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EXECUTION COPY
EXHIBIT 10.1
REVOLVING CREDIT AGREEMENT
dated as of November 12, 1999
- between -
EDISON SCHOOLS INC.,
as Borrower
- and -
IMPERIAL BANK,
as Bank
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TABLE OF CONTENTS
ARTICLE I DEFINITIONS............................................................................... 1
SECTION 1.1. Defined Terms................................................................. 1
SECTION 1.2. Use of Defined Terms.......................................................... 22
SECTION 1.3. Cross-References.............................................................. 22
SECTION 1.4. Accounting and Financial Determinations....................................... 23
SECTION 1.5. General Provisions Relating to Definitions.................................... 23
ARTICLE II COMMITMENT............................................................................... 23
SECTION 2.1 Commitment..................................................................... 23
SECTION 2.2. Commitment Amounts............................................................ 24
SECTION 2.3. The Borrowing Base............................................................ 24
ARTICLE III LOANS AND NOTES......................................................................... 24
SECTION 3.1. Borrowing Procedures.......................................................... 24
SECTION 3.2. Note.......................................................................... 25
SECTION 3.3. Principal Payments............................................................ 25
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SECTION 3.3.1. Repayments......................................................... 25
SECTION 3.3.2. Loan Prepayments and Repayments.................................... 25
SECTION 3.4. Interest Payments............................................................. 26
SECTION 3.4.1. Interest Rates..................................................... 26
SECTION 3.4.2. Interest During Continuation of Events of Default; etc............. 27
SECTION 3.4.3. Payment Dates...................................................... 27
SECTION 3.5. Fees.......................................................................... 27
SECTION 3.5.l. Closing Fee........................................................ 28
SECTION 3.5.2. Commitment Fees.................................................... 28
SECTION 3.6. Making of Payments; Computations; etc......................................... 28
SECTION 3.6.1. Making of Payments................................................. 28
SECTION 3.6.2. Setoff. 28
SECTION 3.6.3. Due Date Extension................................................. 28
SECTION 3.6.4. Notices of Changes in Prime Rate; Notice of Eurodollar Rates....... 28
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SECTION 3.6.5. Computations....................................................... 29
SECTION 3.6.6. Recordkeeping...................................................... 29
SECTION 3.7. Taxes......................................................................... 29
SECTION 3.8. Use of Proceeds............................................................... 29
SECTION 3.9. No Withholding................................................................ 29
SECTION 3.10. Collateral Security........................................................... 30
ARTICLE IV FUNDING OPTIONS.......................................................................... 31
SECTION 4.1. Pricing of Each Loan.......................................................... 31
SECTION 4.2. Conversion Procedures......................................................... 31
SECTION 4.3. Continuation Procedures....................................................... 31
SECTION 4.4. Limitations on Interest Periods and Continuation and Conversion Elections..... 32
SECTION 4.4.1. Interest Periods................................................... 32
SECTION 4.4.2. Conditions Precedent............................................... 32
SECTION 4.4.3. Other Limitations.................................................. 32
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SECTION 4.5. Increased Costs............................................................... 32
SECTION 4.6. Interest Rate Inadequate or Unfair............................................ 34
SECTION 4.7. Changes in Law Rendering Eurodollar Loans Unlawful............................ 34
SECTION 4.8. Funding Losses................................................................ 34
SECTION 4.9. Discretion of Bank as to Manner of Funding.................................... 35
SECTION 4.10. Conclusiveness of Statements; Survival of Provisions......................... 35
ARTICLE V LETTERS OF CREDIT......................................................................... 35
SECTION 5.1. Requests for Letters of Credit................................................ 35
SECTION 5.2. Issuances and Extensions...................................................... 36
SECTION 5.3. Fees and Expenses............................................................. 36
SECTION 5.4. Disbursements................................................................. 36
SECTION 5.5. Reimbursement................................................................. 37
SECTION 5.6. Deemed Disbursements.......................................................... 37
SECTION 5.7. Nature of Reimbursement Obligations........................................... 38
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SECTION 5.8. Indemnity..................................................................... 39
ARTICLE VI CONDITIONS TO CREDIT EXTENSIONS.......................................................... 39
SECTION 6.1. Conditions to Making First Credit Extensions.................................. 39
SECTION 6.1.1. Execution and Delivery of this Agreement and Note.................. 39
SECTION 6.1.2. Security Agreement; UCC Filings; etc............................... 39
SECTION 6.1.3. Other Loan Documents and Ancillary Documents....................... 40
SECTION 6.1.4. Certificates of Insurance.......................................... 40
SECTION 6.1.5. [Intentionally Omitted.]........................................... 40
SECTION 6.1.6. Closing Date Certificate........................................... 40
SECTION 6.1.7. Resolutions; etc................................................... 40
SECTION 6.1.8. Certificates of Good Standing...................................... 41
SECTION 6.1.9. Compliance Certificate............................................. 41
SECTION 6.1.10. Approvals.......................................................... 41
SECTION 6.1.11. Environmental Compliance........................................... 41
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SECTION 6.1.12. Opinions of Counsel................................................ 41
SECTION 6.1.13. Financial Statements............................................... 41
SECTION 6.1.14. No Materially Adverse Effect....................................... 41
SECTION 6.1.15. Fees and Expenses.................................................. 42
SECTION 6.1.16. Satisfactory Legal Form; etc....................................... 42
SECTION 6.2. All Credit Extensions......................................................... 42
SECTION 6.2.1. Compliance with Representations; Absence of Litigation; No
Default; etc..................................................... 42
SECTION 6.2.2. Credit Request..................................................... 43
SECTION 6.2.3. Legality of Transactions........................................... 43
SECTION 6.2.4. Borrowing Report................................................... 43
SECTION 6.2.5. Banking Arrangements............................................... 43
SECTION 6.3. Conditions to Effectiveness of this Agreement................................. 43
ARTICLE VII WARRANTIES; ETC......................................................................... 44
SECTION 7.1. Organization; etc............................................................. 44
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SECTION 7.2. Power, Authority.............................................................. 44
SECTION 7.3. Validity; etc................................................................. 44
SECTION 7.4. Financial Information......................................................... 44
SECTION 7.5. Projections................................................................... 45
SECTION 7.6. Materially Adverse Effect..................................................... 45
SECTION 7.7. Existing Indebtedness; Absence of Defaults.................................... 45
SECTION 7.8. Litigation; Ancillary Documents; etc.......................................... 45
SECTION 7.9. Regulations U and X........................................................... 46
SECTION 7.10. Government Regulation......................................................... 46
SECTION 7.11. Taxes......................................................................... 47
SECTION 7.12. Compliance with ERISA......................................................... 47
SECTION 7.13. Labor Controversies........................................................... 47
SECTION 7.14. Corporate Structure; etc...................................................... 47
SECTION 7.15. Ownership of Properties; Liens................................................ 47
SECTION 7.16. Trademarks; etc............................................................... 47
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SECTION 7.17. Collateral Documents.......................................................... 48
SECTION 7.18. Environmental Matters......................................................... 48
SECTION 7.19. Compliance with Applicable Laws............................................... 49
SECTION 7.20. Existing Investments.......................................................... 49
SECTION 7.21. Transactions with Affiliates.................................................. 49
SECTION 7.22. Year 2000 Problem............................................................. 49
SECTION 7.23. Banking Arrangements.......................................................... 49
SECTION 7.24. Representations in Loan Documents and Ancillary Documents..................... 50
ARTICLE VIII COVENANTS.............................................................................. 50
SECTION 8.1. Certain Affirmative Covenants................................................. 50
SECTION 8.1.1. Financial Information; etc......................................... 50
SECTION 8.1.2. Maintenance of Existence; etc...................................... 52
SECTION 8.1.3. Foreign Qualification.............................................. 52
SECTION 8.1.4. Payment of Taxes; etc.............................................. 53
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SECTION 8.1.5. Maintenance of Property............................................ 53
SECTION 8.1.6. Notice of Default; etc............................................. 53
SECTION 8.1.7. Books and Records.................................................. 54
SECTION 8.1.8. Compliance with Laws; etc.......................................... 55
SECTION 8.1.9. Identification of Subsidiaries; Provision of Collateral............ 55
SECTION 8.1.10. Landlord Lien Waivers.............................................. 55
SECTION 8.1.11. Year 2000 Compliance............................................... 56
SECTION 8.1.12. Banking Arrangements............................................... 56
SECTION 8.1.13. Compliance with Terms of Management Agreements; etc................ 57
SECTION 8.2. Certain Negative Covenants.................................................... 57
SECTION 8.2.1. Limitation on Lines of Business.................................... 57
SECTION 8.2.2. Indebtedness....................................................... 57
SECTION 8.2.3. Liens.............................................................. 58
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SECTION 8.2.4. Financial Covenants................................................ 58
SECTION 8.2.5. Investments and Acquisitions....................................... 58
SECTION 8.2.6. Restricted Payments................................................ 59
SECTION 8.2.7. Mergers; Sales of Property......................................... 60
SECTION 8.2.8. Limitations on Optional Payments; etc.............................. 60
SECTION 8.2.9. Modification of other Ancillary Documents; etc..................... 61
SECTION 8.2.10. Limitation on Changes in Fiscal Periods............................ 61
SECTION 8.2.11. Limitation on Negative Pledge Clauses.............................. 61
SECTION 8.2.12. Limitation on Restrictions on Subsidiary Distributions............. 61
SECTION 8.2.13. Transactions with Affiliates....................................... 61
SECTION 8.2.14. Sale of Capital Stock; etc......................................... 62
SECTION 8.2.15. Change of Location or Name......................................... 63
SECTION 8.2.16. Financial Asset Accounts........................................... 63
ARTICLE IX EVENTS OF DEFAULT........................................................................ 63
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SECTION 9.1. Events of Default............................................................. 63
SECTION 9.1.1. Non-Payment of Obligations......................................... 63
SECTION 9.1.2. Non-Performance of Certain Obligations............................. 63
SECTION 9.1.3. Non-Performance of Other Obligations............................... 63
SECTION 9.1.4. Breach of Warranty................................................. 64
SECTION 9.1.5. Default Under Other Instruments; etc............................... 64
SECTION 9.1.6. Bankruptcy, Insolvency; etc........................................ 64
SECTION 9.1.7. Judgments.......................................................... 65
SECTION 9.1.8. Impairment of Security; etc........................................ 65
SECTION 9.2. Action if Bankruptcy.......................................................... 65
SECTION 9.3. Action if Other Event of Default.............................................. 66
ARTICLE X MISCELLANEOUS............................................................................. 66
SECTION 10.1. Waivers, Amendments; etc..................................................... 66
SECTION 10.2. Notices...................................................................... 66
SECTION 10.3. Costs and Expenses........................................................... 67
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SECTION 10.4. Indemnification.............................................................. 67
SECTION 10.5. Survival..................................................................... 68
SECTION 10.6. Severability................................................................. 68
SECTION 10.7. Headings..................................................................... 68
SECTION 10.8. Counterparts; Entire Agreement............................................... 69
SECTION 10.9. CHOICE OF LAW................................................................ 69
SECTION 10.10. Successors and Assigns....................................................... 69
SECTION 10.11. Further Assurances........................................................... 69
SECTION 10.12. CONSENT TO JURISDICTION...................................................... 69
SECTION 10.13. WAIVER OF JURY TRIAL......................................................... 71
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LIST OF SCHEDULES
FIRST SCHEDULE - FINANCIAL COVENANT SCHEDULE
SECOND SCHEDULE - DISCLOSURE SCHEDULE
LIST OF EXHIBITS
EXHIBIT A - FORM OF NOTE
EXHIBIT B - FORM OF SECURITY AGREEMENT
EXHIBIT C - FORM OF TRADEMARK SECURITY AGREEMENT
EXHIBIT D - FORM OF COPYRIGHT SECURITY AGREEMENT
EXHIBIT E - FORM OF ACCOUNT AGENCY AGREEMENT
EXHIBIT F - FORM OF LOAN REQUEST
EXHIBIT G - FORM OF ISSUANCE REQUEST
EXHIBIT H - FORM OF COMPLIANCE CERTIFICATE
EXHIBIT I - FORM OF CLOSING DATE CERTIFICATE
EXHIBIT J - LEGAL OPINION OF SPECIAL COUNSEL TO THE BORROWER
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REVOLVING CREDIT AGREEMENT
REVOLVING CREDIT AGREEMENT, dated as of November 12, 1999, between
EDISON SCHOOLS INC., a Delaware corporation (hereinafter, together with its
successors in title and assigns, the "BORROWER"), and IMPERIAL BANK, a bank
organized under the laws of the State of California (hereinafter, together with
its successors in title and assigns, the "BANK").
RECITALS
The Borrower has requested the Bank to make a revolving credit facility
available to the Borrower. The proceeds of the loans and other credit extensions
under the facilities are to be used by the Borrower for working capital and for
the other purposes described in Section 3.8. The Bank is willing to make the
facility available to the Borrower and to make loans and other credit extensions
to the Borrower hereunder, all upon the terms and subject to the conditions
contained in this Agreement.
Accordingly, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. DEFINED TERMS.
The following terms, when used in this Agreement, including the
introductory paragraph and Recitals hereto, or in any of the other Loan
Documents, shall, except where the context otherwise requires, have the
following meanings:
"ACCOUNTS RECEIVABLE" means, in relation to any Person, such Person's
now owned or hereafter acquired rights to payment (a) for the rendition of
services in the ordinary course of such Person's business, or (b) under or in
respect of Management Agreements to which such Person shall from time to time be
a party, in any case under clause (a) or clause (b), whether or not evidenced by
any Instrument. The amount of any Accounts Receivable shall be determined in
accordance with GAAP.
"ACQUISITION" means any transaction, or any series of related
transactions, in which the Borrower or any of its Subsidiaries (a) acquires any
business or all or substantially all of the Property of any Person or any
division or other business unit thereof, whether through purchase of assets,
merger or otherwise, (b) directly or indirectly acquires control of at least a
majority (in number of votes) of the Voting Interests of any Person, or (c)
directly or indirectly acquires ownership or control of a majority of the Equity
Interests of any class or series of any Person.
"ADJUSTED CONSOLIDATED CAPITAL EXPENDITURES" means, in relation to the
Borrower and its Subsidiaries for any period, the Consolidated Capital
Expenditures made by the Borrower and its Subsidiaries for such period LESS the
Charter School Capital Expenditures made by the Borrower and its Subsidiaries
for such period, all as determined on a consolidated basis in accordance with
GAAP.
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"AFFILIATE" of any Person means (a) any other Person which, directly or
indirectly, controls or is controlled by or is under common control with such
Person, or (b) any other Person who is a director, manager or officer of such
Person or of any Person described in clause (a). For purposes of this
definition, control of a Person shall mean the power, whether direct or
indirect, to direct or cause the direction of the management and policies of
such Person, whether by contract or otherwise. For purposes of this Agreement
and the other Loan Documents, (i) the Borrower shall not be or be deemed to be
an Affiliate of any of the Borrower's Subsidiaries, (ii) none of the
Subsidiaries of the Borrower, and none of the Schools, shall be or be deemed to
be an Affiliate of the Borrower or of any of the other Subsidiaries of the
Borrower, and (iii) the Bank shall not be or be deemed to be an Affiliate of the
Borrower or of any of its Subsidiaries.
"AFFILIATE TRANSACTION" means any of the following transactions or
arrangements:
(a) the making by the Borrower or any of its Subsidiaries of
any payment or prepayment (whether of principal, premium, interest or
any other sum) of or on account of, or any payment or other
distribution by the Borrower or any of its Subsidiaries on account of
the redemption, repurchase, defeasance or other acquisition for value
of, any Indebtedness of any kind whatsoever (i) of any Affiliate of the
Borrower, or (ii) of the Borrower or any of its Subsidiaries to any
Affiliate of the Borrower;
(b) the making of any loans, advances or other Investments of
any kind whatsoever by the Borrower or any of its Subsidiaries to or in
any Affiliate of the Borrower or to or in any holder of any
Indebtedness described in clause (a) of this definition;
(c) the Sale by the Borrower or any of its Subsidiaries of all
or any part of its Property to, or for the direct or indirect benefit
of, any Affiliate of the Borrower;
(d) the incurrence by the Borrower or any of its Subsidiaries
of any Indebtedness to any Affiliate of the Borrower;
(e) the declaration or payment by the Borrower or any of its
Subsidiaries of any dividends or other distributions on account of, or
the making by the Borrower or any of its Subsidiaries of any payment or
other distribution on account of the purchase, repurchase, redemption
or other acquisition for value of, any shares of Capital Stock or any
other Equity Interests or Securities of any Affiliate of the Borrower;
(f) the payment by the Borrower or any of its Subsidiaries to
any Affiliate of the Borrower of any fees or commissions of any kind,
including, without limitation, management or consulting fees,
non-competition payments or other similar fees, investment banking or
underwriting fees or commissions, arrangement, placement or syndication
fees, or brokers', finders' or other transaction fees or commissions;
or
(g) any other transaction or Contractual Obligation between
any Affiliate of the Borrower, on the one hand, and the Borrower, on
the other hand, or between any Affiliate of the Borrower, on the one
hand, and any Subsidiary of the Borrower, on the other hand.
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For the purposes of this Agreement and the other Loan Documents, the term
"AFFILIATE TRANSACTION" shall not include any salaries, bonuses, advances or
incentive stock options paid or issued to directors, managers, officers or
employees of the Borrower or of any of its Subsidiaries in the ordinary course
of business and in all material respects consistent with the Borrower's usual
and customary business practice.
"AGENCY ACCOUNT" means any depository, securities, investment or other
similar Financial Asset Account maintained by the Borrower or any of its
Subsidiaries with an Agency Account Institution, the funds or other Property
from which shall be subject to transfer, upon the terms contained in the Agency
Account Agreement applicable thereto, to the Borrower's Concentration Account or
otherwise to the Bank or as the Bank shall direct.
"AGENCY ACCOUNT AGREEMENT" is defined in Section 8.1.12.
"AGENCY ACCOUNT INSTITUTION" means any financial institution (other
than the Bank) which (a) receives deposits directly or indirectly (whether as
the result of an interim concentration of funds in depository accounts or
otherwise) or cash, Cash Equivalents, Securities or other Property from or for
the account of the Borrower or any of its Subsidiaries, and (b) is a party to
and bound by an Agency Account Agreement as contemplated and provided by Section
8.1.12.
"AGREEMENT" means this Credit Agreement.
"AMOUNT" means, with respect to any Acquisition, all consideration paid
in respect thereof, including consideration in the form of cash, Property (as
valued at the time of such Acquisition), or the assumption of Indebtedness or
other obligations.
"ANCILLARY DOCUMENTS" means, collectively, the Governing Documents of
each of the Borrower and its Subsidiaries, the Management Agreements, the
Subordinated Debt Documents, the Real Estate Lease Agreements, and all other
Instruments that shall from time to time be identified by the Borrower and the
Bank in writing as "ANCILLARY DOCUMENTS" for purposes of this Agreement and the
other Loan Documents.
"APPLICABLE LAW" means and includes statutes and rules and regulations
thereunder and interpretations thereof by any Governmental Authority charged
with the administration or the interpretation thereof, and orders, requests,
directives, instructions and notices of any Governmental Authority.
"APPROVAL" means, relative to the Borrower or any of its Subsidiaries,
each approval, consent, filing or registration by or with any Governmental
Authority or any creditor of or any holder of Equity Interests in the Borrower
or (as the case may be) any such Subsidiary necessary to authorize or permit the
execution, delivery or performance by the Borrower or (as the case may be) such
Subsidiary of any of the Loan Documents to which it is a party or the validity
or enforceability of any of such Loan Documents against the Borrower or (as the
case may be) such Subsidiary.
"AUTHORIZED OFFICERS" is defined in Section 6.1.7.
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"BANK" is defined in the introductory paragraph hereto.
"BANKRUPTCY CODE" means Title 11 of the United States Code.
"BANKRUPTCY OR INSOLVENCY PROCEEDING" means, with respect to any
Person, any insolvency or bankruptcy proceeding, or any receivership,
liquidation, reorganization or other similar proceeding in connection therewith,
relative to such Person or its creditors, as such, or to its Property, or any
proceeding for voluntary liquidation, dissolution, or other winding up of such
Person, whether or not involving insolvency or bankruptcy.
"BORROWER" is defined in the introductory paragraph hereto.
"BORROWER'S CONCENTRATION ACCOUNT" is defined in Section 8.1.12.
"BORROWING BASE" means, at the relevant time of reference thereto, as
contemplated and provided by Section 2.3, an amount determined by the Bank by
reference to the most recent Borrowing Base Report delivered to the Bank by the
Borrower pursuant to and in compliance with Section 6.2.4 or (as the case may
be) Section 8.1.1(c)(iii) hereof, which is equal to the greater of (a) 85% of
Eligible Trailing Revenues, or (b) 85% of Eligible Projected Revenues.
"BORROWING BASE REPORT" means a Borrowing Base Report duly executed and
delivered to the Bank by the chief financial, accounting or other senior
executive Authorized Officer of the Borrower, which Borrowing Base Report shall
be in the form prescribed from time to time by the Bank or otherwise in form and
substance reasonably satisfactory to the Bank.
"BUSINESS DAY" means a day on which commercial banks are open for
business in Boston, Massachusetts and in San Jose, California.
"CAPITAL ASSETS" means, with respect to any Person, all equipment,
fixed assets and real Property or improvements of such Person, or replacements
or substitutions therefor or additions thereto, that, in accordance with GAAP,
have been or should be reflected as additions to Property, plant or equipment on
the balance sheet of such Person or that have a useful life of more than one (1)
year.
"CAPITAL EXPENDITURES" means, with respect to any Person for any
period, (a) all expenditures made directly or indirectly by such Person during
such period for Capital Assets (whether paid in cash or other consideration or
accrued as a liability and, including, without limitation, all expenditures for
maintenance and repairs which are required, in accordance with GAAP, to be
capitalized on the books of such Person), and (b) solely to the extent not
otherwise included in clause (a) of this definition, the aggregate principal
amount of all Indebtedness (including, without limitation, Capitalized Lease
Obligations) assumed or incurred during such period in connection with any such
expenditures for Capital Assets.
"CAPITALIZED LEASE OBLIGATIONS" means, with respect to any Person, all
obligations of such Person to pay rent or other amounts under any lease of (or
other arrangements conveying the right to use) real or personal Property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP,
and, for the purposes of this Agreement, the amount of such obligations at any
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time shall be the capitalized amount thereof at such time determined in
accordance with GAAP.
"CAPITAL STOCK" means (a) in the case of any corporation, any corporate
capital stock of any class or series, (b) in the case of any association or
business entity, any shares, interests, participations, rights or other
equivalents (howsoever designated) of corporate capital stock, and (c) in the
case of any partnership or limited liability company, partnership or membership
interests (whether general or limited).
"CASH EQUIVALENTS" means:
(a) marketable obligations or other Securities issued or
directly, fully and unconditionally guaranteed or insured by the United
States government or any agency thereof and, in each case, maturing
within one (1) year after the date of acquisition thereof;
(b) marketable direct obligations or other Securities issued
by any State of the United States or any political subdivision of any
such State or any public instrumentality thereof maturing within one
(1) year after the date of acquisition thereof and, at the time of
acquisition, having one of the three (3) highest ratings obtainable
from either Standard & Poor's Ratings Group ("S&P") or ▇▇▇▇▇'▇
Investors Service, Inc. ("MOODY'S");
(c) commercial paper maturing less than one (1) year after the
date of acquisition thereof, issued by a corporation organized under
the laws of any State of the United States or of the District of
Columbia and, at the time of acquisition, having one of the three (3)
highest ratings obtainable from either S&P or Moody's;
(d) certificates of deposit, time deposits, eurodollar time
deposits or bankers' acceptances maturing within one (1) year after the
date of acquisition thereof, issued by the Bank or by any other
domestic commercial bank that is a member of the Federal Reserve System
that has capital and surplus aggregating not less than $100,000,000 and
is rated A-1 (or the equivalent) or better by S&P or P-1 (or the
equivalent) or better by Moody's;
(e) repurchase agreements entered into with the Bank or any
other domestic commercial bank meeting the qualifications specified in
clause (d), secured by a perfected first-priority Lien on any
obligations of the type described in any of clauses (a) through (d),
having a fair market value at the time such repurchase agreement is
entered into of not less than 100% of the repurchase obligation
thereunder of the Bank or other commercial bank; and
(f) money market funds in which at least 85% of such funds'
assets are invested in "CASH EQUIVALENTS" of the kind described in any
of clauses (a), (b), (c) or (d).
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended.
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"CHARTER SCHOOL" means any public not-for-profit charter school
established, operated or managed by the Borrower or by any of its Subsidiaries
pursuant to one or more Management Agreements to which the Borrower or any of
its Subsidiaries is a party.
"CHARTER SCHOOL CAPITAL EXPENDITURES" means, in relation to the
Borrower and its Subsidiaries for any period, all Capital Expenditures for such
period made by the Borrower and its Subsidiaries for the acquisition or
improvement of any Property, plant or equipment or other facilities of any
Charter School, all as determined on a consolidated basis in accordance with
GAAP.
"CLOSING DATE" means the date on which the first Credit Extensions are
made or to be made by the Bank to the Borrower hereunder.
"CLOSING DATE CERTIFICATE" is defined in Section 6.1.6.
"CLOSING FEE" is defined in Section 3.5.1.
"CODE" means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time.
"COLLATERAL" means, collectively, any and all collateral provided by
the Borrower and its Subsidiaries to the Bank from time to time under the
Collateral Documents and other Loan Documents.
"COLLATERAL DOCUMENTS" means, collectively, the Security Agreements,
the Agency Account Agreements and all other Instruments executed and delivered
to the Bank pursuant to Section 6.1.2, all Instruments executed and delivered to
the Bank pursuant to Section 3.10 or Section 8.1.9 from time to time after the
date hereof, and all other Instruments that shall from time to time after the
date hereof be identified in writing by the Bank and the Borrower as "COLLATERAL
DOCUMENTS" for purposes of this Agreement and the other Loan Documents.
"COLLECTION LOCKBOX" is defined in Section 6.2.5.
"COLLECTION PERIOD" means, in relation to each fiscal month of the
Borrower and its Subsidiaries ending on or after the date hereof, the period of
three (3) consecutive fiscal months of the Borrower ending on the last day of
such fiscal month.
"COMMITMENT" means the Bank's obligations pursuant to Section 2.1 to
make Loans and other Credit Extensions.
"COMMITMENT AMOUNT" is defined in Section 2.2.
"COMMITMENT FEES" is defined in Section 3.5.2.
"COMMITMENT TERMINATION DATE" means the third Business Day prior to the
Final Maturity Date.
"COMPLIANCE CERTIFICATE" means a certificate duly executed by an
Authorized Officer of
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the Borrower, substantially in the form of Exhibit H attached hereto (with such
changes thereto as may be agreed upon from time to time by the Bank and the
Borrower), for purposes of monitoring the compliance of the Borrower and its
Subsidiaries with the Loan Documents.
"CONSOLIDATED CAPITAL EXPENDITURES" means, in relation to any Person
and its Subsidiaries for any period, all Capital Expenditures by such Person and
its Subsidiaries for such period, all as determined on a consolidated basis in
accordance with GAAP.
"CONTINGENT OBLIGATION" means, in relation to any Person, any direct or
indirect liability, contingent or otherwise, of that Person (a) with respect to
any Indebtedness, lease, dividend, letter of credit or other obligation of
another Person if the primary purpose or intent thereof by the Person incurring
the Contingent Obligation is to provide assurance to the obligee of such
obligation that such obligation will be paid, or that any agreements relating
thereto will be complied with, or that the holders of such obligation will be
protected (in whole or in part) against loss in respect thereof, (b) with
respect to any letter of credit issued for the account of that Person or as to
which that Person is otherwise liable for reimbursement of drawings, or (c)
under Hedge Agreements. Contingent Obligations shall in any event include: (i)
any direct or indirect guaranty, endorsement (otherwise than for collection or
deposit in the ordinary course of business), co-making, discounting with
recourse or Sale with recourse by such Person of the obligation of another
Person; and (ii) any liability of such Person for the obligation of another
through any agreement (contingent or otherwise) to purchase, repurchase or
otherwise acquire such obligation or any security therefor, or to provide funds
for the payment or discharge of such obligation (whether in the form of loans,
capital contributions, other Investments or otherwise).
"CONTINUATION/CONVERSION NOTICE" means a notice, signed by an
Authorized Officer of the Borrower, complying with the requirements of Section
4.2 or 4.3, as applicable, or otherwise in form and substance reasonably
satisfactory to the Bank.
"CONTRACTUAL OBLIGATION" means, in relation to any Person, any
agreement or obligation under any Securities issued by such Person or under any
Instrument or undertaking to which such Person is a party or by which it or any
of its Property is bound.
"COPYRIGHT SECURITY AGREEMENT" means a Copyright Security Agreement, in
or substantially in the form of Exhibit D attached hereto, to be executed and
delivered by the Borrower in favor of the Bank pursuant to the Security
Agreement.
"CORPORATION" means, unless the context otherwise requires, any
corporation, limited liability company, association, joint stock company,
business trust or other similar business organization or business enterprise.
"CREDIT EXTENSION" means (a) the advancing of Loans by the Bank to the
Borrower pursuant to Article II and Article III, and (b) the issuance or
extension by the Bank of Letters of Credit pursuant to Article V.
"CREDIT REQUEST" means any Loan Request or Issuance Request.
"DEFAULT" means any Event of Default or any condition or event which,
after notice or
22
-8-
the lapse of time, or both, would become an Event of Default.
"DISBURSEMENT" is defined in Section 5.4.
"DISBURSEMENT DATE" is defined in Section 5.4.
"DISCLOSURE SCHEDULE" means the Disclosure Schedule attached hereto as
the Second Schedule.
"DOLLARS" and the sign "$" mean lawful money of the United States.
"DOMESTIC OFFICE" means, in relation to the Bank, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, or such other office of the Bank within the United States
as may be designated from time to time by prior written notice from the Bank to
the Borrower, by and through which each of the Loans and other Credit Extensions
will be made by the Bank hereunder.
"DRAWDOWN DATE" means any date (which must be a Business Day) on which
any Loan is made or to be made to the Borrower pursuant to Section 3.1.
"EFFECTIVE DATE" means the date of this Agreement.
"ELIGIBLE PROJECTED REVENUES" means, with respect to the Borrower and
its Subsidiaries as at the last day of any fiscal month, the aggregate amount of
all cash which the Borrower, on the basis of reasonable assumptions made in good
faith by the Borrower, projects will be received in the Borrower's Concentration
Account as payment on account of Net Revenues Receivables during the Projected
Collection Period ending on the last day of the third fiscal month following
such fiscal month.
"ELIGIBLE TRAILING REVENUES" means, with respect to the Borrower and
its Subsidiaries as at the last day of any fiscal month, the aggregate amount of
all cash actually received in the Borrower's Concentration Account as payment on
account of Net Revenues Receivables during the Collection Period ending on the
last day of such fiscal month. Notwithstanding the foregoing, as at the last day
of each fiscal month ending during the period commencing on the Closing Date and
continuing through December 31, 1999, Eligible Trailing Revenues shall mean the
aggregate amount of all cash actually received by the Borrower and its
Subsidiaries (either directly or through one or more depository banks) as
payment on account of Net Revenues Receivables during the Collection Period
ending on the last day of such fiscal month, all as more fully described in the
Borrowing Base Report as at the close of such fiscal month and in the other
reports and supporting information delivered by the Borrower to the Bank to
confirm the Borrowing Base calculations as of the last day of such fiscal month
"ENVIRONMENTAL LAWS" means all Applicable Laws relating to health and
safety matters or protection of the environment or relating to or imposing
liability or standards of conduct concerning any hazardous, toxic or dangerous
waste, substance, material or pollutant, in each case, as in effect from time to
time.
"EQUITY INTERESTS" means Capital Stock and all warrants, options or
other rights to purchase or otherwise acquire Capital Stock (but excluding any
debt Securities that are
23
-9-
convertible into, or exchangeable for, Capital Stock).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute of similar import, together with the
regulations thereunder, in each case, as in effect from time to time.
"EURODOLLAR LOAN" means any Loan which bears interest at a rate
determined by reference to the Eurodollar Rate (Reserve Adjusted).
"EURODOLLAR OFFICE" means, in relation to the Bank, ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, or such other office, whether or not outside the
United States, of the Bank as may be designated from time to time, by written
notice from the Bank to the Borrower, as the office from which the Bank shall be
making or maintaining Eurodollar Loans hereunder.
"EURODOLLAR RATE" means, in relation to each Interest Period applicable
to any Eurodollar Loan, the rate of interest per annum determined by the Bank to
be the offered rate per annum at which deposits in Dollars appears on Telerate
Page 3750 (or any successor page) as of 11:00 a.m., London time two (2) Business
Days prior to the beginning of such Interest Period, or in the event such
offered rate is not available from the Telerate Page, the rate per annum
(rounded upwards, if necessary, to the nearest 1/16 of 1%) determined by the
Bank as the annual rate at which the Bank is offered Dollar deposits in
immediately available funds two (2) Business Days prior to the beginning of such
Interest Period by prime banks in the interbank eurodollar market as at or about
1:00 p.m., San Jose, California time, in each case, for delivery on the first
day of such Interest Period, for the number of days comprised therein and in an
amount substantially equal to the amount of the Eurodollar Loan for such
Interest Period.
"EURODOLLAR RATE MARGIN" means, with respect to the principal amount of
any Loans maintained as Eurodollar Loans, four percent (4.0%) per annum.
"EURODOLLAR RATE (RESERVE ADJUSTED)" means, with respect to any
Eurodollar Loan for any Interest Period, a rate per annum (rounded upwards, if
necessary, to the nearest 1/16 of 1%) determined pursuant to the following
formula:
Eurodollar Rate = Eurodollar Rate
-----------------------------
(Reserve Adjusted) 1 - Eurodollar Reserve Percentage
"EURODOLLAR RESERVE PERCENTAGE" means, with respect to any Eurodollar
Loan for any Interest Period, a percentage (expressed as a decimal) equal to the
daily average during such Interest Period of the maximum percentages in effect
on each day of such Interest Period, as prescribed by the F.R.S. Board, for
determining the maximum reserve requirements applicable to "EUROCURRENCY
LIABILITIES" pursuant to Regulation D or any other applicable regulation of the
F.R.S. Board that prescribes reserve requirements applicable to "EUROCURRENCY
LIABILITIES" as currently defined in Regulation D.
"EVENT OF DEFAULT" is defined in Section 9.1.
"EXCLUDED ACCOUNT" is defined in Section 8.1.12(b).
24
-10-
"EXCLUDED EQUIPMENT" means (a) in relation to the Borrower, "Excluded
Equipment" of the Borrower as defined in the Security Agreement, and (b) in
relation to any Subsidiary of the Borrower, equipment of such Subsidiary from
time to time located or used, or otherwise intended to be located or used, in or
at the location of any of the Schools from time to time operated, managed or
administered by such Subsidiary.
"FAIR MARKET VALUE" means, with respect to any Property, the price
which could be negotiated in an arm's length free market transaction, for cash,
between a willing seller and a willing and able buyer, neither of whom is under
undue pressure or compulsion to complete the transaction.
"FEDERAL FUNDS RATE" means, for any day, the rate set forth in the
daily statistical release designated as the Composite 3:30 p.m. Quotations for
U.S. Government Securities, or any successor publication, published by the
Federal Reserve Bank of New York (including any such successor publication, the
"COMPOSITE 3:30 P.M. QUOTATIONS") for such day under the caption "Federal Funds
Effective Rate". If such rate is not published in the Composite 3:30 p.m.
Quotations for any Business Day, the rate for such day will be the arithmetic
mean of the rates for the last transaction in overnight federal funds arranged
prior to 9:00 a.m., New York City time, on such day by each of three brokers of
recognized national standing dealing in federal funds transactions in New York
City, selected by the Bank. The Federal Funds Rate for any day which is not a
Business Day shall be the rate for the immediately preceding Business Day.
"FEES" means, collectively, the Closing Fee, the Commitment Fees and
the Letter of Credit Fees payable pursuant to Section 5.3.
"FINANCIAL ASSET ACCOUNT" means any depository, securities, investment
or other similar account maintained by the Borrower or any of its Subsidiaries
with any bank or other financial institution with respect to the funds, Cash
Equivalents, securities or other Property from time to time owed by the
Borrower.
"FINANCIAL COVENANT SCHEDULE" means the Financial Covenant Schedule
attached hereto as the First Schedule.
"FINAL MATURITY DATE" means November 30, 2002.
"F.R.S. BOARD" means the Board of Governors of the Federal Reserve
System.
"GAAP" is defined in Section 1.4.
"GOVERNING DOCUMENTS" means, with respect to any Person, the
certificate of incorporation or registration (including, if applicable,
certificate of change of name), articles of incorporation or association,
memorandum of association, charter, bylaws, partnership agreement, trust
agreement, joint venture agreement, limited liability company operating or
members agreement, joint venture agreement, or any one or more similar
agreements, Instruments or documents constituting the organization or formation
of such Person.
"GOVERNMENTAL AUTHORITY" means any nation or government, any state,
province, city, municipal entity or other political subdivision thereof, and any
governmental, executive,
25
-11-
legislative, judicial, administrative or regulatory agency, department,
authority, instrumentality, commission, board or similar body, whether federal,
state, provincial, territorial, local or foreign, including, without limitation,
any school district or board of education thereof.
"GROUP" as defined in Section 4.1.
"HAZARDOUS MATERIAL" means and includes the following: any "hazardous
substance", as defined in CERCLA; any "hazardous waste", as defined in the
Resource Conservation and Recovery Act, as amended; any petroleum product; or
any pollutant or contaminant or hazardous, dangerous or toxic chemical, material
or substance within the meaning of any other applicable Environmental Laws.
"HEDGE AGREEMENTS" means interest rate swap, cap or collar
arrangements, interest rate future or option contracts, currency swap
agreements, currency future or option contracts and other similar arrangements.
"HISTORICAL FINANCIALS" is defined in Section 7.4.
"IMPERMISSIBLE QUALIFICATION" means, relative to the opinion or
certification of the Independent Public Accountant as to any financial statement
of the Borrower or any of its Subsidiaries, any qualification or exception to
such opinion or certification:
(a) which is of a "going concern" or similar nature;
(b) which relates to the limited scope of examination of
matters relevant to such financial statement; or
(c) which relates to the treatment or classification of any
item in such financial statement and which, as a condition to its
removal, would require an adjustment to such item the effect of which
would be to cause the Borrower to be in default of any of its
Obligations under Section 8.2.4.
"INCUR" means, with respect to any Indebtedness of any Person, to
create, issue, incur (by conversion, exchange or otherwise), assume, guarantee
or otherwise become liable in respect of such Indebtedness or the recording, as
required pursuant to GAAP or otherwise, of any such Indebtedness on the balance
sheet of such Person (and "INCURRENCE", "INCURRED", and "INCURRING" shall have
meanings correlative to the foregoing).
"INDEBTEDNESS" means, in relation to any Person as at any date, without
duplication, (a) all indebtedness of such Person for borrowed money, (b) all
indebtedness of such Person for the deferred purchase price of Property or
services (other than accounts or trade payables and accrued expenses incurred in
the ordinary course of such Person's business and not overdue more than 90
days), (c) all indebtedness of such Person evidenced by notes, bonds, debentures
or other similar Instruments, (d) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to Property
acquired by such Person (even though the rights and remedies of the seller or
lender under such agreement in the event of default are limited to repossession
or sale of such Property), (e) all Capitalized Lease Obligations of such Person,
(f) the face amount of all indebtedness of such Person, contingent of otherwise,
as an
26
-12-
account party under acceptance, letter of credit or similar facilities, (g) all
indebtedness then due and owing of such Person to purchase, redeem, retire or
otherwise acquire for value any Equity Interests of such Person, (h) all
Contingent Obligations of such Person in respect of indebtedness of the kind
referred to in clauses (a) through (g); (i) all indebtedness of the kind
referred to in clauses (a) through (h) secured by (or for which the holder of
such indebtedness has an existing right, contingent or otherwise, to be secured
by) any Lien on Property (including, without limitation, accounts and contract
rights) owned by such Person, whether or not such Person has assumed or become
liable for the payment of such indebtedness, and (j) all obligations of such
Person in respect of Hedge Agreements. The amount of any indebtedness under
clause (j) shall be the net amount, including any net termination payments that
would be required to be paid to a counterparty on such date if a termination of
the applicable Hedge Agreement were to occur on such date rather than the
notional amount of the applicable Hedge Agreement. Anything in the foregoing
sentence of this definition to the contrary notwithstanding, for purposes of
this Agreement and the other Loan Documents, the term "INDEBTEDNESS", when used
in relation to any Person, shall in no event include any indebtedness or
contingent obligations of such Person in respect of any accounts or trade
payables, accrued expenses or other indebtedness to trade creditors or employees
incurred in the ordinary course of business and not overdue more than 90 days.
"INDEMNIFIED LIABILITIES" is defined in Section 10.4.
"INDEMNIFIED PARTY" is defined in Section 10.4.
"INDEPENDENT PUBLIC ACCOUNTANT" means any one of the so-called
"big-four" firms of certified public accountants or any other firm of certified
public accountants of recognized standing selected by the Borrower and
reasonably acceptable to the Bank.
"INSTRUMENT" means any contract, agreement, indenture, mortgage or
other document or writing (whether a formal agreement, letter or otherwise)
under which any obligation is evidenced, assumed or undertaken, or any right to
any Lien is granted or perfected.
"INTEREST PERIOD" means, relative to any Eurodollar Loan, the period,
selected in accordance with Section 4.4.1, for which such Eurodollar Loan bears
interest at the Eurodollar Rate (Reserve Adjusted).
"INVESTMENT" means, in relation to any Person:
(a) any loan, advance or other extension of credit made by
such Person to any other Person;
(b) the creation of any Contingent Obligation of such Person
to support any of the Indebtedness of any other Person; or
(c) any capital contribution by such Person to, or purchase of
any Equity Interests or other Securities by such Person in, any other
Person, or any other investment evidencing an ownership or similar
interest of such Person in any other Person.
"ISSUANCE REQUEST" means a request and certificate duly executed by the
chief financial,
27
-13-
accounting or executive Authorized Officer of the Borrower, in or substantially
in the form of Exhibit G (with such changes thereto as may be agreed upon from
time to time by the Bank and the Borrower).
"L/C COMMITMENT AMOUNT" means $3,000,000.
"LANDLORD LIEN WAIVER" means, with respect to any Real Estate Lease or
(as the case may be) any warehouse contract to which the Borrower is a party, a
Lien waiver from the lessor, landlord or (as the case may be) warehouse
thereunder in form and substance reasonably satisfactory to the Bank.
"LETTER OF CREDIT" is defined in Section 5.1.
"LETTER OF CREDIT OUTSTANDINGS" means, at any time, an amount equal to
the sum of (a) the then aggregate amount which is undrawn and available under
all outstanding Letters of Credit; PLUS (b) the then aggregate amount of all
unpaid and outstanding Reimbursement Obligations.
"LIEN" means any mortgage, security interest, pledge, encumbrance, lien
(statutory, judgment or otherwise), or other security agreement of any kind or
nature whatsoever (including any conditional sale or other title retention
agreement, and any financing lease involving substantially the same economic
effect as any of the foregoing).
"LINE OF BUSINESS" means the businesses presently conducted by the
Borrower and shall in any event include (a) the businesses of establishing,
operating and managing not-for-profit charter and public schools, and (b)
businesses reasonably related, ancillary or complimentary thereto.
"LOAN DOCUMENTS" means, collectively, this Agreement, the Note, the
Collateral Documents, the Closing Date Certificate, and each other Instrument
executed and delivered pursuant to or in connection with any thereof.
"LOAN REQUEST" means a loan request and certificate duly executed and
delivered to the Bank by the chief financial, accounting or executive Authorized
Officer of the Borrower, in or substantially in the form of Exhibit F hereto,
with such changes thereto as may be agreed upon from time to time by the
Borrower and the Bank.
"LOANS" is defined in Section 2.1.
"MANAGEMENT AGREEMENTS" means, collectively, all management agreements,
educational management service contracts and other similar Instruments to which
the Borrower or any of its Subsidiaries shall from time to time be a party and
pursuant to which the Borrower or any of its Subsidiaries shall establish,
operate or manage one or more Schools.
"MATERIALLY ADVERSE EFFECT" means, in relation to any event, occurrence
or development of whatsoever nature (including any adverse determination in any
litigation, arbitration or governmental investigation or proceeding):
28
-14-
(a) any Materially adverse effect on the business, Property,
results of operations, condition, financial or otherwise, or prospects
of the Borrower and its Subsidiaries, taken as a whole;
(b) any Materially adverse effect on the ability of the
Borrower or any of its Subsidiaries to perform any of its payment or
other material Obligations under any Loan Document to which it is a
party; or
(c) a material impairment of the validity or enforceability of
any Loan Document or any material impairment of the rights or remedies
available to the Bank under any Loan Document.
"NET PROCEEDS" means, with respect to any Sale of any Investment or
other Property or any issue of Equity Interests or other Securities by any
Person, all cash and other Property (including, without limitation, Instruments
evidencing or securing Indebtedness and Equity Interests or other Securities)
payable to or receivable by such Person from such Sale or issuance, net of (a)
all income, sales, use, transfer or other taxes (state, federal or local) solely
attributable to such Sale or issuance and reasonably estimated to be payable in
cash by such Person for the taxable year in which such Sale or issuance
occurred, and (b) all commissions and fees, costs and other expenses incurred in
connection with such Sale or issuance.
"NET REVENUES RECEIVABLE" means, in relation to the Borrower and its
Subsidiaries as at any date, the aggregate amount of all of the cash revenues
payable to or otherwise receivable by the Borrower or any of its Subsidiaries
from any Governmental Authorities or any other Persons pursuant to Management
Agreements by which the Borrower and any of its Subsidiaries is then bound, net
(in each case) of all (if any) credits, rebates, offsets, holdbacks and other
adjustments which will or could reasonably be expected to reduce the liabilities
and obligations represented by such revenues receivable, all as determined as at
such date on a consolidated basis and in accordance with GAAP.
"NOTE" is defined in Section 3.2, and shall also mean and refer to all
other promissory notes accepted from time to time in substitution therefor,
replacement or renewal thereof or refunding thereof.
"OBLIGATIONS" means, collectively, all of the Indebtedness and other
obligations and liabilities existing on the date of this Agreement or arising
from time to time thereafter, whether direct or indirect, joint or several,
actual, absolute or contingent, matured or unmatured, liquidated or
unliquidated, secured or unsecured, arising by contract, operation of law or
otherwise, of the Borrower or any of its Subsidiaries to the Bank (a) in respect
of any of the Loans or other Credit Extensions made or to be made to the
Borrower by the Bank pursuant to this Agreement, or (b) under or in respect of
this Agreement, the Note or any of the other Loan Documents.
"PAID (OR PAYMENT) IN FULL" means paid (or payment) in full and in
cash.
"PARTNERSHIP SCHOOL" means any not-for-profit public school (other than
any Charter School) managed, operated and administered by the Borrower or by any
of its Subsidiaries
29
-15-
pursuant to one or more Management Agreements to which the Borrower or any of
its Subsidiaries is a party.
"PERMITTED DISPOSITION" means:
(a) any Sale by the Borrower or any of its Subsidiaries of any
of its inventory in the ordinary course of its business;
(b) any Sale by the Borrower or any of its Subsidiaries in the
ordinary course of its business of its equipment or other tangible
personal Property that is obsolete or no longer useful or necessary to
its business;
(c) any Sale by the Borrower or any of its Subsidiaries in the
ordinary course of its business, and in a manner consistent with its
customary and usual cash management practices, of its Permitted
Investments; and
(d) the creation or incurrence by the Borrower or any of its
Subsidiaries of any Liens expressly permitted by Section 8.2.3.
"PERMITTED EQUITY INTERESTS" means any Equity Interests of any Person
on account of or with respect to which such Person has no obligation to (a)
declare or pay any dividends or other distributions at any time on or prior to
December 31, 2002, except dividends or other distributions to be paid in
Permitted Equity Interests of such Person, (b) make any redemption, repurchase,
retirement or acquisition, whether through a Subsidiary of such Person or
otherwise, at any time on or prior to December 31, 2002, except (in any such
case) with Permitted Equity Interests of such Person, (c) make any return of
capital to the holder thereof at any time on or prior to December 31, 2002,
except with Permitted Equity Interests of such Person, or (d) make any other
distributions of any kind at any time on or prior to December 31, 2002, except
distributions to be made in Permitted Equity Interests of such Person.
"PERMITTED INDEBTEDNESS" means any of the following Indebtedness:
(a) Indebtedness of the Borrower or any of its Subsidiaries in
respect of taxes, assessments, levies or other governmental charges,
and Indebtedness of any such Person in respect of accounts payable or
other Indebtedness to trade creditors incurred in the ordinary course
of business or in respect of claims against it for labor, materials or
supplies, to the extent (in each case) that the payment thereof shall
not at the time be required to be made in accordance with the
provisions of Section 8.1.4;
(b) Indebtedness of the Borrower or any of its Subsidiaries
secured by Liens of carriers, warehousemen, mechanics, landlords,
materialmen, laborers, suppliers and the like that constitute Permitted
Liens under clause (a) or (d) of the definition thereof;
(c) Indebtedness of the Borrower or any of its Subsidiaries in
respect of judgments or awards which have been in force for less than
the applicable appeal period so long as (i) (in each case) such Person
shall at the time in good faith be prosecuting an appeal or proceedings
for review and execution thereof shall have been effectively stayed
pending such appeal or review, and (ii) the aggregate principal amount
of all such
30
-16-
Indebtedness of the Borrower or any of its Subsidiaries outstanding at
any time (determined on a consolidated basis in accordance with GAAP)
does not exceed $1,000,000;
(d) Contractual Obligations of the Borrower or any of its
Subsidiaries (other than Contractual Obligations constituting
Indebtedness for borrowed money) under Instruments (including operating
leases or subleases of real or personal Property, but in any event
excluding any Instruments creating, governing or securing Indebtedness
for borrowed money) entered into in the ordinary course of business of
such Person, and Contingent Obligations of the Borrower or any of its
Subsidiaries incurred in the ordinary course of business of such Person
in respect of any of such Contractual Obligations;
(e) Indebtedness under or in respect of Contingent Obligations
of the Borrower or any of its Subsidiaries in respect of letters of
credit or bankers' acceptances or surety or other bonds issued in the
ordinary course of business of such Person in connection with Liens
that constitute Permitted Liens under clause (b) of the definition
thereof;
(f) Indebtedness created or incurred by the Borrower or any of
its Subsidiaries from time to time after the date hereof in connection
with the acquisition, lease, construction or improvement by such Person
from time to time after the date hereof and in the ordinary course of
business of Property used or to be used in the ordinary course of
business of the Borrower or any of its Subsidiaries; provided, however,
that (i) any Liens on such Property securing any such Indebtedness of
any such Person shall constitute Permitted Liens under clause (g) of
the definition thereof, and (ii) the aggregate amount of all of the
Indebtedness of the Borrower and its Subsidiaries (determined on a
consolidated basis) described in this clause (f) and in clause (g) of
the definition of the term "PERMITTED LIENS" shall not at any time
exceed $53,500,000; and
(g) Indebtedness of the Borrower that (i) is existing on the
date of this Agreement, and (ii) is specifically identified in Section
7.7 of the Disclosure Schedule.
"PERMITTED INVESTMENTS" means any of the following Investments by the
Borrower or any of its Subsidiaries:
(a) Investments that (i) are owned or held by the Borrower or
are outstanding or are in effect on the date of this Agreement, and
(ii) are identified, unless immaterial and insubstantial, in Section
7.20 of the Disclosure Schedule;
(b) Investments in cash or in Cash Equivalents;
(c) Investments in the form of accounts receivable;
(d) Investments in the form of advances or prepayments to
suppliers or other vendors made in the ordinary course of business and
in all material respects consistent with the Borrower's usual and
customary business practices;
(e) Investments in the form of advances to directors,
managers, officers or
31
-17-
employees in the ordinary course of business and in all material
respects consistent with the Borrower's usual and customary business
practices for travel expenses, entertainment expenses, relocation
expenses, drawing accounts or other similar business-related expenses;
(f) Investments by the Borrower or any of its Subsidiaries if
and to the extent made in exchange for Permitted Equity Interests of
the Borrower;
(g) Investments by the Borrower or any of its Subsidiaries
made in the ordinary course of its business in Capital Assets;
provided, however, that, prior to and after giving effect to each of
such Investments, no Default or Event of Default shall be continuing;
and
(h) other Investments by the Borrower or by any of its
Subsidiaries made from time to time after the date hereof and not
otherwise described in any of clauses (a) through (g) of this
definition; provided, however, that the aggregate amount of all of such
Investments so made from time to time after the date hereof by the
Borrower or by any of its Subsidiaries shall not exceed $500,000, such
aggregate amount to be determined on the basis of the cost of each of
such Investments and determined before giving any effect to any
write-offs or write-downs of any of such Investments or to any
decreases or losses (whether partial or complete) in the Fair Market
Value thereof.
"PERMITTED LIENS" means any of the following Liens:
(a) Liens to secure taxes, assessments, levies or other
governmental charges imposed upon the Borrower or any of its
Subsidiaries, and Liens to secure claims against the Borrower or any of
its Subsidiaries for labor, materials or supplies, to the extent (in
each case) that the payment thereof shall not at the time be required
to be made in accordance with the provisions of Section 8.l.4;
(b) deposits or pledges made by the Borrower or any of its
Subsidiaries in the ordinary course of its business (i) in connection
with, or to secure payment of, (A) workers' compensation, unemployment
insurance or other forms of governmental insurance or benefits, or (B)
liability to insurance carriers under insurance or self-insurance
arrangements, (ii) to secure the performance of bids, tenders,
statutory obligations, leases, contracts (other than contracts relating
to borrowed money) or other obligations of like nature, or (iii) to
secure surety, appeal, indemnity or performance bonds, in each case, in
the ordinary course of the business of such Person, and, in each case,
only to the extent that payment thereof shall not at the time be
required to be made in accordance with the provisions of Section 8.1.4;
(c) Liens in respect of judgments or awards against the
Borrower or any of its Subsidiaries to the extent that such judgments
or awards constitute Permitted Indebtedness under clause (c) of the
definition thereof;
(d) Liens of carriers, warehousemen, mechanics, landlords,
materialmen, laborers, suppliers and the like incurred in the ordinary
course of the business of the
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Borrower or any of its Subsidiaries, in each case, for sums not overdue
or being contested in good faith by appropriate proceedings, and for
which appropriate reserves with respect thereto have been established
and maintained on the consolidated books of the Borrower and its
Subsidiaries in accordance with GAAP to the extent required by GAAP;
(e) easements, rights-of-way, zoning and other similar
restrictions and covenants and other similar encumbrances or title
defects which, in the aggregate, are not substantial in amount, and
which do not in any case materially detract from the value of the
Property subject thereto or interfere with the ordinary conduct of the
business of the Borrower or any of its Subsidiaries;
(f) Liens that (i) are in existence on the date of this
Agreement, and (ii) secure Indebtedness of the Borrower that
constitutes Permitted Indebtedness hereunder;
(g) Liens created or incurred by the Borrower or any of its
Subsidiaries from time to time after the date hereof to secure the
payment of the cost of Property acquired, leased, constructed or
improved by such Person from time to time after the date hereof and in
the ordinary course of business, and which Liens are created or
incurred substantially contemporaneously with or within 360 days after
the acquisition, lease, construction or improvement of the Property
subject thereto (all Liens of the type described in this clause (g)
being hereinafter called "PURCHASE MONEY LIENS"); provided, however,
that:
(i) any Property subject to any such Purchase Money
Lien created or incurred by any such Person shall be used in
the ordinary course of business of the Borrower or any of its
Subsidiaries;
(ii) no such Purchase Money Lien on any such Property
shall extend to or cover any other Property of the Person
creating such Lien or any Property of any other Person; and
(iii) the aggregate amount of all of the Indebtedness
of the Borrower and its Subsidiaries (determined on a
consolidated basis) secured by all of such Purchase Money
Liens described in this clause (g) and in clause (f) of the
definition of the term "PERMITTED INDEBTEDNESS" shall not at
any time exceed $53,500,000; and
(h) extensions, renewals and replacements of Liens described
in clause (g) of this definition, provided that (A) each such
extension, renewal or replacement Lien is limited to the Property
covered by the Lien so extended, renewed or replaced, and (B) does not
secure any Indebtedness other than Indebtedness that constitutes
Permitted Indebtedness under clause (f) of the definition thereof.
"PERMITTED SUBORDINATED DEBT" means any Indebtedness of the Borrower,
all of the proceeds of which are used by the Borrower for working capital and
other corporate purposes; provided, however, that, without the express prior
written consent of the Bank in each case: (a) no portion of such Indebtedness
shall mature or shall be mandatorily redeemable, pursuant to a
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sinking fund obligation or otherwise, or be redeemable at the option of the
holder thereof, in whole or in part, on or prior to the Final Maturity Date; (b)
the interest on such Indebtedness shall not be paid in cash prior to maturity
and no sinking fund shall be required to be established for the payment of
interest; (c) no part of such Indebtedness shall be secured by Liens on any
Property of the Borrower or of any of its Subsidiaries; (d) no part of such
Indebtedness shall be guaranteed by any of the Borrower's Subsidiaries; (e) all
of such Indebtedness shall be subordinated, and made junior in right of payment,
to all of the Obligations of the Borrower to the Bank under this Agreement, the
Note and the other Loan Documents on terms and conditions reasonably
satisfactory to the Bank, as evidenced by its prior written approval thereof;
and (f) all of the other terms and conditions of such Indebtedness shall be
reasonably satisfactory to the Bank, as evidenced by its prior written approval
thereof.
"PERSON" means any natural person, corporation, limited liability
company, partnership, joint venture, association, Governmental Authority or any
other entity, whether acting in an individual, fiduciary or other capacity.
"PRIME RATE" means the greater of (a) the annual rate of interest
announced from time to time by the Bank at its offices in San Jose, California,
as its "prime rate", or (b) one-half of one percent (1/2%) above the Federal
Funds Rate.
"PRIME RATE LOAN" means any Loan which bears interest at a rate
determined by reference to the Prime Rate.
"PRIME RATE MARGIN" means, with respect to the principal amount of any
Loans maintained as Prime Rate Loans, one and three-quarters percent (1-3/4%)
per annum.
"PROJECTED COLLECTION PERIOD" means, in relation to each fiscal month
of the Borrower and its Subsidiaries ending on or after the date hereof, the
period of three (3) consecutive fiscal months of the Borrower ending on the last
day of the third fiscal month following such fiscal month.
"PROJECTIONS" is defined in Section 7.5.
"PROPERTY" means any interest in any kind of property or asset, whether
real, personal or mixed, and whether tangible or intangible.
"REAL ESTATE" means all real Property at any time owned or leased (as
lessee or sublessee) by the Borrower or any of its Subsidiaries.
"REAL ESTATE LEASE" means any lease, including any ground lease or
space lease or any rental or occupancy agreement (in each case, whether written
or oral, and whether express or implied), that relates to and governs or
otherwise evidences the terms and conditions for the leasing or use of, or any
leasehold or other similar interest in, any Real Estate, and pursuant to which
the Borrower or any of its Subsidiaries shall lease any Real Estate, in each
case, as lessee or sublessee thereof .
"REAL ESTATE LEASE AGREEMENTS" means, in relation to any Real Estate
Lease, all Instruments governing or evidencing such Real Estate Lease or
otherwise executed and delivered
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in connection with such Real Estate Lease.
"REFERENCE PERIOD" means each period of four (4) consecutive fiscal
quarters of the Borrower and its Subsidiaries.
"REIMBURSEMENT OBLIGATIONS" is defined in Section 5.5.
"RELEASE" means a "release", as such term is defined in CERCLA.
"RESTRICTED PAYMENTS" means, in relation to the Borrower and its
Subsidiaries:
(a) any payment, prepayment, distribution, loan, advance,
Investment or Sale by the Borrower or any of its Subsidiaries which
constitutes an Affiliate Transaction described in clause (a), (b), (c),
(d), (e), (f) or (g) of the definition "AFFILIATE TRANSACTION"; and
(b) any declaration or payment by the Borrower or any of its
Subsidiaries of any dividends or other distributions on account of, or
any payment or other distribution by the Borrower or any of its
Subsidiaries on account of the purchase, repurchase, redemption,
retirement or other acquisition for value of, any Equity Interests or
other Securities of the Borrower.
"SALE" means any sale, conveyance, exchange, swap, trade, transfer or
other disposition of any Property.
"SCHEDULES" means, collectively, the Financial Covenant Schedule and
the Disclosure Schedule.
"SCHOOLS" means, collectively, the Charter Schools and the Partnership
Schools.
"SCHOOL FACILITIES" is defined in Section 8.2.5(b)(i).
"SECURITIES" means any Capital Stock, Equity Interests, bonds,
debentures, notes or other evidences of Indebtedness, secured or unsecured,
convertible, subordinated or otherwise, or, in general, any Instruments commonly
known as "securities".
"SECURITY AGREEMENT" means the Security Agreement, in or substantially
in the form of Exhibit B attached hereto, to be executed and delivered by the
Borrower on or prior to the Closing Date in favor of the Bank.
"SECURITY AGREEMENTS" means, collectively, the Security Agreement and
each of the Trademark Security Agreements, Copyright Security Agreements and
Agency Account Agreements entered into from time to time.
"SECURITY INSTRUMENT" means any security agreement, chattel mortgage,
assignment, financing or similar statement or notice, continuation statement, or
other agreement or Instrument, or any amendment or supplement to any thereof,
providing for, evidencing or perfecting any Lien.
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"STATED AMOUNT" of each Letter of Credit means the "Stated Amount" as
defined therein or, if not defined therein, the face amount thereof.
"STATED EXPIRY DATE" is defined in clause (B) of Section 5.1.
"STUDENT ENROLLMENT" means, at any date, the aggregate number of
students enrolled in any School for whom the Borrower or any of its Subsidiaries
receives funding or derives revenue from any Governmental Authority or other
Person pursuant to any Management Agreement; provided, however, that, for all
purposes of this Agreement, the Student Enrollment of any School as at any date
on which such School is not in session shall be equal to the Student Enrollment
of such School on and as of the last preceding date on which such School was in
session.
"SUBORDINATED DEBT DOCUMENTS" means, collectively, all agreements or
other Instruments governing or evidencing Permitted Subordinated Debt.
"SUBSIDIARY" means, in relation to any Person (in this paragraph called
the "PARENT") at any time, any corporation, limited liability company,
partnership or other Person (a) of which shares of Capital Stock or other Equity
Interests having ordinary voting power to elect a majority of the board of
directors or other managers of such corporation, limited liability company,
partnership or other Person, or representing a majority of the Equity Interests
in such corporation, limited liability company, partnership or other Person, are
at the time owned, controlled or held, directly or indirectly, by the parent, or
(b) the management of which is otherwise controlled, directly or indirectly, by
the parent.
"TARGET SCHOOL" is defined in Section 8.2.5(b)(i).
"TAXES" is defined in Section 3.7.
"TRADEMARK SECURITY AGREEMENT" means a Trademark Security Agreement, in
or substantially in the form of Exhibit C attached hereto, to be executed and
delivered by the Borrower in favor of the Bank pursuant to the Security
Agreement.
"TYPE" is defined in Section 4.1.
"UNUSED COMMITMENT AMOUNT" means, for any period (of one or more days),
the average daily amount for such period by which the Commitment Amount (as
reduced by any permanent reduction pursuant to Section 2.2) on each day during
such period exceeds the sum of (a) the aggregate principal amount of all Loans
outstanding on each such day, PLUS (b) the aggregate amount of Letter of Credit
Outstandings on each such day.
"VOTING INTERESTS" means, in relation to any Person at any particular
date, any Capital Stock or other Equity Interests of the class or classes having
general voting power under ordinary circumstances to elect the board of
directors, managers or trustees (or any other Persons performing similar
functions) of such Person (irrespective of whether or not at the time Capital
Stock or other Equity Interests of any other classes shall have or might have
voting power by reason of the happening of any contingency).
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"YEAR 2000 COMPLIANT" is defined in Section 8.1.11.
"YEAR 2000 PROBLEM" is defined in Section 7.22.
SECTION 1.2. USE OF DEFINED TERMS.
Terms for which meanings are provided in this Agreement shall, unless
otherwise defined or the context otherwise requires, have such meanings when
used in the Note, the Schedules and Exhibits, each of the other Loan Documents,
and each notice or other communication delivered from time to time in connection
with this Agreement or any Instrument executed pursuant hereto.
SECTION 1.3. CROSS-REFERENCES.
Unless otherwise specified, references in this Agreement or in any of
the other Loan Documents to any Schedule, Exhibit, Article or Section are
references to such Schedule, Exhibit, Article or Section of this Agreement or
such other Loan Document, as the case may be, and unless otherwise specified,
references in any Schedule, Exhibit, Article, Section or definition to any
paragraph or clause are references to such paragraph or clause of such Schedule,
Exhibit, Article, Section or definition.
SECTION 1.4. ACCOUNTING AND FINANCIAL DETERMINATIONS.
(a) Where the character or amount of any asset or liability or item of
income or expense is required to be determined, or any accounting computation is
required to be made, for the purposes of this Agreement and the other Loan
Documents, such determination or calculation shall, to the extent applicable, be
made in accordance with generally accepted accounting principles ("GAAP").
(b) Anything in this Agreement or in any of the other Loan Documents
express or implied to the contrary notwithstanding, until the Borrower acquires,
creates or forms any Subsidiary, any reference (whether in any defined term, in
Article VII, in Article VIII, in connection with any Compliance Certificate or
otherwise) to the term "CONSOLIDATED" or "CONSOLIDATING" in relation to the
Borrower and its Subsidiaries or in relation to any financial statements or
other financial information of any kind (whether pro forma or otherwise)
pertaining to the Borrower and its Subsidiaries shall instead be construed and
treated for all purposes as a reference to the Borrower alone, and any covenant
or other requirement in this Agreement, any Compliance Certificate or any other
Loan Document that consolidated or consolidating financial statements or other
financial information of any kind be furnished to the Bank in relation to the
Borrower and its Subsidiaries shall instead be construed and treated for all
purposes as a covenant and requirement that such financial statements or other
financial information be furnished to the Bank in relation to the Borrower
alone.
SECTION 1.5. GENERAL PROVISIONS RELATING TO DEFINITIONS.
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Terms for which meanings are defined in this Agreement shall apply
equally to the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The term "INCLUDING" means including, without
limiting the generality of any description preceding such term. Each reference
herein to any Person shall include a reference to such Person's successors and
assigns. References to any Instrument defined in this Agreement refer to such
Instrument as originally executed, or, if subsequently amended or supplemented
from time to time, as so amended or supplemented and in effect at the relevant
time of reference thereto.
ARTICLE II
COMMITMENT
SECTION 2.1 COMMITMENT.
Subject to the terms and conditions of this Agreement (including
Article VI) the Bank agrees that it will, from time to time on any Business Day
occurring during the period commencing on the Closing Date and continuing to
(but not including) the Commitment Termination Date, make loans ("LOANS") to the
Borrower in the principal amount requested by the Borrower pursuant to Section
3.1; provided, however, that the Bank shall not be required to make any Loan if,
after giving effect to the making of such Loan, the sum of (a) the aggregate
principal amount of all Loans then outstanding, PLUS (b) the aggregate amount of
Letter of Credit Outstandings, would exceed the lesser of the Commitment Amount
and the Borrowing Base then in effect. Subject to the terms and conditions of
this Agreement (including Article VI), the Bank agrees that it will, from time
to time on any Business Day occurring during the period commencing on the date
hereof and continuing up to (but not including) the Commitment Termination Date,
issue or extend Letters of Credit for the account of the Borrower, all in
accordance with the provisions of Article V. Subject always to the terms and
conditions hereof, the Borrower may from time to time borrow, prepay and
reborrow Loans pursuant to the Commitment.
SECTION 2.2. COMMITMENT AMOUNTS.
The aggregate principal amount ("Commitment Amount") of the Commitment
of the Bank on any date on or prior to the Commitment Termination Date shall be
$10,000,000. The Commitment shall in any event terminate in full and the
Commitment Amount shall be reduced to zero on the Commitment Termination Date.
The Commitment Amount from time to time in effect shall, at the option of the
Borrower, be subject to permanent reduction in full or in part, automatically
and without further action, by the aggregate principal amount of each voluntary
permanent reduction of the Commitment Amount made by the Borrower from time to
time after the date hereof; provided, however, that
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(a) each such permanent reduction of the Commitment Amount
shall require at least three (3) Business Days' prior notice to the
Bank and shall be permanent, and any partial reduction of such amount
shall be in a minimum amount of $200,000 or in an integral multiple of
$50,000 in excess thereof; and
(b) no such permanent reduction of the Commitment Amount may
be made by the Borrower if, after giving effect to such reduction, the
Commitment Amount would be reduced to an amount which is less than the
sum of (i) the aggregate principal amount of all Loans then outstanding
at such time, PLUS (ii) the aggregate amount of Letter of Credit
Outstandings at such time.
SECTION 2.3. THE BORROWING BASE.
The Borrowing Base shall be determined monthly by the Bank by reference
to the Borrowing Base Report delivered to the Bank pursuant to Section 6.2.4 or
Section 8.1.1(c)(iii) (as the case may be), and by reference to such other
information (written or otherwise) as shall from time to time be available to
the Bank.
ARTICLE III
LOANS AND NOTES
SECTION 3.1. BORROWING PROCEDURES.
By delivering to the Bank a Loan Request on or before 11:00 a.m., San
Jose, California time, the Borrower may from time to time request, on not less
than one (1) nor more than five (5) Business Days' notice for Prime Rate Loans
(or not less than four (4) nor more than seven (7) Business Days' notice for
Eurodollar Loans), that a Loan be made by the Bank in a minimum aggregate
principal amount of $200,000, or any integral multiple of $50,000 in excess
thereof, on the Drawdown Date (which must be a Business Day) specified in such
Loan Request. The proceeds of each Loan shall be made available by the Bank to
the Borrower on the Drawdown Date specified in the Loan Request by wire
transferring such funds in such amount or causing such funds in such amount to
be wire transferred to such account of the Borrower, or to such designees of the
Borrower, as shall be designated by the Borrower to the Bank in the Loan Request
therefor. Each request for Loans made pursuant to this Section 3.1 shall
constitute the representation and warranty of the Borrower made to the Bank that
all of the applicable conditions contained in Article VI shall, after giving
effect to such Loans, have been satisfied by the Borrower, and the making
available of such Loans to the Borrower shall be subject to the satisfaction by
the Borrower of the applicable conditions of Article VI.
SECTION 3.2. NOTE.
All Loans made by the Bank shall be evidenced by a single promissory
note of the
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Borrower, dated on or prior to the Closing Date, and in or substantially in the
form of Exhibit A attached hereto (as amended, endorsed, replaced or otherwise
modified from time to time, the "NOTE"), payable to the order of the Bank in a
face amount equal to the Commitment Amount in effect on the Effective Date.
SECTION 3.3. PRINCIPAL PAYMENTS.
Repayments and prepayments of principal of the Loans shall be made as
follows in accordance with this Section 3.3:
SECTION 3.3.1. REPAYMENTS.
The Borrower absolutely and unconditionally promises to pay in full, on
the Final Maturity Date, all of the principal of the Loans remaining unpaid on
the Final Maturity Date. All of the other Obligations evidenced by the Note
shall, if not sooner paid, be in any event due and payable in full on the Final
Maturity Date.
SECTION 3.3.2. LOAN PREPAYMENTS AND REPAYMENTS.
(a) The Borrower:
(i) VOLUNTARY PREPAYMENTS. May, from time to time on
any Business Day (without premium or penalty, except as may be
required by Section 4.8), make a voluntary prepayment, in
whole or in part, of the then aggregate outstanding principal
amount of the Loans; provided, however, that
(A) all such voluntary prepayments shall
require at least one (1) and no more than five (5)
Business Days' prior notice as to prepayments of
Prime Rate Loans, and at least three (3) and no more
than five (5) Business Days' prior notice as to
prepayments of Eurodollar Loans, in each case, to the
Bank; and
(B) all such voluntary prepayments in part
shall be in a minimum aggregate principal amount of
$200,000 or in any integral multiple of $50,000 in
excess thereof;
(ii) CERTAIN MANDATORY REPAYMENTS. Shall, on each
Business Day when the sum of (A) the then outstanding
principal amount of the Loans, PLUS (B) the aggregate amount
of the Letter of Credit Outstandings, exceeds the LESSER of
(Y) the Commitment Amount, or (Z) the Borrowing Base then in
effect, pay to the Bank principal of the Loans equal to such
excess for application to principal of such Loans then
outstanding; and
(iii) ANNUAL CLEAN-UP. Shall, during each calendar
year (beginning with calendar year 2000) ensure that, for a
period of not less than thirty (30) consecutive calendar days
during such calendar year, no principal of the Loans shall
remain outstanding, and the Borrower shall pay to the Bank
principal of the Loans in such amounts and at such times as
shall be necessary to ensure
40
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compliance with the Borrower's Obligations under this clause
(iii).
(b) Each repayment or prepayment of the Loans made pursuant to
clause (a) of this Section 3.3.2 shall be without premium or penalty,
except as may be required by Section 4.8. Subject always to the terms
and conditions hereof, on or prior to (but not after) the Commitment
Termination Date the Borrower shall be entitled to reborrow all or any
part of the principal of the Loans which shall be repaid or prepaid.
Voluntary prepayments of any Eurodollar Loans pursuant to subclause (i)
of Section 3.3.2(a) shall only be made at the end of the Interest
Periods applicable thereto, unless all losses and expenses referred to
in Section 4.8 (if any) shall be paid by the Borrower to the Bank
concurrently with such prepayments.
(c) Any partial payment of the Obligations of the Borrower
under or in respect of the Note shall be applied: (i) first, to the
payment of all of the interest due and payable on principal of the Note
at the time of such partial payment; (ii) then, to the payment of all
(if any) other amounts (except principal) due and payable under the
Note at such time; and (iii) finally, to the payment of the principal
of the Note due and payable at such time in accordance with paragraph
(a) or paragraph (b) of this Section 3.3.2.
SECTION 3.4. INTEREST PAYMENTS.
The Borrower shall make payments of interest in accordance with this
Section 3.4 as follows:
SECTION 3.4.1. INTEREST RATES.
The Borrower hereby absolutely and unconditionally promises to pay
interest on the unpaid principal amount of each Loan for the period commencing
on the date of such Loan until such Loan is paid in full (excluding the date of
payment), as follows:
(a) on any portion of each Loan that constitutes a Prime Rate
Loan, at a rate per annum equal to the sum of the Prime Rate from time
to time in effect, PLUS the Prime Rate Margin; and
(b) on any portion of each Loan that constitutes a Eurodollar
Loan, at a rate per annum equal to the Eurodollar Rate (Reserve
Adjusted) applicable to each Interest Period for such Eurodollar Loan,
PLUS the Eurodollar Rate Margin;
provided, however, that in no event shall the rate of interest on any Loan
exceed the maximum rate permitted by Applicable Law.
SECTION 3.4.2. INTEREST DURING CONTINUATION OF EVENTS OF DEFAULT; ETC.
The Borrower shall pay interest,
(a) during the continuation of any Event of Default, on the
unpaid principal amount of each Loan, from the date on which such Event
of Default shall have first occurred to the date on which such
principal shall be paid to the Bank (whether before or
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after judgment), at a rate per annum that is at all times equal to the
sum of the Prime Rate from time to time in effect, PLUS the Prime Rate
Margin, PLUS four percent (4%); and
(b) to the maximum extent permitted by Applicable Law, on any
overdue interest, fees or other sums (other than principal) owing to
the Bank under this Agreement or the other Loan Documents, from and
including the third day after such overdue amount shall have first
become due and payable to the date on which such amount shall be paid
to the Bank (whether before or after judgment), at a rate per annum
that is at all times equal to the sum of the Prime Rate from time to
time in effect, PLUS the Prime Rate Margin, PLUS four percent (4%).
SECTION 3.4.3. PAYMENT DATES.
Interest accrued on each Loan shall be payable, without duplication:
(a) on the Final Maturity Date;
(b) with respect to the outstanding principal amount of each
Prime Rate Loan, on the first day of each month;
(c) with respect to the outstanding principal amount of all
Eurodollar Loans, on the last day of each applicable Interest Period
(and, if such Interest Period shall exceed three (3) months, on the
last day of each consecutive three-month period occurring during such
Interest Period);
(d) with respect to that portion of the outstanding principal
amount of Loans converted into Prime Rate Loans or Eurodollar Loans on
a day when interest would not otherwise have been payable pursuant to
clause (b) or (c), the date of such conversion;
(e) with respect to any portion of any Loans prepaid pursuant
to Section 3.3.2, on the date of such prepayment; and
(f) with respect to any interest accrued pursuant to Section
3.4.2 on principal of the Loans, and, to the maximum extent permitted
by Applicable Law, on any overdue interest, fees or other sums, upon
demand and, in any event, on the last Business Day of each month.
SECTION 3.5. FEES.
SECTION 3.5.1. CLOSING FEE.
The Bank has previously received from the Borrower the sum of $30,000,
representing one-fifth (1/5th) of the non-refundable closing fee of $150,000
("Closing Fee") payable by the Borrower hereunder. The Borrower shall pay to the
Bank on the Effective Date the $120,000 balance of the non-refundable Closing
Fee.
SECTION 3.5.2. COMMITMENT FEES.
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The Borrower shall pay to the Bank commitment fees ("Commitment Fees")
on the unused Commitment Amount from time to time in effect during the period
commencing on the date hereof and ending on the Final Maturity Date. The
Commitment Fees shall be payable by the Borrower to the Bank for each calendar
month ending after the date hereof, and (a) shall be computed on the Unused
Commitment Amount in effect on each day during each calendar month at the annual
rate equal to 0.50%, and (b) shall be payable in arrears on the first day of
each calendar month, beginning December 1, 1999, and on the Commitment
Termination Date.
SECTION 3.6. MAKING OF PAYMENTS; COMPUTATIONS; ETC.
SECTION 3.6.1. MAKING OF PAYMENTS.
All payments of principal of and interest on the Note, and all payments
of Fees and other sums payable under the Loan Documents, shall be made by the
Borrower to the Bank in immediately available funds at its Domestic Office not
later than 1:00 p.m., San Jose, California time, on the date due, and funds
received after that hour shall be deemed to have been received by the Bank on
the next following Business Day.
SECTION 3.6.2. SETOFF.
The Borrower agrees with the Bank that, regardless of the adequacy of
any Collateral, the Bank shall continue to have all rights of set-off and
bankers' liens provided by Applicable Law, and, in addition thereto, the
Borrower further agrees that, so long as any Event of Default shall be
continuing, the Bank may, regardless of the adequacy of any Collateral, apply to
the payment of the Obligations any and all balances, credits, deposits, accounts
or moneys of the Borrower then or thereafter deposited with or held by the Bank.
SECTION 3.6.3. DUE DATE EXTENSION.
If any payment of principal of or interest on the Note, or any payment
of any Fees or other sums payable under any of the Loan Documents, falls due on
a day which is not a Business Day, then such due date shall be extended to the
next following Business Day (unless, in the case of interest due on the
principal amount of any Eurodollar Loan, such next following Business Day is the
first day of a calendar month, in which case such due date shall be the
immediately preceding Business Day), and additional interest and Fees shall
accrue and be payable for the period of such extension.
SECTION 3.6.4. NOTICES OF CHANGES IN PRIME RATE; NOTICE OF EURODOLLAR
RATES.
Changes in the rate of interest on any Prime Rate Loans shall take
effect simultaneously with each change in the Prime Rate. The Bank shall, upon
request of the Borrower from time to time, give notice of changes in the Prime
Rate. The applicable Eurodollar Rate for each Interest Period shall be
determined by the Bank, and notice thereof shall, upon request of the Borrower
from time to time, be given by the Bank to the Borrower. Each determination of
the Prime Rate and the applicable Eurodollar Rate by the Bank shall be
conclusive and binding upon the parties hereto, in the absence of manifest
error. The Bank shall, upon written request of the Borrower from time to time,
deliver to the Borrower a statement showing in reasonable detail the
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computations used by the Bank in determining any applicable Eurodollar Rate
hereunder.
SECTION 3.6.5. COMPUTATIONS.
Interest and Commitment Fees shall be computed based on the actual
number of days elapsed and a year of 360 days.
SECTION 3.6.6. RECORDKEEPING.
The Bank shall record in its records, or at its option on the grid
attached to the Note, the date and amount of each of the Loans made by the Bank
and each repayment and prepayment thereof, and in the case of each Eurodollar
Loan, the principal amount thereof and the dates on which each Interest Period
for such Loan shall begin and end. The aggregate unpaid principal amount so
recorded shall be rebuttable presumptive evidence of the principal amount owing
and unpaid on the Note. The failure to so record any such amount or any error in
so recording any such amount shall not, however, limit or otherwise affect the
Obligations of the Borrower hereunder or under the Note to repay the principal
amount of the Loans evidenced by the Note together with all interest accruing
thereon in accordance with the terms hereof.
SECTION 3.7. TAXES.
All payments of principal of and interest on the Note and of all Fees
and other sums payable hereunder or under any of the other Loan Documents shall
be made free and clear of and without deduction for any present or future
income, excise, stamp or franchise taxes or other taxes, fees, duties,
withholdings or charges of any nature whatsoever imposed by any Governmental
Authority, but excluding franchise taxes imposed on the Bank and taxes imposed
on the Bank measured by its net income or receipts (all non-excluded items being
called "TAXES"). If any withholding or deduction from any such payment to be
made hereunder or under any of the other Loan Documents is required in respect
of any Taxes pursuant to any Applicable Law, then the Borrower will pay to the
Bank such additional amounts as are necessary to ensure that the net amount
actually received by the Bank will equal the full amount the Bank would have
received had no such withholding or deduction been required. If the Borrower
fails to pay any Taxes when due to the appropriate Governmental Authority or
fails to remit to the Bank when due any payments required by this Section 3.7 or
any required receipts or other required documentary evidence, the Borrower shall
indemnify the Bank for any incremental Taxes, interest or penalties that may
become payable by the Bank as a result of any such failure and shall promptly
pay to the Bank any amounts not paid when due to the Bank as required by this
Section 3.7.
SECTION 3.8. USE OF PROCEEDS.
The Borrower covenants and agrees with the Bank that the entire
proceeds of all Loans made pursuant hereto will be used and applied by the
Borrower for working capital and other general corporate purposes not otherwise
prohibited by this Agreement.
SECTION 3.9. NO WITHHOLDING.
The Borrower absolutely, unconditionally and irrevocably agrees with
the Bank that
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each payment of principal, interest, Fees or other sums which shall become due
and payable to the Bank under this Agreement, the Note or any of the other Loan
Documents shall be made by the Borrower to the Bank without any set-off or
counterclaim whatsoever and free and clear of and without any deductions or
withholdings of any kind.
SECTION 3.10. COLLATERAL SECURITY.
(a) As security for the payment of all of the Obligations, the Borrower
shall grant or cause to be granted to the Bank, for the benefit of the Bank, a
Lien on and security interest in and to all of the following, whether now or
hereafter owned, existing, created, arising or acquired: (i) all of the Equity
Interests in its Subsidiaries or in any other Person now or hereafter owned or
otherwise acquired by the Borrower or any of its Subsidiaries, and all income
and proceeds thereof; and (ii) all of the tangible or intangible personal
Properties of the Borrower and of each of its Subsidiaries (other than Excluded
Equipment), and all income, proceeds and products thereof. If, in order to
secure financing provided to the Borrower after the date hereof, the Borrower
shall not have granted a first-priority Lien on the Real Estate located at ▇▇▇
▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, by February 28, 2000, then the Borrower
shall, by March 31, 2000, grant to the Bank a first-priority Lien on such Real
Estate pursuant to mortgage or other Instruments reasonably satisfactory in form
and substance to the Bank
(b) Concurrently with the consummation of any acquisition,
organization, creation or formation of any new Subsidiary of the Borrower, the
Borrower will:
(i) execute and deliver to the Bank a pledge agreement, in
form and substance satisfactory to the Bank, pledging all of the
Borrower's Equity Interests in such new subsidiary; and;
(ii) (A) deliver or cause to be delivered to the Bank in
pledge all of the certificates representing such Equity Interests, and
(B) cause such new Subsidiary to execute and deliver to the Bank (1) a
guarantee agreement and a security agreement in form and substance
satisfactory to the Bank upon the terms of which such Subsidiary shall
guarantee the payment and performance in full of all of the
Obligations and grant to the Bank a Lien on and security interest in
and to all of its tangible or intangible personal Properties (other
than Excluded Equipment), and (2) such Uniform Commercial Code
financing statements and other Security Instruments as shall be
required to perfect the security interests and Liens of the Bank in
the collateral being pledged and assigned by such new Subsidiary
pursuant to such security agreement; and
(iii) in each such case, comply with all of the applicable
provisions of Section 8.1.9 and provide all such other documentation,
including, without limitation, one or more opinions of counsel
reasonably satisfactory to the Bank, Governing Documents, and
resolutions, as in the reasonable opinion of the Bank shall be
necessary or advisable in connection with such acquisition or
formation of such new Subsidiary.
(c) From time to time after the date hereof, upon and in accordance
with the reasonable request of the Bank, and at the cost and expense of the
Borrower, promptly create or cause to be created in favor of the Bank, as
security for the payment and performance of all of the
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Obligations, perfected Liens (subject only to such other Liens as shall be
expressly permitted by this Agreement or by any of the other Loan Documents)
with respect to all (if any) of the personal Property of the Borrower or any of
its Subsidiaries (whether tangible or intangible) which is not then subject to
perfected Liens in favor of the Bank (subject only to such other Liens as shall
be expressly permitted by this Agreement or by any of the other Loan Documents),
all such Liens to be created under Security Instruments in form and substance
reasonably satisfactory to the Bank; deliver or cause to be delivered to the
Bank all such Instruments (including legal opinions, Lien search results and
releases and termination statements) as the Bank shall reasonably request to
evidence satisfaction of the Obligations created by this Section 3.10(c); and
promptly provide such evidence as the Bank shall from time to time reasonably
request as to the perfection and priority of such Liens and any other Liens
created pursuant to any of the Collateral Documents; provided, however, that
nothing in this paragraph (c) shall be construed so as to require the Borrower
or any of its Subsidiaries to create perfected Liens in and to any Excluded
Equipment or any copyrights which have not been registered with the United
States Copyright Office.
ARTICLE IV
FUNDING OPTIONS
SECTION 4.1. PRICING OF EACH LOAN.
The outstanding principal amount of each Loan made by the Bank may be
allocated among different types (as hereinafter defined) of Loans selected by
the Borrower from time to time in accordance with Sections 3.1, 4.2 and 4.3.
Each Loan shall be either a Prime Rate Loan or a Eurodollar Loan (each a "TYPE"
of Loan), as the Borrower shall specify in the initial notice of borrowing
delivered by the Borrower pursuant to Section 3.1, or in any
Continuation/Conversion Notice delivered by the Borrower pursuant to Section 4.2
or 4.3. All Prime Rate Loans, and all Eurodollar Loans having the same Interest
Period, may sometimes be referred to as a "GROUP" of Loans.
SECTION 4.2. CONVERSION PROCEDURES.
Subject to the provisions of Section 4.4, the Borrower may convert all
or any part of any outstanding Group of Loans into a Group of Loans of a
different type by delivering a Continuation/Conversion Notice to the Bank not
later than (a) in the case of conversion into a Prime Rate Loan, 1:00 p.m., San
Jose, California time, on the proposed date of such conversion, and (b) in the
case of a conversion into a Eurodollar Loan, 1:00 p.m., San Jose, California
time, at least four (4) Business Days prior to the proposed date of such
conversion. Each such notice shall be irrevocable upon receipt by the Bank and
shall specify the date and amount of such conversion, the Group of Loans (or
portion thereof) to be so converted, the type of Loan to be converted into and,
in the case of a conversion into a Eurodollar Loan, the initial Interest Period
therefor; provided, however, that no Eurodollar Loan shall be converted on any
day other than the last day of its Interest Period. Subject to the provisions of
this Section 4.2 and Section 4.4, each Loan shall be so converted on the
requested date of conversion.
SECTION 4.3. CONTINUATION PROCEDURES.
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Subject to the provisions of Section 4.4, the Borrower may continue all
or any part of any outstanding Group of Eurodollar Loans for an additional
Interest Period commencing upon the conclusion of the Interest Period then in
effect for such Group of Eurodollar Loans, by delivering a
Continuation/Conversion Notice to the Bank not later than 1:00 p.m., San Jose,
California time, at least four (4) Business Days prior to the end of such
then-current Interest Period. Each such notice shall be irrevocable upon receipt
by the Bank and shall specify the amount to be so continued, the date of such
continuation and the Interest Period therefor that is to commence upon the
termination of the then-current Interest Period.
SECTION 4.4. LIMITATIONS ON INTEREST PERIODS AND CONTINUATION AND
CONVERSION ELECTIONS.
The Borrower's rights under Sections 3.1, 4.2 and 4.3 shall be subject
to the following limitations:
SECTION 4.4.1. INTEREST PERIODS.
Each Interest Period for a Eurodollar Loan shall commence on the date
the Loan is made, if applicable, or on the date such Loan is converted from a
Prime Rate Loan, or, in the case of a continuation, on the expiration of the
immediately preceding Interest Period for such Eurodollar Loan, and shall end on
the date which is one, two, three or six months thereafter, as the Borrower may
specify in the related notice of borrowing pursuant to Section 3.1, or in any
Continuation/Conversion Notice pursuant to Section 4.2 or 4.3; provided,
however, that: (a) each Interest Period for a Eurodollar Loan that would
otherwise end on a day which is not a Business Day shall end on the immediately
succeeding Business Day (unless such immediately succeeding Business Day is the
first Business Day of a calendar month, in which case such Interest Period shall
end on the immediately preceding Business Day); (b) the Borrower may not select
any Interest Period for any principal of any Loan which would end after the
Final Maturity Date; and (c) absent the timely selection of a new Interest
Period for a then outstanding Eurodollar Loan, or any part thereof, such
Eurodollar Loan or such part, as the case may be, shall, immediately upon the
expiration of such Interest Period, automatically and without further action, be
converted into a Prime Rate Loan.
SECTION 4.4.2. CONDITIONS PRECEDENT.
No portion of the outstanding principal amount of any Loan may be
continued as, or converted into, one or more Eurodollar Loans if, on or as of
the requested date of continuation or conversion, as the case may be, any
Default shall have occurred and shall be continuing.
SECTION 4.4.3. OTHER LIMITATIONS.
At all times:
(a) the aggregate principal amount of each Group of Eurodollar
Loans shall be in a minimum amount of $500,000 or in an integral
multiple of $50,000 in excess thereof; and
(b) the total number of Eurodollar Loans in effect at any time
shall not exceed
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six (6).
SECTION 4.5. INCREASED COSTS.
(a) If, after the date hereof, the adoption of any Applicable
Law, or any change therein or in any existing Applicable Law, or any
change in the interpretation or administration thereof by any
Governmental Authority charged with the interpretation or
administration thereof, or compliance by the Bank (or the Eurodollar
Office of the Bank) with any request or directive (whether or not
having the force of law) of such Governmental Authority:
(i) shall subject the Bank (or the Eurodollar Office
of the Bank) to any tax, duty or other charge with respect to
the Eurodollar Loans, the Note or the Bank's obligation to
make Eurodollar Loans available, or shall change the basis of
taxation of payments to the Bank of the principal of or
interest on its Eurodollar Loans or any other amounts due
under this Agreement in respect of its Eurodollar Loans or its
obligation to make Eurodollar Loans available (except for
taxes covered by Section 3.7 and except for changes in the
rate of tax on the overall net income of the Bank or its
Eurodollar Office imposed by the jurisdiction in which the
Bank's Eurodollar Office is located); or
(ii) shall impose, modify or deem applicable any
reserve (including, without limitation, any reserve imposed by
the F.R.S. Board), special deposit or similar requirement
against assets of, deposits with or for the account of, or
credit extended by, the Bank (or the Eurodollar Office of the
Bank) (which is not otherwise reflected in the definition of
the term "EURODOLLAR RATE (RESERVE ADJUSTED)"; or
(iii) shall impose on the Bank (or its Eurodollar
Office) any other condition affecting its Eurodollar Loans,
its Note or the Bank's obligation to make Eurodollar Loans
available;
and the result of any of the foregoing is to increase the cost to the
Bank (or the Eurodollar Office of the Bank) of making or maintaining
any Eurodollar Loan, or to reduce the amount of any sum received or
receivable by the Bank (or its Eurodollar Office) under this Agreement
or under its Note with respect thereto, then upon demand by the Bank,
the Borrower shall pay directly to the Bank such additional amount as
will compensate the Bank for such increased cost or such reduction.
(b) If the Bank shall reasonably determine that the adoption
of any Applicable Law regarding capital adequacy, or any change therein
or in any existing Applicable Law, or any change in the interpretation
or administration thereof by any Governmental Authority charged with
the interpretation or administration thereof, or compliance by the Bank
(or its Eurodollar Office) or any Person controlling the Bank with any
request or directive regarding capital adequacy (whether or not having
the force of law) of any such Governmental Authority, in each case,
after the date hereof, has or would have the effect of reducing the
rate of return on the Bank's or such controlling Person's capital as a
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consequence of the Bank's obligations hereunder (including, without
limitation, the Commitment) to a level below that which the Bank or
such controlling Person could have achieved but for such adoption,
change or compliance (taking into consideration the Bank's or such
controlling Person's policies with respect to capital adequacy) by an
amount deemed by the Bank or such controlling Person to be material,
then the Bank shall promptly after its determination of such occurrence
give written notice thereof to the Borrower. The Borrower shall within
thirty (30) days after the day on which the Borrower shall receive such
notice pay such additional amounts which will, in the Bank's reasonable
determination, compensate the Bank or such controlling person for such
reduction. In determining such amount, the Bank may use any reasonable
methods of averaging, allocating or attributing such reductions among
its customers.
SECTION 4.6. INTEREST RATE INADEQUATE OR UNFAIR.
If with respect to any Interest Period:
(a) the Bank reasonably determines (which determination shall
be binding and conclusive on the Borrower) that, by reason of
circumstances affecting the interbank eurodollar market, adequate and
reasonable means do not exist for ascertaining the applicable
Eurodollar Rate; or
(b) the Bank reasonably determines that the Eurodollar Rate
(Reserve Adjusted) will not adequately and fairly reflect the cost to
the Bank of maintaining or funding Eurodollar Loans for such Interest
Period, or that the maintaining or funding of Eurodollar Loans has
become impracticable as a result of an event occurring after the date
of this Agreement which in the reasonable opinion of the Bank
materially adversely affects Eurodollar Loans;
then the Bank shall promptly notify the Borrower in writing, and so long as such
circumstances shall continue, (i) the Bank shall thereafter have no obligation
to fund or make available Eurodollar Loans, and (ii) on the last day of the
current Interest Period for any Eurodollar Loan, such Eurodollar Loan shall,
unless then repaid in full, automatically convert to a Prime Rate Loan.
SECTION 4.7. CHANGES IN LAW RENDERING EURODOLLAR LOANS UNLAWFUL.
In the event that the adoption of any Applicable Law, or any change
therein or in any existing Applicable Law or any change in the interpretation
thereof by any Governmental Authority charged with the interpretation or
administration thereof, in each case after the date hereof, shall make it
unlawful for the Bank to maintain or fund Eurodollar Loans, then the Bank shall
promptly notify the Borrower in writing, and, so long as such circumstances
shall continue, (a) the Bank shall thereafter have no obligation to fund or make
available Eurodollar Loans, and (b) on the last day of the current Interest
Period for any Eurodollar Loan (or, in any event, on such earlier date as may be
required by the relevant Applicable Law), such Eurodollar Loan shall, unless
then repaid in full, automatically convert to a Prime Rate Loan.
SECTION 4.8. FUNDING LOSSES.
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The Borrower hereby agrees that, upon demand by the Bank, the Borrower
will indemnify the Bank against any net loss or expense which the Bank shall
sustain or incur (including, without limitation, any net loss or expense
reasonably incurred by reason of the liquidation or employment of deposits or
other funds acquired by the Bank to maintain or fund any Eurodollar Loan), as
reasonably determined by the Bank, as a result of (a) any payment, repayment,
prepayment or conversion of any Eurodollar Loan of the Bank on a date other than
the last day of an Interest Period for such Eurodollar Loan (including any
conversion pursuant to Section 4.7) or (b) any failure of the Borrower to
borrow, continue or convert any Loan on a date specified therefor in a notice of
borrowing pursuant to Section 3.1 or in any Continuation/Conversion Notice
pursuant to Section 4.2 or 4.3.
SECTION 4.9. DISCRETION OF BANK AS TO MANNER OF FUNDING.
Notwithstanding any provision of this Agreement to the contrary, the
Bank shall be entitled to maintain and fund all or any part of any of the Loans
in any manner it sees fit, it being understood, however, that for purposes of
this Agreement all determinations hereunder (including determinations of any net
loss or expense under Section 4.8) shall be made as if the Bank had actually
funded and maintained each Eurodollar Loan during each Interest Period for such
Eurodollar Loan through the purchase of a deposit on the first day of such
Interest Period having a principal amount equal to the principal amount of such
Eurodollar Loan, having a maturity corresponding to such Interest Period, and
bearing an interest rate equal to the Eurodollar Rate for such Interest Period.
SECTION 4.10. CONCLUSIVENESS OF STATEMENTS; SURVIVAL OF PROVISIONS.
Demands made by the Bank to the Borrower under Section 4.5, 4.6, 4.7 or
4.8 shall be accompanied by a statement setting forth in reasonable detail the
basis for the calculations of the amounts being claimed. Such statements, and
all other determinations and statements of the Bank pursuant to Section 4.5,
4.6, 4.7 or 4.8, shall be conclusive absent manifest error. It is understood and
agreed that, for purposes of calculating any net losses or expenses of the kind
described in Section 4.8, and for purposes of calculating other amounts claimed
under Section 4.5, 4.6, 4.7 or 4.8, the Bank may use reasonable averaging and
attribution methods in determining compensation, reimbursement or
indemnification under Section 4.5, 4.6, 4.7 or 4.8, and the provisions of such
Sections shall survive repayment or prepayment of any of the Loans, cancellation
of the Note and any termination of this Agreement.
ARTICLE V
LETTERS OF CREDIT
SECTION 5.1. REQUESTS FOR LETTERS OF CREDIT.
The Borrower may request, by delivering to the Bank an Issuance Request
on or before 11:00 a.m., San Jose, California time, at any time and from time to
time prior to the Commitment Termination Date and on not less than four (4) nor
more than seven (7) Business Days' notice, that the Bank issue, for the account
of the Borrower, an irrevocable documentary or standby letter of credit in such
form as may be requested by the Borrower and approved by the Bank
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(each a "LETTER OF CREDIT"), in support of financial obligations of the Borrower
incurred in the ordinary course of its business and which are described in such
Issuance Request; provided, however, that immediately after giving effect to
such request (a) the sum of (i) the Letter of Credit Outstandings, PLUS (ii) the
aggregate principal amount of all Loans outstanding, shall not exceed the LESSER
of (A) the Commitment Amount then in effect, and (B) the Borrowing Base then in
effect, and (b) the Letter of Credit Outstandings shall not exceed the L/C
Commitment Amount then in effect. Each Letter of Credit shall by its terms:
(1) be issued in a Stated Amount which is at least $20,000 and
an integral multiple of $1,000 in excess thereof;
(2) be stated to expire on a date (its "STATED EXPIRY DATE")
that is no later than the earlier of one (1) year from its date of
issuance or the Commitment Termination Date; and
(3) on or prior to its Stated Expiry Date
(a) terminate immediately upon notice to the Bank
from the beneficiary thereunder that all obligations covered
thereby have been terminated, paid or otherwise satisfied in
full,
(b) reduce in part immediately and to the extent the
beneficiary thereunder has notified the Bank that the
obligations covered thereby have been paid or otherwise
satisfied in part, or
(c) terminate not more than thirty (30) days after
notice to the beneficiary thereunder from the Bank that any
Default has occurred and is continuing.
By delivery to the Bank of an Issuance Request at least four (4) but
not more than seven (7) Business Days prior to the Stated Expiry Date of any
Letter of Credit, the Borrower may request the Bank to extend the Stated Expiry
Date of such Letter of Credit for an additional period not to exceed the earlier
of one (1) year from its date of extension or the Commitment Termination Date.
SECTION 5.2. ISSUANCES AND EXTENSIONS.
Subject to the terms and conditions of this Agreement (including
Article VI), the Bank shall issue Letters of Credit and extend the Stated Expiry
Dates of outstanding Letters of Credit for additional periods of the shorter of
(a) one (1) year, or (b) the Commitment Termination Date, in accordance with the
Issuance Requests made therefor. The Bank will make available the original of
each Letter of Credit which it issues in accordance with the Issuance Request
therefor to the beneficiary thereof and will notify the beneficiary under any
Letter of Credit issued by it of any extension of the Stated Expiry Date
thereof.
SECTION 5.3. FEES AND EXPENSES.
The Borrower agrees to pay to the Bank: (a) for the account of the
Bank, with respect to
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each Letter of Credit, a letter of credit fee of equal to two percent (2.0%) of
the Stated Amount of such Letter of Credit, which fee shall be payable by the
Borrower on the date of issuance and on each date of renewal or extension (if
any) thereof; and (b) for the account of the Bank, all such other reasonable
fees and other administrative expenses customarily charged by the Bank in
connection with the issuance, maintenance, modification (if any) and
administration of each applicable Letter of Credit upon demand by the Bank from
time to time.
SECTION 5.4. DISBURSEMENTS.
The Bank will notify the Borrower promptly of the presentment for
payment of any Letter of Credit issued by it, together with notice of the date
(the "DISBURSEMENT DATE") such payment shall be made. Subject to the terms and
provisions of such Letter of Credit, the Bank shall make such payment to the
beneficiary (or its designee) of such Letter of Credit (a "DISBURSEMENT"). Prior
to 1:00 p.m., San Jose, California time, on the Disbursement Date, the Borrower
will reimburse the Bank for all amounts which the Bank has disbursed under such
Letter of Credit issued by it. To the extent the Bank is not reimbursed in full
in accordance with the third sentence of this Section 5.4, the Reimbursement
Obligations in respect of a Letter of Credit shall accrue interest at a
fluctuating rate determined by reference to the Prime Rate, PLUS the Prime Rate
Margin applicable to the Loans, PLUS four percent (4%), payable on demand. In
the event the Bank is not reimbursed by the Borrower on the Disbursement Date,
or if the Bank must for any reason return or disgorge such reimbursement, the
Bank shall, subject to the satisfaction of all conditions contained in Article
VI, fund the Reimbursement Obligations therefor by making Loans which are Prime
Rate Loans as provided in Section 3.1 (the Borrower being deemed to have given a
timely Loan Request therefor for such amount); provided, however, that, for the
purposes of funding the Reimbursement Obligations by making Prime Rate Loans
pursuant to this sentence of Section 5.4, in order to determine the Letter of
Credit Outstandings immediately prior to giving effect to the application of the
proceeds of such Loans, such Reimbursement Obligations shall be deemed not to be
outstanding at such time.
SECTION 5.5. REIMBURSEMENT.
The Borrower's Obligations under Section 5.4 to reimburse the Bank with
respect to each Disbursement (including interest thereon) in respect of Letters
of Credit (the "REIMBURSEMENT OBLIGATIONS") shall be absolute and unconditional
under any and all circumstances and irrespective of any setoff, counterclaim or
defense to payment which the Borrower may have or have had against the Bank or
any beneficiary of any Letter of Credit, including any defense based upon the
occurrence of any Default or Event of Default, any draft, demand or certificate
or other document presented under a Letter of Credit proving to be forged,
fraudulent, invalid or insufficient, the failure of any Disbursement to conform
to the terms of the applicable Letter of Credit (if, in the Bank's good faith
opinion in respect of Letters of Credit, such Disbursement is determined to be
appropriate), or any nonapplication or misapplication by the beneficiary of the
proceeds of such Disbursement, or the legality, validity, form, regularity or
enforceability of such Letter of Credit.
SECTION 5.6. DEEMED DISBURSEMENTS.
Upon the occurrence and during the continuation of any Default, an
amount equal to that
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portion of Letter of Credit Outstandings attributable to outstanding and undrawn
Letters of Credit shall, at the option of the Bank, and without demand upon or
notice to the Borrower, be deemed to have been paid or disbursed by the Bank
under such Letters of Credit (notwithstanding that such amount may not in fact
have been so paid or disbursed), and, upon notification by the Bank to the
Borrower of the Borrower's Obligations under this Section 5.6, the Borrower
shall be immediately obligated to reimburse the Bank the amount deemed to have
been so paid or disbursed by the Bank. Any amounts so received by the Bank from
the Borrower pursuant to this Section 5.6 shall be held as Collateral security
for the repayment of the Borrower's Obligations in connection with the Letters
of Credit issued by the Bank. At any time when such Letters of Credit shall
terminate and all obligations of the Bank thereunder are either terminated or
paid or reimbursed to the Bank in full, the Obligations of the Borrower under
this Section 5.6 shall be reduced accordingly (subject, however, to
reinstatement in the event any payment in respect of such Letters of Credit is
recovered in any manner from the Bank), and the Bank will, if no other
Obligations are then owed to the Bank hereunder, return to the Borrower the
EXCESS, if any, of
(a) the aggregate amount deposited by the Borrower with the
Bank pursuant to this Section 5.6 and not theretofore applied by the
Bank to any Reimbursement Obligations owed to the Bank, OVER
(b) the aggregate amount of all Reimbursement Obligations owed
to the Bank pursuant to this Section 5.6, as so adjusted.
If any other Obligations shall be owed by the Borrower or any of its
Subsidiaries to the Bank hereunder, then the Bank shall apply such excess to
such Obligations until the same shall be paid in full. At such time when all
Defaults shall have been cured or waived and all of the Borrower's Obligations
hereunder shall have been paid in full, the Bank shall return to the Borrower
all amounts then on deposit with the Bank pursuant to this Section 5.6.
SECTION 5.7. NATURE OF REIMBURSEMENT OBLIGATIONS.
The Borrower shall assume all risks of the acts, omissions or misuse of
any Letter of Credit by the beneficiary thereof. The Bank (except to the extent
of its own gross negligence or willful misconduct) shall not be responsible for:
(a) the form, validity, sufficiency, accuracy, genuineness or
legal effect of any Letter of Credit or any document submitted by any
party in connection with the application for and issuance of a Letter
of Credit, even if it should in fact prove to be in any or all respects
invalid, insufficient, inaccurate, fraudulent or forged;
(b) the form, validity, sufficiency, accuracy, genuineness or
legal effect of any Instrument transferring or assigning or purporting
to transfer or assign a Letter of Credit or the rights or benefits
thereunder or proceeds thereof, in whole or in part, which may prove to
be invalid or ineffective for any reason;
(c) the failure of the beneficiary to comply fully with
conditions required in order to demand payment under a Letter of
Credit;
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(d) errors, omissions, interruptions or delays in transmission
or delivery of any messages, by mail, cable, telegraph, telex or
otherwise; or
(e) any loss or delay in the transmission or otherwise of any
document or draft required in order to make a Disbursement under a
Letter of Credit or of the proceeds thereof.
None of the foregoing shall affect, impair or prevent the vesting of any of the
rights or powers granted to the Bank hereunder. In furtherance and extension,
and not in limitation or derogation of any of the foregoing, any action taken or
omitted to be taken by the Bank in good faith shall be binding upon the Borrower
and shall not put the Bank under any resulting liability to the Borrower.
SECTION 5.8. INDEMNITY.
In addition to amounts payable as elsewhere provided in this Article V,
the Borrower hereby agrees to protect, indemnify, pay and save the Bank harmless
from and against any and all claims, demands, liabilities, damages, losses,
costs, charges and expenses (including reasonable attorneys' fees) which the
Bank may incur or be subject to as a consequence, direct or indirect, of (a) the
issuance of any Letter of Credit, other than as a result of the negligence or
willful misconduct of the Bank as determined by a court of competent
jurisdiction, or (b) the failure of the Bank to honor a drawing under any Letter
of Credit issued by it as a result of any act or omission, whether rightful or
wrongful, of any present or future de jure or de facto Governmental Authority.
ARTICLE VI
CONDITIONS TO CREDIT EXTENSIONS
SECTION 6.1. CONDITIONS TO MAKING FIRST CREDIT EXTENSIONS.
The obligations of the Bank to make its first Credit Extensions
hereunder on the Closing Date shall be subject to the fulfillment by the
Borrower of the following conditions precedent prior to or simultaneously with
the making of the first Credit Extensions on the Closing Date:
SECTION 6.1.1. EXECUTION AND DELIVERY OF THIS AGREEMENT AND NOTE.
The Bank shall have received (a) counterparts of this Agreement duly
executed and delivered by the Borrower and the Bank, and (b) for the account of
the Bank, the Note, dated not later than the Closing Date, duly executed and
delivered to the Bank by the Borrower and containing appropriate insertions and
conforming to the requirements of Section 3.2.
SECTION 6.1.2. SECURITY AGREEMENT; UCC FILINGS; ETC.
The Bank shall have received counterparts of the Security Agreement,
dated not later than the Closing Date and duly executed and delivered by the
Borrower, together (in each case) with:
(a) executed copies of proper financing statements (Form
UCC-1), each in
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appropriate form for filing, naming the Borrower as the debtor, and the
Bank as the secured party, and other similar Instruments or documents,
to be filed under the Uniform Commercial Code in the jurisdictions
identified in the Security Agreement;
(b) executed copies of proper financing statements (Form
UCC-3) necessary to release all material Liens and other rights of any
other Persons in the Collateral described in the Security Agreement
previously granted by the Borrower (or an undertaking reasonably
satisfactory to the Bank by the secured party under any such security
agreement to execute and deliver all financing statements (Form UCC-3)
reasonably required by the Bank to release all such Liens), except for
any Liens that constitute Permitted Liens or that are otherwise
expressly permitted by this Agreement or any of the other Loan
Documents; and
(c) copies of such search reports, dated a date reasonably
near (but prior to) the Closing Date, as shall have been previously
requested by special counsel for the Bank, listing effective financing
statements which name the Borrower (under its present name or any
previous name) as debtor and which are filed in jurisdictions
(specified by special counsel for the Bank) in which certain of the
filings are to be made pursuant to clause (a), together with copies of
such financing statements.
Any other action, including the taking of possession of specific Collateral by
the Bank, reasonably required by the Bank to create in favor of the Bank
perfected first-priority Liens (subject to Permitted Liens and other Liens
otherwise expressly permitted by this Agreement or any of the other Loan
Documents) in the Collateral described in the Security Instruments referred to
in this Section 6.1.2 shall have been properly taken by or on behalf of the
Borrower.
SECTION 6.1.3. OTHER LOAN DOCUMENTS AND ANCILLARY DOCUMENTS.
(a) Each of the other Loan Documents required by the terms hereof to be
executed and delivered on or prior to the Closing Date shall have been duly and
properly authorized, executed and delivered by the respective party or parties
thereto and shall be in full force and effect.
(b) The Bank shall have received counterparts of each of such other
Loan Documents and true and complete copies of each of the Ancillary Documents.
Each Loan Document shall, where applicable, be substantially in the form of an
Exhibit attached hereto, and all other Loan Documents and all of such Ancillary
Documents shall be in form and substance reasonably satisfactory to the Bank.
All exhibits, schedules or other attachments to any of the Collateral Documents
shall be in form and substance reasonably satisfactory to the Bank.
SECTION 6.1.4. CERTIFICATES OF INSURANCE.
The Bank shall have received a certificate of insurance from an
independent insurance broker, dated as of a date reasonably near (but not after)
the Closing Date, identifying insurers, types of insurance, insurance limits and
policy terms, and otherwise describing the insurance obtained in accordance with
the provisions of the Security Agreement, including noting that the Bank has
been named as additional insured and loss payee on such insurance.
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SECTION 6.1.5. [INTENTIONALLY OMITTED.]
SECTION 6.1.6. CLOSING DATE CERTIFICATE.
The Bank shall have received a duly executed and completed certificate,
dated as of the Closing Date, in or substantially in the form of Exhibit I (a
"CLOSING DATE CERTIFICATE"), duly executed and delivered by an Authorized
Officer of the Borrower.
SECTION 6.1.7. RESOLUTIONS; ETC.
The Bank shall have received from the Borrower, a certificate, dated
not later than the Effective Date, of its Secretary or any Assistant Secretary
as to:
(a) resolutions of its Board of Directors then in full force
and effect authorizing the execution, delivery and performance of, in
each case, to the extent the Borrower is a party thereto, this
Agreement and each of the other Loan Documents;
(b) the incumbency and signatures of the officers of the
Borrower (the "AUTHORIZED OFFICERS") authorized to act with respect to
(in each case, to the extent the Borrower is a party thereto) this
Agreement and each of the other Loan Documents (upon which certificate
the Bank may conclusively rely until the Bank shall have received a
further certificate of the Borrower canceling or amending such prior
certificate, which further certificate shall be reasonably satisfactory
to the Bank); and
(c) the Fifth Amended and Restated Certificate of
Incorporation of the Borrower and the By-laws of the Borrower, each as
amended and as in effect on and as of the date of such certificate.
SECTION 6.1.8. CERTIFICATES OF GOOD STANDING.
The Bank shall have received a certificate signed by the Secretary of
State of the State of Delaware, dated a date reasonably near (but not after) the
Closing Date, stating that the Borrower is a corporation duly organized, validly
existing and in good standing under the laws of such State. The Bank shall have
also received, from the Secretary of State of each State (other than the State
of Ohio and the District of Columbia) in which the nature of the Borrower's
business makes qualification to do business as a foreign corporation necessary
or appropriate, a certificate signed by such Secretary of State, dated a date
reasonably near (but not after) the Closing Date, stating that the Borrower is
duly qualified to do business and is in good standing as a foreign corporation
in such State.
SECTION 6.1.9. COMPLIANCE CERTIFICATE.
The Bank shall have received a duly executed and completed Compliance
Certificate, dated as of the Closing Date, in or substantially in the form of
Exhibit H, duly executed by an Authorized Officer of the Borrower.
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SECTION 6.1.10. APPROVALS.
The Bank shall have received evidence that all Approvals necessary in
connection with the credit facilities contemplated hereby shall have been
obtained and shall be in full force and effect.
SECTION 6.1.11. ENVIRONMENTAL COMPLIANCE.
The Borrower shall have demonstrated to the Bank's reasonable
satisfaction that on the Closing Date all representations and warranties set
forth in Section 7.18 hereof are accurate, true and complete in all material
respects.
SECTION 6.1.12. OPINIONS OF COUNSEL.
The Bank shall have received an opinion, dated not later than Closing
Date, addressed to the Bank from counsel to the Borrower, in or substantially in
the form of Exhibit J.
SECTION 6.1.13. FINANCIAL STATEMENTS.
The Borrower shall have furnished to the Bank the Historical Financials
and the Projections.
SECTION 6.1.14. NO MATERIALLY ADVERSE EFFECT.
No events or developments shall have occurred since June 30, 1999
which, individually or in the aggregate, have had or could reasonably be
expected to have any Materially Adverse Effect.
SECTION 6.1.15. FEES AND EXPENSES.
The Bank shall have received from the Borrower payment in full of all
of the Fees required to be paid to the Bank on or prior to the Closing Date in
accordance with Section 3.5, and the Bank, or (as the case may be) its special
counsel, shall have received from the Borrower payment in full of the Bank's
reasonable out-of-pocket costs and expenses (including reasonable counsel fees
and disbursements payable in accordance with Section 10.3 for which invoices
shall have been submitted to the Borrower on or prior to the Closing Date).
SECTION 6.1.16. SATISFACTORY LEGAL FORM; ETC.
All documents executed and delivered or submitted pursuant hereto by or
on behalf of the Borrower shall be reasonably satisfactory in form and substance
to the Bank and its special counsel; the Bank and its special counsel shall have
received all such information, and such counterpart originals or such certified
or other copies of such materials, as the Bank or its special counsel may
reasonably request; and all legal matters incident to the transactions
contemplated by this Agreement and the other Loan Documents shall be reasonably
satisfactory to special counsel to the Bank.
SECTION 6.2. ALL CREDIT EXTENSIONS.
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The obligations of the Bank to make Credit Extensions hereunder
(including its first Credit Extensions to be made on the Closing Date) shall
also be subject to the satisfaction by the Borrower of each of the following
conditions precedent set forth in this Section 6.2:
SECTION 6.2.1. COMPLIANCE WITH REPRESENTATIONS; ABSENCE OF LITIGATION;
NO DEFAULT; ETC.
The representations and warranties of the Borrower set forth in Article
VII, in the Collateral Documents and in the other Loan Documents shall have been
true and correct in all material respects as of the date made; and, both
immediately before and immediately after giving effect to each of such Credit
Extensions:
(a) such representations and warranties shall be true and
correct in all material respects with the same full force and effect as
if then made (except for any such representation or warranty that
relates solely to a prior date);
(b) (i) no litigation, arbitration or governmental
investigation or proceeding shall be pending or, to the best
knowledge of the Borrower (after due inquiry), threatened
against the Borrower or any of its Subsidiaries or affecting
the business, Property, results of operations, condition
(financial or otherwise) or prospects of any thereof which was
not disclosed by the Borrower to the Bank in Section 7.8 of
the Disclosure Schedule, except to the extent such litigation,
arbitration or governmental investigation or proceeding does
not have and could not reasonably be expected to have any
Materially Adverse Effect; and
(ii) no development shall have occurred in any
litigation, arbitration or governmental investigation or
proceeding so disclosed, which, in any event, has had and
continues to have, or (as the case may be) could reasonably be
expected to have, any Materially Adverse Effect or relates to
the validity or enforceability of this Agreement, the Note or
any of the other Loan Documents or of any Obligations existing
under or, if such Credit Extension is made, would be existing
under any thereof; and
(c) no Default shall have occurred and then be continuing and
no Change of Control shall have occurred.
SECTION 6.2.2. CREDIT REQUEST.
The Bank shall have received a Credit Request for each Credit
Extension. The delivery of such Credit Request shall constitute a representation
and warranty by the Borrower that on and as of the requested date of such Credit
Extension, and before and after giving effect to such Credit Extension, all
representations and warranties required by Section 6.2.1 are true and correct in
all material respects.
SECTION 6.2.3. LEGALITY OF TRANSACTIONS.
It shall not be unlawful (a) for the Bank to perform any of its
obligations under any of the Loan Documents, or (b) for the Borrower to perform
any of its Obligations under any of the Loan
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Documents.
SECTION 6.2.4. BORROWING REPORT.
In the case of each request by the Borrower for any Credit Extension,
the Bank shall have received from the Borrower, if the Bank shall have so
requested, such written and other information and reports relating to the
Borrowing Base then in effect, and such certificates of Authorized Officers of
the Borrower relating to the Borrowing Base then in effect, as the Bank shall
have requested in order to calculate and confirm the Borrowing Base as of the
date of such Credit Extension.
SECTION 6.2.5. BANKING ARRANGEMENTS.
For purposes of each Credit Extension to be made after December 14,
1999, the Borrower shall have established by December 15, 1999 lockbox
arrangements in form and substance satisfactory to the Bank (the "COLLECTION
LOCKBOX") and shall have established with the Bank by December 15, 1999 all
primary banking and transaction accounts (including the Borrower's Concentration
Account), all upon terms and conditions reasonably satisfactory to the Bank and
the Borrower.
SECTION 6.3. CONDITIONS TO EFFECTIVENESS OF THIS AGREEMENT.
This Agreement shall become and be effective on and as of and from and
after the Effective Date; provided, however, that each of the following
conditions precedent shall first be satisfied:
(a) the Bank shall have received counterparts of this Agreement duly
executed and delivered by the Borrower and the Bank;
(b) the Bank shall have received from the Borrower the certificate
referred to and described in Section 6.1.7; and
(c) the Bank shall have received from the Borrower payment in full of
all of the Fees required to be paid to the Bank on the Effective Date in
accordance with Section 3.5.1, and the Bank, or (as the case may be) its special
counsel, shall have received from the Borrower payment in full of the Bank's
reasonable out-of-pocket costs and expenses (including reasonable counsel fees
and disbursements payable in accordance with Section 10.3 for which invoices
shall have been submitted to the Borrower on or prior to the Effective Date).
ARTICLE VII
WARRANTIES; ETC.
In order to induce the Bank to enter into this Agreement, and in order
to induce the Bank to make Credit Extensions hereunder, the Borrower represents
and warrants to the Bank as set forth in this Article VII as follows:
SECTION 7.1. ORGANIZATION; ETC.
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The Borrower is an organization duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization, is duly
qualified to do business and is in good standing as a foreign organization in
each jurisdiction where the nature of its business makes such qualification
necessary or appropriate and where the failure to so qualify has had or could
reasonably be expected to have a Materially Adverse Effect, and has full power
and authority and holds all requisite governmental licenses, permits and other
Approvals to own or hold under lease its material Properties and to conduct its
business substantially as currently conducted by it, and to execute, deliver and
perform the Loan Documents executed or to be executed by it.
SECTION 7.2. POWER, AUTHORITY.
The Borrower has taken all necessary organizational action to authorize
the execution, delivery and performance by it of the Loan Documents executed or
to be executed by it. The execution, delivery and performance by the Borrower of
each of the Loan Documents to which the Borrower is or is to become a party do
not and will not (except for Approvals which have been already given or
obtained) require any Approvals, will not result in any violation of, or
constitute any default under, (a) any provisions of any Governing Documents of
the Borrower or any other Ancillary Documents, (b) any other Contractual
Obligations of the Borrower, or (c) any Applicable Laws, and do not and will not
result in or require the creation or imposition of any Liens on any of the
Property of the Borrower pursuant to the provisions of any Instruments binding
upon or applicable to the Borrower or any of its Property.
SECTION 7.3. VALIDITY; ETC.
This Agreement has been duly executed and delivered by the Borrower and
constitutes the legal, valid, and binding Obligation of the Borrower,
enforceable in accordance with its terms. Each of the other Loan Documents,
including, without limitation, the Note, to which the Borrower is or is to
become a party has been, or, upon execution and delivery thereof will be, duly
executed and delivered by the Borrower, and does or will constitute the legal,
valid and binding obligation of the Borrower, enforceable in accordance with its
terms. The enforceability of this Agreement and the other Loan Documents against
the Borrower shall be subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws at the time in effect affecting the
enforceability of the rights of creditors generally and to general equitable
principles.
SECTION 7.4. FINANCIAL INFORMATION.
All balance sheets, all statements of operations and of cash flows, and
all other financial statements which have been furnished by the Borrower to the
Bank for the purposes of or in connection with this Agreement, including the
audited consolidated balance sheet at June 30, 1999, and the related audited
consolidated statements of operations, of stockholders' equity and of cash
flows, for the fiscal year then ended, of the Borrower accompanied by the notes
thereto and the reports thereon of the Independent Public Accountant, and the
related letters to management for the fiscal year then ended (such financial
statements being herein referred to, collectively, as the "HISTORICAL
FINANCIALS"), have been prepared in accordance with GAAP consistently (except as
otherwise described therein and in Section 7.4 of the Disclosure Schedule)
applied throughout the periods involved and present fairly the financial
condition of
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the Borrower as at the dates thereof and the results of the Borrower's
operations for the periods then ended.
SECTION 7.5. PROJECTIONS.
The projected balance sheets and projected statements of income and of
cash flows of the Borrower for each of the fiscal years of the Borrower from
fiscal year 1999 through fiscal year 2005, all of which have been delivered to
the Bank prior to the date of this Agreement (collectively, the "PROJECTIONS"),
have been prepared on the basis of the assumptions accompanying them and
reflect, as of the date of this Agreement, the good faith estimates made on a
reasonable basis by the Borrower of the financial condition and the performance
of the Borrower for the periods covered thereby based on such assumptions.
SECTION 7.6. MATERIALLY ADVERSE EFFECT.
(a) For purposes of the Credit Extensions to be made on the Closing
Date, no events or developments have occurred since June 30, 1999 which,
individually or in the aggregate, have had or could reasonably be expected to
have any Materially Adverse Effect.
(b) For purposes of each Credit Extension requested to be made after
the Closing Date, no events or developments have occurred since the Closing Date
which, individually or in the aggregate, have had or could reasonably be
expected to have any Materially Adverse Effect.
SECTION 7.7. EXISTING INDEBTEDNESS; ABSENCE OF DEFAULTS.
The Indebtedness of the Borrower in existence on the Closing Date is
identified in Section 7.7 of the Disclosure Schedule. With respect to each item
of Indebtedness identified in Section 7.7 of the Disclosure Schedule, the
Borrower has delivered or otherwise made available to the Bank a true and
complete copy of each Instrument evidencing such Indebtedness or pursuant to
which such Indebtedness was issued or secured (including each amendment,
consent, waiver or other Instrument executed and/or delivered in respect
thereof), as the same is in effect on or as of the Closing Date. Except as
otherwise disclosed in Section 7.7 of the Disclosure Schedule, the Borrower is
not in default in the payment of any Indebtedness, which payments, in the
aggregate, exceed $100,000, or in default or breach, in any material respect, in
the performance of any other material obligation under any Instrument evidencing
any Indebtedness (in an aggregate amount exceeding $1,000,000) or pursuant to
which such Indebtedness (in an aggregate amount exceeding $1,000,000) was issued
or secured.
SECTION 7.8. LITIGATION; ANCILLARY DOCUMENTS; ETC.
(a) Except as to matters identified in Section 7.8 of the Disclosure
Schedule, there is no pending or, to the best knowledge of the Borrower,
threatened litigation, arbitration or governmental investigation or proceeding
against the Borrower or any of its Subsidiaries or to which any of the
Properties of any thereof is subject which:
(i) has had and continues to have, or (as the case may be)
could reasonably be expected to have, any Materially Adverse Effect;
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(ii) relates to this Agreement, any of the other Loan
Documents or any of the Ancillary Documents; or
(iii) seeks to enjoin or otherwise prevent the consummation
of, or to recover any damages or obtain relief as a result of, any of
the transactions contemplated by or in connection with this Agreement,
any of the other Loan Documents or any of the Ancillary Documents.
None of such pending or threatened proceedings has had and continues to have, or
could reasonably be expected to have, any Materially Adverse Effect.
(b) Each of the Ancillary Documents to which the Borrower is a party or
by which the Borrower is bound on or as of the date hereof is identified in
Section 7.8 of the Disclosure Schedule.
(c) Each of the Ancillary Documents is in full force and effect. No
material default on the part of any Person bound by any Ancillary Document, and
no material breach by any such Person in the payment, performance or observance
of any of its material obligations thereunder, is continuing. No Person bound by
any of the Ancillary Documents has exercised or attempted to exercise any right
of termination, cancellation or rescission thereunder; and no event or condition
is continuing which permits any Person bound by any of the Ancillary Documents
to exercise any right of termination, cancellation or rescission thereunder.
SECTION 7.9. REGULATIONS U AND X.
The Borrower is not engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing or
carrying margin stock. None of the proceeds of any of the Credit Extensions will
be used for the purpose of, or be made available by the Borrower in any manner
to any other Person to enable or assist such Person in, directly or indirectly,
purchasing or carrying margin stock in violation of F.R.S. Board Regulation U or
X. Terms for which meanings are provided in F.R.S. Board Regulation U or X or
any regulations substituted therefor, as from time to time in effect, are used
in this Section 7.9 with such meanings.
SECTION 7.10. GOVERNMENT REGULATION.
The Borrower is not an "investment company" or a "company controlled by
an investment company" within the meaning of the Investment Company Act of 1940,
as amended, or a "holding company", or a "subsidiary company" of a "holding
company", or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company", within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
SECTION 7.11. TAXES.
Except as otherwise disclosed in Section 7.11 of the Disclosure
Schedule, each of the Borrower and its Subsidiaries has filed all material tax
returns and material reports required by Applicable Law to have been filed by it
and has paid all taxes and governmental charges thereby shown to be owing,
except any such taxes or charges which are being contested in good faith by
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appropriate proceedings and for which adequate reserves in accordance with GAAP
shall have been set aside on its books. Except as otherwise disclosed in Section
7.11 of the Disclosure Schedule, no tax Liens (other than tax Liens that
constitute Permitted Liens) have been filed with respect to the Borrower or any
of its Subsidiaries and, to the best knowledge of the Borrower (after due
inquiry), no claims are being asserted with respect to any such taxes or charges
(and, to the best knowledge of the Borrower, no basis exists for any such
claims).
SECTION 7.12. COMPLIANCE WITH ERISA.
Each of the Borrower and its Subsidiaries is in substantial compliance
with all material provisions of ERISA, except to the extent that any failure so
to be in compliance with any provisions of ERISA does not continue to have and
could not be reasonably expected to have any Materially Adverse Effect.
SECTION 7.13. LABOR CONTROVERSIES.
Except as disclosed in Section 7.13 of the Disclosure Schedule, there
are no labor controversies pending or, to the best knowledge of the Borrower
(after due inquiry), threatened against the Borrower or any of its Subsidiaries
which have had and continue to have, or (as the case may be) could reasonably be
expected to have, any Materially Adverse Effect.
SECTION 7.14. CORPORATE STRUCTURE; ETC.
As of the Closing Date the Borrower has no Subsidiaries. Section 7.14
of the Disclosure Schedule identifies, with respect to the Borrower as of the
Closing Date, (a) the State of organization of the Borrower, (b) the number of
authorized and outstanding shares of each class of Capital Stock and all other
Equity Interests of the Borrower, (c) each of the owners of more than five
percent (5%) of the outstanding shares of each class of Capital Stock of the
Borrower, and (d) each Partnership School, each Charter School and each
Management Agreement.
SECTION 7.15. OWNERSHIP OF PROPERTIES; LIENS.
Section 7.15 of the Disclosure Schedule identifies all of the real
Property owned or leased by the Borrower as of the Closing Date. Each of the
Borrower and its Subsidiaries has valid fee or leasehold interests in all of its
real Property and good and marketable title to all of its material personal
Property, and none of such Property is or will be subject to any Liens, except
such Liens as are permitted by Section 8.2.3 or by the other Loan Documents.
Section 7.15 of the Disclosure Schedule identifies all of the Liens upon
Property of the Borrower that secure Indebtedness of the Borrower and that are
in existence on the Closing Date and either (a) are known to the Borrower on or
as of the Closing Date, or (b) are of record on and as of the Closing Date.
SECTION 7.16. TRADEMARKS; ETC.
Each of the Borrower and its Subsidiaries owns and possesses all such
patent rights, trademark rights, trade name rights, service ▇▇▇▇ rights and
copyrights material to the conduct of the businesses of such Person without (to
the knowledge of the Borrower) any infringement upon any proprietary or other
rights of any other Person, except to the extent that any such
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infringement does not continue to have, and could not reasonably be expected to
have, any Materially Adverse Effect.
SECTION 7.17. COLLATERAL DOCUMENTS.
The provisions of the Collateral Documents will be, from and after the
Closing Date, effective to create, in favor of the Bank and as security for all
of the Obligations, legal, valid and enforceable Liens in all right, title and
interest of the Borrower in the Collateral described in the Collateral
Documents. Upon filing of all required financing statements and other filings
necessary in order to perfect the Bank's Liens in the Collateral and the Bank's
taking possession of items of Collateral as to which possession is required to
perfect a Lien therein, each of the Collateral Documents will create a fully
perfected Lien in all right, title and interest of the Borrower in the
Collateral described therein superior in right to any Liens, existing or future,
which any creditor of or purchaser from the Borrower or any other Person may
have against such Collateral, except to the extent otherwise expressly permitted
hereby or by any of the other Loan Documents.
SECTION 7.18. ENVIRONMENTAL MATTERS.
Except as identified in Section 7.18 of the Disclosure Schedule:
(a) to the best knowledge of the Borrower, all Property
(including underlying groundwater) owned or leased by the Borrower or
any of its Subsidiaries has been, and continues to be, owned or leased
by such Person in substantial compliance with all Environmental Laws,
except to the extent that any failure so to be in compliance with
Environmental Laws does not continue to have, and could not reasonably
be expected to have, any Materially Adverse Effect;
(b) there have been no past, and there are no pending or, to
the knowledge of the Borrower, threatened:
(i) material claims, complaints, notices or requests
for information received by the Borrower or any of its
Subsidiaries from any Governmental Authority with respect to
any alleged violation of any Environmental Laws; or
(ii) material complaints, notices or inquiries to the
Borrower or any of its Subsidiaries from any Governmental
Authority alleging material liability under any Environmental
Laws;
(c) to the best knowledge of the Borrower, there have been no
Releases of Hazardous Materials at, on or under Property now or (to the
best knowledge of the Borrower) previously owned or leased by the
Borrower or any of its Subsidiaries, the costs to address which,
individually or in the aggregate, continue to have or (as the case may
be) could reasonably be expected to have any Materially Adverse Effect;
(d) each of the Borrower and its Subsidiaries has been issued
and is in material compliance with all permits, certificates,
approvals, licenses and other authorizations relating to environmental
matters and required under Environmental Laws
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for its businesses, except to the extent that any failure so to be in
compliance does not continue to have, and could not reasonably be
expected to have, any Materially Adverse Effect; and
(e) to the best knowledge of the Borrower, no conditions exist
at, on or under any Property now or previously owned or leased by the
Borrower or any of its Subsidiaries which has given rise to, or (as the
case may be) which could reasonably be expected to give rise to,
liability under any Environmental Laws, which liability has, or (as the
case may be) could reasonably be expected to have, individually or in
the aggregate, any Materially Adverse Effect.
SECTION 7.19. COMPLIANCE WITH APPLICABLE LAWS.
Each of the Borrower and its Subsidiaries is in substantial compliance
in all material respects with all Applicable Laws, except to the extent that any
failure so to be in compliance does not continue to have, and could not
reasonably be expected to have, any Materially Adverse Effect.
SECTION 7.20. EXISTING INVESTMENTS.
Section 7.20 of the Disclosure Schedule identifies each Investment of
the Borrower that is owned or held or is outstanding or in effect on the Closing
Date other than insubstantial and immaterial Investments and other than
Investments of the kind described in any of clauses (b) through (e) or in clause
(g) of the definition of the term "PERMITTED INVESTMENTS".
SECTION 7.21. TRANSACTIONS WITH AFFILIATES.
Section 7.21 of the Disclosure Schedule identifies (a) all (if any)
Indebtedness of the Borrower to any Affiliate of the Borrower on or as of the
Closing Date and all (if any) Contractual Obligations of the Borrower to any
Affiliate of the Borrower on or as of the Closing Date, and (b) all (if any)
Indebtedness of any Affiliate of the Borrower to the Borrower on or as of the
Closing Date and all (if any) Contractual Obligations of any Affiliate of the
Borrower to the Borrower on or as of the Closing Date.
SECTION 7.22. YEAR 2000 PROBLEM.
The Borrower has reviewed the areas within its operations and business
which could be materially adversely affected by, and has developed or is making
commercially reasonable efforts to develop a program to address on a timely
basis, the Year 2000 Problem and has made related inquiry of material suppliers,
vendors and customers (if appropriate). Based on such review and program, the
Borrower represents and warrants that the Year 2000 Problem will not have any
Materially Adverse Effect. As used herein, the term "YEAR 2000 PROBLEM" means
the possibility that any computer applications or equipment (a) used by the
Borrower, or (b) used by material suppliers, vendors or customers in connection
with the conduct of material business with the Borrower, may be unable to
recognize and properly perform date-sensitive functions involving certain dates
prior to and any dates on or after January 1, 2000.
SECTION 7.23. BANKING ARRANGEMENTS.
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The Borrower is and will be taking all action necessary or appropriate
to complete each of the following in a manner reasonably satisfactory to the
Bank by December 15, 1999: (a) direct and instruct in writing all account
debtors and other obligors of the Borrower or of any of its Subsidiaries to make
all payments and remit all cash proceeds of Net Revenues Receivable solely to
the Collection Lockbox, (b) establish the Borrower's Concentration Account, (c)
except as and to the extent otherwise expressly provided by Section 8.1.12(b) or
otherwise permitted by the Bank, make subject to an Agency Account Agreement
each bank account and other Financial Asset Account held or maintained by the
Borrower or any of its Subsidiaries with any bank or other financial institution
other than the Bank, (d) except as and to the extent otherwise expressly
permitted by the Bank, direct each Agency Account Institution, pursuant to the
Agency Account Agreement to which such Agency Account Institution is a party
(whereby such Agency Account Institution shall, among other things, waive all
rights of set-off, other than for service charges and returns incurred in
connection therewith), to cause all funds held by such Agency Account
Institution in its Agency Accounts to be transferred (with such frequency as the
Bank shall reasonably request) to, and only to, the Bank for deposit in the
Borrower's Concentration Account. Each of the bank accounts and other Financial
Asset Accounts (other than Excluded Accounts) opened, held or maintained by the
Borrower or any of its Subsidiaries with any bank or other financial institution
of any kind other than the Bank is identified in Section 7.23 of the Disclosure
Schedule.
SECTION 7.24. REPRESENTATIONS IN LOAN DOCUMENTS AND ANCILLARY
DOCUMENTS.
Except as otherwise described in Section 7.24 of the Disclosure
Schedule, each of the representations and warranties made by the Borrower in the
Loan Documents and Ancillary Documents is true and correct in all material
respects, and the Borrower makes to the Bank each such representation and
warranty made therein to the same extent and with the same full force and effect
as if such representation or warranty were set forth herein in full.
ARTICLE VIII
COVENANTS
SECTION 8.1. CERTAIN AFFIRMATIVE COVENANTS.
The Borrower agrees with the Bank and warrants that, from and after the
date of this Agreement and until the Commitment shall have terminated in full
and all of the Obligations shall have been paid in full, the Borrower will, and
will cause each of its Subsidiaries to:
SECTION 8.1.1. FINANCIAL INFORMATION; ETC.
Furnish to the Bank copies of the following financial statements,
reports and other information:
(a) promptly when available and in any event within ninety
(90) days after the close of each fiscal year of the Borrower:
(i) a consolidated balance sheet as at the close of
such fiscal year, and
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related consolidated statements of operations, stockholders'
equity and cash flows for such fiscal year, of the Borrower
and its Subsidiaries (with comparable information as at the
close of and for the prior fiscal year), such statements for
such fiscal year to be audited and accompanied by an audit
report issued without Impermissible Qualification by the
Independent Public Accountant;
(ii) consolidating balance sheets as at the close of
such fiscal year, and related consolidating statements of
operations for such fiscal year, of the Borrower and its
Subsidiaries (with comparable information as at the close of
and for the prior fiscal year), certified as to fairness of
presentation by the principal accounting or financial
Authorized Officer of the Borrower;
(iii) a Compliance Certificate calculated as at the
close of such fiscal year; and
(iv) commencing with the fiscal year of the Borrower
ending June 30, 1999, a written statement of the Independent
Public Accountant stating that, in making the examination
necessary to make the audit report on the financial statements
delivered pursuant to clause (i), it obtained no knowledge of
any Default by the Borrower or any of its Subsidiaries in the
performance or observance of any of the covenants contained in
Section 8.2.4, or, if the Independent Public Accountant shall
have obtained knowledge of any such Default, specifying all
such Defaults and the nature and status thereof;
(b) promptly when available and in any event within forty-five
(45) days after the close of each fiscal quarter of each fiscal year of
the Borrower:
(i) a consolidated balance sheet as at the close of
each such fiscal quarter, and related consolidated statements
of operations and cash flows for such fiscal quarter and for
the portion of the fiscal year then ended, of the Borrower and
its Subsidiaries (with comparable information as at the close
of and for the corresponding fiscal quarter of the prior
fiscal year and for the corresponding portion of such prior
fiscal year), certified as to fairness of presentation by the
principal accounting or financial Authorized Officer of the
Borrower;
(ii) consolidating balance sheets as at the close of
such fiscal quarter, and related consolidating statements of
operations and cash flows for such fiscal quarter and for the
portion of the fiscal year then ended, of the Borrower and its
Subsidiaries (with comparable information as at the close of
and for the corresponding fiscal quarter of the prior fiscal
year and for the corresponding portion of such prior fiscal
year), certified as to fairness of presentation by the
principal accounting or financial Authorized Officer of the
Borrower; and
(iii) a Compliance Certificate calculated as at the
close of such fiscal quarter;
(c) promptly when available and in any event within forty-five
(45) days (or,
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with respect to subclause (iii) below, fifteen (15) days) after the
close of each fiscal month of the Borrower:
(i) a consolidated balance sheet as at the close of
each such fiscal month, and related consolidated statements of
operations and cash flows for such fiscal month, of the
Borrower and its Subsidiaries;
(ii) a statement as at the close of each such fiscal
month showing aging and reconciliation of the Net Revenues
Receivable of the Borrower and its Subsidiaries as at the
close of such fiscal month; and
(iii) a schedule identifying each Financial Asset
Account (other than Excluded Accounts) opened by or for the
Borrower or any of its Subsidiaries during such fiscal month,
and a Borrowing Base Report as at the close of each such
fiscal month setting forth the amount of each of Eligible
Trailing Revenues and the Eligible Projected Revenues of the
Borrower and its Subsidiaries for the Collection Period ending
as at the last day of such fiscal month and for the Projected
Collection Period ending as at the last day of the third
fiscal month following such fiscal month, attached to which
shall be all reports and supporting information required by
the Bank to confirm the Borrowing Base calculations as of the
last day of such fiscal month;
(d) promptly upon receipt thereof, copies of all detailed
financial and management reports, if any, submitted to the Borrower or
any of its Subsidiaries by any independent public accountant in
connection with any annual or interim audit made by any such
independent public accountant of the books of the Borrower or of any of
its Subsidiaries;
(e) promptly upon completion thereof, and in any event not
later than June 15 of each fiscal year of the Borrower, a copy of the
budget for the following fiscal year for the Borrower and its
Subsidiaries, including, in each case, budgeted results for each fiscal
quarter and for the fiscal year as a whole, together with an
explanation of any differences between the sum of the individual
budgets and the consolidated totals, and upon the delivery of any
financial statements relating to any period included in such budget, a
summary comparing the actual financial performance of the Borrower and
its Subsidiaries during such period to that provided for in such
budget; and
(f) promptly, such additional financial and other information
with respect to the Borrower or any of its Subsidiaries as the Bank may
from time to time reasonably request.
SECTION 8.1.2. MAINTENANCE OF EXISTENCE; ETC.
Maintain and preserve its separate existence as a limited liability
company, limited partnership or (as the case may be) corporation and maintain
and preserve its material rights and franchises and continue to own and hold,
legally and beneficially, free and clear of all Liens (except Liens permitted by
Section 8.2.3 or by any of the other Loan Documents), all of the
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Equity Interests of each of its Subsidiaries; provided, however, that the
foregoing shall not prohibit the Borrower or any of its Subsidiaries from
entering into or implementing any Permitted Disposition or any other arrangement
or transaction permitted by Section 8.2.7.
SECTION 8.1.3. FOREIGN QUALIFICATION.
Cause to be done at all times all things necessary to be duly qualified
to do business and to be in good standing as a foreign organization in each
jurisdiction where the nature of its business makes such qualification necessary
or appropriate and where the failure to so qualify has or could reasonably be
expected to have any Materially Adverse Effect.
SECTION 8.1.4. PAYMENT OF TAXES; ETC.
Pay and discharge, as the same become due and payable, all material
federal, state and local taxes, assessments and other governmental charges or
levies against or on any of its income, profits or Property, as well as all
claims of any kind, including all claims for labor, materials and supplies,
which, if unpaid, will become a Lien upon any of its Property (other than Liens
expressly permitted by this Agreement or any of the other Loan Documents), and
pay before they become delinquent all other material obligations and
liabilities; provided, however, that the foregoing shall not require the
Borrower or any of its Subsidiaries to pay or discharge any such tax,
assessment, charge, levy, claim, obligation or liability (a) which is not yet
due and payable, or (b) so long as it shall contest the validity thereof in good
faith by appropriate proceedings and shall have set aside on its books, to the
extent required by GAAP, adequate reserves in accordance with GAAP with respect
thereto. Nothing in this Section 8.1.4 shall be construed so as to diminish or
impair the absolute and unconditional Obligations of the Borrower to pay to the
Bank all of the Obligations as and when the same shall become due and payable.
SECTION 8.1.5. MAINTENANCE OF PROPERTY.
Keep all Property owned by it that is useful and necessary in its
businesses in good working order and condition (ordinary wear and tear
excepted), and maintain or cause to be maintained insurance with respect to
Property owned by it and with respect to its businesses against such casualties
and contingencies and of such types and in such amounts and with such
deductibles as are customary in the case of similar businesses, including,
without limitation, property and casualty insurance complying with the foregoing
provisions and naming the Bank as loss payee and additional insured; and, upon
the reasonable request of the Bank at any time and from time to time (which
request, however, shall not be made by the Bank more than once in any fiscal
year of the Borrower unless any Defaults shall be continuing), furnish to the
Bank a certificate of an Authorized Officer of the Borrower setting forth the
nature and extent of all insurance maintained by the Borrower or by any of its
Subsidiaries in accordance with this Section 8.1.5.
SECTION 8.1.6. NOTICE OF DEFAULT; ETC.
Give written notice (accompanied by a reasonably detailed written
explanation with respect thereto) promptly, and in any event within five (5)
Business Days after the Borrower or any of its Subsidiaries shall have first
obtained knowledge thereof, to the Bank of:
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(a) the occurrence of
(i) any Default,
(ii) the receipt by the Borrower from or on behalf of
any holder of any Capital Stock or other Equity Interests of
the Borrower of any notice, demand or request for redemption,
purchase, repurchase or other acquisition by the Borrower of
any of the Capital Stock or other Equity Interests of the
Borrower, and
(iii) any material default or event of default under
any Ancillary Document on the part of any Person bound
thereby, or any other material breach by any Person bound by
any Ancillary Document of any of its or his material
obligations thereunder;
(b) any litigation, arbitration or governmental investigation
or proceeding not previously disclosed by the Borrower to the Bank
which has been instituted or, to the best knowledge of the Borrower
(after due inquiry), is threatened against the Borrower or any of its
Subsidiaries, or to which any of their respective Properties is
subject, which
(i) has had and continues to have, or (as the case
may be) could reasonably be expected to have, any Materially
Adverse Effect, or
(ii) relates to this Agreement, any other Loan
Document, any Collateral or any Ancillary Document;
(c) any material adverse development which shall occur in any
litigation, arbitration or governmental investigation or proceeding
previously disclosed by the Borrower to the Bank and which has had and
continues to have, or (as the case may be) could reasonably be expected
to have, any Materially Adverse Effect;
(d) any development in the business, operations, Property,
financial condition or prospects of the Borrower or any of its
Subsidiaries which has had and continues to have, or (as the case may
be) could reasonably be expected to have, any Materially Adverse
Effect;
(e) the receipt by the Borrower or any of its Subsidiaries of
written notice of the intention of any Governmental Authority or any
other Person to terminate or renegotiate a Management Agreement, or the
delivery by the Borrower or any of its Subsidiaries to any Governmental
Authority or any other Person of written notice of the intention of the
Borrower or of any of its Subsidiaries to terminate or renegotiate any
Management Agreement, if (in any such case) the termination or
renegotiation thereof has had or could reasonably be expected to have a
Materially Adverse Effect; and
(f) any termination, cancellation or rescission or any
material amendment or modification of any Management Agreement or other
Ancillary Document, which written notice shall include a copy (if in
writing) or a description (if not in writing) of any such termination,
cancellation, rescission, amendment or modification of any such
Management Agreement or Ancillary Document; provided, however, that the
Borrower
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shall have no obligation to give notices or other information or
documents under this clause (f) unless the subject event or arrangement
has had or could reasonably be expected to have a Materially Adverse
Effect.
SECTION 8.1.7. BOOKS AND RECORDS.
Keep proper books and records reflecting all of its material business affairs
and transactions in accordance with GAAP, and permit the Bank or any of its
representatives, upon reasonable notice at reasonable times and intervals during
ordinary business hours, to visit and inspect any of its offices and Properties,
discuss financial matters relating to the Borrower or any of its Subsidiaries
with any of their officers and the Independent Public Accountant (and the
Borrower hereby irrevocably authorizes the Independent Public Accountant to
discuss its financial matters with the Bank or any of the Bank's
representatives), and examine and make abstracts or photocopies from any of its
books or other corporate records, all at the cost and expense of the Borrower
for any charges imposed by such accountant or for making such abstracts or
photocopies. The Borrower acknowledges and agrees that the Bank shall have the
right to perform a collateral audit at the offices and at the business and
Property locations of the Borrower and each of its Subsidiaries twice during
each fiscal year of the Borrower so long as no Defaults shall be continuing,
and, if any Defaults shall be continuing, at such additional time or times
during each fiscal year of the Borrower as the Bank shall in its sole discretion
determine to be necessary or appropriate. All of the reasonable out-of-pocket
costs and expenses incurred or sustained by the Bank in connection with the
conduct of such collateral audits shall be for the account of the Borrower;
provided, however, that the Borrower shall not be responsible for the costs and
expenses of more than one (1) such collateral audit per fiscal year conducted by
the Bank while no Defaults are continuing.
SECTION 8.1.8. COMPLIANCE WITH LAWS; ETC.
(a) Obtain all such Approvals and take all such other action with
respect to any Governmental Authority as shall from time to time be required for
the execution, delivery or performance of this Agreement and the other Loan
Documents and duly perform and comply in all material respects with all of the
material terms and conditions of all Approvals so obtained.
(b) Comply in all material respects with all Applicable Laws, including
all Environmental Laws and all material provisions of ERISA, except to the
extent that any failure so to comply does not have and could not reasonably be
expected to have any Materially Adverse Effect.
SECTION 8.1.9. IDENTIFICATION OF SUBSIDIARIES; PROVISION OF COLLATERAL.
If and whenever any direct or indirect Subsidiary of the Borrower shall
be created or acquired by the Borrower or by any of its Subsidiaries at any time
after the date hereof:
(a) furnish promptly to the Bank a written notice identifying such
Subsidiary and setting forth with respect to such Subsidiary the information
required by Section 7.14 with respect to the Borrower; and
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(b) promptly comply with, and cause such Subsidiary to comply with, the
applicable terms of Section 3.10.
SECTION 8.1.10. LANDLORD LIEN WAIVERS.
If and when requested by the Bank with respect to any particular Real
Estate Lease or warehouse contract, continue to use commercially reasonable
efforts, including making written requests and follow-up telephone calls, to
obtain a Landlord Lien Waiver reasonably satisfactory to the Bank in form and
substance with respect to each Real Estate Lease or (as the case may be)
warehouse contract which is negotiated, completed, renewed or extended by the
Borrower or any of its Subsidiaries at any time or from time to time after the
Closing Date; and, in any event, use all commercially reasonable efforts to
obtain by December 15, 1999 a Landlord Lien Waiver reasonably satisfactory to
the Bank in form and substance with respect to each warehouse contract to which
the Borrower is a party on the date hereof. Anything in the foregoing provisions
of this Section 8.1.10 to the contrary, the Borrower shall have no obligation to
obtain any Landlord Lien Waivers with respect to any Real Estate Leases of
School facilities.
SECTION 8.1.11. YEAR 2000 COMPLIANCE.
Perform all commercially reasonable acts necessary to ensure that the
Borrower and its Subsidiaries (a) shall become Year 2000 Compliant in a timely
manner, and (b) shall not be materially adversely affected as a consequence of
the failure by any supplier, vendor or customer of the Borrower or its
Subsidiaries to become Year 2000 Compliant in a timely manner, except (in each
case) to the extent that any failure to do so will not have and could not
reasonably be expected to have any Materially Adverse Effect. Such acts will
include, as and to the extent determined by the Borrower on a reasonable basis
to be reasonably necessary and appropriate considering the nature of the
business and operations conducted by the Borrower and its Subsidiaries,
performing a comprehensive review and assessment of all material systems of the
Borrower and its Subsidiaries and, if and as reasonably necessary or
appropriate, adopting a plan, with itemized budget, if appropriate, for the
remediation, monitoring and testing of such systems. As used in this Section
8.1.11, the term "YEAR 2000 COMPLIANT" means, with respect to any Person, that
all software, hardware, firmware, equipment, goods or systems utilized by or
material to the business, operations or financial condition of such Person will
properly perform date sensitive functions before, during and after the year
2000. The Borrower will, promptly upon request by the Bank, provide to the Bank
such evidence of compliance by the Borrower and its Subsidiaries with the terms
of this Section 8.1.11 as the Bank may from time to time reasonably require.
SECTION 8.1.12. BANKING ARRANGEMENTS.
(a) The Borrower will, from and after December 15, 1999, continue to
maintain with the Bank all primary banking and transaction accounts established
by the Borrower with the Bank by December 15, 1999, all upon terms and
conditions reasonably satisfactory to the Bank and the Borrower. By December 15,
1999 and continuing thereafter, the Borrower will (i) direct and instruct in
writing all account debtors and other obligors of the Borrower or any of its
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Subsidiaries, to make all payments and remit all cash proceeds of Net Revenues
Receivable solely to the Collection Lockbox, (ii) establish a depository account
(the "BORROWER'S CONCENTRATION ACCOUNT") under the control of the Bank, in the
name of the Borrower, (iii) except as and to the extent otherwise provided by
paragraph (b) or otherwise expressly permitted by the Bank from time to time,
make subject to an agency account agreement in form and substance reasonably
satisfactory to the Bank (each, an "AGENCY ACCOUNT AGREEMENT") each bank account
and other Financial Asset Account held or maintained by the Borrower or any of
its Subsidiaries with any bank or other financial institution other than the
Bank, (iv) except as and to the extent otherwise expressly permitted by the Bank
from time to time, direct each Agency Account Institution, pursuant to the
Agency Account Agreement to which it is a party (whereby such Agency Account
Institution shall, among other things, waive all rights of set-off, other than
for service charges and returns incurred in connection therewith), to cause all
funds held by such Agency Account Institution in its Agency Accounts to be
transferred (with such frequency as shall be required by such Agency Account
Agreement) to, and only to, the Bank for deposit in the Borrower's Concentration
Account, and (v) at all times ensure that immediately upon the Borrower's or any
of its Subsidiaries' receipt of any funds constituting cash proceeds of Net
Revenues Receivable, cause such amounts to be immediately transferred to and
deposited in the Borrower's Concentration Account. All cash proceeds of Net
Revenues Receivable received in the Collection Lockbox will be transferred daily
to, and only to, the Borrower's Concentration Account. The Bank hereby agrees
with the Borrower that, unless any Event of Default is continuing, the Bank will
not give to any Agency Account Institution any written "Notice" of the kind
described in paragraph 4 of the form of Agency Account Agreement.
(b) The Borrower shall not be required to make subject to an Agency
Account Agreement any of the following Financial Asset Accounts (each, an
"EXCLUDED ACCOUNT"): (i) any Financial Asset Account (A) the cash balances or
the Cash Equivalents or other Property of which at no time exceed $50,000, and
(B) the aggregate amount of all sums or Cash Equivalents or other Property
credited to which in any calendar month do not exceed $200,000; or (ii) any
Financial Asset Account identified in Section 7.7 of the Disclosure Schedule as
being subject to Liens or other restrictions on the date hereof; provided,
however, that the Borrower shall not at any time after December 14, 1999 cause
or permit (1) the aggregate amount of all cash balances, Cash Equivalents and
other Property of all Excluded Accounts of the kind described in clause (i)
above to exceed $1,500,000 in the aggregate, or (2) the aggregate amount of all
sums, Cash Equivalents and other Property credited to Excluded Accounts of the
kind described in clause (i) above in any calendar month to exceed $4,000,000.
SECTION 8.1.13. COMPLIANCE WITH TERMS OF MANAGEMENT AGREEMENTS; ETC.
Make all payments and otherwise perform in all material respects all
material obligations in respect of all Management Agreements, Subordinated Debt
Documents and Real Estate Leases, keep such Instruments in full force and effect
and not allow such Instruments to lapse or be terminated or any rights to renew
such Instruments to be forfeited or canceled, notify the Bank of any material
default by any party with respect to such Instruments, and cooperate with the
Bank in all respects to cure any such default, except, in any case, where the
failure to do so, either individually or in the aggregate, does not have and
could not reasonably be expected to have a Materially Adverse Effect.
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SECTION 8.2. CERTAIN NEGATIVE COVENANTS.
The Borrower agrees with the Bank and warrants that, from and after the
date of this Agreement and until the Commitment shall have terminated in full
and all of the Obligations shall have been paid in full, the Borrower will not,
and the Borrower will not cause or permit any of its Subsidiaries to:
SECTION 8.2.1. LIMITATION ON LINES OF BUSINESS.
At any time undertake, conduct or transact, directly or indirectly, any
businesses except businesses that are in the Line of Business.
SECTION 8.2.2. INDEBTEDNESS.
Incur or permit or suffer to exist, or otherwise become or be liable in
respect of or be responsible for, any Indebtedness; except:
(a) Indebtedness of the Borrower or of any of its Subsidiaries
under any of the Loan Documents or in respect of any of the Credit
Extensions or any of the Obligations;
(b) Permitted Indebtedness of the Borrower or of any of its
Subsidiaries; and
(c) Permitted Subordinated Debt of the Borrower.
SECTION 8.2.3. LIENS.
Create, incur or assume, or permit or suffer to exist, any Liens upon
any of its Property (including any Equity Interests in any of its Subsidiaries),
whether now owned or hereafter created, arising or acquired; except:
(a) Liens in favor of the Bank securing the payment or
performance of any of the Credit Extensions or any of the Obligations
under or in respect of any of the Loan Documents; and
(b) Permitted Liens.
SECTION 8.2.4. FINANCIAL COVENANTS.
(a) MAXIMUM ADJUSTED CONSOLIDATED CAPITAL EXPENDITURES. Permit the
Adjusted Consolidated Capital Expenditures for any period identified in the
table set forth in Section 8.2.4(a) of the First Schedule to be greater than the
maximum Adjusted Consolidated Capital Expenditures set forth opposite such
period.
(b) MAXIMUM CHARTER SCHOOL CAPITAL EXPENDITURES. Permit the Charter
School Capital Expenditures for any period identified in the table set forth in
Section 8.2.4(b) of the First Schedule to be greater than the maximum Charter
School Capital Expenditures set forth opposite such period.
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(c) MINIMUM STUDENT ENROLLMENT. Permit the Student Enrollment on any
date identified in the table set forth in Section 8.2.4(c) of the First Schedule
to be less than the minimum Student Enrollment set forth opposite such date.
SECTION 8.2.5. INVESTMENTS AND ACQUISITIONS.
(a) Make, incur or assume, or permit or suffer to exist, or
make any offer or commitment to make, or enter into any agreement to
make, any Investments in any other Person or any Acquisitions; EXCEPT:
(i) Permitted Investments;
(ii) Investments by the Borrower made by way of
short-term loans to Schools; provided, however, that (A) the
aggregate outstanding principal amount of all of such loans
shall not at any time exceed $30,000,000, and (B) no such
loans shall be made by the Borrower while any Events of
Default shall be continuing;
(iii) Acquisitions by the Borrower or by any of its
Subsidiaries, in a single transaction or in a series of
related transactions, for total consideration paid in an
Amount not exceeding $200,000 in the aggregate for any such
single transaction or series of related transactions;
provided, however, that: (A) each such Acquisition shall be
made in the ordinary course of business and on terms and
conditions that are in all material respects consistent with
the Borrower's usual and customary business practices; (B) the
aggregate Amount of all of the consideration paid in any
fiscal year of the Borrower for all of such Acquisitions
pursuant to this clause (iii) shall not exceed $500,000 in any
such fiscal year; and (C) no Default shall be continuing at
the time of any such Acquisition or shall result therefrom;
and
(iv) Acquisitions by the Borrower or by any of its
Subsidiaries, if and to the extent that the consideration
payable therefor is Permitted Equity Interests of the
Borrower.
(b) During the continuation of any Event of Default:
(i) make, incur or assume any Investments that are
related to the acquisition or improvement by the Borrower, any
of its Subsidiaries or any other Person or Persons of any
Property, plant or equipment or other facilities
(collectively, "SCHOOL FACILITIES") for any charter school,
managed school or other similar school that is not at the time
of the occurrence of such Event of Default a School (any
charter school, managed school or other similar school that is
not a School at the time of the occurrence of such Event of
Default being herein called a "TARGET SCHOOL");
(ii) make, incur or assume any Capital Expenditures
for or in
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connection with any Target School or any School Facilities
relating to such Target School;
(iii) incur any Permitted Indebtedness of the kind
described in clause (f) of the definition of the term
"PERMITTED INDEBTEDNESS" for the purpose of acquiring,
leasing, constructing or improving any Property used or to be
used for or in connection with any Target School or any School
Facilities relating thereto; or
(iv) make any offer or commitment to make or incur,
or enter into any agreement or undertaking to make or incur,
any Investments, Capital Expenditures or Indebtedness of the
kind described in clause (i), (ii) or (iii) of this paragraph
(b).
SECTION 8.2.6. RESTRICTED PAYMENTS.
Make, extend or enter into any offer or commitment to make, or enter
into any agreement to make, any Restricted Payments; EXCEPT:
(a) the declaration and payment by the Borrower of dividends
or other distributions on its Equity Interests in the form of Permitted
Equity Interests of the Borrower; and
(b) payments, not otherwise expressly permitted by any of the
other clauses of this Section 8.2.6 and not otherwise prohibited by any
of the other covenants in this Section 8.2 or by any of the other
provisions contained in this Agreement, by the Borrower or any of its
Subsidiaries to any Affiliates of the Borrower, but, in each case, only
to the extent permitted by Section 8.2.13.
SECTION 8.2.7. MERGERS; SALES OF PROPERTY.
Consolidate or merge with or into any Person, engage in any Sale of all
or any substantial part of its Property (either in a single transaction or in a
series of related transactions), make any offer or commitment to do so, or enter
into any agreement to do so; EXCEPT:
(a) any Permitted Dispositions; and
(b) the consolidation or merger of any Subsidiary of the
Borrower with or into, or the Sale or other transfer by any such
Subsidiary of all or substantially all of its Property to, the
Borrower; provided, however, that, in the event of any merger or other
similar transaction involving the Borrower, the Borrower shall be the
Person surviving such merger or other transaction; and, provided,
further, that, prior to or in connection with the consolidation or
merger of any Subsidiary of the Borrower with or into, or the transfer
of all of the Property of any Subsidiary of the Borrower to, the
Borrower, (i) true and complete copies of all of the Instruments
evidencing such transactions shall have been furnished to the Bank and
shall be reasonably satisfactory to the Bank in form and substance, and
(ii) the Borrower shall execute and deliver to the Bank all such
Instruments (including Instruments of assumption) as shall be requested
by the Bank in
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order to protect and preserve all of its rights and remedies under the
Loan Documents and in relation to the Collateral.
SECTION 8.2.8. LIMITATIONS ON OPTIONAL PAYMENTS; ETC.
(a) Make or offer to make any optional or voluntary payment,
prepayment, repurchase or redemption of, or otherwise voluntarily or optionally
defease any Permitted Subordinated Debt or any other Indebtedness governed or
otherwise evidenced by any Ancillary Documents, or segregate funds for any such
payment, prepayment, repurchase, redemption or defeasance, provided that the
Borrower may in any fiscal year make such payments or other prepayments in a
maximum aggregate amount not exceeding $1,000,000, (b) amend, modify or
otherwise change, or consent or agree to any amendment, modification, waiver or
other change to, any of the terms governing the payment, prepayment, repurchase
or redemption of any Permitted Subordinated Debt or any other Indebtedness
governed or otherwise evidenced by any Ancillary Documents (other than any such
amendment, modification, waiver or other change (i) which affects or relates to
the Guarantee, dated November 25, 1997, in favor of BankBoston, N.A., or (ii)
which (A) would extend the maturity or reduce the amount of any payment of
principal thereof, reduce the rate or extend the date for payment of interest
thereon or relax any covenant or other restriction applicable to the Borrower or
any of its Subsidiaries, and (B) does not involve the payment of a consent fee),
or (c) designate any Indebtedness (other than the Obligations) as "senior
indebtedness" or "senior debt" for the purposes of any Instrument or Instruments
governing or otherwise evidencing any Permitted Subordinated Debt.
SECTION 8.2.9. MODIFICATION OF OTHER ANCILLARY DOCUMENTS; ETC.
Consent to or enter into or permit any material amendment, supplement
or other modification of any of the Governing Documents of the Borrower or any
of its Subsidiaries or any of the other Ancillary Documents, if such amendment,
supplement or modification (a) shall have, or (as the case may be) could
reasonably be expected to have, any Materially Adverse Effect, or (b) shall
include any term, covenant or other provision, or shall otherwise effect any
change, that conflicts with or otherwise contravenes any of the terms, covenants
or other provisions of this Agreement or any of the other Loan Documents. The
covenant of the Borrower in Section 8.2.8 is separate from and in addition to
the covenant in this Section 8.2.9.
SECTION 8.2.10. LIMITATION ON CHANGES IN FISCAL PERIODS.
Permit the fiscal year of the Borrower to end on a day other than June
30 or change the Borrower's method of determining fiscal quarters.
SECTION 8.2.11. LIMITATION ON NEGATIVE PLEDGE CLAUSES.
Enter into or suffer to exist or become effective any Instrument which
prohibits or limits the ability of the Borrower or any of its Subsidiaries to
create, incur, assume or suffer to exist any Lien upon any of its Property or
revenues, whether now owned or hereafter acquired, other than (a) this Agreement
and the other Loan Documents, and (b) any agreements governing any Purchase
Money Liens or Capitalized Lease Obligations otherwise permitted hereby (in
which case, any prohibition or limitation shall only be effective against the
assets financed thereby).
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SECTION 8.2.12. LIMITATION ON RESTRICTIONS ON SUBSIDIARY DISTRIBUTIONS.
Enter into or suffer to exist or become effective any consensual
encumbrance or restriction on the ability of any Subsidiary of the Borrower to
(a) make any dividends or other distributions in respect of any Capital Stock of
such Subsidiary held by, or pay any Indebtedness owed to, the Borrower or any of
its Subsidiaries, (b) make Investments in the Borrower or any of its
Subsidiaries, or (c) transfer any of its Property to the Borrower or any of its
Subsidiaries, EXCEPT for such encumbrances or restrictions existing under or by
reason of (i) any restrictions existing under the Loan Documents, and (ii) any
restrictions on the ability of the Borrower or any of its Subsidiaries to
transfer any asset imposed by the provisions of the documentation pursuant to
which there shall have been created a Lien on such asset expressly permitted by
Section 8.2.3.
SECTION 8.2.13. TRANSACTIONS WITH AFFILIATES.
Enter into, engage in or perform any Affiliate Transaction, make any
offer or commitment to do so, or enter into any agreement to do so, EXCEPT:
(a) Restricted Payments by the Borrower, if and only to the
extent expressly permitted by Section 8.2.6;
(b) loans or advances to any director, manager, officer or
employee of the Borrower or any of its Subsidiaries made in the
ordinary course of business and on terms and conditions that are in all
material respects consistent with the Borrower's usual and customary
business practices; provided, however, that the aggregate principal
amount of all of such loans or advances from time to time outstanding
shall not exceed $250,000 at any time;
(c) the payment by the Borrower of management or transaction
fees to any of its Affiliates; provided, however, that: (i) the
aggregate amount of all of such fees so paid in any fiscal year of the
Borrower shall not exceed $100,000 in any such fiscal year; and (ii) no
such fees shall be paid so long as any Default shall be continuing;
(d) Permitted Investments of the kind described in paragraph
(f) of the definition of the term "PERMITTED INVESTMENTS";
(e) each of the Affiliate Transactions described in Section
7.21 of the Disclosure Schedule; and
(f) any other Affiliate Transaction not otherwise permitted by
any of the other provisions of this Section 8.2.13; provided, however,
that (i) such Affiliate Transaction is not otherwise prohibited by the
terms of this Agreement or any of the other Loan Documents; (ii) such
Affiliate Transaction is made or undertaken in the ordinary course of
business by the Borrower or by any of its Subsidiaries and on terms and
conditions that are in all material respects consistent with the
Borrower's usual and customary business practices; (iii) the terms of
such Affiliate Transaction, taken as a whole, are no less favorable to
the Borrower or its Subsidiaries than would be the case if such
Affiliate Transaction had been entered into on an arm's length basis
with a Person that is not an
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Affiliate of the Borrower; and (iv) at the time of the completion of
such Affiliate Transaction, and after giving effect thereto, no Default
shall occur or be continuing.
SECTION 8.2.14. SALE OF CAPITAL STOCK; ETC.
Issue, sell, transfer or otherwise dispose of any shares of any Capital
Stock or other Equity Interests of the Borrower or any of its Subsidiaries;
EXCEPT:
(a) the pledge to the Bank from time to time of Capital Stock
and other Equity Interests now owned or from time to time hereafter
acquired by the Borrower or by any of its Subsidiaries, all in
accordance with the terms of this Agreement and the Collateral
Documents;
(b) the issuance and Sale by the Borrower or by any of its
Subsidiaries of Permitted Equity Interests of the Borrower as
consideration in, or in connection with the formation of any
acquisition vehicle to be used in, any Acquisition permitted by
paragraph (iii) of Section 8.2.5(a); and
(c) the issuance and Sale by the Borrower of shares of its
Permitted Equity Interests; provided, however, that no breach of
Section 8.2.16 shall occur as a result of such Sale.
SECTION 8.2.15. CHANGE OF LOCATION OR NAME.
Change (a) the location of its principal place of business, chief
executive office, major executive office, chief place of business or records
concerning its business and financial affairs, or (b) its name or the name under
or by which it conducts its business, in each case, without first giving the
Bank written notice thereof and having taken any and all action reasonably
required by the Bank to maintain and preserve the perfected first-priority Liens
in favor of the Bank created by the Collateral Documents.
SECTION 8.2.16. FINANCIAL ASSET ACCOUNTS.
Except as and to the extent otherwise expressly permitted by the Bank,
establish, at any time after December 14, 1999, any bank accounts or other
Financial Asset Accounts other than those with the Bank or with any Agency
Account Institution that is party to an Agency Account Agreement and other than
as otherwise expressly permitted by Section 8.1.12(b).
ARTICLE IX
EVENTS OF DEFAULT
SECTION 9.1. EVENTS OF DEFAULT.
The term "EVENT OF DEFAULT" shall mean any of the following events set
forth in this Section 9.1 occurring or existing at any time on or after the date
of this Agreement:
SECTION 9.1.1. NON-PAYMENT OF OBLIGATIONS.
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The Borrower shall default:
(a) in the payment or prepayment when due under this Agreement
or the Note of any principal of any of the Loans, and such default
shall continue unremedied for a period of more than one (1) Business
Day;
(b) in the payment or prepayment when due under this
Agreement, the Note or any other Loan Documents of any interest on any
of the Loans or on any other Obligations or any Fees payable under
Section 3.5, and such default shall continue unremedied for a period of
more than three (3) Business Days; or
(c) in the payment when due under this Agreement or any of the
other Loan Documents of any other sum (other than any sum referred to
in clause (a) or (b)), and such default shall continue unremedied for a
period of more than five (5) Business Days.
SECTION 9.1.2. NON-PERFORMANCE OF CERTAIN OBLIGATIONS.
The Borrower shall default in the due performance or observance of any
of its Obligations under Section 3.10, Section 8.1.6, Section 8.1.9, Section
8.1.12, Section 8.1.13, or Section 8.2 (including Sections 8.2.1 through 8.2.16,
inclusive).
SECTION 9.1.3. NON-PERFORMANCE OF OTHER OBLIGATIONS.
The Borrower shall default in the due performance or observance of any
of its Obligations under any of the Loan Documents (other than the Obligations
specified in Section 9.1.1 or 9.1.2), and such default shall continue unremedied
for more than thirty (30) days after written notice thereof shall have been
given to the Borrower by the Bank.
SECTION 9.1.4. BREACH OF WARRANTY.
Any representation or warranty of the Borrower under any of the Loan
Documents is or shall be untrue or incorrect in any material respect when made
or deemed made.
SECTION 9.1.5. DEFAULT UNDER OTHER INSTRUMENTS; ETC.
At any time after the date hereof,
(a) the Borrower or any of its Subsidiaries shall fail to make
any payments, when due, of any Indebtedness of the Borrower or of any
of its Subsidiaries (other than the Obligations), such payments shall
exceed $2,000,000 in the aggregate, and such failure shall continue
beyond the periods of grace, if any, provided in the Instruments under
or by which such Indebtedness is governed or evidenced;
(b) the Borrower or any of its Subsidiaries shall fail to
perform or observe the terms of any Instruments governing or evidencing
any Indebtedness of the Borrower or of any of its Subsidiaries, and
such failure of the kind described in this clause (b) shall permit any
one or more holders of such Indebtedness to declare immediately due and
payable or otherwise to immediately accelerate Indebtedness of the
Borrower or of any of
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its Subsidiaries in an aggregate amount exceeding $4,000,000;
(c) any Lien on any Property of the Borrower or of any of its
Subsidiaries securing any Indebtedness of the Borrower or of any of its
Subsidiaries in an aggregate amount exceeding $2,000,000, or any Lien
created under or in connection with the Real Estate Lease in effect on
the date hereof, shall be foreclosed or otherwise enforced;
(d) during any fiscal year of the Borrower, the aggregate
Student Enrollment of all Schools, determined after deducting the
aggregate Student Enrollment of all Schools covered by Management
Agreements in respect of which the Borrower or any of its Subsidiaries
shall have received written notices of termination or of intention to
terminate, shall be less than ninety percent (90%) of the minimum
Student Enrollment required to be maintained during such fiscal year
pursuant to Section 8.2.4(c).
SECTION 9.1.6. BANKRUPTCY, INSOLVENCY; ETC.
The Borrower or any Subsidiary of the Borrower shall:
(a) generally fail to pay its debts as they become due, or
admit in writing its inability to pay its debts as they become due;
(b) apply for, consent to, or acquiesce in, the appointment of
a trustee, receiver, sequestrator, or other custodian for the Borrower
or any such Subsidiary or any Property of any thereof, or make a
general assignment for the benefit of creditors;
(c) in the absence of such application, consent or
acquiescence, permit or suffer to exist the involuntary appointment of
a trustee, receiver, sequestrator or other custodian for the Borrower
or any such Subsidiary or for a substantial part of the Property of any
thereof, and such trustee, receiver, sequestrator or other custodian
shall not be discharged within sixty (60) days;
(d) permit or suffer to exist the involuntary commencement of,
or voluntarily commence, any bankruptcy, reorganization, debt
arrangement, or other case or proceeding under any bankruptcy or
insolvency laws, or permit or suffer to exist the involuntary
commencement of, or voluntarily commence, any dissolution, winding up
or liquidation proceeding, in each case, by or against the Borrower or
any such Subsidiary; provided that if not commenced by the Borrower or
any such Subsidiary, such proceeding shall be consented to or
acquiesced in by the Borrower or any such Subsidiary, or shall result
in the entry of an order for relief or shall remain undismissed or
shall not be stayed, bonded or vacated for more than sixty (60) days;
(e) permit or suffer to exist the commencement of any case,
proceeding or other action seeking the issuance of a warrant of
attachment, execution, distraint or similar process against all or any
material part of its Property (except for any such attachment or
similar process that would constitute a Permitted Lien); or
(f) take any corporate action authorizing, or in furtherance
of, any of the foregoing.
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SECTION 9.1.7. JUDGMENTS.
A final judgment which, with all other such outstanding final judgments
against the Borrower or any of its Subsidiaries, exceeds an aggregate of
$1,000,000 shall be rendered against the Borrower or any of its Subsidiaries,
and, within thirty (30) days after entry thereof, such judgment shall not have
been discharged or execution thereof stayed pending appeal, or within thirty
(30) days after the expiration of any such stay, such judgment shall not have
been discharged.
SECTION 9.1.8. IMPAIRMENT OF SECURITY; ETC.
Any Loan Document, or any Lien on any material portion of the
Collateral granted thereunder, shall (except in accordance with its terms), in
whole or in part, terminate, cease to be effective, or cease to be the legally
valid, binding and enforceable obligation of the Borrower or (as the case may
be) any of its Subsidiaries; or the Borrower or any of its Subsidiaries shall,
directly or indirectly, contest in any manner such effectiveness, validity,
binding nature or enforceability; or any Lien on any material portion of the
Collateral securing any of the Obligations shall, in whole or in part, cease to
be a perfected first-priority Lien, subject only to the exceptions permitted by
the Loan Documents.
SECTION 9.2. ACTION IF BANKRUPTCY.
If any Default or Event of Default described in Section 9.1.6 shall
occur, the Commitment shall automatically be terminated in full and the
outstanding principal amount of all Loans and the outstanding amount of all
other Obligations shall automatically be and become immediately due and payable,
and the Borrower shall automatically become obligated to provide cash Collateral
to the Bank in an amount equal to the undrawn amount under all Letters of
Credit, all without notice, demand, presentment or other action of any kind.
SECTION 9.3. ACTION IF OTHER EVENT OF DEFAULT.
If any Event of Default (other than an Event of Default described in
Section 9.1.6) shall occur for any reason, whether voluntary or involuntary, and
be continuing, the Bank may, by giving written notice to the Borrower, declare
(a) the Commitment to be terminated in full, whereupon the Commitment shall be
immediately terminated in full, and/or (b) all or any portion of the outstanding
principal amount of the Loans or the outstanding amount of any other Obligations
to be immediately due and payable, whereupon the Commitment shall terminate
forthwith in full and such Loans and other Obligations, or, as the case may be,
such portion thereof, shall be and become immediately due and payable, and the
Borrower shall automatically become obligated to provide cash Collateral to the
Bank in an amount equal to the undrawn amount under all Letters of Credit, in
each case under clause (a) or clause (b), without further notice, demand,
presentment or other action of any kind.
ARTICLE X
MISCELLANEOUS
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SECTION 10.1. WAIVERS, AMENDMENTS; ETC.
The provisions of this Agreement and the other Loan Documents may from
time to time be amended, modified or waived, and all or any Collateral may be
released, if such amendment, modification, waiver or release is consented to in
writing by the Bank and, in the case of any amendment or modification, the
Borrower. No waiver or approval by the Bank under this Agreement, the Note or
any other Loan Documents shall, except as may be otherwise stated in such waiver
or approval, be applicable to subsequent transactions. No waiver or approval
hereunder shall require any similar or dissimilar waiver or approval thereafter
to be granted hereunder.
SECTION 10.2. NOTICES.
(a) All notices and other communications pursuant to this
Agreement or any of the other Loan Documents shall be in writing,
either delivered in hand or sent by first-class mail, postage prepaid,
or sent by facsimile transmission, addressed as follows:
(i) if to the Borrower, at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, marked Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇,
Chief Financial Officer; telecopy: (▇▇▇) ▇▇▇-▇▇▇▇, with a copy
of each such notice or other communication given
simultaneously to ▇▇▇▇ and ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇.▇., ▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇, marked Attention: ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, Esq., telecopy: (▇▇▇)▇▇▇-▇▇▇▇; or
(ii) if to the Bank, at ▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, marked
"Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq., Senior Vice President,
General Counsel and Secretary", with a copy of each such
notice or other communication given simultaneously to ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, Senior Vice President, Imperial Bank Merchant Banking
Division, ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and also to ▇▇▇▇▇▇▇ ▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, marked "Attention: ▇▇▇▇▇
▇. ▇▇▇▇▇, Esq.", telecopy: (▇▇▇) ▇▇▇-▇▇▇▇; or
(iii) to such other addresses as any party hereto
shall have designated in a written notice to the other parties
hereto.
(b) Any notice or other communication pursuant to this
Agreement or any of the other Loan Documents shall be deemed to have
been duly given or made and to have become effective when delivered in
hand to the party to which it is directed, or, if sent by first-class
mail, postage prepaid, or by facsimile transmission, and properly
addressed in accordance with paragraph (a) of this Section 10.2, when
received by the addressee.
SECTION 10.3. COSTS AND EXPENSES.
The Borrower agrees to pay to the Bank upon demand all reasonable
out-of-pocket costs and expenses incurred by the Bank in connection with the
structuring, preparation, negotiation, review, execution or delivery of this
Agreement or any of the other Loan Documents, including
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all Schedules and Exhibits, or in connection with any amendments, consents or
waivers to this Agreement, any of the other Loan Documents or any related
documents (whether or not any of the same become effective), including (in each
case) all reasonable fees and expenses of counsel (including all local and
special counsel) for the Bank from time to time incurred in connection
therewith, whether or not any of the transactions contemplated hereby or thereby
are consummated, and to pay all reasonable costs and expenses of the Bank
(including reasonable fees and expenses of counsel to the Bank) incurred in
connection with the preparation, negotiation, review, execution or delivery of
the form of any Instrument relevant to this Agreement or any of the other Loan
Documents, the consideration of legal questions relevant hereto and thereto, and
the consideration and/or conduct of any proposed or actual restructuring or
"workout" of any of the Obligations. The Borrower also agrees to reimburse the
Bank upon demand for all Uniform Commercial Code and U.S. Patent and Trademark
Office and U.S. Copyright Office filing fees and all stamp or other taxes
payable in connection with the execution, delivery or enforcement of this
Agreement, any of the other Loan Documents or any Instrument related hereto or
thereto and for all reasonable out-of-pocket expenses (including reasonable
attorneys' fees and legal expenses) incurred by the Bank in enforcing any of the
Obligations of the Borrower under this Agreement or any other Loan Documents and
the consideration and/or conduct of any proposed or actual restructuring or
"workout" of any Obligations.
SECTION 10.4. INDEMNIFICATION.
In consideration of the execution and delivery of this Agreement by the
Bank and the extension of the Commitment by the Bank, the Borrower hereby
indemnifies and holds free and harmless the Bank and its shareholders, officers,
directors, employees, agents and Affiliates (collectively, the "INDEMNIFIED
PARTIES" and, individually, an "INDEMNIFIED PARTY") from and against any and all
actions, causes of action, suits, losses, costs, liabilities, damages and
expenses actually incurred in connection with any of the Loan Documents or any
of the transactions contemplated thereby (irrespective of whether such
Indemnified Party is a party to the action for which indemnification hereunder
is sought), including all reasonable fees and disbursements of counsel, all
amounts paid in settlement and all court costs (the "INDEMNIFIED LIABILITIES"),
incurred from time to time by the Indemnified Parties or any of them as a result
of, or arising out of, or relating to, or as a direct or indirect result of:
(a) any transactions financed or to be financed in whole or in
part or directly or indirectly with the proceeds of any of the Credit
Extensions; or
(b) the entering into or performance of this Agreement or any
of the other Loan Documents by any of the Indemnified Parties or the
Borrower or any of its Subsidiaries; or
(c) the enforcement by any of the Indemnified Parties of any
of its rights or remedies under any of the Loan Documents or in respect
of any of the Collateral; or
(d) the presence on or under, or the escape, seepage, leakage,
spillage, discharge, emission, discharging or release from, any real
Property owned or operated by the Borrower or any of its Subsidiaries
of any Hazardous Material (including, without
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limitation, any losses, liabilities, damages, injuries, costs, expenses
or claims asserted or arising under any Environmental Laws), regardless
of whether or not caused by, or within the control of, the Borrower or
any of its Subsidiaries.
except for any portion of such Indemnified Liabilities which a court of
competent jurisdiction has found resulted by reason of such Indemnified Party's
fraud, gross negligence or willful misconduct or the breach by such Indemnified
Party of its obligations under the Loan Documents. If and to the extent that the
foregoing undertaking may be unenforceable for any reason, the Borrower hereby
agrees to make the maximum contribution to the payment and satisfaction of each
of the Indemnified Liabilities which is permissible under Applicable Law, except
as aforesaid to the extent not payable by reason of the Indemnified Party's
fraud, negligence or willful misconduct or breach of such obligations.
SECTION 10.5. SURVIVAL.
The Obligations of the Borrower under each of Sections 10.3, 10.4 and
10.5 shall in each case survive any termination of this Agreement and the
payment of any of the other Obligations. The representations and warranties made
by the Borrower in this Agreement or in any of the other Loan Documents, or in
any document, certificate or statement delivered pursuant hereto or thereto or
in connection herewith or therewith, shall survive the execution and delivery of
this Agreement and each of the other Loan Documents and the making of the Loans.
SECTION 10.6. SEVERABILITY.
Any provision of this Agreement, the Note or any of the other Loan
Documents which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent only of such prohibition or
unenforceability without invalidating any of the remaining provisions of this
Agreement, the Note or any of the other Loan Documents or the enforceability of
any such provision in any other jurisdiction.
SECTION 10.7. HEADINGS.
The various headings of this Agreement and of each of the other Loan
Documents are inserted for convenience only and shall not affect the meaning or
interpretation of this Agreement or any of such other Loan Documents or any
provisions hereof or thereof.
SECTION 10.8. COUNTERPARTS; ENTIRE AGREEMENT.
This Agreement may be executed by the parties hereto in several
counterparts, each of which shall be deemed to be an original and all of which
shall constitute together but one and the same agreement. This Agreement, the
Note and the other Loan Documents constitute the entire understanding among the
parties hereto with respect to the subject matter hereof and supersede any prior
agreements, written or oral, with respect thereto, including, without
limitation, all engagement letters, commitment letters and term sheets.
SECTION 10.9. CHOICE OF LAW.
THIS AGREEMENT, THE NOTES AND THE OTHER LOAN DOCUMENTS
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SHALL IN ALL RESPECTS BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
INTERNAL SUBSTANTIVE LAWS OF THE STATE OF CALIFORNIA, AND, IN THE CASE OF
PROVISIONS RELATING TO INTEREST RATES, ANY APPLICABLE LAWS OF THE UNITED STATES
OF AMERICA.
SECTION 10.10. SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and assigns; provided,
however, that the Borrower may not assign or transfer any of its rights or
obligations hereunder or under any other Loan Documents without the prior
written consent of the Bank.
SECTION 10.11. FURTHER ASSURANCES.
The Borrower hereby agrees that it will, from time to time at its own
expense, promptly execute and deliver all such further Instruments and take all
such further action that may be necessary or appropriate, or that the Bank may
reasonably request, in order to perfect, preserve or protect any Liens granted
or purported to be granted under the Collateral Documents, to enable the Bank to
exercise and enforce any of its rights or remedies under this Agreement or any
of the other Loan Documents or otherwise to carry out the intent of this
Agreement or any of the other Loan Documents.
SECTION 10.12. CONSENT TO JURISDICTION.
THE BORROWER BY ITS EXECUTION HEREOF (A) HEREBY IRREVOCABLY SUBMITS TO
THE NONEXCLUSIVE JURISDICTION OF THE STATE COURTS OF THE STATE OF CALIFORNIA AND
TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE
DISTRICT OF CALIFORNIA FOR THE PURPOSE OF ANY SUIT, ACTION OR OTHER PROCEEDING
ARISING OUT OF OR BASED UPON THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE
SUBJECT MATTER HEREOF OR THEREOF, AND (B) HEREBY WAIVES TO THE EXTENT NOT
PROHIBITED BY APPLICABLE LAW, AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A
DEFENSE OR OTHERWISE, IN ANY SUCH PROCEEDING, ANY CLAIM THAT IT IS NOT SUBJECT
PERSONALLY TO THE JURISDICTION OF THE ABOVE-NAMED COURTS, THAT ITS PROPERTY IS
EXEMPT OR IMMUNE FROM ATTACHMENT OR EXECUTION, THAT ANY SUCH PROCEEDING BROUGHT
IN ONE OF THE ABOVE-NAMED COURTS IS IMPROPER, OR THAT THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT, OR THE SUBJECT MATTER HEREOF OR THEREOF MAY NOT BE ENFORCED
IN OR BY SUCH COURT. THE BORROWER HEREBY CONSENTS TO SERVICE OF PROCESS IN ANY
SUCH PROCEEDING IN ANY MANNER PERMITTED BY THE LAWS OF THE STATE OF CALIFORNIA,
AND AGREES THAT SERVICE OF PROCESS BY REGISTERED OR CERTIFIED MAIL, RETURN
RECEIPT REQUESTED, TO THE BORROWER IS REASONABLY CALCULATED TO GIVE ACTUAL
NOTICE.
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SECTION 10.13. WAIVER OF JURY TRIAL.
TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW WHICH CANNOT BE WAIVED,
EACH OF THE BANK AND THE BORROWER HEREBY WAIVES, AND COVENANTS THAT IT WILL NOT
ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE), ANY RIGHT TO TRIAL BY
JURY IN ANY FORUM IN RESPECT OF ANY ISSUE, CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT TO
WHICH SUCH PERSON IS PARTY OR THE SUBJECT MATTER HEREOF OR THEREOF OR ANY
OBLIGATION OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS
OF THE BANK OR THE BORROWER IN CONNECTION WITH ANY OF THE ABOVE, IN EACH CASE
WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER IN CONTRACT OR TORT OR
OTHERWISE. THE BORROWER ACKNOWLEDGES THAT THE PROVISIONS OF THIS SECTION 10.13
CONSTITUTE A MATERIAL INDUCEMENT UPON WHICH THE BANK IS RELYING AND WILL RELY IN
ENTERING INTO THIS AGREEMENT AND ANY OTHER LOAN DOCUMENT. THE BANK OR THE
BORROWER MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 10.13 WITH
ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF EACH OF THE BANK AND THE
BORROWER TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY.
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SECTION 10.14. TERMINATION OF LOAN DOCUMENTS. Upon the latest
to occur of the reduction or termination in full of the Commitment (whether at
the option of the Borrower pursuant to Section 2.2 or otherwise in accordance
with the terms hereof), the payment in full of the unpaid principal of all of
the Loans, the payment in full or (as the case may be) the termination of all
Letter of Credit Outstandings, or the payment in full of all other Obligations
under this Agreement and the other Loan Documents, this Agreement and all of the
other Loan Documents shall (except as and to the extent otherwise expressly
provided by Section 10.5 hereof) be for all purposes terminated and of no
further force or effect whatsoever, and, in accordance with the terms of Section
2.10 of the Security Agreement, all Liens granted to the Bank to secure payment
of all of the Obligations shall terminate and shall be of no further force or
effect.
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IN WITNESS WHEREOF, the parties hereto have caused this REVOLVING
CREDIT AGREEMENT to be executed by their respective officers hereunto duly
authorized on and as of the day and in the year first above written.
THE BORROWER:
EDISON SCHOOLS INC.
By:_________________________________
Name:
Title:
THE BANK:
IMPERIAL BANK
By:_________________________________
Name:
Title: