
declaration, shall have been cured or waived pursuant to paragraph 11C, and (iv)
no judgment or decree shall have been entered for the payment of any amounts due
pursuant to the Notes or this Agreement. No such rescission or annulment shall
extend to or affect any subsequent Event of Default or Default or impair any
right arising therefrom.
7C. NOTICE OF ACCELERATION OR RESCISSION. Whenever any Note shall be
declared immediately due and payable pursuant to paragraph 7A or any such
declaration shall be rescinded and annulled pursuant to paragraph 7B, the
Company shall forthwith give written notice thereof to the holder of each Note
at the time outstanding.
7D. OTHER REMEDIES. If any Event of Default or Default shall occur and be
continuing, the holder of any Note may proceed to
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protect and enforce its rights under this Agreement, such Note and the other
Transaction Documents by exercising such remedies as are available to such
holder in respect thereof (i) under the Transaction Documents and (ii) under
applicable law, either by suit in equity or by action at law, or both, whether
for specific performance of any covenant or other agreement contained in this
Agreement or any other Transaction Document or in aid of the exercise of any
power granted in this Agreement. No remedy conferred in this Agreement or any
other Transaction Document upon the holder of any Note is intended to be
exclusive of any other remedy, and each and every such remedy shall be
cumulative and shall be in addition to every other remedy conferred herein, in
any other Transaction Document or now or hereafter existing at law or in equity
or by statute or otherwise.
8. REPRESENTATIONS, COVENANTS AND WARRANTIES. The Company represents,
covenants and warrants as follows:
8A(1). ORGANIZATION; CAPITAL STOCK.
(a) The Company is a corporation duly organized and existing in good
standing under the laws of the State of Delaware and is licensed or qualified to
do business and in good standing in every jurisdiction where the ownership of
its properties or the nature of the business conducted by it makes such
licensing or qualification necessary, except where the failure to be licensed or
qualified would not have a material adverse affect on the Company. Each
Subsidiary is duly organized and existing in good standing in every jurisdiction
in which it is incorporated or organized and is licensed or qualified to do
business and in good standing in every jurisdiction where the ownership of its
properties or the nature of the business conducted by it makes such licensing or
qualification necessary, except where the failure to be licensed or qualified
would not have a material adverse affect on such Subsidiary. The names of the
Subsidiaries, the jurisdiction in which each such Subsidiary is organized, the
shareholder(s) of such Subsidiaries and the ownership interests of such owners
therein are as set forth in Schedule 8A(1)(a).
(b) On the Closing Day, and after giving effect to the transactions
contemplated by the Transaction Documents (i) the authorized and issued Capital
Stock of the Company will consist of (1) 9,000,000 shares of authorized Class A
Common Stock, 111,660 shares of which are issued and outstanding and 6243.89
shares of which will be reserved for the issuance of shares upon exercise of the
Warrants and 1133.95 shares of which will be reserved for the issuance of shares
upon the exercise of the Equity Sponsor Warrants, (2) 500,000 shares of
authorized Class B Common Stock, 32,090 shares (which
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includes 18,750 shares held by Senior Management and subject to vesting) of
which are issued and outstanding and 4535.83 shares of which will be reserved
for issuance of shares upon exercise of the Equity Sponsor Warrant and (3)
500,000 shares of authorized preferred stock of which 18,125 shares of Class A
Preferred Stock (the "CLASS A PREFERRED"), are authorized, issued and
outstanding and (ii) other than the Warrants and the Equity Sponsor Warrants,
there are no other options for, rights to acquire, agreements to issue, or
securities exercisable for or convertible into shares of the Company's Capital
Stock. The names of the owners of the capital stock of the Company and the
number of shares held by each, after giving effect to the transactions
contemplated by the Transaction Documents, are as set forth in Schedule
8A(1)(b).
8A(2). POWER AND AUTHORITY. The Company and each of its Subsidiaries has
all requisite corporate power to conduct its business as currently conducted and
as currently proposed to be conducted. The Company has all requisite corporate
power to execute, deliver and perform its obligations under this Agreement, the
Notes and the other Transaction Documents to which the Company is a party. The
execution, delivery and performance of this Agreement, the Notes, and each
Transaction Document to which the Company is a party have been duly authorized
by all requisite action and this Agreement, the Notes and the Transaction
Documents have been duly executed and delivered by authorized officers of the
Company, and are valid obligations of the Company, legally binding upon and
enforceable against the Company in accordance with their terms, except as such
enforceability may be limited by (i) bankruptcy, insolvency, reorganization or
other similar laws affecting the enforcement of creditors' rights generally and
(ii) general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law). The Company has duly
authorized the issuance of 6243.89 shares of its Class A Common Stock upon the
exercise of the Warrants, such number of shares of the Class A Common Stock has
been reserved for issuance upon the exercise of the Warrants and, upon such
exercise and payment of the purchase price therefor pursuant to the Warrants,
such shares shall be duly authorized and issued, fully paid and non-assessable.
8B. FINANCIAL STATEMENTS; RESTRICTED PAYMENTS. The Company has furnished
Prudential with the following financial statements, identified by a principal
financial officer of the Company: (i) a consolidated balance sheet of the
Company and its Subsidiaries as of June 30, 1996 and all fiscal years completed
subsequent to such date (other than fiscal years completed within 90 days prior
to the date as of which this representation is made or repeated to Prudential
and for which audited financial statements have not been released) and
consolidated statements of income, retained earnings and cash flows of the
Company and its Subsidiaries for each such
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fiscal year, all certified by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇; and (ii) a consolidated balance
sheet of the Company and its Subsidiaries as of the end of the quarterly period
(if any) most recently completed prior to such date and after the end of such
fiscal year (other than quarterly periods completed within 45 days prior to such
date for which financial statements have not been released) and the comparable
quarterly period in the preceding fiscal year and consolidated statements of
income, retained earnings and cash flows for the Company and its Subsidiaries
for the periods from the beginning of the fiscal years in which such quarterly
periods are included to the end of such quarterly periods, prepared by the
Company. Such financial statements (including any related schedules and/or
notes) are true and correct in all material respects (subject, as to interim
statements to changes resulting from audits and normal year-end adjustments) and
have been prepared in accordance with GAAP consistently followed throughout the
periods involved. The balance sheets fairly present the condition of the Company
and its Subsidiaries as at the dates thereof, and the statements of income,
retained earnings and cash flows fairly present the results of the operations of
the Company and its Subsidiaries for the periods indicated. There has been no
material adverse change in the business, condition or operations (financial or
otherwise) of the Company and its Subsidiaries taken as a whole since the end of
the most recent fiscal year for which such audited financial statements have
been furnished. No Restricted Payment has been made by the Company from July 1,
1996 through the Closing Day.
8C. ACTIONS PENDING. There is no action, suit, investigation or
proceeding pending or, to the knowledge of the Company, threatened against the
Company or any of its Subsidiaries, or any Properties or rights of the Company
or any of its Subsidiaries, by or before any court, arbitrator or administrative
or governmental body which might result in (i) the closure, loss of eligibility
for state or federal financial assistance or loss of accreditation of any
schools owned or operated by the Company or any Subsidiary or (ii) any other any
material adverse change in the business, condition (financial or otherwise) or
operations of the Company and its Subsidiaries taken as a whole.
8D. OUTSTANDING DEBT. The Company does not have outstanding any Debt
except as permitted by paragraph 6A(3). There exists no default under the
provisions of any instrument evidencing such Debt or of any agreement relating
thereto. No Subsidiary of the Company has any outstanding Debt except as
permitted by paragraph 6C(2).
8E. TITLE TO PROPERTIES. The Company and each Subsidiary has good and
indefeasible title to its respective real properties (other than properties
which it leases) and good title to all of its other properties and assets,
including, without limitation, all Properties and assets reflected in the most
recent audited balance sheet delivered pursuant to paragraph 5A (or, if no
audited balance sheet has been delivered, the most recent audited balance sheet
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referred to in paragraph 8B), subject to no Lien of any kind except Liens
permitted by paragraph 6C(1). All material leases necessary in any material
respect for the conduct of the business of the Company are valid and subsisting
and are in full force and effect. Schedule 8E sets forth as of the Closing Day
each school facility lease and the base rent currently payable, the scheduled
lease expiration date and the amount of any buyout option with respect thereto.
8F. COMPLIANCE WITH LAWS. The Company and its Subsidiaries and all of
their respective Properties and facilities have complied at all times and in all
material respects with all laws, statutes, regulations, including, without
limitation, the Higher Education Act of 1965, as amended, and all Environmental
Laws, except where failure to comply would not result in a material adverse
effect on the business, condition (financial or otherwise) or operations of the
Company and its Subsidiaries taken as a whole.
8G. TAXES. The Company has and each of its Subsidiaries has filed all
federal, state and other income tax returns which, to the best knowledge of the
officers of the Company, are required to be filed, and each has paid all taxes
as shown on such returns and on all assessments received by it to the extent
that such taxes have become due, except such taxes which are subject to a Good
Faith Contest.
8H. CONFLICTING AGREEMENTS AND OTHER MATTERS. Neither the Company nor any
of its Subsidiaries is a party to any contract or agreement or subject to any
charter or other corporate restriction which materially and adversely affects
its business, property or assets, or financial condition. Neither the execution
nor delivery of this Agreement, the Notes or any other Transaction Document, nor
the offering, issuance and sale of the Notes, nor the making of any Revolving
Loan, nor the fulfillment of nor compliance with the terms and provisions
hereof, of the Notes and of any other Transaction Document will conflict with,
or result in a breach of the terms, conditions or provisions of, or constitute a
default under, or result in any violation of, or result in the creation of any
Lien (other than Liens created for the benefit of the holders of the Notes
pursuant to the Transaction Documents) upon any of the Properties or assets of
the Company or any of its Subsidiaries pursuant to, the charter or by-laws of
the Company or any of its Subsidiaries, any award of any arbitrator or any
agreement (including any agreement with stockholders of the Company or Persons
with direct or indirect ownership interests in stockholders of the Company),
instrument, order, judgment, decree, statute, law, rule or regulation to which
the Company or any of its Subsidiaries is subject. Neither the Company nor any
of its Subsidiaries is a party to, or otherwise subject to any provision
contained in, any instrument evidencing Debt of the Company or such Subsidiary,
any agreement relating thereto or any other contract or agreement (including its
charter) which limits the amount of, or otherwise imposes restrictions on, the
incurring of Debt of the Company of
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the type to be evidenced by the Notes except as set forth in the agreements
listed on Schedule 8H attached hereto.
8I. OFFERING OF NOTES. Neither the Company nor any agent acting on its
behalf has, directly or indirectly, offered the Notes or any similar security of
the Company for sale to, or solicited any offers to buy the Notes or any similar
security of the Company from, or otherwise approached or negotiated with respect
thereto with, any Person other than Institutional Investors, and neither the
Company nor any agent acting on its behalf has taken or will take any action
which would subject the issuance or sale of the Notes to the provisions of
section 5 of the Securities Act or to the provisions of any securities or Blue
Sky law of any applicable jurisdiction.
8J. USE OF PROCEEDS. The proceeds of sale of the Term Notes and the
Revolving Loan made on the Closing Day will be used to finance the acquisition
of the assets purchased pursuant to the Master Agreement and the Schools
Agreement and for working capital. None of the proceeds of any Term Note or
Revolving Loan will be used, directly or indirectly, for the purpose, whether
immediate, incidental or ultimate (i) of purchasing or carrying any margin stock
or for the purpose of maintaining, reducing or retiring any indebtedness which
was originally incurred to purchase or carry any stock that is currently a
margin stock or for any other purpose which might constitute this transaction a
"PURPOSE CREDIT" within the meaning of such Regulation G or (ii) except for
$500,000 of the proceeds of the Revolving Loans, to repay any Debt incurred to
▇▇▇▇▇▇▇▇ or any Affiliate to acquire any real estate under the Real Estate
Acquisition Agreement or to fund any escrow under the Acquisition Agreements
after the Closing Day. Neither the Company nor any agent acting on its behalf
has taken or will take any action which might cause this Agreement, the Notes or
any Revolving Loan to violate Regulation G, Regulation T or any other regulation
of the Board of Governors of the Federal Reserve System or to violate the
Exchange Act, in each case as in effect now or as the same may hereafter be in
effect.
8K. ERISA. No accumulated funding deficiency (as defined in section 302
of ERISA and section 412 of the Code), whether or not waived, exists with
respect to any Plan (other than a Multiemployer Plan). No liability to the PBGC
has been or is expected by the Company or any ERISA Affiliate to be incurred
with respect to any Plan (other than a Multiemployer Plan) by the Company, any
Subsidiary or any ERISA Affiliate which is or would be materially adverse to the
business, condition (financial or otherwise) or operations of the Company and
its Subsidiaries taken as a whole. Neither the Company, any Subsidiary nor any
ERISA Affiliate has incurred or presently expects to incur any withdrawal
liability under Title IV of ERISA with respect to any Multiemployer Plan which
is or would be materially adverse to the business, condition (financial or
otherwise) or operations of the Company and its Subsidiaries taken as a whole.
The execution and delivery of this
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Agreement, the issuance and sale of the Notes and the making of each Revolving
Loan will be exempt from, or will not involve any transaction which is subject
to, the prohibitions of section 406 of ERISA and will not involve any
transaction in connection with which a penalty could be imposed under section
502(i) of ERISA or a tax could be imposed pursuant to section 4975 of the Code.
The representation by the Company in the next preceding sentence is made in
reliance upon and subject to the accuracy of Prudential's representation in
paragraph 9B as to the source of funds to be used by it to purchase any Term
Notes and make any Revolving Loans.
8L. GOVERNMENTAL CONSENT. Neither the nature of the Company or of any
Subsidiary nor any of their respective businesses or Properties, nor any
relationship between the Company or any Subsidiary and any other Person, nor any
circumstance in connection with the offering, issuance, sale or delivery of the
Notes, the making of any Revolving Loan or the use of the proceeds of either is
such as to require any authorization, consent, approval, exemption or other
action by or notice to or filing with any court or administrative or
governmental body (excluding routine filings with respect to the Notes to be
made after the date of closing with the Securities and Exchange Commission
and/or state Blue Sky authorities and the filing of appropriate notices for
perfection of security interests) in connection with the execution and delivery
of this Agreement, the offering, issuance, sale or delivery of the Notes, the
making of any Revolving Loan or the fulfillment of or compliance with the terms
and provisions hereof, of the Notes or of any other Transaction Document.
8M. REGULATORY STATUS. Neither the Company nor any Subsidiary is (i) an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended, (ii) a "holding
company" or a "subsidiary company" or an "affiliate" of a "holding company" or a
"subsidiary company" of a "holding company", within the meaning of the Public
Utility Act of 1935, as amended, or (iii) a "public utility" within the meaning
of the Federal Power Act, as amended.
8N. SECTION 144A. The Term Notes are not of the same class as securities,
if any, of the Company listed on a national securities exchange registered under
Section 6 of the Exchange Act or quoted in a U.S. automated inter-dealer
quotation system.
8O. ABSENCE OF FINANCING STATEMENTS, ETC. Except with respect to Liens
permitted by paragraph 6C(1) hereof, there is no financing statement, security
agreement, chattel mortgage, real estate mortgage or other document filed or
recorded with any filing records, registry or other public office, that purports
to cover, affect or give notice of any present or possible future Lien on, or
security interest in, any assets or property of the Company or any of its
Subsidiaries or any rights relating thereto.
-41-
8P. ESTABLISHMENT OF SECURITY INTEREST. All filings, assignments, pledges
and deposits of documents or instruments have been made and all other actions
have been taken, that are necessary or advisable under applicable law and are
required to be made or taken on or prior to the Closing Day to establish and
perfect Prudential's security interest in the Collateral. The Collateral and
Prudential's rights with respect to the Collateral are not subject to any
setoff, claims, withholdings or other defenses. The Company is the owner of the
Collateral described in each Security Document free from any Lien, security
interest, encumbrance and any other claim or demand, except for Liens permitted
by paragraph 6C(1) hereof.
8Q. POSSESSION OF INTELLECTUAL PROPERTY. Except as set forth in Schedule
8Q, as of the Closing Day, the Company has no patents, trademarks, service
marks, tradenames, copyrights, curricula, know-how or similar intellectual
property (collectively, "INTELLECTUAL PROPERTY") which are material to the
conduct of the Company's business. The Company and its Subsidiaries possess all
Intellectual Property free from burdensome restriction and that are necessary in
any material respect for the ownership, maintenance and operation of their
business, properties and assets, and neither the Company nor any Subsidiary has
infringed upon or violated the Intellectual Property of any third party. From
and after the date hereof, all Intellectual Property of the Company and
Subsidiaries will be validly issued and will be in full force and effect and
will not contain any provision or restriction which could materially affect or
impair their value or use.
8R. PERMITS AND OTHER OPERATING RIGHTS. The Company and each of its
Subsidiaries has all such valid franchises, licenses, permits, accreditation,
operating rights, certificates of convenience and necessity, other
authorizations from Federal, state, regional, municipal and other local
regulatory bodies or administrative agencies or other governmental bodies having
jurisdiction over the Company or any of its Subsidiaries (collectively,
"AUTHORIZATIONS") as are necessary in all material respects for the ownership,
operation and maintenance of its business and Properties, and such
Authorizations are free from burdensome restrictions or conditions of an unusual
character or restrictions or conditions materially adverse to the business or
operations of the Company or any of its Subsidiaries, and the Company and each
of its Subsidiaries is not in violation thereof in any material respect.
Schedule 8R sets forth as of the Closing Day (i) the accreditation for each of
the Company's schools, (ii) the last date each such accreditation was issued or
renewed, (iii) the expiration date of each such accreditation and (iv) any
alternative or additional accreditation, if any, which the Company intends to
seek for each such school.
8S. DISCLOSURE. Neither this Agreement, any Transaction Document nor any
other document, certificate or statement
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(including, without limitation, the Private Placement Memorandum) furnished by
or on behalf of the Company in connection with this Agreement, the other
Transaction Documents, the issuance of the Notes or the making of any Revolving
Loan contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein and
therein not misleading. There is no fact peculiar to the Company or any of its
Subsidiaries which materially adversely affects or in the future may (so far as
the Company can now reasonably foresee) materially adversely affect the
business, property or assets, or financial condition of the Company and its
Subsidiaries taken as a whole and which has not been set forth in this Agreement
or in the other documents, certificates and statements furnished in connection
herewith by or on behalf of the Company prior to the date hereof or any date on
which this representation is repeated or confirmed in connection with the
transactions contemplated hereby. The projections contained in the Private
Placement Memorandum are reasonable in light of the facts and circumstances at
the time of their preparation and no event, condition or development has since
occurred that would make such projections misleading in any material respect.
9. REPRESENTATIONS OF PRUDENTIAL. Prudential represents as follows:
9A. NATURE OF PURCHASE. Prudential is not acquiring the Notes or the
Warrant to be purchased by it hereunder with a view to or for sale in connection
with any distribution thereof within the meaning of the Securities Act, provided
that the disposition of Prudential's property shall at all times be and remain
within its control.
9B. SOURCE OF FUNDS. The source of funds being used by Prudential to pay
the purchase price of the Notes and the Warrant being purchased by it hereunder
or to make any Revolving Loan hereunder constitutes assets allocated to: (i)
Prudential's "INSURANCE COMPANY GENERAL ACCOUNT" (as such term is defined under
Section V of the United States Department of Labor's Prohibited Transaction
Class Exemption ("PTCE") 95-60), and as of the date of the purchase of the Notes
Prudential satisfies all of the applicable requirements for relief under
Sections I and IV of PTCE 95-60 or (ii) a separate account maintained by
Prudential in which no employee benefit plan, other than employee benefit plans
identified on a list which has been furnished by it to the Company, participates
to the extent of 10% or more. For the purpose of this paragraph 9B, the terms
"SEPARATE ACCOUNT" and "EMPLOYEE BENEFIT PLAN" shall have the respective
meanings specified in section 3 of ERISA.
10. DEFINITIONS; ACCOUNTING MATTERS. For the purpose of this Agreement,
the terms defined in paragraphs 10A and 10B (or within the text of any other
paragraph) shall have the respective meanings
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specified therein and all accounting matters shall be subject to determination
as provided in paragraph 10C.
10A. YIELD-MAINTENANCE TERMS.
"BUSINESS DAY" shall mean any day other than a Saturday, a Sunday or a day
on which commercial banks in New York City or California are required or
authorized to be closed.
"CALLED PRINCIPAL" shall mean, with respect to any Note, the principal of
such Note that is to be prepaid pursuant to paragraph 4B(1) or 4B(2) or
purchased by the Company pursuant to paragraph 5E or becomes immediately due and
payable pursuant to paragraph 7A, as the context requires.
"DISCOUNTED VALUE" shall mean, with respect to the Called Principal of any
Note, the amount obtained by discounting all Remaining Scheduled Payments with
respect to such Called Principal from their respective scheduled due dates to
the Settlement Date with respect to such Called Principal, in accordance with
accepted financial practice and at a discount factor (as converted to reflect
the periodic basis on which interest on such Note is payable, if interest is
payable other than on a semi-annual basis) equal to the Reinvestment Yield with
respect to such Called Principal.
"REINVESTMENT YIELD" shall mean, with respect to the Called Principal of
any Note, 1.00% over the yield to maturity implied by (i) the yields reported,
as of 10:00 a.m. (New York city time) on the Business Day next preceding the
Settlement Date with respect to such Called Principal, on the display designated
as "PAGE 678" on the Telerate Service (or such other display as may replace Page
678 on the Telerate Service) for actively traded U.S. Treasury securities having
a maturity equal to the Remaining Average Life of such Called Principal as of
such Settlement Date, or if such yields shall not be reported as of such time or
the yields reported as of such time shall not be ascertainable, (ii) the
Treasury Constant Maturity Series yields reported, for the latest day for which
such yields shall have been so reported as of the Business Day next preceding
the Settlement Date with respect to such Called Principal, in Federal Reserve
Statistical Release H.15 (519) (or any comparable successor publication) for
actively traded U.S. Treasury securities having a constant maturity equal to the
Remaining Average Life of such Called Principal as of such Settlement Date.
Such implied yield shall be determined, if necessary, by (a) converting U.S.
Treasury ▇▇▇▇ quotations to bond-equivalent yields in accordance with accepted
financial practice and (b) interpolating linearly between yields reported for
various maturities.
"REMAINING AVERAGE LIFE" shall mean, with respect to the Called Principal
of any Note, the number of years (calculated to
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the nearest one-twelfth year) obtained by dividing (i) such Called Principal
into (ii) the sum of the products obtained by multiplying (a) each Remaining
Scheduled Payment of such Called Principal (but not of interest thereon) by (b)
the number of years (calculated to the nearest one-twelfth year) which will
elapse between the Settlement Date with respect to such Called Principal and the
scheduled due date of such Remaining Scheduled Payment.
"REMAINING SCHEDULED PAYMENTS" shall mean, with respect to the Called
Principal of any Note, all payments of such Called Principal and interest
thereon that would be due on or after the Settlement Date with respect to such
Called Principal if no payment of such Called Principal were made prior to its
scheduled due date.
"SETTLEMENT DATE" shall mean, with respect to the Called Principal of any
Note, the date on which such Called Principal is to be prepaid pursuant to
paragraph 4B(1) or 4B(2) or purchased pursuant to paragraph 5E or becomes
immediately due and payable pursuant to paragraph 7A, as the context requires.
"YIELD-MAINTENANCE AMOUNT" shall mean, with respect to any Note, an amount
equal to the excess, if any, of the Discounted Value of the Called Principal of
such Note over the sum of (i) such Called Principal plus (ii) interest accrued
thereon as of (including interest due on) the Settlement Date with respect to
such Called Principal. The Yield-Maintenance Amount shall in no event be less
than zero.
10B. OTHER TERMS.
"ACQUISITION AGREEMENTS" shall have the meaning specified in paragraph
3A(7).
"ADJUSTED COMMERCIAL PAPER RATE" shall mean a rate per annum equal to the
sum of 3.00% plus the yield-adjusted rate (i.e., the nominal rate increased by
the cost of any discount) charged or quoted to Prudential Funding Corporation
for dealer-placed, 30- day promissory notes issued by Prudential Funding
Corporation on the Rate Day.
"AFFILIATE" shall mean any Person directly or indirectly controlling,
controlled by, or under direct or indirect common control with, the Company or
another specified Person, except a Subsidiary. A Person shall be deemed to
control a corporation if such Person possesses, directly or indirectly, the
power to direct or cause the direction of the management and policies of such
corporation, whether through the ownership of voting securities, by contract or
otherwise.
"AUTHORIZED OFFICER" shall mean the Company's chief executive officer,
chief operating officer, chief financial officer or chief accounting officer of
the Company or any other officer of the
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Company involved principally in its financial administration or its
controllership function, any other officer of the Company designated as an
"AUTHORIZED OFFICER" in the Information Schedule attached hereto and any other
officer of the Company designated as an "AUTHORIZED OFFICER" for the purpose of
this Agreement in an Officer's Certificate executed by the Company's chief
executive officer or chief financial officer and delivered to Prudential. Any
action taken under this Agreement on behalf of the Company by any individual who
on or after the date of this Agreement shall have been an Authorized Officer of
the Company and whom Prudential in good faith believes to be an Authorized
Officer of the Company at the time of such action shall be binding on the
Company even though such individual shall have ceased to be an Authorized
Officer of the Company.
"AUTHORIZATION" shall have the meaning specified in paragraph 8R.
"BANKRUPTCY LAW" shall have the meaning specified in clause (vii) of
paragraph ▇▇.
"▇▇▇▇ ▇▇" shall mean Banc One Capital Partners II, Ltd., an Ohio limited
liability company.
"CAPITAL STOCK" of any Person, shall mean any and all shares, interests,
participations or other equivalents (however designated) of corporate stock,
including each class of common stock and preferred stock of such Person or
partnership interests and any warrants, options or other rights to acquire such
stock or interests. The term "CAPITAL STOCK" as used herein with respect to the
Company shall include the Class A Preferred.
"CAPITALIZED LEASE OBLIGATION" shall mean any rental obligation which,
under GAAP, is or will be required to be capitalized on the books of the Company
or any Subsidiary, taken at the amount thereof accounted for as indebtedness
(net of interest expense) in accordance with such principles.
"CHANGE OF CONTROL EVENT" shall mean (i) ▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇ St. ▇▇▇▇▇▇
▇▇▇▇▇ at any time to be employed for any reason by the Company on a full-time
basis; (ii) either ▇▇▇▇▇ ▇▇▇▇▇ or ▇▇▇▇ St. Pierre and any two of the remaining
three members of Senior Management cease at any time to be employed for any
reason by the Company on a full-time basis; (iii) Senior Management (or trusts,
the beneficiaries of which are immediate family members of a member of Senior
Management), and the Equity Sponsors cease to own at any time in the aggregate
at least 50% of the outstanding common stock of the Company; (iv) BOCP II and
LLC shall cease to own at any time in the aggregate at least 50% of the common
stock of the Company that they own in the aggregate as of the Closing Day (after
giving effect to the transactions contemplated by the transaction documents);
(v) Primus shall cease to own at any time at least 50%
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of the common stock of the Company that it owns as of the Closing Day; or (vi) a
Person other than the shareholders at the Closing Day acquires the right or
ability to elect, or direct the election, of a majority of the Company's Board
of Directors; provided, however, that after a Qualifying Equity Offering a
"CHANGE OF CONTROL EVENT" shall mean (a) an event of the type described in
clauses (i) or (ii) above; (b) an event or series of events by which any Person
or Persons or other entities acting in concert as a partnership or other group
(a "GROUP OF PERSONS") shall, as a result of a tender or exchange offer, open
market purchases, privately negotiated purchases, merger, consolidation or
otherwise, have become the beneficial owner (within the meaning of Rule 13d-3
under the Exchange Act), of 50% or more of the Voting Power of the Company; (c)
the Company is merged with or into another corporation with the effect that
immediately after such transaction the stockholders of the Company immediately
prior to such transaction hold less than a majority of the combined Voting Power
of the Person surviving the transaction; (d) the direct or indirect, sale,
lease, exchange or other transfer of all or substantially all of the assets of
the Company to any Person or Group of Persons; or (e) Senior Management (or
trusts, the beneficiaries of which are immediate family members of a member of
Senior Management) ceases to own at any time in the aggregate at least 30% of
the common stock of the Company that they own in the aggregate as of the Closing
Day (after giving effect to the transactions contemplated by the Transaction
Documents). An event of the type described in clause (iii),(iv) or (v) in the
foregoing sentence that results from the consummation of an initial public
offering of the Company's Qualified Stock shall not be deemed a Change of
Control Event.
"CLASS A PREFERRED" shall have the meaning provided in paragraph 8A(1).
"CLOSING DAY" shall have the meaning provided in paragraph 2A.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COLLATERAL" shall mean all the Company's property and assets, including
accounts receivable, fixed assets (other than the real estate permitted to be
subject to Liens pursuant to paragraph 6C(1)(vi) hereof) and other Intellectual
Property.
"COLLATERAL DOCUMENTS" shall have the meaning specified in paragraph 3A(9).
"COMPANY" shall have the meaning specified in the introductory paragraph of
this Agreement.
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"CONSOLIDATED" shall mean, with respect to any financial or accounting
term, such term on a consolidated basis for the Company and its Subsidiaries in
accordance with GAAP.
"CONSOLIDATED CAPITALIZATION" shall mean, as at any time of determination,
Consolidated Senior Debt plus (i) Consolidated subordinated debt designated in
writing by the Required Holders in their sole discretion as eligible for
inclusion in computing Consolidated Capitalization and (ii) Consolidated
shareholders equity.
"CONSOLIDATED CASH FLOW" shall mean, as to any period, Consolidated Net
Income plus (i) depreciation and amortization expense, (ii) Consolidated
Interest Expense and (iii) income tax expense.
"CONSOLIDATED CASH FLOW FROM OPERATIONS" shall mean, as to any period,
Consolidated cash flow from operations calculated in accordance with GAAP and as
set forth on the Company's statement of cash flows delivered to the holders of
the Notes pursuant to paragraph 5A.
"CONSOLIDATED EBIT" shall mean, as to any period, Consolidated Net Income
plus all amounts deducted in arriving at such Consolidated Net Income amount in
respect of (i) Consolidated Interest Expense and (ii) income tax expense.
"CONSOLIDATED FIXED CHARGES" shall mean, as to any period, the sum of (i)
Consolidated Interest Expense, (ii) scheduled principal payments in respect of
Debt of the Company and its Subsidiaries, including, without limitation, the
Subordinated Debt, and (iii) Consolidated Operating Lease Payments.
"CONSOLIDATED INTEREST EXPENSE" shall mean, as to any period, all interest
expense, including, without limitation, all commissions, discounts or related
amortization and other fees and charges with respect to letters of credit and
bankers' acceptance financing and the net costs associated with interest swap
obligations, amortization of debt expense and original issue discount and the
interest portion of any deferred payment obligation (including leases of all
types), calculated in accordance with the effective interest method.
"CONSOLIDATED NET INCOME" shall mean, as to any period, gross revenues of
the Company and its Subsidiaries less all expenses and other proper charges
(including taxes on income), but excluding (i) extraordinary gains, (ii) any
gains or losses resulting from the sale or other disposition of capital assets,
(iii) undistributed earnings of any Person which is not a Subsidiary, (iv) gains
arising from changes in accounting principles, (v) gains arising from the write-
up of assets, (vi) any earnings of a Person acquired through purchase, merger or
consolidation or otherwise by the
-48-
Company or any Subsidiary for any period prior to the date of acquisition, and
(vii) any gains or losses resulting from the retirement or extinguishment of
Debt.
"CONSOLIDATED OPERATING LEASE PAYMENTS" shall mean, as to any period, all
payments under operating leases.
"CONSOLIDATED QUICK ASSETS" shall mean, as at any time of determination,
all cash, cash equivalents, marketable securities and accounts receivable (net
of bad debt reserve).
"CONSOLIDATED SENIOR DEBT" shall mean, as at any time of determination, the
aggregate amount of all Senior Debt.
"CUMULATIVE PERCENTAGE OF NET INCOME CAPACITY TRANSFERRED" shall mean, with
respect to the period from the Closing Day until the date of determination
hereof, the sum of the Percentages of Net Income Capacity Transferred for each
asset of the Company and its Subsidiaries that is Transferred during such
period.
"DEBT" shall mean for any Person (without duplication) (i) all indebtedness
created, assumed or incurred in any manner by such Person representing money
borrowed (including, without limitation, commercial paper and revolving credit
advances and indebtedness which is evidenced by bonds, debentures or notes),
(ii) all indebtedness for the deferred purchase price of property or services or
extensions of credit (other than current trade accounts payable, payroll
obligations and taxes), (iii) all indebtedness secured by any Lien upon Property
of such Person, whether or not such Person has assumed or become liable for the
payment of such indebtedness, (iv) all Capitalized Lease Obligations of such
Person, (v) all obligations of such Person on or with respect to letters of
credit, bankers' acceptances and other extensions of credit whether or not
representing obligations for borrowed money, (vi) all obligations with respect
to which such Person has become liable by way of a Guarantee, (vii) Capital
Stock of such Person which is not Qualified Stock, (viii) all obligations with
respect to interest rate swaps, exchanges or cap agreements, letters of credit
and similar obligations and (ix) all modifications, renewals and extensions of
any of the above.
"DOMESTIC SUBSIDIARY" shall have the meaning provided in paragraph
6C(3)(vi).
"ENVIRONMENTAL LAWS" shall mean all federal, state, local and foreign laws
relating to pollution or protection of the environment, including laws relating
to emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or wastes
into the environment (including, without limitation, ambient air, surface water,
ground water or land), or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage,
-49-
disposal, transport, or handling of pollutants, contaminants, chemicals, or
industrial, toxic or hazardous substances or wastes, and any and all
regulations, codes, plans, orders, decrees, judgments, injunctions, notices or
demand letters issued, entered, promulgated or approved thereunder.
"EQUITY SPONSOR WARRANTS" shall mean the warrants to purchase 806.45 shares
of the Company's Class A Common Stock, the contingent warrants to purchase
327.50 shares of the Company's Class A Common Stock, the warrants to purchase
3225.81 shares of the Company's Class B Common Stock and the contingent warrants
to purchase 1310.02 shares of the Company's Class B Common Stock issued to the
Equity Sponsors pursuant to the Subordinated Note and Warrant Purchase
Agreement.
"EQUITY SPONSORS" shall mean BOCP II, LLC and Primus and their respective
successors and assigns.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA AFFILIATE" shall mean any corporation which is a member of the same
controlled group of corporations as the Company within the meaning of section
414(b) of the Code, or any trade or business which is under common control with
the Company within the meaning of section 414(c) of the Code.
"EVENT OF DEFAULT" shall mean any of the events specified in paragraph 7A,
provided that there has been satisfied any requirement in connection with such
event for the giving of notice, or the lapse of time, or the happening of any
further condition, event or act, and "DEFAULT" shall mean any of such events,
whether or not any such requirement has been satisfied.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended.
"GAAP" shall mean generally accepted accounting principles as in existence
from time to time, applied on a basis consistent with the financial statements
delivered pursuant to paragraph 5A(ii) or, if no such financial statements have
been delivered, the most recent financial statements referenced in clause (i) of
paragraph 8B.
"GOOD FAITH CONTEST" shall mean an active challenge or contest initiated in
good faith by appropriate proceedings for which adequate reserves have been
established in accordance with GAAP.
"GUARANTEE" shall mean, with respect to any Person, any direct or indirect
liability, contingent or otherwise, of such Person with respect to any Debt,
lease, dividend or other obligation of another, including, without limitation,
any such obligation
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directly or indirectly guaranteed, endorsed (otherwise than for collection or
deposit in the ordinary course of business) or discounted or sold with recourse
by such Person, or in respect of which such Person is otherwise directly or
indirectly liable, including, without limitation, any such obligation in effect
guaranteed by such Person through any agreement (contingent or otherwise) to (i)
maintain the solvency or any balance sheet or other financial condition of
another Person or (ii) make payment for any products, materials or supplies or
for any transportation or services regardless of the non-delivery or non-
furnishing thereof, in any such case if the purpose or effect of such agreement
is to provide assurance that such obligation will be paid or discharged, or that
any agreements relating thereto will be complied with, or that the holders of
such obligation will be protected against loss in respect thereof. Guarantees
shall include obligations of partnerships and joint ventures of which the
Company or any Subsidiary is a general partner or co-venturer that is not
expressly non-recourse to the Company or such Subsidiary.
"HOSTILE TENDER OFFER" shall mean, with respect to the use of proceeds of
any Revolving Loan, any offer to purchase, or any purchase of, shares of Capital
Stock of any corporation or equity interests in any other entity, or securities
convertible into or representing the beneficial ownership of, or rights to
acquire, any such shares or equity interests, if such shares, equity interests,
securities or rights are of a class which is publicly traded on any securities
exchange or in any over-the-counter market, other than purchases of such shares,
equity interests, securities or rights representing less than 5% of the equity
interests or beneficial ownership of such corporation or other entity for
portfolio investment purposes, and such offer or purchase has not been duly
approved by the board of directors of such corporation or the equivalent
governing body of such other entity prior to the date on which the Company
requests such Revolving Loan.
"INCLUDING" shall mean, unless the context clearly requires otherwise,
"INCLUDING WITHOUT LIMITATION".
"INFLATION FACTOR" for a year means the quotient (expressed as a decimal
fraction) of (i) the Consumer Price Index for Southern California published by
the U.S. Department of Labor, Bureau of Labor Statistics (if the issuance of
this index is discontinued, the official index published by a federal
governmental agency, which is most nearly equivalent to such index, as
determined by the Required Holders and the Company), as at the end of such year,
divided by (ii) the same index as at the end of the previous year.
"INSTITUTIONAL INVESTOR" shall mean an insurance company, bank, savings and
loan association, finance company, mutual fund, registered money manager,
pension fund, investment company, "qualified institutional buyer" (as such term
is defined under Rule 144A promulgated under the Securities Act, or any
successor law, rule or regulation) or "accredited investor" (as such term is
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defined under Regulation D promulgated under the Securities Act, or any
successor law, rule or regulation).
"INTELLECTUAL PROPERTY" shall have the meaning provided in paragraph 8Q.
"INVESTMENTS" shall have the meaning provided in paragraph 6C(3).
"LIBOR BUSINESS DAY" shall mean a Business Day on which dealings are also
being carried on in the London interbank market and banks are open for business
in London.
"LIBOR RATE" shall mean, for any Rate Period, for any Revolving Loan
outstanding during such Rate Period, the sum of 3.00% plus (i) the interest rate
per annum for deposits in Dollars with a six month maturity which appears on
Telerate Page 3750 as of 11:00 A.M. (London time), two LIBOR Business Days prior
to the Rate Day, or (ii) if such rate ceases to be reported in accordance with
the above definition on Telerate Page 3750, the arithmetic mean of the rates per
annum at which deposits in U.S. dollars are offered by the principal London
office of the LIBOR Reference Banks at approximately 11:00 A.M. (London time),
on the day that is two LIBOR Business Days before the first day of such Rate
Period to prime banks in the London interbank market for a six month period,
commencing on the first day of such Rate Period, and in a Representative Amount.
This arithmetic mean shall be determined by Prudential on the basis of
quotations of the applicable rate requested of each of the LIBOR Reference Banks
by, and furnished to, Prudential, provided, that if fewer than two quotations
are provided as requested, the rate per annum shall equal the arithmetic mean of
the rates quoted by major banks in New York City, selected by Prudential, at
approximately 11:00 A.M. (New York City time) on the first day of the Rate
Period for loans in U.S. Dollars to leading European banks for a six month
period, commencing on the first day of such Rate Period, and in a Representative
Amount.
"LIBOR REFERENCE BANKS" shall mean four major banks in the London interbank
market selected by Prudential.
"LIEN" shall mean any mortgage, pledge, security interest, encumbrance,
deposit agreement, set-off, bankers' lien, lien (statutory or otherwise) or
charge of any kind (including any agreement to give any of the foregoing, any
conditional sale or other title retention agreement, any lease in the nature
thereof, and the filing of or agreement to give any financing statement under
the Uniform Commercial Code of any jurisdiction) or any other type of
preferential arrangement for the purpose, or having the effect, of protecting a
creditor against loss or securing the payment or performance of an obligation.
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"LLC" shall mean BOCP II, Limited Liability Company, an Ohio limited
liability company and successor by merger to Banc One Capital Partners, II L.P.
"MASTER AGREEMENT" shall have the meaning specified in paragraph 3A(7).
"MULTIEMPLOYER PLAN" shall mean any Plan which is a "MULTIEMPLOYER PLAN"
(as such term is defined in section 4001(a)(3) of ERISA).
"NEC" shall mean National Education Centers, Inc.
"NEC COLLATERAL" shall mean the "NEC Collateral", as defined in the NEC
Subordination Agreement.
"NEC OBLIGATIONS" shall mean the "NEC Obligations", as defined in the NEC
Subordination Agreement.
"NEC SUBORDINATION AGREEMENT" shall have the meaning specified in Paragraph
3A(8).
"NOTE" and "NOTES" shall have the meaning specified in paragraph 1B.
"OFFICER'S CERTIFICATE" shall mean a certificate signed in the name of the
Company by an Authorized Officer of the Company.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"PERCENTAGE OF NET INCOME CAPACITY TRANSFERRED" shall mean, with respect to
each asset Transferred by the Company or a Subsidiary, the percentage of
Consolidated Net Income produced by, or attributable to, such asset during the
twelve fiscal quarter period most recently ended prior to the effective date of
such Transfer.
"PERSON" shall mean and include an individual, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization and a government
or any department or agency thereof.
"▇▇▇▇▇▇▇▇" shall mean ▇▇▇▇▇▇▇▇ Colleges, Inc.
"▇▇▇▇▇▇▇▇ SCHOOLS" shall mean the colleges acquired by the Company from
▇▇▇▇▇▇▇▇ on the Closing Day.
"PLAN" shall mean any "employee pension benefit plan" (as such term is
defined in section 3 of ERISA) which is or has been established or maintained,
or to which contributions are or have been made, by the Company or by any trade
or business, whether or
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not incorporated which, together with the Company, is under common control, as
described in section 414(b) or (c) of the Code.
"PLEDGE AGREEMENTS" shall have the meaning specified in paragraph 3A(9).
"PRIMUS" shall mean Primus Capital Fund III Limited Partnership.
"PRIVATE PLACEMENT MEMORANDUM" shall mean the Private Placement Memorandum
previously delivered to Prudential with respect to the financing provided
hereunder.
"PROPERTY" shall mean, unless otherwise specifically limited, real or
personal property of any kind, tangible or intangible, ▇▇▇▇▇▇ or inchoate.
"PRUDENTIAL" shall mean The Prudential Insurance Company of America.
"PURCHASE PRICE" shall have the meaning provided in paragraph 6C(3)(i).
"QUALIFIED STOCK" shall mean common stock or other classes of Capital Stock
without (i) mandatory repurchase or redemption obligation during the term of the
Notes; (ii) fixed or accruing dividends or similar obligations; or (iii)
convertibility or exchangeability into securities with the features described in
clause (i) or (ii) above. Qualified Stock shall not include stock issued
pursuant to exercises of employee stock options or similar securities.
"QUALIFYING EQUITY OFFERING" shall mean an equity offering after the
Closing Day that (i) yields net proceeds to the Company in excess of $10,000,000
from investors other than the Equity Sponsors (or their Affiliates), employees
or directors of the Company or its Subsidiaries, or Prudential and (ii) values
the equity on a fully diluted basis (based on the offering price) held by BOCP,
Primus, Senior Management and Prudential, as a group, at an amount no less than
$35,000,000.
"RATE DAY" shall mean for each Rate Period the first day of such Rate
Period; provided, however, that if such day is not a LIBOR Business Day, then
the next LIBOR Business Day succeeding the first day of such Rate Period.
"RATE PERIOD" shall mean the period during which the LIBOR Rate remains in
effect and unchanged. For purposes of this Agreement, the Rate Period shall
begin on the first day of each calendar quarter and shall end on the last day of
such calendar quarter; provided, however, that if the first day of any calendar
quarter is not a Business Day then the Rate Period otherwise
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beginning on the first day of such calendar quarter (the "SPECIFIED RATE
PERIOD") shall begin on the first Business Day of such calendar quarter and the
Rate Period immediately preceding the Specified Rate Period shall end on the day
immediately preceding such first Business Day.
"REAL ESTATE ACQUISITION AGREEMENT" shall have the meaning specified in
paragraph 3A(7).
"REFERENCE BANKS" shall mean ▇▇▇▇▇▇ Guaranty Trust Company of New York,
Citibank, N.A. and Chase Manhattan Bank, N.A.
"REGISTRATION RIGHTS AGREEMENT" shall have the meaning set forth in
paragraph 3A(9).
"RELATED PARTY" shall mean (i) any Person owning any Capital Stock of the
Company (excluding Persons who own or exercise any Warrants), (ii) all Persons
to whom any Person described in clause (i) above is related by blood, adoption
or marriage and (iii) all Affiliates of the Company and the foregoing Persons.
"REPRESENTATIVE AMOUNT" means, for purposes of determining the LIBOR Rate
for any Rate Period, an amount that is equal to the aggregate principal amount
of Revolving Loan for which the LIBOR Rate is being determined for such Rate
Period.
"REQUIRED HOLDER(S)" shall mean the holder(s) of at least 66-2/3% of the
aggregate principal amount of Notes from time to time outstanding.
"RESTRICTED PAYMENTS" shall mean any: (i) dividend payments or other
distributions of assets, Properties, obligations or securities on account of any
shares of any class of Capital Stock (other than dividends paid solely in
stock), (ii) repurchases or redemptions of Capital Stock, and (iii) payments of
any kind in respect of the Subordinated Debt.
"REVOLVING COMMITMENT" shall have the meaning set forth in paragraph 2B(l).
"REVOLVING LOAN" AND "REVOLVING LOANS" shall have the meanings set forth in
paragraph 2B(1).
"REVOLVING LOAN REQUEST" shall mean a completed and executed revolving loan
request in the form of Exhibit G hereto.
"REVOLVING LOANS TERMINATION DATE" shall have the meaning set forth in
paragraph 2B(1).
"REVOLVING NOTE" AND "REVOLVING NOTES" shall have the meanings set forth in
paragraph 1B.
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"SCHOOLS AGREEMENT" shall have the meaning specified in paragraph 3A(7).
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SECURITY AGREEMENT" shall have the meaning set forth in paragraph 3A(9).
"SENIOR DEBT" shall mean Debt which is not subordinated to the Notes
pursuant to an agreement accepted and executed by the Required Holders.
"SENIOR MANAGEMENT" shall mean the following individuals: ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇
St. Pierre, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇.
"SIGNIFICANT HOLDER" shall mean (i) Prudential through the Revolving Loans
Termination Date or (ii) any other holder of at least 10% of the aggregate
principal amount of the Notes from time to time outstanding.
"SUBORDINATED DEBT" shall mean $5,000,000 aggregate principal amount of the
Company's Subordinated Notes due September 30, 2004 issued to BOCP II and Primus
under the Subordinated Note and Warrant Purchase Agreement.
"SUBORDINATED NOTE AND WARRANT PURCHASE AGREEMENT" shall have the meaning
specified in paragraph 3A(8).
"SUBSIDIARY" or "SUBSIDIARIES" shall mean (i) any corporation(s) of which
the Company or another Subsidiary beneficially owns or controls, either directly
or indirectly, 100% of the outstanding Capital Stock having by its terms the
ordinary voting power to elect a majority of the Board of Directors, and (ii)
any other entities in which the Company or any Subsidiary holds a 100% equity
interest and controls the management of such entity.
"TELERATE PAGE 3750" means Page 3750 of the Dow ▇▇▇▇▇ Telerate Service (or
such other page as may replace that page on that service) or such other service
as may be nominated as the information vendor for the purpose of displaying
rates or prices comparable thereto.
"TRANSACTION DOCUMENT" shall mean this Agreement, the Notes, the Collateral
Documents, the Warrants, the Registration Rights Agreement, the Acquisition
Agreements, the Subordinated Note and Warrant Purchase Agreement, the Equity
Sponsor Warrants, each Revolving Loan Request and other agreements, documents,
certificates and instruments now or hereafter executed or delivered
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by the Company in connection with this Agreement, as each may be amended,
modified or supplemented from time to time.
"TRANSFER" shall mean, with respect to any property, the sale, exchange,
conveyance, lease, transfer or other disposition of such property.
"TRANSFEREE" shall mean any direct or indirect transferee of all or any
part of any Note purchased under this Agreement.
"TWELVE MONTH PERCENTAGE OF NET INCOME CAPACITY TRANSFERRED" shall mean,
with respect to any twelve month period ending on any date after June 30, 1998,
the sum of the Percentages of Net Income Capacity Transferred for each asset of
the Company and its Subsidiaries that is Transferred during such period.
"VOTING POWER" of any Person shall mean the aggregate number of votes of
all classes of Capital Stock of such Person which ordinarily has voting power
for the election of the Board of Directors or their equivalents of such Person.
"WARRANTS" shall have the meaning set forth in paragraph 3A(10).
10C. ACCOUNTING AND LEGAL PRINCIPLES, TERMS AND DETERMINATIONS. Unless
otherwise specified herein, all accounting terms used herein shall be
interpreted, all determinations with respect to accounting matters hereunder
shall be made, and all unaudited financial statements and certificates and
reports as to financial matters required to be furnished hereunder shall be
prepared, in accordance with GAAP (without provision of footnotes in the case of
unaudited financial statements), applied on a basis consistent with the most
recent audited consolidated financial statements of the Company and its
Subsidiaries delivered pursuant to clause (ii) of paragraph 5A or, if no such
statements have been so delivered, the most recent audited financial statements
referred to in clause (i) of paragraph 8B.
11. MISCELLANEOUS.
11A. NOTE PAYMENTS. The Company agrees that, so long as Prudential shall
hold any Note, it will make payments of principal thereof, Yield-Maintenance
Amount and non-usage fees, if any, and interest thereon, which comply with the
terms of this Agreement, by wire transfer of immediately available funds for
credit to (i) the account or accounts as specified in the Information Schedule
attached hereto or (ii) such other account or accounts in the United States as
Prudential may designate in writing, notwithstanding any contrary provision
herein or in any Note with respect to the place of payment. Prudential agrees
that, before disposing of any Note, it will make a notation thereon (or on a
schedule attached thereto) of all principal payments previously
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made thereon and of the date to which interest thereon has been paid. The
Company agrees to afford the benefits of this paragraph 11A to any Transferee
which shall have made the same agreement as Prudential has made in this
paragraph 11A.
11B. EXPENSES. The Company agrees, whether or not the transactions
contemplated hereby shall be consummated, to pay, and save Prudential and any
Transferee harmless against liability for the payment of, all reasonable out-of-
pocket expenses arising in connection with such transactions, including (i) all
document production and duplication charges and the reasonable fees and expenses
of any special counsel engaged by Prudential or any Transferee in connection
with this Agreement, the Transaction Documents, the transactions contemplated
hereby and thereby and any subsequent proposed modification requested by the
Company of, or proposed consent under, this Agreement or any Transaction
Document, whether or not such proposed modification shall be effected or
proposed consent granted, (ii) the reasonable costs and expenses, including
without limitation reasonable attorneys' fees, incurred by Prudential or such
Transferee in enforcing (or determining whether or how to enforce) any rights
under this Agreement or the Notes or any of the Transaction Documents
(including without limitation to protect, collect, lease, sell, take possession
of, release or liquidate any of the Collateral), in responding to any subpoena
or other legal process or informal investigative demand issued in connection
with this Agreement, any of the Transaction Documents, or the transactions
contemplated hereby and thereby or by reason of Prudential's or such
Transferee's having acquired any Note, including without limitation reasonable
costs and expenses incurred in any bankruptcy case, and (iii) all costs and
expenses, including without limitation reasonable attorneys' fees, of obtaining
a Private Placement Number from the CUSIP Service Bureau of ▇▇▇▇▇▇-▇▇▇▇, Inc.
with respect to the Notes and of preparing, recording and filing all financing
statements, instruments and other documents to create, perfect and fully
preserve and protect the Liens granted in the Transaction Documents and the
rights of the holders of the Notes for the benefit of the holders of the Notes.
The obligations of the Company under this paragraph 11B shall survive the
transfer of any Note or portion thereof or interest therein by Prudential or any
Transferee and the payment of any Note.
11C. CONSENT TO AMENDMENTS. This Agreement may be amended, and the Company
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, if the Company shall obtain the written consent
to such amendment, action or omission to act, of the Required Holder(s) of the
Notes except that, (i) with the written consent of the holders of all Revolving
Notes (and not without such written consents), the Revolving Notes may be
amended or the provisions thereof waived to change the maturity thereof, to
change or affect the principal thereof, or to change or affect the rate or time
of payment of interest or non-usage fees payable with respect to the Revolving
Notes, (ii) with
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the written consent of the holders of all Term Notes (and not without such
written consents), the Term Notes may be amended or the provisions thereof
waived to change the maturity thereof, to change or affect the principal
thereof, or to change or affect the rate or time of payment of interest or
Yield-Maintenance Amounts payable with respect to the Term Notes, (iii) without
the written consent of the holder or holders of all Notes at the time
outstanding, no amendment to or waiver of the provisions of this Agreement shall
change or affect the provisions of paragraph 7A or this paragraph 11C insofar as
such provisions relate to proportions of the principal amount of the Revolving
Notes or the Term Notes, or the rights of any individual holder of Notes,
required with respect to any declaration of Notes to be due and payable or with
respect to any consent and (iv) with the written consent of Prudential (and not
without the written consent of Prudential) the provisions of paragraphs 2B and
3B may be amended or waived. Each holder of any Note at the time or thereafter
outstanding shall be bound by any consent authorized by this paragraph 11C,
whether or not such Note shall have been marked to indicate such consent, but
any Notes issued thereafter may bear a notation referring to any such consent.
No course of dealing between the Company and the holder of any Note nor any
delay in exercising any rights hereunder or under any Note shall operate as a
waiver of any rights of any holder of such Note. As used herein and in the
Notes, the term "THIS AGREEMENT" and references thereto shall mean this
Agreement as it may from time to time be amended or supplemented.
11D. FORM, REGISTRATION, TRANSFER AND EXCHANGE OF NOTES; LOST NOTES;
LIMITATION ON TRANSFER OF NOTES. The Notes are issuable as registered notes
without coupons in denominations of at least $500,000, except as may be
necessary to reflect any principal amount not evenly divisible by $500,000. The
Company shall keep at its principal office a register in which the Company shall
provide for the registration of Notes and of transfers of Notes. Upon surrender
for registration of transfer of any Note at the principal office of the Company,
the Company shall, at its expense, execute and deliver one or more new Notes of
like tenor and of a like aggregate principal amount, registered in the name of
such transferee or transferees. At the option of the holder of any Note, such
Note may be exchanged for other Notes of like tenor and of any authorized
denominations, of a like aggregate principal amount, upon surrender of the Note
to be exchanged at the principal office of the Company. Whenever any Notes are
so surrendered for exchange, the Company shall, at its expense, execute and
deliver the Notes which the holder making the exchange is entitled to receive.
Every Note surrendered for registration of transfer or exchange shall be duly
endorsed, or be accompanied by a written instrument of transfer duly executed,
by the holder of such Note or such holder's attorney duly authorized in writing.
Any Note or Notes issued in exchange for any Note or upon transfer thereof shall
carry the rights to unpaid interest and interest to accrue which were carried by
the Note so exchanged or transferred, so that neither gain nor loss of interest
shall result from any such
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transfer or exchange. Upon receipt of written notice from the holder of any Note
of the loss, theft, destruction or mutilation of such Note and, in the case of
any such loss, theft or destruction, upon receipt of such holder's unsecured
indemnity agreement, or in the case of any such mutilation upon surrender and
cancellation of such Note, the Company will make and deliver a new Note, of like
tenor in lieu of the lost, stolen, destroyed or mutilated Note.
11E. PERSONS DEEMED OWNERS; PARTICIPATIONS. Prior to due presentment for
registration of transfer, the Company may treat the Person in whose name any
Note is registered as the owner and holder of such Note for the purpose of
receiving payment of principal of and any Yield-Maintenance Amount, non-usage
fee and interest on such Note and for all other purposes whatsoever, whether or
not such Note shall be overdue, and the Company shall not be affected by notice
to the contrary. Subject to the preceding sentence, the holder of any Note may
from time to time grant participations in all or any part of such Note to any
Person on such terms and conditions as may be determined by such holder in its
sole and absolute discretion.
11F. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT. All
representations and warranties contained herein or in any other Transaction
Document or made in writing by or on behalf of the Company in connection
herewith or in conjunction with any other Transaction Document shall survive the
execution and delivery of this Agreement and the Notes, the transfer by
Prudential of any Note or portion thereof or interest therein and the payment of
any Note, and may be relied upon by any Transferee, regardless of any
investigation made at any time by or on behalf of Prudential or any Transferee.
Subject to the first sentence of this paragraph, this Agreement and the other
Transaction Documents embody the entire agreement and understanding between the
parties hereto with respect to the subject matter hereof and supersede all prior
agreements and understandings relating to the subject matter hereof.
11G. SUCCESSORS AND ASSIGNS. All covenants and other agreements in this
Agreement and the Transaction Documents contained by or on behalf of any of the
parties hereto shall bind and inure to the benefit of the respective successors
and assigns of the parties hereto (including, without limitation, any
Transferee) whether so expressed or not; provided, however, that the Company may
not assign its rights or obligations hereunder to any Person.
11H. NOTICES. All written communications provided for hereunder shall be
sent by first class mail or nationwide overnight delivery service (with charges
prepaid) and (i) if to Prudential, addressed as specified for such
communications in the Information Schedule attached hereto, or at such other
address as Prudential shall have specified to the Company in writing, (ii) if to
any other holder of any Note, addressed to such other holder at such
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address as such other holder shall have specified to the Company in writing or,
if any such other holder shall not have so specified an address to the Company,
then addressed to such other holder in care of the last holder of such Note
which shall have so specified an address to the Company, and (iii) if to the
Company, addressed to it at Corinthian Colleges, Inc., ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, Attention: Chief Financial Officer,
or at such other address as the Company shall have specified to the holder of
each Note in writing.
11I. DESCRIPTIVE HEADINGS. The descriptive headings of the several
paragraphs of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
11J. SATISFACTION REQUIREMENT. If any agreement, certificate or other
writing, or any action taken or to be taken, is by the terms of this Agreement
required to be satisfactory to Prudential or to the Required Holder(s), the
determination of such satisfaction shall be made by Prudential or the Required
Holder(s), as the case may be, in the sole and exclusive judgment (exercised in
good faith) of the Person or Persons making such determination.
11K. PAYMENTS DUE ON NON-BUSINESS DAYS. Anything in this Agreement or the
Notes to the contrary notwithstanding, any payment of principal of or interest
on any Note that is due on a date other than a Business Day shall be made on the
next succeeding Business Day. If the date for any payment is extended to the
next succeeding Business Day by reason of the preceding sentence, the period of
such extension shall be included in the computation of the interest payable on
such Business Day.
11L. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE
INTERNAL LAW OF THE STATE OF CALIFORNIA.
11M. COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, and it shall not
be necessary in making proof of this Agreement to produce or account for more
than one such counterpart.
11N. INDEPENDENCE OF COVENANTS. All covenants hereunder shall be given
independent effect so that if a particular action or condition is prohibited by
any one of such covenants, the fact that it would be permitted by an exception
to, or otherwise be in compliance within the limitations of, another covenant
shall not (i) avoid the occurrence of an Event of Default or Default if such
action is taken or such condition exists or (ii) in any way prejudice an attempt
by a holder or the holders of the Notes to prohibit (through equitable action or
otherwise) the taking of any action by the Company or a Subsidiary which would
result in an Event of Default or Default.
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11O. BINDING AGREEMENT. When this Agreement is executed and delivered by
the Company and Prudential, it shall become a binding agreement between the
Company and Prudential.
[SIGNATURE PAGE(S) TO FOLLOW]
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Very truly yours,
CORINTHIAN COLLEGES, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------------------------
Its: President
--------------------------------------------------
The foregoing Agreement is
hereby accepted as of the
date first above written.
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By:
-------------------------------
Title: Vice President
Very truly yours,
CORINTHIAN COLLEGES, INC.
By:__________________________________
Its:_________________________________
The foregoing Agreement is
hereby accepted as of the
date first above written.
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------
Title: Vice President