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EXHIBIT 10.67
AMENDED AND RESTATED
BUSINESS LOAN AGREEMENT
BETWEEN
BANK OF AMERICA, FSB (THE "BANK")
AND
EDUCATIONAL MEDICAL, INC. ("EMI")
AND ALL SUBSIDIARIES OF EMI ("BORROWERS")
DATED: MARCH 13,1998
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TABLE OF CONTENTS
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1. DEFINITIONS..................................................................................................7
1.01 Borrowing Base........................................................................................7
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1.02 Acceptable Receivable.................................................................................7
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1.03 Termination Date......................................................................................9
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2. FACILITY NO. 1: REVOLVING LINE OF CREDIT AMOUNT AND TERMS....................................................9
2.01 Revolving Line of Credit Amount.......................................................................9
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2.02 Availability Period...................................................................................9
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2.03 Conditions to Each Extension of Credit...............................................................10
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2.04 Repayment Terms......................................................................................10
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2.05 Letters of Credit....................................................................................11
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2.06 Swap Contracts.......................................................................................12
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3. FACILITY NO. 2: TERM LOAN FACILITY AMOUNT AND TERMS.........................................................13
3.01 Term Loan Facility...................................................................................13
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3.02 Availability Period..................................................................................14
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3.03 Conditions to Each Extension of Credit...............................................................14
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3.04 Repayment Terms......................................................................................14
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3.05 Letters of Credit....................................................................................15
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4. FACILITY NO. 3: ACQUISITION LINE OF CREDIT AMOUNT AND TERMS.................................................16
4.01 Acquisition Line of Credit Amount....................................................................16
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4.02 Availability Period..................................................................................16
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4.03 Conditions to Each Extension of Credit...............................................................16
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4.04 Repayment Terms......................................................................................17
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4.05 Letters of Credit....................................................................................18
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5. INTEREST....................................................................................................18
5.01 Interest Rate.........................................................................................18
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5.02 Optional Interest Rate................................................................................19
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6. COLLATERAL..................................................................................................20
6.01 Personal Property....................................................................................21
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7. DISBURSEMENTS, PAYMENTS AND COSTS...........................................................................21
7.01 Requests for Credit..................................................................................21
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7.02 Disbursements and Payments...........................................................................21
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7.03 Direct Debit.........................................................................................21
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7.04 Banking Days.........................................................................................22
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7.05 Taxes................................................................................................22
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7.06 Additional Costs.....................................................................................22
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7.07 Interest Calculation.................................................................................22
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7.08 Default Rate.........................................................................................22
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7.09 Overdrafts...........................................................................................23
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7.10 Payments in Kind.....................................................................................23
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8. CONDITIONS..................................................................................................23
8.01 Authorizations.......................................................................................23
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8.02 Governing Documents..................................................................................23
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8.03 Security Agreements..................................................................................23
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8.04 Evidence of Priority.................................................................................24
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8.05 Insurance............................................................................................24
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8.06 Legal Opinion........................................................................................24
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8.07 Good Standing........................................................................................24
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8.08 Payment of Closing Fee...............................................................................24
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8.09 Payment of Expenses and Fees.........................................................................24
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8.10 Representations of Corporate Officers................................................................24
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8.11 Other Items..........................................................................................24
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9. CONDITIONS..................................................................................................24
9.01 Organization of Borrower.............................................................................24
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9.02 Authorization........................................................................................24
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9.03 Enforceable Agreement................................................................................24
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9.04 Good Standing........................................................................................25
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9.05 No Conflicts.........................................................................................25
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9.06 Financial Information................................................................................25
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9.07 Lawsuits.............................................................................................25
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9.08 Collateral...........................................................................................25
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9.09 Permits, Franchises..................................................................................25
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9.10 Other Obligations....................................................................................25
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9.11 Income Tax Returns...................................................................................26
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9.12 No Tax Avoidance Plan................................................................................26
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9.13 No Event of Default..................................................................................26
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9.14 ERISA Plans..........................................................................................26
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9.15 Locations of Borrowers...............................................................................27
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9.16 Subsidiaries.........................................................................................27
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9.17 Year 2000 Compliance.................................................................................27
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10. COVENANTS..................................................................................................27
10.01 Use of Proceeds.....................................................................................27
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10.02 Financial Information...............................................................................27
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10.03 Fixed Charge Coverage Ratio.........................................................................29
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10.04 Total Funded Debt/Adjusted Cash Flow Ratio..........................................................29
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10.05 Senior Funded Debt/Adjusted Cash Flow Ratio.........................................................30
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10.06 Financial Information...............................................................................30
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10.07 Other Debts.........................................................................................30
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10.08 Other Liens.........................................................................................31
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10.09 Capital Expenditures................................................................................32
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10.10 Dividends...........................................................................................32
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10.11 Loans and Investments...............................................................................32
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10.12 Change of Ownership.................................................................................33
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10.13 Notices to Bank.....................................................................................33
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10.14 Books and Records...................................................................................33
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10.15 Audits..............................................................................................33
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10.16 Compliance with Laws................................................................................33
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10.17 Preservation of Rights..............................................................................34
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10.18 Maintenance of Properties...........................................................................34
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10.19 Perfection of Liens.................................................................................34
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10.20 Cooperation.........................................................................................34
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10.21 Insurance...........................................................................................34
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10.22 Additional Negative Covenants.......................................................................34
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10.23 ERISA Plans.........................................................................................36
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10.24 Title IV Program Requirements.......................................................................36
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10.25 Subsidiaries........................................................................................37
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11. HAZARDOUS WASTE INDEMNIFICATION............................................................................37
12. DEFAULT....................................................................................................37
1201 Failure to Pay.......................................................................................38
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12.02 Lien Priority.......................................................................................38
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12.03 False Information...................................................................................38
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12.04 Bankruptcy..........................................................................................38
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12.05 Receivers...........................................................................................38
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12.06 Lawsuits............................................................................................38
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12.07 Judgments...........................................................................................38
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12.08 Government Action...................................................................................38
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12.09 Material Adverse Change.............................................................................39
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12.10 Cross-default.......................................................................................39
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12.11 Default under Related Documents.....................................................................39
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12.12 Other Bank Agreements...............................................................................39
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12.13 ERISA Plans.........................................................................................39
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12.14 Delisting...........................................................................................39
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12.15 Other Breach Under Agreement........................................................................39
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13. ENFORCING THIS AGREEMENT; MISCELLANEOUS....................................................................40
13.01 GAAP................................................................................................40
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13.02 Georgia Law.........................................................................................40
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13.03 Successors and Assigns..............................................................................40
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13.04 Arbitration.........................................................................................40
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13.05 Severability; Waivers...............................................................................41
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13.06 Reimbursement Costs.................................................................................41
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13.07 Administration Costs................................................................................41
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13.08 Attorneys' Fees.....................................................................................42
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13.09 Joint and Several Liability.........................................................................42
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13.10 One Agreement.......................................................................................43
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13.11 Disposition of Schedules............................................................................43
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13.12 Credit Adjustments..................................................................................43
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13.13 Verification of Receivables.........................................................................44
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13.14 Indemnification.....................................................................................44
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13.15 Notices.............................................................................................44
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13.16 Headings............................................................................................44
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13.17 Counterparts........................................................................................44
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13.18 Amendment and Restatement...........................................................................44
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List of Certain Defined Terms
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Defined Term Location in Text
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Acceptable Receivable Para. 1.2
BofA Para. 3. l(b)
banking day Para. 7.4
Borrower, Borrowers Page 1, First Paragraph
Borrowing Base Para. 1.1
Closing Date Page 1, First Paragraph
Default ▇▇▇▇. ▇▇
▇▇▇▇▇▇ ▇▇▇▇. 10.4
EMI Page 1, First Paragraph
ERISA Para. 9.14(e)
▇▇▇▇▇ of default Para. 13
Facilities or Facility Para. 5.1
Facility No. 1 Para. 2.1
Facility No. 1 Commitment Para. 2.1
Facility No. 2 Para. 3.1
Facility No. 2 Commitment Para. 3.1
Facility No. 3 Para. 4.1
Facility No. 3 Commitment Para. 4.1
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AMENDED AND RESTATED BUSINESS LOAN AGREEMENT
This Agreement, dated as of March 13, 1998 ("Closing Date"), is made among
BANK OF AMERICA, FSB (the "Bank"), EDUCATIONAL MEDICAL, INC. ("EMI") and all
those subsidiaries of EMI listed on the signature page(s) to this Agreement
(EMI and such subsidiaries hereinafter sometimes collectively called the
"Borrowers" and individually called a "Borrower").
PREAMBLE. EMI and its subsidiaries are engaged In a common business
enterprise and, in connection therewith, have determined it to be in their
mutual economic interests to apply to the Bank on a collective basis for
extensions of credit for working capital and to finance continued expansion,
with EMI acting as agent for all Borrowers in connection with any requests for,
the receipt, disbursement, allocation and administration of, and the repayment
of, the extensions of credit to be made hereunder. Accordingly, the Borrowers
hereby covenant to and agree with the Bank as follows:
1. DEFINITIONS
In addition to the terms which are defined elsewhere in this Agreement, the
following terms have the meanings indicated for the purposes of this Agreement:
1.01 "Borrowing Base means 80% of the balance due on Acceptable
Receivables of the --------------- Borrowers.
1.02 "Acceptable Receivable means an account receivable of a Borrower
which satisfies the following requirements:
(a) The account has resulted from the sale of goods or the
performance of services by the Borrower in the ordinary course of the
Borrower's business.
(b) There are no conditions which must be satisfied before the
Borrower is entitled to receive payment of the account. Accounts arising from
COD sales, consignments or guaranteed sales are not acceptable.
(c) The debtor upon the account does not claim any defense to payment
of the account.
(d) The account balance does not include the amount of any
counterclaims or offsets which have been or may be asserted against the
Borrower by the account debtor (including offsets for any "contra accounts"
owed by the Borrower to the account debtor for goods purchased by the
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Borrower or for services performed for the Borrower). To the extent any
counterclaims, offsets, contra accounts, or credit balances exist in favor of
the debtor, such amounts shall be deducted from the account balance.
(e) The account represents a genuine obligation of the debtor for
goods sold and accepted by the debtor, or for services performed for and
accepted by the debtor.
(f) The Borrower has sent an invoice to the debtor in the amount of
the account.
(g) The Borrower is not prohibited by the laws of the state where the
account debtor is located from bringing an action in the courts of that state
to enforce the debtor's obligation to pay the account. The Borrower has taken
all appropriate actions to ensure access to the courts of the state where the
account debtor is located, including, where necessary, the filing of a notice
of business activities report or other similar filing with the applicable state
agency or the qualification by the Borrower as a foreign corporation authorized
to transact business in such state.
(h) The account is owned by the Borrower free of any title defects or
any liens or interests of others except the security interest in favor of the
Bank, and except as permitted under Paragraph 10.8.
(i) The debtor upon the account is not any of the following:
(1) an employee, affiliate, parent or subsidiary of the Borrower, or,
an entity which has common officers or directors with the Borrower;
(2) any state, county, city, town or municipality;
(3) any person or entity located in a foreign country.
(j) The account is not in default. An account will be considered it
default if any of the following occur:
(1) The account is not paid within the 180 day period starting on it.
billing date; or
(2) Any petition is filed by or against the debtor obligated upon the
account under any bankruptcy law or any other law or laws for the relief of
debtors
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(k) The account is not the obligation of a debtor who is in default
(as defined above) on 50% or more of the accounts (if more than one) with the
Borrower upon which such debtor is obligated.
(l) The account is not evidenced by a promissory note or chattel
paper.
(m) The account is otherwise acceptable to the Bank.
1.03 "Termination Date shall mean the third (3rd) anniversary of the date
of this Agreement; provided however, that the Bank, in its sole discretion,
upon the Borrowers' request, may elect, by giving written notice to the
Borrowers to such effect, beginning in the second year of this Agreement, but
not later than 120 days before any then effective Termination Date, to extend
such "Termination Date" for up to two (2) additional periods of up to one (1)
year each on such terms and conditions (which may differ from those set forth
herein) as the Bank may offer, and the Borrowers may accept.
2. FACILITY NO. 1: REVOLVING LINE OF CREDIT AMOUNT AND TERMS
2.01 Revolving Line of Credit Amount.
(a) During the availability period described below, the Bank will
provide a revolving line of credit ("Facility No. 1 ") to the Borrowers. The
amount of this revolving line of credit (the "Facility No. 1 Commitment") is
equal to the lesser of (i) $10,000,000 or (ii) the Borrowing Base.
(b) Facility No. 1 is a revolving line of credit for advances with a
within line facility for letters of credit. During the availability period, the
Borrowers may repay principal amounts and reborrow them.
(c) Each advance under Facility No. 1 must be for at least $250,000
or for the amount of the remaining available line of credit, if less.
(d) The Borrowers agree not to permit the sum of outstanding
principal amount of advances obtained under Facility No. 1 plus the outstanding
amounts of any letters of credit under Paragraph 2.5, including amounts drawn
on letters of credit and not yet reimbursed, to exceed the Facility No. 1
Commitment. If the Borrowers exceed this limit, the Borrowers will immediately
pay the excess to the Bank upon the Bank's demand.
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Unless and until an Event of Default has occurred and is continuing? the
Borrowers shall have the right to direct the manner or order in which payments
received from the Borrowers under this Paragraph shall be applied to this
Facility. From and after the occurrence of an Event of Default and during its
continuance, the Bank may apply payments received from the Borrowers under this
Paragraph to the obligations of the Borrowers to the Bank in the order and the
manner as the Bank, in its discretion, may determine, including to this
Facility or the other Facility.
2.02 Availability Period. Facility No. 1 is available between the
date of this Agreement and the Termination Date, unless the Borrowers are in
default.
2.03 Conditions to Each Extension of Credit. Before each extension of
credit under Facility No. 1, including the first, the Borrowers will deliver to
the Bank (i) a notice of borrowing, in form and detail satisfactory to the
Bank, issued by EMI as agent for and on behalf of the Borrowers, specifying the
amount of the requested advance, the intended use of the proceeds thereof, the
requested disbursement date and the desired interest rate to be applicable,
initially, thereto; and (ii) a borrowing base certificate, in form and detail
satisfactory to the Bank, issued by EMI as agent for and on behalf of the
Borrowers, setting forth the Acceptable Receivables on which the requested
extension of credit is to be based and setting forth calculations demonstrating
the Borrowers' compliance with the requirements of Paragraphs 10.4 and 10.5
after giving effect to such advance.
2.04 Repayment Terms
(a) The Borrowers will pay interest, in arrears, at the then
applicable interest rate described below on outstanding advances under Facility
No. 1 on the first day of the calendar month following the disbursement of any
advance under Facility No. 1 and then on a monthly basis thereafter until
payment in full of such advance. The interest rate payable on outstanding
advances under Facility No. 1 shall be determined as follows:
Interest Interest
Rate shall Rate shall be
If the Test be Reference -or- LIBOR Rate
Ratio is: Rate plus plus
2.0:1 or greater 0% 1.75%
1.0:1 or greater, but less than 2.0:1 (.25)% 1.50%
less than 1.0: 1 (.50)% 1.25%
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As used herein, (i) "Reference Rate" is defined in Paragraph S.1, (ii) "LIBOR
Rate" is defined in Paragraph 5.2, and (iii) the "Test Ratio" shall be the
Total Funded Debt/Adjusted Cash Flow Ratio, as defined in Paragraph 10.4. The
Test Ratio shall be calculated on a quarterly basis by the Bank from the
Borrowers' quarterly or, as the case may be, annual financial statements then
most recently delivered to it pursuant to Paragraphs l0.2(a) and l0.2(b), and
the interest rate(s) described above shall be adjusted by the Bank, as
appropriate, effective as of the first day of the month following the month in
which such financial statements are delivered to the Bank, (i) as to all
advances then outstanding and any made on or after such date, for all advances
which bear interest determined by reference to the Reference Rate and (ii) as
to all advances made on or after such date (including any "rollover" of
existing LIBOR Rate portions during such period), for LIBOR Rate portions; in
each case, until the next such determination by the Bank becomes effective. If,
however, the Borrowers fail to timely deliver their quarterly or, as the case
may be, annual financial statements to the Bank pursuant to Paragraphs l0.2(a)
or l0.2(b) for any fiscal quarter, the Bank shall use an assumed Test Ratio of
2.0: 1 to make its calculations.
(b) The Borrowers agree to pay the Bank a commitment fee,
determined by multiplying (i) the difference between (A) the full amount of the
Bank's Facility No. 1 Commitment and (B) the amount of credit which the
Borrowers actually use of Facility No. 1, based on the weighted average credit
outstanding under Facility No. 1 during the specified period, by (ii) the per
annum commitment fee described below,
computed as follows:
The Per Annum
If the Test Commitment
Ratio is Fee shall be
2.0:1 or greater .500%
1.0:1 or greater but less than 2.0:1 .375%
less than 1.0:1 .250%
with the Test Ratio being computed by the Bank in the same manner, and to take
effect at the same time, as is provided in subparagraph (a) above. The
calculation of credit outstanding under Facility No. 1 shall include the
undrawn amount of letters of credit. This commitment fee shall be due and
payable monthly in arrears on the first day of each calendar month until the
expiration of the availability period for Facility No. 1, commencing on the
first day of the first calendar month following the date of this Agreement.
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(c) The Borrowers will repay in full all principal and any
unpaid interest or other charges outstanding under Facility No. 1 no later than
the Termination Date.
2.05 Letters of Credit. Facility No. 1 may also be used for financing
standby letters of credit with a maximum maturity not to extend for more than
one (1) year or, in any event, beyond the Termination Date. The standby letters
of credit will be issued by Bank of America National Trust and Savings
Association or its designated affiliate bank (herein, an "issuer") subject to a
reimbursement obligation on the part of the Bank (which, in turn, will be
reimbursed by the Borrowers). The amount of such letters of credit outstanding
at any one time (including amounts drawn on letters of credit and not yet
reimbursed) may not exceed $4,000,000. In further regard to these standby
letters of credit, the Borrowers agree:
(a) any sum drawn under a letter of credit issued pursuant to
this Section 2.5 and reimbursed by the Bank may, at the option of the Bank, be
added to the principal amount outstanding under Facility No. 1. This amount
will bear interest and be due as described elsewhere in this Agreement.
(b) if there is a default under this Agreement, to immediately
prepay and make the Bank whole for its liability to the issuer for any
outstanding letters of credit.
(c) the issuance of any letter of credit and any amendment to a
letter of credit is subject to the Bank's and the issuer's written approval and
must be in form and content satisfactory to the Bank and the issuer and in
favor of a beneficiary acceptable to the Bank and the issuer.
(d) at the Bank's or the issuer's request, to sign the issuer's
form application and agreement for standby letters of credit.
(e) to pay any issuance and/or other fees that the Bank or the
issuer notifies the Borrower will be charged for issuing and processing letters
of credit for the Borrower.
(f) to pay the Bank a non-refundable fee equal to 1-1/2% per
annum of the average daily balance of the outstanding undrawn amount of each
standby letter of credit, payable monthly in arrears. If there is a default
under this Agreement, at the Bank's option, the amount of the fee shall be
increased by 2% per annum, effective starting on the day the Bank provides
notice of the increase to the Borrowers.
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2.06 Swap Contracts. Facility No. 1 may also be used by the Borrowers
to obtain "swap contracts" from time to time, which term shall include any
agreement, whether or not in writing, relating to any transaction that is an
interest rate swap, basis swap, forward rate transaction, commodity swap,
commodity option, equity or equity index swap or option, bond, note or ▇▇▇▇
option, interest rate option, forward foreign exchange transaction cap. collar
or floor transaction, currency swap, cross-currency rate swap, swaption,
currency option or any other, similar transaction (including any option to
enter into any of the foregoing) or any combination of the foregoing, and,
unless the context otherwise clearly requires, any master agreement relating to
or governing any or all of the foregoing. Swap contracts shall be issued by
Bank of America National Trust and Savings Association or its designated
affiliate (herein, a "swap provider"), subject to a reimbursement obligation on
the part of the Bank (which, in turn, will be reimbursed by the Borrowers). The
termination value of all such swap contracts outstanding at any one time
(including any amounts then subject to reimbursement by the Borrowers, but not
then reimbursed) may not exceed, in any event, $3,000,000. All such swap
contracts shall have maturity dates not later than, and be co-terminous with,
the Termination Date. Swap contracts may be issued only for the reasonable
requirements of the Borrowers' business, and no swap contracts may be issued
for speculative purposes. In further regard to these swap contracts, the
Borrowers agree:
(a) that any sum for which the Bank reimburses the swap provider
pursuant hereto may, at the option of the Bank, be added to the principal
amount outstanding under Facility No. 1. This amount will bear interest and be
due as described elsewhere in this Agreement.
(b) that if there is a default under this Agreement, to
immediately prepay and make the Bank whole for its liability to the swap
provider for any outstanding swap contracts.
(c) that the issuance of any swap contract (and any amendment to
any swap contract) is subject to the Bank's and the swap provider's written
approval and must be in form and content satisfactory to the Bank and the swap
provider.
(d) at the Bank's or the swap provider's request, to sign a form
application and agreement for swap contracts, commonly known as an "ISDA
Contract."
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(e) to pay any issuance and/or other fees that the Bank or the
swap provider notifies the Borrowers will be charged for issuing and processing
swap contracts for the Borrowers.
3. FACILITY NO. 2: TERM LOAN FACILITY AMOUNT AND TERMS
3.01 Term Loan Facility.
(a) During the availability period described below, the Bank
will provide a term loan facility to the Borrowers for the purpose of
financing, in whole or in part, permitted acquisitions under Paragraph 10.22(e)
("Facility No. 2"). The amount of this term loan facility (the "Facility No. 2
Commitment"), is equal to $11,000,000, initially, subject, however, to
reduction as provided in subparagraph (b).
(b) Each advance obtained under the Facility No. 2 Commitment
shall reduce, dollar-for-dollar, borrowing availability under the Facility No.
2 Commitment, but such advance may be re-borrowed, once repaid, if such
repayment and subsequent reborrowing occurs within the availability period
described in Paragraph 3.2 below. After the availability period for this
Facility No. 2 has expired, no further borrowing (or reborrowing) under this
Facility No. 2 may be obtained. In addition, the amount of the Facility No. 2
Commitment shall be reduced to $9,000,000, effective on March 31, 1999, and
shall continue to be reduced thereafter, in increments of $750,000, on a
quarterly basis, commencing on June 30, 1999, and continuing thereafter on each
successive September 30, December 31, March 31 and June 30, until the Facility
No. 2 Commitment is reduced to zero.
(c) Each advance under Facility No. 2 must be for at least
$500,000, or for the amount of the then remaining available Facility No. 2
Commitment, if less.
(d) The Borrowers agree not to permit the outstanding principal
amount of advances obtained under Facility No. 2 to exceed the Facility No. 2
Commitment (as it will be reduced from time to time). If the Borrowers exceed
this limit, the Borrowers will immediately pay the excess to the Bank upon the
Bank's demand. Unless and until an Event of Default has occurred and is
continuing, the Borrowers shall have the right to direct the manner or order in
which payments received from the Borrowers under this Paragraph shall be
applied to this Facility. From and after the occurrence of an Event of Default
and during its continuance, the Bank may apply any payments received from the
Borrowers under this Paragraph to the obligations of the
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Borrowers to the Bank in the order and manner as the Bank, in its discretion,
may determine, including to this Facility or another Facility.
3.02 Availability Period. Advances under Facility No. 2 may be made
between the date of this Agreement and March 31, 1999, unless the Borrowers are
in default.
3.03 Conditions to Each Extension of Credit. Before each extension of
credit is made under Facility No. 2, including the first, the Bank shall
receive a notice of borrowing, in form and detail satisfactory to the Bank,
issued by EMI as agent for and on behalf of the Borrowers, specifying the
amount of the requested advance, the intended use of the proceeds thereof, the
requested disbursement date of the requested advance and the desired interest
rate to be applicable, initially, thereto, together with evidence satisfactory
to the Bank from the Borrowers that (i) the acquisition proposed to be financed
is then permitted under Paragraph 10.22(e) and (ii) EMI is then in compliance
with the requirements of Paragraphs 10.4 and 10.5 and will remain so after such
advance is obtained.
3.04 Repayment Terms.
(a) The Borrowers will pay interest, in arrears, at the then
applicable interest rate described below, on each advance made under this
Facility No. 2 on the first day of each calendar month following its
disbursement and then on a monthly basis thereafter and at maturity. The
interest rate payable on each advance made under this Facility No. 2 shall be
determined as follows:
Interest Interest
Rate shall Rate shall
If the Test be Reference -or- be LIBOR
Ratio is : Rate plus Rate plus
2.0:1 or greater .25% 2.125%
l.0:1 or greater, but less than 2.0:1 0% 1.875%
less than 1.0:1 (.25)% 1.500%
with the Test Ratio, and resulting interest rate, being computed by the Bank in
the same manner as is provided in Paragraph 2.4(a).
(b) The Borrowers will pay the Bank a non-refundable closing fee
in respect of Facility No. 2, equal to .125% of the full amount of the Facility
No. 2 Commitment, or $13,750, on the date of this Agreement.
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(c) The Borrowers further agree to pay the Bank a commitment fee
determined by multiplying (i) the difference between (A) the then full amount
of the Bank's Facility No. 2 Commitment and (B) the amount of credit which the
Borrowers actually use of the Facility, based on the weighted average credit
outstanding under Facility No. 2 during the availability period specified in
Paragraph 3.2 (including, for this purpose, letters of credit opened pursuant
to Paragraph 3.5 below), by (ii) the per annum commitment fee
described below, computed as follows:
Per Annum
If the Test Commitment
Ratio is Fee shall be
2.0:1 or greater .500%
1.0: 1 or greater, but less than 2.0: 1 .375%
less than 1.0:1 .250%
The fee shall be due and payable monthly in arrears on the first day of each
calendar month until the expiration of the availability period for Facility No.
2, commencing on the first day of the first calendar month following the date
of this Agreement.
(d) The Borrowers will repay in full, all principal or other
charges outstanding under this Facility No. 2 on the Termination Date.
3.05 Letters of Credit. During the availability period specified in
Paragraph 3.2, Facility No. 2 may also be used for financing one or more
standby letters of credit in an amount not to exceed borrowing availability
then existing under this Facility, with a maximum maturity not to extend beyond
the end of the availability period or for more than one (1) year in any event,
to be issued to the seller under any acquisition otherwise approved by the Bank
pursuant to Paragraph 10.22(e). Any such standby letter of credit will be
issued by the issuer subject to a reimbursement obligation on the part of the
Bank (which, in turn, will be reimbursed by the Borrowers). The amount of
advances which the Borrowers may obtain under Facility No. 2 will be reduced
dollar-for-dollar by the amount of each such letter of credit so long as it
remains outstanding. In further regard to each standby letter of credit, the
Borrowers agree:
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(a) any sum drawn under each such letter of credit and
reimbursed by the Bank shall constitute an advance under Facility No. 2,
bearing interest, and payable as provided in Paragraph 3.4 hereof; and
(b) the provisions of clauses (b) through (f) of Paragraph 2.5
hereof shall apply in all respects to each such letter of credit.
4. FACILITY NO. 3: ACQUISITION LINE OF CREDIT AMOUNT AND TERMS
4.01 Acquisition Line of Credit Amount
(a) During the availability period described below, the Bank
will also provide a line of credit to the Borrowers for the purpose of
financing, in whole or in part, permitted acquisitions under Paragraph 10.22(e)
("Facility No. 3"). The amount of this acquisition line of credit (the
"Facility No. 3 Commitment") is equal to $15,000,000, subject, however, to
reduction in each year as provided in subparagraph (b).
(b) Facility No. 3 is not a revolving line of credit. That is,
each advance obtained under Facility No. 3 shall reduce, dollar-for-dollar, the
Facility No. 3 Commitment, regardless if and when such advance is made or
repaid; that is, an advance made in the first year shall reduce the Facility
No. 3 commitment dollar-for-dollar in such year and in all subsequent years;
(c) Each advance under Facility No. 3 must be for at least
$500,000, or for the amount of the then remaining available Facility No. 3
Commitment, if less.
(d) The Borrowers agree not to permit the outstanding principal
amount of advances obtained under Facility No. 3 to exceed the Facility No. 3
Commitment. If the Borrowers exceed this limit, the Borrowers will immediately
pay the excess to the Bank upon the Bank's demand. Unless and until an Event of
Default has occurred and is continuing, the Borrowers shall have the right to
direct the manner or order in which payments received from the Borrowers under
this Paragraph shall be applied to this Facility. from and after the occurrence
of an Event of Default and during its continuance, the Bank may apply any
payments received from the Borrowers under this Paragraph to the obligations of
the Borrowers to the Bank in the order and manner as the Bank, in its
discretion, may determine, including to this Facility or another Facility.
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4.02 Availability Period. Facility No. 3 is available between the
date of this Agreement and the Termination Date, unless the Borrowers are in
default.
4.03 Conditions to Each Extension of Credit. Before each extension of
credit under Facility No. 3, including the first, the Bank shall receive a
notice of borrowing, in form and detail satisfactory to the Bank, issued by EMI
as agent for and on behalf of the Borrowers, specifying the amount of the
requested advance, the intended use of the proceeds thereof, the requested
disbursement date and the desired interest rate to be applicable, initially,
thereto, together with evidence satisfactory to the Bank from the Borrowers
that (i) the acquisition proposed to be financed is then permitted under
Paragraph l0.22(e) and (ii) EMI is then in compliance with the requirements of
Paragraphs 10.4 and l0.5.
4.04 Repayment Terms.
(a) The Borrowers will pay interest, in arrears, at the then
applicable interest rate described below, on outstanding advances under
Facility No. 3 on the first day of the calendar month following the
disbursement of any advance under Facility No. 3 and then on a monthly basis
thereafter until such advance is paid in full. The interest rate payable on
outstanding advances under Facility No. 3 shall be determined as follows:
Interest Interest
Rate shall Rate shall
If the Test be Reference -or- be LIBOR
Ratio is : Rate plus Rate plus
2.0:1 or greater .50% 2.25%
1.0:1 or greater but less than 2.0:1 .25% 2.00%
less than l.0:1 0% 1.75%
with the Test Ratio, and resulting interest rate, being computed by the Bank in
the same manner as is provided in Paragraph 2.4(a).
(b) The Borrowers agree to pay the Bank a nonrefundable closing
fee for Facility No. 3, equal in amount to .25% of the initial Facility No. 3
Commitment, or $37,500, on the date of this Agreement.
(c) The Borrowers further agree to pay the Bank a commitment fee
determined by multiplying (i) the difference between (A) the then full amount
of the Bank's Facility No. 3 Commitment and (B) the amount of credit which the
Borrowers actually use of the Facility, based on the weighted
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19
average credit outstanding under Facility No. 3 during the specified period, by
(ii) the per annum commitment fee described below, computed as follows:
Per Annum
If the Test Commitment
Ratio is Fee shall be
2.0:1 or greater .500%
1.0:l or greater, but less than 2.0:1 .375%
less than 1.0:1 .250%
The fee shall be due and payable monthly in arrears on the first day of each
calendar month until the expiration of the availability period for Facility No.
3, commencing on the first day of the first calendar month following the date
of this Agreement.
(d) The Borrowers will repay in full all principal or other
charges outstanding under this Facility No. 3 no later than the Termination
Date
4.05 Letters of Credit. During the availability period specified in
Paragraph 4.2, Facility No. 3 may also be used for financing one or more
standby letters of credit in an amount not to exceed borrowing availability
then existing under this Facility or $12,000,000, in the aggregate (whichever
is the lesser), with a maximum maturity not to extend beyond the end of the
availability period or for more than one year or beyond the Termination Date in
any event, to be issued to the seller under any acquisition otherwise approved
by the Bank pursuant to Paragraph 10..22(e). Any such standby letter of credit
will be issued by the issuer subject to a reimbursement obligation on the part
of the Bank (which, in turn, will be reimbursed by the Borrowers). The amount
of advances which the Borrowers may obtain under Facility No. 3 will be reduced
dollar-for-dollar by the amount of each such letter of credit so long as it
remains outstanding. In further regard to each standby letter of credit, the
Borrowers agree:
(a) any sum drawn under each such letter of credit and
reimbursed by the Bank shall constitute an advance under Facility No. 2,
bearing interest, and payable as provided in Paragraph 3.4 hereof; and
(b) the provisions of clauses (b) through (f) of Paragraph 2.5
hereof shall apply in all respects to each such letter of credit.
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20
5. INTEREST
5.01 Interest Rate
(a) Unless the Borrowers elect the optional interest rate
described below, the interest rate payable on advances outstanding under
Facility ▇▇. ▇, ▇▇▇▇▇▇▇▇ ▇▇. ▇ and Facility No. 3 (the "Facilities" or a
"Facility") shall be based on the Bank's Reference Rate (described below), plus
the addition of a spread, as described more particularly in Paragraphs 2.4(a),
3.4(a) and 4.4(a).
(b) The "Reference Rate" is the rate of interest publicly
announced from time to time by Bank of America, National Trust and Saving
Association ("BofA") in San Francisco, California, as its Reference Rate. The
Reference Rate is set by BofA based on various factors, including its costs and
desired return, general economic conditions and other factors, and is used as a
reference point for pricing some loans. BofA may price loans to its customers
at, above, or below the Reference Rate. Any change in the Reference Rate shall
take effect at the opening of business on the day specified in the public
announcement of a change in BofA's Reference Rate.
5.02 Optional Interest Rate. Instead of an interest rate based on the
Reference Rate, the Borrowers may elect to have all or portions of their
outstanding advances and loans (herein called a "LIBOR Rate Portion") bear
interest based on the "LIBOR Rate" (described below), plus the addition of a
spread, as described more particularly in Paragraphs 2.4(a), 3.4(a) and 4.4(a).
Designation of a LIBOR Rate Portion is subject to the following requirements:
(a) The interest period during which the LIBOR Rate will be in
effect will be one, two, three or six months. The first day of the interest
period must be a day other than a Saturday or a Sunday on which BofA is open
for business in California, New York and London and dealing in offshore dollars
(a "LIBOR Banking Day"). The last day of the interest period and the actual
number of days during the interest period will be determined by the Bank using
the practices of the London interbank market. No interest period may extend
beyond the Termination Date, however.
(b) Each LIBOR Rate Portion will be for an amount not less than
$500,000, and no more than four (4) LIBOR Rate Portions, in total, per each
Facility, may be outstanding at any one time.
(c) The "LIBOR Rate" means the interest rate determined by the
following formula, rounded upward to the nearest 1/l00th of one percent. (All
amounts in the calculation will be determined by the Bank as of the first day
of the interest period.)
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21
LIBOR Rate = London Inter-Bank Offered Rate
------------------------------
( 1.00 - Reserve Percentage)
Where,
(i) "London Inter-Bank offered Rate" means the interest rate at
which BofA's London Branch, London, Great Britain, would offer U.S. dollar
deposits in amounts comparable to the LIBOR Rate Portion for the applicable
interest period to other major banks in the London inter-bank market at
approximately 11:00 a.m. London time two (2) London Banking Days before the
commencement of the interest period. A "London Banking Day" is a day on which
BofA's London Branch is open for business and dealing in offshore dollars.
(ii) "Reserve Percentage" means the total of the maximum reserve
percentages for determining the reserves to be maintained by member banks of
the Federal Reserve System for Eurocurrency Liabilities, as defined in Federal
Reserve Board Regulation D, rounded upward to the nearest 1/l00th of one
percent. The percentage will be expressed as a decimal, and will include, but
not be limited to, marginal, emergency, supplemental, special, and other
reserve percentages.
(d) The Borrowers shall irrevocably request a LIBOR Rate Portion
no later than 9:00 a.m. Atlanta time on the LIBOR Banking Day preceding the day
on which the London Inter-Bank offered Rate will be set, as specified above;
that is, three (3) LIBOR Banking Days before the date on which the requested
advance is to be made.
(e) The Borrowers may not elect a LIBOR Rate with respect to any
principal amount which is scheduled to be repaid before the last day of the
applicable interest period.
(f) Any portion of an advance or loan already bearing interest
at the LIBOR Rate will not be converted to a different rate during its interest
period.
(g) Each prepayment of a LIBOR Rate Portion, whether voluntary,
by reason of acceleration or otherwise, will be accompanied by the amount of
accrued interest on the amount prepaid and by a prepayment fee, which shall be
equal to the amount (if any) by which:
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(i) the additional interest which would have been payable at the
LIBOR Rate, without the addition of any spread; i.e., add-on, during the
Reinvestment Period (as defined below) on the amount prepaid had it not been
prepaid, exceeds
(ii) the interest which would have been recoverable by the Bank
by relending the amount prepaid at the Reinvestment Rate, for a period starting
on the date on which it was prepaid and ending on the last day of the interest
period for such portion (or the scheduled payment date for the amount prepaid,
if earlier) (the "Reinvestment Period"). The "Reinvestment Rate" shall be the
LIBOR Rate, without the addition of any spread, determined as of the date of
the prepayment, for the entire Reinvestment Period.
(h) The Bank will have no obligation to accept an election for a
LIBOR Rate Portion if any of the following described events has occurred and is
continuing:
(i) Dollar deposits in the principal amount, and for periods
equal to the interest period, of a LIBOR Rate Portion are not available in the
London inter-bank market;
(ii) the LIBOR Rate does not accurately reflect the cost of a
LIBOR Rate Portion; or
(iii) the Borrowers are in default.
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6. COLLATERAL
6.01 Personal Property. The Borrowers' obligations to the Bank
under this Agreement will be secured by all personal property which the
Borrowers now own or will Own in the future and, at the Bank's option, all or
portions of any real property (or interests in real property) owned or acquired
by the Borrowers from time to time. Collateral shall specifically include, but
not be limited to, all accounts receivables and general intangibles of each
Borrower, all equipment of each Borrower and the capital stock of each Borrower
(other than the capital stock of EMI, and except for any capital stock which,
now or hereafter, is encumbered in accordance with Section 10.8(e)). The
collateral is further defined in security agreement(s) executed by the
Borrowers. In addition, all collateral securing obligations under this
Agreement shall also secure all other present and future obligations of the
Borrowers to the Bank, any "issuer" or any "swap provider" (as those terms are
elsewhere defined herein); and all collateral securing any other present or
future obligations of the Borrowers to the Bank, any such "issuer" or any such
"swap provider" shall also secure obligations under this Agreement.
7. DISBURSEMENTS, PAYMENTS AND COSTS.
7.01 Requests for Credit. Each request for an extension of
credit will be made in writing in a manner acceptable to the Bank, or by
another means acceptable to the Bank, to be issued by EMI, as agent for and on
behalf of all the Borrowers.
7.02 Disbursements and Payments. Each disbursement by the Bank
and each payment by the Borrowers will be: (a) made at the Bank's branch (or
other location) selected by the Bank from time to time; (b) made for the
account of the Bank's branch selected by the Bank from time to time; (c) made
in immediately available funds, or such other type of funds selected by the
Bank; and (d) evidenced by records kept by the Bank. In addition, the Bank may,
at its discretion, require the Borrowers to sign one or more promissory notes
to evidence the debt arising from such disbursements.
7.03 Direct Debit. The Borrowers agree that after their
default in the payment of any such obligation, the Bank may create advances
under Facility No. 1 to pay interest, principal payments, and any fees that are
due under this Agreement. The Bank will create such advances on the dates the
payments become due. If a due date does not fall on a banking day, the Bank
will create the advance on the first banking day following the due date. If the
creation of an advance under Facility No. 1 causes the total amount of credit
outstanding under Facility No. 1 to exceed the limitations set forth in this
Agreement, the Borrowers will immediately pay the excess to the Bank upon the
Bank's demand. The foregoing shall not constitute a waiver by the Bank of any
such default.
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7.04 Banking Days. Unless otherwise provided in this
Agreement, a "banking day" is a day other than a Saturday or a Sunday on which
the Bank is open for business in Georgia. All payments and disbursements which
would be due on a day which is not a banking day will be due on the next
banking day. All payments received on a day which is not a banking day will be
applied to the credit on the next banking day.
7.05 Taxes.
(a) If any payments to the Bank under this Agreement are
made from outside the United States, the Borrowers will not deduct any foreign
taxes from any payments it makes to the Bank. If any such taxes are imposed on
any payments made by the Borrower (including payments under this paragraph),
the Borrowers will pay the taxes and will also pay to the Bank, at the time
interest is paid, any additional amount which the Bank specifies as necessary
to preserve the after-tax yield the Bank would have received if such taxes had
not been imposed. The Borrowers will confirm that they have paid any such taxes
by giving the Bank official tax receipts (or notarized copies) within 30 days
after the due date.
(b) Payments made by the Borrowers to the Bank will be
made without deduction of United States withholding or similar taxes. If the
Borrowers are required to pay U.S. withholding taxes, the Borrowers will pay
such taxes in addition to the amounts due to the Bank under this Agreement. If
the Borrowers fail to make such tax payments when due, each of the Borrowers
indemnifies the Bank against any liability for such taxes, as well as for any
related interest, expenses, additions to tax, or penalties asserted against or
suffered by the Bank with respect to such taxes.
7.06 Additional Costs. The Borrowers will pay the Bank, on
demand, for the Bank's costs or losses arising from any statute or regulation,
or any request or requirement of a regulatory agency which is applicable to all
national banks or a class of all national banks. The costs and losses will be
allocated to the advances in a manner determined by the Bank, using any
reasonable method. The costs include the following: (a) any reserve or deposit
requirements; and (b) any capital requirements relating to the Bank's assets
and commitments for credit.
7.07 Interest Calculation. Except as otherwise stated in this
Agreement, all interest and fees, if any, will be computed on the basis of a
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360-day year and the actual number of days elapsed. This results in more
interest or a higher fee than if a 365-day year is used.
7.08 Default Rate. Upon the occurrence and during the
continuation of any default under this Agreement, principal amounts outstanding
under this Agreement will at the option of the Bank bear interest at a rate
which is two percent (2%) per annum higher than the rate of interest otherwise
provided under this Agreement. This will not constitute a waiver of any
default. Installments of principal which are not paid when due under this
Agreement shall continue to bear interest until paid. Any interest, fees or
costs which are not paid when due shall bear interest at the Reference Rate
plus two percent (2%) per annum. This may result in compounding of interest.
7.09 Overdrafts. At the Bank's sole option in each instance,
the Bank may do one of the following:
(a) The Bank may make advances under this Agreement to
prevent or cover an overdraft on any account of the Borrowers with the Bank or
BofA. Each such advance will accrue interest from the date of the advance or
the date on which the account is overdrawn, whichever occurs first, at the
Reference Rate plus two percent (2%) per annum.
(b) The Bank may reduce the amount of credit otherwise
available under this Agreement by the amount of any overdraft on any account of
the Borrowers with the Bank or BofA. This paragraph shall not be deemed to
authorize the Borrowers to create overdrafts on any of the Borrower's accounts
with the Bank or BofA.
7.10 Payments in Kind. If the Bank requires delivery in kind
of the proceeds of collection of any Borrower's accounts receivable, such
proceeds shall be credited to interest, principal, and other sums owed to the
Bank under this Agreement in the order and proportion determined by the Bank in
its sole discretion. All such credits will be conditioned upon collection and
any returned items may, at the Bank's option, be charged to the Borrowers.
8. CONDITIONS
The Bank must receive the following items, in form and content
acceptable to the Bank, before it is required to extend any credit to the
Borrowers under this Agreement:
26
8.01 Authorizations. Evidence that the execution, delivery and
performance by the Borrowers of this Agreement and any instrument or agreement
required under this Agreement have been duly authorized.
8.02 Governing Documents. A copy of each Borrower's articles
of incorporation and bylaws.
8.03 Security Agreements. Signed original security agreements
(or amendments to existing security agreements made by the Borrowers in favor
of the Bank pursuant to the Existing Loan Agreement), assignments, financing
statements and fixture filings (together with collateral in which the Bank
requires a possessory security interest), which the Bank may require from any
Borrower.
8.04 Evidence of Priority. Evidence that security interests
and liens in favor of the Bank are valid, enforceable, and prior to all others'
rights and interests, except as provided in Paragraph 10.8.
8.05 Insurance. Evidence of insurance coverage, as required in
Paragraph 1 O.2 1.
8.06 Legal Opinion. A written opinion from the Borrowers'
legal counsel, covering such matters as the Bank may require. The legal counsel
and the terms of the opinion must be acceptable to the Bank.
8.07 Good Standing. Certificates of good standing for each
Borrower from its state of formation and from any other state in which each
Borrower is required to qualify to conduct its business.
8.08 Payment of Closing Fee. Payment upon execution of this
Agreement of the non-refundable closing fees described in Paragraphs 3.4(b) and
4.4(b) above.
8.09 Payment of Expenses and Fees. Payment of all accrued and
unpaid expenses incurred by the Bank as required by Paragraph 13.6.
8.10 Representations of Corporate Officers. A completed
original of the Bank's form of Representations and Warranties of Corporate
officers executed by the principal officers of each Borrower.
8.11 Other Items. Any other items that the Bank reasonably
requires.
9. REPRESENTATIONS AND WARRANTIES
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When the Borrowers sign this Agreement, and until the Bank is
repaid in full the Borrowers make the following representations and warranties.
Each request for an extension of credit (including any letter of credit)
constitutes a renewed representation:
9.01 Organization of Borrower. Each Borrower is a corporation
duly formed and existing under the laws of the state where organized.
9.02 Authorization. This Agreement, and any instrument or
agreement required hereunder, are within the Borrowers' powers, have been duly
authorized, and do not conflict with any of their organizational papers.
9.03 Enforceable Agreement. This Agreement is a legal, valid
and binding agreement of the Borrowers, enforceable against the Borrowers in
accordance with its terms, and any instrument or agreement required hereunder,
when executed and delivered, will be similarly legal, valid, binding and
enforceable.
9.04 Good Standing. In each state in which a Borrower does
business, it is properly licensed, in good standing, and, where required, in
compliance with fictitious name statutes.
9.05 No Conflicts. This Agreement does not conflict with any
law, agreement, or obligation by which any Borrower is bound.
9.06 Financial Information. All financial and other
information that has been or will be supplied to the Bank, including the
Borrowers' financial statements as of and for the most recently completed
fiscal quarter of the Borrowers for which financial statements are available,
is:
(a) sufficiently complete to give the Bank accurate
knowledge of the Borrowers' financial condition.
(b) in compliance with all government regulations that
apply.
Since the date of the financial statements specified above, there has been no
material adverse change in the business condition (financial or otherwise),
operations, properties or prospects of the Borrowers.
9.07 Lawsuits. There is no lawsuit, tax claim or other dispute
pending or threatened against any Borrower which, if lost, would impair such
Borrower's
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financial condition or ability to repay the loans made pursuant hereto, except
as have been disclosed in writing to the Bank.
9.08 Collateral. All collateral required in this Agreement is
owned by the grantor of the security interest free of any title defects or any
liens or interests of others, except for those title defects, liens or
interests of others, as applicable thereto, specified in Paragraph 10.8.
9.09 Permits. Franchises. The Borrowers possess all permits,
memberships, franchises, contracts and licenses required and all trademark
rights, trade name rights, patent rights and fictitious name rights necessary
to enable it to conduct the business in which it is now engaged.
9.10 Other Obligations. The Borrowers are not in default on
any obligation for borrowed money, any purchase money obligation or any other
material lease, commitment, contract, instrument or obligation.
9.11 Income Tax Returns. The Borrowers have no knowledge of
any pending assessments or adjustments of their income tax liabilities for any
year.
9.12 No Tax Avoidance Plan. The Borrowers' obtaining of credit
from the Bank under this Agreement does not have as a principal purpose the
avoidance of U.S. withholding taxes.
9.13 No Event of Default There is no event which is, or with
notice or lapse of time or both would be, a default under this Agreement.
9.14 ERISA Plans.
(a) The Borrowers have fulfilled their obligations, if
any, under the minimum funding standards of ERISA and the Code with respect to
each Plan and are in compliance in all material respects with the presently
applicable provisions of ERISA and the Code, and have not incurred any
liability with respect to any Plan under Title IV of ERISA.
(b) No reportable event has occurred under Section
4043(b) of ERISA for which the PBGC requires 30 day notice.
(c) No action by the Borrowers to terminate or withdraw
from any Plan has been taken and no notice of intent to terminate a Plan has
been filed under Section 4041 of ERISA.
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(d) No proceeding has been commenced with respect to a
Plan under Section 4042 of ERISA, and no event has occurred or condition exists
which might constitute grounds for the commencement of such a proceeding.
(e) The following terms have the meanings indicated for
purposes of this Agreement:
(i) "Code" means the Internal Revenue Code of 1986, as
amended from time to time.
(ii) "ER1SA" means the Employee Retirement Income
Security Act of 1974, as amended from time to time.
(iii) "PBGC" means the Pension Benefit Guaranty
Corporation established pursuant to Subtitle A of Title IV of ERISA.
(iv) "Plan" means any employee pension benefit plan
maintained or contributed to by the Borrowers and insured by the Pension
Benefit Guaranty Corporation under Title IV of ERISA.
9.15 Locations of Borrowers. Each Borrower's place of business
(or, if such Borrower has more than one place of business, its chief executive
of lice) is located at the address listed under such Borrower's signature on
this Agreement.
9.16 Subsidiaries. No Borrower has any subsidiaries, except as
disclosed on Schedule 9.16 attached hereto. All subsidiaries of EMI are
Borrowers under this Agreement.
9.17 Year 2000 Compliance. The Borrowers have conducted a
comprehensive review and assessment of their computer applications and made
inquiry of the Borrowers' key suppliers, vendors and customers as they have
determined to be appropriate with respect to the "year 2000 problem" (that is,
the risk that computer applications may not be able to properly perform
date-sensitive functions after December 31, 1999) and, based on that review and
inquiry, the Borrowers do not believe the year 2000 problem will result in a
material adverse change in their business condition (financial or otherwise),
operations, properties or prospects, or ability to repay the credit.
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10. COVENANTS
The Borrowers agree, so long as credit is available under this
Agreement and until the Bank is repaid in full:
10.01 Use of Proceeds. To use the proceeds of the credit only
for working capital and general operating needs under Facility No. 1 and
permitted acquisitions under Facility No. 2 and Facility No. 3.
10.02 Financial Information. To provide the following
financial information and statements in form and content acceptable to the
Bank, and such additional information as requested by the Bank from time to
time:
(a) Within 120 days following the end of EMI's fiscal
year (1) consolidated financial statements meeting the requirements of
regulation S-X ("Regulation S-X") promulgated by the Securities Exchange
Commission ("SEC") for financial statements to be included in EMI's Annual
Report on Form 10-K to be filed with the SEC pursuant to the provisions of the
Securities Exchange Act of 1934 (the "34 Act") audited (with an unqualified
opinion) by a firm of certified public accountants acceptable to the Bank; (2)
unaudited annual consolidating statements of operations; and (3) audited
balance sheets and statements of operations for the individual schools operated
by EMI, likewise accompanied by the unqualified opinion of such certified
public accountants.
(b) Within 45 days of EMI's first, second and third
fiscal quarter (i) unaudited consolidated financial statements meeting the
requirements of regulation S-X for financial statements to be included in EMI's
Quarterly Report on Form 10-Q to be filed with the SEC pursuant to the
provisions of the "34 Act," (ii) unaudited quarterly consolidating statements
of operations for the applicable quarter, and (iii) unaudited statements of
operations for the individual schools operated by EMI.
(c) Within 30 days of the period's end, EMI's monthly
(i) unaudited consolidated statements of operations for the applicable period,
(ii) unaudited monthly consolidating statements of operations for the
applicable period, and (iii) unaudited statements of operations for the
individual schools operated by EMI for the applicable period.
(d) Copies of EMI's Form 10-K Annual Report and Form
10-Q Quarterly Report within 5 days after the date of filing with the
Securities and Exchange Commission, copies of EMI's Form 8-K Current Report
within 1 business day after the date of its filing with the Securities and
Exchange Commission and copies of any news releases within 1 business day after
their publication.
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(e) Within the period(s) provided in (a) and (b) above,
a compliance certificate of the Borrowers signed by an authorized financial
officer of EMI, as agent for the Borrowers, setting forth (i) the information
and computations (in sufficient detail) to establish that the Borrowers are in
compliance with all financial covenants contained herein at the end of the
period covered by the financial statements then being furnished and (ii)
whether there existed as of the date of such financial statements and whether
there exists as of the date of the certificate, any default under this
Agreement and, if any such default exists, specifying the nature thereof and
the action the Borrowers are taking and propose to take with respect thereto.
(f) A borrowing certificate, signed by EMI, as agent for
the Borrowers, setting forth the amount of Acceptable Receivables as of the
last day of each fiscal month as to which average daily advances outstanding
under Facility No. 1 equaled or exceeded $5,000,000 within 30 days after each
month end and as of the last day of each fiscal quarter within 45 days after
each quarter end, and on a pro forma basis in connection with each proposed
advance under either Facility No. 2 or Facility No. 3.
(g) Statements showing an aging and reconciliation of
the Borrowers' receivables upon Bank's request.
(h) A statement showing an aging of accounts payable of
the Borrowers upon Bank's request.
(i) A listing of the names and addresses of all debtors
obligated upon the Borrowers' accounts receivable upon the Bank's request.
(j) Promptly upon the Bank's request, such other
statements, lists of property and accounts, budgets, forecasts, reports or
information as to the Borrowers, any school, or group of schools, and as to
each guarantor of the Borrowers' obligations to the Bank as the Bank may
request from time to time.
(k) a report of continuing compliance and eligibility in
respect of all Title IV Program Requirements within 120 days after each fiscal
year end of EMI, such report to demonstrate, among other things, each school's
continuing maintenance of prescribed- financial responsibility standards which
are part of the Title IV Program Requirements, to include calculations
demonstrating maintenance of at least the following: (i) a 1:1 "acid test;"
(ii) a positive tangible net worth; and (iii) net operating results (two years)
which do not show an aggregate net loss of 10% of tangible net worth.
32
10.03 Fixed Charge Coverage Ratio. To maintain on a
consolidated basis a Fixed Charge Coverage Ratio of at least the ratio set
forth below for each fiscal quarter end occurring within each "Applicable
Period" set forth below:
Applicable Period Ratio
---------------------------------- --------
Fiscal year ending March 31, 1998 1.10:1.0
Fiscal year ending March 31, l999 1.15:1.0
Fiscal year ending March 31, 2000 1.20:1.0
and each fiscal year thereafter
"Fixed Charge Coverage Ratio" means the ratio of (1) Adjusted EBIRTDA to (2)
the sum of interest expense, lease expense and rent expense plus scheduled debt
repayments capital expenditures of EMI and its subsidiaries (excluding
therefrom any payment made in respect of permitted school acquisitions), on a
consolidated basis, in the preceding four fiscal quarters. "Adjusted EBIRTDA"
means the sum of net income after taxes (considered without regard to any
extraordinary items of gain or loss unless otherwise approved by the Bank after
consultation with EMI), EM interest expense, lease expense and rent expense,
plus tax expense, ~ depreciation and amortization expense, on a consolidated
basis. This ratio will be calculated at the end of each fiscal quarter of EMI,
using the results of that quarter and each of the three immediately preceding
quarters.
10.04 Total Funded Debt/Adjusted Cash Flow Ratio. To maintain
on a consolidated basis a Total Funded Debt/Adjusted Cash Flow Ratio of not
more than 3.0:1.
"Total Funded Debt/Adjusted Cash Flow Ratio" means the ratio of Total Funded
Debt to Adjusted Cash Flow. "Total Funded Debt" means purchase money debt
(including, without limitation, any such debts to sellers of schools, but
excluding trade payables) and indebtedness for money borrowed and guarantees of
such debts, including, without limitation, any debts represented by notes
payable, bonds, debentures, capitalized lease obligations and letters of credit
and any subordinated debt, of EMI and its subsidiaries, on a consolidated
basis. "Adjusted Cash Flow" means the sum of (a) "EBITDA" (as defined below) of
EMI and its consolidated subsidiaries less dividends, withdrawals, loans,
advances, and other distributions to any stockholders, of EMI and its
subsidiaries on a consolidated basis and (b) 75 of EBITDA for all schools
acquired by EMI during the measurement period (to the extent that the operating
results of such schools would not otherwise be included in the calculation set
forth in the preceding clause (a)). For purposes hereof "EBITDA" for any entity
shall mean net income after taxes of such entity (considered without regard to
any extraordinary items of gain or loss unless otherwise approved by the Bank
after consultation with
33
EMI), and, in the case of EMI, its consolidated subsidiaries, after adjustment
to reflect the following, as applicable: plus in the case of any newly acquired
school, any non-recurring charges or expenses; plus interest expense; plus tax
expense; plus depreciation and amortization expense, each for the same said
entities and period. This ratio will be calculated (a) at the end of each
fiscal quarter of EMI, using the results of that quarter and each of the three
immediately preceding quarters and (b) prior to the making of any loan or
advance hereunder under any of the Facilities, on a pro forma basis, as of the
most recently ended fiscal quarter of EMI, after giving effect to such loan or
advance.
10.05 Senior Funded Debt/Adjusted Cash Flow Ratio. To maintain
a Senior Funded Debt/Adjusted Cash Flow Ratio of not more than 2.25:1 during
the fiscal years of EMI and its consolidated subsidiaries ending March 31, 1998
and March 31, 1999 and 2.0:1.0 during each fiscal year thereafter.
"Senior Funded Debt/Adjusted Cash Flow Ratio" means the ratio of "Senior Funded
Debt" to "Adjusted Cash Flow." Senior Funded Debt is equal to Total Funded Debt
(as defined above) less any such debt which has been subordinated, in a form,
manner and substance acceptable to the Bank, to all of the Borrowers'
obligations to the Bank. "Adjusted Cash Flow" has the meaning described in
Paragraph 10.4 above. This ratio will be calculated (a) at the end of each
fiscal quarter, using the results of that quarter and each of the three
immediately preceding quarters (b) and prior to the making of any loan or
advance hereunder under any of the Facilities, on a pro forma basis, as of the
most recently ended fiscal quarter of EMI, after giving effect to such loan or
advance.
10.06 Total Liabilities to Net Worth Ratio. To maintain at all
times on a consolidated basis a ratio of total liabilities to book net worth of
not more than 1.6 to 1.0. "Total liabilities" and "book net worth" shall have
the respective meanings given to such terms under GAAP.
10.07 Other Debts. Not to have outstanding or incur any direct
or contingent liabilities or lease obligations (other than those to the Bank,
any "issuer," any "swap provider" or any of its other affiliates, whether
arising pursuant hereto or otherwise), or Become liable for the liabilities of
others (other than those to the Bank or any of its affiliates, whether arising
pursuant hereto or otherwise) without the Bank's written consent. This does not
prohibit:
(a) Acquiring goods, supplies, or merchandise on normal
trade credit.
34
(b) Endorsing negotiable instruments received in the
usual course of business.
(c) obtaining surety bonds in the usual course of
business.
(d) Liabilities in existence on the date of this
Agreement disclosed in the Borrowers' financial statements described in
Paragraph 9.6.
(e) Additional debts and lease obligations for the
acquisition of fixed or capital assets, to the extent permitted elsewhere in
this Agreement.
(f) unsecured (except for permitted liens, as described
below) debt to sellers of schools provided that (i) such indebtedness is on
terms and conditions satisfactory to the Bank and (ii) the maximum amount of
such indebtedness does not exceed $10,000,000.
(g) swap contracts, as defined in Paragraph 2.6. to the
extent made in accordance with the terms thereof.
(h) Additional debts and lease obligations incurred for
business purposes not otherwise described in, and permitted by, subparagraphs
(a) through (g) above, which, m aggregate amount, do not exceed a total
principal amount of $2,000,000 outstanding at any one time.
10.08 Other Liens. Not to create, assume, or allow any
security interest or lien (including judicial liens) on property the Borrowers
now or later own, except:
(a) Deeds of trust and security agreements in favor of
the Bank, any "issuer" or any "swap provider" or any of its other affiliates,
whether arising pursuant hereto or otherwise.
(b) Liens for taxes not yet due.
(c) Liens outstanding on the date of this Agreement and
disclosed in writing to the Bank on Schedule 10.8 attached hereto.
(d) Additional purchase money security interests in
personal or real property acquired after the date of this Agreement, if the
total principal amount of all debts secured by such liens does not exceed
$2,500,000 at any one time.
35
(e) Pledges of a school's capital stock given to support
the payment of permitted purchase money debt to the seller of a school pursuant
to an acquisition permitted in Paragraph 10.22(e).
(f) Liens which the DOE may claim in respect of certain
deposit accounts which the schools may be required to maintain for the receipt
of funds under Title IV Programs as part of the Title IV Program Requirements.
(g) Liens in the form of letters of credit issued to
seller under Facility No. 2 or Facility No. 3.
10.09 Capital Expenditures. Not to spend more than the
following amounts in any specified fiscal year to acquire fixed or capital
assets (except any made for permitted school acquisitions under Paragraph
10.22(e)):
Fiscal Year
Ending Amount
March 31, 1999 $4,000,000
March 31, 2000 $5,000,000
March 31, 2001 $6,000,000
10.10 Dividends. Not to declare or pay any dividends on any
of its shares except dividends payable to EMI by its subsidiaries and dividends
payable in capital stock of a Borrower; and not to purchase, redeem or
otherwise acquire for value any of its shares, or create any sinking fund in
relation thereto.
10.11 Loans and Investments. Not to make any loans or other
extensions of credit to, or make any investments in, or make any capital
contributions or other transfers of assets to, any individual or entity, except
for:
(a) extensions of credit in the nature of accounts
receivable or notes receivable arising from the sale or lease of goods or
services in the ordinary course of business.
(b) investments in any of the following: (i) marketable,
direct obligations of the United States of America and its agencies maturing
within three hundred sixty-five (365) days of the date of purchase, (ii)
commercial paper issued by corporations maturing 180 days from the date of
original issue which is rated "P-1" or better by ▇▇▇▇▇'▇ or "A-1" or better by
S&P, (iii) certificates of deposit maturing within l year of the date of
purchase issued by a United States national or state bank having deposits
totaling more than
36
$250,000,000, and whose short-term debt is rated "P- 1" or better by ▇▇▇▇▇'▇ or
"A- l" or better by S&P, and (iv) investments made with, or through, the Bank
or BofA.
(c) extensions of credit to and investments in other
Borrowers.
(d) acquisitions of schools permitted under Paragraph
10.22(e).
10.12 Change of Ownership. Not to cause, permit, or suffer
any change, direct or indirect, in (i) the capital ownership by EMI of its
subsidiaries; or (ii) the capital ownership of EMI, to the extent that a report
on Form 8-K is required to be filed with the Securities and Exchange Commission
disclosing a change in control.
10.13 Notices to Bank. To promptly notify the Bank in writing
of:
(a) any lawsuit claiming damages over $100,000 against a
Borrower.
(b) any dispute between a Borrower and any government
authority which the Bank determines, if resolved adversely to such Borrower,
would materially interfere with the conduct of such Borrower's business as then
being conducted by it.
(c) any failure to comply with this Agreement.
(d) any material adverse change in a Borrower's (or any
guarantor's) business condition (financial or otherwise), operations,
properties or prospects, or ability to repay the credit.
(e) any change in a Borrower's name, legal structure,
place of business, or chief executive of rice if such Borrower has more than
one place of business.
(f) any default or event of default under Paragraph 12.
10.14 Books and Records. To maintain adequate books and
records.
10.15 Audits. To allow the Bank and its agents to inspect
Borrowers' properties and examine, audit and make copies of books and records
37
at any reasonable time. If any of the Borrowers' properties, books or records
are in the possession of a third party, the Borrowers authorize that third
party to permit the Bank or its agents to have access to perform inspections or
audits and to respond to the Bank's requests for information concerning such
properties, books and records.
10.16 Compliance with Laws. To comply with the laws
(including any fictitious name statute), regulations, and orders of any
government body with authority over each Borrower's business (excepting
therefrom, however, instances of incidental noncompliance occurring from time
to time in the ordinary course of a Borrower's business without actual
knowledge of a Borrower, which the Bank determines are immaterial to the
operation of its business and are capable of being cured without any
significant disruption to such business). The foregoing shall include,
specifically, but without limitation, compliance with all Title IV Program
Requirements, as prescribed with more particularity in Section 10.24.
10.17 Preservation of Rights. To maintain and preserve all
rights, privileges, and franchises the Borrowers now have.
10.18 Maintenance of Properties. To make any repairs,
renewals, or replacements to keep the Borrowers' properties in good working
condition.
10.19 Perfection of Liens. To help the Bank perfect and
protect its security interests and liens, and reimburse it for related costs it
incurs to protect its security interests and liens.
10.20 Cooperation. To take any action reasonably requested by
the Bank to carry out the intent of this Agreement.
10.21 Insurance.
(a) Insurance Covering Collateral. To maintain all risk
property damage insurance policies covering the tangible property comprising
the collateral. Each insurance policy must be in an amount acceptable to the
Bank. The insurance must be issued by an insurance company acceptable to the
Bank and must include a lender's loss payable endorsement in favor of the Bank
in a form acceptable to the Bank.
(b) General Business Insurance. To maintain insurance
satisfactory to the Bank as to amount, nature and carrier covering property
damage (including loss of use and occupancy) to any Borrower's properties,
public liability insurance including coverage for contractual liability,
product
38
liability and workers' compensation, and any other insurance which is usual for
the Borrowers' businesses.
(c) Evidence of Insurance. Upon the request of the Bank,
to deliver to the Bank a copy of each insurance policy, or, if permitted by the
Bank, a certificate of insurance listing all insurance in force.
10.22 Additional Negative Covenants. Not to, without the
Bank's written consent:
(a) engage in any business activities substantially
different from the Borrowers' present businesses.
(b) liquidate or dissolve any of the Borrowers'
businesses.
(c) enter into any consolidation, merger, or other
combination, or become a partner in a partnership, a member of a joint venture,
or a member of a limited liability company, except (i) in connection with any
acquisition permitted under subparagraph (e) and (ii) that Subsidiaries of EMI
may merge, combine or consolidate with each other or with EMI (so long as, in
the case of any merger, combination or consolidation with EMI, EMI is the
survivor).
(d) sell, lease, transfer or dispose of all or a
substantial part of a Borrower's business or a Borrower's assets, except, in
the case of any Borrower, to any other Borrower.
(e) acquire or purchase a business or its assets;
provided, however, that, acquisitions of all, or substantially all, of the
assets of, or of all or a controlling interest in the shares of capital stock
of, any business engaged in the provision of career-oriented, postsecondary
education within the United States (herein, a "school"), shall be permitted,
if, but only if: (i) no default then exists under this Agreement, or would be
caused by, or would result from, such proposed acquisition (after giving pro
forma effect to such acquisition, in respect of the financial covenants set
forth at Paragraphs 10.3 through 10.6); (ii) both (A) the cash consideration
payable in respect of such acquisition does not exceed $5,000,000, and (B) the
cash consideration payable in respect of such acquisition (subject to the
foregoing limitation) plus the amount of any assumed liabilities plus the
amount of any seller debt does not exceed $10,000,000; (iii) the incremental
amount which the Borrower then may borrow under Facility No. 1 (after giving
pro forma effect to the proposed acquisition), determined under subparagraphs
(a) and (d) of Paragraph 2.1, is at least $4,000,000; (iv) the school being
acquired has a positive EBITDA (computed in the same manner as
39
is defined in Paragraph 10.4 in respect of EMI, after adjustments by the Bank
as necessary for excessive compensation amounts and like items) for its most
recently concluded period of twelve (12) fiscal months; and (v) the acquisition
is not opposed by the board of directors of the school proposed to be acquired;
net, it is not a "hostile" acquisition. EMI, as agent on behalf of the
Borrowers, shall certify the foregoing to the Bank at the time of such
acquisition. Such certification shall include calculations of pro forma
compliance with Paragraphs 10.3 through 10.6 on both a consolidated basis
(including the school being acquired) and on a stand alone basis for such
school. The Bank has reserved to itself the right, in its sole discretion, to
consent in writing to any such acquisition notwithstanding the Borrower's
non-compliance with one or more of the foregoing conditions, but any such
consent may be made subject to such other terms and conditions as the Bank, in
its sole discretion, then may elect.
(f) sell, assign, lease, transfer or otherwise dispose
of any assets, or enter into any agreement to do so, except:
(i) dispositions of inventory, or used, worn-out
or surplus equipment, all in the ordinary course of business;
(ii) the sale of equipment to the extent that such
equipment is exchanged for credit against the purchase price of similar
replacement equipment, or the proceeds of such sale are reasonably promptly
applied to the purchase price of such replacement equipment; and
(iii) dispositions not otherwise permitted hereunder
which are made for fair market value; provided, that (i) at the time of any
disposition, no event of default shall exist or shall result from such
disposition, (ii) the aggregate sales price from such disposition shall be paid
in cash, and (iii) the aggregate value of all assets so sold by the Borrowers
shall not exceed in any fiscal year $250,000.
(g) enter into any sale and leaseback agreement covering
any of its fixed or capital assets.
(h) close, or voluntarily suspend the business of any
school (other than for the purpose of consolidating the operations of one
school with one or more other schools) for more than 30 days, if that school's
contribution (computed as defined in Paragraph 10.24) then represents 5% or
more of the total school contributions for the most recently concluded period
of four fiscal quarters.
10.23 ERISA Plans. To give prompt written notice to the Bank
of:
40
(a) The occurrence of any reportable event under Section
4043(b) of ERISA for which the PBGC requires 30 day notice.
(b) Any action by a Borrower to terminate or withdraw
from a Plan or the filing of any notice of intent to terminate under Section
4041 of ERISA.
(c) Any notice of noncompliance made with respect to a
Plan under Section 404 1 (b) of ERISA.
(d) The commencement of any proceeding with respect to a
Plan under Section 4042 of ERISA.
10.24 Title IV Program Requirements. To maintain at all times
all Title IV Program Requirements for schools representing, in the aggregate,
not less than 80% of the total school contributions of all schools operated by
the Borrowers. For purposes hereof, "school contributions" for each school
shall be computed on a quarterly basis, for the most recently completed period
of four fiscal quarters, and shall be equal to each school's total revenue
minus all school operating costs (to include training expense, facility
expense, advertising expense, sales expense, administrative expense and bad
debt expense). "Total school contributions" of all schools shall be the
aggregate of each school's contribution.
"Title IV Program Requirements" shall mean and include all
eligibility, program and general requirements imposed upon schools under Title
IV programs administered by the U.S. Department of Education ("DOE") under the
Higher Education Act of 1965, as amended, and the regulations thereunder
("Title IV Programs"), including, without limitation, for each of the schools
operated by Borrowers (i) its continuing certification by the DOE as an
"eligible institution;" (ii) its continuing authorization to offer its programs
by the relevant state agency where it is located; (iii) its continuing
accreditation by a nationally recognized accrediting agency; (iv) its
continuing compliance with respect to maximum rates of default by its students
with respect to federally guaranteed or funded student loans; i.e., cohort
default rates; (v) its continuing satisfaction of certain financial
responsibility standards; (vi) its continuing compliance with standards for
maximum acceptable proportions of school revenues derived from Title IV
programs, i.e., "85/15" rule; and (vii) its continuing compliance in respect of
changes in curriculum, location and control. Without limitation of the
foregoing, to the extent that any school is at any time required by the DOE to
post a letter of credit, bond or other, similar evidence of financial assurance
as a condition to its remaining an "eligible institution," the Bank, in its
sole
41
discretion shall have the right to declare that such school shall not be
considered as maintaining all Title IV Program Requirements for purposes of
this Paragraph.
10.25 Subsidiaries. Promptly upon its creation or
acquisition, to cause all subsidiaries of Borrowers hereafter created or
acquired (including any acquired as schools) to execute a joinder to this
Agreement in form and substance acceptable to the Bank whereby such subsidiary
shall become a Borrower hereunder.
11. HAZARDOUS WASTE INDEMNIFICATION
The Borrowers, jointly and severally, will indemnify and hold
harmless the Bank from any loss or liability directly or indirectly arising out
of the use, generation, manufacture, production, storage, release, threatened
release, discharge, disposal or presence of a hazardous substance. This
indemnity will apply whether the hazardous substance is on, under or about any
Borrower's property or operations or property leased to any Borrower. The
indemnity includes but is not limited to attorneys' fees (including the
reasonable estimate of the allocated cost of in-house counsel and staff). The
indemnity extends to the Bank, its parent, its and its parent's subsidiaries
(including BofA) and all of their directors, officers, employees, agents,
successors, attorneys and assigns. For these purposes, the term "hazardous
substances" means any substance which is or becomes designated as "hazardous"
or "toxic" under any federal, state or local law. This indemnity will survive
repayment of the Borrowers' obligations to the Bank and this Agreement's
termination.
12. DEFAULT
If any of the following events occurs (called in this
Agreement a "default" or "event of default"), the Bank may do one or more of
the following: declare the Borrowers in default, stop making any additional
credit available to the Borrowers, and require the Borrowers to repay the
entire debt immediately and without prior notice. If an event of default occurs
under the paragraph entitled "Bankruptcy," below, with respect to the
Borrowers, then, the entire debt outstanding under this Agreement will
automatically be due immediately.
12.01 Failure to Pay. A Borrower fails to make a payment
under this Agreement when due.
12.02 Lien Priority. The Bank fails to have an enforceable
first lien (except for any prior liens which are expressly permitted to exist
under this
42
Agreement or as to which the Bank has consented in writing) on or security
interest in any property given as security for the advances.
12.03 False Information. A Borrower (or any guarantor) has
given the Bank false or misleading information or representations in respect of
any matter, event or occurrence which the Bank determines to be material.
12.04 Bankruptcy. A Borrower (or any guarantor) files a
bankruptcy petition, a bankruptcy petition is filed against a Borrower (or any
guarantor) or a Borrower (or any guarantor) makes a general assignment for the
benefit of creditors. The default will be deemed cured if any bankruptcy
petition filed against a Borrower (or any guarantor) is dismissed within a
period of 60 days after the filing; provided. however. that the Bank will not
be obligated to extend any additional credit to the Borrowers during that
period.
12.05 Receivers. A receiver or similar official is appointed
for any Borrower's business, or the business is terminated.
12.06 Lawsuits. Any lawsuit or lawsuits are filed on behalf
of one or more creditors against a Borrower in an aggregate amount of $100,000
or more in excess of any insurance coverage.
12.07 Judgments. Any judgments or arbitration awards are
entered against any Borrower (or any guarantor), or any Borrower (or any
guarantor) enters into any settlement agreements with respect to any litigation
or arbitration, in an aggregate amount of $100,000 or more in excess of any
insurance coverage.
12.08 Government Action. Any government authority takes
action that the Bank believes materially adversely affects any Borrower's (or
any guarantor's) financial condition or ability to repay the advances.
12.09 Material Adverse Change. A material adverse change
occurs in any Borrower's (or any guarantor's) business condition (financial or
otherwise), operations, properties or prospects, or ability to repay the
advances.
12.10 Cross-default. Any default occurs under any agreement
in connection with any credit which any Borrower (or any guarantor) or any
Borrower's related entities or affiliates has obtained from another lender or
which any Borrower (or any guarantor) or any Borrower's related entities or
affiliates has guaranteed in the amount of $100,000 or more in the aggregate if
the default consists of failing to make a payment when due or gives the other
lender the right to accelerate the obligation.
43
12.11 Default under Related Documents. Any guaranty,
subordination agreement, security agreement, deed of trust, or other document
required by this Agreement is violated or no longer in effect.
12.12 Other Bank Agreements. A Borrower (or any guarantor)
fails to meet the conditions of, or fails to perform any obligation under any
other agreement which a Borrower (or any guarantor) has with the Bank, BofA,
any "issuer," any "swap provider" or any other affiliate of the Bank. If, in
the Bank's opinion, the breach is capable of being remedied, the breach will
not be considered an event of default under this Agreement for a period of 10
days after the date on which the Bank gives written notice of the breach to the
Borrowers; provided, however, that the Bank will not be obligated to extend any
additional credit to the Borrowers during that period.
12.13 ERISA Plans. The occurrence of any one or more of the
following events with respect to any Borrower, provided such event or events
could reasonably be expected, in the judgment of the Bank, to subject any
Borrower to any tax, penalty or liability (or any combination of the foregoing)
which, in the aggregate, could have a material adverse effect on the financial
condition of any Borrower with respect to a Plan:
(a) A reportable event shall occur with respect to a
Plan which is, in the reasonable judgment of the Bank likely to result in the
termination of such Plan for purposes of Title IV of ERISA.
(b) Any Plan termination (or commencement of proceedings
to terminate a Plan) or a Borrower's full or partial withdrawal from a Plan.
12.14 Delisting. EMI's stock ceases to be listed on NASDAQ
for any reason (except for its being listed, instead, on the NYSE or AMEX).
12.15 Other Breach Under Agreement. The Borrowers fail to
meet the conditions of, or fail to perform any obligation under, any term of
this Agreement not specifically referred to in this Article. This includes any
failure or anticipated failure by the Borrowers to comply with any financial
covenants set forth in this Agreement, whether such failure is evidenced by
financial statements delivered to the Bank or is otherwise known to the
Borrowers or the Bank. If, in the Bank's opinion, the breach is capable of
being remedied, the breach will not be considered an event of default under
this Agreement for a period of 10 days after the date on which the Bank gives
written notice of the breach to the Borrowers; provided, however, that the Bank
will not be obligated to extend any additional credit to the Borrowers during
that period.
44
13 ENFORCING THIS AGREEMENT; MISCELLANEOUS
13.01 GAAP. Except as otherwise stated in this Agreement, all
financial information provided to the Bank and all financial covenants will be
made under generally accepted accounting principles, consistently applied
(herein, "GAAP").
13.02 Georgia Law. This Agreement is governed by Georgia law.
13.03 Successors and Assigns. This Agreement is binding on
each Borrower's and the Bank's successors and assignees. The Borrowers agree
that they will not assign this Agreement without the Bank's prior consent. The
Bank may sell participations in or assign this loan, and may exchange financial
information about the Borrowers with actual or potential participants or
assignees. If a participation is sold or the loan is assigned, the purchaser
will have the right of set-off against the Borrowers.
13.04 Arbitration
(a) Dispute Resolution. Any controversy or claim between
or among the parties or their assignees arising out of or relating to this
Agreement or any agreements or instruments relating hereto or delivered in
connection herewith, including any claim based on or arising from an alleged
tort, shall at the request of any party be determined by arbitration,
reference, or trial by a judge as provided hereafter. A controversy involving
only a single claimant, or claimants who are related or asserting claims
arising from a single transaction, shall be determined by arbitration as
described below. Any other controversy shall be determined by judicial
reference of the controversy to a referee appointed by the court or, if the
court where the controversy is venued lacks the power to appoint a referee, by
trial by a judge without a jury, as described below. THE PARTIES AGREE AND
UNDERSTAND THAT THEY ARE GIVING -UP THE RIGHT To TRIAL BY JURY, AND THERE SHALL
BE No JURY WHETHER THE CONTROVERSY OR CLAIM IS DECIDED BY ARBITRATION, BY
JUDICIAL REFERENCE, OR BY TRIAL BY A JUDGE.
(b) Arbitration. Since this Agreement touches and
concerns interstate commerce, an arbitration under this Agreement shall be
conducted in accordance with the United States Arbitration Act (Title 9, United
States Code), notwithstanding any choice of law provision in this Agreement.
The Commercial Rules of the American Arbitration Association ("AAA") also shall
apply. The arbitrator(s) shall follow the law and shall give effect to statutes
of limitation in determining any claim. Any controversy concerning whether an
issue is
45
arbitrable shall be determined by the arbitrator(s). The award of the
arbitrator(s) shall be in writing and include a statement of reasons for the
award. The award shall be final. Judgment upon the award may be entered in any
court having jurisdiction, and no challenge to entry of judgment upon the award
shall be entertained except as provided by Section 10 of the United States
Arbitration Act or upon a finding of manifest injustice.
(c) Judicial Reference or Trial by a Judge. At the
request of any party any controversy or claim under subparagraph (a) that is
not submitted to arbitration as provided in subparagraph (b) shall be
determined by reference to a referee appointed by the court who, sitting alone
and without a jury, shall decide all questions of law and fact. The parties
shall designate to the court a referee selected under the auspices of the AAA
in the same manner as arbitrators are selected in AAA-sponsored proceedings.
The referee shall be an active attorney or retired judge. If the court where
the controversy is venued lacks the power to appoint a referee, the controversy
instead shall be decided by trial by a judge without a jury.
(d) Self-Help. Foreclosure. and Provisional Remedies. No
provision of this paragraph shall limit the right of any party to this
Agreement to exercise self-help remedies such as setoff or repossession, to
foreclose by power of sale or judicially against or sell any collateral or
security, or to obtain any provisional or ancillary remedies from a court of
competent jurisdiction before, after, or during the pendency of any arbitration
under subparagraph (b), above. Neither the obtaining nor the exercise of any
such remedy shall waive the right of either party to demand that the related or
any other dispute or controversy be determined by arbitration as provided
above.
13.05 Severability; Waivers. If any part of this Agreement is
not enforceable, the rest of the Agreement may be enforced. The Bank retains
all rights, even if it makes an advance after default. If the Bank waives a
default, it may enforce a later default. Any consent or waiver under this
Agreement must be in writing.
13.06 Reimbursement Costs. The Borrowers agree to reimburse
the Bank immediately for any expenses it incurs in the preparation of this
Agreement and any agreement or instrument required by this Agreement. Expenses
include, but are not limited to, reasonable attorneys' fees, including any
allocated costs of the Bank's in-house counsel, filing, recording and search
fees, appraisal fees, title report fees and documentation fees.
46
13.07 Administration Costs. The Borrowers shall pay the Bank
for all reasonable costs incurred by the Bank in connection with administering
this Agreement.
13.08 Attorneys' Fees. The Borrowers shall reimburse
the Bank for any reasonable costs and attorneys' fees incurred by the Bank in
connection with the enforcement or preservation of any rights or remedies under
this Agreement and any other documents executed in connection with this
Agreement, and including any amendment, waiver, "workout" or restructuring
under this Agreement. In the event of a lawsuit or arbitration proceeding, the
prevailing party is entitled to recover costs and reasonable attorneys' fees
incurred in connection with the lawsuit or arbitration proceeding, as
determined by the court or arbitrator. In the event that any case is commenced
by or against the Borrowers under the Bankruptcy Code (Title l l, United States
Code) or any similar or successor statute, the Bank is entitled to recover
costs and reasonable attorneys' fees incurred by the Bank related to the
preservation, protection, or enforcement of any rights of the Bank in such a
case. As used in this paragraph, "attorneys' fees" includes the allocated costs
of the Bank's in-house counsel.
13.09 Joint and Several Liability.
(a) Each Borrower agrees that it is jointly and
severally liable to the Bank for the payment of all obligations arising under
this Agreement, and that such liability is independent of the obligations of
the other Borrower(s) (or any guarantor). The Bank may bring an action against
any Borrower, whether an action is brought against the other Borrower(s) (or
any guarantor).
(b) Each Borrower agrees that any release which may
be given by the Bank to the other Borrower(s) (or any guarantor) will not
release such Borrower from its obligations under this Agreement.
(c) Each Borrower waives any right to assert against
the Bank any defense, setoff, counterclaim, or claims which such Borrower may
have against the other Borrower(s) or any other party (including any guarantor)
liable to the Bank for the obligations of the Borrowers under this Agreement.
(d) Each Borrower agrees that it is solely
responsible for keeping itself informed as to the financial condition of the
other Borrower(s) and of all circumstances which bear upon the risk of
nonpayment. Each Borrower waives any right it may have to require the Bank to
disclose to such Borrower any information which the Bank may now or hereafter
acquire concerning the financial condition of the other Borrower(s).
(e) Each Borrower waives all rights to notices of
default or nonperformance by any other Borrower under this Agreement. Each
Borrower further waives all rights to notices of the existence or the creation
of new indebtedness by any other Borrower.
(f) The Borrowers represent and warrant to the Bank
that they each will derive benefit, directly and indirectly, from the
collective administration and
47
availability of credit under this Agreement. The Borrowers agree that the Bank
will not be required to inquire as to the disposition by any Borrower of funds
disbursed in accordance with the terms of this Agreement.
(g) Each Borrower waives any right of subrogation,
reimbursement, indemnification and contribution (contractual, statutory or
otherwise), including without limitation, any claim or right of subrogation
under the Bankruptcy Code (Title 11 of the U.S. Code) or any successor statute,
which such Borrower may now or hereafter have against any other Borrower with
respect to the indebtedness incurred under this Agreement, unless and until
this Agreement is terminated and all debts to the Bank arising hereunder have
been fully paid and satisfied. Each Borrower further waives any right to
enforce any remedy which the Bank now has or may hereafter have against any
other Borrower, and waives any benefit of, and any right to participate in, any
security now or hereafter held by the Bank.
13.10 One Agreement. This Agreement and any related security
or other agreements required by this Agreement, collectively:
(a) represent the sum of the understandings and
agreements between the Bank and the Borrowers concerning this credit;
(b) replace any prior oral or written agreements
between the Bank and the Borrowers concerning this credit; and
(c) are intended by the Bank and the Borrowers as
the final, complete and exclusive statement of the terms agreed to by them. In
the event of any conflict between this Agreement and any other agreements
required by this Agreement, this Agreement will prevail.
13.11 Disposition of Schedules. The Bank will not be obligated
to return any schedules, invoices, statements, budgets, forecasts, reports or
other papers delivered by the Borrowers. The Bank will destroy or otherwise
dispose of such materials at such time as the Bank, in its discretion, deems
appropriate.
13.12 Credit Adjustments. Until the Bank exercises its rights
to collect the accounts receivable as provided under any security agreement
required under this Agreement, the Borrowers may continue their present policies
for credit adjustments. If a credit adjustment is made with respect to any
Acceptable Receivable, the amount of such adjustment shall no longer be included
in the amount of such Acceptable Receivable in computing the Borrowing Base.
48
13.13 Verification of Receivables The Bank may at any time,
either orally or in writing, request confirmation from any debtor of the current
amount and status of the accounts receivable upon which such debtor is
obligated.
13.14 Indemnification. The Borrowers will indemnify and hold
the Bank harmless from any loss, liability, damages, judgments, and costs of any
kind relating to or arising directly or indirectly out of (a) this Agreement or
any document required hereunder, (b) any credit extended or committed by the
Bank to the Borrowers hereunder, (c) any claim, whether well-founded or
otherwise, that there has been a failure to comply with any law regulating the
Borrowers' sales or leases to or performance of services for debtors obligated
upon the Borrowers' accounts receivable and disclosures in connection therewith,
and (d) any litigation or proceeding related to or arising out of this
Agreement, any such document, any such credit, or any such claim. This indemnity
includes but is not limited to attorneys' fees (including the allocated cost of
in-house counsel). This indemnity extends to the Bank, its parent, its and its
parent's subsidiaries (including BofA) and all of their directors, officers,
employees, agents, successors, attorneys, and assigns. This indemnity Will
survive repayment of the Borrowers' obligations to the Bank and this Agreement's
termination. All sums due to the Bank hereunder shall be obligations of the
Borrowers, due and payable immediately without demand.
13.15 Notices. All notices required under this Agreement shall
be personally delivered or sent by first class mail, postage prepaid, to the
addresses on the signature page of this Agreement, or to such other addresses as
the Bank and the Borrowers may specify from time to time in writing.
13.16 Headings. Article and paragraph headings are for
reference only and shall not affect the interpretation or meaning of any
provisions of this Agreement.
13.17 Counterparts This Agreement may be executed in as many
counterparts as necessary or convenient, and by the different parties on
separate counterparts each of which, when so executed, shall be deemed an
original but all such counterparts shall constitute but one and the same
agreement.
13.18 Amendment and Restatement. This Agreement constitutes an
amendment and restatement of the Business Loan Agreement, dated as of February
25, 1997, between Borrowers (or certain of them, as the case may be) and the
Bank (the "Existing Loan Agreement"). The execution and delivery of this
Agreement shall not constitute a novation, waiver, release or modification of
any rights, claims or remedies of the Bank under the Existing Loan Agreement or
otherwise, or any indebtedness or other obligations owing to the Bank under the
Existing Loan Agreement or otherwise, based on any facts or events occurring or
existing prior to the execution and delivery of this Agreement.
49
This Agreement is executed as of the date stated at the top of the first page.
BANK OF AMERICA, FSB EDUCATIONAL MEDICAL, INC.
By: By:
-------------------------------- -------------------------------
Typed Name Typed Name
------------------------- ------------------------
Title Title Vice President and Chief
------------------------------ -----------------------------
Officer
-----------------------------
Attest
----------------------------
Typed Name ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------
Title Secretary
-----------------------------
Address where notices to Addresses where notices to
the Bank are to be sent: the Borrowers are to be sent:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
ANDON COLLEGES, INC.
By:
-------------------------------
Typed Name ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------
Title Vice President and Chief
------------------------------
Officer
------------------------------
Attest
-----------------------------
Typed Name ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------
Title Secretary
------------------------------
Chief executive office:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
50
CALIFORNIA ACADEMY OF
MERCHANDISING, ART AND
DESIGN, INC.
By:
-------------------------------
Typed Name ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------
Title Vice President and Chief
------------------------
Officer
------------------------
Attest
------------------------
Typed Name ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------
Title Secretary
------------------------
Chief executive office:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
51
DBS ACQUISITION CORP.
By:
-------------------------------
Typed Name ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------
Title Vice President and Chief
------------------------
Officer
------------------------
Attest
------------------------
Typed Name ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------
Title Secretary
------------------------
Chief executive office:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
52
DEST EDUCATION CORPORATION
By:
-------------------------------
Typed Name ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------
Title Vice President and Chief
------------------------
Officer
------------------------
Attest
------------------------
Typed Name ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------
Title Secretary
------------------------
Chief executive office:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
53
ICM ACQUISITION CORP.
By:
-------------------------------
Typed Name ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------
Title Vice President and Chief
------------------------
Officer
------------------------
Attest
------------------------
Typed Name ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------
Title Secretary
------------------------
Chief executive office:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
54
HBC ACQUISITION CORP.
By:
-------------------------------
Typed Name ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------
Title Vice President and Chief
------------------------
Officer
------------------------
Attest
------------------------
Typed Name ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------
Title Secretary
------------------------
Chief executive office:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
55
MARIC LEARNING SYSTEMS
By:
-------------------------------
Typed Name ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------
Title Vice President and Chief
------------------------
Officer
------------------------
- Attest
------------------------
Typed Name ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------
Title Secretary
------------------------
Chief executive office:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
56
MTSX ACQUISITION CORP.
By:
-------------------------------
Typed Name ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------
Title Vice President and Chief
------------------------
Officer
------------------------
Attest
------------------------
Typed Name ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------
Title Secretary
------------------------
Chief executive office:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
57
OIOPT ACQUISITION CORP.
By:
-------------------------------
Typed Name ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------
Title Vice President and Chief
------------------------
Officer
------------------------
Attest
------------------------
Typed Name ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------
Title Secretary
------------------------
Chief executive office:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
58
PALO VISTA COLLEGE OF NURSING
AND ALLIED HEALTH
SCIENCES, INC.
By:
-------------------------------
Typed Name ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------
Title Vice President and Chief
------------------------
Officer
------------------------
Attest
------------------------
Typed Name ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------
Title Secretary
------------------------
Chief executive office:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
59
SACMD ACQUISITION CORP.
By:
-------------------------------
Typed Name ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------
Title Vice President and Chief
------------------------
Officer
------------------------
Attest
------------------------
Typed Name ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------
Title Secretary
------------------------
Chief executive office:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
60
SCOTTSDALE EDUCATIONAL
CENTER FOR ALLIED HEALTH
CAREERS, INCORPORATED
By:
-------------------------------
Typed Name ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------
Title Vice President and Chief
------------------------
Officer
------------------------
Attest
------------------------
Typed Name ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------
Title Secretary
-----------------------
Chief executive office:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
61
NEBRASKA ACQUISITION CORP.
By:
-------------------------------
Typed Name ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------
Title Vice President and Chief
------------------------
Officer
------------------------
Attest
------------------------
Typed Name ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------
Title Secretary
------------------------
Chief executive office:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
62
CHI ACQUISITION CORP.
By:
-------------------------------
Typed Name ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------
Title Vice President and Chief
------------------------
Officer
------------------------
Attest
------------------------
Typed Name ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------
Title Secretary
------------------------
Chief executive office:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
63
SCHEDULE 3.1
Certain Acquisitions
64
SCHEDULE 8.16
[SUBSIDIARIES]
Dest Education Corporation is a subsidiary of Andon Colleges, Inc.
65
SCHEDULE 9.9
[LIENS]
[See attached]