AMENDED AND RESTATED CREDIT AGREEMENT between ITT EDUCATIONAL SERVICES, INC. and JPMORGAN CHASE BANK, N.A. Dated effective as of December 17, 2007 AMENDED AND RESTATED CREDIT AGREEMENT

Exhibit 10.62

 

 

 

 

 

AMENDED AND RESTATED CREDIT AGREEMENT

 

 

 

 

between

 

ITT EDUCATIONAL SERVICES, INC.

 

 

and

 

JPMORGAN CHASE BANK, N.A.

 

 

 

 

 

Dated effective as of December 17, 2007

 

AMENDED AND RESTATED CREDIT AGREEMENT

 

THIS AMENDED AND RESTATED CREDIT AGREEMENT, dated effective as of December 17, 2007, is between ITT EDUCATIONAL SERVICES, INC., a Delaware corporation (the “Borrower”), and JPMORGAN CHASE BANK, N.A., a national banking association (the “Bank”).

 

WHEREAS, the Borrower and the Bank have previously entered into a certain Credit Agreement dated as of December 22, 2006 (the "Prior Agreement"); and

 

WHEREAS, the Borrower has requested an increase and extension of the credit facilities from the Bank provided for in the Prior Agreement and the Bank is willing to increase and extend such credit facilities upon the terms and conditions hereinafter set forth; and

 

WHEREAS, the parties have mutually agreed to amend and restate the terms of the Prior Agreement by the terms of this Agreement;

 

NOW THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, hereby agree as follows:

 

 

 

“Advance” has the meaning ascribed to such term in the Notes.

 

“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with Borrower.

 

“Agreement” means this Amended and Restated Credit Agreement, as further modified, amended or replaced from time to time.

 

"Applicable Margin" means the applicable per annum rate set forth below related to a Secured Note or Unsecured Note, as the case may be, based upon the Borrower's Indebtedness to Net Worth Ratio as reflected in its most recent Financials:

 

 

For the purposes of this definition, the following terms have the following meanings, subject to the final paragraph of this definition:

 

"Financials" means the annual or quarterly Financial Statements of the Borrower delivered pursuant to this Agreement.

 

"Level I Status" exists at any date if, as of the last day of the fiscal quarter of the Borrower referred to in the most recent Financials, the Indebtedness to Net Worth Ratio is less than 2.00 to 1.00.

 

"Level II Status" exists at any date if, as of the last day of the fiscal quarter of the Borrower referred to in the most recent Financials, (i) the Borrower has not qualified for Level I Status and (ii) the Indebtedness to Net Worth Ratio is

less than or equal to 6.0 to 1.00.

 

"Level III Status" exists at any date if, as of the last day of the fiscal quarter of the Borrower referred to in the most recent Financials, the Borrower has not qualified for Level I Status or Level II Status.

 

 

The Applicable Margin shall be determined in accordance with the foregoing table based on the Borrower's Status as reflected in the then most recent Financials. Adjustments, if any, to the Applicable Margin shall be effective five Business Days after the Bank has received the applicable Financials. If the Borrower fails to deliver Financial Statements to the Bank at the time required pursuant to this Agreement, then beginning on the fifth Business Day after the date such Financial Statements were due to be delivered, the Applicable Margin shall be the highest Applicable Margin for a Secured Note or an Unsecured Note, as applicable, set forth in the foregoing table until five days after such Financials are so delivered. As of the Closing Date and until the first adjustment as provided above, the Applicable Margin shall be at Level II Status.

 

“Authorized Officer” means any of the Chief Executive Officer, the President and/or the Chief Financial Officer of the Borrower or such other officer whose authority to perform acts to be performed only by an Authorized Officer under the terms of this Agreement is evidenced to the Bank by a certified copy of an appropriate resolution of the Board of Directors of the Borrower.

 

“Bank” means JPMorgan Chase Bank, N.A., a national banking association, its successors and assigns.

 

“Borrower” means ITT Educational Services, Inc., a Delaware corporation, its successors and assigns.

 

“Business Day” has the meaning ascribed to such term in the Notes.

 

“Closing Date” means December 17, 2007.

 

“Collateral Requirement” will have the meaning ascribed to such term In Section 2.7 hereof.

 

“Control Agreement” means that certain Control Agreement dated August 30, 2007, among the Borrower, the Bank, and JPMorgan Chase Bank, N.A. as Intermediary, as the same may be modified, amended, or replaced from time to time.

 

“Custodial Account” means the Custodial Account established by the Borrower with the Bank (initially Account No. xxxxxxxxxx) in which the Bank has been granted a security interest to cover Obligations under the Secured Notes, which will contain investment property subject to the Security Agreement

 

“Current Financials” means the Financial Statements of Borrower as of December 31, 2006, and for the fiscal year then ended.

 

“Default” means any of the events specified in Section 6 hereof.

 

“EBITDA” means, for any period, net income for such period plus (a) without duplication and to the extent deducted in determining net income for such period, the sum of (i) interest expense for such period, (ii) income tax expense for such period, (iii) all amounts attributable to depreciation and amortization expense for such period, (iv) any extraordinary charges for such period and (v) any other non-cash charges for such period (but excluding any non-cash charge in respect of an item that was included in net income in a prior period) , minus (b) without duplication and to the

 

extent included in net income, any extraordinary gains and any non-cash items of income for such period, all calculated for the Borrower on a consolidated basis in accordance with GAAP.

 

“Environmental Laws” means all provisions of laws, statutes, ordinances, rules, regulations, permits, licenses, judgments, writs, injunctions, decrees, orders, awards and standards promulgated by any Governmental Authority concerning health, safety and protection of, or regulation of the discharge of substances into, the environment.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time-to-time.

 

“ERISA Affiliate” means any trade or business, whether or not incorporated, which together with Borrower would be treated as a single employer under ERISA.

 

“Financial Statements” means the balance sheets, income statements and statements of cash flows of Borrower, and any accompanying notes or other disclosures to such statements.

 

“GAAP” means generally accepted accounting principles in the United States of America in effect from time to time as promulgated by the Financial Standards Accounting Board and recognized and interpreted by the American Institute of Certified Public Accountants.

 

“Governmental Authority” means any nation or government, any state or other political subdivision thereof, and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to any government, including, without limiting the generality of the foregoing, any agency, body, commission, court or department thereof whether federal, state, local or foreign.

 

“Hazardous Substances” means asbestos, polychlorinated biphenyls and petroleum products and any other regulated, hazardous or toxic materials, wastes and substances which are defined, determined, regulated or identified as such in any Environmental Laws (whether now existing or hereafter enacted or promulgated).

 

“Indebtedness” means (a) all indebtedness or other obligations of the Borrower for borrowed money or for the deferred purchase price of property or services; (b) all indebtedness or other obligations of any other Person for borrowed money or for the deferred purchase price of property or services, to the extent the payment or collection of which the Borrower has guaranteed or in respect of which the Borrower is liable, contingently or otherwise, including, without limitation, liability by way of agreement to purchase, to provide funds for payment, to supply funds to or otherwise to invest in such other Person, or otherwise to assure a creditor against loss, excluding however, (i) endorsements on instruments for collection in the ordinary course of business, and (ii) the amount of any potential liability for guarantees or other payment obligations under the Risk Sharing Loan Program Agreement between the Borrower and ▇▇▇▇▇▇ ▇▇▇, Inc. dated as of July 17, 2007, as the same may be amended, modified or replaced, that under GAAP are not required to be, and have not been, recorded as a liability in the Borrower's Financial Statements; (c) all indebtedness or other obligations of the Borrower for borrowed money or for the deferred purchase price of property or services to the extent the same are secured by (or for which the holder of such indebtedness has an existing right, contingent or otherwise, to be secured by) any mortgage, deed of trust, pledge, lien, security interest or other charge or encumbrance upon or in property (including, without limitation, accounts) owned by the Borrower, whether or not the Borrower has assumed or become liable for the payment of such indebtedness or obligations, and (d) capitalized lease obligations of the Borrower.

 

"Indebtedness to Net Worth Ratio" means the ratio of the Borrower's (i) Indebtedness, to (ii) total shareholder's equity, as reflected in the Financials.

 

“Leverage Ratio” means, on any date, the ratio of (a) total Indebtedness on such date to (b) EBITDA for the period of four consecutive fiscal quarters ended on such date.

 

“Line of Credit A” means the revolving line of credit made available by the Bank to the Borrower in the maximum principal amount of One Hundred Ten Million and 00/100 Dollars ($110,000,000.00), governed by this Agreement, including any renewal or extension thereof.

 

“Line of Credit B” means the revolving line of credit made available by the Bank to the Borrower in the maximum principal amount of Fifty Million and 00/100 Dollars ($50,000,000.00), governed by this Agreement, including any renewal or extension thereof.

 

"Lines of Credit" means collectively, Line of Credit A and Line of Credit B.

 

“Loan Documents” means this Agreement, the Notes, the Security Agreement, and all other documents executed and delivered by Borrower or any other third party to govern, evidence, guarantee or secure the Lines of Credit.

 

“Loss” shall have the meaning ascribed in Section 8.9 hereof.

 

“Maturity Date” means July 1, 2010.

 

“Notes” means the Secured Notes and the Unsecured Notes, any renewals, amendments, replacements or renewals thereof, and any other promissory note delivered by Borrower pursuant to this Agreement. “Note” means any of the Secured Notes or the Unsecured Notes, any renewals, amendments, replacements or renewals thereof.

 

“Obligations” means all unpaid principal and accrued and unpaid interest on the Notes, all accrued and unpaid fees hereunder, including, without limitation, any advances pursuant to this Agreement or any amendment, and to the extent recoverable, all reasonable costs of collection and enforcement of any and all thereof, including reasonable attorney fees.

 

“PBGC” means the Pension Benefit Guaranty Corporation established pursuant to ERISA, or any successor entity.

 

“Permitted Encumbrances” means (a) liens for taxes or assessments which are not yet due, liens for taxes or assessments or liens of judgments which are being contested, appealed or reviewed in good faith by appropriate proceedings which prevent foreclosure of any such lien or levy of execution thereunder and against which liens, if any, adequate insurance or reserves have been provided; (b) pledges or deposits to secure payment of workers’ compensation obligations and deposits or indemnities to secure public or statutory obligations or for similar purposes; (c) liens and other security interests in favor of Bank; and (d) those further encumbrances (if any) shown on Schedule 1 attached hereto.

 

“Permissible Investments” means the investments specified as Permissible Investments in the Investment Guidelines attached to the Investment Management Agreement dated as of December 22, 2006, between the Borrower and ▇.▇. ▇▇▇▇▇▇ Investment Management Inc. pertaining to the Custodial Account which also meet the Maturity Guidelines and Quality Guidelines specified therein, without amendment unless consented to by the Bank.

 

“Person” means and includes an individual, a partnership, a joint venture, a corporation, a trust, an unincorporated association and a Governmental Authority.

 

“Secured Notes” means the Secured Promissory Notes, in substantially the forms of Exhibit A and Exhibit B hereto, duly executed by Borrower to Bank to evidence secured borrowings under Line of Credit A or Line of Credit B, respectively, including any amendment, modification, renewal, extension or replacement thereof. "Secured Note" means either of the Secured Notes.

 

 

“Security Agreement” means the Security Agreement with Respect to Custodial Account and Investment Property of even date herewith or later in the form of Exhibit E hereto, from the Borrower in favor of the Bank, duly executed by Borrower and Bank, to secure borrowings under the Secured Notes, including any amendment, modification, renewal, extension or replacement thereof.

 

“Unsecured Notes” means the Unsecured Promissory Notes, in substantially the form of Exhibit C and Exhibit D hereto, duly executed by Borrower to Bank to evidence unsecured borrowings under Line of Credit A or Line of Credit B, respectively, including any amendment, modification, renewal, extension or replacement thereof. "Unsecured Note" means either of the Unsecured Notes.

 

“Unmatured Default” means any event which with notice, or lapse of time, or both, would constitute a Default.

 

 

 

 

 

Prior to the Maturity Date, the Borrower may borrow, repay and reborrow under the Lines of Credit so long as the aggregate principal amount outstanding under the Lines of Credit does not exceed the foregoing limitations, or as otherwise limited under this Agreement. Advances under the Lines of Credit will be in the minimum amount and increments set forth in the applicable Notes.

 

The entire outstanding balance of Line of Credit A and the Borrower’s obligation to pay interest thereon, at all times shall be evidenced by either the relevant Secured Note or the Unsecured Note given to further evidence Line of Credit A. The entire outstanding balance of Line of Credit B and the Borrower’s obligation to pay interest thereon, at all times shall be evidenced by either the relevant Secured Note or the Unsecured Note given to further evidence Line of Credit B. The Borrower may elect to borrow under either or both of the Lines of Credit, on a secured basis or on an unsecured basis. Advances outstanding under the Prior Agreement on the Closing Date shall continue as secured Advances under Line of Credit A and Line of Credit B and on the Closing Date shall be evidenced by the Secured Notes. At any time Borrower has elected to borrow under either of the Lines of Credit on a secured basis, Borrower, upon not fewer

 

than ten (10) days prior written notice to the Bank, may elect to borrow on the relevant Line of Credit on an unsecured basis, and on the effective date of such election (subject to the condition that no Default has occurred and is continuing) the entire outstanding principal balance of the relevant Secured Note shall be deemed to have been paid and satisfied by an Advance made under the relevant Line of Credit and evidenced by the relevant Unsecured Note, which Advance shall be unsecured. At any time Borrower has elected to borrow under either of the Lines of Credit on an unsecured basis, Borrower, upon not fewer than ten (10) Business Days prior written notice to the Bank, may elect to borrow on the relevant Line of Credit on a secured basis, and on the effective date of such election (subject to satisfaction of all conditions in this Agreement to the making of secured Advances) the entire outstanding principal balance of the relevant Unsecured Note shall be deemed to have been paid and satisfied by an Advance made under the relevant Line of Credit and evidenced by the relevant Secured Note. The effective date of each such election will be the tenth (10^th) Business Day following delivery of such election by the Borrower to the Bank.

 

 

 

 

 

 

 

 

 

 

 

other fee, charge, payment or expense required to be borne by the Borrower under the Loan Documents.

 

 

 

 

 

 

 

 

 

bankruptcy, insolvency, moratorium or other laws affecting generally the enforcement of creditors’ rights.

 

 

 

 

 

 

 

 

 

extending credit to others for the purpose of purchasing or carrying any margin stock, and Borrower shall furnish to Bank, upon its request, a statement in conformity with the requirements of Federal Reserve Board Form U-1 referred to in Regulation U. Further, no part of the proceeds of the Lines of Credit will be used for any purpose that violates, or which is inconsistent with, the provisions of Regulations G, T, U or X of the Board of Governors.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

by or against Borrower which, if adversely determined, could reasonably be expected to have a material effect upon the business, operations, financial condition or properties of Borrower;

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

resolutions adopted by its Board of Directors authorizing the Borrower to incur Indebtedness under this Agreement in an amount not less than $160,000,000.00.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

the Federal Bankruptcy Code or seeking to adjudicate it a bankrupt or insolvent, or seeking dissolution, winding up, liquidation, reorganization, arrangement, adjustment or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors or fail to file an answer or other pleading denying the material allegations of any such proceeding filed against it, or (vi) suspend operations as presently conducted or discontinue doing business as an ongoing concern;

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

the expiration of the obligation of Bank to make available the Lines of Credit and the payment of all Obligations.

 

 

 

 

 

 

 

 

amount of any payment receivable by Bank under this Agreement with respect to any of the Lines of Credit, (iii) requires Bank to make any payment calculated by reference to the gross amount of any sum received or paid by Bank pursuant to any of the Lines of Credit, or (iv) reduces the rate of return on Bank’s capital to a level below that which Bank could otherwise have achieved (taking into consideration Bank’s policies with respect to capital adequacy), then Borrower shall pay to Bank, as additional compensation for the Lines of Credit, such amounts as will compensate Bank for such increased cost, payment or reduction. Within twenty (20) days after (A) the initial demand therefor and (B) presentation by Bank of a certificate to Borrower containing a statement of the cause of such increased cost, payment or reduction and a calculation of the amount thereof (which statement and calculation shall be presumed prima facie to be correct absent manifest error), Borrower shall pay the additional amount payable measured from the date such change, enactment, adoption or interpretation first affects Bank.

 

 

 

 

 

 

 

agreement containing provisions substantially the same as those of this Section, to (i) any assignee of or participant in, or any prospective assignee of or participant in, any of its rights or obligations under this Agreement (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential)or (ii) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the Borrower and its obligations, (f) with the consent of the Borrower or (g) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section or (ii) becomes available to the Bank , on a nonconfidential basis from a source other than the Borrower. For the purposes of this Section, "Information" means all information received from the Borrower relating to the Borrower or its business, other than any such information that is available to the Bank on a nonconfidential basis prior to disclosure by the Borrower.

 

 

 

 

THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK

(Signature Page follows)

 

 

IN WITNESS WHEREOF, Borrower and Bank have caused this Agreement to be executed by their respective officers duly authorized as of the date first above written.

 

 

 

 

▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇ – Senior Vice

President, Chief Financial Officer

 

 

 

Address:

▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇

▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇

Attention: Chief Financial Officer

Phone: (▇▇▇) ▇▇▇-▇▇▇▇

Fax: (▇▇▇) ▇▇▇-▇▇▇▇

 

JPMORGAN CHASE BANK, N.A.

 

▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Senior Vice President

 

Address:

▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, Mail Code ▇▇▇-▇▇▇▇

▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇

Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇

Phone: (▇▇▇) ▇▇▇-▇▇▇▇

Fax: (▇▇▇) ▇▇▇-▇▇▇▇

 

Exhibits and Schedules

Exhibit A- Form of Secured Note Line of Credit A

Exhibit B – Form of Secured Note Line of Credit B

Exhibit C – Form of Unsecured Note Line of Credit A

Exhibit D – Form of Unsecured Note Line of Credit B

Exhibit E – Form of Security Agreement

Schedule 1- Permitted Liens and Encumbrances

Schedule 3.8- Litigation

 

Schedule 1

Other Permitted Encumbrances

 

 

2.             any lien or deposit with any governmental agency required or permitted to qualify it to conduct business or exercise any privilege, franchise or license, or to maintain self insurance or to obtain the benefits of or secure obligations under any law pertaining to worker's compensation, unemployment insurance, old age pensions, social security or similar matters, or to obtain any stay or discharge in any legal or administrative proceedings, or any similar lien or deposit arising in the ordinary course of business;

 

3.             any mechanic's, worker's, repairmen's, carrier's, warehousemen's or other like liens arising in the ordinary course of business (i) for amounts not yet due, or (ii) which do not exceed in aggregate $1,000,000, or (iii) which do exceed in aggregate $1,000,000 but for which adequate reserves have been established or deposits made to obtain the release of such liens;

 

4.             easements, licenses, minor irregularities in title or minor encumbrances on or over any real property which do not materially detract from the value of such property or its marketability or its usefulness in its business;

 

5.             liens for taxes and governmental charges which are not yet due or which are being contested in good faith and by appropriate proceedings and for which appropriate reserves have been established;

 

6.             liens created by or resulting from any litigation or legal proceeding which is being contested in good faith and by appropriate proceedings and for which appropriate reserves have been established;

 

7.             liens on property that secure only Indebtedness incurred for the purchase price of such property or liens related to capitalized lease transactions;

 

 

 

Schedule 3.8

Litigation

 

None

 

Exhibit A

SECURED PROMISSORY NOTE - LINE OF CREDIT A

 

 

PROMISE TO PAY: On or before July 1, 2010 for value received, the undersigned ITT EDUCATIONAL SERVICES, INC., a Delaware corporation ("Borrower") promises to pay to JPMORGAN CHASE BANK, N.A., a national banking association (the "Bank") or order, at any office of the Bank, the sum of ONE HUNDRED TEN MILLION AND 00/100 DOLLARS ($110,000,000.00) or if less, the aggregate unpaid principal amount of all secured Advances by the Bank outstanding under the Agreement, plus interest as hereinafter described.

 

DEFINITIONS. In addition to the terms defined elsewhere in this Note, the following terms have the meanings indicated for purposes of this Note:

 

"Advance" means a loan under Line of Credit A made by Bank to the Borrower pursuant to the Agreement and this Note.

 

"Agreement" means that certain Amended and Restated Credit Agreement dated effective as of December 17, 2007 between the Borrower and the Bank, as the same may be modified, amended or replaced from time to time.

 

"Applicable Margin" as used herein will mean the relevant Applicable Margin for a Secured Note as set forth in the definition of such term in the Agreement.

 

"Business Day" means any day other than a Saturday, Sunday or other day on which commercial banks in the State of Indiana are authorized or required to close under the laws of the State of Indiana.

 

"Interest Period" shall mean each calendar month.

 

“Line of Credit A” means Line of Credit A established under the Agreement.

 

"London Business Day" means any day other than a Saturday, Sunday or a day on which banking institutions are generally authorized or obligated by law or executive order to close in the City of London, England.

 

"LIBOR Rate" means, for any Interest Period, the rate appearing on the Reuters Screen LIBOR 01 Page (or on any successor or substitute page of such Service, or any successor to or substitute for such Service, providing rate quotations comparable to those currently provided on such page of such Service, as determined by the Bank from time to time for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market) at approximately 11:00 a.m., London time, two London Business Days prior to the commencement of such Interest Period, as the rate for dollar deposits with a maturity comparable to such Interest Period. In the event that such rate is not available at such time for any reason, then the “LIBOR Rate” for such Interest Period shall be the rate at which dollar deposits of $5,000,000 and for a maturity comparable to such Interest Period are offered by the principal London office of the Bank in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two London Business Days prior to the commencement of such Interest Period.

 

REQUESTS FOR ADVANCES. Advances may be made to the Borrower prior to maturity, provided that the Bank receives, at the time and in accordance with the terms of this Note, a request ("Request").

 

Each Advance shall not be less than $1,000,000.00 and increased by increments of $1,000,000.00 above such amount;

Each Request, which shall be irrevocable once received, must be received by the Bank not later than 1:30 p.m., Indianapolis time, on the day such Advance is to be made. Requests may be made in accordance with the terms of the Agreement.

 

All Advances will be made to the Borrower by a credit to the Borrower's account maintained at the Bank, or as otherwise directed by the Borrower.

 

Aggregate Advances outstanding under this Note will not exceed the limitations set forth in the Agreement.

 

INTEREST. Interest will accrue on the unpaid principal amount of this Note during each Interest Period at a per annum rate equal to the sum of (i) the LIBOR Rate established for such Interest Period plus (ii) the relevant Applicable Margin. Accrued interest shall be payable in arrears on the first Business Day of each month. All computations of interest and fees under this Note shall be made on the basis of a year of three hundred sixty (360) days and calculated for the actual days elapsed. Interest shall accrue on any principal balance outstanding from and including the date of an advance to but excluding the date on which such principal balance is repaid.

 

All principal hereunder not paid when due, whether by lapse of time or by acceleration, shall bear interest after maturity at a rate equal to three percent (3.0%) per annum plus the otherwise applicable rate.

 

LATE CHARGES: If any payment is not received by the Bank within ten (10) days after its due date, the Bank may assess and the Borrower agrees to pay a late fee equal to the greater of five percent (5%) of the past due amount or Twenty-Five and 00/100 Dollars ($25.00), but in any event not more than Fifteen Hundred and 00/100 Dollars ($1,500.00) per late charge to compensate the Bank for administrative expenses and other costs of delinquent payments. This late charge may be assessed without notice, shall be immediately due and payable and shall be in addition to all other rights and remedies available to the Bank.

 

REPAYMENT OF PRINCIPAL. Prior to maturity, the Borrower will make principal payments in such amounts and at such times to insure that the outstanding principal balance of this Note does not exceed the limitations applicable to Line of Credit A set forth in the Credit Agreement (including without limitation Section 2.7 of the Agreement). In any and all events, a payment of all outstanding principal plus all accrued but unpaid interest shall be due and payable on July 1, 2010.

 

PREPAYMENT. The Borrower may prepay this Note in whole or in part at any time without premium or penalty.

 

METHOD OF PAYMENT. All payments due under this Note shall be made by the Borrower to the Bank at its main office in Indianapolis, Indiana and each payment of interest and other sums due under this Note shall be made without set-off or counterclaim in immediately available funds on a Business Day not later than Noon Indianapolis time. All sums received after such time shall be deemed received on the next Business Day. Any payment due on a day that is not a Business Day shall be made on the next Business Day.

 

EVIDENCE OF CREDIT EXTENSIONS. Bank shall record the date and amount of each Advance and the amount of each payment of principal made by the Borrower with respect thereto in its records, and Bank's record shall be conclusive absent manifest error. Any statement of the Bank to the Borrower setting forth the Borrower's account regarding the advances and payments shall be considered true and correct and binding on the Borrower unless Bank is notified in writing of any discrepancy or exception within thirty (30) days from the mailing by the Bank to the Borrower of any such monthly statement.

 

SECURITY: This Note is secured under the terms of the Security Agreement described in the Agreement.

 

MASTER NOTE: The Bank has authorized a credit facility to the Borrower in a principal amount not to exceed the face amount of this Note or as otherwise limited by the Agreement. The credit facility is in the form of loans made from time to time by the Bank to the Borrower under the Agreement, which may be made on a secured or unsecured basis. This Note evidences the Borrower's obligation to repay Advances made on a secured basis. The aggregate principal amount of debt evidenced by this Note shall be the amount reflected from time to time in the records of the Bank. The Borrower may borrow, pay down and reborrow under this Note pursuant to the terms of this Note and

 

the Agreement and may refinance the Advances outstanding thereunder as unsecured Advances pursuant to the terms of the Agreement.

 

RELATED DOCUMENTS. The terms of any other document executed as part of the loan evidenced by this Note, including without limitation the Agreement, are incorporated by reference. This Note evidences Line of Credit A described in the Agreement and reference is made thereto for the terms and conditions upon which the indebtedness evidenced by this Note may be declared immediately due and payable.

 

EVENTS OF ACCELERATION: If any Default described in the Agreement occurs or is continuing, then, this Note shall become due immediately, with notice, at the Bank's option.

 

REMEDIES. If this Note is not paid at maturity, whether by acceleration or otherwise, the Bank shall have all of the rights and remedies provided by any law or agreement. Any requirement of reasonable notice shall be met if the Bank sends the notice to the Borrower at least seven (7) days prior to the date of sale, disposition or other event giving rise to the required notice. Subject to the terms of the Agreement, the Borrower is liable to the Bank for all reasonable costs and expenses of every kind incurred in the collection of this Note, including, without limitation, reasonable attorneys' fees and court costs. These costs and expenses shall include, without limitation, any costs or expenses incurred by the Bank in any bankruptcy, reorganization, insolvency or other similar proceeding.

 

WAIVER. Each endorser and any other party liable on this Note severally waives demand, presentment, notice of dishonor and protest, and consents to any extension or postponement of time of its payment without limit as to the number or period, to any substitution, exchange or release of all or any part of the collateral, to the addition of any party, and to the release or discharge of, or suspension of any rights and remedies against, any person who may be liable for the payment of this Note. No delay on the part of the Bank in the exercise of any right or remedy shall operate as a waiver. No single or partial exercise by the Bank of any right or remedy shall preclude any other future exercise of it or the exercise of any other right or remedy. No waiver or indulgence by the Bank of any default shall be effective unless in writing and signed by the Bank, nor shall a waiver on one occasion be construed as a bar to or waiver of that right on any future occasion.

 

MISCELLANEOUS. This Note shall be binding on Borrower and its successors, and shall inure to the benefit of the Bank, its successors and assigns. Any reference to the Bank shall include any holder of this Note. This Note is governed by Indiana law. Section headings are for convenience of reference only and shall not affect the interpretation of this Note. This Note and the Loan Documents embody the entire agreement between the Borrower and the Bank regarding the terms of the loan evidenced by this Note and supersede all oral statements and prior writings relating to that loan.

 

WAIVER OF JURY TRIAL BY BANK AND BORROWER. The Bank and the Borrower, after consulting or having had the opportunity to consult with counsel, knowingly, voluntarily and intentionally waive any right either of them may have to a trial by jury in any litigation based upon or arising out of this Note or any related instrument or agreement or any of the transactions contemplated by this Note or any course of conduct, dealing, statements (whether oral or written), or actions of either of them. Neither the Bank nor the Borrower shall seek to consolidate, by counterclaim or otherwise, any action in which a jury trial has been waived with any other action in which a jury trial cannot be or has not been waived. These provisions shall not be deemed to have been modified in any respect or relinquished by either the Bank or the Borrower except by a written instrument executed by both of them.

 

 

 

 

 

 

Exhibit B

SECURED PROMISSORY NOTE - LINE OF CREDIT B

 

 

PROMISE TO PAY: On or before July 1, 2010 for value received, the undersigned ITT EDUCATIONAL SERVICES, INC., a Delaware corporation ("Borrower") promises to pay to JPMORGAN CHASE BANK, N.A., a national banking association (the "Bank") or order, at any office of the Bank, the sum of FIFTY MILLION AND 00/100 DOLLARS ($50,000,000.00) or if less, the aggregate unpaid principal amount of all secured Advances by the Bank outstanding under the Agreement, plus interest as hereinafter described.

 

DEFINITIONS. In addition to the terms defined elsewhere in this Note, the following terms have the meanings indicated for purposes of this Note:

 

"Advance" means a loan under Line of Credit B made by Bank to the Borrower pursuant to the Agreement and this Note.

 

"Agreement" means that certain Amended and Restated Credit Agreement dated effective as of December 17, 2007 between the Borrower and the Bank, as the same may be modified, amended or replaced from time to time.

 

"Applicable Margin" as used herein will mean the relevant Applicable Margin applicable for a Secured Note as set forth in the definition of such term in the Agreement.

 

"Business Day" means any day other than a Saturday, Sunday or other day on which commercial banks in the State of Indiana are authorized or required to close under the laws of the State of Indiana.

 

"Interest Period" shall mean each calendar month.

 

“Line of Credit B” means Line of Credit B established under the Agreement.

 

"London Business Day" means any day other than a Saturday, Sunday or a day on which banking institutions are generally authorized or obligated by law or executive order to close in the City of London, England.

 

"LIBOR Rate" means, for any Interest Period, the rate appearing on the Reuters Screen LIBOR 01 Page (or on any successor or substitute page of such Service, or any successor to or substitute for such Service, providing rate quotations comparable to those currently provided on such page of such Service, as determined by the Bank from time to time for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market) at approximately 11:00 a.m., London time, two London Business Days prior to the commencement of such Interest Period, as the rate for dollar deposits with a maturity comparable to such Interest Period. In the event that such rate is not available at such time for any reason, then the “LIBOR Rate” for such Interest Period shall be the rate at which dollar deposits of $5,000,000 and for a maturity comparable to such Interest Period are offered by the principal London office of the Bank in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two London Business Days prior to the commencement of such Interest Period.

 

REQUESTS FOR ADVANCES. Advances may be made to the Borrower prior to maturity, provided that the Bank receives, at the time and in accordance with the terms of this Note, a request ("Request").

 

Each Advance shall not be less than $1,000,000.00 and increased by increments of $1,000,000.00 above such amount;

Each Request, which shall be irrevocable once received, must be received by the Bank not later than 1:30 p.m., Indianapolis time, on the day such Advance is to be made. Requests may be made in accordance with the terms of the Agreement.

 

All Advances will be made to the Borrower by a credit to the Borrower's account maintained at the Bank, or as otherwise directed by the Borrower.

 

Aggregate Advances outstanding under this Note will not exceed the limitations set forth in the Agreement.

 

INTEREST. Interest will accrue on the unpaid principal amount of this Note during each Interest Period at a per annum rate equal to the sum of (i) the LIBOR Rate established for such Interest Period plus (ii) the relevant Applicable Margin. Accrued interest shall be payable in arrears on the first Business Day of each month. All computations of interest and fees under this Note shall be made on the basis of a year of three hundred sixty (360) days and calculated for the actual days elapsed. Interest shall accrue on any principal balance outstanding from and including the date of an advance to but excluding the date on which such principal balance is repaid.

 

All principal hereunder not paid when due, whether by lapse of time or by acceleration, shall bear interest after maturity at a rate equal to three percent (3.0%) per annum plus the otherwise applicable rate.

 

LATE CHARGES: If any payment is not received by the Bank within ten (10) days after its due date, the Bank may assess and the Borrower agrees to pay a late fee equal to the greater of five percent (5%) of the past due amount or Twenty-Five and 00/100 Dollars ($25.00), but in any event not more than Fifteen Hundred and 00/100 Dollars ($1,500.00) per late charge to compensate the Bank for administrative expenses and other costs of delinquent payments. This late charge may be assessed without notice, shall be immediately due and payable and shall be in addition to all other rights and remedies available to the Bank.

 

REPAYMENT OF PRINCIPAL. Prior to maturity, the Borrower will make principal payments in such amounts and at such times to insure that the outstanding principal balance of this Note does not exceed the limitations applicable to Line of Credit B set forth in the Credit Agreement (including without limitation Section 2.7 of the Agreement). In any and all events, a payment of all outstanding principal plus all accrued but unpaid interest shall be due and payable on July 1, 2010.

 

PREPAYMENT. The Borrower may prepay this Note in whole or in part at any time without premium or penalty.

 

METHOD OF PAYMENT. All payments due under this Note shall be made by the Borrower to the Bank at its main office in Indianapolis, Indiana and each payment of interest and other sums due under this Note shall be made without set-off or counterclaim in immediately available funds on a Business Day not later than Noon Indianapolis time. All sums received after such time shall be deemed received on the next Business Day. Any payment due on a day that is not a Business Day shall be made on the next Business Day.

 

EVIDENCE OF CREDIT EXTENSIONS. Bank shall record the date and amount of each Advance and the amount of each payment of principal made by the Borrower with respect thereto in its records, and Bank's record shall be conclusive absent manifest error. Any statement of the Bank to the Borrower setting forth the Borrower's account regarding the advances and payments shall be considered true and correct and binding on the Borrower unless Bank is notified in writing of any discrepancy or exception within thirty (30) days from the mailing by the Bank to the Borrower of any such monthly statement.

 

SECURITY: This Note is secured under the terms of the Security Agreement described in the Agreement.

 

MASTER NOTE: The Bank has authorized a credit facility to the Borrower in a principal amount not to exceed the face amount of this Note or as otherwise limited by the Agreement. The credit facility is in the form of loans made from time to time by the Bank to the Borrower under the Agreement, which may be made on a secured or unsecured basis. This Note evidences the Borrower's obligation to repay Advances made on a secured basis. The aggregate principal amount of debt evidenced by this Note shall be the amount reflected from time to time in the records of the Bank. The Borrower may borrow, pay down and reborrow under this Note pursuant to the terms of this Note and

 

the Agreement and may refinance the Advances outstanding thereunder as unsecured Advances pursuant to the terms of the Agreement.

 

RELATED DOCUMENTS. The terms of any other document executed as part of the loan evidenced by this Note, including without limitation the Agreement, are incorporated by reference. This Note evidences Line of Credit B described in the Agreement and reference is made thereto for the terms and conditions upon which the indebtedness evidenced by this Note may be declared immediately due and payable.

 

EVENTS OF ACCELERATION: If any Default described in the Agreement occurs or is continuing, then, this Note shall become due immediately, with notice, at the Bank's option.

 

REMEDIES. If this Note is not paid at maturity, whether by acceleration or otherwise, the Bank shall have all of the rights and remedies provided by any law or agreement. Any requirement of reasonable notice shall be met if the Bank sends the notice to the Borrower at least seven (7) days prior to the date of sale, disposition or other event giving rise to the required notice. Subject to the terms of the Agreement, the Borrower is liable to the Bank for all reasonable costs and expenses of every kind incurred in the collection of this Note, including, without limitation, reasonable attorneys' fees and court costs. These costs and expenses shall include, without limitation, any costs or expenses incurred by the Bank in any bankruptcy, reorganization, insolvency or other similar proceeding.

 

WAIVER. Each endorser and any other party liable on this Note severally waives demand, presentment, notice of dishonor and protest, and consents to any extension or postponement of time of its payment without limit as to the number or period, to any substitution, exchange or release of all or any part of the collateral, to the addition of any party, and to the release or discharge of, or suspension of any rights and remedies against, any person who may be liable for the payment of this Note. No delay on the part of the Bank in the exercise of any right or remedy shall operate as a waiver. No single or partial exercise by the Bank of any right or remedy shall preclude any other future exercise of it or the exercise of any other right or remedy. No waiver or indulgence by the Bank of any default shall be effective unless in writing and signed by the Bank, nor shall a waiver on one occasion be construed as a bar to or waiver of that right on any future occasion.

 

MISCELLANEOUS. This Note shall be binding on Borrower and its successors, and shall inure to the benefit of the Bank, its successors and assigns. Any reference to the Bank shall include any holder of this Note. This Note is governed by Indiana law. Section headings are for convenience of reference only and shall not affect the interpretation of this Note. This Note and the Loan Documents embody the entire agreement between the Borrower and the Bank regarding the terms of the loan evidenced by this Note and supersede all oral statements and prior writings relating to that loan.

 

WAIVER OF JURY TRIAL BY BANK AND BORROWER. The Bank and the Borrower, after consulting or having had the opportunity to consult with counsel, knowingly, voluntarily and intentionally waive any right either of them may have to a trial by jury in any litigation based upon or arising out of this Note or any related instrument or agreement or any of the transactions contemplated by this Note or any course of conduct, dealing, statements (whether oral or written), or actions of either of them. Neither the Bank nor the Borrower shall seek to consolidate, by counterclaim or otherwise, any action in which a jury trial has been waived with any other action in which a jury trial cannot be or has not been waived. These provisions shall not be deemed to have been modified in any respect or relinquished by either the Bank or the Borrower except by a written instrument executed by both of them.

 

 

 

 

 

Exhibit C

UNSECURED PROMISSORY NOTE – LINE OF CREDIT A

 

 

PROMISE TO PAY: On or before July 1, 2010 for value received, the undersigned ITT EDUCATIONAL SERVICES, INC., a Delaware corporation ("Borrower") promises to pay to JPMORGAN CHASE BANK, N.A., a national banking association (the "Bank") or order, at any office of the Bank, the sum of ONE HUNDRED TEN MILLION AND 00/100 DOLLARS ($110,000,000.00) or if less, the aggregate unpaid principal amount of all unsecured Advances by the Bank outstanding under the Agreement, plus interest as hereinafter described.

 

DEFINITIONS. In addition to the terms defined elsewhere in this Note, the following terms have the meanings indicated for purposes of this Note:

 

"Advance" means a loan under Line of Credit A made by Bank to the Borrower pursuant to the Agreement and this Note.

 

"Agreement" means that certain Amended and Restated Credit Agreement dated effective as of December 17, 2007 between the Borrower and the Bank, as the same may be modified, amended or replaced from time to time.

 

"Applicable Margin" as used herein will mean the relevant Applicable Margin for an Unsecured Note as set forth in the definition of such term in the Agreement.

 

"Business Day" means any day other than a Saturday, Sunday or other day on which commercial banks in the State of Indiana are authorized or required to close under the laws of the State of Indiana.

 

"Interest Period" shall mean each calendar month.

 

“Line of Credit A” means Line of Credit A established under the Agreement.

 

"London Business Day" means any day other than a Saturday, Sunday or a day on which banking institutions are generally authorized or obligated by law or executive order to close in the City of London, England.

 

"LIBOR Rate" means, for any Interest Period, the rate appearing on the Reuters Screen LIBOR 01 Page (or on any successor or substitute page of such Service, or any successor to or substitute for such Service, providing rate quotations comparable to those currently provided on such page of such Service, as determined by the Bank from time to time for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market) at approximately 11:00 a.m., London time, two London Business Days prior to the commencement of such Interest Period, as the rate for dollar deposits with a maturity comparable to such Interest Period. In the event that such rate is not available at such time for any reason, then the “LIBOR Rate” for such Interest Period shall be the rate at which dollar deposits of $5,000,000 and for a maturity comparable to such Interest Period are offered by the principal London office of the Bank in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two London Business Days prior to the commencement of such Interest Period.

 

REQUESTS FOR ADVANCES. Advances may be made to the Borrower prior to maturity, provided that the Bank receives, at the time and in accordance with the terms of this Note, a request ("Request").

 

Each Advance shall not be less than $1,000,000.00 and increased by increments of $1,000,000.00 above such amount;

Each Request, which shall be irrevocable once received, must be received by the Bank not later than 1:30 p.m., Indianapolis time, on the day such Advance is to be made. Requests may be made in accordance with the terms of the Agreement.

 

All Advances will be made to the Borrower by a credit to the Borrower's account maintained at the Bank, or as otherwise directed by the Borrower.

 

Aggregate Advances outstanding under this Note will not exceed the limitations set forth in the Agreement.

 

INTEREST. Interest will accrue on the unpaid principal amount of this Note during each Interest Period, at a per annum rate equal to (i) the LIBOR Rate established for such Interest Period, plus (ii) the relevant Applicable Margin. Accrued interest shall be payable in arrears on the first Business Day of each month. All computations of interest and fees under this Note shall be made on the basis of a year of three hundred sixty (360) days and calculated for the actual days elapsed. Interest shall accrue on any principal balance outstanding from and including the date of an advance to but excluding the date on which such principal balance is repaid.

 

All principal hereunder not paid when due, whether by lapse of time or by acceleration, shall bear interest after maturity at a rate equal to three percent (3.0%) per annum plus the otherwise applicable rate.

 

LATE CHARGES: If any payment is not received by the Bank within ten (10) days after its due date, the Bank may assess and the Borrower agrees to pay a late fee equal to the greater of five percent (5%) of the past due amount or Twenty-Five and 00/100 Dollars ($25.00), but in any event not more than Fifteen Hundred and 00/100 Dollars ($1,500.00) per late charge to compensate the Bank for administrative expenses and other costs of delinquent payments. This late charge may be assessed without notice, shall be immediately due and payable and shall be in addition to all other rights and remedies available to the Bank.

 

REPAYMENT OF PRINCIPAL. Prior to maturity, the Borrower will make principal payments in such amounts and at such times to insure that the outstanding principal balance of this Note does not exceed the limitations applicable to Line of Credit A set forth in the Agreement. In any and all events, a payment of all outstanding principal plus all accrued but unpaid interest shall be due and payable on July 1, 2010.

 

PREPAYMENT. The Borrower may prepay this Note in whole or in part at any time without premium or penalty.

 

METHOD OF PAYMENT. All payments due under this Note shall be made by the Borrower to the Bank at its main office in Indianapolis, Indiana and each payment of interest and other sums due under this Note shall be made without set-off or counterclaim in immediately available funds on a Business Day not later than Noon, Indianapolis time. All sums received after such time shall be deemed received on the next Business Day. Any payment due on a day that is not a Business Day shall be made on the next Business Day.

 

EVIDENCE OF CREDIT EXTENSIONS. Bank shall record the date and amount of each Advance and the amount of each payment of principal made by the Borrower with respect thereto in its records, and Bank's record shall be conclusive absent manifest error. Any statement of the Bank to the Borrower setting forth the Borrower's account regarding the Advances and payments shall be considered true and correct and binding on the Borrower unless Bank is notified in writing of any discrepancy or exception within thirty (30) days from the mailing by the Bank to the Borrower of any such monthly statement.

 

MASTER NOTE: The Bank has authorized a credit facility to the Borrower in a principal amount not to exceed the face amount of this Note or as otherwise limited by the Agreement. The credit facility is in the form of loans made from time to time by the Bank to the Borrower, which may be made on a secured or unsecured basis. This Note evidences the Borrower's obligation to repay Advances made on an unsecured basis. The aggregate principal amount of debt evidenced by this Note shall be the amount reflected from time to time in the records of the Bank. The Borrower may borrow, pay down and reborrow under this Note pursuant to the terms of this Note and the Agreement, and may refinance the Advances outstanding hereunder as secured Advances pursuant to the terms of the Agreement.

 

RELATED DOCUMENTS. The terms of any other document executed as part of the loan evidenced by this Note, including without limitation the Agreement, are incorporated by reference. This Note evidences Line of Credit A described in the Agreement, and reference is made thereto for the terms and conditions upon which the indebtedness evidenced by this Note may be declared immediately due and payable.

 

EVENTS OF ACCELERATION: If any Default described in the Agreement occurs or is continuing, then, this Note shall become due immediately, with notice, at the Bank's option.

 

REMEDIES. If this Note is not paid at maturity, whether by acceleration or otherwise, the Bank shall have all of the rights and remedies provided by any law or agreement. Any requirement of reasonable notice shall be met if the Bank sends the notice to the Borrower at least seven (7) days prior to the date of sale, disposition or other event giving rise to the required notice. Subject to the terms of the Agreement, the Borrower is liable to the Bank for all reasonable costs and expenses of every kind incurred in the collection of this Note, including, without limitation, reasonable attorneys' fees and court costs. These costs and expenses shall include, without limitation, any costs or expenses incurred by the Bank in any bankruptcy, reorganization, insolvency or other similar proceeding.

 

WAIVER. Each endorser and any other party liable on this Note severally waives demand, presentment, notice of dishonor and protest, and consents to any extension or postponement of time of its payment without limit as to the number or period, to any substitution, exchange or release of all or any part of the collateral, to the addition of any party, and to the release or discharge of, or suspension of any rights and remedies against, any person who may be liable for the payment of this Note. No delay on the part of the Bank in the exercise of any right or remedy shall operate as a waiver. No single or partial exercise by the Bank of any right or remedy shall preclude any other future exercise of it or the exercise of any other right or remedy. No waiver or indulgence by the Bank of any default shall be effective unless in writing and signed by the Bank, nor shall a waiver on one occasion be construed as a bar to or waiver of that right on any future occasion.

 

MISCELLANEOUS. This Note shall be binding on Borrower and its successors, and shall inure to the benefit of the Bank, its successors and assigns. Any reference to the Bank shall include any holder of this Note. This Note is governed by Indiana law. Section headings are for convenience of reference only and shall not affect the interpretation of this Note. This Note and the Loan Documents embody the entire agreement between the Borrower and the Bank regarding the terms of the loan evidenced by this Note and supersede all oral statements and prior writings relating to that loan.

 

WAIVER OF JURY TRIAL BY BANK AND BORROWER. The Bank and the Borrower, after consulting or having had the opportunity to consult with counsel, knowingly, voluntarily and intentionally waive any right either of them may have to a trial by jury in any litigation based upon or arising out of this Note or any related instrument or agreement or any of the transactions contemplated by this Note or any course of conduct, dealing, statements (whether oral or written), or actions of either of them. Neither the Bank nor the Borrower shall seek to consolidate, by counterclaim or otherwise, any action in which a jury trial has been waived with any other action in which a jury trial cannot be or has not been waived. These provisions shall not be deemed to have been modified in any respect or relinquished by either the Bank or the Borrower except by a written instrument executed by both of them.

 

 

 

 

 

 

Exhibit D

UNSECURED PROMISSORY NOTE – LINE OF CREDIT B

 

 

PROMISE TO PAY: On or before July 1, 2010 for value received, the undersigned ITT EDUCATIONAL SERVICES, INC., a Delaware corporation ("Borrower") promises to pay to JPMORGAN CHASE BANK, N.A., a national banking association (the "Bank") or order, at any office of the Bank, the sum of FIFTY MILLION AND 00/100 DOLLARS ($50,000,000.00) or if less, the aggregate unpaid principal amount of all unsecured Advances by the Bank outstanding under the Agreement, plus interest as hereinafter described.

 

DEFINITIONS. In addition to the terms defined elsewhere in this Note, the following terms have the meanings indicated for purposes of this Note:

 

"Advance" means a loan under Line of Credit B made by Bank to the Borrower pursuant to the Agreement and this Note.

 

"Agreement" means that certain Amended and Restated Credit Agreement dated effective as of December 17, 2007 between the Borrower and the Bank, as the same may be modified, amended or replaced from time to time.

 

"Applicable Margin" as used herein will mean the relevant Applicable Margin for an Unsecured Note as set forth in the definition of such term in the Agreement.

 

"Business Day" means any day other than a Saturday, Sunday or other day on which commercial banks in the State of Indiana are authorized or required to close under the laws of the State of Indiana.

 

"Interest Period" shall mean each calendar month.

 

“Line of Credit B” means Line of Credit B established under the Agreement.

 

"London Business Day" means any day other than a Saturday, Sunday or a day on which banking institutions are generally authorized or obligated by law or executive order to close in the City of London, England.

 

"LIBOR Rate" means, for any Interest Period, the rate appearing on the Reuters Screen LIBOR 01 Page (or on any successor or substitute page of such Service, or any successor to or substitute for such Service, providing rate quotations comparable to those currently provided on such page of such Service, as determined by the Bank from time to time for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market) at approximately 11:00 a.m., London time, two London Business Days prior to the commencement of such Interest Period, as the rate for dollar deposits with a maturity comparable to such Interest Period. In the event that such rate is not available at such time for any reason, then the “LIBOR Rate” for such Interest Period shall be the rate at which dollar deposits of $5,000,000 and for a maturity comparable to such Interest Period are offered by the principal London office of the Bank in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two London Business Days prior to the commencement of such Interest Period.

 

REQUESTS FOR ADVANCES. Advances may be made to the Borrower prior to maturity, provided that the Bank receives, at the time and in accordance with the terms of this Note, a request ("Request").

 

Each Advance shall not be less than $1,000,000.00 and increased by increments of $1,000,000.00 above such amount;

Each Request, which shall be irrevocable once received, must be received by the Bank not later than 1:30 p.m., Indianapolis time, on the day such Advance is to be made. Requests may be made in accordance with the terms of the Agreement.

 

All Advances will be made to the Borrower by a credit to the Borrower's account maintained at the Bank, or as otherwise directed by the Borrower.

 

Aggregate Advances outstanding under this Note will not exceed the limitations set forth in the Agreement.

 

INTEREST. Interest will accrue on the unpaid principal amount of this Note during each Interest Period, at a per annum rate equal to (i) the LIBOR Rate established for such Interest Period plus (ii) the relevant Applicable Margin. Accrued interest shall be payable in arrears on the first Business Day of each month. All computations of interest and fees under this Note shall be made on the basis of a year of three hundred sixty (360) days and calculated for the actual days elapsed. Interest shall accrue on any principal balance outstanding from and including the date of an advance to but excluding the date on which such principal balance is repaid.

 

All principal hereunder not paid when due, whether by lapse of time or by acceleration, shall bear interest after maturity at a rate equal to three percent (3.0%) per annum plus the otherwise applicable rate.

 

LATE CHARGES: If any payment is not received by the Bank within ten (10) days after its due date, the Bank may assess and the Borrower agrees to pay a late fee equal to the greater of five percent (5%) of the past due amount or Twenty-Five and 00/100 Dollars ($25.00), but in any event not more than Fifteen Hundred and 00/100 Dollars ($1,500.00) per late charge to compensate the Bank for administrative expenses and other costs of delinquent payments. This late charge may be assessed without notice, shall be immediately due and payable and shall be in addition to all other rights and remedies available to the Bank.

 

REPAYMENT OF PRINCIPAL. Prior to maturity, the Borrower will make principal payments in such amounts and at such times to insure that the outstanding principal balance of this Note does not exceed the limitations applicable to Line of Credit B set forth in the Agreement. In any and all events, a payment of all outstanding principal plus all accrued but unpaid interest shall be due and payable on July 1, 2010.

 

PREPAYMENT. The Borrower may prepay this Note in whole or in part at any time without premium or penalty.

 

METHOD OF PAYMENT. All payments due under this Note shall be made by the Borrower to the Bank at its main office in Indianapolis, Indiana and each payment of interest and other sums due under this Note shall be made without set-off or counterclaim in immediately available funds on a Business Day not later than Noon, Indianapolis time. All sums received after such time shall be deemed received on the next Business Day. Any payment due on a day that is not a Business Day shall be made on the next Business Day.

 

EVIDENCE OF CREDIT EXTENSIONS. Bank shall record the date and amount of each Advance and the amount of each payment of principal made by the Borrower with respect thereto in its records, and Bank's record shall be conclusive absent manifest error. Any statement of the Bank to the Borrower setting forth the Borrower's account regarding the Advances and payments shall be considered true and correct and binding on the Borrower unless Bank is notified in writing of any discrepancy or exception within thirty (30) days from the mailing by the Bank to the Borrower of any such monthly statement.

 

MASTER NOTE: The Bank has authorized a credit facility to the Borrower in a principal amount not to exceed the face amount of this Note or as otherwise limited by the Agreement. The credit facility is in the form of loans made from time to time by the Bank to the Borrower, which may be made on a secured or unsecured basis. This Note evidences the Borrower's obligation to repay Advances made on an unsecured basis. The aggregate principal amount of debt evidenced by this Note shall be the amount reflected from time to time in the records of the Bank. The Borrower may borrow, pay down and reborrow under this Note pursuant to the terms of this Note and the Agreement, and may refinance the Advances outstanding hereunder as secured Advances pursuant to the terms of the Agreement.

 

RELATED DOCUMENTS. The terms of any other document executed as part of the loan evidenced by this Note, including without limitation the Agreement, are incorporated by reference. This Note evidences Line of Credit B described in the Agreement, and reference is made thereto for the terms and conditions upon which the indebtedness evidenced by this Note may be declared immediately due and payable.

 

EVENTS OF ACCELERATION: If any Default described in the Agreement occurs or is continuing, then, this Note shall become due immediately, with notice, at the Bank's option.

 

REMEDIES. If this Note is not paid at maturity, whether by acceleration or otherwise, the Bank shall have all of the rights and remedies provided by any law or agreement. Any requirement of reasonable notice shall be met if the Bank sends the notice to the Borrower at least seven (7) days prior to the date of sale, disposition or other event giving rise to the required notice. Subject to the terms of the Agreement, the Borrower is liable to the Bank for all reasonable costs and expenses of every kind incurred in the collection of this Note, including, without limitation, reasonable attorneys' fees and court costs. These costs and expenses shall include, without limitation, any costs or expenses incurred by the Bank in any bankruptcy, reorganization, insolvency or other similar proceeding.

 

WAIVER. Each endorser and any other party liable on this Note severally waives demand, presentment, notice of dishonor and protest, and consents to any extension or postponement of time of its payment without limit as to the number or period, to any substitution, exchange or release of all or any part of the collateral, to the addition of any party, and to the release or discharge of, or suspension of any rights and remedies against, any person who may be liable for the payment of this Note. No delay on the part of the Bank in the exercise of any right or remedy shall operate as a waiver. No single or partial exercise by the Bank of any right or remedy shall preclude any other future exercise of it or the exercise of any other right or remedy. No waiver or indulgence by the Bank of any default shall be effective unless in writing and signed by the Bank, nor shall a waiver on one occasion be construed as a bar to or waiver of that right on any future occasion.

 

MISCELLANEOUS. This Note shall be binding on Borrower and its successors, and shall inure to the benefit of the Bank, its successors and assigns. Any reference to the Bank shall include any holder of this Note. This Note is governed by Indiana law. Section headings are for convenience of reference only and shall not affect the interpretation of this Note. This Note and the Loan Documents embody the entire agreement between the Borrower and the Bank regarding the terms of the loan evidenced by this Note and supersede all oral statements and prior writings relating to that loan.

 

WAIVER OF JURY TRIAL BY BANK AND BORROWER. The Bank and the Borrower, after consulting or having had the opportunity to consult with counsel, knowingly, voluntarily and intentionally waive any right either of them may have to a trial by jury in any litigation based upon or arising out of this Note or any related instrument or agreement or any of the transactions contemplated by this Note or any course of conduct, dealing, statements (whether oral or written), or actions of either of them. Neither the Bank nor the Borrower shall seek to consolidate, by counterclaim or otherwise, any action in which a jury trial has been waived with any other action in which a jury trial cannot be or has not been waived. These provisions shall not be deemed to have been modified in any respect or relinquished by either the Bank or the Borrower except by a written instrument executed by both of them.

 

 

 

 

 

 

Exhibit E

FORM OF SECURITY AGREEMENT

 

(Attached)

AMENDED SECURITY AGREEMENT WITH

RESPECT TO CUSTODIAL ACCOUNT AND INVESTMENT PROPERTY

 

This Amended Security Agreement with Respect to Custodial Account and Investment Property (the "Agreement" is entered into as of December 17, 2007 by ITT EDUCATIONAL SERVICES, INC., a Delaware corporation (“Debtor”) and is in favor of JPMORGAN CHASE BANK, N.A., a national banking association (hereinafter referred to as “Lender”)

 

RECITALS:

 

A.          Lender is making available to Debtor revolving credit facilities in the maximum aggregate principal amount of $160,000,000 pursuant to the terms of an Amended and Restated Credit Agreement dated December 17, 2007, between the Debtor and Lender, as the same may be amended from time to time (the “Credit Agreement”).

 

B.           Under the Credit Agreement Debtor has the option to borrow on an unsecured basis on either or both of Line of Credit A or Line of Credit B under the terms of the applicable Unsecured Note described in the Credit Agreement or on a secured basis on either or both of Line of Credit A or Line of Credit B under the terms of the applicable Secured Note described in the Credit Agreement.

 

C.            In order to induce Lender to make Advances to Debtor under the Secured Notes and in order to secure all of Debtor's obligations to Lender under the Secured Notes, Debtor has agreed to grant to Lender a security interest in certain of Debtor’s securities or other property relating thereto, carried in or credited to Agency/Custodial Account No. xxxxxxxxxx (the “Account”) of Debtor maintained with JPMorgan Chase Bank, N.A. in its capacity as a securities intermediary (“Intermediary”) and in the Account itself.

 

D.          This Agreement is intended to amend and restate in its entirety the provisions of that certain Security Agreement with Respect to Custodial Account and Investment Property between the parties hereto dated December 22, 2006.

 

 

1.           As security for the obligations (if any) of Debtor to Lender under the Secured Notes, as the same may be modified or amended from time to time, including, without limitation, the repayment of all monies which Lender may hereafter loan or advance to or for the benefit of Debtor under the Secured Notes (the “Secured Obligations”), and in order to secure the obligations of Debtor thereunder, Debtor hereby grants a security interest to Lender in all of Debtor’s right, title and interest in the investment property and financial assets credited to the Account and the securities entitlement represented by the Account, together with the proceeds thereof, including all replacement investments and all monies owing to Debtor and funds which may hereafter accumulate in or become withdrawable from such Account, including any balance which may remain to the credit of said Account upon the closing thereof (together, the “Collateral”). In connection herewith, and in order to perfect the security interest granted hereunder, Lender, Debtor and the Intermediary have entered into the Control Agreement. Lender hereby acknowledges and agrees that at any time any outstanding Advances are evidenced by either of the Unsecured Notes, the Obligations under such Unsecured Note shall not be secured by the Collateral, and at any time all outstanding Advances are evidenced by one or both of the Unsecured Notes, the amount of the Secured Obligations secured by the Collateral shall be zero.

 

2.           All capitalized terms used in this Agreement and not defined herein are used with the meanings ascribed to such terms in the Credit Agreement For the purposes of this Agreement:

 

“Effective Date” of a Notice of Sole Control shall be the beginning of the Business Day after an officer of Intermediary at the level of Vice President or above has verified receipt of the Notice of Sole Control to Lender, provided that Intermediary may, at its option, act on the Notice of Sole Control at any time after actual receipt by Intermediary of the Notice of Sole Control (even if before the beginning of the business day after Intermediary has acknowledged receipt, as provided above).

“Notice of Sole Control” shall mean a written notification from Lender to Intermediary in the form attached hereto as Exhibit A.

 

“Permitted Instructions” shall mean the following instructions from Debtor or Debtor’s agents: (i) Trading Instructions, including instructions for the purpose of effecting the clearance or settlement of a trade in the Account; (ii) instructions to disburse income and dividends with respect to property in the Account; and (iii) instructions to debit the Account for any fees payable with respect to the Account or to any investment manager or advisor engaged by Debtor to manage the Account (an “Investment Manager”).

 

“Trading Instructions” shall mean instructions to buy, sell or otherwise trade the assets in the Account.

 

3.           Lender and Debtor acknowledge and agree that, prior to the Effective Date of a Notice of Sole Control, Debtor and Debtor's agents are entitled to give Permitted Instructions without any concurrence or consent of Lender, and the Intermediary is authorized to comply with all Permitted Instructions of Debtor without further consent from Lender. Any instructions to Intermediary other than Permitted Instructions shall be made by a written instrument to such effect which shall be executed by:

 

(a)         Before the Effective Date of a Notice of Sole Control, an authorized officer of Debtor and Lender, or

 

 

Notwithstanding the foregoing, at any time there are no Advances outstanding under either of the Secured Notes, Debtor shall have the exclusive right to determine what instructions are given to Intermediary, and Lender will be obligated to execute the written instrument setting forth Debtor's instructions, and to deliver the same to the Intermediary, within one Business Day of the receipt of such a request from Debtor.

 

Lender agrees that, at any time there are Advances outstanding under either or both of the Secured Notes and no Notice of Sole Control has been delivered to Intermediary, in connection with any instructions to withdraw and/or disburse principal or cash (other than Permitted Instructions as to which Debtor shall have sole authority) out of the Account, Lender will be obligated to execute the written instrument setting forth Debtor's instructions, and to deliver the same to the Intermediary, within one Business Day of the receipt of such a request from Debtor, so long as after giving effect to such request, the Collateral Requirement would not be violated.

 

Prior to the Effective Date of a Notice of Sole Control, Intermediary shall be entitled to rely on all Trading Instructions and other Permitted Instructions from Debtor or Debtor’s agents as described in this Section 3, and Intermediary shall have no obligation to notify Lender prior to acting on any such instructions, including, but not limited to, delivery or receipt of cash or securities to effect clearance or settlement of any trade. All of the undersigned agree that Intermediary shall not be responsible for any diminution or loss of value of the Collateral attributable to decline in market value of the Collateral.

 

4..          Lender and Debtor acknowledge and agree that, after the Effective Date of a Notice of Sole Control, unless and until such Notice of Sole Control is rescinded by the Lender,

 

(a)          Debtor and Debtor’s agents will cease giving Intermediary any instructions regarding the Account;

 

 

 

(d)         Lender shall give all other instructions regarding the Account to Intermediary with a copy to Debtor; and

 

(e)          Intermediary will cease complying with all instructions concerning the Account from Debtor or Debtor’s agents, and will comply with Trading Instructions and all other instructions from Lender, without further consent of Debtor.

 

Notwithstanding the foregoing, Lender agrees that after the Effective Date of a Notice of Sole Control and until such Notice of Sole Control is rescinded by the Lender, Lender will give instructions to the Intermediary as Debtor reasonably requests, including instruction to withdraw and/or disburse principal or cash, if after giving effect to such instruction the Collateral Requirement would not be violated.

 

If Lender shall send to Intermediary a Notice of Sole Control as provided in Section 5 below, and Intermediary shall have sent a copy of such Notice of Sole Control to Debtor as provided in the Notice of Sole Control, Intermediary shall have no duty or obligation whatsoever of any kind or character to determine the validity of any Notice of Sole Control or to take further instructions from Debtor or Debtor’s agents after the Effective Date of a Notice of Sole Control until it is rescinded by Lender.

 

5.           Lender may send a Notice of Sole Control to the Intermediary only after a Default occurs while there are Advances outstanding under either of the Secured Notes, and while such Default is continuing. Upon delivery of a Notice of Sole Control, Lender, without further authority from Debtor, shall be entitled to direct Intermediary to liquidate any or all the Collateral in the Account and to request Intermediary to remit to Lender the proceeds of such liquidation up to the amount sufficient to satisfy the Secured Obligations under the Secured Notes that are then due and unpaid, and Intermediary is hereby authorized and directed to pay to Lender such sums as Lender shall so request or demand without the consent of or notice to Debtor. If a Default is cured or waived after a Notice of Sole Control is delivered to Intermediary, Lender immediately shall send Intermediary a written notice that the Notice of Sole Control is rescinded, and instructing Intermediary to comply with all Permitted Instructions from Debtor without further consent of Lender.

 

6.           Debtor hereby constitutes and appoints Lender to act, after a Default that occurs while there are Advances outstanding under either of the Secured Notes and during the continuance thereof, and after Lender has sent a Notice of Sole Control to Intermediary, as Debtor’s true, lawful and irrevocable attorney-in-fact to demand, receive and enforce payments and to give receipts, releases, satisfactions for, and to ▇▇▇ for all monies payable to Debtor by Intermediary with respect to the Collateral, and Debtor agrees that this may be done in the name of Lender with the same force and effect as Debtor could do had this Agreement not been made. Any and all monies or payments which may be received by Debtor at such time with respect to the Collateral, to which Lender is entitled under and by reason of this Agreement, will be received by Debtor as trustee for Lender, and will be immediately delivered, in kind, to Lender without commingling.

 

7.           Any sums paid under this Agreement by Intermediary to Lender from the Account of Debtor shall be applied by Lender to the payment of the Secured Obligations owing by Debtor to Lender under the Secured Notes. The balance, if any, remaining after the payment of said Secured Obligations immediately shall be paid by Lender to Debtor. The receipt or receipts of Lender for such funds so paid to it by Intermediary shall, as to Intermediary, operate as the receipt of Debtor as fully and as completely as if funds had been paid to Debtor in person and receipted for by Debtor. The liens created by this Agreement shall be junior to the liens claimed by Intermediary for indebtedness owed to Intermediary by Debtor in connection with fees and expenses associated with the administration of the Account.

 

8.           Lender is hereby authorized and empowered to receive from Intermediary, and Intermediary is authorized and directed to deliver to Lender and at Debtor’s expense, copies of all confirmations and other notices with respect to all transactions executed by Intermediary for the account of Debtor, copies of the periodic Account statements of Debtor, and copies of any and all matters pertaining to the Account of Debtor with Intermediary, including, without limitation, copies of all correspondence directed to Debtor.

 

9.           As between Debtor and Lender, this Agreement shall remain in full force and effect until the Secured Obligations under the Secured Notes have been satisfied and Lender has no further commitment to lend on a secured basis under the Credit Agreement, whereupon Lender immediately shall deliver to Intermediary a notice terminating the Control Agreement.

 

10.         Debtor hereby represents and warrants to Lender that the Collateral above assigned has not heretofore been alienated or assigned to any party other than Lender, and that Debtor will not allow any lien, security interest or encumbrance to attach to such Collateral (other than the security interest of Lender) without the written consent of Lender.

 

11.         Debtor agrees to indemnify, defend, save and hold free and harmless Lender and Intermediary from any claim of Debtor, Lender or any third party arising out of compliance with any instruction or requests of Debtor or Lender with respect to the Account, or any attempted attachment or garnishment of such Account, or any property therein contained, including all reasonable fees and expenses, including without limitation, attorneys’ fees; provided that Debtor shall have no duty to indemnify Lender in respect of any claim arising from or related to any action or failure to act by Lender in violation of the terms of this Agreement.

 

12.         Intermediary owes no duty to Lender to do or refrain from doing any act other than to follow specific instructions from Lender as authorized by this Agreement. In all other respects, the operation and management of Debtor’s Account will continue unmodified, except as specifically indicated to the contrary by this Agreement or the Control Agreement.

 

13.         Any Notice of Sole Control shall be effective on its Effective Date. All other notices under this Agreement shall be effective when actually received. Any notices or other communications which may be required under this Agreement are to be sent to the parties at the following addresses or such other addresses as may be subsequently given to the other parties in writing:

 

 

 

 

Intermediary shall send to both Debtor and Lender at the above addresses copies of all periodic and transaction statements concerning the Account.

 

14.         Debtor acknowledges that this Agreement supplements any existing agreement(s) with Intermediary and in no way is this Agreement intended to abridge any rights that Intermediary might otherwise have with respect to Debtor under the terms of any such existing agreements with Debtor, except as expressly provided herein or in the Control Agreement. This Agreement shall not amend any contractual agreements between Intermediary and Debtor with respect to the Account or abridge any rights that Intermediary may have under any such contractual agreements. This Agreement may not be changed orally, but only by an agreement in writing and signed by the parties.

 

15.         This Agreement shall be binding upon and inure to the benefit of the successors and assigns of the respective parties hereto and shall be governed by, and construed in accordance with, the laws of the State of Indiana without regard to conflicts of law principles.

 

16.         This Agreement shall not be considered to create a joint venture or partnership between the parties hereto. Neither party to this Agreement may utilize the name of the other in any way without the other party’s

 

written consent.

 

17.         If any provision of this Agreement shall be held to be invalid or unenforceable by any court or regulatory or self-regulatory agency or body, such invalidity or unenforceability shall attach only to such provision or condition. The validity of the remaining provisions and conditions shall not be affected thereby and this Agreement shall be carried out as if any such invalid or unenforceable provision or condition were not contained herein.

 

18.         This Agreement is between the parties and is not intended to confer any benefits on third parties, provided however that the Intermediary will be deemed to be a beneficiary of the provisions related to the Intermediary contained in the Control Agreement.

 

19.         This Agreement amends and restates in its entirety that certain Security Agreement with Respect to Custodial Account and Investment Property between the parties hereto dated December 22, 2006, which agreement will be of no further force and effect other than to evidence the agreement of the parties prior to entering this Agreement.

.

original, but all of which taken together shall constitute one and the same instrument.

 

IN WITNESS WHEREOF, Debtor and Lender have caused this Agreement to be executed by their respective authorized officers and delivered effective as of the date written above

 

 

 

 

 

 

)

 

Before me, a Notary Public in and for said County and State, personally appeared ________________________, the _____________________ of ITT Educational Services, Inc. , and acknowledged the execution of the foregoing document as the authorized and voluntary act of said corporation.

 

 

___________________________________

Notary Public

 

___________________________________

 

 

 

 

 

 

 

 

 

 

EXHIBIT A

 

[DATE]

 

JPMorgan Chase Bank, N.A.

▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇, ▇▇▇▇ Code OH1-0634

▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇

Attn: ▇▇▇▇▇ ▇▇▇▇▇

 

 

 

Ladies and Gentlemen:

 

Pursuant to the Control Agreement, dated ____________________ (a copy of the Control Agreement being attached hereto), we give you notice of our sole control over account number xxxxxxxxxx and any property therein (the "Account") held with JPMorgan Chase Bank, N.A. You are instructed not to accept any instructions, entitlement orders or directions with respect to the Account from any party other than the undersigned affiliate.

 

 

 

 

JPMorgan Chase Bank, N.A.

 

By:________________

Name:______________

Title:_______________