REVOLVING CREDIT, SECURITY AND GUARANTY AGREEMENT
THIS REVOLVING CREDIT, SECURITY AND GUARANTY AGREEMENT ("AGREEMENT"), made
and entered into as of March 13, 1997, is by and among SECURITY BANK OF KANSAS
CITY, a Kansas banking corporation ("BANK"); CONCORDE CAREER COLLEGES, INC., a
Delaware corporation ("BORROWER"); UNITED HEALTH CAREERS INSTITUTE, INC., a
California corporation ("UNITED"); SOUTHERN CALIFORNIA COLLEGE OF MEDICAL AND
DENTAL ASSISTANTS, INC., a California corporation ("SOUTHERN CALIFORNIA");
CONCORDE CAREERS - FLORIDA, INC., a Florida corporation ("FLORIDA"); COLLEGES OF
DENTAL AND MEDICAL ASSISTANTS, INC. a California corporation ("DENTAL"); CAREER
ASSISTANCE, INC., a Missouri corporation ("CAI"); and COMPUTER CAREER INSTITUTE,
INC., an Oregon corporation ("COMPUTER") (hereinafter, United, Southern
California, Florida, Dental, CAI, and Computer shall sometimes be collectively
referred to as "GUARANTORS" and each individually as a "GUARANTOR").
WITNESSETH THAT:
WHEREAS, Borrower has requested that Bank extend to Borrower a secured line
of credit for working capital purposes; and
WHEREAS, Bank is willing to extend the secured line of credit to Borrower,
and Borrower is willing to accept loans from Bank pursuant to the secured line
of credit, on the terms, covenants and conditions contained in this Agreement;
and
WHEREAS, the proceeds of Bank's loans to Borrower will be used by Borrower,
in part, to satisfy the working capital needs of Guarantors by paying, for the
respective accounts of Guarantors, expenses incurred by them in the operation of
their respective businesses, and Guarantors, thus, will receive tangible
benefits from Bank's loans to Borrower, and each of them has determined that it
is in its respective best interest to guarantee the repayment of Bank's loans to
Borrower and the interest which will accrue thereon and to secure its guaranty
by granting Bank a security interest in all or substantially all of its assets,
all so as to provide a material inducement to Bank to extend credit pursuant
hereto for the respective benefits of Borrower and Guarantors;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein contained, Borrower, Bank and Guarantors agree as follows:
ARTICLE I
Definitions
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1.01. Certain Defined Terms. The following terms used herein shall have
the meanings set forth in this Article and in the other parts of this Agreement
referred to in this Article, and such meanings shall apply to both the singular
and plural forms of such terms:
When spelled with initial capital letters, "ACCOUNTS", "CHATTEL
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PAPER", "CONSUMER GOODS", "DOCUMENTS", "EQUIPMENT", "FARM PRODUCTS", "FIXTURES",
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"GENERAL INTANGIBLES", "INSTRUMENTS", "INVENTORY", and "PROCEEDS" shall have the
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same respective meanings as are given to those terms in the Uniform Commercial
Code as enacted and in force at the date of this Agreement in the State of
Kansas. Without limiting the generality of the foregoing, "Accounts" shall
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include all rights to payment (not evidenced by an Instrument or Chattel Paper)
of tuition and fees due or to become due (whether or not fully earned) from any
Person in respect of a course of study in which such Person or some other Person
has enrolled or contracted to enroll at any of the schools operated by Borrower
and Guarantors or other educational program offered by Borrower or any
Guarantor, and shall include both Eligible Accounts and Accounts which are not
Eligible Accounts; "General Intangibles" shall include any and all claims and
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rights to repayment of loans or advances, whether or not evidenced by receipt,
ledger entry, book account or otherwise; and "Instruments" shall include shares
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of capital stock, notes and other securities of Subsidiaries of Borrower,
Eligible Notes and Student Notes which are not Eligible Notes.
"ADDITIONAL PLEDGED SECURITIES" is defined in the Section of this
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Agreement entitled "Pledge Provisions".
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"AFFILIATE" means, when used with reference to a given Person, any
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Person controlling, controlled by or under common control with such Person,
within the meaning of such terms hereinafter in this Section set forth.
"AGREEMENT" means this Revolving Credit, Security and Guaranty
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Agreement, including all Exhibits attached hereto and all amendments,
modifications, restatements, substitutions and replacements hereof.
"ASSETS" (only when spelled with an upper case "A") shall mean all
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Collateral (as hereafter defined) and all tangible and intangible assets,
rights, and property (whether real, personal or mixed) in which Borrower and
Guarantors have a direct or indirect interest, including, without limitation,
all the capital stock of each of the Guarantors.
"BANK" is defined in the first paragraph hereof.
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"BANKING DAY" means any day other than Saturday, Sunday or any other
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day on which commercial banks in the State of Kansas are required to close under
applicable law or executive order.
"BANK LIABILITIES" means and includes all present and future
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liabilities and obligations owed by Borrower to Bank under the Note (as
hereinafter defined) and all obligations of Borrower and Guarantors under this
Agreement and all other Loan Documents.
"BORROWER" is defined in the first paragraph hereof.
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"BORROWING BASE" means, at any point in time, (i) eighty percent
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(80%) of the Eligible Accounts (after deducting all payments, adjustments,
credits, and that portion of the Accounts and Notes representing unearned
tuition) plus (ii) fifty percent (50%) of the aggregate principal amount (after
deducting all payments, adjustments, credits and 100% of the aggregate principal
amount of all Eligible Accounts and Eligible Notes with respect to which the
obligor has not made any payment for 90 or more days) of the then-existing
Eligible Notes, plus (iii) eighty percent (80%) of the net book value of
Borrower's and all Guarantor's Equipment appearing on their books being kept in
accordance with generally accepted accounting principles ("GAAP") as promulgated
by the Financial Accounting Standards Board (the "FASB").
"CAPITALIZED LEASE" shall mean any lease which is or should be
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capitalized on the balance sheet of the lessee in accordance with GAAP,
including (without limitation) Statement of Financial Accounting Standards No.
13 promulgated by the FASB.
"CAPITALIZED LEASE OBLIGATIONS" shall mean the amount of the
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liability reflecting the aggregate obligations under Capitalized Leases
calculated in accordance with GAAP, including (without limitation) Statement of
Financial Accounting Standards No. 13 promulgated by the FASB.
"CLOSING" means disbursement by Bank to Borrower of the first Loan.
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"CODE" means the Internal Revenue Code of 1986, as amended from time
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to time, together with all regulations from time to time in force thereunder.
"COLLATERAL" is defined in the Section of this Agreement entitled
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"Definition of Collateral; Security Documents".
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"CONSOLIDATED CURRENT ASSETS" means the current assets of Borrower
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and all Guarantors, consolidated in accordance with GAAP.
"CONSOLIDATED CURRENT LIABILITIES" means the current liabilities of
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Borrower and the Guarantors, consolidated in accordance with GAAP.
"CONSOLIDATED TANGIBLE NET WORTH" means, as of the time of any
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determination thereof, the difference between total stockholders' equity and the
sum of the values, as carried on the books of Borrower and Guarantors, of all
unamortized debt discount and expense, goodwill, trademarks, trade names,
patents, copyrights, deferred charges, and other intangible assets, all
determined on a consolidated basis for Borrower and all Guarantors in accordance
with GAAP consistent with those followed in the preparation of the financial
statements referred to in the Sections of this Agreement entitled "Financial and
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Other Information" and "Financial Statements".
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"CONSOLIDATED TOTAL ASSETS" means the total assets of Borrower and
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the Guarantors, consolidated in accordance with GAAP.
"CONSOLIDATED TOTAL LIABILITIES" means the total liabilities of
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Borrower and the Guarantors, consolidated in accordance with GAAP.
"CONSOLIDATED WORKING CAPITAL" means the excess of Consolidated
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Current Assets over Consolidated Current Liabilities, provided that there shall
not be included in Consolidated Current Assets for this purpose (a) any loans or
advances (whether or not permitted by this Agreement) made by Borrower or any
Guarantor to any Person other than a Guarantor except loans or advances to
officers or employees in the ordinary course of business for travel and like
expenses, or (b) any assets located outside (including any amounts payable by
Persons located outside) the United States of America and Canada.
"CONTRACT RIGHTS" has the meaning given to such term in the Uniform
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Commercial Code.
"CONTROL" (including the terms "controlling, "controlled by" and
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"under common control with", and whether spelled with an upper case or lower
case "c") means the possession, direct or indirect, of the power to direct or
cause the direction of the management and policies of a Person, whether through
the ownership of voting securities, by contract, or otherwise. Without
precluding the existence of a control relationship in other circumstances, a
Person conclusively shall be deemed to control another Person if the first
Person has the power to vote or direct the voting of five percent (5%) or more
of the outstanding voting stock of the second Person.
"DAY" (whether spelled with an upper case or lower case "d") means
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a calendar day, unless otherwise specified.
"DEFAULT" means an Event of Default, as defined in the Section of
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this Agreement entitled "Defaults and Remedies", or an event or condition which,
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with the passage of time or giving of notice, or both, would become an Event of
Default.
"DENTAL" is defined in the first paragraph of this Agreement.
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"ELIGIBLE ACCOUNT" means an Account now or hereafter owing to
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Borrower or a Guarantor, which meets the following specifications at the time it
first is included in computing the Borrowing Base and continues to meet the same
so long as it continues to be so included:
(a) To the best of Borrower's knowledge, based upon information
available to Borrower at Borrower's corporate headquarters, the Account is
currently due and payable and neither the Account nor
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any installment or other payment scheduled to be made on the Account has
been written off by Borrower;
(b) The Account arose from a bona fide, outright sale of goods
by Borrower or the Guarantor, from a bona fide contract for the outright
sale of goods entered into by Borrower or the Guarantor, from the
performance of services by Borrower or the Guarantor or from a bona fide
contract for the performance of services by Borrower or the Guarantor;
(c) The Account is owned by Borrower or the Guarantor and is not
subject to any assignment, claim, Lien or security interest of any
character except the security interest of Bank or any other Liens
permitted under Section 9.02 hereof;
(d) The amount of the Account shown on Borrower's or the
Guarantor's books is unconditionally owing to Borrower or the Guarantor,
subject, in the case of an Account arising under a contract for the
performance of services which have not been fully performed, to the
performance of such services;
(e) The Account arose in the ordinary course of Borrower's or
the Guarantor's business, and Borrower has not received any notice of the
appointment of a receiver for the account debtor or any of its property or
of the death, dissolution, termination of existence, bankruptcy or
insolvency, or any material adverse change in the financial condition, of
the account debtor;
(f) The Account did not arise out of a contract with or order
from an account debtor which by its terms forbids or makes void or
unenforceable the assignment to Bank of the Account arising therefrom;
(g) The Account is not evidenced by a judgment, an Instrument or
Chattel Paper;
(h) Bank has not notified Borrower that Bank has determined the
collectibility of the Account to be materially impaired (any such
determination to be made by Bank in the reasonable exercise of its
discretion); and
(i) In the case of an Account arising under a contract for the
sale of goods or the performance of services by Borrower or a Guarantor,
which contract has not been fully performed by Borrower or the Guarantor,
no default in the performance of Borrower's or the Guarantor's obligations
under the contract or any other contract between Borrower (or the
Guarantor) and the account debtor has occurred and is continuing.
"ELIGIBLE NOTE" means a Student Note now or hereafter owned by Borrower
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or a Guarantor, which meets the following specifications at the time it first is
included in computing the Borrowing Base and continues to meet the same so long
as it continues to be so included:
(a) One or more of the scheduled installment payments on the
Student Note have become due and payable, and neither the Student Note nor
any installment payment has been written off by Borrower;
(b) The Student Note arose from a bona fide, outright sale of
goods by Borrower or the Guarantor, from a bona fide contract for the
outright sale of goods entered into by Borrower or the Guarantor, from the
performance of services by Borrower or the Guarantor or from a bona fide
contract for the performance of services by Borrower or the Guarantor;
(c) The Student Note is owned by Borrower or the Guarantor and
is not subject to any assignment, claim, lien or security interest of any
character except the security interest of Bank or any other Liens
permitted under Section 9.02 hereof;
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(d) The amount of the Student Note shown on Borrower's books is
unconditionally owing to Borrower or the Guarantor, subject, in the case
of a Student Note arising under a contract for the performance of services
which have not been fully performed, to the performance of such services;
(e) The Student Note arose in the ordinary course of Borrower's
or the Guarantor's business, and Borrower has not received any notice of
the appointment of a receiver for the maker or any of its property or of
the death, dissolution, termination of existence, bankruptcy or
insolvency, or any material adverse change in the financial condition, of
the maker;
(f) The Student Note does not, by its terms, forbid or make void
or unenforceable the assignment thereof by Borrower to Bank;
(g) Bank has not notified Borrower that Bank has determined the
collectibility of the Student Note to be materially impaired (any such
determination to be made by Bank in the reasonable exercise of its
discretion);
(h) In the case of a Student Note arising under a contract for
the sale of goods or the performance of services by Borrower or a
Guarantor, which contract has not been fully performed by Borrower or the
Guarantor, no default in the performance of Borrower's or the Guarantor's
obligations under the contract or any other contract between Borrower (or
the Guarantor) and the maker has occurred; and
(i) The Student Note is listed in the last Alpha Accounts
Receivable report from NLSC prepared each month.
"ENVIRONMENTAL LAW" means and includes the Comprehensive
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Environmental Response, Compensation, and Liability Act; the Hazardous Materials
Transportation Act; the Resource Conservation and Recovery Act, as amended by
the Hazardous and Solid Waste Amendments of 1984; the Toxic Substance Control
Act; the Federal Insecticide, Fungicide and Rodenticide-Act; and any other
applicable federal, state, or local law, regulation, ordinance, or requirement
(including consent decrees and administrative orders) relating to or imposing
liability or standards of conduct concerning any hazardous, toxic or dangerous
waste, substance or material, including, without limitation, asbestos and
petroleum products; all as amended or hereafter amended.
"ERISA" means the Employee Retirement Income Security Act of 1974,
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as amended from time to time, together with all regulations from time to time in
force thereunder.
"EVENT OF DEFAULT" is defined in the Section of this Agreement
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entitled "Events of Default".
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"GUARANTOR" and "GUARANTORS" include those Persons defined in the
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first paragraph of this Agreement as "Guarantors" and all "New Subsidiaries" as
defined in the Section of this Agreement entitled, "Additional and Replacement
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Subsidiaries".
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"INCOME" is defined in the Section of this Agreement entitled
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"Pledge Provisions".
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"INDEBTEDNESS" means all obligations for the payment of money,
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absolute or contingent, matured or unmatured, direct or indirect, joint or
several or joint and several, including, without limitation, all liabilities
secured by a Lien now or hereafter existing on property owned or acquired by a
Person (whether or not the liability secured thereby shall have been assumed by
such Person), all Capitalized Lease Obligations and all guaranties, endorsements
and other contingent obligations in respect of Indebtedness of others.
"LIEN" means, with respect to any Asset, (i) any mortgage, lien,
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pledge, charge, security interest, hypothecation or encumbrance of any kind with
respect to such asset, whether created by contract, operation of law, levy,
attachment, garnishment, other legal process or otherwise; (ii) the interest of
a vendor, lessor or other Person under any conditional sale agreement, financing
lease or other title retention agreement relating to such asset; or (iii) any
agreement to ▇▇▇▇▇ ▇ ▇▇▇▇ within the meaning of the foregoing clauses (i) and
(ii).
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"LOAN" means a loan pursuant to Article II of this Agreement.
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"LOAN DOCUMENTS" means this Agreement, the Note, and all other
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documents now or hereafter executed by Borrower or Guarantor to evidence or
secure any Loan, including all modifications, renewals and replacements thereof.
"MAXIMUM CREDIT" means Three Million Dollars ($3,000,000.00) or such
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other amount as may from time to time be determined by written agreement duly
executed by Borrower and Bank.
"NOTE" is defined in the Section of this Agreement entitled "Note;
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Repayment".
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"OTHER PLEDGED PAPER" and "OTHER PLEDGED PROPERTY" are defined in
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the Section of this Agreement entitled "Pledge Provisions".
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"PBGC" means the Pension Benefit Guaranty Corporation or any
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successor entity.
"PER ANNUM" means a calculation based on a year having 360 days, for
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the actual number of days elapsed.
"PERSON" means any natural person, corporation, association, joint
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venture, partnership, trust, organization or business, or any government or
governmental or quasi-governmental agency, commission, board or other
organization or any other political subdivision.
"PLAN" shall mean any employee pension benefit plan (as defined in
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Section 3(2) of ERISA, and specifically including any multi-employer plan, as
defined in Section 4001(a)(3) of ERISA), the funding requirements of which
(under Section 302 of ERISA or Section 412 of the Code) are, or were at any time
within the six years immediately preceding the date as of which a Plan's status
as such is being determined, in whole or in part, the responsibility of the
Borrower.
"PLEDGED COLLATERAL", "PLEDGED NOTES", and "PLEDGED STOCK" are
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defined in the Section of this Agreement entitled "Pledge Provisions".
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"PRIME RATE" means the Per Annum prime or base rate of interest
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determined by Bank and distributed to its officers and employees from time to
time for their use in setting and adjusting interest rates on loans, regardless
of whether such prime or base rate is otherwise published or utilized and
irrespective of the rates charged by Bank on loans to Persons other than
Borrower. Borrower acknowledges that the Prime Rate is not necessarily the best
available rate or even a favorable rate.
"REPORTABLE EVENT" means (a) any of the events set forth in Section
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4043(b) (other than a Reportable Event as to which the provision of 30 days'
notice to the PBGC is waived under applicable regulations), 4062 or 4063(a) of
ERISA, (b) an event requiring the Borrower or any Guarantor to provide security
to a Plan under Section 401(a)(29) of the Code and (c) any failure to make
payments required by Section 412(m) of the Code.
"SECURITY DOCUMENTS" is defined in the Section of this Agreement
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entitled "Definition of Collateral; Security Documents".
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"SOUTHERN CALIFORNIA" is defined in the first paragraph of this
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Agreement.
"STUDENT NOTE" means a promissory note payable to or to the order of
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Borrower or a Guarantor to evidence Borrower's or such Guarantor's right to
payment of tuition and fees due or to become due (whether or not fully
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earned) from any Person in respect of a course of study in which such Person or
some other Person has enrolled or contracted to enroll at any of the schools
operated by Borrower or such Guarantor or pursuant to any education program
offered by Borrower or such Guarantor.
"SUBORDINATED 5% DEBENTURES" means the 5% Debentures dated February
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25, 1997, in the aggregate principal amount of $3,500,000.00 issued by Borrower
to ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ Strategic Partners Fund, L.P. and Strategic Associates, L.P.
(collectively, "DEBENTURE HOLDERS").
"SUBSIDIARY" means, when used with reference to a given Person, any
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Person controlled by such Person, within the meaning of the term "controlled" as
defined above.
"UNIFORM COMMERCIAL CODE" means, except where otherwise provided or
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otherwise required by law, the Uniform Commercial Code as enacted in the State
of Kansas, as amended or modified from time to time.
1.02. Accounting Terms. All accounting terms used herein and not
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otherwise defined shall be construed and interpreted, all accounting
determinations hereunder shall be made, and all financial statements required to
be delivered hereunder shall be prepared, in accordance with generally accepted
accounting principles and practices in effect from time to time in the United
States, applied on a consistent basis.
ARTICLE II
Line of Credit
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2.01. Loans; Conditions Precedent. Bank agrees, on the terms and subject
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to the conditions of this Agreement, to make loans (each a "LOAN") to Borrower,
from time to time during the period ending on the earlier of the expiration or
termination of Bank's commitment pursuant to the Section of this Agreement
entitled "Termination" (but not during the pendency of any suspension of Bank's
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commitment pursuant to said Section), in such amounts as Borrower shall request;
provided, however, Bank shall have no obligation to make a Loan to Borrower if,
after the making of such Loan, the aggregate unpaid principal balance of all
Loans to Borrower would exceed the lesser of the Maximum Credit or the then
Borrowing Base based upon the most recent Borrowing Base Certificate provided by
Borrower to Bank.
2.02. Note; Repayment. The Loans shall initially be evidenced by and
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repaid in accordance with a single promissory note duly executed on behalf of
Borrower, substantially in the form of Exhibit 2.02, attached hereto, dated as
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of the date of Closing, in a principal amount equal to the Maximum Credit as
initially fixed herein, and payable to the order of Bank. Such note and any and
all amendments, extensions, modifications, renewals, reaffirmations,
restatements, replacements and substitutions thereof and therefor are herein
referred to as the "NOTE".
2.03. Interest Rate and Payments. Interest shall accrue on the unpaid
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principal balance of the Note outstanding from time to time at a rate or rates
specified in or calculated as provided in the Note. Bank intends to give notice
to Borrower of each change in the Prime Rate and of the anticipated amount of
each interest payment scheduled under the Note, but Bank shall have no liability
to Borrower or any other Person for failure to give any such notice. If Borrower
does not pay any interest when due, Bank shall have the right, at its option, as
attorney-in-fact of Borrower under an irrevocable power, to effect payment of
such interest by making a Loan or a charge to any account or accounts maintained
by Borrower with Bank in the amount of such interest.
2.04. Line of Credit Procedures. Within fifteen (15) days after the end
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of each calendar month, Borrower shall deliver to Bank a Borrowing Base
Certificate, substantially in the form of Exhibit 2.04, attached hereto, showing
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the Borrowing Base as of the end of the month just ended. Upon Borrower's
request for a Loan and Borrower's satisfaction of the conditions precedent for
such Loan, Bank will disburse such Loan to or for the benefit or account of
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Borrower. Requests may be made by Borrower in person, in writing, or by
telephone; provided, however, Bank shall have no responsibility whatsoever to
verify the authority of the individual making request for a Loan on behalf of
Borrower by telephone. Bank shall set up and establish a loan account for
Borrower on the books of Bank in which will be recorded all Loans made by Bank
to Borrower pursuant to this Agreement ("LOAN ACCOUNT"). Bank shall enter all
Loans as debits in Borrower's Loan Account. Bank shall also record in Borrower's
Loan Account, in accordance with customary accounting practice, all other taxes,
charges, expenses and other items which are chargeable to Borrower under the
expressed terms of the Loan Documents, all payments received by Bank, all
proceeds of Collateral which are finally paid to Bank in cash or solvent credits
and all other appropriate debits and credits. The debit balance of Borrower's
Loan Account shall reflect the amount of Borrower's Indebtedness to Bank from
time to time by reason of Loans and other appropriate charges hereunder. Bank
intends to prepare, monthly, a statement of interest for Borrower's Loan
Account. Each such statement shall be considered correct and accepted by
Borrower, unless Borrower notifies Bank to the contrary within thirty (30) days
after the sending of said statement by Bank to Borrower.
ARTICLE III
Guaranty
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3.01. Guaranties. Guarantors hereby unconditionally, jointly and
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severally, guarantee payment when due of all Bank Liabilities. Guarantors,
further, jointly and severally agree to pay, if and to the extent not prohibited
by applicable law, any and all expenses (including but not limited to reasonable
attorneys' fees and expenses) incurred by Bank in endeavoring to collect any
Bank Liabilities and in enforcing their respective guaranties. With respect to
all Bank Liabilities, the liability of the Borrower and Guarantors shall be
joint and several, with the same effect as if all of Guarantors had executed a
joint and several guaranty separate from this Agreement.
3.02. Waivers. Guarantors hereby severally waive presentment, demand and
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protest, notice of acceptance of their respective guaranties, of the creation of
Bank Liabilities, of any default and of protest, dishonor or other action taken
in reliance on their respective guaranties, and any and all demands and notices
of any kind in connection with the protection of or realization upon any Bank
Liabilities, any obligation hereunder or any security for any of the foregoing.
Each Guarantor unconditionally and irrevocably waives any and all defenses,
claims and counterclaims any or all of them may ever have which are based upon
(a) any action or omission by Bank with respect to the preservation of the value
of any Collateral, but not any act or omission that is determined to constitute
intentional misconduct; (b) Bank's exercise, or failure to exercise, any right
or remedy against Borrower, any Guarantor or any Collateral; and (c) any failure
to attach, perfect, or realize upon any Lien or other security interest or
encumbrance upon any Collateral.
3.03. Bank's Rights. Bank may, from time to time and without in any way
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affecting any of Guarantors' respective liabilities or any of Bank's rights
under this Agreement, any other of the Loan Documents or applicable law, take
any one or more of the following actions, successively or concurrently, and in
any order: demand payment of or accelerate any Bank Liabilities following an
Event of Default, alter, extend, renew, or change the time, place, manner or
terms of payment of, or grant indulgences with respect to, any Bank Liabilities;
increase or decrease the rate of interest on any Bank Liabilities; obtain the
primary or secondary liability of any party or parties, in addition to
Guarantors, with respect to any Bank Liabilities; release or compromise any
liability of any of Guarantors or of any other party or parties primarily or
secondarily liable on any Bank Liabilities; take, exchange, sell, release or
otherwise deal in any manner or in any order with any Collateral or other
property securing any Bank Liabilities or any obligation of any of Guarantors
following an Event of Default; apply to Bank Liabilities in such order as Bank
shall determine any sum received by it from whatsoever source; or resort to
Guarantors or any one or more of them for payment of any or all Bank Liabilities
following an Event of Default, whether or not Bank shall have resorted to any
Collateral or other property securing any Bank Liabilities or shall have
proceeded against any other party primarily or secondarily liable on any Bank
Liabilities.
3.04. Preservation of Liability. Guarantors jointly and severally agree
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that should Bank repay (either by reason of court order or judgment or in
settlement of a controversy) to Borrower or the estate or trustee of Borrower or
to Borrower as debtor-in-possession, any sum previously received by Bank in
respect of any Bank Liabilities, as a result
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of a claim of a voidable preference or fraudulent transfer or otherwise, then
Guarantors shall immediately reimburse Bank for the sum so repaid, with interest
on such sum from the date Bank makes such payment until paid in full at the
Default Rate specified in Exhibit 2.02, attached hereto, and, if and to the
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extent not prohibited by applicable law, any and all expenses (including but not
limited to reasonable attorneys' fees and expenses) incurred by Bank in
enforcing such reimbursement and in resisting such repayment.
3.05. Financial Condition of Borrower. Bank may grant or continue credit
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or financial accommodations to Borrower from time to time, without notice to or
authorization from any of Guarantors, regardless of Borrower's financial
condition at the time of such grant or continuation and regardless of any other
fact concerning Borrower which Bank knows or should know at such time. Bank
shall have no obligation to disclose to or discuss with any of Guarantors Bank's
assessment of the financial condition of, or any other matter concerning,
Borrower or any other Guarantor
3.06. Bankruptcy. The obligations of all Guarantors shall in no way be
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affected, diminished, or impaired by the voluntary or involuntary bankruptcy,
assignment for the benefit of creditors, appointment of a receiver,
reorganization or similar proceeding at law or in equity affecting the duties of
Borrower or any Guarantor under this Agreement. Nor shall the obligations of any
Guarantor be affected, diminished, or impaired by the release of Borrower or any
other Guarantor by the operation of law or otherwise from the performance or
observance of any of the covenants contained herein or in any Loan Agreement.
3.07. Waiver of Claims Against Borrower and Other Guarantors. Each
------------------------------------------------------
Guarantor hereby waives all claims, rights and remedies, whether under theories
of reimbursement, indemnity, or subrogation to Bank's rights or otherwise, which
any Guarantor may now have or hereafter acquire against Borrower or any other
Guarantor that arises hereunder or from the performance by such Guarantor
hereunder, including, without limitation, all claims, remedies and rights of
subrogation, reimbursement, exoneration, contribution, indemnification, and
participation in any claim, right or remedy of Bank against Borrower or any
Guarantor or any security which Bank now has or hereafter acquires, whether or
not such claim, right or remedy arises in equity, under contract, by statute,
under common law or otherwise. No Guarantor shall be deemed a "creditor" of
Borrower or any other Guarantor with respect to the Bank Liabilities, as said
term "creditor" is defined in the U.S. Bankruptcy Code, as amended. Each
Guarantor further waives all rights to require the marshaling of any assets of
Borrower and the other Guarantors, which right of marshaling might otherwise
arise from any partial payment of the Bank Liabilities by Guarantor.
3.08. Defenses of Borrower and other Guarantors. The guaranty obligations
-----------------------------------------
of each Guarantor shall remain fully enforceable irrespective of any defenses or
counterclaims that Borrower or any other Guarantor may assert on the Bank
Liabilities, including but not limited to failure of consideration, breach of
warranty, fraud, payment, statute of frauds, bankruptcy, infancy, statute of
limitations, lender liability, accord and satisfaction, and usury.
3.09. Joint Application. Each Guarantor hereby acknowledges that the
-----------------
extension of credit by Bank as referenced herein has been made upon the joint
application of Borrower and all Guarantors, and such extension of credit would
not have been made based solely upon the credit worthiness of Borrower or any
individual Guarantor.
3.10. Subrogation; Subordination. No Guarantor shall exercise any right or
--------------------------
remedy it may acquire against Borrower or any other Guarantor by way of
subrogation, as a result of a payment of Bank Liabilities pursuant to a guaranty
contained in this Article or otherwise, until all Bank Liabilities have been
paid in full. Each Guarantor hereby subordinates all sums presently or hereafter
owed by Borrower to Guarantors to all Bank Liabilities presently or hereafter
owed by Borrower to Bank. This subordination shall cover all forms of debt and
claims that are presently or hereafter owed to Guarantor, including but not
limited to income, fees, expenses, loans and other sums Borrower or any other
Guarantor may owe to such Guarantor. Upon demand by Bank after the occurrence of
and during the continuance of any Event of Default, no Guarantor shall demand or
accept payment of any consideration or debt from Borrower or any other Guarantor
unless and until the Bank Liabilities have been satisfied in full; provided,
however, Guarantors may continue to receive usual and customary expense
payments, rental payments and other payments typically made by Borrower to or on
behalf of Guarantors in the ordinary course of business. Any sums received by
any Guarantor in
9
violation of this paragraph shall be held by Guarantor in trust for Bank, and
such Guarantor shall immediately notify Bank in writing of all such sums
received. Upon receiving demand from Bank, all sums received and held in trust
pursuant to this paragraph shall be immediately paid over to Bank.
3.11. Burden and Benefit; No other Conditions or Limitations. The
------------------------------------------------------
guaranties set forth in this Article shall inure to the benefit of Bank, its
successors and assigns, and shall be binding upon Guarantors and their
respective successors and assigns. There are no conditions or limitations to
such guaranties except as expressly set forth in this Article.
3.12. Additional and Replacement Subsidiaries. Borrower represents and
---------------------------------------
warrants that the Guarantors and those subsidiaries listed on Exhibit 3.12
------------
comprise all Subsidiaries and other business entities in which Borrower owns
(legally or beneficially) a controlling interest. Should Borrower or any
Guarantor acquire any controlling interest in any other Subsidiary or other
business entity other than those listed on Exhibit 3.12 ("NEW SUBSIDIARY"), then
------------
Borrower and all Guarantors covenant and warrant that each such New Subsidiary
shall guarantee all Bank Liabilities on the same terms and conditions as those
contained within this Article, and all terms and conditions of this Agreement
pertaining to, or binding upon, the Guarantors shall pertain to and bind each
New Subsidiary. Any failure or refusal of any New Subsidiary to immediately join
in the execution of this Agreement and a separate guaranty agreement containing
the same terms and conditions as those appearing within this Article shall be
deemed an Event of Default hereunder.
ARTICLE IV
Security for Loans
------------------
4.01. Grant of Security Interests by Borrower to Bank. To secure the full
-----------------------------------------------
performance of all Bank Liabilities, Borrower hereby mortgages, pledges, conveys
and assigns to Bank, and grants Bank a continuing security interest in, all
personal property of the following types which is now owned or hereafter shall
be owned or acquired by Borrower, whether now in existence or hereafter coming
into existence, and all products and proceeds of such property:
All Equipment, Farm Products, Consumer Goods, Inventory,
Accounts, Contract Rights, Deposit Accounts, General Intangibles,
Instruments, Documents, Chattel Paper, and money (including money
in bank accounts), including but not limited to all accounts
receivable, promissory notes, contracts, furniture, fixtures,
computers, books, supplies, records, and other assets of any kind
owned by Borrower.
4.02. Grant of Security Interests by Guarantors to Bank. To secure its
-------------------------------------------------
guaranty contained in Article III hereof, and all other present and future
liabilities and obligations owed by it to Bank, of every kind or description,
now existing or hereafter created or incurred, matured or unmatured, direct or
indirect, absolute or contingent, joint or several or joint and several, whether
or not evidenced by promissory note, receipt, ledger entry, book account or
otherwise, including interest accrued or accruing thereon and any extensions or
renewals thereof and substitutions therefor, and whether similar or dissimilar
to its guaranty contained in Article III hereof, each Guarantor hereby
mortgages, pledges, conveys and assigns to Bank, and grants Bank a continuing
security interest in, all personal property of the following types which is now
owned or hereafter shall be owned or acquired by such Guarantor, whether now in
existence or hereafter coming into existence, and all proceeds of such property:
All Equipment, Farm Products, Consumer Goods, Inventory,
Accounts, Contract Rights, Deposit Accounts, General Intangibles,
Instruments, Documents, Chattel Paper and money (including money
in bank accounts), including but not limited to all accounts
receivable, promissory notes, contracts, furniture, fixtures,
computers, books, supplies, records, and other assets of any kind
owned by Guarantors.
4.03. Grant of Security Interests by Guarantors to Borrower. To secure any
-----------------------------------------------------
and all present and future liabilities
10
and obligations owed by it to Borrower, of every kind or description, now
existing or hereafter created or incurred, matured or unmatured, direct or
indirect, absolute or contingent, joint or several or joint and several, whether
or not evidenced by promissory note, receipt, ledger entry, book account or
otherwise, including interest accrued or accruing thereon and any extensions or
renewals thereof and substitutions therefor, each Guarantor hereby mortgages,
pledges, conveys and assigns to Borrower, and grants Borrower a continuing
security interest in, all personal property of the following types which is now
owned or hereafter shall be owned or acquired by such Guarantor, whether now in
existence or hereafter coming into existence, and all proceeds of such property:
All Equipment, Farm Products, Consumer Goods, Inventory,
Accounts, Contract Rights, Deposit Accounts, General Intangibles,
Instruments, Documents, Chattel Paper and money (including money
in bank accounts), including but not limited to all accounts
receivable, promissory notes, contracts, furniture, fixtures,
computers, books, supplies, records, and other assets of any kind
owned by Guarantors.
The security interests granted in this Section shall be junior and subordinate
to the security interests granted in favor of Bank, irrespective of the order in
which such security interests are perfected.
4.04. Assignment by Borrower to Bank of Security Interests Granted by
---------------------------------------------------------------
Guarantors to Borrower. Borrower acknowledges and agrees that the property in
----------------------
which it has granted Bank a security interest in Section 4.01 hereof includes
all of the Indebtedness, liabilities and obligations of the Guarantors to
Borrower and the security interests which Guarantors have granted to Borrower in
Section 4.03 hereof to secure such indebtedness, liabilities and obligations.
Borrower shall execute and deliver to Bank, promptly upon Bank's request
therefor, such further instruments of assignment regarding the security
interests granted by Guarantors to Borrower as Bank may request.
4.05. Definition of Collateral; Security Documents. All of the property
--------------------------------------------
described in Sections 4.01 through 4.03 is herein referred to as the
"COLLATERAL." Borrower and Guarantors shall execute and furnish to Bank any and
all financing statements, continuation statements, termination statements, UCC
information and copies certificates and other documents, information and
materials pertaining to the Collateral (collectively referred to herein as the
"SECURITY DOCUMENTS") as Bank may reasonably request from time to time to fully
perfect, preserve, protect, maintain and determine the priority of Bank's
security interest in the Collateral. A carbon, photographic or other
reproduction of this Agreement or of a financing statement shall be sufficient
as a financing statement.
4.06. Pledge Provisions. The following provisions shall apply to all
-----------------
shares of capital stock (of all classes), whether now owned or hereafter
acquired, of all Guarantors and all New Subsidiaries (the "PLEDGED STOCK"), all
Student Notes now or hereafter owned by Borrower or any Guarantor (the "PLEDGED
NOTES"), any and all other Instruments, Chattel Paper and Documents now or
hereafter owned by Borrower or a Guarantor ("OTHER PLEDGED PAPER"), and any and
all other property, now or hereafter owned by Borrower or any Guarantor, which
is now or at any time hereafter in the possession of Bank ("OTHER PLEDGED
PROPERTY"); provided, however, that (i) nothing in this Section shall be deemed
to limit the application or effect of any of the provisions of any other Article
hereof or any other provision of this Agreement, it being intended that the
provisions of this Section be cumulative with all other provisions of this
Agreement, (ii) the terms "COLLATERAL" and "OTHER PLEDGED PAPER" shall not
include any Student Notes transferred to CenCor, Inc., a Delaware corporation
("CENCOR") pursuant to the terms hereof, and (iii) the term "OTHER PLEDGED
PROPERTY" shall not include certificates of deposit pledged by the Borrower to
▇▇▇▇ ▇▇▇▇▇ Bank as of the date of this Agreement:
(a) Borrower and all Guarantors hereby pledge, assign, convey, and
transfer unto Bank all the Pledged Stock, Pledged Notes, Other Pledged Paper,
and Other Pledged Property as security for the payment and performance of all
the Bank Liabilities. At or prior to the execution of this Agreement, Borrower
and Guarantors shall deliver to Bank (i) the certificates evidencing all of the
Pledged Stock which is then owned by Borrower or any Guarantor, each
11
duly endorsed or accompanied by a stock power or other instrument of assignment
duly executed in blank; (ii) all Other Pledged Paper then owned by Borrower or a
Guarantor; and (iii) all of the Pledged Notes which are owned by Borrower or any
Guarantor as of the date of this Agreement. Borrower and each Guarantor
represents and warrants that all Pledged Stock, Other Pledged Paper, and Other
Pledged Property that is owned or controlled by any of them as of the date of
this Agreement is fully and accurately identified on Exhibit 4.06(a), attached
---------------
hereto and incorporated herein by reference. All additional securities received
by Borrower or any Guarantor in distributions in respect of any of the Pledged
Stock by the issuer thereof (or any successor of any such issuer), by way of
stock dividend, split-up, reorganization, recapitalization or other similar
proceedings ("ADDITIONAL PLEDGED SECURITIES"), shall be delivered to Bank, duly
endorsed or accompanied by a stock power or other instrument of assignment duly
executed in blank, promptly after Borrower's or any Guarantor's receipt thereof.
All Student Notes and Other Pledged Paper hereafter acquired by Borrower or any
Guarantor also shall be promptly delivered to Bank. The Pledged Stock, Pledged
Notes, Additional Pledged Securities, Other Pledged Paper and Other Pledged
Property are herein referred to as the "PLEDGED COLLATERAL". Each item of the
Pledged Collateral shall be accompanied, at the time it is delivered to Bank, by
a transmittal letter identifying each item of the Pledged Collateral by date of
execution, the party who executed same, the number of shares and the corporation
issuing same (in the case of Pledged Stock), the stated principal balance (in
the case of Pledged Notes), and other information that reasonably identifies the
other Pledged Collateral. Borrower and Guarantors hereby irrevocably constitute
and appoint Bank, and each of its present and future officers, the agents and
attorneys-in-fact of Borrower and Guarantors, under powers coupled with
interests, with full power of substitution in each, to endorse, in Bank's name
or in the name of Borrower or any Guarantor, any of the Pledged Stock, Pledged
Notes, Additional Pledged Securities or Other Pledged Paper which is not
endorsed prior to the delivery thereof to Bank, and after an Event of Default to
execute, in Bank's name or in the name of Borrower or any Guarantor, any other
writing which Bank deems necessary or appropriate in order to realize on any of
the Pledged Collateral.
(b) Borrower and each Guarantor represents and warrants (i)
Borrower and Guarantors are the only legal and beneficial owners of all the
Pledged Collateral; and (ii) all the Pledged Collateral is and shall remain free
and clear all liens, encumbrances and adverse interests of any kind other than
the pledges and security interests contained herein and the other Liens
permitted by Section 9.02 hereof.
(c) Without limiting the generality of the grants of security
interests in the foregoing Sections, Borrower and Guarantors hereby assign to
Bank any and all cash dividends, redemptions, payments of principal and
interest, and all other distributions and other income (hereinafter collectively
referred to by the term "INCOME") which may become payable on the Pledged
Collateral while this Agreement is in force; provided, however, that until an
Event of Default has occurred and is continuing, Borrower shall have the right
to collect and receive all income payable on the Pledged Collateral. Following
and during the continuance of an Event of Default, Borrower and Guarantors
hereby authorize Bank to direct all issuers and makers of, and all other Persons
obligated on, any of the Pledged Collateral to pay all such Income directly to
Bank or in accordance with Bank's directions, and release such issuers, makers
and other Persons from any and all liability any of them otherwise might have to
Borrower or any Guarantor for paying any such Income directly to Bank. Each such
issuer, maker or other Person may rely and act on the foregoing assignment and
direction with respect to any of the Pledged Collateral until, and the foregoing
release shall be effective with respect to all Income on any of the Pledged
Collateral paid to Bank prior to, the time such issuer, maker or other Person
receives a written notice signed by Bank and acknowledging that it no longer
claims a security interest in the Pledged Collateral or the item thereof in
question. Bank shall have the further authority, after an Event of Default shall
have occurred or be continuing, to endorse, in Bank's own name or in that of
Borrower or any Guarantor, any and all Instruments by which any Income on any of
the Pledged Collateral may be paid, and to take such action as it may deem
appropriate from time to time, in its own name or in that of Borrower or any
Guarantor, to enforce collection of any of the Pledged Collateral or realization
on Borrower's or any Guarantor's rights in any real or personal property
securing the same. To effectuate the foregoing, Bank is hereby granted an
irrevocable power of attorney, coupled with an interest, by Borrower and each
Guarantor, to endorse all such Instruments and related documents and
correspondence in the names of Borrower and Guarantors. Bank may hold any Income
received by it pursuant to this paragraph as additional security for the Bank
Liabilities or may, at its sole option, apply the same to the payment of the
Bank Liabilities in such
12
order as it may determine. Unless an Event of Default shall have occurred and
be continuing, each of Borrower and Guarantors shall be entitled to exercise any
voting rights carried by any of the Pledged Collateral owned by it and to give
consents, waivers and ratifications in respect thereof; provided, however, no
vote shall be cast, nor shall any consent, waiver, ratification or other action
be given or taken, which would be inconsistent with or violate the terms of any
of the Bank Liabilities or of any instrument or agreement evidencing or relating
to any of the Bank Liabilities.
(d) Upon request by Bank after the occurrence of an Event of
Default, Borrower and Guarantors promptly shall deliver to any issuer or maker
of, or other Person obligated on, any of the Pledged Collateral, and to each
such issuer's transfer agent and/or registrar, if any, written notice of Bank's
security interest in the Pledged Collateral, and shall request each such issuer
and its transfer agent and/or registrar, if any, and each such maker or other
Person to deliver to Bank a written acknowledgment of receipt of such notice,
including a statement that a notation of Bank's security interest has been made
in the records of such issuer or its transfer agent and/or registrar or such
maker or other Person.
(e) Upon payment and performance in full of the Bank Liabilities in
accordance with their terms, if Bank has no further obligation to extend credit
to Borrower or any Guarantor, Borrower and Guarantors shall be entitled to the
return, at their own expense, of such (if any) of the Pledged Collateral as then
is held by Bank under this Agreement, together with any funds then held by Bank
hereunder and a notice of the nature contemplated by paragraph (b) of this
Section, in such number of signed counterparts as Borrower or any Guarantor may
require.
(f) In the event any of the Pledged Collateral is lost, damaged or
destroyed through no fault of Borrower or any Guarantor while in the possession
of Bank and, as a result, Borrower or a Guarantor incurs a loss, Bank shall
reimburse Borrower or the Guarantor for such loss; provided, however, in the
case of Pledged Stock, Pledged Notes, Additional Pledged Securities or Other
Pledged Paper, that Borrower or the Guarantor has retained and can produce a
photocopy of, and prove the existence of, the lost Pledged Collateral. In any
action to enforce Bank's obligations under this paragraph, Borrower or the
Guarantor, as the case may be, must establish by a preponderance of the evidence
that it has exhausted all other avenues of recovery of the alleged loss and
shall otherwise bear the ultimate burden of persuasion with respect to the
issues of causation and amount of loss.
(g) So long as Bank's commitment hereunder is in effect and until
such time as all Loans and all other Bank Liabilities have been fully paid and
discharged, the Bank reserves the right to assess Borrower and Guarantors a fee
(not to exceed $200.00 per month) to offset the personnel expense incurred by
Bank in handling and accounting for the Pledged Collateral. Such fee shall be
payable in accordance with Bank's customary practices.
4.07. Assignment of Servicing Agreement. At or before Borrower's execution
---------------------------------
of this Agreement, Borrower shall cause to be executed and delivered to Bank an
assignment of the agreement between Borrower and National Loan Servicing
Corporation ("NLSC") regarding the servicing and collection by NLSC of all
Student Loans and Student Accounts in the form attached hereto as Exhibit 4.07,
------------
incorporated herein by reference.
ARTICLE V
Conditions Precedent to Loans
-----------------------------
Bank's obligations under this Agreement and the other Loan
Documents, including its obligations to make and to continue making Loans, are
in all events subject to Borrower's and Guarantors' satisfaction of the
following conditions precedent: (a) the continuing truth and accuracy of all of
Borrower's and Guarantors' representations and warranties set forth in this
Agreement; (b) the full and timely performance of all of Borrower's and
Guarantors' covenants and obligations to be performed hereunder; (c) the due
execution and delivery of this Agreement and the other Loan Documents; (d) the
receipt by Bank of all of the Security Documents requested by Bank prior to the
Closing, duly executed and filed or recorded where appropriate; (e) the non-
occurrence of any Default; and (f) the receipt by Bank (at or before the Closing
unless otherwise specified or waived by Bank) of all of the following
instruments, documents and
13
other items, in form and substance reasonably satisfactory to Bank:
5.01. Evidence of Insurance. Policies or certificates of casualty
---------------------
liability and workers' compensation insurance, naming Bank as an additional
insured or loss payee, in form and substance reasonably satisfactory to Bank and
with limits of liability as prescribed in the Section of this Agreement entitled
"Insurance";
----------
5.02. Corporate Authority. Current certificates of good standing issued by
-------------------
the Secretaries of State of Delaware, Tennessee, Colorado, and Missouri
certifying that Borrower is in good standing in each such state; as to each
Guarantor, a current certificate of good standing issued by the Secretary of
State of the state in which it is incorporated and each other jurisdiction in
which it is qualified as a foreign corporation, certifying that such Guarantor
is in good standing in each such state or other jurisdiction; a copy of
Borrower's current certificate of incorporation, including all amendments
thereto, certified to be true and complete by the Secretary of State of
Delaware; a copy of Borrower's current by-laws, including all amendments
thereto, certified to be true and complete by its Secretary or Assistant
Secretary; copies of the current certificate or articles of incorporation and
current by-laws of each Guarantor, including all amendments thereto, certified
to be true and complete by the Secretary or an Assistant Secretary of such
Guarantor; copies of the resolutions adopted by the Boards of Directors of
Borrower and each Guarantor which authorize the execution, delivery and
performance of this Agreement and all other Loan Documents to which Borrower or
such Guarantor is to be a party, certified in each case by the Secretary or
Assistant Secretary of the corporation in question as having been duly adopted
by the Board of Directors of such corporation and as being in full force and
effect as of the date of the Closing; and certificates of Borrower's Secretary
or Assistant Secretary and of the Secretary or Assistant Secretary of each of
Guarantors as to the incumbency and signatures of the officers authorized to
sign, on behalf of Borrower or such Guarantor, as the case may be, this
Agreement, such other of the Loan Documents to which the corporation in question
is to be a party, and, in the case of Borrower, requests for Loans and Borrowing
Base Certificates;
5.03. Borrowing Base Certificate. A duly executed Borrowing Base
--------------------------
Certificate substantially in the form attached hereto as Exhibit 2.04 for each
------------
calendar month prior to the date of the requested Loan;
5.04. Opinion of Counsel. The written opinion of ▇▇▇▇▇ ▇▇▇▇ LLP, counsel
------------------
for Borrower, in the form attached hereto as Exhibit 5.04; and
------------
5.05. Subordination Agreements. Subordination Agreements executed by the
------------------------
Debenture Holders in form and content satisfactory to Bank in its sole
discretion.
5.06. Other Documents. All other documents, instruments and other items
---------------
reasonably requested by Bank.
ARTICLE VI
Representations and Warranties
------------------------------
As an inducement to Bank to enter into this Agreement and to make the Loans
hereunder, Borrower and Guarantors jointly and severally represent and warrant
to Bank that:
6.01. Organization, Guarantors and Qualification. Borrower is a
------------------------------------------
corporation duly organized and validly existing in good standing under the laws
of the State of Delaware. Each Guarantor is a corporation duly organized and
existing in good standing under the laws of the jurisdiction in which it is
incorporated, as indicated in the first paragraph of this Agreement. Borrower is
the record and beneficial owner of all of the outstanding shares of capital
stock of each Guarantor (except that Southern California is the record and
beneficial owner of all of the outstanding shares of capital stock of Dental).
Each of Borrower and the Guarantors has all requisite power and authority to own
its properties and assets and to carry on its business as now being conducted,
and each of them is duly qualified as a foreign corporation and in good standing
in every jurisdiction where the nature of the business transacted or property
owned by it is such that
14
applicable law requires such qualification, except where the failure to so
qualify would not have a material adverse effect on Borrower, and is duly
authorized, qualified and licensed under all laws, regulations, ordinances or
orders of public authorities, or otherwise, to carry on its business in the
places and in the manner presently conducted.
6.02. Corporate Authority and Authorization. Each of Borrower and
-------------------------------------
Guarantors has all requisite power and authority to enter into and perform this
Agreement and to execute, deliver and perform its obligations under such other
of the Loan Documents to which it is or is to be a party. This Agreement and the
other Loan Documents have been duly authorized by all necessary corporate action
by and have been (or, in the case of any of the Loan Documents except this
Agreement, will be) duly executed and delivered by authorized officers of, such
of Borrower and Guarantors as are or are to be parties thereto, and are (or, in
the case of any of the Loan Documents except this Agreement, will be upon
execution thereof) valid agreements and obligations of such of Borrower and
Guarantors as are or are to be parties thereto, legally binding upon and
enforceable against such of Borrower and Guarantors as are or are to be parties
thereto, in accordance with their respective terms.
6.03. Financial and Other Information. Borrower has heretofore furnished
-------------------------------
to Bank (a) the consolidated balance sheets of Borrower and all Guarantors as of
December 31, 1995 and 1994 and as of September 30, 1996 and 1995, (b) the
consolidated statements of income and cash flows of Borrower and all Guarantors
for the years and partial years ended said dates, and (c) the consolidated
statements of stockholders' equity of Borrower and all Guarantors for the years
ending on said dates. Said consolidated balance sheets and consolidated
statements referred to above fairly present the financial position of Borrower
and all Guarantors as of the dates of such balance sheets and the results of
their operations and cash flows and, in the case of full years, changes in their
stockholders' equity during the years and partial years ended said dates, and
were prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved. Neither Borrower nor any
of the Guarantors had, on September 30, 1996, any contingent liabilities,
liabilities for taxes, unusual forward or long-term commitments, unrealized or
anticipated losses from any unfavorable commitments, or other liabilities,
except as referred to or reflected or provided for in the consolidated balance
sheet as of such date or as disclosed in public documents filed with the
Securities and Exchange Commission.
6.04. Changes in Condition, Since September 30, 1996, there has been no
--------------------
material change in the business, operations, financial condition or prospects of
Borrower and Guarantors, taken as a whole, and neither Borrower nor any of the
Guarantors has entered into any material transaction outside of the ordinary
course of business, except as disclosed on Exhibit 6.04, attached hereto.
------------
6.05. Assets. Borrower has good and marketable title, either directly or
------
indirectly through a Guarantor, to all of the Assets, subject to no Liens,
charges or encumbrances except for those, if any, disclosed on Exhibit 6.05,
------------
attached hereto.
6.06. Litigation. There is no litigation, at law or in equity, or any
----------
proceeding before any federal, state, provincial or municipal board or other
governmental or administrative agency pending, or known to Borrower to be
threatened, which may result in an adverse judgment against, liability of or
loss to Borrower or any of the Guarantors, the amount of which may exceed
$250,000.00 and which is not fully covered by insurance, or which might
otherwise result in any material adverse change in or to the business,
operations, prospects or financial condition of Borrower and the Guarantors
taken as a whole, and no judgment, decree, or order of any federal, state,
provincial or municipal court, board or other governmental or administrative
agency has been issued, or is known to be probable, which has, or is likely to
have, any material adverse effect on the business, operations, prospects or
financial condition of Borrower and the Guarantors taken as a whole, all except
as disclosed on Exhibit 6.06, attached hereto.
------------
6.07. Tax Returns. With the exception of those returns listed on Exhibit
----------- -------
6.07, Borrower and the Guarantors have filed all tax returns which are required
----
to be filed and have paid, or made adequate provision for the payment of, all
taxes which have or may become due pursuant to said returns or pursuant to
assessments received. Borrower knows of no material additional assessments for
which adequate reserves determined in accordance with generally accepted
accounting principles have not been established. Borrower and all Guarantors
have made adequate provision for all
15
current taxes.
6.08. No Legal Obstacle to Agreement. Neither the execution nor the
------------------------------
delivery of the Loan Documents, nor Borrower's and Guarantors' performance of
and compliance with the terms and provisions thereof, will conflict with, or
result in a breach of the terms, conditions or provisions of, or constitute a
default under, or result in any violation of, or result in the creation of, any
Lien upon any of the Assets of Borrower or any of the Guarantors other than
Liens in favor of Bank created hereby. Nor will such execution, delivery,
performance or compliance require any authorization, consent, approval,
exemption or other action by or notice to or filing with any court, governmental
body, administrative agency or other Person pursuant to the charter or by-laws
of Borrower or any of the Guarantors, any material agreement (including any
agreement with stockholders), lease, indenture, mortgage, security agreement or
other instrument, or any order, judgment, decree, arbitration award, law, rule
or regulation to or by which Borrower or any of the Guarantors or any of
Borrower's Assets is subject or bound. Neither Borrower nor any Guarantor is a
party to, or otherwise subject to any provision contained in, any instrument
evidencing Indebtedness of Borrower or such Guarantor, any agreement relating
thereto or any other contract or agreement (including its charter) which limits
the amount of Indebtedness which Borrower or such Guarantor may incur or
otherwise imposes restrictions on the incurring of Indebtedness by Borrower or
such Guarantor, except as set forth in Exhibit 6.08, attached hereto.
------------
6.09. Defaults. Neither Borrower nor any Guarantor is in default under or
--------
in violation of any provision of its charter or bylaws, any provision of any
agreement, lease, indenture, mortgage, security agreement or other instrument,
or any order, judgment, decree, arbitration award, law, rule or regulation to or
by which Borrower or any Guarantor or any of Borrower's Assets is subject or
bound, which default or violation has had, or may have in the future, a material
adverse effect on the business, operations, financial condition or prospects of
Borrower and the Guarantors, taken as a whole.
6.10. Pension Plans. All Plans (if any) existing at the date hereof are
-------------
identified on Exhibit 6.10 hereto. Each Plan is in compliance with the
------------
applicable provisions of ERISA and the Code in all material respects. At the
date hereof, there are no unfunded benefit liabilities (as determined under
Section 4001(a)(18) of ERISA) under any Plan. Neither Borrower nor any Guarantor
has any obligations under any multi employer plan (as defined in Section
4001(a)(3) of ERISA). Borrower has met all of the funding standards applicable
to the Plans, and there exists no event or condition which would permit or
require the institution of proceedings to terminate any Plan under Section 4042
of ERISA. No material liability to the PBGC has been, or is expected by Borrower
to be, incurred by Borrower or any Guarantor.
6.11. Margin Stock. Neither Borrower nor any Guarantor is engaged in the
------------
business of extending credit for the purpose of purchasing or carrying margin
stock, within meaning of Regulation U of the Board of Governors of the Federal
Reserve System. Neither Borrower nor any Guarantor owns any margin stock, and
none of the proceeds of any of the Loans will be used, directly or indirectly,
for the purpose of purchasing or carrying margin stock.
6.12. Disclosure. Neither this Agreement nor any agreement, document,
----------
certificate, statement or information furnished to Bank by or on behalf of
Borrower in connection with the transactions contemplated hereby contains or
will contain any untrue statement of material fact or omits or will omit a
material fact necessary in order to make the statements contained herein or
therein not misleading. There is no fact known to Borrower which materially and
adversely affects or in the future may (so far as Borrower can now foresee)
materially and adversely affect the business, operations, prospects or financial
condition of Borrower and the Guarantors taken as a whole, except to the extent
that the same may be affected by future general economic conditions and except
as has been disclosed to Bank in writing prior to the execution hereof.
ARTICLE VII
Representations, Rights, Duties
and Covenants with Respect to Collateral
----------------------------------------
16
7.01. Representations Concerning Collateral. Borrower and Guarantors
-------------------------------------
jointly and severally represent and warrant to Bank that:
(a) The Collateral is and shall be used primarily for business
purposes and such thereof as consists of tangible property is and will be kept
at Borrower's and Guarantors' respective business locations set forth in Exhibit
-------
7.01(a), attached hereto, except that parts of the Collateral may be kept at
-------
other locations if the type of Collateral in question and the location at which
it is or will be kept are disclosed in writing to Bank either in Exhibit 7.01(a)
---------------
or in a separate notice given not less than 30 days prior to such Collateral
being moved to such location.
(b) As of the effective date of any Borrowing Base Certificate
signed and delivered to Bank on behalf of Borrower, Borrower shall be deemed to
have warranted as to each Account or Student Note included as an Eligible
Account or Eligible Note in the calculation of the Borrowing Base in such
Certificate that such Account or Student Note is an Eligible Account or Eligible
Note, as the case may be, as defined herein.
(c) Except for the security interests granted to Bank herein and
those permitted under the Section entitled, "Restrictions on Liens", Borrower or
---------------------
a Guarantor is, and as to Collateral acquired after the date hereof Borrower or
a Guarantor shall and will be, the owner of the Collateral free from any Lien or
other right, title or interest of any other Person and free from any restriction
on transfer except such as may be imposed by applicable securities laws, and
Borrower and Guarantors shall defend the Collateral against all claims and
demands of all Persons at any time claiming the same or any interest therein
adverse to Bank.
(d) All of Borrower's and Guarantors' records pertaining to
Accounts, Instruments, Contract Rights and Inventory are kept at the addresses
set forth in Exhibit 7.01(a), except as may be disclosed in writing to Bank in
---------------
an Exhibit to this Agreement designated Exhibit 7.01(d).
---------------
(e) The address of each place of business and the chief executive
office of each of Borrower and Guarantors is as set forth on Exhibit 7.01(e).
---------------
(f) Except as set forth on Exhibit 7.01(f), if any, neither
---------------
Borrower nor any Guarantor owns any property subject to a certificate of title
law or any judgments, tort claims, ships or aircraft.
7.02. Rights and Duties Respecting the Collateral. Borrower and Guarantors
-------------------------------------------
jointly and severally agree as follows:
(a) Except for the Liens created herein and those permitted under
the Section entitled "Restrictions on Liens", Borrower and Guarantors shall keep
---------------------
and maintain the Collateral intact and free and clear of all Liens.
(b) Neither Borrower nor any Guarantor shall use the Collateral
illegally or improperly or in any manner differing from usual and ordinary
business usage.
(c) Neither Borrower nor any Guarantor shall transfer any interest
in the Collateral or transfer or dispose of any of the same except for (i) sales
or disposal of obsolete equipment in the ordinary course of business; (ii)
transfers to Borrower or a Guarantor; and (iii) transfers expressly permitted
pursuant to Sections 9.01 and 9.03, below.
(d) Bank shall have the rights, exercisable at any time after an
Event of Default has occurred and during the continuance thereof and whether or
not Borrower and Guarantors were theretofore making collections on their
respective Accounts, (i) to notify the account debtors obligated on any or all
of the Accounts of Borrower and Guarantors to make payment thereof directly to
Bank, (ii) to demand, collect, receive, receipt for, ▇▇▇ for, compound and give
acquittance for, in its own name or that of Borrower, any and all amounts due
and to become due on the Accounts of Borrower and Guarantors, (iii) to endorse,
in its own name or that of Borrower or any Guarantor, as agent and attorney-in-
fact of Borrower and Guarantors under an irrevocable power, any and all
commercial paper given in payment or part payment of the Accounts of Borrower
and Guarantors, (iv) in its discretion, to file any claim or take any other
action
17
which Bank may deem necessary or appropriate to protect and preserve and realize
upon the security interest of Bank in the Accounts of Borrower and Guarantors
and Proceeds thereof, and (v) to take control of all Proceeds of any or all of
the Accounts of Borrower and Guarantors and retain such Proceeds as security for
or apply them against the Bank Liabilities, the order and method of any such
application to be in the discretion of Bank. Until such time as Bank elects to
exercise any such rights by giving notice to Borrower, Borrower and Guarantors
are authorized to collect and enforce said Accounts in their own respective
names. The costs of such collection and enforcement, including reasonable
attorneys' fees and out-of-pocket expenses, and all other expenses and
liabilities resulting therefrom shall be borne solely by Borrower and Guarantors
whether the same are incurred by Borrower, any Guarantor or Bank.
(e) Bank shall not have any duty as to the protection or collection
of the Collateral or any income thereon, or as to the preservation of any rights
pertaining thereto, beyond the duty to use reasonable care in the custody and
preservation of any of the Collateral in its possession. "Reasonable care" shall
not include taking necessary steps to preserve rights against adverse claimants
or other persons or to ascertain or notify Borrower, any Guarantor or any other
Person of declines in the market value of the Pledged Collateral; maturity, call
or redemption dates; or the accrual or impending expiration of any right, option
or privilege.
7.03. Covenants. Borrower and Guarantors jointly and severally covenant
---------
and agree that so long as Bank's commitment hereunder remains in effect and
until all Loans and other Bank Liabilities have been fully paid and discharged:
(a) They shall keep and maintain at their own respective cost and
expense, at their respective chief executive offices, records relating to the
Collateral which are accurate and complete in all material respects.
(b) They shall keep and maintain such of the Collateral as consists
of tangible property in good repair, condition and operating order and shall
replace the same as reasonably necessary.
(c) They shall furnish to Bank from time to time statements and
schedules further identifying and describing any of the Collateral and its
location.
(d) They shall advise Bank promptly, in reasonable detail, of any
Lien (other than any lien permitted under the Section entitled "Restrictions on
---------------
Liens") or material claim made or asserted against any of the Collateral after
------
the date hereof, any material change in the composition of the Collateral, and
of the occurrence of any event which would have a material adverse effect on the
aggregate value of the Collateral or the security interests created hereunder or
the ability of Bank to obtain value from any of the Collateral upon foreclosure.
(e) They shall not permit any of the Collateral which consists of
tangible property to be moved into any state in which one or more financing
statements covering such Collateral are required to be filed to perfect or
maintain the perfection of Bank's security interest in such Collateral, unless
such financing statements have been filed in all required offices.
(f) They shall observe and perform all terms, covenants and
agreements in this Agreement relating to the Collateral, regardless of the
termination of any right or obligation under this Agreement.
(g) If any of them should receive any promissory note, trade
acceptance, chattel mortgage, or other Instrument (except a check or draft which
is promptly deposited in a bank account) in payment of or to evidence the
indebtedness owed on any of their respective Accounts or Instruments, the
recipient shall immediately deliver the same to Bank, except that Student Notes
shall not be required to be delivered more frequently than monthly,
appropriately endorsed or assigned with recourse to Bank's order and, regardless
of the form of such endorsement or assignment, Borrower and Guarantors hereby
waive presentment, demand, notice of dishonor, protest and all other notices
with respect to any such Instrument.
(h) At such times as Bank may request, Borrower or any Guarantor
shall execute and deliver a
18
schedule or other form of identification, in form reasonably required by Bank,
of all Accounts and Instruments of Borrower or such Guarantor, together with
such other evidences of the existence, status and identity of such Accounts and
Instruments as Bank may reasonably require. At such times as Bank may request,
Borrower shall deliver to Bank copies of all management reports produced in the
ordinary course of Borrower's business which concern payments made with respect
to Accounts or Instruments.
ARTICLE VIII
Other Affirmative Covenants
---------------------------
Borrower and Guarantors jointly and severally covenant and agree that so
long as Bank's commitment hereunder is in effect and until such time as all
Loans and all other Bank Liabilities have been fully paid and discharged,
Borrower and, where indicated, Guarantors shall duly perform and observe each
and all of the following covenants and agreements unless Bank shall otherwise
consent in writing:
8.01. Maintenance of Corporate Existence; Compliance with Laws. Each of
--------------------------------------------------------
Borrower and Guarantors shall maintain its corporate existence, rights and
franchises; shall do or cause to be done all things necessary to become and
remain duly qualified to do business in all jurisdictions where such
qualification is required; shall comply with all applicable laws and all
applicable rules, orders and regulations of and restrictions imposed by federal,
state and local (or foreign, if applicable) governmental bodies, agencies and
instrumentalities, specifically including but not limited to any law, rule,
order, regulation or restriction promulgated or enforceable by the United States
Department of Education ("DOE"), or relating to securities (including, without
limitation, the Securities Act of 1933 and the Securities Exchange Act of 1934,
as amended, and the rules and regulations of the Securities and Exchange
Commission under such acts), employee benefits (including, without limitation,
ERISA and the Code), fair labor standards, environmental protection and
pollution control (including, without limitation, all Environmental Laws), land
use and zoning, energy and industrial facilities siting, or occupational health
and safety, where any failure to comply would or could have a material adverse
effect on the business, operations, financial condition or prospects of Borrower
or any Guarantor; and shall obtain, preserve and keep in force any and all
licenses, permits, franchises, patents, patent rights, trademarks, trademark
rights, trade names, trade name rights, copyrights, trade secrets and other
authorizations and rights necessary to the ownership of its properties or
necessary to or useful in the conduct of its business.
8.02. Financial Statements.
--------------------
(a) As soon as available and in any event within one hundred
five (105) days after the end of each of its fiscal years, Borrower shall
deliver to Bank a consolidated balance sheet of Borrower and all Guarantors as
at the end of such fiscal year and consolidated statements of income,
stockholders' equity and cash flows of Borrower and all Guarantors for such year
(all hereinafter collectively referred to as "financial statements"), in
reasonable detail, setting forth in comparative columnar form the corresponding
figures for the preceding fiscal year, and accompanied by a report of a firm of
independent certified public accountants acceptable to Bank, stating that such
accountants have audited such financial statements in accordance with generally
accepted auditing standards, that such accountants believe that their audits
provide a reasonable basis for their opinion, and that, in the opinion of such
accountants such financial statements present fairly, in all material respects,
the consolidated financial position of Borrower and all Guarantors as of the
dates indicated and the consolidated results of their operations and their cash
flows for the years then ended, in conformity with generally accepted accounting
principles. Such accountants, however, shall not be liable to anyone by reason
of their failure to obtain knowledge of any Event of Default which would not be
disclosed in the course of an audit conducted in accordance with generally
accepted auditing standards.
(b) Within thirty (30) days after the end of each calendar month
(excluding each December), Borrower shall deliver to Bank (i) consolidated
financial statements of Borrower and all Guarantors, combined financial
statements of Borrower and all Guarantors, all as of the end of and for such
month and the part of Borrower's current fiscal year ended at the end of such
month, in form and detail acceptable to Bank, setting forth in comparative
columnar form the figures for the corresponding period of the preceding fiscal
year and certified by the chief financial officer or
19
principal accounting officer of Borrower to present fairly, in all material
respects, the financial position of Borrower and all Guarantors as of the end of
such month and the results of their operations for the period then ended, in
conformity with generally accepted accounting principles consistently applied,
(ii) a certificate signed by the chief executive officer, chief financial
officer or principal accounting officer of Borrower demonstrating (with
computations in reasonable detail) compliance by Borrower with the provisions of
this Article VIII and Article IX hereof and stating that there exists no
Default, or, if any Default exists, specifying the nature and period of
existence thereof and what action Borrower proposes to take with respect
thereto, and (iii) a listing of all Eligible Notes as prepared by NLSC.
8.03. Notices and Reports. Borrower shall also provide to Bank:
-------------------
(a) Forthwith upon learning of (i) the occurrence of any
Default, (ii) the institution of, or any adverse determination in, any
litigation, arbitration proceeding or administrative or other governmental
proceeding which involves an asserted liability of Borrower or any of the
Guarantors exceeding $250,000.00 or which is otherwise material to Borrower and
the Guarantors, taken as a whole, or (iii) any other material adverse action
taken by any private or governmental commission, board, agency or other Person
with respect to the accreditation, or eligibility to receive funds under or to
otherwise participate in student financial assistance programs, of any school,
or other educational institution or program operated by Borrower or any of the
Guarantors, written notice setting forth the details thereof and the steps being
taken by Borrower with respect thereto;
(b) Forthwith upon receipt of any written communication from any
surety on any bond in which Borrower or any of the Guarantors is a named
principal, a true and complete copy of such communication;
(c) Concurrently with the transmission thereof to the Securities
and Exchange Commission or Borrower's security holders, copies of all
registration statements, proxy statements, reports and other communications
filed by Borrower with the Securities and Exchange Commission or distributed to
Borrower's security holders as such; and
(d) From time to time, such additional information regarding the
financial position, business, properties or affairs of Borrower or any of the
Guarantors as Bank may reasonably request.
8.04. Insurance. Borrower and each Guarantor shall maintain:
---------
(a) Extended coverage hazard insurance on all tangible property
that is part of the Collateral and all other of their respective assets and
properties of an insurable nature and of a character usually insured by persons
engaged in the same or similar businesses, in amounts equal to the full
insurable value (determined in a manner reasonably acceptable to Bank) of the
insured property, insuring against all risks customarily insured against by
persons engaged in the same or similar businesses, including, without
limitation, fire, malicious mischief, vandalism and other casualty coverage, and
naming Bank as loss payee as its interest appears;
(b) Liability insurance against claims for personal injury or
death or property damage suffered by members of the public or others in or about
any of Borrower's or any Guarantor's premises or occurring by reason of
Borrower's or any Guarantor's ownership, maintenance, use, operation or
construction of any plants, shops, machinery or other facilities, with limits of
liability not less than $1,000,000 combined single limit per occurrence, and
naming Bank as an additional insured; and
(c) Any and all workers' compensation or similar insurance
required under the laws of any jurisdiction in which any of its places of
business may be situated.
All such casualty, liability and workers' compensation insurance shall be
effected under valid and enforceable policies issued by insurers reasonably
acceptable to Bank and shall be maintained in full force and effect until all
Bank Liabilities are paid. Each such insurance policy shall include an
endorsement prohibiting cancellation or material change of the policy within at
least 30 days prior written notice to Bank, without any disclaimer of liability
for failure to give such
20
notice.
8.05. Taxes, Other Liens and Indebtedness. Borrower and each Guarantor
-----------------------------------
shall promptly pay and discharge when due, or in conformity with customary trade
terms, all taxes, assessments, and other governmental charges or levies imposed
upon Borrower or such Guarantor or upon their respective incomes or upon any of
Borrower's Assets, or upon any part thereof, as well as all other Indebtedness
incident to the operations of Borrower or such Guarantor; provided, however,
that Borrower and Guarantors shall not be required to pay any such tax,
assessment, charge, levy or other Indebtedness (other than the Bank Liabilities)
if the amount, applicability or validity thereof shall currently be contested in
good faith by appropriate proceedings diligently conducted and if Borrower or
such Guarantor shall have set up adequate reserves therefor as determined by
Bank in its reasonable discretion.
8.06. Maintenance of Properties. Borrower and each Guarantor shall, and
-------------------------
Borrower shall cause all employees, agents or other operators authorized to
operate or use or have custody of any of Borrower's Assets to, maintain
Borrower's Assets generally in good and workable condition at all times and make
all repairs, replacements, additions and improvements thereto as are reasonably
needed for the proper and efficient conduct of the businesses carried on in
connection therewith. Borrower and each Guarantor shall comply at all times,
with the provisions of all leases and other agreements to which Borrower or any
Guarantor is a party and which (i) relate to real or personal property useful in
the business of Borrower or of any Guarantor, or (ii) are, or the lapse of which
is or would be, material to the business, operations financial condition or
prospects of Borrower and the Guarantors, taken as a whole, so as to prevent any
loss or forfeiture thereof or thereunder, unless compliance therewith is being
currently contested in good faith by appropriate proceedings and Borrower shall,
in accordance with generally accepted accounting principles, have set aside on
its books adequate reserves with respect thereto as determined by Bank in its
reasonable discretion;
8.07. Nature of Business; Books and Records; Other Information; Inspection
--------------------------------------------------------------------
and Audit. Borrower and Guarantors shall continue their respective businesses
---------
without material change or interruption and, without the written approval of
Bank, Borrower and Guarantors shall not engage in any material business other
than their respective regular businesses as carried on as of the date hereof.
Borrower and Guarantors shall keep proper books and records of account
pertaining to their respective operations. Promptly upon receipt thereof,
Borrower shall furnish a copy of any report, not otherwise required to be
delivered hereunder, submitted to Borrower by independent public accountants in
connection with any annual, interim or special audit made by them of the books
of Borrower or any Guarantor. From time to time upon the reasonable request of
any authorized officer of Bank to Borrower, Borrower will furnish or will cause
its independent certified public accountants to furnish to Bank such other
information regarding the business, affairs and condition, financial or
otherwise, of Borrower and the Guarantors as such officer may reasonably
request. The authorized officers, agents, independent auditors, employees and
representatives of Bank shall have the right, during normal business hours and
upon reasonable notice, to visit and inspect any premises occupied by Borrower
or a Guarantor or any other of Borrower's Assets and to examine and audit the
books and records of Borrower and the Guarantor to make copies, notes and
abstracts therefrom, and to discuss the affairs, finances and accounts of
Borrower and the Guarantor with the principal officers of and independent public
accountants for Borrower and the Guarantors, all at such reasonable times and as
often as Bank may reasonably request.
8.08. Bank Accounts. Borrower shall maintain its principal banking
-------------
relationship and accounts with Bank, and shall pay fees and other charges for
depository services at the same rates as are customarily charged to other
similar commercial deposit customers of Bank.
8.09. Cooperation; Further Assurances, Borrower and Guarantors shall
-------------------------------
cooperate fully with Bank in preparing, submitting, furnishing, filing and
recording at Borrower's expense any reports, financing statements, instruments,
documents or other items that may be required of or reasonably requested by
Bank. Borrower and Guarantors shall, upon Bank's request, provide such further
documents and assurances concerning the transactions contemplated hereunder as
may be necessary or desirable to establish Borrower's and Guarantor's
willingness and ability to fully perform the terms and obligations contained in
this Agreement and the other Loan Documents.
8.10. Compliance with Loan Documents. Borrower and Guarantors shall cause
------------------------------
all payments to be made on
21
the Note as the same shall become due and payable and shall promptly and fully
perform the Bank Liabilities and all the agreements and undertakings of Borrower
under the Loan Documents and refrain from doing any act or acts that would
violate any covenant or agreement contained in the Loan Documents.
8.11. Indemnification Against Environmental Liability. Borrower and
-----------------------------------------------
Guarantors jointly and severally agree that they shall indemnify and hold
harmless Bank, any other financial institution which purchases a participation
in the Loans, and their respective officers, directors, employees, agents,
successors and assigns, and the officers, directors, employees and agents of any
successor or assign of either Bank or any such other financial institution,
against any and all claims, demands, losses, liabilities, costs and expenses
(including without limitation reasonable attorneys' fees, whether or not suit be
commenced and including fees incurred in connection with proceedings in
appellate courts) which (a) arise out of or relate to any investigatory or
remedial action, pursuant to any Environmental Law, which relates to or involves
operations or property (including but not limited to the real property
encumbered by the Mortgage) of Borrower or any of the Guarantors, or (b) on
account of injury to any person or damage to any property arising out of, in
connection with or in any way relating to the breach of any covenant contained
in this Agreement, including but not limited to covenants regarding compliance
with Environmental Laws.
8.12. Net Worth, Current Ratio and Working Capital. Based upon the monthly
--------------------------------------------
financial statements delivered by Borrower pursuant to Section 8.02(b), Borrower
and Guarantors shall maintain (a) Consolidated Tangible Net Worth not less than
$6,400,000.00; (b) Consolidated Current Assets equal to not less than 100% of
Consolidated Current Liabilities; (c) Consolidated Quick Ratio (as defined under
FASB) of 1:1; and (d) Consolidated Working Capital of not less than $1,000.00.
Borrower and Guarantors shall remain in compliance with all federal statutes,
regulations and orders binding upon them and enforceable by the DOE, including
but not limited to the Factors of Financial Responsibility as required by the
DOE in regulations published in the Federal Register on June 30, 1995, 34 CFR
Section 688.15: "Factors of Financial Responsibility@, and all amendments
thereto as of the end of each fiscal quarter or other period for which Borrower
is required to submit compliance reports to the DOE.
ARTICLE IX
Other Negative Covenants
------------------------
Borrower and Guarantors jointly and severally covenant and agree that so
long as Bank's commitment hereunder is in effect and until such time as all
Loans and all other Bank Liabilities have been fully paid and discharged,
Borrower and Guarantors shall observe each and all of the following covenants
and agreements unless Bank shall otherwise consent in writing:
9.01. Merger; Liquidation; Sale of Assets. Borrower and Guarantors shall
-----------------------------------
not become a party to any merger or consolidation with any Person other than
Borrower or a Guarantor, nor shall Borrower or any Guarantor dissolve or
liquidate, or sell, convey, lease, transfer or otherwise dispose of, in any
single transaction or series or related transactions, all or any substantial
part of the respective assets of Borrower or any Guarantor to any Person other
than Borrower or a Guarantor; provided, however, (a) the liquidation or sale in
any calendar year of Assets having an aggregate book value of no greater than
$100,000.00, and (b) the transfer to CenCor of accounts that have been written-
off by Borrower in the usual and ordinary course of its business, shall not be
deemed a violation of this Section.
9.02. Restrictions on Liens. Borrower and Guarantors shall not, and
---------------------
Borrower shall not permit any Guarantor to, (a) create or incur or suffer to be
created or incurred or to exist any Lien upon any of Borrower's Assets, whether
now owned or hereafter acquired, or upon the income or profits therefrom; (b)
enter into or permit to exist any arrangement or agreement which prohibits it
from creating such Liens, except to the extent any such prohibition is imposed
by applicable law or a regulatory agency; (c) transfer any of Borrower's Assets,
or any interest therein, for the purpose of subjecting the same to the payment
of Indebtedness or performance of any other obligation in priority to payment of
its general creditors (other than a transfer to Bank); (d) acquire or agree or
have an option to acquire any property or assets upon conditional sale or other
title retention agreement, device or arrangement; (e) suffer to exist, for
22
a period of more than 30 days after the same shall have been incurred, any
Indebtedness which if unpaid might by law or upon bankruptcy or insolvency, or
otherwise, be given any priority whatsoever over its general creditors; or (f)
subject to the provisions of Section 9.01, sell, assign or otherwise transfer
any of its Accounts, Instruments or Chattel Paper, with or without recourse;
provided, however, that Borrower may create or incur or suffer to be created or
incurred or to exist:
(i) Liens incidental to the conduct of Borrower's or any Guarantor's
business or the ownership of Borrower's Assets which were not incurred in
connection with the borrowing of money or the obtaining of advances or
credit, and which do not in the aggregate --
(A) materially impair the use of the assets subject to such Liens in
the operation of the business of Borrower and the Guarantors, taken as
a whole; or
(B) materially detract from the value of the assets subject to such
Liens for the purpose of the business of the Borrower and the
Guarantors, taken as a whole;
(ii) Liens to secure taxes, assessments and other governmental charges or
claims for labor, material or supplies to the extent that and so long as
payment thereof is not required to be made in accordance with the Section
of this Agreement entitled "Taxes, Other Liens and Indebtedness";
-----------------------------------
(iii) Deposits or pledges made in connection with, or to secure payment
of, workmen's compensation, unemployment insurance, old age pensions or
other employment related claims or charges or in connection with any
litigation, administrative proceeding, dispute or contest in respect of any
such claims or charges to the extent that and so long as payment thereof is
not required to be made in accordance with the Section of this Agreement
entitled "Taxes, Other Liens and Indebtedness";
-----------------------------------
(iv) Liens on property or assets of a Guarantor to secure obligations of
such Guarantor to the Borrower or another Guarantor;
(v) Liens arising from Capitalized Leases; and
(vi) Liens on certificates of deposit pledged by Borrower as of the date
hereof to secure contingent obligations to ▇▇▇▇ ▇▇▇▇▇ Bank.
9.03. Indebtedness. Neither Borrower nor any Guarantor shall directly or
------------
indirectly, incur, create, assume, guarantee, become contingently liable in
connection with, or suffer to exist any Indebtedness except (a) the Bank
Liabilities, (b) trade payables and other Indebtedness (excluding any
Indebtedness for borrowed money) that arise in the ordinary and usual course of
the business of Borrower and Guarantors, (c) obligations for the payment of rent
on real property necessary to the operation of the business of Borrower and
Guarantors, (d) Capitalized Leases Obligations and loans not exceeding an
aggregate principal amount of $750,000.00 and annual payment obligations thereon
not exceeding $250,000.00; (e) leases other than Capitalized Leases for the
possession and use of real and personal property; (f) the Subordinated 5%
Debentures; and (g) contingent obligations owed to ▇▇▇▇ ▇▇▇▇▇ Bank of Kansas
City ("▇▇▇▇ ▇▇▇▇▇ BANK") relating solely to letters of credit issued by that
Bank in favor of the DOE and the States of California and Colorado.
Notwithstanding the foregoing, Bank acknowledges that Borrower and Guarantors
owe certain indebtedness ("CENCOR DEBT") to CenCor. Borrower and each Guarantor
represents and warrants the CenCor Debt (x) is a non-recourse, unsecured
obligation; (y) does not exceed $480,000.00; and (z) is collectible solely from
Borrower's and Guarantors' Accounts that (i) have not had any payments made for
180 or more days; (ii) do not qualify as Eligible Accounts; and (iii) have been
written-off as uncollectible Accounts in accordance with Borrower's and
Guarantors' usual and customary accounting practices ("BAD ACCOUNTS"). Bank
agrees that Borrower and Guarantors may continue to assign their Bad Accounts to
CenCor solely to satisfy the remaining balance of the CenCor Debt.
9.04. Rental Obligations. Neither Borrower nor any Guarantor shall incur
------------------
any obligation for the payment of rent which causes the aggregate obligations of
Borrower and the Guarantors for the payment of rent (excluding
23
obligations under Capitalized Leases) to exceed $3,300,000.00 during any fiscal
year of Borrower.
9.05. Maintenance of Location of Records and Chief Executive Office.
-------------------------------------------------------------
Neither Borrower nor any Guarantor shall move any of its records relating to
Accounts, Contract Rights or Inventory to a new location, or change the location
of its Chief Executive Office, except upon not less than thirty (30) days prior
notice to Bank.
ARTICLE X
Defaults and Remedies
---------------------
10.01. Events of Default. The occurrence of one or more of the following
-----------------
events shall constitute an "EVENT OF DEFAULT" under this Agreement:
(a) Any failure by Borrower to pay when due any installment of
principal or interest on the Note or any costs, fees, reimbursable expenses or
other amounts payable by Borrower hereunder or under any of the other Loan
Documents, which failure is not cured within five (5) Banking Days after the
payment shall have become due; or
(b) Any failure by Borrower or any Guarantor to perform or
observe any other term, covenant or provision of the Bank Liabilities, which
failure is not remedied or cured within thirty (30) days after written notice
thereof shall have been given by Bank to Borrower; provided, however, that in
the case of any such failure which by its nature can be cured but cannot
possibly be cured within such thirty-day period, such failure shall not
constitute an Event of Default so long as (i) Borrower or the affected Guarantor
shall have commenced action to cure the same within such thirty-day period; (ii)
Borrower or the affected Guarantor shall be diligently pursuing action to cure
the same as promptly as possible; and (iii) such default is not materially
impairing the value of the Collateral or the validity or enforceability of the
Liens; or
(c) Any representation or warranty made by Borrower herein or in
any report, certificate, financial statement or other writing furnished in
connection with or pursuant to this Agreement or the Loan Documents proving to
have been false or materially incorrect or misleading as of the date on which it
was made or to have become incorrect in any material respect; or
(d) The occurrence of a default or event of default with respect
to, or of any other event which permits the holder thereof to accelerate the
maturity of, any Indebtedness owing by Borrower to any Person other than Bank;
or
(e) The validity or enforceability of this Agreement, any of the
Loan Documents or any transaction contemplated hereunder being contested by
Borrower or any Guarantor, or Borrower or any Guarantor denying that it has any
further liability or obligation hereunder when any Bank Liabilities remain
unpaid; or
(f) Commencement by Borrower of a voluntary case under Title 11
of the United States Code, or any similar law, federal or state, whether now or
hereafter existing; or
(g) Entry by a court of an order for relief against Borrower in
an involuntary case under Title 11 of the United States Code or any such similar
law, appointment of a trustee or receiver for Borrower or all or a substantial
part of the properties of Borrower in any involuntary proceeding, or the taking
by any court of jurisdiction of all or a substantial part of the properties of
Borrower in any involuntary proceeding for the reorganization, dissolution,
liquidation or winding up of the business of Borrower, unless such order is
vacated or stayed on appeal or otherwise or such trustee or receiver is
discharged or such jurisdiction is relinquished within 60 days of the event in
question; or
(h) Borrower becoming insolvent, or making an assignment for the
benefit of creditors or admitting in writing its inability to pay its debts
generally as they become due, or consenting to the appointment of a
24
receiver or trustee or liquidator of all its properties or a substantial part
thereof, or failing within 60 days to pay bond or otherwise discharge any
judgment or attachment which is not stayed on appeal or otherwise being
contested in good faith; or
(i) ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇") shall cease to be Chairman of
the Board of Directors of Borrower for any reason whatsoever and a substitute
Chairman acceptable to Bank in its reasonable discretion is not appointed within
a reasonable period of time; or
(j) the total percentage of Borrower's outstanding common stock
owned by Brozman, the Estate of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, deceased, or other Persons
controlled by Brozman, declines to less than 20% for any reason whatsoever.
All Events of Default described within Section 10.01(a) shall be deemed
continuing unless such amounts are paid and accepted by Bank within the calendar
month in which they are due. All other Events of Default described in Section
10.01 shall be deemed continuing unless expressly waived by Bank in writing.
10.02. Acceleration of Note; Remedies. At any time after the
------------------------------
occurrence of any Event of Default, Bank may, without prior notice to Borrower
or any other Person, declare the unpaid balance of the Note, all accrued and
unpaid interest thereon and all other Bank Liabilities to be immediately due and
payable notwithstanding the stated maturity thereof. Upon such declaration, the
unpaid balance and accrued interest on the Note and all other sums owing under
this Agreement and the other Loan Documents shall become immediately due and
payable without presentment, protest or further demand or notice of any kind,
all of which are hereby expressly waived, and notwithstanding any subsequent
cure of all Events of Default. Bank may thereupon proceed to enforce its rights
and remedies under this Agreement, the Loan Documents and the Uniform Commercial
Code and to collect the Note, by suit at law or in equity or otherwise. Bank's
rights include, without limitation, all other collection rights under this
Agreement and the rights to:
(a) transfer any of the Collateral into its name or that of its
nominee on the books of the issuer thereof (if any), without thereby effecting a
foreclosure of its security interest or a retention of the Collateral in
satisfaction of the Bank Liabilities or any thereof, unless otherwise
acknowledged in writing by Bank;
(b) exercise any voting rights carried by any of the Collateral
and give all consents, waivers and ratifications in respect thereof and
otherwise act with respect thereto as though it were the outright owner thereof
(Borrower and Guarantors hereby for such purpose irrevocably constituting and
appointing Bank and each of its present and future officers the proxies and
attorneys-in-fact of Borrower and Guarantors, under powers coupled with
interests, with full power of substitution in each, and hereby releasing Bank
from any liability it otherwise might have to Borrower or any Guarantor as a
result of any action taken pursuant to this authorization);
(c) require Borrower and Guarantors to assemble the Collateral
and to make it available to Bank at a place reasonably convenient to both
parties; and
(d) sell, assign and deliver, at any time or from time to time,
in one or more lots, any or all of the Collateral, at any private or public
sale, for cash, for credit or for other property, for immediate or future
delivery, and for such price or prices and on such terms as Bank, in its
reasonable discretion, may determine, Borrower and Guarantors hereby waiving and
releasing any and all right or equity of redemption whether before or after sale
hereunder.
Bank, if permitted by law under the circumstances, may bid for and purchase the
whole or any part of the Collateral so sold free from any such right or equity
of redemption. Any notification required by law to be given in connection with
any sale shall conclusively be deemed reasonable if given as provided in the
Section of this Agreement entitled "Notices" hereof not less than ten (10) days
-------
prior to the time of any public sale or the time after which any private sale is
to be made. For the purpose hereof, an agreement to sell all or any part of the
Collateral shall be treated as a sale thereof, and Bank shall be free to carry
out such sale pursuant to such agreement and Borrower and Guarantors shall
25
not be entitled to the return of any of the Collateral subject thereto,
notwithstanding that subsequent to the Pledgee's entry into such an agreement
Borrower and Guarantors may have paid in full the Bank Liabilities. In
connection with any sale of all or any part of the Collateral, Bank may adopt
such procedures and require such representations from and impose such
restrictions on the purchaser as Bank may reasonably deem necessary to avoid
violation of federal or state securities laws, without thereby detracting from
the commercial reasonableness of the sale.
10.03. Right of Set-Off. In addition to any other remedies provided for
----------------
herein, in the Loan Documents, in the Uniform Commercial Code, or otherwise at
law or in equity, upon the occurrence of an Event of Default, Bank shall have
the right of set-off, without demand or notice to anyone, against any funds of
Borrower or any Guarantor on deposit with it.
10.04. Collection of Accounts. Bank shall have the right to control the
----------------------
collection of Accounts as provided in Section 7.02(d) of this Agreement, but
shall have no obligation to exercise such right.
10.05. Performance of Contracts. At any time after the occurrence of an
------------------------
Event of Default, if Bank determines in good faith that such action is necessary
or appropriate in the interest of preserving and realizing on the Collateral,
Bank may take over, either directly or by contracting with a third party, at
Borrower's expense, the performance of Borrower's obligations under any contract
under which an Account has arisen and which has not been fully performed by
Borrower.
10.06. Remedies Cumulative. All rights and remedies of Bank provided in
-------------------
this Agreement, the other Loan Documents, the Uniform Commercial Code or
otherwise at law or in equity are cumulative, and Bank may exercise any or all
such rights and remedies at any time and from time to time. No single or
partial exercise of any right, power, or privilege under any Loan Document shall
constitute a waiver of or prejudice or preclude any other or future exercise
thereof or the exercise of any other right, power, or privilege.
10.07. No Cure. The exercise of any right or remedy of Bank shall not
-------
constitute a cure of any Event of Default unless all sums then due and payable
to Bank with respect to the Loan Documents are repaid and Borrower has cured
all other Events of Default.
10.08. Borrower's and Guarantor's Schools. Part of the Collateral is
----------------------------------
owned and used by Borrower and Guarantors in connection with the operation
of"ConCorde Career Institutes" located in various states (collectively,
"Schools"). Borrower, Guarantors and Bank acknowledge and agree the value of
the Schools as going concerns significantly exceeds the combined value of their
individual assets sold on a piecemeal basis. In order to maximize the value of
such Collateral, Borrower and each Guarantor covenants and agrees that upon
demand by Bank following any Event of Default and during the continuance
thereof, they shall relinquish possession and control of such Schools demanded
by Bank to either Bank or any Person designated by Bank ("TRUSTEE"). The
Trustee shall be permitted to operate such Schools pending final sale or other
disposition thereof, either by Borrower or Guarantors, or by Bank in the
exercise of its remedies under the Uniform Commercial Code. Should Bank
commence any litigation against Borrower or any Guarantor following any Event of
Default and during the continuance thereof, Borrower and all Guarantors hereby
unconditionally and irrevocably consent to the appointment of one or more
receivers (individually, "RECEIVER") for the operation of any one or more
Schools pending final disposition of such litigation. Notwithstanding the
foregoing, nothing contained herein shall obligate Bank to demand the
appointment of a Trustee or Receiver or to take possession or control of all or
any part of the Collateral subsequent to an Event of Default and during the
continuance thereof, and the decision of whether to take any such action or
remedy shall be in the sole and exclusive discretion of Bank. Neither Bank, any
Trustee, nor any Receiver shall be personally liable for any loss whatsoever
occurring after the transfer of possession of any School other than for those
losses directly and proximately caused by the intentional or wilful misconduct
of the party sought to be charged with such loss.
ARTICLE XI
Miscellaneous
-------------
26
11.01. Place and Crediting of Payments. All payments of interest,
-------------------------------
principal, fees, expenses and other amounts payable by Borrower hereunder shall
be made promptly when due, in immediately available funds and lawful money of
the United States, at Bank's office at 701 Minnesota, ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, or at such other office as Bank shall direct in writing from
time to time. Payments received by Bank after 2:00 p.m. shall be credited on the
next Banking Day.
11.02. Payment on Non-Banking Days. Whenever any payment to be made
---------------------------
pursuant to this Agreement or the Note or the other Loan Documents shall be
stated to be due on a day that is not a Banking Day, payment shall be due and
made on the next succeeding Banking Day and such extension of time shall in such
case be included in computing interest, if any, in connection with such payment.
11.03. No Waiver. Neither any course of dealing between Borrower Bank nor
---------
any omission or delay by Bank in exercising any right, power or privilege under
this Agreement or any other Loan Documents shall impair such right, power or
privilege or be construed to be a waiver of or acquiescence in any Event of
Default, and any single or partial exercise of any right, power or privilege
shall not preclude other or further exercise of that or any other right, power
or privilege and no waiver shall be valid unless in writing and signed by Bank
and then only to the extent specified.
11.04. Authority to Act. Bank shall be entitled to act upon any notices
----------------
and instructions (telephonic or written) reasonably believed by Bank to have
been delivered by any person authorized to act on behalf of Borrower or any
Guarantor pursuant hereto, regardless of whether any such notice or instruction
was in fact delivered by a person so authorized to act, and Borrower and
Guarantors hereby agree to indemnify Bank and hold it harmless with respect to
any losses or expenses ensuing from any such action.
11.05. Termination. Unless sooner terminated as hereinafter provided,
-----------
Bank's commitment to make Loans hereunder shall expire on April 30, 1998,
provided that Bank's commitment may be extended by written instrument specifying
the duration of the extension and signed on behalf of Bank by an authorized
officer of Bank. Without any prior notice to Borrower in either case, Bank may
suspend its commitment to make Loans under this Agreement at any time during the
existence of any uncured Default and may terminate its commitment at any time
after the occurrence of any Event of Default, notwithstanding any subsequent
cure of such Event of Default. In the event Bank suspends its commitment and
thereafter all existing Defaults are cured before becoming Events of Default,
Bank's commitment shall be reinstated upon the cure of the last of such Defaults
to be cured. Neither the suspension nor the termination of Bank's commitment
shall affect any other of the rights, liabilities or obligations of Bank and
Borrower under this Agreement.
11.06. Successors and Assigns. The provisions of this Agreement shall be
----------------------
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns except that neither Borrower nor any Guarantor may assign
or transfer any of its rights or obligations under this Agreement or any of the
Loan Documents or any interest in any moneys due or to become due under any of
the Loan Documents without the prior written consent of Bank. Borrower
recognizes that in making the Loans hereunder Bank is relying upon Borrower's
expertise and reputation and Bank's knowledge of Borrower.
11.07. Notices. All notices, requests, demands and other communications
-------
required or permitted by this Agreement shall be in writing and shall be given
to or made upon the respective parties hereto by depositing the same in the
United States mail, certified or registered, postage prepaid, or by telegram or
private courier service, charges prepaid, or by delivery in person, to the
appropriate address set forth below, and shall be deemed given or made when so
deposited in the mail, delivered to the telegraph company or personally
delivered.
If to Borrower:
---------------
ConCorde Career Colleges, Inc.
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
12th & Baltimore, City Center Square
P.O. Box 26610
27
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
with copies to:
▇▇▇▇▇ ▇▇▇▇, LLP
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇ ▇▇▇▇
One Kansas City Place, Suite 3500
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
If to Bank:
-----------
Security Bank of Kansas City
P.O. Box 171297
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
with a copy to:
▇▇▇▇ & ▇▇▇▇▇▇, ▇.▇.
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Either party may change its notice address by giving written notice to the
other party. When given to Borrower as herein provided, notice shall also
be deemed to have been given to all Guarantors.
11.08. Amendments. Borrower, Bank and Guarantors may from time to time
----------
enter into written agreements supplemental hereto for the purpose of modifying
or adding any provision to this Agreement or changing the rights and privileges
of Bank, Borrower or any Guarantor hereunder. Any such supplemental agreement
shall be binding upon Borrower, Bank and Guarantors and their respective
successors and assigns. The provisions of this Section shall not, under any
circumstances, limit the Bank's rights, or Borrower's or any Guarantor's
obligations, under any other provision of this Agreement.
11.09. Severability. Should any court or bankruptcy tribunal hold any
------------
provision of this Agreement to be invalid, void or unenforceable for any reason
whatsoever, then such provision shall be deemed automatically severed from this
Agreement and all other provisions hereof shall remain fully and completely
enforceable according to their original terms. Should Borrower, any Guarantor,
or any other Person upon whom any provision of this Agreement is binding be
discharged or released of any obligation hereunder, such discharge or release
shall not affect the liability of any other party to this Agreement. A judicial
determination in any jurisdiction that any provision hereof is invalid, void or
unenforceable shall not preclude the operation or binding effect of such
provision in any other jurisdiction.
11.10. Survival of Representations, Rights and Obligations. All
representations, warranties, conditions, covenants and other terms herein shall
survive the Closing and the execution hereof and all other Loan Documents and
the making of the Loans hereunder. The rights of Bank and the obligations of
Borrower under this Agreement shall survive the maturity of the Note (whether
such maturity occurs by acceleration or otherwise) and shall continue in full
force and effect until all amounts due under the Note and all other Bank
Liabilities have been fully paid and discharged.
11.11. Governing Law. This Agreement, the Note and the other Loan
-------------
Documents shall be construed in accordance with and governed by the laws,
statutes and decisions of the State of Kansas.
11.12. Headings. Article and Section headings in this Agreement are
--------
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose.
11.13. Expenses of Bank. Borrower and Guarantors jointly and severally
----------------
agree to pay or reimburse Bank, on demand, for all reasonable out-of-pocket
costs, fees and expenses, including but not limited to reasonable attorneys'
28
fees and expenses (whether or not suit be commenced and including fees and
expenses in connection with proceedings in bankruptcy and appellate courts), if
and to the extent not prohibited by applicable law, incurred or paid by Bank in
connection with the negotiation, preparation, execution, interpretation and
enforcement of this Agreement and the other Loan Documents, or in connection
with the collection or enforcement of any of the Bank Liabilities or the
exercise of any of Bank's rights and remedies under the Loan Documents, all of
which costs, fees and expenses shall become and remain a part of the Bank
Liabilities until paid or reimbursed and shall bear interest from the date of
Bank's demand until paid or reimbursed in full at the Default Rate specified in
the Note; provided, however, Borrower and Guarantors shall not be obligated to
reimburse more than $10,000.00 to Bank for attorneys' fees incurred in
connection with the negotiation, preparation and execution of this Agreement and
the other Loan Documents.
11.14. Certain Decisions. Where this Agreement, the Note, the other Loan
-----------------
Documents or related materials provide that any matter, document, instrument,
item or thing is subject to the discretion, consent, satisfaction, approval or
determination of Bank, then, unless expressly otherwise provided, such
discretion, consent, satisfaction, approval or determination may be exercised,
made or withheld by Bank in the exercise of its sole and absolute discretion and
shall not be subject to review under any standard other than Bank's subjective
good faith in conformity with its customary standards and practices.
11.15. Entire Agreement. This Agreement and the Exhibits attached hereto
----------------
embody the entire agreement and understanding between the parties with respect
to the subject matter hereof and supersede all prior agreements and
understandings relating to such subject matter.
11.16. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
11.17. NO ORAL AGREEMENTS. The following is included in this Agreement
------------------
pursuant to K.S.A. Section 16-118(b):
THIS AGREEMENT, THE NOTE, AND THE LOAN DOCUMENTS COLLECTIVELY
CONSTITUTE THE WRITTEN CREDIT AGREEMENT WHICH IS THE COMPLETE AND
FINAL EXPRESSION OF THE CREDIT AGREEMENT BETWEEN BORROWER AND BANK
WITH REGARD TO THE EXTENSION OF CREDIT AND/OR FINANCIAL
ACCOMMODATION REFERRED TO HEREIN AND CONTAINS ALL NONSTANDARD TERMS
RELATING THERETO.
SUCH WRITTEN CREDIT AGREEMENT MAY NOT BE CONTRADICTED BY EVIDENCE
OF ANY PRIOR ORAL CREDIT AGREEMENT OR OF ANY CONTEMPORANEOUS ORAL
CREDIT AGREEMENT BETWEEN THE PARTIES.
BORROWER AND BANK AFFIRM THAT THERE ARE NO UNWRITTEN ORAL CREDIT
AGREEMENTS.
Bank's Initials: ______ Borrower's Initials: ______
11.18. Venue. Borrower and each Guarantor irrevocably agrees that
-----
subject to Bank's sole and absolute election, Bank may bring suit, action, or
other legal proceedings arising out of this Agreement in courts located in
Kansas, whether local, state, or federal. Borrower and each Guarantor hereby
consents to the jurisdiction of such courts and waives any rights they may have
to request a change of venue or a removal to another court.
11.19. WAIVERS OF JURY TRIAL. ALL PERSONS WHO SIGN THIS AGREEMENT: A)
---------------------
WAIVE THE RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM
BASED UPON, OR RELATED TO, THE SUBJECT MATTER OF THIS AGREEMENT, THE NOTE OR THE
LOAN DOCUMENTS BROUGHT BY ANY PARTY; B) HAVE MADE THIS WAIVER KNOWINGLY,
INTENTIONALLY, AND VOLUNTARILY; C) ACKNOWLEDGE NO RELIANCE UPON ANY ORAL OR
WRITTEN STATEMENTS MADE BY ANY OTHER PARTY OR IN ITS BEHALF, EITHER TO INDUCE
THIS WAIVER OF TRIAL BY JURY OR TO MODIFY OR NULLIFY ITS EFFECT, OTHER THAN
THOSE CONTAINED HEREIN; AND D) ACKNOWLEDGE HAVING READ AND UNDERSTANDING THE
MEANINGS AND RAMIFICATIONS OF THIS WAIVER PROVISION. TO EFFECTUATE THE
FOREGOING, BANK IS HEREBY GRANTED A POWER OF ATTORNEY TO FILE, AS ATTORNEY-IN-
FACT FOR ALL OF THE PERSONS WHO SIGN THIS AGREEMENT, A COPY OF THIS AGREEMENT IN
ANY COURT DESCRIBED IN THE SECTION OF THIS AGREEMENT ENTITLED "VENUS" . tHIS
GRANT IS TO ALLOW BANK TO RECEIVE THE BENEFIT OF THIS WAIVER OF TRIAL BY
29
JURY PURSUANT TO ANY APPLICABLE LAW. THE COPY OF THIS AGREEMENT SO FILED SHALL
CONCLUSIVELY BE DEEMED TO CONSTITUTE THE WAIVER OF TRIAL BY JURY BY ALL PERSONS
WHO SIGN THIS AGREEMENT IN ANY PROCEEDING ARISING OUT OF OR OTHERWISE RELATING
TO THIS AGREEMENT, THE NOTE, ANY OTHER LOAN DOCUMENT, OR BANK'S CONDUCT WITH
RESPECT TO ANY OF THE FOREGOING. THIS POWER OF ATTORNEY IS COUPLED WITH AN
INTEREST AND IS IRREVOCABLE. ALL PERSONS WHO SIGN THIS AGREEMENT ACKNOWLEDGE
THE FOREGOING WAIVER HAS BEEN REVIEWED WITH AN ATTORNEY OF SUCH PERSON'S CHOICE
AND THE MEANING AND EFFECT OF THE FOREGOING WAIVER ARE FULLY UNDERSTOOD.
30
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective duly authorized officers as of the day and
year first above written.
SECURITY BANK OF KANSAS CITY
By: __________________________________
Authorized Officer
CONCORDE CAREER COLLEGES, INC.
By: __________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chairman of the Board and
Chief Executive Officer
ATTEST:
_________________________
▇▇▇▇ ▇. ▇▇▇▇▇, Secretary
ACKNOWLEDGMENT
--------------
STATE OF MISSOURI )
) ss.
COUNTY OF ▇▇▇▇▇▇▇ )
BE IT REMEMBERED, that on this _____ day of March 1997, before me, the
undersigned, a notary public in and for said state, came ▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
Chairman of the Board and Chief Executive Officer of ConCorde Career Colleges,
Inc., a Delaware corporation, to me personally known to be such officer and the
same person who executed as such officer the foregoing instrument on behalf of
said corporation, and such person duly acknowledged the execution of the same to
be the act and deed of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal at my office in Kansas City, Missouri, the day and year last above
mentioned.
_______________________________________
Notary Public in and for said County and State
My commission expires:
_____________________
31
[THIS PAGE INTENTIONALLY LEFT BLANK]
32
UNITED HEALTH CAREERS
INSTITUTE, INC.
By: __________________________________
▇▇▇ ▇. ▇▇▇▇▇▇▇, President
ATTEST:
_________________________
▇▇▇▇ ▇. ▇▇▇▇▇, Secretary
ACKNOWLEDGEMENT
---------------
STATE OF MISSOURI )
) ss.
COUNTY OF ▇▇▇▇▇▇▇ )
BE IT REMEMBERED, that on this _____ day of March, 1997, before me,
the undersigned, a notary public in and for said state, came ▇▇▇ ▇. ▇▇▇▇▇▇▇,
President of United Health Careers Institute, Inc., a California corporation, to
me personally known to be such officer and the same person who executed as such
officer the foregoing instrument on behalf of said corporation, and such person
duly acknowledged the execution of the same to be the act and deed of said
corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal at my office in Kansas City, Missouri, the day and year last
above mentioned.
_______________________________________________
Notary Public in and for said County and State
My commission expires:
_____________________
33
SOUTHERN CALIFORNIA COLLEGE OF
MEDICAL AND DENTAL ASSISTANTS, INC.
By: __________________________________
▇▇▇ ▇. ▇▇▇▇▇▇▇, President
ATTEST:
_________________________
▇▇▇▇ ▇. ▇▇▇▇▇, Secretary
AKNOWLEDGEMENT
--------------
STATE OF MISSOURI )
) ss.
COUNTY OF ▇▇▇▇▇▇▇ )
BE IT REMEMBERED, that on this _____ day of March, 1997, before me,
the undersigned, a notary public in and for said state, came ▇▇▇ ▇. ▇▇▇▇▇▇▇,
President of United Health Careers Institute, Inc., a California corporation, to
me personally known to be such officer and the same person who executed as such
officer the foregoing instrument on behalf of said corporation, and such person
duly acknowledged the execution of the same to be the act and deed of said
corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal at my office in Kansas City, Missouri, the day and year last above
mentioned.
_______________________________________
Notary Public in and for said County and State
My commission expires:
_____________________
34
CONCORDE CAREERS - FLORIDA, INC.
By: __________________________________
▇▇▇ ▇. ▇▇▇▇▇▇▇, President
ATTEST:
_________________________
▇▇▇▇ ▇. ▇▇▇▇▇, Secretary
ACKNOWLEDGEMENT
---------------
STATE OF MISSOURI )
) ss.
COUNTY OF ▇▇▇▇▇▇▇ )
BE IT REMEMBERED, that on this _____ day of March, 1997, before me,
the undersigned, a notary public in and for said state, came ▇▇▇ ▇. ▇▇▇▇▇▇▇,
President of ConCorde Careers - Florida, Inc., a Florida corporation, to me
personally known to be such officer and the same person who executed as such
officer the foregoing instrument on behalf of said corporation, and such person
duly acknowledged the execution of the same to be the act and deed of said
corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal at my office in Kansas City, Missouri, the day and year last
above mentioned.
_______________________________________________
Notary Public in and for said County and State
My commission expires:
_____________________
35
COLLEGES OF DENTAL AND MEDICAL
ASSISTANTS, INC.
By: __________________________________
▇▇▇ ▇. ▇▇▇▇▇▇▇, President
ATTEST:
_________________________
▇▇▇▇ ▇. ▇▇▇▇▇, Secretary
ACKNOWLEDGEMENT
---------------
STATE OF MISSOURI )
) ss.
COUNTY OF ▇▇▇▇▇▇▇ )
BE IT REMEMBERED, that on this _____ day of March, 1997, before me,
the undersigned, a notary public in and for said state, came ▇▇▇ ▇. ▇▇▇▇▇▇▇,
President of Colleges of Dental and Medical Assistants, Inc., a California
corporation, to me personally known to be such officer and the same person who
executed as such officer the foregoing instrument on behalf of said corporation,
and such person duly acknowledged the execution of the same to be the act and
deed of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal at my office in Kansas City, Missouri, the day and year last above
mentioned.
_______________________________________
Notary Public in and for said County and State
My commission expires:
_____________________
36
CAREER ASSISTANCE, INC.
By: __________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
ATTEST:
_________________________
▇▇▇▇ ▇. ▇▇▇▇▇, Secretary
ACKNOWLEDGEMENT
---------------
STATE OF MISSOURI )
) ss.
COUNTY OF ▇▇▇▇▇▇▇ )
BE IT REMEMBERED, that on this _____ day of March, 1997, before me,
the undersigned, a notary public in and for said state, came ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
President of Career Assistance, Inc., a Delaware corporation, to me personally
known to be such officer and the same person who executed as such officer the
foregoing instrument on behalf of said corporation, and such person duly
acknowledged the execution of the same to be the act and deed of said
corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal at my office in Kansas City, Missouri, the day and year last above
mentioned.
_______________________________________
Notary Public in and for said County and State
My commission expires:
_____________________
37
COMPUTER CAREER INSTITUTE, INC.
By: __________________________________
▇▇▇ ▇. ▇▇▇▇▇▇▇, President
ATTEST:
_________________________
▇▇▇▇ ▇. ▇▇▇▇▇, Secretary
ACKNOWLEDGEMENT
---------------
STATE OF MISSOURI )
) ss.
COUNTY OF ▇▇▇▇▇▇▇ )
BE IT REMEMBERED, that on this _____ day of March, 1997, before me,
the undersigned, a notary public in and for said state, came ▇▇▇ ▇. ▇▇▇▇▇▇▇,
President of Computer Career Institute, Inc., an Oregon corporation, to me
personally known to be such officer and the same person who executed as such
officer the foregoing instrument on behalf of said corporation, and such person
duly acknowledged the execution of the same to be the act and deed of said
corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal at my office in Kansas City, Missouri, the day and year last above
mentioned.
_______________________________________
Notary Public in and for said County and State
My commission expires:
_____________________
38