\n SECTION 10.4. Indemnification…………………………………………………….. 67
\n SECTION 10.5. Survival…………………………………………………………… 68
\n SECTION 10.6. Severability……………………………………………………….. 68
\n SECTION 10.7. Headings…………………………………………………………… 68
\n SECTION 10.8. Counterparts; Entire Agreement……………………………………….. 69
\n SECTION 10.9. CHOICE OF LAW………………………………………………………. 69
\n SECTION 10.10. Successors and Assigns………………………………………………. 69
\n SECTION 10.11. Further Assurances………………………………………………….. 69
\n SECTION 10.12. CONSENT TO JURISDICTION……………………………………………… 69
\n SECTION 10.13. WAIVER OF JURY TRIAL………………………………………………… 71
\n<\/c><\/s><\/table>\n -xii-
\n 14
\n LIST OF SCHEDULES<\/p>\n
FIRST SCHEDULE – FINANCIAL COVENANT SCHEDULE<\/p>\n
SECOND SCHEDULE – DISCLOSURE SCHEDULE<\/p>\n
LIST OF EXHIBITS<\/p>\n
EXHIBIT A – FORM OF NOTE<\/p>\n
EXHIBIT B – FORM OF SECURITY AGREEMENT<\/p>\n
EXHIBIT C – FORM OF TRADEMARK SECURITY AGREEMENT<\/p>\n
EXHIBIT D – FORM OF COPYRIGHT SECURITY AGREEMENT<\/p>\n
EXHIBIT E – FORM OF ACCOUNT AGENCY AGREEMENT<\/p>\n
EXHIBIT F – FORM OF LOAN REQUEST<\/p>\n
EXHIBIT G – FORM OF ISSUANCE REQUEST<\/p>\n
EXHIBIT H – FORM OF COMPLIANCE CERTIFICATE<\/p>\n
EXHIBIT I – FORM OF CLOSING DATE CERTIFICATE<\/p>\n
EXHIBIT J – LEGAL OPINION OF SPECIAL COUNSEL TO THE BORROWER
\n 15
\n REVOLVING CREDIT AGREEMENT<\/p>\n
REVOLVING CREDIT AGREEMENT, dated as of November 12, 1999, between
\nEDISON SCHOOLS INC., a Delaware corporation (hereinafter, together with its
\nsuccessors in title and assigns, the “BORROWER”), and IMPERIAL BANK, a bank
\norganized under the laws of the State of California (hereinafter, together with
\nits successors in title and assigns, the “BANK”).<\/p>\n
RECITALS<\/p>\n
The Borrower has requested the Bank to make a revolving credit facility
\navailable to the Borrower. The proceeds of the loans and other credit extensions
\nunder the facilities are to be used by the Borrower for working capital and for
\nthe other purposes described in Section 3.8. The Bank is willing to make the
\nfacility available to the Borrower and to make loans and other credit extensions
\nto the Borrower hereunder, all upon the terms and subject to the conditions
\ncontained in this Agreement.<\/p>\n
Accordingly, the parties hereto agree as follows:<\/p>\n
ARTICLE I<\/p>\n
DEFINITIONS<\/p>\n
SECTION 1.1. DEFINED TERMS. <\/p>\n
The following terms, when used in this Agreement, including the
\nintroductory paragraph and Recitals hereto, or in any of the other Loan
\nDocuments, shall, except where the context otherwise requires, have the
\nfollowing meanings:<\/p>\n
“ACCOUNTS RECEIVABLE” means, in relation to any Person, such Person’s
\nnow owned or hereafter acquired rights to payment (a) for the rendition of
\nservices in the ordinary course of such Person’s business, or (b) under or in
\nrespect of Management Agreements to which such Person shall from time to time be
\na party, in any case under clause (a) or clause (b), whether or not evidenced by
\nany Instrument. The amount of any Accounts Receivable shall be determined in
\naccordance with GAAP.<\/p>\n
“ACQUISITION” means any transaction, or any series of related
\ntransactions, in which the Borrower or any of its Subsidiaries (a) acquires any
\nbusiness or all or substantially all of the Property of any Person or any
\ndivision or other business unit thereof, whether through purchase of assets,
\nmerger or otherwise, (b) directly or indirectly acquires control of at least a
\nmajority (in number of votes) of the Voting Interests of any Person, or (c)
\ndirectly or indirectly acquires ownership or control of a majority of the Equity
\nInterests of any class or series of any Person.<\/p>\n
“ADJUSTED CONSOLIDATED CAPITAL EXPENDITURES” means, in relation to the
\nBorrower and its Subsidiaries for any period, the Consolidated Capital
\nExpenditures made by the Borrower and its Subsidiaries for such period LESS the
\nCharter School Capital Expenditures made by the Borrower and its Subsidiaries
\nfor such period, all as determined on a consolidated basis in accordance with
\nGAAP.
\n 16
\n -2-<\/p>\n
“AFFILIATE” of any Person means (a) any other Person which, directly or
\nindirectly, controls or is controlled by or is under common control with such
\nPerson, or (b) any other Person who is a director, manager or officer of such
\nPerson or of any Person described in clause (a). For purposes of this
\ndefinition, control of a Person shall mean the power, whether direct or
\nindirect, to direct or cause the direction of the management and policies of
\nsuch Person, whether by contract or otherwise. For purposes of this Agreement
\nand the other Loan Documents, (i) the Borrower shall not be or be deemed to be
\nan Affiliate of any of the Borrower’s Subsidiaries, (ii) none of the
\nSubsidiaries of the Borrower, and none of the Schools, shall be or be deemed to
\nbe an Affiliate of the Borrower or of any of the other Subsidiaries of the
\nBorrower, and (iii) the Bank shall not be or be deemed to be an Affiliate of the
\nBorrower or of any of its Subsidiaries.<\/p>\n
“AFFILIATE TRANSACTION” means any of the following transactions or
\narrangements:<\/p>\n
(a) the making by the Borrower or any of its Subsidiaries of
\n any payment or prepayment (whether of principal, premium, interest or
\n any other sum) of or on account of, or any payment or other
\n distribution by the Borrower or any of its Subsidiaries on account of
\n the redemption, repurchase, defeasance or other acquisition for value
\n of, any Indebtedness of any kind whatsoever (i) of any Affiliate of the
\n Borrower, or (ii) of the Borrower or any of its Subsidiaries to any
\n Affiliate of the Borrower;<\/p>\n
(b) the making of any loans, advances or other Investments of
\n any kind whatsoever by the Borrower or any of its Subsidiaries to or in
\n any Affiliate of the Borrower or to or in any holder of any
\n Indebtedness described in clause (a) of this definition;<\/p>\n
(c) the Sale by the Borrower or any of its Subsidiaries of all
\n or any part of its Property to, or for the direct or indirect benefit
\n of, any Affiliate of the Borrower;<\/p>\n
(d) the incurrence by the Borrower or any of its Subsidiaries
\n of any Indebtedness to any Affiliate of the Borrower;<\/p>\n
(e) the declaration or payment by the Borrower or any of its
\n Subsidiaries of any dividends or other distributions on account of, or
\n the making by the Borrower or any of its Subsidiaries of any payment or
\n other distribution on account of the purchase, repurchase, redemption
\n or other acquisition for value of, any shares of Capital Stock or any
\n other Equity Interests or Securities of any Affiliate of the Borrower;<\/p>\n
(f) the payment by the Borrower or any of its Subsidiaries to
\n any Affiliate of the Borrower of any fees or commissions of any kind,
\n including, without limitation, management or consulting fees,
\n non-competition payments or other similar fees, investment banking or
\n underwriting fees or commissions, arrangement, placement or syndication
\n fees, or brokers’, finders’ or other transaction fees or commissions;
\n or<\/p>\n
(g) any other transaction or Contractual Obligation between
\n any Affiliate of the Borrower, on the one hand, and the Borrower, on
\n the other hand, or between any Affiliate of the Borrower, on the one
\n hand, and any Subsidiary of the Borrower, on the other hand.
\n 17
\n -3-<\/p>\n
For the purposes of this Agreement and the other Loan Documents, the term
\n“AFFILIATE TRANSACTION” shall not include any salaries, bonuses, advances or
\nincentive stock options paid or issued to directors, managers, officers or
\nemployees of the Borrower or of any of its Subsidiaries in the ordinary course
\nof business and in all material respects consistent with the Borrower’s usual
\nand customary business practice.<\/p>\n
“AGENCY ACCOUNT” means any depository, securities, investment or other
\nsimilar Financial Asset Account maintained by the Borrower or any of its
\nSubsidiaries with an Agency Account Institution, the funds or other Property
\nfrom which shall be subject to transfer, upon the terms contained in the Agency
\nAccount Agreement applicable thereto, to the Borrower’s Concentration Account or
\notherwise to the Bank or as the Bank shall direct.<\/p>\n
“AGENCY ACCOUNT AGREEMENT” is defined in Section 8.1.12.<\/p>\n
“AGENCY ACCOUNT INSTITUTION” means any financial institution (other
\nthan the Bank) which (a) receives deposits directly or indirectly (whether as
\nthe result of an interim concentration of funds in depository accounts or
\notherwise) or cash, Cash Equivalents, Securities or other Property from or for
\nthe account of the Borrower or any of its Subsidiaries, and (b) is a party to
\nand bound by an Agency Account Agreement as contemplated and provided by Section
\n8.1.12.<\/p>\n
“AGREEMENT” means this Credit Agreement.<\/p>\n
“AMOUNT” means, with respect to any Acquisition, all consideration paid
\nin respect thereof, including consideration in the form of cash, Property (as
\nvalued at the time of such Acquisition), or the assumption of Indebtedness or
\nother obligations.<\/p>\n
“ANCILLARY DOCUMENTS” means, collectively, the Governing Documents of
\neach of the Borrower and its Subsidiaries, the Management Agreements, the
\nSubordinated Debt Documents, the Real Estate Lease Agreements, and all other
\nInstruments that shall from time to time be identified by the Borrower and the
\nBank in writing as “ANCILLARY DOCUMENTS” for purposes of this Agreement and the
\nother Loan Documents.<\/p>\n
“APPLICABLE LAW” means and includes statutes and rules and regulations
\nthereunder and interpretations thereof by any Governmental Authority charged
\nwith the administration or the interpretation thereof, and orders, requests,
\ndirectives, instructions and notices of any Governmental Authority.<\/p>\n
“APPROVAL” means, relative to the Borrower or any of its Subsidiaries,
\neach approval, consent, filing or registration by or with any Governmental
\nAuthority or any creditor of or any holder of Equity Interests in the Borrower
\nor (as the case may be) any such Subsidiary necessary to authorize or permit the
\nexecution, delivery or performance by the Borrower or (as the case may be) such
\nSubsidiary of any of the Loan Documents to which it is a party or the validity
\nor enforceability of any of such Loan Documents against the Borrower or (as the
\ncase may be) such Subsidiary.<\/p>\n
“AUTHORIZED OFFICERS” is defined in Section 6.1.7.
\n 18
\n -4-<\/p>\n
“BANK” is defined in the introductory paragraph hereto.<\/p>\n
“BANKRUPTCY CODE” means Title 11 of the United States Code.<\/p>\n
“BANKRUPTCY OR INSOLVENCY PROCEEDING” means, with respect to any
\nPerson, any insolvency or bankruptcy proceeding, or any receivership,
\nliquidation, reorganization or other similar proceeding in connection therewith,
\nrelative to such Person or its creditors, as such, or to its Property, or any
\nproceeding for voluntary liquidation, dissolution, or other winding up of such
\nPerson, whether or not involving insolvency or bankruptcy.<\/p>\n
“BORROWER” is defined in the introductory paragraph hereto.<\/p>\n
“BORROWER’S CONCENTRATION ACCOUNT” is defined in Section 8.1.12.<\/p>\n
“BORROWING BASE” means, at the relevant time of reference thereto, as
\ncontemplated and provided by Section 2.3, an amount determined by the Bank by
\nreference to the most recent Borrowing Base Report delivered to the Bank by the
\nBorrower pursuant to and in compliance with Section 6.2.4 or (as the case may
\nbe) Section 8.1.1(c)(iii) hereof, which is equal to the greater of (a) 85% of
\nEligible Trailing Revenues, or (b) 85% of Eligible Projected Revenues.<\/p>\n
“BORROWING BASE REPORT” means a Borrowing Base Report duly executed and
\ndelivered to the Bank by the chief financial, accounting or other senior
\nexecutive Authorized Officer of the Borrower, which Borrowing Base Report shall
\nbe in the form prescribed from time to time by the Bank or otherwise in form and
\nsubstance reasonably satisfactory to the Bank.<\/p>\n
“BUSINESS DAY” means a day on which commercial banks are open for
\nbusiness in Boston, Massachusetts and in San Jose, California.<\/p>\n
“CAPITAL ASSETS” means, with respect to any Person, all equipment,
\nfixed assets and real Property or improvements of such Person, or replacements
\nor substitutions therefor or additions thereto, that, in accordance with GAAP,
\nhave been or should be reflected as additions to Property, plant or equipment on
\nthe balance sheet of such Person or that have a useful life of more than one (1)
\nyear.<\/p>\n
“CAPITAL EXPENDITURES” means, with respect to any Person for any
\nperiod, (a) all expenditures made directly or indirectly by such Person during
\nsuch period for Capital Assets (whether paid in cash or other consideration or
\naccrued as a liability and, including, without limitation, all expenditures for
\nmaintenance and repairs which are required, in accordance with GAAP, to be
\ncapitalized on the books of such Person), and (b) solely to the extent not
\notherwise included in clause (a) of this definition, the aggregate principal
\namount of all Indebtedness (including, without limitation, Capitalized Lease
\nObligations) assumed or incurred during such period in connection with any such
\nexpenditures for Capital Assets.<\/p>\n
“CAPITALIZED LEASE OBLIGATIONS” means, with respect to any Person, all
\nobligations of such Person to pay rent or other amounts under any lease of (or
\nother arrangements conveying the right to use) real or personal Property, or a
\ncombination thereof, which obligations are required to be classified and
\naccounted for as capital leases on a balance sheet of such Person under GAAP,
\nand, for the purposes of this Agreement, the amount of such obligations at any
\n 19
\n -5-<\/p>\n
time shall be the capitalized amount thereof at such time determined in
\naccordance with GAAP.<\/p>\n
“CAPITAL STOCK” means (a) in the case of any corporation, any corporate
\ncapital stock of any class or series, (b) in the case of any association or
\nbusiness entity, any shares, interests, participations, rights or other
\nequivalents (howsoever designated) of corporate capital stock, and (c) in the
\ncase of any partnership or limited liability company, partnership or membership
\ninterests (whether general or limited).<\/p>\n
“CASH EQUIVALENTS” means:<\/p>\n
(a) marketable obligations or other Securities issued or
\n directly, fully and unconditionally guaranteed or insured by the United
\n States government or any agency thereof and, in each case, maturing
\n within one (1) year after the date of acquisition thereof;<\/p>\n
(b) marketable direct obligations or other Securities issued
\n by any State of the United States or any political subdivision of any
\n such State or any public instrumentality thereof maturing within one
\n (1) year after the date of acquisition thereof and, at the time of
\n acquisition, having one of the three (3) highest ratings obtainable
\n from either Standard & Poor’s Ratings Group (“S&P”) or Moody’s
\n Investors Service, Inc. (“MOODY’S”);<\/p>\n
(c) commercial paper maturing less than one (1) year after the
\n date of acquisition thereof, issued by a corporation organized under
\n the laws of any State of the United States or of the District of
\n Columbia and, at the time of acquisition, having one of the three (3)
\n highest ratings obtainable from either S&P or Moody’s;<\/p>\n
(d) certificates of deposit, time deposits, eurodollar time
\n deposits or bankers’ acceptances maturing within one (1) year after the
\n date of acquisition thereof, issued by the Bank or by any other
\n domestic commercial bank that is a member of the Federal Reserve System
\n that has capital and surplus aggregating not less than $100,000,000 and
\n is rated A-1 (or the equivalent) or better by S&P or P-1 (or the
\n equivalent) or better by Moody’s;<\/p>\n
(e) repurchase agreements entered into with the Bank or any
\n other domestic commercial bank meeting the qualifications specified in
\n clause (d), secured by a perfected first-priority Lien on any
\n obligations of the type described in any of clauses (a) through (d),
\n having a fair market value at the time such repurchase agreement is
\n entered into of not less than 100% of the repurchase obligation
\n thereunder of the Bank or other commercial bank; and<\/p>\n
(f) money market funds in which at least 85% of such funds’
\n assets are invested in “CASH EQUIVALENTS” of the kind described in any
\n of clauses (a), (b), (c) or (d).<\/p>\n
“CERCLA” means the Comprehensive Environmental Response, Compensation
\nand Liability Act of 1980, as amended.
\n 20
\n -6-<\/p>\n
“CHARTER SCHOOL” means any public not-for-profit charter school
\nestablished, operated or managed by the Borrower or by any of its Subsidiaries
\npursuant to one or more Management Agreements to which the Borrower or any of
\nits Subsidiaries is a party.<\/p>\n
“CHARTER SCHOOL CAPITAL EXPENDITURES” means, in relation to the
\nBorrower and its Subsidiaries for any period, all Capital Expenditures for such
\nperiod made by the Borrower and its Subsidiaries for the acquisition or
\nimprovement of any Property, plant or equipment or other facilities of any
\nCharter School, all as determined on a consolidated basis in accordance with
\nGAAP.<\/p>\n
“CLOSING DATE” means the date on which the first Credit Extensions are
\nmade or to be made by the Bank to the Borrower hereunder.<\/p>\n
“CLOSING DATE CERTIFICATE” is defined in Section 6.1.6.<\/p>\n
“CLOSING FEE” is defined in Section 3.5.1.<\/p>\n
“CODE” means the Internal Revenue Code of 1986, as amended, reformed or
\notherwise modified from time to time.<\/p>\n
“COLLATERAL” means, collectively, any and all collateral provided by
\nthe Borrower and its Subsidiaries to the Bank from time to time under the
\nCollateral Documents and other Loan Documents.<\/p>\n
“COLLATERAL DOCUMENTS” means, collectively, the Security Agreements,
\nthe Agency Account Agreements and all other Instruments executed and delivered
\nto the Bank pursuant to Section 6.1.2, all Instruments executed and delivered to
\nthe Bank pursuant to Section 3.10 or Section 8.1.9 from time to time after the
\ndate hereof, and all other Instruments that shall from time to time after the
\ndate hereof be identified in writing by the Bank and the Borrower as “COLLATERAL
\nDOCUMENTS” for purposes of this Agreement and the other Loan Documents.<\/p>\n
“COLLECTION LOCKBOX” is defined in Section 6.2.5.<\/p>\n
“COLLECTION PERIOD” means, in relation to each fiscal month of the
\nBorrower and its Subsidiaries ending on or after the date hereof, the period of
\nthree (3) consecutive fiscal months of the Borrower ending on the last day of
\nsuch fiscal month.<\/p>\n
“COMMITMENT” means the Bank’s obligations pursuant to Section 2.1 to
\nmake Loans and other Credit Extensions.<\/p>\n
“COMMITMENT AMOUNT” is defined in Section 2.2.<\/p>\n
“COMMITMENT FEES” is defined in Section 3.5.2.<\/p>\n
“COMMITMENT TERMINATION DATE” means the third Business Day prior to the
\nFinal Maturity Date.<\/p>\n
“COMPLIANCE CERTIFICATE” means a certificate duly executed by an
\nAuthorized Officer of
\n 21
\n -7-<\/p>\n
the Borrower, substantially in the form of Exhibit H attached hereto (with such
\nchanges thereto as may be agreed upon from time to time by the Bank and the
\nBorrower), for purposes of monitoring the compliance of the Borrower and its
\nSubsidiaries with the Loan Documents.<\/p>\n
“CONSOLIDATED CAPITAL EXPENDITURES” means, in relation to any Person
\nand its Subsidiaries for any period, all Capital Expenditures by such Person and
\nits Subsidiaries for such period, all as determined on a consolidated basis in
\naccordance with GAAP.<\/p>\n
“CONTINGENT OBLIGATION” means, in relation to any Person, any direct or
\nindirect liability, contingent or otherwise, of that Person (a) with respect to
\nany Indebtedness, lease, dividend, letter of credit or other obligation of
\nanother Person if the primary purpose or intent thereof by the Person incurring
\nthe Contingent Obligation is to provide assurance to the obligee of such
\nobligation that such obligation will be paid, or that any agreements relating
\nthereto will be complied with, or that the holders of such obligation will be
\nprotected (in whole or in part) against loss in respect thereof, (b) with
\nrespect to any letter of credit issued for the account of that Person or as to
\nwhich that Person is otherwise liable for reimbursement of drawings, or (c)
\nunder Hedge Agreements. Contingent Obligations shall in any event include: (i)
\nany direct or indirect guaranty, endorsement (otherwise than for collection or
\ndeposit in the ordinary course of business), co-making, discounting with
\nrecourse or Sale with recourse by such Person of the obligation of another
\nPerson; and (ii) any liability of such Person for the obligation of another
\nthrough any agreement (contingent or otherwise) to purchase, repurchase or
\notherwise acquire such obligation or any security therefor, or to provide funds
\nfor the payment or discharge of such obligation (whether in the form of loans,
\ncapital contributions, other Investments or otherwise).<\/p>\n
“CONTINUATION\/CONVERSION NOTICE” means a notice, signed by an
\nAuthorized Officer of the Borrower, complying with the requirements of Section
\n4.2 or 4.3, as applicable, or otherwise in form and substance reasonably
\nsatisfactory to the Bank.<\/p>\n
“CONTRACTUAL OBLIGATION” means, in relation to any Person, any
\nagreement or obligation under any Securities issued by such Person or under any
\nInstrument or undertaking to which such Person is a party or by which it or any
\nof its Property is bound.<\/p>\n
“COPYRIGHT SECURITY AGREEMENT” means a Copyright Security Agreement, in
\nor substantially in the form of Exhibit D attached hereto, to be executed and
\ndelivered by the Borrower in favor of the Bank pursuant to the Security
\nAgreement.<\/p>\n
“CORPORATION” means, unless the context otherwise requires, any
\ncorporation, limited liability company, association, joint stock company,
\nbusiness trust or other similar business organization or business enterprise.<\/p>\n
“CREDIT EXTENSION” means (a) the advancing of Loans by the Bank to the
\nBorrower pursuant to Article II and Article III, and (b) the issuance or
\nextension by the Bank of Letters of Credit pursuant to Article V.<\/p>\n
“CREDIT REQUEST” means any Loan Request or Issuance Request.<\/p>\n
“DEFAULT” means any Event of Default or any condition or event which,
\nafter notice or
\n 22
\n -8-<\/p>\n
the lapse of time, or both, would become an Event of Default.<\/p>\n
“DISBURSEMENT” is defined in Section 5.4.<\/p>\n
“DISBURSEMENT DATE” is defined in Section 5.4.<\/p>\n
“DISCLOSURE SCHEDULE” means the Disclosure Schedule attached hereto as
\nthe Second Schedule.<\/p>\n
“DOLLARS” and the sign “$” mean lawful money of the United States.<\/p>\n
“DOMESTIC OFFICE” means, in relation to the Bank, 226 Airport Parkway,
\nSan Jose, California, or such other office of the Bank within the United States
\nas may be designated from time to time by prior written notice from the Bank to
\nthe Borrower, by and through which each of the Loans and other Credit Extensions
\nwill be made by the Bank hereunder.<\/p>\n
“DRAWDOWN DATE” means any date (which must be a Business Day) on which
\nany Loan is made or to be made to the Borrower pursuant to Section 3.1.<\/p>\n
“EFFECTIVE DATE” means the date of this Agreement.<\/p>\n
“ELIGIBLE PROJECTED REVENUES” means, with respect to the Borrower and
\nits Subsidiaries as at the last day of any fiscal month, the aggregate amount of
\nall cash which the Borrower, on the basis of reasonable assumptions made in good
\nfaith by the Borrower, projects will be received in the Borrower’s Concentration
\nAccount as payment on account of Net Revenues Receivables during the Projected
\nCollection Period ending on the last day of the third fiscal month following
\nsuch fiscal month.<\/p>\n
“ELIGIBLE TRAILING REVENUES” means, with respect to the Borrower and
\nits Subsidiaries as at the last day of any fiscal month, the aggregate amount of
\nall cash actually received in the Borrower’s Concentration Account as payment on
\naccount of Net Revenues Receivables during the Collection Period ending on the
\nlast day of such fiscal month. Notwithstanding the foregoing, as at the last day
\nof each fiscal month ending during the period commencing on the Closing Date and
\ncontinuing through December 31, 1999, Eligible Trailing Revenues shall mean the
\naggregate amount of all cash actually received by the Borrower and its
\nSubsidiaries (either directly or through one or more depository banks) as
\npayment on account of Net Revenues Receivables during the Collection Period
\nending on the last day of such fiscal month, all as more fully described in the
\nBorrowing Base Report as at the close of such fiscal month and in the other
\nreports and supporting information delivered by the Borrower to the Bank to
\nconfirm the Borrowing Base calculations as of the last day of such fiscal month<\/p>\n
“ENVIRONMENTAL LAWS” means all Applicable Laws relating to health and
\nsafety matters or protection of the environment or relating to or imposing
\nliability or standards of conduct concerning any hazardous, toxic or dangerous
\nwaste, substance, material or pollutant, in each case, as in effect from time to
\ntime.<\/p>\n
“EQUITY INTERESTS” means Capital Stock and all warrants, options or
\nother rights to purchase or otherwise acquire Capital Stock (but excluding any
\ndebt Securities that are
\n 23
\n -9-<\/p>\n
convertible into, or exchangeable for, Capital Stock).<\/p>\n
“ERISA” means the Employee Retirement Income Security Act of 1974, as
\namended, and any successor statute of similar import, together with the
\nregulations thereunder, in each case, as in effect from time to time.<\/p>\n
“EURODOLLAR LOAN” means any Loan which bears interest at a rate
\ndetermined by reference to the Eurodollar Rate (Reserve Adjusted).<\/p>\n
“EURODOLLAR OFFICE” means, in relation to the Bank, 226 Airport
\nParkway, San Jose, California, or such other office, whether or not outside the
\nUnited States, of the Bank as may be designated from time to time, by written
\nnotice from the Bank to the Borrower, as the office from which the Bank shall be
\nmaking or maintaining Eurodollar Loans hereunder.<\/p>\n
“EURODOLLAR RATE” means, in relation to each Interest Period applicable
\nto any Eurodollar Loan, the rate of interest per annum determined by the Bank to
\nbe the offered rate per annum at which deposits in Dollars appears on Telerate
\nPage 3750 (or any successor page) as of 11:00 a.m., London time two (2) Business
\nDays prior to the beginning of such Interest Period, or in the event such
\noffered rate is not available from the Telerate Page, the rate per annum
\n(rounded upwards, if necessary, to the nearest 1\/16 of 1%) determined by the
\nBank as the annual rate at which the Bank is offered Dollar deposits in
\nimmediately available funds two (2) Business Days prior to the beginning of such
\nInterest Period by prime banks in the interbank eurodollar market as at or about
\n1:00 p.m., San Jose, California time, in each case, for delivery on the first
\nday of such Interest Period, for the number of days comprised therein and in an
\namount substantially equal to the amount of the Eurodollar Loan for such
\nInterest Period.<\/p>\n
“EURODOLLAR RATE MARGIN” means, with respect to the principal amount of
\nany Loans maintained as Eurodollar Loans, four percent (4.0%) per annum.<\/p>\n
“EURODOLLAR RATE (RESERVE ADJUSTED)” means, with respect to any
\nEurodollar Loan for any Interest Period, a rate per annum (rounded upwards, if
\nnecessary, to the nearest 1\/16 of 1%) determined pursuant to the following
\nformula:<\/p>\n
Eurodollar Rate = Eurodollar Rate
\n —————————–
\n (Reserve Adjusted) 1 – Eurodollar Reserve Percentage<\/p>\n
“EURODOLLAR RESERVE PERCENTAGE” means, with respect to any Eurodollar
\nLoan for any Interest Period, a percentage (expressed as a decimal) equal to the
\ndaily average during such Interest Period of the maximum percentages in effect
\non each day of such Interest Period, as prescribed by the F.R.S. Board, for
\ndetermining the maximum reserve requirements applicable to “EUROCURRENCY
\nLIABILITIES” pursuant to Regulation D or any other applicable regulation of the
\nF.R.S. Board that prescribes reserve requirements applicable to “EUROCURRENCY
\nLIABILITIES” as currently defined in Regulation D.<\/p>\n
“EVENT OF DEFAULT” is defined in Section 9.1.<\/p>\n
“EXCLUDED ACCOUNT” is defined in Section 8.1.12(b).
\n 24
\n -10-<\/p>\n
“EXCLUDED EQUIPMENT” means (a) in relation to the Borrower, “Excluded
\nEquipment” of the Borrower as defined in the Security Agreement, and (b) in
\nrelation to any Subsidiary of the Borrower, equipment of such Subsidiary from
\ntime to time located or used, or otherwise intended to be located or used, in or
\nat the location of any of the Schools from time to time operated, managed or
\nadministered by such Subsidiary.<\/p>\n
“FAIR MARKET VALUE” means, with respect to any Property, the price
\nwhich could be negotiated in an arm’s length free market transaction, for cash,
\nbetween a willing seller and a willing and able buyer, neither of whom is under
\nundue pressure or compulsion to complete the transaction.<\/p>\n
“FEDERAL FUNDS RATE” means, for any day, the rate set forth in the
\ndaily statistical release designated as the Composite 3:30 p.m. Quotations for
\nU.S. Government Securities, or any successor publication, published by the
\nFederal Reserve Bank of New York (including any such successor publication, the
\n“COMPOSITE 3:30 P.M. QUOTATIONS”) for such day under the caption “Federal Funds
\nEffective Rate”. If such rate is not published in the Composite 3:30 p.m.
\nQuotations for any Business Day, the rate for such day will be the arithmetic
\nmean of the rates for the last transaction in overnight federal funds arranged
\nprior to 9:00 a.m., New York City time, on such day by each of three brokers of
\nrecognized national standing dealing in federal funds transactions in New York
\nCity, selected by the Bank. The Federal Funds Rate for any day which is not a
\nBusiness Day shall be the rate for the immediately preceding Business Day.<\/p>\n
“FEES” means, collectively, the Closing Fee, the Commitment Fees and
\nthe Letter of Credit Fees payable pursuant to Section 5.3.<\/p>\n
“FINANCIAL ASSET ACCOUNT” means any depository, securities, investment
\nor other similar account maintained by the Borrower or any of its Subsidiaries
\nwith any bank or other financial institution with respect to the funds, Cash
\nEquivalents, securities or other Property from time to time owed by the
\nBorrower.<\/p>\n
“FINANCIAL COVENANT SCHEDULE” means the Financial Covenant Schedule
\nattached hereto as the First Schedule.<\/p>\n
“FINAL MATURITY DATE” means November 30, 2002.<\/p>\n
“F.R.S. BOARD” means the Board of Governors of the Federal Reserve
\nSystem.<\/p>\n
“GAAP” is defined in Section 1.4.<\/p>\n
“GOVERNING DOCUMENTS” means, with respect to any Person, the
\ncertificate of incorporation or registration (including, if applicable,
\ncertificate of change of name), articles of incorporation or association,
\nmemorandum of association, charter, bylaws, partnership agreement, trust
\nagreement, joint venture agreement, limited liability company operating or
\nmembers agreement, joint venture agreement, or any one or more similar
\nagreements, Instruments or documents constituting the organization or formation
\nof such Person.<\/p>\n
“GOVERNMENTAL AUTHORITY” means any nation or government, any state,
\nprovince, city, municipal entity or other political subdivision thereof, and any
\ngovernmental, executive,
\n 25
\n -11-<\/p>\n
legislative, judicial, administrative or regulatory agency, department,
\nauthority, instrumentality, commission, board or similar body, whether federal,
\nstate, provincial, territorial, local or foreign, including, without limitation,
\nany school district or board of education thereof.<\/p>\n
“GROUP” as defined in Section 4.1.<\/p>\n
“HAZARDOUS MATERIAL” means and includes the following: any “hazardous
\nsubstance”, as defined in CERCLA; any “hazardous waste”, as defined in the
\nResource Conservation and Recovery Act, as amended; any petroleum product; or
\nany pollutant or contaminant or hazardous, dangerous or toxic chemical, material
\nor substance within the meaning of any other applicable Environmental Laws.<\/p>\n
“HEDGE AGREEMENTS” means interest rate swap, cap or collar
\narrangements, interest rate future or option contracts, currency swap
\nagreements, currency future or option contracts and other similar arrangements.<\/p>\n
“HISTORICAL FINANCIALS” is defined in Section 7.4.<\/p>\n
“IMPERMISSIBLE QUALIFICATION” means, relative to the opinion or
\ncertification of the Independent Public Accountant as to any financial statement
\nof the Borrower or any of its Subsidiaries, any qualification or exception to
\nsuch opinion or certification:<\/p>\n
(a) which is of a “going concern” or similar nature;<\/p>\n
(b) which relates to the limited scope of examination of
\n matters relevant to such financial statement; or<\/p>\n
(c) which relates to the treatment or classification of any
\n item in such financial statement and which, as a condition to its
\n removal, would require an adjustment to such item the effect of which
\n would be to cause the Borrower to be in default of any of its
\n Obligations under Section 8.2.4.<\/p>\n
“INCUR” means, with respect to any Indebtedness of any Person, to
\ncreate, issue, incur (by conversion, exchange or otherwise), assume, guarantee
\nor otherwise become liable in respect of such Indebtedness or the recording, as
\nrequired pursuant to GAAP or otherwise, of any such Indebtedness on the balance
\nsheet of such Person (and “INCURRENCE”, “INCURRED”, and “INCURRING” shall have
\nmeanings correlative to the foregoing).<\/p>\n
“INDEBTEDNESS” means, in relation to any Person as at any date, without
\nduplication, (a) all indebtedness of such Person for borrowed money, (b) all
\nindebtedness of such Person for the deferred purchase price of Property or
\nservices (other than accounts or trade payables and accrued expenses incurred in
\nthe ordinary course of such Person’s business and not overdue more than 90
\ndays), (c) all indebtedness of such Person evidenced by notes, bonds, debentures
\nor other similar Instruments, (d) all indebtedness created or arising under any
\nconditional sale or other title retention agreement with respect to Property
\nacquired by such Person (even though the rights and remedies of the seller or
\nlender under such agreement in the event of default are limited to repossession
\nor sale of such Property), (e) all Capitalized Lease Obligations of such Person,
\n(f) the face amount of all indebtedness of such Person, contingent of otherwise,
\nas an <\/p>\n
26
\n -12-<\/p>\n
account party under acceptance, letter of credit or similar facilities, (g) all
\nindebtedness then due and owing of such Person to purchase, redeem, retire or
\notherwise acquire for value any Equity Interests of such Person, (h) all
\nContingent Obligations of such Person in respect of indebtedness of the kind
\nreferred to in clauses (a) through (g); (i) all indebtedness of the kind
\nreferred to in clauses (a) through (h) secured by (or for which the holder of
\nsuch indebtedness has an existing right, contingent or otherwise, to be secured
\nby) any Lien on Property (including, without limitation, accounts and contract
\nrights) owned by such Person, whether or not such Person has assumed or become
\nliable for the payment of such indebtedness, and (j) all obligations of such
\nPerson in respect of Hedge Agreements. The amount of any indebtedness under
\nclause (j) shall be the net amount, including any net termination payments that
\nwould be required to be paid to a counterparty on such date if a termination of
\nthe applicable Hedge Agreement were to occur on such date rather than the
\nnotional amount of the applicable Hedge Agreement. Anything in the foregoing
\nsentence of this definition to the contrary notwithstanding, for purposes of
\nthis Agreement and the other Loan Documents, the term “INDEBTEDNESS”, when used
\nin relation to any Person, shall in no event include any indebtedness or
\ncontingent obligations of such Person in respect of any accounts or trade
\npayables, accrued expenses or other indebtedness to trade creditors or employees
\nincurred in the ordinary course of business and not overdue more than 90 days.<\/p>\n
“INDEMNIFIED LIABILITIES” is defined in Section 10.4.<\/p>\n
“INDEMNIFIED PARTY” is defined in Section 10.4.<\/p>\n
“INDEPENDENT PUBLIC ACCOUNTANT” means any one of the so-called
\n“big-four” firms of certified public accountants or any other firm of certified
\npublic accountants of recognized standing selected by the Borrower and
\nreasonably acceptable to the Bank.<\/p>\n
“INSTRUMENT” means any contract, agreement, indenture, mortgage or
\nother document or writing (whether a formal agreement, letter or otherwise)
\nunder which any obligation is evidenced, assumed or undertaken, or any right to
\nany Lien is granted or perfected.<\/p>\n
“INTEREST PERIOD” means, relative to any Eurodollar Loan, the period,
\nselected in accordance with Section 4.4.1, for which such Eurodollar Loan bears
\ninterest at the Eurodollar Rate (Reserve Adjusted).<\/p>\n
“INVESTMENT” means, in relation to any Person:<\/p>\n
(a) any loan, advance or other extension of credit made by
\n such Person to any other Person;<\/p>\n
(b) the creation of any Contingent Obligation of such Person
\n to support any of the Indebtedness of any other Person; or<\/p>\n
(c) any capital contribution by such Person to, or purchase of
\n any Equity Interests or other Securities by such Person in, any other
\n Person, or any other investment evidencing an ownership or similar
\n interest of such Person in any other Person.<\/p>\n
“ISSUANCE REQUEST” means a request and certificate duly executed by the
\nchief financial,
\n 27
\n -13-<\/p>\n
accounting or executive Authorized Officer of the Borrower, in or substantially
\nin the form of Exhibit G (with such changes thereto as may be agreed upon from
\ntime to time by the Bank and the Borrower).<\/p>\n
“L\/C COMMITMENT AMOUNT” means $3,000,000.<\/p>\n
“LANDLORD LIEN WAIVER” means, with respect to any Real Estate Lease or
\n(as the case may be) any warehouse contract to which the Borrower is a party, a
\nLien waiver from the lessor, landlord or (as the case may be) warehouse
\nthereunder in form and substance reasonably satisfactory to the Bank.<\/p>\n
“LETTER OF CREDIT” is defined in Section 5.1.<\/p>\n
“LETTER OF CREDIT OUTSTANDINGS” means, at any time, an amount equal to
\nthe sum of (a) the then aggregate amount which is undrawn and available under
\nall outstanding Letters of Credit; PLUS (b) the then aggregate amount of all
\nunpaid and outstanding Reimbursement Obligations.<\/p>\n
“LIEN” means any mortgage, security interest, pledge, encumbrance, lien
\n(statutory, judgment or otherwise), or other security agreement of any kind or
\nnature whatsoever (including any conditional sale or other title retention
\nagreement, and any financing lease involving substantially the same economic
\neffect as any of the foregoing).<\/p>\n
“LINE OF BUSINESS” means the businesses presently conducted by the
\nBorrower and shall in any event include (a) the businesses of establishing,
\noperating and managing not-for-profit charter and public schools, and (b)
\nbusinesses reasonably related, ancillary or complimentary thereto.<\/p>\n
“LOAN DOCUMENTS” means, collectively, this Agreement, the Note, the
\nCollateral Documents, the Closing Date Certificate, and each other Instrument
\nexecuted and delivered pursuant to or in connection with any thereof.<\/p>\n
“LOAN REQUEST” means a loan request and certificate duly executed and
\ndelivered to the Bank by the chief financial, accounting or executive Authorized
\nOfficer of the Borrower, in or substantially in the form of Exhibit F hereto,
\nwith such changes thereto as may be agreed upon from time to time by the
\nBorrower and the Bank.<\/p>\n
“LOANS” is defined in Section 2.1.<\/p>\n
“MANAGEMENT AGREEMENTS” means, collectively, all management agreements,
\neducational management service contracts and other similar Instruments to which
\nthe Borrower or any of its Subsidiaries shall from time to time be a party and
\npursuant to which the Borrower or any of its Subsidiaries shall establish,
\noperate or manage one or more Schools.<\/p>\n
“MATERIALLY ADVERSE EFFECT” means, in relation to any event, occurrence
\nor development of whatsoever nature (including any adverse determination in any
\nlitigation, arbitration or governmental investigation or proceeding):
\n 28
\n -14-<\/p>\n
(a) any Materially adverse effect on the business, Property,
\n results of operations, condition, financial or otherwise, or prospects
\n of the Borrower and its Subsidiaries, taken as a whole;<\/p>\n
(b) any Materially adverse effect on the ability of the
\n Borrower or any of its Subsidiaries to perform any of its payment or
\n other material Obligations under any Loan Document to which it is a
\n party; or<\/p>\n
(c) a material impairment of the validity or enforceability of
\n any Loan Document or any material impairment of the rights or remedies
\n available to the Bank under any Loan Document.<\/p>\n
“NET PROCEEDS” means, with respect to any Sale of any Investment or
\nother Property or any issue of Equity Interests or other Securities by any
\nPerson, all cash and other Property (including, without limitation, Instruments
\nevidencing or securing Indebtedness and Equity Interests or other Securities)
\npayable to or receivable by such Person from such Sale or issuance, net of (a)
\nall income, sales, use, transfer or other taxes (state, federal or local) solely
\nattributable to such Sale or issuance and reasonably estimated to be payable in
\ncash by such Person for the taxable year in which such Sale or issuance
\noccurred, and (b) all commissions and fees, costs and other expenses incurred in
\nconnection with such Sale or issuance.<\/p>\n
“NET REVENUES RECEIVABLE” means, in relation to the Borrower and its
\nSubsidiaries as at any date, the aggregate amount of all of the cash revenues
\npayable to or otherwise receivable by the Borrower or any of its Subsidiaries
\nfrom any Governmental Authorities or any other Persons pursuant to Management
\nAgreements by which the Borrower and any of its Subsidiaries is then bound, net
\n(in each case) of all (if any) credits, rebates, offsets, holdbacks and other
\nadjustments which will or could reasonably be expected to reduce the liabilities
\nand obligations represented by such revenues receivable, all as determined as at
\nsuch date on a consolidated basis and in accordance with GAAP.<\/p>\n
“NOTE” is defined in Section 3.2, and shall also mean and refer to all
\nother promissory notes accepted from time to time in substitution therefor,
\nreplacement or renewal thereof or refunding thereof.<\/p>\n
“OBLIGATIONS” means, collectively, all of the Indebtedness and other
\nobligations and liabilities existing on the date of this Agreement or arising
\nfrom time to time thereafter, whether direct or indirect, joint or several,
\nactual, absolute or contingent, matured or unmatured, liquidated or
\nunliquidated, secured or unsecured, arising by contract, operation of law or
\notherwise, of the Borrower or any of its Subsidiaries to the Bank (a) in respect
\nof any of the Loans or other Credit Extensions made or to be made to the
\nBorrower by the Bank pursuant to this Agreement, or (b) under or in respect of
\nthis Agreement, the Note or any of the other Loan Documents.<\/p>\n
“PAID (OR PAYMENT) IN FULL” means paid (or payment) in full and in
\ncash.<\/p>\n
“PARTNERSHIP SCHOOL” means any not-for-profit public school (other than
\nany Charter School) managed, operated and administered by the Borrower or by any
\nof its Subsidiaries
\n 29
\n -15-<\/p>\n
pursuant to one or more Management Agreements to which the Borrower or any of
\nits Subsidiaries is a party.<\/p>\n
“PERMITTED DISPOSITION” means:<\/p>\n
(a) any Sale by the Borrower or any of its Subsidiaries of any
\n of its inventory in the ordinary course of its business;<\/p>\n
(b) any Sale by the Borrower or any of its Subsidiaries in the
\n ordinary course of its business of its equipment or other tangible
\n personal Property that is obsolete or no longer useful or necessary to
\n its business;<\/p>\n
(c) any Sale by the Borrower or any of its Subsidiaries in the
\n ordinary course of its business, and in a manner consistent with its
\n customary and usual cash management practices, of its Permitted
\n Investments; and<\/p>\n
(d) the creation or incurrence by the Borrower or any of its
\n Subsidiaries of any Liens expressly permitted by Section 8.2.3.<\/p>\n
“PERMITTED EQUITY INTERESTS” means any Equity Interests of any Person
\non account of or with respect to which such Person has no obligation to (a)
\ndeclare or pay any dividends or other distributions at any time on or prior to
\nDecember 31, 2002, except dividends or other distributions to be paid in
\nPermitted Equity Interests of such Person, (b) make any redemption, repurchase,
\nretirement or acquisition, whether through a Subsidiary of such Person or
\notherwise, at any time on or prior to December 31, 2002, except (in any such
\ncase) with Permitted Equity Interests of such Person, (c) make any return of
\ncapital to the holder thereof at any time on or prior to December 31, 2002,
\nexcept with Permitted Equity Interests of such Person, or (d) make any other
\ndistributions of any kind at any time on or prior to December 31, 2002, except
\ndistributions to be made in Permitted Equity Interests of such Person.<\/p>\n
“PERMITTED INDEBTEDNESS” means any of the following Indebtedness:<\/p>\n
(a) Indebtedness of the Borrower or any of its Subsidiaries in
\n respect of taxes, assessments, levies or other governmental charges,
\n and Indebtedness of any such Person in respect of accounts payable or
\n other Indebtedness to trade creditors incurred in the ordinary course
\n of business or in respect of claims against it for labor, materials or
\n supplies, to the extent (in each case) that the payment thereof shall
\n not at the time be required to be made in accordance with the
\n provisions of Section 8.1.4;<\/p>\n
(b) Indebtedness of the Borrower or any of its Subsidiaries
\n secured by Liens of carriers, warehousemen, mechanics, landlords,
\n materialmen, laborers, suppliers and the like that constitute Permitted
\n Liens under clause (a) or (d) of the definition thereof;<\/p>\n
(c) Indebtedness of the Borrower or any of its Subsidiaries in
\n respect of judgments or awards which have been in force for less than
\n the applicable appeal period so long as (i) (in each case) such Person
\n shall at the time in good faith be prosecuting an appeal or proceedings
\n for review and execution thereof shall have been effectively stayed
\n pending such appeal or review, and (ii) the aggregate principal amount
\n of all such
\n 30
\n -16-<\/p>\n
Indebtedness of the Borrower or any of its Subsidiaries outstanding at
\n any time (determined on a consolidated basis in accordance with GAAP)
\n does not exceed $1,000,000;<\/p>\n
(d) Contractual Obligations of the Borrower or any of its
\n Subsidiaries (other than Contractual Obligations constituting
\n Indebtedness for borrowed money) under Instruments (including operating
\n leases or subleases of real or personal Property, but in any event
\n excluding any Instruments creating, governing or securing Indebtedness
\n for borrowed money) entered into in the ordinary course of business of
\n such Person, and Contingent Obligations of the Borrower or any of its
\n Subsidiaries incurred in the ordinary course of business of such Person
\n in respect of any of such Contractual Obligations;<\/p>\n
(e) Indebtedness under or in respect of Contingent Obligations
\n of the Borrower or any of its Subsidiaries in respect of letters of
\n credit or bankers’ acceptances or surety or other bonds issued in the
\n ordinary course of business of such Person in connection with Liens
\n that constitute Permitted Liens under clause (b) of the definition
\n thereof;<\/p>\n
(f) Indebtedness created or incurred by the Borrower or any of
\n its Subsidiaries from time to time after the date hereof in connection
\n with the acquisition, lease, construction or improvement by such Person
\n from time to time after the date hereof and in the ordinary course of
\n business of Property used or to be used in the ordinary course of
\n business of the Borrower or any of its Subsidiaries; provided, however,
\n that (i) any Liens on such Property securing any such Indebtedness of
\n any such Person shall constitute Permitted Liens under clause (g) of
\n the definition thereof, and (ii) the aggregate amount of all of the
\n Indebtedness of the Borrower and its Subsidiaries (determined on a
\n consolidated basis) described in this clause (f) and in clause (g) of
\n the definition of the term “PERMITTED LIENS” shall not at any time
\n exceed $53,500,000; and<\/p>\n
(g) Indebtedness of the Borrower that (i) is existing on the
\n date of this Agreement, and (ii) is specifically identified in Section
\n 7.7 of the Disclosure Schedule.<\/p>\n
“PERMITTED INVESTMENTS” means any of the following Investments by the
\nBorrower or any of its Subsidiaries:<\/p>\n
(a) Investments that (i) are owned or held by the Borrower or
\n are outstanding or are in effect on the date of this Agreement, and
\n (ii) are identified, unless immaterial and insubstantial, in Section
\n 7.20 of the Disclosure Schedule;<\/p>\n
(b) Investments in cash or in Cash Equivalents;<\/p>\n
(c) Investments in the form of accounts receivable;<\/p>\n
(d) Investments in the form of advances or prepayments to
\n suppliers or other vendors made in the ordinary course of business and
\n in all material respects consistent with the Borrower’s usual and
\n customary business practices;<\/p>\n
(e) Investments in the form of advances to directors,
\n managers, officers or
\n 31
\n -17-<\/p>\n
employees in the ordinary course of business and in all material
\n respects consistent with the Borrower’s usual and customary business
\n practices for travel expenses, entertainment expenses, relocation
\n expenses, drawing accounts or other similar business-related expenses;<\/p>\n
(f) Investments by the Borrower or any of its Subsidiaries if
\n and to the extent made in exchange for Permitted Equity Interests of
\n the Borrower;<\/p>\n
(g) Investments by the Borrower or any of its Subsidiaries
\n made in the ordinary course of its business in Capital Assets;
\n provided, however, that, prior to and after giving effect to each of
\n such Investments, no Default or Event of Default shall be continuing;
\n and<\/p>\n
(h) other Investments by the Borrower or by any of its
\n Subsidiaries made from time to time after the date hereof and not
\n otherwise described in any of clauses (a) through (g) of this
\n definition; provided, however, that the aggregate amount of all of such
\n Investments so made from time to time after the date hereof by the
\n Borrower or by any of its Subsidiaries shall not exceed $500,000, such
\n aggregate amount to be determined on the basis of the cost of each of
\n such Investments and determined before giving any effect to any
\n write-offs or write-downs of any of such Investments or to any
\n decreases or losses (whether partial or complete) in the Fair Market
\n Value thereof.<\/p>\n
“PERMITTED LIENS” means any of the following Liens:<\/p>\n
(a) Liens to secure taxes, assessments, levies or other
\n governmental charges imposed upon the Borrower or any of its
\n Subsidiaries, and Liens to secure claims against the Borrower or any of
\n its Subsidiaries for labor, materials or supplies, to the extent (in
\n each case) that the payment thereof shall not at the time be required
\n to be made in accordance with the provisions of Section 8.l.4;<\/p>\n
(b) deposits or pledges made by the Borrower or any of its
\n Subsidiaries in the ordinary course of its business (i) in connection
\n with, or to secure payment of, (A) workers’ compensation, unemployment
\n insurance or other forms of governmental insurance or benefits, or (B)
\n liability to insurance carriers under insurance or self-insurance
\n arrangements, (ii) to secure the performance of bids, tenders,
\n statutory obligations, leases, contracts (other than contracts relating
\n to borrowed money) or other obligations of like nature, or (iii) to
\n secure surety, appeal, indemnity or performance bonds, in each case, in
\n the ordinary course of the business of such Person, and, in each case,
\n only to the extent that payment thereof shall not at the time be
\n required to be made in accordance with the provisions of Section 8.1.4;<\/p>\n
(c) Liens in respect of judgments or awards against the
\n Borrower or any of its Subsidiaries to the extent that such judgments
\n or awards constitute Permitted Indebtedness under clause (c) of the
\n definition thereof;<\/p>\n
(d) Liens of carriers, warehousemen, mechanics, landlords,
\n materialmen, laborers, suppliers and the like incurred in the ordinary
\n course of the business of the
\n 32
\n -18-<\/p>\n
Borrower or any of its Subsidiaries, in each case, for sums not overdue
\n or being contested in good faith by appropriate proceedings, and for
\n which appropriate reserves with respect thereto have been established
\n and maintained on the consolidated books of the Borrower and its
\n Subsidiaries in accordance with GAAP to the extent required by GAAP;<\/p>\n
(e) easements, rights-of-way, zoning and other similar
\n restrictions and covenants and other similar encumbrances or title
\n defects which, in the aggregate, are not substantial in amount, and
\n which do not in any case materially detract from the value of the
\n Property subject thereto or interfere with the ordinary conduct of the
\n business of the Borrower or any of its Subsidiaries;<\/p>\n
(f) Liens that (i) are in existence on the date of this
\n Agreement, and (ii) secure Indebtedness of the Borrower that
\n constitutes Permitted Indebtedness hereunder;<\/p>\n
(g) Liens created or incurred by the Borrower or any of its
\n Subsidiaries from time to time after the date hereof to secure the
\n payment of the cost of Property acquired, leased, constructed or
\n improved by such Person from time to time after the date hereof and in
\n the ordinary course of business, and which Liens are created or
\n incurred substantially contemporaneously with or within 360 days after
\n the acquisition, lease, construction or improvement of the Property
\n subject thereto (all Liens of the type described in this clause (g)
\n being hereinafter called “PURCHASE MONEY LIENS”); provided, however,
\n that:<\/p>\n
(i) any Property subject to any such Purchase Money
\n Lien created or incurred by any such Person shall be used in
\n the ordinary course of business of the Borrower or any of its
\n Subsidiaries;<\/p>\n
(ii) no such Purchase Money Lien on any such Property
\n shall extend to or cover any other Property of the Person
\n creating such Lien or any Property of any other Person; and<\/p>\n
(iii) the aggregate amount of all of the Indebtedness
\n of the Borrower and its Subsidiaries (determined on a
\n consolidated basis) secured by all of such Purchase Money
\n Liens described in this clause (g) and in clause (f) of the
\n definition of the term “PERMITTED INDEBTEDNESS” shall not at
\n any time exceed $53,500,000; and<\/p>\n
(h) extensions, renewals and replacements of Liens described
\n in clause (g) of this definition, provided that (A) each such
\n extension, renewal or replacement Lien is limited to the Property
\n covered by the Lien so extended, renewed or replaced, and (B) does not
\n secure any Indebtedness other than Indebtedness that constitutes
\n Permitted Indebtedness under clause (f) of the definition thereof.<\/p>\n
“PERMITTED SUBORDINATED DEBT” means any Indebtedness of the Borrower,
\nall of the proceeds of which are used by the Borrower for working capital and
\nother corporate purposes; provided, however, that, without the express prior
\nwritten consent of the Bank in each case: (a) no portion of such Indebtedness
\nshall mature or shall be mandatorily redeemable, pursuant to a
\n 33
\n -19-<\/p>\n
sinking fund obligation or otherwise, or be redeemable at the option of the
\nholder thereof, in whole or in part, on or prior to the Final Maturity Date; (b)
\nthe interest on such Indebtedness shall not be paid in cash prior to maturity
\nand no sinking fund shall be required to be established for the payment of
\ninterest; (c) no part of such Indebtedness shall be secured by Liens on any
\nProperty of the Borrower or of any of its Subsidiaries; (d) no part of such
\nIndebtedness shall be guaranteed by any of the Borrower’s Subsidiaries; (e) all
\nof such Indebtedness shall be subordinated, and made junior in right of payment,
\nto all of the Obligations of the Borrower to the Bank under this Agreement, the
\nNote and the other Loan Documents on terms and conditions reasonably
\nsatisfactory to the Bank, as evidenced by its prior written approval thereof;
\nand (f) all of the other terms and conditions of such Indebtedness shall be
\nreasonably satisfactory to the Bank, as evidenced by its prior written approval
\nthereof.<\/p>\n
“PERSON” means any natural person, corporation, limited liability
\ncompany, partnership, joint venture, association, Governmental Authority or any
\nother entity, whether acting in an individual, fiduciary or other capacity.<\/p>\n
“PRIME RATE” means the greater of (a) the annual rate of interest
\nannounced from time to time by the Bank at its offices in San Jose, California,
\nas its “prime rate”, or (b) one-half of one percent (1\/2%) above the Federal
\nFunds Rate.<\/p>\n
“PRIME RATE LOAN” means any Loan which bears interest at a rate
\ndetermined by reference to the Prime Rate.<\/p>\n
“PRIME RATE MARGIN” means, with respect to the principal amount of any
\nLoans maintained as Prime Rate Loans, one and three-quarters percent (1-3\/4%)
\nper annum.<\/p>\n
“PROJECTED COLLECTION PERIOD” means, in relation to each fiscal month
\nof the Borrower and its Subsidiaries ending on or after the date hereof, the
\nperiod of three (3) consecutive fiscal months of the Borrower ending on the last
\nday of the third fiscal month following such fiscal month.<\/p>\n
“PROJECTIONS” is defined in Section 7.5.<\/p>\n
“PROPERTY” means any interest in any kind of property or asset, whether
\nreal, personal or mixed, and whether tangible or intangible.<\/p>\n
“REAL ESTATE” means all real Property at any time owned or leased (as
\nlessee or sublessee) by the Borrower or any of its Subsidiaries.<\/p>\n
“REAL ESTATE LEASE” means any lease, including any ground lease or
\nspace lease or any rental or occupancy agreement (in each case, whether written
\nor oral, and whether express or implied), that relates to and governs or
\notherwise evidences the terms and conditions for the leasing or use of, or any
\nleasehold or other similar interest in, any Real Estate, and pursuant to which
\nthe Borrower or any of its Subsidiaries shall lease any Real Estate, in each
\ncase, as lessee or sublessee thereof .<\/p>\n
“REAL ESTATE LEASE AGREEMENTS” means, in relation to any Real Estate
\nLease, all Instruments governing or evidencing such Real Estate Lease or
\notherwise executed and delivered
\n 34
\n -20-<\/p>\n
in connection with such Real Estate Lease.<\/p>\n
“REFERENCE PERIOD” means each period of four (4) consecutive fiscal
\nquarters of the Borrower and its Subsidiaries.<\/p>\n
“REIMBURSEMENT OBLIGATIONS” is defined in Section 5.5.<\/p>\n
“RELEASE” means a “release”, as such term is defined in CERCLA.<\/p>\n
“RESTRICTED PAYMENTS” means, in relation to the Borrower and its
\nSubsidiaries:<\/p>\n
(a) any payment, prepayment, distribution, loan, advance,
\n Investment or Sale by the Borrower or any of its Subsidiaries which
\n constitutes an Affiliate Transaction described in clause (a), (b), (c),
\n (d), (e), (f) or (g) of the definition “AFFILIATE TRANSACTION”; and<\/p>\n
(b) any declaration or payment by the Borrower or any of its
\n Subsidiaries of any dividends or other distributions on account of, or
\n any payment or other distribution by the Borrower or any of its
\n Subsidiaries on account of the purchase, repurchase, redemption,
\n retirement or other acquisition for value of, any Equity Interests or
\n other Securities of the Borrower.<\/p>\n
“SALE” means any sale, conveyance, exchange, swap, trade, transfer or
\nother disposition of any Property.<\/p>\n
“SCHEDULES” means, collectively, the Financial Covenant Schedule and
\nthe Disclosure Schedule.<\/p>\n
“SCHOOLS” means, collectively, the Charter Schools and the Partnership
\nSchools.<\/p>\n
“SCHOOL FACILITIES” is defined in Section 8.2.5(b)(i).<\/p>\n
“SECURITIES” means any Capital Stock, Equity Interests, bonds,
\ndebentures, notes or other evidences of Indebtedness, secured or unsecured,
\nconvertible, subordinated or otherwise, or, in general, any Instruments commonly
\nknown as “securities”.<\/p>\n
“SECURITY AGREEMENT” means the Security Agreement, in or substantially
\nin the form of Exhibit B attached hereto, to be executed and delivered by the
\nBorrower on or prior to the Closing Date in favor of the Bank.<\/p>\n
“SECURITY AGREEMENTS” means, collectively, the Security Agreement and
\neach of the Trademark Security Agreements, Copyright Security Agreements and
\nAgency Account Agreements entered into from time to time.<\/p>\n
“SECURITY INSTRUMENT” means any security agreement, chattel mortgage,
\nassignment, financing or similar statement or notice, continuation statement, or
\nother agreement or Instrument, or any amendment or supplement to any thereof,
\nproviding for, evidencing or perfecting any Lien.
\n 35
\n -21-<\/p>\n
“STATED AMOUNT” of each Letter of Credit means the “Stated Amount” as
\ndefined therein or, if not defined therein, the face amount thereof.<\/p>\n
“STATED EXPIRY DATE” is defined in clause (B) of Section 5.1.<\/p>\n
“STUDENT ENROLLMENT” means, at any date, the aggregate number of
\nstudents enrolled in any School for whom the Borrower or any of its Subsidiaries
\nreceives funding or derives revenue from any Governmental Authority or other
\nPerson pursuant to any Management Agreement; provided, however, that, for all
\npurposes of this Agreement, the Student Enrollment of any School as at any date
\non which such School is not in session shall be equal to the Student Enrollment
\nof such School on and as of the last preceding date on which such School was in
\nsession.<\/p>\n
“SUBORDINATED DEBT DOCUMENTS” means, collectively, all agreements or
\nother Instruments governing or evidencing Permitted Subordinated Debt.<\/p>\n
“SUBSIDIARY” means, in relation to any Person (in this paragraph called
\nthe “PARENT”) at any time, any corporation, limited liability company,
\npartnership or other Person (a) of which shares of Capital Stock or other Equity
\nInterests having ordinary voting power to elect a majority of the board of
\ndirectors or other managers of such corporation, limited liability company,
\npartnership or other Person, or representing a majority of the Equity Interests
\nin such corporation, limited liability company, partnership or other Person, are
\nat the time owned, controlled or held, directly or indirectly, by the parent, or
\n(b) the management of which is otherwise controlled, directly or indirectly, by
\nthe parent.<\/p>\n
“TARGET SCHOOL” is defined in Section 8.2.5(b)(i).<\/p>\n
“TAXES” is defined in Section 3.7.<\/p>\n
“TRADEMARK SECURITY AGREEMENT” means a Trademark Security Agreement, in
\nor substantially in the form of Exhibit C attached hereto, to be executed and
\ndelivered by the Borrower in favor of the Bank pursuant to the Security
\nAgreement.<\/p>\n
“TYPE” is defined in Section 4.1.<\/p>\n
“UNUSED COMMITMENT AMOUNT” means, for any period (of one or more days),
\nthe average daily amount for such period by which the Commitment Amount (as
\nreduced by any permanent reduction pursuant to Section 2.2) on each day during
\nsuch period exceeds the sum of (a) the aggregate principal amount of all Loans
\noutstanding on each such day, PLUS (b) the aggregate amount of Letter of Credit
\nOutstandings on each such day.<\/p>\n
“VOTING INTERESTS” means, in relation to any Person at any particular
\ndate, any Capital Stock or other Equity Interests of the class or classes having
\ngeneral voting power under ordinary circumstances to elect the board of
\ndirectors, managers or trustees (or any other Persons performing similar
\nfunctions) of such Person (irrespective of whether or not at the time Capital
\nStock or other Equity Interests of any other classes shall have or might have
\nvoting power by reason of the happening of any contingency).
\n 36
\n -22-<\/p>\n
“YEAR 2000 COMPLIANT” is defined in Section 8.1.11.<\/p>\n
“YEAR 2000 PROBLEM” is defined in Section 7.22.<\/p>\n
SECTION 1.2. USE OF DEFINED TERMS.<\/p>\n
Terms for which meanings are provided in this Agreement shall, unless
\notherwise defined or the context otherwise requires, have such meanings when
\nused in the Note, the Schedules and Exhibits, each of the other Loan Documents,
\nand each notice or other communication delivered from time to time in connection
\nwith this Agreement or any Instrument executed pursuant hereto.<\/p>\n
SECTION 1.3. CROSS-REFERENCES. <\/p>\n
Unless otherwise specified, references in this Agreement or in any of
\nthe other Loan Documents to any Schedule, Exhibit, Article or Section are
\nreferences to such Schedule, Exhibit, Article or Section of this Agreement or
\nsuch other Loan Document, as the case may be, and unless otherwise specified,
\nreferences in any Schedule, Exhibit, Article, Section or definition to any
\nparagraph or clause are references to such paragraph or clause of such Schedule,
\nExhibit, Article, Section or definition.<\/p>\n
SECTION 1.4. ACCOUNTING AND FINANCIAL DETERMINATIONS. <\/p>\n
(a) Where the character or amount of any asset or liability or item of
\nincome or expense is required to be determined, or any accounting computation is
\nrequired to be made, for the purposes of this Agreement and the other Loan
\nDocuments, such determination or calculation shall, to the extent applicable, be
\nmade in accordance with generally accepted accounting principles (“GAAP”).<\/p>\n
(b) Anything in this Agreement or in any of the other Loan Documents
\nexpress or implied to the contrary notwithstanding, until the Borrower acquires,
\ncreates or forms any Subsidiary, any reference (whether in any defined term, in
\nArticle VII, in Article VIII, in connection with any Compliance Certificate or
\notherwise) to the term “CONSOLIDATED” or “CONSOLIDATING” in relation to the
\nBorrower and its Subsidiaries or in relation to any financial statements or
\nother financial information of any kind (whether pro forma or otherwise)
\npertaining to the Borrower and its Subsidiaries shall instead be construed and
\ntreated for all purposes as a reference to the Borrower alone, and any covenant
\nor other requirement in this Agreement, any Compliance Certificate or any other
\nLoan Document that consolidated or consolidating financial statements or other
\nfinancial information of any kind be furnished to the Bank in relation to the
\nBorrower and its Subsidiaries shall instead be construed and treated for all
\npurposes as a covenant and requirement that such financial statements or other
\nfinancial information be furnished to the Bank in relation to the Borrower
\nalone.<\/p>\n
SECTION 1.5. GENERAL PROVISIONS RELATING TO DEFINITIONS.
\n 37
\n -23-<\/p>\n
Terms for which meanings are defined in this Agreement shall apply
\nequally to the singular and plural forms of the terms defined. Whenever the
\ncontext may require, any pronoun shall include the corresponding masculine,
\nfeminine and neuter forms. The term “INCLUDING” means including, without
\nlimiting the generality of any description preceding such term. Each reference
\nherein to any Person shall include a reference to such Person’s successors and
\nassigns. References to any Instrument defined in this Agreement refer to such
\nInstrument as originally executed, or, if subsequently amended or supplemented
\nfrom time to time, as so amended or supplemented and in effect at the relevant
\ntime of reference thereto.<\/p>\n
ARTICLE II<\/p>\n
COMMITMENT<\/p>\n
SECTION 2.1 COMMITMENT. <\/p>\n
Subject to the terms and conditions of this Agreement (including
\nArticle VI) the Bank agrees that it will, from time to time on any Business Day
\noccurring during the period commencing on the Closing Date and continuing to
\n(but not including) the Commitment Termination Date, make loans (“LOANS”) to the
\nBorrower in the principal amount requested by the Borrower pursuant to Section
\n3.1; provided, however, that the Bank shall not be required to make any Loan if,
\nafter giving effect to the making of such Loan, the sum of (a) the aggregate
\nprincipal amount of all Loans then outstanding, PLUS (b) the aggregate amount of
\nLetter of Credit Outstandings, would exceed the lesser of the Commitment Amount
\nand the Borrowing Base then in effect. Subject to the terms and conditions of
\nthis Agreement (including Article VI), the Bank agrees that it will, from time
\nto time on any Business Day occurring during the period commencing on the date
\nhereof and continuing up to (but not including) the Commitment Termination Date,
\nissue or extend Letters of Credit for the account of the Borrower, all in
\naccordance with the provisions of Article V. Subject always to the terms and
\nconditions hereof, the Borrower may from time to time borrow, prepay and
\nreborrow Loans pursuant to the Commitment.<\/p>\n
SECTION 2.2. COMMITMENT AMOUNTS. <\/p>\n
The aggregate principal amount (“Commitment Amount”) of the Commitment
\nof the Bank on any date on or prior to the Commitment Termination Date shall be
\n$10,000,000. The Commitment shall in any event terminate in full and the
\nCommitment Amount shall be reduced to zero on the Commitment Termination Date.
\nThe Commitment Amount from time to time in effect shall, at the option of the
\nBorrower, be subject to permanent reduction in full or in part, automatically
\nand without further action, by the aggregate principal amount of each voluntary
\npermanent reduction of the Commitment Amount made by the Borrower from time to
\ntime after the date hereof; provided, however, that
\n 38
\n -24-<\/p>\n
(a) each such permanent reduction of the Commitment Amount
\n shall require at least three (3) Business Days’ prior notice to the
\n Bank and shall be permanent, and any partial reduction of such amount
\n shall be in a minimum amount of $200,000 or in an integral multiple of
\n $50,000 in excess thereof; and<\/p>\n
(b) no such permanent reduction of the Commitment Amount may
\n be made by the Borrower if, after giving effect to such reduction, the
\n Commitment Amount would be reduced to an amount which is less than the
\n sum of (i) the aggregate principal amount of all Loans then outstanding
\n at such time, PLUS (ii) the aggregate amount of Letter of Credit
\n Outstandings at such time.<\/p>\n
SECTION 2.3. THE BORROWING BASE.<\/p>\n
The Borrowing Base shall be determined monthly by the Bank by reference
\nto the Borrowing Base Report delivered to the Bank pursuant to Section 6.2.4 or
\nSection 8.1.1(c)(iii) (as the case may be), and by reference to such other
\ninformation (written or otherwise) as shall from time to time be available to
\nthe Bank.<\/p>\n
ARTICLE III<\/p>\n
LOANS AND NOTES<\/p>\n
SECTION 3.1. BORROWING PROCEDURES. <\/p>\n
By delivering to the Bank a Loan Request on or before 11:00 a.m., San
\nJose, California time, the Borrower may from time to time request, on not less
\nthan one (1) nor more than five (5) Business Days’ notice for Prime Rate Loans
\n(or not less than four (4) nor more than seven (7) Business Days’ notice for
\nEurodollar Loans), that a Loan be made by the Bank in a minimum aggregate
\nprincipal amount of $200,000, or any integral multiple of $50,000 in excess
\nthereof, on the Drawdown Date (which must be a Business Day) specified in such
\nLoan Request. The proceeds of each Loan shall be made available by the Bank to
\nthe Borrower on the Drawdown Date specified in the Loan Request by wire
\ntransferring such funds in such amount or causing such funds in such amount to
\nbe wire transferred to such account of the Borrower, or to such designees of the
\nBorrower, as shall be designated by the Borrower to the Bank in the Loan Request
\ntherefor. Each request for Loans made pursuant to this Section 3.1 shall
\nconstitute the representation and warranty of the Borrower made to the Bank that
\nall of the applicable conditions contained in Article VI shall, after giving
\neffect to such Loans, have been satisfied by the Borrower, and the making
\navailable of such Loans to the Borrower shall be subject to the satisfaction by
\nthe Borrower of the applicable conditions of Article VI.<\/p>\n
SECTION 3.2. NOTE. <\/p>\n
All Loans made by the Bank shall be evidenced by a single promissory
\nnote of the
\n 39
\n -25-<\/p>\n
Borrower, dated on or prior to the Closing Date, and in or substantially in the
\nform of Exhibit A attached hereto (as amended, endorsed, replaced or otherwise
\nmodified from time to time, the “NOTE”), payable to the order of the Bank in a
\nface amount equal to the Commitment Amount in effect on the Effective Date.<\/p>\n
SECTION 3.3. PRINCIPAL PAYMENTS. <\/p>\n
Repayments and prepayments of principal of the Loans shall be made as
\nfollows in accordance with this Section 3.3:<\/p>\n
SECTION 3.3.1. REPAYMENTS. <\/p>\n
The Borrower absolutely and unconditionally promises to pay in full, on
\nthe Final Maturity Date, all of the principal of the Loans remaining unpaid on
\nthe Final Maturity Date. All of the other Obligations evidenced by the Note
\nshall, if not sooner paid, be in any event due and payable in full on the Final
\nMaturity Date.<\/p>\n
SECTION 3.3.2. LOAN PREPAYMENTS AND REPAYMENTS. <\/p>\n
(a) The Borrower:<\/p>\n
(i) VOLUNTARY PREPAYMENTS. May, from time to time on
\n any Business Day (without premium or penalty, except as may be
\n required by Section 4.8), make a voluntary prepayment, in
\n whole or in part, of the then aggregate outstanding principal
\n amount of the Loans; provided, however, that<\/p>\n
(A) all such voluntary prepayments shall
\n require at least one (1) and no more than five (5)
\n Business Days’ prior notice as to prepayments of
\n Prime Rate Loans, and at least three (3) and no more
\n than five (5) Business Days’ prior notice as to
\n prepayments of Eurodollar Loans, in each case, to the
\n Bank; and<\/p>\n
(B) all such voluntary prepayments in part
\n shall be in a minimum aggregate principal amount of
\n $200,000 or in any integral multiple of $50,000 in
\n excess thereof;<\/p>\n
(ii) CERTAIN MANDATORY REPAYMENTS. Shall, on each
\n Business Day when the sum of (A) the then outstanding
\n principal amount of the Loans, PLUS (B) the aggregate amount
\n of the Letter of Credit Outstandings, exceeds the LESSER of
\n (Y) the Commitment Amount, or (Z) the Borrowing Base then in
\n effect, pay to the Bank principal of the Loans equal to such
\n excess for application to principal of such Loans then
\n outstanding; and<\/p>\n
(iii) ANNUAL CLEAN-UP. Shall, during each calendar
\n year (beginning with calendar year 2000) ensure that, for a
\n period of not less than thirty (30) consecutive calendar days
\n during such calendar year, no principal of the Loans shall
\n remain outstanding, and the Borrower shall pay to the Bank
\n principal of the Loans in such amounts and at such times as
\n shall be necessary to ensure
\n 40
\n -26-<\/p>\n
compliance with the Borrower’s Obligations under this clause
\n (iii).<\/p>\n
(b) Each repayment or prepayment of the Loans made pursuant to
\n clause (a) of this Section 3.3.2 shall be without premium or penalty,
\n except as may be required by Section 4.8. Subject always to the terms
\n and conditions hereof, on or prior to (but not after) the Commitment
\n Termination Date the Borrower shall be entitled to reborrow all or any
\n part of the principal of the Loans which shall be repaid or prepaid.
\n Voluntary prepayments of any Eurodollar Loans pursuant to subclause (i)
\n of Section 3.3.2(a) shall only be made at the end of the Interest
\n Periods applicable thereto, unless all losses and expenses referred to
\n in Section 4.8 (if any) shall be paid by the Borrower to the Bank
\n concurrently with such prepayments.<\/p>\n
(c) Any partial payment of the Obligations of the Borrower
\n under or in respect of the Note shall be applied: (i) first, to the
\n payment of all of the interest due and payable on principal of the Note
\n at the time of such partial payment; (ii) then, to the payment of all
\n (if any) other amounts (except principal) due and payable under the
\n Note at such time; and (iii) finally, to the payment of the principal
\n of the Note due and payable at such time in accordance with paragraph
\n (a) or paragraph (b) of this Section 3.3.2.<\/p>\n
SECTION 3.4. INTEREST PAYMENTS. <\/p>\n
The Borrower shall make payments of interest in accordance with this
\nSection 3.4 as follows:<\/p>\n
SECTION 3.4.1. INTEREST RATES. <\/p>\n
The Borrower hereby absolutely and unconditionally promises to pay
\ninterest on the unpaid principal amount of each Loan for the period commencing
\non the date of such Loan until such Loan is paid in full (excluding the date of
\npayment), as follows:<\/p>\n
(a) on any portion of each Loan that constitutes a Prime Rate
\n Loan, at a rate per annum equal to the sum of the Prime Rate from time
\n to time in effect, PLUS the Prime Rate Margin; and<\/p>\n
(b) on any portion of each Loan that constitutes a Eurodollar
\n Loan, at a rate per annum equal to the Eurodollar Rate (Reserve
\n Adjusted) applicable to each Interest Period for such Eurodollar Loan,
\n PLUS the Eurodollar Rate Margin;<\/p>\n
provided, however, that in no event shall the rate of interest on any Loan
\nexceed the maximum rate permitted by Applicable Law.<\/p>\n
SECTION 3.4.2. INTEREST DURING CONTINUATION OF EVENTS OF DEFAULT; ETC.<\/p>\n
The Borrower shall pay interest,<\/p>\n
(a) during the continuation of any Event of Default, on the
\n unpaid principal amount of each Loan, from the date on which such Event
\n of Default shall have first occurred to the date on which such
\n principal shall be paid to the Bank (whether before or
\n 41
\n -27-<\/p>\n
after judgment), at a rate per annum that is at all times equal to the
\n sum of the Prime Rate from time to time in effect, PLUS the Prime Rate
\n Margin, PLUS four percent (4%); and<\/p>\n
(b) to the maximum extent permitted by Applicable Law, on any
\n overdue interest, fees or other sums (other than principal) owing to
\n the Bank under this Agreement or the other Loan Documents, from and
\n including the third day after such overdue amount shall have first
\n become due and payable to the date on which such amount shall be paid
\n to the Bank (whether before or after judgment), at a rate per annum
\n that is at all times equal to the sum of the Prime Rate from time to
\n time in effect, PLUS the Prime Rate Margin, PLUS four percent (4%).<\/p>\n
SECTION 3.4.3. PAYMENT DATES. <\/p>\n
Interest accrued on each Loan shall be payable, without duplication:<\/p>\n
(a) on the Final Maturity Date;<\/p>\n
(b) with respect to the outstanding principal amount of each
\n Prime Rate Loan, on the first day of each month;<\/p>\n
(c) with respect to the outstanding principal amount of all
\n Eurodollar Loans, on the last day of each applicable Interest Period
\n (and, if such Interest Period shall exceed three (3) months, on the
\n last day of each consecutive three-month period occurring during such
\n Interest Period);<\/p>\n
(d) with respect to that portion of the outstanding principal
\n amount of Loans converted into Prime Rate Loans or Eurodollar Loans on
\n a day when interest would not otherwise have been payable pursuant to
\n clause (b) or (c), the date of such conversion;<\/p>\n
(e) with respect to any portion of any Loans prepaid pursuant
\n to Section 3.3.2, on the date of such prepayment; and<\/p>\n
(f) with respect to any interest accrued pursuant to Section
\n 3.4.2 on principal of the Loans, and, to the maximum extent permitted
\n by Applicable Law, on any overdue interest, fees or other sums, upon
\n demand and, in any event, on the last Business Day of each month.<\/p>\n
SECTION 3.5. FEES. <\/p>\n
SECTION 3.5.1. CLOSING FEE. <\/p>\n
The Bank has previously received from the Borrower the sum of $30,000,
\nrepresenting one-fifth (1\/5th) of the non-refundable closing fee of $150,000
\n(“Closing Fee”) payable by the Borrower hereunder. The Borrower shall pay to the
\nBank on the Effective Date the $120,000 balance of the non-refundable Closing
\nFee.<\/p>\n
SECTION 3.5.2. COMMITMENT FEES.
\n 42
\n -28-<\/p>\n
The Borrower shall pay to the Bank commitment fees (“Commitment Fees”)
\non the unused Commitment Amount from time to time in effect during the period
\ncommencing on the date hereof and ending on the Final Maturity Date. The
\nCommitment Fees shall be payable by the Borrower to the Bank for each calendar
\nmonth ending after the date hereof, and (a) shall be computed on the Unused
\nCommitment Amount in effect on each day during each calendar month at the annual
\nrate equal to 0.50%, and (b) shall be payable in arrears on the first day of
\neach calendar month, beginning December 1, 1999, and on the Commitment
\nTermination Date.<\/p>\n
SECTION 3.6. MAKING OF PAYMENTS; COMPUTATIONS; ETC.<\/p>\n
SECTION 3.6.1. MAKING OF PAYMENTS. <\/p>\n
All payments of principal of and interest on the Note, and all payments
\nof Fees and other sums payable under the Loan Documents, shall be made by the
\nBorrower to the Bank in immediately available funds at its Domestic Office not
\nlater than 1:00 p.m., San Jose, California time, on the date due, and funds
\nreceived after that hour shall be deemed to have been received by the Bank on
\nthe next following Business Day.<\/p>\n
SECTION 3.6.2. SETOFF. <\/p>\n
The Borrower agrees with the Bank that, regardless of the adequacy of
\nany Collateral, the Bank shall continue to have all rights of set-off and
\nbankers’ liens provided by Applicable Law, and, in addition thereto, the
\nBorrower further agrees that, so long as any Event of Default shall be
\ncontinuing, the Bank may, regardless of the adequacy of any Collateral, apply to
\nthe payment of the Obligations any and all balances, credits, deposits, accounts
\nor moneys of the Borrower then or thereafter deposited with or held by the Bank.<\/p>\n
SECTION 3.6.3. DUE DATE EXTENSION. <\/p>\n
If any payment of principal of or interest on the Note, or any payment
\nof any Fees or other sums payable under any of the Loan Documents, falls due on
\na day which is not a Business Day, then such due date shall be extended to the
\nnext following Business Day (unless, in the case of interest due on the
\nprincipal amount of any Eurodollar Loan, such next following Business Day is the
\nfirst day of a calendar month, in which case such due date shall be the
\nimmediately preceding Business Day), and additional interest and Fees shall
\naccrue and be payable for the period of such extension.<\/p>\n
SECTION 3.6.4. NOTICES OF CHANGES IN PRIME RATE; NOTICE OF EURODOLLAR
\nRATES. <\/p>\n
Changes in the rate of interest on any Prime Rate Loans shall take
\neffect simultaneously with each change in the Prime Rate. The Bank shall, upon
\nrequest of the Borrower from time to time, give notice of changes in the Prime
\nRate. The applicable Eurodollar Rate for each Interest Period shall be
\ndetermined by the Bank, and notice thereof shall, upon request of the Borrower
\nfrom time to time, be given by the Bank to the Borrower. Each determination of
\nthe Prime Rate and the applicable Eurodollar Rate by the Bank shall be
\nconclusive and binding upon the parties hereto, in the absence of manifest
\nerror. The Bank shall, upon written request of the Borrower from time to time,
\ndeliver to the Borrower a statement showing in reasonable detail the
\n 43
\n -29-<\/p>\n
computations used by the Bank in determining any applicable Eurodollar Rate
\nhereunder.<\/p>\n
SECTION 3.6.5. COMPUTATIONS. <\/p>\n
Interest and Commitment Fees shall be computed based on the actual
\nnumber of days elapsed and a year of 360 days.<\/p>\n
SECTION 3.6.6. RECORDKEEPING. <\/p>\n
The Bank shall record in its records, or at its option on the grid
\nattached to the Note, the date and amount of each of the Loans made by the Bank
\nand each repayment and prepayment thereof, and in the case of each Eurodollar
\nLoan, the principal amount thereof and the dates on which each Interest Period
\nfor such Loan shall begin and end. The aggregate unpaid principal amount so
\nrecorded shall be rebuttable presumptive evidence of the principal amount owing
\nand unpaid on the Note. The failure to so record any such amount or any error in
\nso recording any such amount shall not, however, limit or otherwise affect the
\nObligations of the Borrower hereunder or under the Note to repay the principal
\namount of the Loans evidenced by the Note together with all interest accruing
\nthereon in accordance with the terms hereof.<\/p>\n
SECTION 3.7. TAXES. <\/p>\n
All payments of principal of and interest on the Note and of all Fees
\nand other sums payable hereunder or under any of the other Loan Documents shall
\nbe made free and clear of and without deduction for any present or future
\nincome, excise, stamp or franchise taxes or other taxes, fees, duties,
\nwithholdings or charges of any nature whatsoever imposed by any Governmental
\nAuthority, but excluding franchise taxes imposed on the Bank and taxes imposed
\non the Bank measured by its net income or receipts (all non-excluded items being
\ncalled “TAXES”). If any withholding or deduction from any such payment to be
\nmade hereunder or under any of the other Loan Documents is required in respect
\nof any Taxes pursuant to any Applicable Law, then the Borrower will pay to the
\nBank such additional amounts as are necessary to ensure that the net amount
\nactually received by the Bank will equal the full amount the Bank would have
\nreceived had no such withholding or deduction been required. If the Borrower
\nfails to pay any Taxes when due to the appropriate Governmental Authority or
\nfails to remit to the Bank when due any payments required by this Section 3.7 or
\nany required receipts or other required documentary evidence, the Borrower shall
\nindemnify the Bank for any incremental Taxes, interest or penalties that may
\nbecome payable by the Bank as a result of any such failure and shall promptly
\npay to the Bank any amounts not paid when due to the Bank as required by this
\nSection 3.7.<\/p>\n
SECTION 3.8. USE OF PROCEEDS. <\/p>\n
The Borrower covenants and agrees with the Bank that the entire
\nproceeds of all Loans made pursuant hereto will be used and applied by the
\nBorrower for working capital and other general corporate purposes not otherwise
\nprohibited by this Agreement.<\/p>\n
SECTION 3.9. NO WITHHOLDING. <\/p>\n
The Borrower absolutely, unconditionally and irrevocably agrees with
\nthe Bank that
\n 44
\n -30-<\/p>\n
each payment of principal, interest, Fees or other sums which shall become due
\nand payable to the Bank under this Agreement, the Note or any of the other Loan
\nDocuments shall be made by the Borrower to the Bank without any set-off or
\ncounterclaim whatsoever and free and clear of and without any deductions or
\nwithholdings of any kind.<\/p>\n
SECTION 3.10. COLLATERAL SECURITY. <\/p>\n
(a) As security for the payment of all of the Obligations, the Borrower
\nshall grant or cause to be granted to the Bank, for the benefit of the Bank, a
\nLien on and security interest in and to all of the following, whether now or
\nhereafter owned, existing, created, arising or acquired: (i) all of the Equity
\nInterests in its Subsidiaries or in any other Person now or hereafter owned or
\notherwise acquired by the Borrower or any of its Subsidiaries, and all income
\nand proceeds thereof; and (ii) all of the tangible or intangible personal
\nProperties of the Borrower and of each of its Subsidiaries (other than Excluded
\nEquipment), and all income, proceeds and products thereof. If, in order to
\nsecure financing provided to the Borrower after the date hereof, the Borrower
\nshall not have granted a first-priority Lien on the Real Estate located at 706
\nW. 42nd Street, Kansas City, Missouri, by February 28, 2000, then the Borrower
\nshall, by March 31, 2000, grant to the Bank a first-priority Lien on such Real
\nEstate pursuant to mortgage or other Instruments reasonably satisfactory in form
\nand substance to the Bank<\/p>\n
(b) Concurrently with the consummation of any acquisition,
\norganization, creation or formation of any new Subsidiary of the Borrower, the
\nBorrower will:<\/p>\n
(i) execute and deliver to the Bank a pledge agreement, in
\n form and substance satisfactory to the Bank, pledging all of the
\n Borrower’s Equity Interests in such new subsidiary; and;<\/p>\n
(ii) (A) deliver or cause to be delivered to the Bank in
\n pledge all of the certificates representing such Equity Interests, and
\n (B) cause such new Subsidiary to execute and deliver to the Bank (1) a
\n guarantee agreement and a security agreement in form and substance
\n satisfactory to the Bank upon the terms of which such Subsidiary shall
\n guarantee the payment and performance in full of all of the
\n Obligations and grant to the Bank a Lien on and security interest in
\n and to all of its tangible or intangible personal Properties (other
\n than Excluded Equipment), and (2) such Uniform Commercial Code
\n financing statements and other Security Instruments as shall be
\n required to perfect the security interests and Liens of the Bank in
\n the collateral being pledged and assigned by such new Subsidiary
\n pursuant to such security agreement; and<\/p>\n
(iii) in each such case, comply with all of the applicable
\n provisions of Section 8.1.9 and provide all such other documentation,
\n including, without limitation, one or more opinions of counsel
\n reasonably satisfactory to the Bank, Governing Documents, and
\n resolutions, as in the reasonable opinion of the Bank shall be
\n necessary or advisable in connection with such acquisition or
\n formation of such new Subsidiary.<\/p>\n
(c) From time to time after the date hereof, upon and in accordance
\nwith the reasonable request of the Bank, and at the cost and expense of the
\nBorrower, promptly create or cause to be created in favor of the Bank, as
\nsecurity for the payment and performance of all of the
\n 45
\n -31-<\/p>\n
Obligations, perfected Liens (subject only to such other Liens as shall be
\nexpressly permitted by this Agreement or by any of the other Loan Documents)
\nwith respect to all (if any) of the personal Property of the Borrower or any of
\nits Subsidiaries (whether tangible or intangible) which is not then subject to
\nperfected Liens in favor of the Bank (subject only to such other Liens as shall
\nbe expressly permitted by this Agreement or by any of the other Loan Documents),
\nall such Liens to be created under Security Instruments in form and substance
\nreasonably satisfactory to the Bank; deliver or cause to be delivered to the
\nBank all such Instruments (including legal opinions, Lien search results and
\nreleases and termination statements) as the Bank shall reasonably request to
\nevidence satisfaction of the Obligations created by this Section 3.10(c); and
\npromptly provide such evidence as the Bank shall from time to time reasonably
\nrequest as to the perfection and priority of such Liens and any other Liens
\ncreated pursuant to any of the Collateral Documents; provided, however, that
\nnothing in this paragraph (c) shall be construed so as to require the Borrower
\nor any of its Subsidiaries to create perfected Liens in and to any Excluded
\nEquipment or any copyrights which have not been registered with the United
\nStates Copyright Office.<\/p>\n
ARTICLE IV<\/p>\n
FUNDING OPTIONS<\/p>\n
SECTION 4.1. PRICING OF EACH LOAN. <\/p>\n
The outstanding principal amount of each Loan made by the Bank may be
\nallocated among different types (as hereinafter defined) of Loans selected by
\nthe Borrower from time to time in accordance with Sections 3.1, 4.2 and 4.3.
\nEach Loan shall be either a Prime Rate Loan or a Eurodollar Loan (each a “TYPE”
\nof Loan), as the Borrower shall specify in the initial notice of borrowing
\ndelivered by the Borrower pursuant to Section 3.1, or in any
\nContinuation\/Conversion Notice delivered by the Borrower pursuant to Section 4.2
\nor 4.3. All Prime Rate Loans, and all Eurodollar Loans having the same Interest
\nPeriod, may sometimes be referred to as a “GROUP” of Loans.<\/p>\n
SECTION 4.2. CONVERSION PROCEDURES. <\/p>\n
Subject to the provisions of Section 4.4, the Borrower may convert all
\nor any part of any outstanding Group of Loans into a Group of Loans of a
\ndifferent type by delivering a Continuation\/Conversion Notice to the Bank not
\nlater than (a) in the case of conversion into a Prime Rate Loan, 1:00 p.m., San
\nJose, California time, on the proposed date of such conversion, and (b) in the
\ncase of a conversion into a Eurodollar Loan, 1:00 p.m., San Jose, California
\ntime, at least four (4) Business Days prior to the proposed date of such
\nconversion. Each such notice shall be irrevocable upon receipt by the Bank and
\nshall specify the date and amount of such conversion, the Group of Loans (or
\nportion thereof) to be so converted, the type of Loan to be converted into and,
\nin the case of a conversion into a Eurodollar Loan, the initial Interest Period
\ntherefor; provided, however, that no Eurodollar Loan shall be converted on any
\nday other than the last day of its Interest Period. Subject to the provisions of
\nthis Section 4.2 and Section 4.4, each Loan shall be so converted on the
\nrequested date of conversion.<\/p>\n
SECTION 4.3. CONTINUATION PROCEDURES.
\n 46
\n -32-<\/p>\n
Subject to the provisions of Section 4.4, the Borrower may continue all
\nor any part of any outstanding Group of Eurodollar Loans for an additional
\nInterest Period commencing upon the conclusion of the Interest Period then in
\neffect for such Group of Eurodollar Loans, by delivering a
\nContinuation\/Conversion Notice to the Bank not later than 1:00 p.m., San Jose,
\nCalifornia time, at least four (4) Business Days prior to the end of such
\nthen-current Interest Period. Each such notice shall be irrevocable upon receipt
\nby the Bank and shall specify the amount to be so continued, the date of such
\ncontinuation and the Interest Period therefor that is to commence upon the
\ntermination of the then-current Interest Period.<\/p>\n
SECTION 4.4. LIMITATIONS ON INTEREST PERIODS AND CONTINUATION AND
\nCONVERSION ELECTIONS. <\/p>\n
The Borrower’s rights under Sections 3.1, 4.2 and 4.3 shall be subject
\nto the following limitations:<\/p>\n
SECTION 4.4.1. INTEREST PERIODS. <\/p>\n
Each Interest Period for a Eurodollar Loan shall commence on the date
\nthe Loan is made, if applicable, or on the date such Loan is converted from a
\nPrime Rate Loan, or, in the case of a continuation, on the expiration of the
\nimmediately preceding Interest Period for such Eurodollar Loan, and shall end on
\nthe date which is one, two, three or six months thereafter, as the Borrower may
\nspecify in the related notice of borrowing pursuant to Section 3.1, or in any
\nContinuation\/Conversion Notice pursuant to Section 4.2 or 4.3; provided,
\nhowever, that: (a) each Interest Period for a Eurodollar Loan that would
\notherwise end on a day which is not a Business Day shall end on the immediately
\nsucceeding Business Day (unless such immediately succeeding Business Day is the
\nfirst Business Day of a calendar month, in which case such Interest Period shall
\nend on the immediately preceding Business Day); (b) the Borrower may not select
\nany Interest Period for any principal of any Loan which would end after the
\nFinal Maturity Date; and (c) absent the timely selection of a new Interest
\nPeriod for a then outstanding Eurodollar Loan, or any part thereof, such
\nEurodollar Loan or such part, as the case may be, shall, immediately upon the
\nexpiration of such Interest Period, automatically and without further action, be
\nconverted into a Prime Rate Loan.<\/p>\n
SECTION 4.4.2. CONDITIONS PRECEDENT. <\/p>\n
No portion of the outstanding principal amount of any Loan may be
\ncontinued as, or converted into, one or more Eurodollar Loans if, on or as of
\nthe requested date of continuation or conversion, as the case may be, any
\nDefault shall have occurred and shall be continuing.<\/p>\n
SECTION 4.4.3. OTHER LIMITATIONS. <\/p>\n
At all times:<\/p>\n
(a) the aggregate principal amount of each Group of Eurodollar
\n Loans shall be in a minimum amount of $500,000 or in an integral
\n multiple of $50,000 in excess thereof; and<\/p>\n
(b) the total number of Eurodollar Loans in effect at any time
\n shall not exceed
\n 47
\n -33-<\/p>\n
six (6). <\/p>\n
SECTION 4.5. INCREASED COSTS.<\/p>\n
(a) If, after the date hereof, the adoption of any Applicable
\n Law, or any change therein or in any existing Applicable Law, or any
\n change in the interpretation or administration thereof by any
\n Governmental Authority charged with the interpretation or
\n administration thereof, or compliance by the Bank (or the Eurodollar
\n Office of the Bank) with any request or directive (whether or not
\n having the force of law) of such Governmental Authority:<\/p>\n
(i) shall subject the Bank (or the Eurodollar Office
\n of the Bank) to any tax, duty or other charge with respect to
\n the Eurodollar Loans, the Note or the Bank’s obligation to
\n make Eurodollar Loans available, or shall change the basis of
\n taxation of payments to the Bank of the principal of or
\n interest on its Eurodollar Loans or any other amounts due
\n under this Agreement in respect of its Eurodollar Loans or its
\n obligation to make Eurodollar Loans available (except for
\n taxes covered by Section 3.7 and except for changes in the
\n rate of tax on the overall net income of the Bank or its
\n Eurodollar Office imposed by the jurisdiction in which the
\n Bank’s Eurodollar Office is located); or<\/p>\n
(ii) shall impose, modify or deem applicable any
\n reserve (including, without limitation, any reserve imposed by
\n the F.R.S. Board), special deposit or similar requirement
\n against assets of, deposits with or for the account of, or
\n credit extended by, the Bank (or the Eurodollar Office of the
\n Bank) (which is not otherwise reflected in the definition of
\n the term “EURODOLLAR RATE (RESERVE ADJUSTED)”; or<\/p>\n
(iii) shall impose on the Bank (or its Eurodollar
\n Office) any other condition affecting its Eurodollar Loans,
\n its Note or the Bank’s obligation to make Eurodollar Loans
\n available;<\/p>\n
and the result of any of the foregoing is to increase the cost to the
\n Bank (or the Eurodollar Office of the Bank) of making or maintaining
\n any Eurodollar Loan, or to reduce the amount of any sum received or
\n receivable by the Bank (or its Eurodollar Office) under this Agreement
\n or under its Note with respect thereto, then upon demand by the Bank,
\n the Borrower shall pay directly to the Bank such additional amount as
\n will compensate the Bank for such increased cost or such reduction.<\/p>\n
(b) If the Bank shall reasonably determine that the adoption
\n of any Applicable Law regarding capital adequacy, or any change therein
\n or in any existing Applicable Law, or any change in the interpretation
\n or administration thereof by any Governmental Authority charged with
\n the interpretation or administration thereof, or compliance by the Bank
\n (or its Eurodollar Office) or any Person controlling the Bank with any
\n request or directive regarding capital adequacy (whether or not having
\n the force of law) of any such Governmental Authority, in each case,
\n after the date hereof, has or would have the effect of reducing the
\n rate of return on the Bank’s or such controlling Person’s capital as a
\n 48
\n -34-<\/p>\n
consequence of the Bank’s obligations hereunder (including, without
\n limitation, the Commitment) to a level below that which the Bank or
\n such controlling Person could have achieved but for such adoption,
\n change or compliance (taking into consideration the Bank’s or such
\n controlling Person’s policies with respect to capital adequacy) by an
\n amount deemed by the Bank or such controlling Person to be material,
\n then the Bank shall promptly after its determination of such occurrence
\n give written notice thereof to the Borrower. The Borrower shall within
\n thirty (30) days after the day on which the Borrower shall receive such
\n notice pay such additional amounts which will, in the Bank’s reasonable
\n determination, compensate the Bank or such controlling person for such
\n reduction. In determining such amount, the Bank may use any reasonable
\n methods of averaging, allocating or attributing such reductions among
\n its customers.<\/p>\n
SECTION 4.6. INTEREST RATE INADEQUATE OR UNFAIR. <\/p>\n
If with respect to any Interest Period:<\/p>\n
(a) the Bank reasonably determines (which determination shall
\n be binding and conclusive on the Borrower) that, by reason of
\n circumstances affecting the interbank eurodollar market, adequate and
\n reasonable means do not exist for ascertaining the applicable
\n Eurodollar Rate; or<\/p>\n
(b) the Bank reasonably determines that the Eurodollar Rate
\n (Reserve Adjusted) will not adequately and fairly reflect the cost to
\n the Bank of maintaining or funding Eurodollar Loans for such Interest
\n Period, or that the maintaining or funding of Eurodollar Loans has
\n become impracticable as a result of an event occurring after the date
\n of this Agreement which in the reasonable opinion of the Bank
\n materially adversely affects Eurodollar Loans;<\/p>\n
then the Bank shall promptly notify the Borrower in writing, and so long as such
\ncircumstances shall continue, (i) the Bank shall thereafter have no obligation
\nto fund or make available Eurodollar Loans, and (ii) on the last day of the
\ncurrent Interest Period for any Eurodollar Loan, such Eurodollar Loan shall,
\nunless then repaid in full, automatically convert to a Prime Rate Loan.<\/p>\n
SECTION 4.7. CHANGES IN LAW RENDERING EURODOLLAR LOANS UNLAWFUL. <\/p>\n
In the event that the adoption of any Applicable Law, or any change
\ntherein or in any existing Applicable Law or any change in the interpretation
\nthereof by any Governmental Authority charged with the interpretation or
\nadministration thereof, in each case after the date hereof, shall make it
\nunlawful for the Bank to maintain or fund Eurodollar Loans, then the Bank shall
\npromptly notify the Borrower in writing, and, so long as such circumstances
\nshall continue, (a) the Bank shall thereafter have no obligation to fund or make
\navailable Eurodollar Loans, and (b) on the last day of the current Interest
\nPeriod for any Eurodollar Loan (or, in any event, on such earlier date as may be
\nrequired by the relevant Applicable Law), such Eurodollar Loan shall, unless
\nthen repaid in full, automatically convert to a Prime Rate Loan.<\/p>\n
SECTION 4.8. FUNDING LOSSES.
\n 49
\n -35-<\/p>\n
The Borrower hereby agrees that, upon demand by the Bank, the Borrower
\nwill indemnify the Bank against any net loss or expense which the Bank shall
\nsustain or incur (including, without limitation, any net loss or expense
\nreasonably incurred by reason of the liquidation or employment of deposits or
\nother funds acquired by the Bank to maintain or fund any Eurodollar Loan), as
\nreasonably determined by the Bank, as a result of (a) any payment, repayment,
\nprepayment or conversion of any Eurodollar Loan of the Bank on a date other than
\nthe last day of an Interest Period for such Eurodollar Loan (including any
\nconversion pursuant to Section 4.7) or (b) any failure of the Borrower to
\nborrow, continue or convert any Loan on a date specified therefor in a notice of
\nborrowing pursuant to Section 3.1 or in any Continuation\/Conversion Notice
\npursuant to Section 4.2 or 4.3.<\/p>\n
SECTION 4.9. DISCRETION OF BANK AS TO MANNER OF FUNDING.<\/p>\n
Notwithstanding any provision of this Agreement to the contrary, the
\nBank shall be entitled to maintain and fund all or any part of any of the Loans
\nin any manner it sees fit, it being understood, however, that for purposes of
\nthis Agreement all determinations hereunder (including determinations of any net
\nloss or expense under Section 4.8) shall be made as if the Bank had actually
\nfunded and maintained each Eurodollar Loan during each Interest Period for such
\nEurodollar Loan through the purchase of a deposit on the first day of such
\nInterest Period having a principal amount equal to the principal amount of such
\nEurodollar Loan, having a maturity corresponding to such Interest Period, and
\nbearing an interest rate equal to the Eurodollar Rate for such Interest Period.<\/p>\n
SECTION 4.10. CONCLUSIVENESS OF STATEMENTS; SURVIVAL OF PROVISIONS.<\/p>\n
Demands made by the Bank to the Borrower under Section 4.5, 4.6, 4.7 or
\n4.8 shall be accompanied by a statement setting forth in reasonable detail the
\nbasis for the calculations of the amounts being claimed. Such statements, and
\nall other determinations and statements of the Bank pursuant to Section 4.5,
\n4.6, 4.7 or 4.8, shall be conclusive absent manifest error. It is understood and
\nagreed that, for purposes of calculating any net losses or expenses of the kind
\ndescribed in Section 4.8, and for purposes of calculating other amounts claimed
\nunder Section 4.5, 4.6, 4.7 or 4.8, the Bank may use reasonable averaging and
\nattribution methods in determining compensation, reimbursement or
\nindemnification under Section 4.5, 4.6, 4.7 or 4.8, and the provisions of such
\nSections shall survive repayment or prepayment of any of the Loans, cancellation
\nof the Note and any termination of this Agreement.<\/p>\n
ARTICLE V<\/p>\n
LETTERS OF CREDIT<\/p>\n
SECTION 5.1. REQUESTS FOR LETTERS OF CREDIT. <\/p>\n
The Borrower may request, by delivering to the Bank an Issuance Request
\non or before 11:00 a.m., San Jose, California time, at any time and from time to
\ntime prior to the Commitment Termination Date and on not less than four (4) nor
\nmore than seven (7) Business Days’ notice, that the Bank issue, for the account
\nof the Borrower, an irrevocable documentary or standby letter of credit in such
\nform as may be requested by the Borrower and approved by the Bank
\n 50
\n -36-<\/p>\n
(each a “LETTER OF CREDIT”), in support of financial obligations of the Borrower
\nincurred in the ordinary course of its business and which are described in such
\nIssuance Request; provided, however, that immediately after giving effect to
\nsuch request (a) the sum of (i) the Letter of Credit Outstandings, PLUS (ii) the
\naggregate principal amount of all Loans outstanding, shall not exceed the LESSER
\nof (A) the Commitment Amount then in effect, and (B) the Borrowing Base then in
\neffect, and (b) the Letter of Credit Outstandings shall not exceed the L\/C
\nCommitment Amount then in effect. Each Letter of Credit shall by its terms:<\/p>\n
(1) be issued in a Stated Amount which is at least $20,000 and
\n an integral multiple of $1,000 in excess thereof;<\/p>\n
(2) be stated to expire on a date (its “STATED EXPIRY DATE”)
\n that is no later than the earlier of one (1) year from its date of
\n issuance or the Commitment Termination Date; and<\/p>\n
(3) on or prior to its Stated Expiry Date<\/p>\n
(a) terminate immediately upon notice to the Bank
\n from the beneficiary thereunder that all obligations covered
\n thereby have been terminated, paid or otherwise satisfied in
\n full,<\/p>\n
(b) reduce in part immediately and to the extent the
\n beneficiary thereunder has notified the Bank that the
\n obligations covered thereby have been paid or otherwise
\n satisfied in part, or<\/p>\n
(c) terminate not more than thirty (30) days after
\n notice to the beneficiary thereunder from the Bank that any
\n Default has occurred and is continuing.<\/p>\n
By delivery to the Bank of an Issuance Request at least four (4) but
\nnot more than seven (7) Business Days prior to the Stated Expiry Date of any
\nLetter of Credit, the Borrower may request the Bank to extend the Stated Expiry
\nDate of such Letter of Credit for an additional period not to exceed the earlier
\nof one (1) year from its date of extension or the Commitment Termination Date.<\/p>\n
SECTION 5.2. ISSUANCES AND EXTENSIONS.<\/p>\n
Subject to the terms and conditions of this Agreement (including
\nArticle VI), the Bank shall issue Letters of Credit and extend the Stated Expiry
\nDates of outstanding Letters of Credit for additional periods of the shorter of
\n(a) one (1) year, or (b) the Commitment Termination Date, in accordance with the
\nIssuance Requests made therefor. The Bank will make available the original of
\neach Letter of Credit which it issues in accordance with the Issuance Request
\ntherefor to the beneficiary thereof and will notify the beneficiary under any
\nLetter of Credit issued by it of any extension of the Stated Expiry Date
\nthereof.<\/p>\n
SECTION 5.3. FEES AND EXPENSES. <\/p>\n
The Borrower agrees to pay to the Bank: (a) for the account of the
\nBank, with respect to
\n 51
\n -37-<\/p>\n
each Letter of Credit, a letter of credit fee of equal to two percent (2.0%) of
\nthe Stated Amount of such Letter of Credit, which fee shall be payable by the
\nBorrower on the date of issuance and on each date of renewal or extension (if
\nany) thereof; and (b) for the account of the Bank, all such other reasonable
\nfees and other administrative expenses customarily charged by the Bank in
\nconnection with the issuance, maintenance, modification (if any) and
\nadministration of each applicable Letter of Credit upon demand by the Bank from
\ntime to time.<\/p>\n
SECTION 5.4. DISBURSEMENTS. <\/p>\n
The Bank will notify the Borrower promptly of the presentment for
\npayment of any Letter of Credit issued by it, together with notice of the date
\n(the “DISBURSEMENT DATE”) such payment shall be made. Subject to the terms and
\nprovisions of such Letter of Credit, the Bank shall make such payment to the
\nbeneficiary (or its designee) of such Letter of Credit (a “DISBURSEMENT”). Prior
\nto 1:00 p.m., San Jose, California time, on the Disbursement Date, the Borrower
\nwill reimburse the Bank for all amounts which the Bank has disbursed under such
\nLetter of Credit issued by it. To the extent the Bank is not reimbursed in full
\nin accordance with the third sentence of this Section 5.4, the Reimbursement
\nObligations in respect of a Letter of Credit shall accrue interest at a
\nfluctuating rate determined by reference to the Prime Rate, PLUS the Prime Rate
\nMargin applicable to the Loans, PLUS four percent (4%), payable on demand. In
\nthe event the Bank is not reimbursed by the Borrower on the Disbursement Date,
\nor if the Bank must for any reason return or disgorge such reimbursement, the
\nBank shall, subject to the satisfaction of all conditions contained in Article
\nVI, fund the Reimbursement Obligations therefor by making Loans which are Prime
\nRate Loans as provided in Section 3.1 (the Borrower being deemed to have given a
\ntimely Loan Request therefor for such amount); provided, however, that, for the
\npurposes of funding the Reimbursement Obligations by making Prime Rate Loans
\npursuant to this sentence of Section 5.4, in order to determine the Letter of
\nCredit Outstandings immediately prior to giving effect to the application of the
\nproceeds of such Loans, such Reimbursement Obligations shall be deemed not to be
\noutstanding at such time.<\/p>\n
SECTION 5.5. REIMBURSEMENT. <\/p>\n
The Borrower’s Obligations under Section 5.4 to reimburse the Bank with
\nrespect to each Disbursement (including interest thereon) in respect of Letters
\nof Credit (the “REIMBURSEMENT OBLIGATIONS”) shall be absolute and unconditional
\nunder any and all circumstances and irrespective of any setoff, counterclaim or
\ndefense to payment which the Borrower may have or have had against the Bank or
\nany beneficiary of any Letter of Credit, including any defense based upon the
\noccurrence of any Default or Event of Default, any draft, demand or certificate
\nor other document presented under a Letter of Credit proving to be forged,
\nfraudulent, invalid or insufficient, the failure of any Disbursement to conform
\nto the terms of the applicable Letter of Credit (if, in the Bank’s good faith
\nopinion in respect of Letters of Credit, such Disbursement is determined to be
\nappropriate), or any nonapplication or misapplication by the beneficiary of the
\nproceeds of such Disbursement, or the legality, validity, form, regularity or
\nenforceability of such Letter of Credit.<\/p>\n
SECTION 5.6. DEEMED DISBURSEMENTS. <\/p>\n
Upon the occurrence and during the continuation of any Default, an
\namount equal to that
\n 52
\n -38-<\/p>\n
portion of Letter of Credit Outstandings attributable to outstanding and undrawn
\nLetters of Credit shall, at the option of the Bank, and without demand upon or
\nnotice to the Borrower, be deemed to have been paid or disbursed by the Bank
\nunder such Letters of Credit (notwithstanding that such amount may not in fact
\nhave been so paid or disbursed), and, upon notification by the Bank to the
\nBorrower of the Borrower’s Obligations under this Section 5.6, the Borrower
\nshall be immediately obligated to reimburse the Bank the amount deemed to have
\nbeen so paid or disbursed by the Bank. Any amounts so received by the Bank from
\nthe Borrower pursuant to this Section 5.6 shall be held as Collateral security
\nfor the repayment of the Borrower’s Obligations in connection with the Letters
\nof Credit issued by the Bank. At any time when such Letters of Credit shall
\nterminate and all obligations of the Bank thereunder are either terminated or
\npaid or reimbursed to the Bank in full, the Obligations of the Borrower under
\nthis Section 5.6 shall be reduced accordingly (subject, however, to
\nreinstatement in the event any payment in respect of such Letters of Credit is
\nrecovered in any manner from the Bank), and the Bank will, if no other
\nObligations are then owed to the Bank hereunder, return to the Borrower the
\nEXCESS, if any, of<\/p>\n
(a) the aggregate amount deposited by the Borrower with the
\n Bank pursuant to this Section 5.6 and not theretofore applied by the
\n Bank to any Reimbursement Obligations owed to the Bank, OVER<\/p>\n
(b) the aggregate amount of all Reimbursement Obligations owed
\n to the Bank pursuant to this Section 5.6, as so adjusted.<\/p>\n
If any other Obligations shall be owed by the Borrower or any of its
\nSubsidiaries to the Bank hereunder, then the Bank shall apply such excess to
\nsuch Obligations until the same shall be paid in full. At such time when all
\nDefaults shall have been cured or waived and all of the Borrower’s Obligations
\nhereunder shall have been paid in full, the Bank shall return to the Borrower
\nall amounts then on deposit with the Bank pursuant to this Section 5.6.<\/p>\n
SECTION 5.7. NATURE OF REIMBURSEMENT OBLIGATIONS. <\/p>\n
The Borrower shall assume all risks of the acts, omissions or misuse of
\nany Letter of Credit by the beneficiary thereof. The Bank (except to the extent
\nof its own gross negligence or willful misconduct) shall not be responsible for:<\/p>\n
(a) the form, validity, sufficiency, accuracy, genuineness or
\n legal effect of any Letter of Credit or any document submitted by any
\n party in connection with the application for and issuance of a Letter
\n of Credit, even if it should in fact prove to be in any or all respects
\n invalid, insufficient, inaccurate, fraudulent or forged;<\/p>\n
(b) the form, validity, sufficiency, accuracy, genuineness or
\n legal effect of any Instrument transferring or assigning or purporting
\n to transfer or assign a Letter of Credit or the rights or benefits
\n thereunder or proceeds thereof, in whole or in part, which may prove to
\n be invalid or ineffective for any reason;<\/p>\n
(c) the failure of the beneficiary to comply fully with
\n conditions required in order to demand payment under a Letter of
\n Credit;
\n 53
\n -39-<\/p>\n
(d) errors, omissions, interruptions or delays in transmission
\n or delivery of any messages, by mail, cable, telegraph, telex or
\n otherwise; or<\/p>\n
(e) any loss or delay in the transmission or otherwise of any
\n document or draft required in order to make a Disbursement under a
\n Letter of Credit or of the proceeds thereof.<\/p>\n
None of the foregoing shall affect, impair or prevent the vesting of any of the
\nrights or powers granted to the Bank hereunder. In furtherance and extension,
\nand not in limitation or derogation of any of the foregoing, any action taken or
\nomitted to be taken by the Bank in good faith shall be binding upon the Borrower
\nand shall not put the Bank under any resulting liability to the Borrower.<\/p>\n
SECTION 5.8. INDEMNITY. <\/p>\n
In addition to amounts payable as elsewhere provided in this Article V,
\nthe Borrower hereby agrees to protect, indemnify, pay and save the Bank harmless
\nfrom and against any and all claims, demands, liabilities, damages, losses,
\ncosts, charges and expenses (including reasonable attorneys’ fees) which the
\nBank may incur or be subject to as a consequence, direct or indirect, of (a) the
\nissuance of any Letter of Credit, other than as a result of the negligence or
\nwillful misconduct of the Bank as determined by a court of competent
\njurisdiction, or (b) the failure of the Bank to honor a drawing under any Letter
\nof Credit issued by it as a result of any act or omission, whether rightful or
\nwrongful, of any present or future de jure or de facto Governmental Authority.<\/p>\n
ARTICLE VI<\/p>\n
CONDITIONS TO CREDIT EXTENSIONS<\/p>\n
SECTION 6.1. CONDITIONS TO MAKING FIRST CREDIT EXTENSIONS. <\/p>\n
The obligations of the Bank to make its first Credit Extensions
\nhereunder on the Closing Date shall be subject to the fulfillment by the
\nBorrower of the following conditions precedent prior to or simultaneously with
\nthe making of the first Credit Extensions on the Closing Date:<\/p>\n
SECTION 6.1.1. EXECUTION AND DELIVERY OF THIS AGREEMENT AND NOTE. <\/p>\n
The Bank shall have received (a) counterparts of this Agreement duly
\nexecuted and delivered by the Borrower and the Bank, and (b) for the account of
\nthe Bank, the Note, dated not later than the Closing Date, duly executed and
\ndelivered to the Bank by the Borrower and containing appropriate insertions and
\nconforming to the requirements of Section 3.2.<\/p>\n
SECTION 6.1.2. SECURITY AGREEMENT; UCC FILINGS; ETC. <\/p>\n
The Bank shall have received counterparts of the Security Agreement,
\ndated not later than the Closing Date and duly executed and delivered by the
\nBorrower, together (in each case) with:<\/p>\n
(a) executed copies of proper financing statements (Form
\n UCC-1), each in
\n 54
\n -40-<\/p>\n
appropriate form for filing, naming the Borrower as the debtor, and the
\n Bank as the secured party, and other similar Instruments or documents,
\n to be filed under the Uniform Commercial Code in the jurisdictions
\n identified in the Security Agreement;<\/p>\n
(b) executed copies of proper financing statements (Form
\n UCC-3) necessary to release all material Liens and other rights of any
\n other Persons in the Collateral described in the Security Agreement
\n previously granted by the Borrower (or an undertaking reasonably
\n satisfactory to the Bank by the secured party under any such security
\n agreement to execute and deliver all financing statements (Form UCC-3)
\n reasonably required by the Bank to release all such Liens), except for
\n any Liens that constitute Permitted Liens or that are otherwise
\n expressly permitted by this Agreement or any of the other Loan
\n Documents; and<\/p>\n
(c) copies of such search reports, dated a date reasonably
\n near (but prior to) the Closing Date, as shall have been previously
\n requested by special counsel for the Bank, listing effective financing
\n statements which name the Borrower (under its present name or any
\n previous name) as debtor and which are filed in jurisdictions
\n (specified by special counsel for the Bank) in which certain of the
\n filings are to be made pursuant to clause (a), together with copies of
\n such financing statements.<\/p>\n
Any other action, including the taking of possession of specific Collateral by
\nthe Bank, reasonably required by the Bank to create in favor of the Bank
\nperfected first-priority Liens (subject to Permitted Liens and other Liens
\notherwise expressly permitted by this Agreement or any of the other Loan
\nDocuments) in the Collateral described in the Security Instruments referred to
\nin this Section 6.1.2 shall have been properly taken by or on behalf of the
\nBorrower.<\/p>\n
SECTION 6.1.3. OTHER LOAN DOCUMENTS AND ANCILLARY DOCUMENTS. <\/p>\n
(a) Each of the other Loan Documents required by the terms hereof to be
\nexecuted and delivered on or prior to the Closing Date shall have been duly and
\nproperly authorized, executed and delivered by the respective party or parties
\nthereto and shall be in full force and effect.<\/p>\n
(b) The Bank shall have received counterparts of each of such other
\nLoan Documents and true and complete copies of each of the Ancillary Documents.
\nEach Loan Document shall, where applicable, be substantially in the form of an
\nExhibit attached hereto, and all other Loan Documents and all of such Ancillary
\nDocuments shall be in form and substance reasonably satisfactory to the Bank.
\nAll exhibits, schedules or other attachments to any of the Collateral Documents
\nshall be in form and substance reasonably satisfactory to the Bank.<\/p>\n
SECTION 6.1.4. CERTIFICATES OF INSURANCE. <\/p>\n
The Bank shall have received a certificate of insurance from an
\nindependent insurance broker, dated as of a date reasonably near (but not after)
\nthe Closing Date, identifying insurers, types of insurance, insurance limits and
\npolicy terms, and otherwise describing the insurance obtained in accordance with
\nthe provisions of the Security Agreement, including noting that the Bank has
\nbeen named as additional insured and loss payee on such insurance.
\n 55
\n -41-<\/p>\n
SECTION 6.1.5. [INTENTIONALLY OMITTED.]<\/p>\n
SECTION 6.1.6. CLOSING DATE CERTIFICATE. <\/p>\n
The Bank shall have received a duly executed and completed certificate,
\ndated as of the Closing Date, in or substantially in the form of Exhibit I (a
\n“CLOSING DATE CERTIFICATE”), duly executed and delivered by an Authorized
\nOfficer of the Borrower.<\/p>\n
SECTION 6.1.7. RESOLUTIONS; ETC. <\/p>\n
The Bank shall have received from the Borrower, a certificate, dated
\nnot later than the Effective Date, of its Secretary or any Assistant Secretary
\nas to:<\/p>\n
(a) resolutions of its Board of Directors then in full force
\n and effect authorizing the execution, delivery and performance of, in
\n each case, to the extent the Borrower is a party thereto, this
\n Agreement and each of the other Loan Documents;<\/p>\n
(b) the incumbency and signatures of the officers of the
\n Borrower (the “AUTHORIZED OFFICERS”) authorized to act with respect to
\n (in each case, to the extent the Borrower is a party thereto) this
\n Agreement and each of the other Loan Documents (upon which certificate
\n the Bank may conclusively rely until the Bank shall have received a
\n further certificate of the Borrower canceling or amending such prior
\n certificate, which further certificate shall be reasonably satisfactory
\n to the Bank); and<\/p>\n
(c) the Fifth Amended and Restated Certificate of
\n Incorporation of the Borrower and the By-laws of the Borrower, each as
\n amended and as in effect on and as of the date of such certificate.<\/p>\n
SECTION 6.1.8. CERTIFICATES OF GOOD STANDING. <\/p>\n
The Bank shall have received a certificate signed by the Secretary of
\nState of the State of Delaware, dated a date reasonably near (but not after) the
\nClosing Date, stating that the Borrower is a corporation duly organized, validly
\nexisting and in good standing under the laws of such State. The Bank shall have
\nalso received, from the Secretary of State of each State (other than the State
\nof Ohio and the District of Columbia) in which the nature of the Borrower’s
\nbusiness makes qualification to do business as a foreign corporation necessary
\nor appropriate, a certificate signed by such Secretary of State, dated a date
\nreasonably near (but not after) the Closing Date, stating that the Borrower is
\nduly qualified to do business and is in good standing as a foreign corporation
\nin such State.<\/p>\n
SECTION 6.1.9. COMPLIANCE CERTIFICATE. <\/p>\n
The Bank shall have received a duly executed and completed Compliance
\nCertificate, dated as of the Closing Date, in or substantially in the form of
\nExhibit H, duly executed by an Authorized Officer of the Borrower.
\n 56
\n -42-<\/p>\n
SECTION 6.1.10. APPROVALS. <\/p>\n
The Bank shall have received evidence that all Approvals necessary in
\nconnection with the credit facilities contemplated hereby shall have been
\nobtained and shall be in full force and effect.<\/p>\n
SECTION 6.1.11. ENVIRONMENTAL COMPLIANCE. <\/p>\n
The Borrower shall have demonstrated to the Bank’s reasonable
\nsatisfaction that on the Closing Date all representations and warranties set
\nforth in Section 7.18 hereof are accurate, true and complete in all material
\nrespects.<\/p>\n
SECTION 6.1.12. OPINIONS OF COUNSEL. <\/p>\n
The Bank shall have received an opinion, dated not later than Closing
\nDate, addressed to the Bank from counsel to the Borrower, in or substantially in
\nthe form of Exhibit J.<\/p>\n
SECTION 6.1.13. FINANCIAL STATEMENTS. <\/p>\n
The Borrower shall have furnished to the Bank the Historical Financials
\nand the Projections.<\/p>\n
SECTION 6.1.14. NO MATERIALLY ADVERSE EFFECT. <\/p>\n
No events or developments shall have occurred since June 30, 1999
\nwhich, individually or in the aggregate, have had or could reasonably be
\nexpected to have any Materially Adverse Effect.<\/p>\n
SECTION 6.1.15. FEES AND EXPENSES. <\/p>\n
The Bank shall have received from the Borrower payment in full of all
\nof the Fees required to be paid to the Bank on or prior to the Closing Date in
\naccordance with Section 3.5, and the Bank, or (as the case may be) its special
\ncounsel, shall have received from the Borrower payment in full of the Bank’s
\nreasonable out-of-pocket costs and expenses (including reasonable counsel fees
\nand disbursements payable in accordance with Section 10.3 for which invoices
\nshall have been submitted to the Borrower on or prior to the Closing Date).<\/p>\n
SECTION 6.1.16. SATISFACTORY LEGAL FORM; ETC. <\/p>\n
All documents executed and delivered or submitted pursuant hereto by or
\non behalf of the Borrower shall be reasonably satisfactory in form and substance
\nto the Bank and its special counsel; the Bank and its special counsel shall have
\nreceived all such information, and such counterpart originals or such certified
\nor other copies of such materials, as the Bank or its special counsel may
\nreasonably request; and all legal matters incident to the transactions
\ncontemplated by this Agreement and the other Loan Documents shall be reasonably
\nsatisfactory to special counsel to the Bank.<\/p>\n
SECTION 6.2. ALL CREDIT EXTENSIONS.
\n 57
\n -43-<\/p>\n
The obligations of the Bank to make Credit Extensions hereunder
\n(including its first Credit Extensions to be made on the Closing Date) shall
\nalso be subject to the satisfaction by the Borrower of each of the following
\nconditions precedent set forth in this Section 6.2:<\/p>\n
SECTION 6.2.1. COMPLIANCE WITH REPRESENTATIONS; ABSENCE OF LITIGATION;
\nNO DEFAULT; ETC. <\/p>\n
The representations and warranties of the Borrower set forth in Article
\nVII, in the Collateral Documents and in the other Loan Documents shall have been
\ntrue and correct in all material respects as of the date made; and, both
\nimmediately before and immediately after giving effect to each of such Credit
\nExtensions:<\/p>\n
(a) such representations and warranties shall be true and
\n correct in all material respects with the same full force and effect as
\n if then made (except for any such representation or warranty that
\n relates solely to a prior date);<\/p>\n
(b) (i) no litigation, arbitration or governmental
\n investigation or proceeding shall be pending or, to the best
\n knowledge of the Borrower (after due inquiry), threatened
\n against the Borrower or any of its Subsidiaries or affecting
\n the business, Property, results of operations, condition
\n (financial or otherwise) or prospects of any thereof which was
\n not disclosed by the Borrower to the Bank in Section 7.8 of
\n the Disclosure Schedule, except to the extent such litigation,
\n arbitration or governmental investigation or proceeding does
\n not have and could not reasonably be expected to have any
\n Materially Adverse Effect; and<\/p>\n
(ii) no development shall have occurred in any
\n litigation, arbitration or governmental investigation or
\n proceeding so disclosed, which, in any event, has had and
\n continues to have, or (as the case may be) could reasonably be
\n expected to have, any Materially Adverse Effect or relates to
\n the validity or enforceability of this Agreement, the Note or
\n any of the other Loan Documents or of any Obligations existing
\n under or, if such Credit Extension is made, would be existing
\n under any thereof; and<\/p>\n
(c) no Default shall have occurred and then be continuing and
\n no Change of Control shall have occurred.<\/p>\n
SECTION 6.2.2. CREDIT REQUEST. <\/p>\n
The Bank shall have received a Credit Request for each Credit
\nExtension. The delivery of such Credit Request shall constitute a representation
\nand warranty by the Borrower that on and as of the requested date of such Credit
\nExtension, and before and after giving effect to such Credit Extension, all
\nrepresentations and warranties required by Section 6.2.1 are true and correct in
\nall material respects.<\/p>\n
SECTION 6.2.3. LEGALITY OF TRANSACTIONS. <\/p>\n
It shall not be unlawful (a) for the Bank to perform any of its
\nobligations under any of the Loan Documents, or (b) for the Borrower to perform
\nany of its Obligations under any of the Loan <\/p>\n
58
\n -44-<\/p>\n
Documents.<\/p>\n
SECTION 6.2.4. BORROWING REPORT. <\/p>\n
In the case of each request by the Borrower for any Credit Extension,
\nthe Bank shall have received from the Borrower, if the Bank shall have so
\nrequested, such written and other information and reports relating to the
\nBorrowing Base then in effect, and such certificates of Authorized Officers of
\nthe Borrower relating to the Borrowing Base then in effect, as the Bank shall
\nhave requested in order to calculate and confirm the Borrowing Base as of the
\ndate of such Credit Extension.<\/p>\n
SECTION 6.2.5. BANKING ARRANGEMENTS. <\/p>\n
For purposes of each Credit Extension to be made after December 14,
\n1999, the Borrower shall have established by December 15, 1999 lockbox
\narrangements in form and substance satisfactory to the Bank (the “COLLECTION
\nLOCKBOX”) and shall have established with the Bank by December 15, 1999 all
\nprimary banking and transaction accounts (including the Borrower’s Concentration
\nAccount), all upon terms and conditions reasonably satisfactory to the Bank and
\nthe Borrower.<\/p>\n
SECTION 6.3. CONDITIONS TO EFFECTIVENESS OF THIS AGREEMENT. <\/p>\n
This Agreement shall become and be effective on and as of and from and
\nafter the Effective Date; provided, however, that each of the following
\nconditions precedent shall first be satisfied:<\/p>\n
(a) the Bank shall have received counterparts of this Agreement duly
\nexecuted and delivered by the Borrower and the Bank;<\/p>\n
(b) the Bank shall have received from the Borrower the certificate
\nreferred to and described in Section 6.1.7; and<\/p>\n
(c) the Bank shall have received from the Borrower payment in full of
\nall of the Fees required to be paid to the Bank on the Effective Date in
\naccordance with Section 3.5.1, and the Bank, or (as the case may be) its special
\ncounsel, shall have received from the Borrower payment in full of the Bank’s
\nreasonable out-of-pocket costs and expenses (including reasonable counsel fees
\nand disbursements payable in accordance with Section 10.3 for which invoices
\nshall have been submitted to the Borrower on or prior to the Effective Date).<\/p>\n
ARTICLE VII<\/p>\n
WARRANTIES; ETC.<\/p>\n
In order to induce the Bank to enter into this Agreement, and in order
\nto induce the Bank to make Credit Extensions hereunder, the Borrower represents
\nand warrants to the Bank as set forth in this Article VII as follows:<\/p>\n
SECTION 7.1. ORGANIZATION; ETC.
\n 59
\n -45-<\/p>\n
The Borrower is an organization duly organized, validly existing and in
\ngood standing under the laws of the jurisdiction of its organization, is duly
\nqualified to do business and is in good standing as a foreign organization in
\neach jurisdiction where the nature of its business makes such qualification
\nnecessary or appropriate and where the failure to so qualify has had or could
\nreasonably be expected to have a Materially Adverse Effect, and has full power
\nand authority and holds all requisite governmental licenses, permits and other
\nApprovals to own or hold under lease its material Properties and to conduct its
\nbusiness substantially as currently conducted by it, and to execute, deliver and
\nperform the Loan Documents executed or to be executed by it.<\/p>\n
SECTION 7.2. POWER, AUTHORITY. <\/p>\n
The Borrower has taken all necessary organizational action to authorize
\nthe execution, delivery and performance by it of the Loan Documents executed or
\nto be executed by it. The execution, delivery and performance by the Borrower of
\neach of the Loan Documents to which the Borrower is or is to become a party do
\nnot and will not (except for Approvals which have been already given or
\nobtained) require any Approvals, will not result in any violation of, or
\nconstitute any default under, (a) any provisions of any Governing Documents of
\nthe Borrower or any other Ancillary Documents, (b) any other Contractual
\nObligations of the Borrower, or (c) any Applicable Laws, and do not and will not
\nresult in or require the creation or imposition of any Liens on any of the
\nProperty of the Borrower pursuant to the provisions of any Instruments binding
\nupon or applicable to the Borrower or any of its Property.<\/p>\n
SECTION 7.3. VALIDITY; ETC. <\/p>\n
This Agreement has been duly executed and delivered by the Borrower and
\nconstitutes the legal, valid, and binding Obligation of the Borrower,
\nenforceable in accordance with its terms. Each of the other Loan Documents,
\nincluding, without limitation, the Note, to which the Borrower is or is to
\nbecome a party has been, or, upon execution and delivery thereof will be, duly
\nexecuted and delivered by the Borrower, and does or will constitute the legal,
\nvalid and binding obligation of the Borrower, enforceable in accordance with its
\nterms. The enforceability of this Agreement and the other Loan Documents against
\nthe Borrower shall be subject to bankruptcy, insolvency, reorganization,
\nmoratorium or other similar laws at the time in effect affecting the
\nenforceability of the rights of creditors generally and to general equitable
\nprinciples.<\/p>\n
SECTION 7.4. FINANCIAL INFORMATION. <\/p>\n
All balance sheets, all statements of operations and of cash flows, and
\nall other financial statements which have been furnished by the Borrower to the
\nBank for the purposes of or in connection with this Agreement, including the
\naudited consolidated balance sheet at June 30, 1999, and the related audited
\nconsolidated statements of operations, of stockholders’ equity and of cash
\nflows, for the fiscal year then ended, of the Borrower accompanied by the notes
\nthereto and the reports thereon of the Independent Public Accountant, and the
\nrelated letters to management for the fiscal year then ended (such financial
\nstatements being herein referred to, collectively, as the “HISTORICAL
\nFINANCIALS”), have been prepared in accordance with GAAP consistently (except as
\notherwise described therein and in Section 7.4 of the Disclosure Schedule)
\napplied throughout the periods involved and present fairly the financial
\ncondition of
\n 60
\n -46-<\/p>\n
the Borrower as at the dates thereof and the results of the Borrower’s
\noperations for the periods then ended.<\/p>\n
SECTION 7.5. PROJECTIONS. <\/p>\n
The projected balance sheets and projected statements of income and of
\ncash flows of the Borrower for each of the fiscal years of the Borrower from
\nfiscal year 1999 through fiscal year 2005, all of which have been delivered to
\nthe Bank prior to the date of this Agreement (collectively, the “PROJECTIONS”),
\nhave been prepared on the basis of the assumptions accompanying them and
\nreflect, as of the date of this Agreement, the good faith estimates made on a
\nreasonable basis by the Borrower of the financial condition and the performance
\nof the Borrower for the periods covered thereby based on such assumptions.<\/p>\n
SECTION 7.6. MATERIALLY ADVERSE EFFECT. <\/p>\n
(a) For purposes of the Credit Extensions to be made on the Closing
\nDate, no events or developments have occurred since June 30, 1999 which,
\nindividually or in the aggregate, have had or could reasonably be expected to
\nhave any Materially Adverse Effect.<\/p>\n
(b) For purposes of each Credit Extension requested to be made after
\nthe Closing Date, no events or developments have occurred since the Closing Date
\nwhich, individually or in the aggregate, have had or could reasonably be
\nexpected to have any Materially Adverse Effect.<\/p>\n
SECTION 7.7. EXISTING INDEBTEDNESS; ABSENCE OF DEFAULTS. <\/p>\n
The Indebtedness of the Borrower in existence on the Closing Date is
\nidentified in Section 7.7 of the Disclosure Schedule. With respect to each item
\nof Indebtedness identified in Section 7.7 of the Disclosure Schedule, the
\nBorrower has delivered or otherwise made available to the Bank a true and
\ncomplete copy of each Instrument evidencing such Indebtedness or pursuant to
\nwhich such Indebtedness was issued or secured (including each amendment,
\nconsent, waiver or other Instrument executed and\/or delivered in respect
\nthereof), as the same is in effect on or as of the Closing Date. Except as
\notherwise disclosed in Section 7.7 of the Disclosure Schedule, the Borrower is
\nnot in default in the payment of any Indebtedness, which payments, in the
\naggregate, exceed $100,000, or in default or breach, in any material respect, in
\nthe performance of any other material obligation under any Instrument evidencing
\nany Indebtedness (in an aggregate amount exceeding $1,000,000) or pursuant to
\nwhich such Indebtedness (in an aggregate amount exceeding $1,000,000) was issued
\nor secured.<\/p>\n
SECTION 7.8. LITIGATION; ANCILLARY DOCUMENTS; ETC. <\/p>\n
(a) Except as to matters identified in Section 7.8 of the Disclosure
\nSchedule, there is no pending or, to the best knowledge of the Borrower,
\nthreatened litigation, arbitration or governmental investigation or proceeding
\nagainst the Borrower or any of its Subsidiaries or to which any of the
\nProperties of any thereof is subject which:<\/p>\n
(i) has had and continues to have, or (as the case may be)
\n could reasonably be expected to have, any Materially Adverse Effect;
\n 61
\n -47-<\/p>\n
(ii) relates to this Agreement, any of the other Loan
\n Documents or any of the Ancillary Documents; or<\/p>\n
(iii) seeks to enjoin or otherwise prevent the consummation
\n of, or to recover any damages or obtain relief as a result of, any of
\n the transactions contemplated by or in connection with this Agreement,
\n any of the other Loan Documents or any of the Ancillary Documents.<\/p>\n
None of such pending or threatened proceedings has had and continues to have, or
\ncould reasonably be expected to have, any Materially Adverse Effect.<\/p>\n
(b) Each of the Ancillary Documents to which the Borrower is a party or
\nby which the Borrower is bound on or as of the date hereof is identified in
\nSection 7.8 of the Disclosure Schedule.<\/p>\n
(c) Each of the Ancillary Documents is in full force and effect. No
\nmaterial default on the part of any Person bound by any Ancillary Document, and
\nno material breach by any such Person in the payment, performance or observance
\nof any of its material obligations thereunder, is continuing. No Person bound by
\nany of the Ancillary Documents has exercised or attempted to exercise any right
\nof termination, cancellation or rescission thereunder; and no event or condition
\nis continuing which permits any Person bound by any of the Ancillary Documents
\nto exercise any right of termination, cancellation or rescission thereunder.<\/p>\n
SECTION 7.9. REGULATIONS U AND X. <\/p>\n
The Borrower is not engaged principally, or as one of its important
\nactivities, in the business of extending credit for the purpose of purchasing or
\ncarrying margin stock. None of the proceeds of any of the Credit Extensions will
\nbe used for the purpose of, or be made available by the Borrower in any manner
\nto any other Person to enable or assist such Person in, directly or indirectly,
\npurchasing or carrying margin stock in violation of F.R.S. Board Regulation U or
\nX. Terms for which meanings are provided in F.R.S. Board Regulation U or X or
\nany regulations substituted therefor, as from time to time in effect, are used
\nin this Section 7.9 with such meanings.<\/p>\n
SECTION 7.10. GOVERNMENT REGULATION. <\/p>\n
The Borrower is not an “investment company” or a “company controlled by
\nan investment company” within the meaning of the Investment Company Act of 1940,
\nas amended, or a “holding company”, or a “subsidiary company” of a “holding
\ncompany”, or an “affiliate” of a “holding company” or of a “subsidiary company”
\nof a “holding company”, within the meaning of the Public Utility Holding Company
\nAct of 1935, as amended.<\/p>\n
SECTION 7.11. TAXES. <\/p>\n
Except as otherwise disclosed in Section 7.11 of the Disclosure
\nSchedule, each of the Borrower and its Subsidiaries has filed all material tax
\nreturns and material reports required by Applicable Law to have been filed by it
\nand has paid all taxes and governmental charges thereby shown to be owing,
\nexcept any such taxes or charges which are being contested in good faith by
\n 62
\n -48-<\/p>\n
appropriate proceedings and for which adequate reserves in accordance with GAAP
\nshall have been set aside on its books. Except as otherwise disclosed in Section
\n7.11 of the Disclosure Schedule, no tax Liens (other than tax Liens that
\nconstitute Permitted Liens) have been filed with respect to the Borrower or any
\nof its Subsidiaries and, to the best knowledge of the Borrower (after due
\ninquiry), no claims are being asserted with respect to any such taxes or charges
\n(and, to the best knowledge of the Borrower, no basis exists for any such
\nclaims).<\/p>\n
SECTION 7.12. COMPLIANCE WITH ERISA. <\/p>\n
Each of the Borrower and its Subsidiaries is in substantial compliance
\nwith all material provisions of ERISA, except to the extent that any failure so
\nto be in compliance with any provisions of ERISA does not continue to have and
\ncould not be reasonably expected to have any Materially Adverse Effect.<\/p>\n
SECTION 7.13. LABOR CONTROVERSIES. <\/p>\n
Except as disclosed in Section 7.13 of the Disclosure Schedule, there
\nare no labor controversies pending or, to the best knowledge of the Borrower
\n(after due inquiry), threatened against the Borrower or any of its Subsidiaries
\nwhich have had and continue to have, or (as the case may be) could reasonably be
\nexpected to have, any Materially Adverse Effect.<\/p>\n
SECTION 7.14. CORPORATE STRUCTURE; ETC. <\/p>\n
As of the Closing Date the Borrower has no Subsidiaries. Section 7.14
\nof the Disclosure Schedule identifies, with respect to the Borrower as of the
\nClosing Date, (a) the State of organization of the Borrower, (b) the number of
\nauthorized and outstanding shares of each class of Capital Stock and all other
\nEquity Interests of the Borrower, (c) each of the owners of more than five
\npercent (5%) of the outstanding shares of each class of Capital Stock of the
\nBorrower, and (d) each Partnership School, each Charter School and each
\nManagement Agreement.<\/p>\n
SECTION 7.15. OWNERSHIP OF PROPERTIES; LIENS. <\/p>\n
Section 7.15 of the Disclosure Schedule identifies all of the real
\nProperty owned or leased by the Borrower as of the Closing Date. Each of the
\nBorrower and its Subsidiaries has valid fee or leasehold interests in all of its
\nreal Property and good and marketable title to all of its material personal
\nProperty, and none of such Property is or will be subject to any Liens, except
\nsuch Liens as are permitted by Section 8.2.3 or by the other Loan Documents.
\nSection 7.15 of the Disclosure Schedule identifies all of the Liens upon
\nProperty of the Borrower that secure Indebtedness of the Borrower and that are
\nin existence on the Closing Date and either (a) are known to the Borrower on or
\nas of the Closing Date, or (b) are of record on and as of the Closing Date.<\/p>\n
SECTION 7.16. TRADEMARKS; ETC. <\/p>\n
Each of the Borrower and its Subsidiaries owns and possesses all such
\npatent rights, trademark rights, trade name rights, service mark rights and
\ncopyrights material to the conduct of the businesses of such Person without (to
\nthe knowledge of the Borrower) any infringement upon any proprietary or other
\nrights of any other Person, except to the extent that any such
\n 63
\n -49-<\/p>\n
infringement does not continue to have, and could not reasonably be expected to
\nhave, any Materially Adverse Effect.<\/p>\n
SECTION 7.17. COLLATERAL DOCUMENTS. <\/p>\n
The provisions of the Collateral Documents will be, from and after the
\nClosing Date, effective to create, in favor of the Bank and as security for all
\nof the Obligations, legal, valid and enforceable Liens in all right, title and
\ninterest of the Borrower in the Collateral described in the Collateral
\nDocuments. Upon filing of all required financing statements and other filings
\nnecessary in order to perfect the Bank’s Liens in the Collateral and the Bank’s
\ntaking possession of items of Collateral as to which possession is required to
\nperfect a Lien therein, each of the Collateral Documents will create a fully
\nperfected Lien in all right, title and interest of the Borrower in the
\nCollateral described therein superior in right to any Liens, existing or future,
\nwhich any creditor of or purchaser from the Borrower or any other Person may
\nhave against such Collateral, except to the extent otherwise expressly permitted
\nhereby or by any of the other Loan Documents.<\/p>\n
SECTION 7.18. ENVIRONMENTAL MATTERS. <\/p>\n
Except as identified in Section 7.18 of the Disclosure Schedule:<\/p>\n
(a) to the best knowledge of the Borrower, all Property
\n (including underlying groundwater) owned or leased by the Borrower or
\n any of its Subsidiaries has been, and continues to be, owned or leased
\n by such Person in substantial compliance with all Environmental Laws,
\n except to the extent that any failure so to be in compliance with
\n Environmental Laws does not continue to have, and could not reasonably
\n be expected to have, any Materially Adverse Effect;<\/p>\n
(b) there have been no past, and there are no pending or, to
\n the knowledge of the Borrower, threatened:<\/p>\n
(i) material claims, complaints, notices or requests
\n for information received by the Borrower or any of its
\n Subsidiaries from any Governmental Authority with respect to
\n any alleged violation of any Environmental Laws; or<\/p>\n
(ii) material complaints, notices or inquiries to the
\n Borrower or any of its Subsidiaries from any Governmental
\n Authority alleging material liability under any Environmental
\n Laws;<\/p>\n
(c) to the best knowledge of the Borrower, there have been no
\n Releases of Hazardous Materials at, on or under Property now or (to the
\n best knowledge of the Borrower) previously owned or leased by the
\n Borrower or any of its Subsidiaries, the costs to address which,
\n individually or in the aggregate, continue to have or (as the case may
\n be) could reasonably be expected to have any Materially Adverse Effect;<\/p>\n
(d) each of the Borrower and its Subsidiaries has been issued
\n and is in material compliance with all permits, certificates,
\n approvals, licenses and other authorizations relating to environmental
\n matters and required under Environmental Laws
\n 64
\n -50-<\/p>\n
for its businesses, except to the extent that any failure so to be in
\n compliance does not continue to have, and could not reasonably be
\n expected to have, any Materially Adverse Effect; and<\/p>\n
(e) to the best knowledge of the Borrower, no conditions exist
\n at, on or under any Property now or previously owned or leased by the
\n Borrower or any of its Subsidiaries which has given rise to, or (as the
\n case may be) which could reasonably be expected to give rise to,
\n liability under any Environmental Laws, which liability has, or (as the
\n case may be) could reasonably be expected to have, individually or in
\n the aggregate, any Materially Adverse Effect.<\/p>\n
SECTION 7.19. COMPLIANCE WITH APPLICABLE LAWS. <\/p>\n
Each of the Borrower and its Subsidiaries is in substantial compliance
\nin all material respects with all Applicable Laws, except to the extent that any
\nfailure so to be in compliance does not continue to have, and could not
\nreasonably be expected to have, any Materially Adverse Effect.<\/p>\n
SECTION 7.20. EXISTING INVESTMENTS. <\/p>\n
Section 7.20 of the Disclosure Schedule identifies each Investment of
\nthe Borrower that is owned or held or is outstanding or in effect on the Closing
\nDate other than insubstantial and immaterial Investments and other than
\nInvestments of the kind described in any of clauses (b) through (e) or in clause
\n(g) of the definition of the term “PERMITTED INVESTMENTS”.<\/p>\n
SECTION 7.21. TRANSACTIONS WITH AFFILIATES. <\/p>\n
Section 7.21 of the Disclosure Schedule identifies (a) all (if any)
\nIndebtedness of the Borrower to any Affiliate of the Borrower on or as of the
\nClosing Date and all (if any) Contractual Obligations of the Borrower to any
\nAffiliate of the Borrower on or as of the Closing Date, and (b) all (if any)
\nIndebtedness of any Affiliate of the Borrower to the Borrower on or as of the
\nClosing Date and all (if any) Contractual Obligations of any Affiliate of the
\nBorrower to the Borrower on or as of the Closing Date.<\/p>\n
SECTION 7.22. YEAR 2000 PROBLEM. <\/p>\n
The Borrower has reviewed the areas within its operations and business
\nwhich could be materially adversely affected by, and has developed or is making
\ncommercially reasonable efforts to develop a program to address on a timely
\nbasis, the Year 2000 Problem and has made related inquiry of material suppliers,
\nvendors and customers (if appropriate). Based on such review and program, the
\nBorrower represents and warrants that the Year 2000 Problem will not have any
\nMaterially Adverse Effect. As used herein, the term “YEAR 2000 PROBLEM” means
\nthe possibility that any computer applications or equipment (a) used by the
\nBorrower, or (b) used by material suppliers, vendors or customers in connection
\nwith the conduct of material business with the Borrower, may be unable to
\nrecognize and properly perform date-sensitive functions involving certain dates
\nprior to and any dates on or after January 1, 2000.<\/p>\n
SECTION 7.23. BANKING ARRANGEMENTS.
\n 65
\n -51-<\/p>\n
The Borrower is and will be taking all action necessary or appropriate
\nto complete each of the following in a manner reasonably satisfactory to the
\nBank by December 15, 1999: (a) direct and instruct in writing all account
\ndebtors and other obligors of the Borrower or of any of its Subsidiaries to make
\nall payments and remit all cash proceeds of Net Revenues Receivable solely to
\nthe Collection Lockbox, (b) establish the Borrower’s Concentration Account, (c)
\nexcept as and to the extent otherwise expressly provided by Section 8.1.12(b) or
\notherwise permitted by the Bank, make subject to an Agency Account Agreement
\neach bank account and other Financial Asset Account held or maintained by the
\nBorrower or any of its Subsidiaries with any bank or other financial institution
\nother than the Bank, (d) except as and to the extent otherwise expressly
\npermitted by the Bank, direct each Agency Account Institution, pursuant to the
\nAgency Account Agreement to which such Agency Account Institution is a party
\n(whereby such Agency Account Institution shall, among other things, waive all
\nrights of set-off, other than for service charges and returns incurred in
\nconnection therewith), to cause all funds held by such Agency Account
\nInstitution in its Agency Accounts to be transferred (with such frequency as the
\nBank shall reasonably request) to, and only to, the Bank for deposit in the
\nBorrower’s Concentration Account. Each of the bank accounts and other Financial
\nAsset Accounts (other than Excluded Accounts) opened, held or maintained by the
\nBorrower or any of its Subsidiaries with any bank or other financial institution
\nof any kind other than the Bank is identified in Section 7.23 of the Disclosure
\nSchedule.<\/p>\n
SECTION 7.24. REPRESENTATIONS IN LOAN DOCUMENTS AND ANCILLARY
\nDOCUMENTS. <\/p>\n
Except as otherwise described in Section 7.24 of the Disclosure
\nSchedule, each of the representations and warranties made by the Borrower in the
\nLoan Documents and Ancillary Documents is true and correct in all material
\nrespects, and the Borrower makes to the Bank each such representation and
\nwarranty made therein to the same extent and with the same full force and effect
\nas if such representation or warranty were set forth herein in full.<\/p>\n
ARTICLE VIII<\/p>\n
COVENANTS<\/p>\n
SECTION 8.1. CERTAIN AFFIRMATIVE COVENANTS. <\/p>\n
The Borrower agrees with the Bank and warrants that, from and after the
\ndate of this Agreement and until the Commitment shall have terminated in full
\nand all of the Obligations shall have been paid in full, the Borrower will, and
\nwill cause each of its Subsidiaries to:<\/p>\n
SECTION 8.1.1. FINANCIAL INFORMATION; ETC. <\/p>\n
Furnish to the Bank copies of the following financial statements,
\nreports and other information:<\/p>\n
(a) promptly when available and in any event within ninety
\n (90) days after the close of each fiscal year of the Borrower:<\/p>\n
(i) a consolidated balance sheet as at the close of
\n such fiscal year, and
\n 66
\n -52-<\/p>\n
related consolidated statements of operations, stockholders’
\n equity and cash flows for such fiscal year, of the Borrower
\n and its Subsidiaries (with comparable information as at the
\n close of and for the prior fiscal year), such statements for
\n such fiscal year to be audited and accompanied by an audit
\n report issued without Impermissible Qualification by the
\n Independent Public Accountant;<\/p>\n
(ii) consolidating balance sheets as at the close of
\n such fiscal year, and related consolidating statements of
\n operations for such fiscal year, of the Borrower and its
\n Subsidiaries (with comparable information as at the close of
\n and for the prior fiscal year), certified as to fairness of
\n presentation by the principal accounting or financial
\n Authorized Officer of the Borrower;<\/p>\n
(iii) a Compliance Certificate calculated as at the
\n close of such fiscal year; and<\/p>\n
(iv) commencing with the fiscal year of the Borrower
\n ending June 30, 1999, a written statement of the Independent
\n Public Accountant stating that, in making the examination
\n necessary to make the audit report on the financial statements
\n delivered pursuant to clause (i), it obtained no knowledge of
\n any Default by the Borrower or any of its Subsidiaries in the
\n performance or observance of any of the covenants contained in
\n Section 8.2.4, or, if the Independent Public Accountant shall
\n have obtained knowledge of any such Default, specifying all
\n such Defaults and the nature and status thereof;<\/p>\n
(b) promptly when available and in any event within forty-five
\n (45) days after the close of each fiscal quarter of each fiscal year of
\n the Borrower:<\/p>\n
(i) a consolidated balance sheet as at the close of
\n each such fiscal quarter, and related consolidated statements
\n of operations and cash flows for such fiscal quarter and for
\n the portion of the fiscal year then ended, of the Borrower and
\n its Subsidiaries (with comparable information as at the close
\n of and for the corresponding fiscal quarter of the prior
\n fiscal year and for the corresponding portion of such prior
\n fiscal year), certified as to fairness of presentation by the
\n principal accounting or financial Authorized Officer of the
\n Borrower;<\/p>\n
(ii) consolidating balance sheets as at the close of
\n such fiscal quarter, and related consolidating statements of
\n operations and cash flows for such fiscal quarter and for the
\n portion of the fiscal year then ended, of the Borrower and its
\n Subsidiaries (with comparable information as at the close of
\n and for the corresponding fiscal quarter of the prior fiscal
\n year and for the corresponding portion of such prior fiscal
\n year), certified as to fairness of presentation by the
\n principal accounting or financial Authorized Officer of the
\n Borrower; and<\/p>\n
(iii) a Compliance Certificate calculated as at the
\n close of such fiscal quarter;<\/p>\n
(c) promptly when available and in any event within forty-five
\n (45) days (or,
\n 67
\n -53-<\/p>\n
with respect to subclause (iii) below, fifteen (15) days) after the
\n close of each fiscal month of the Borrower:<\/p>\n
(i) a consolidated balance sheet as at the close of
\n each such fiscal month, and related consolidated statements of
\n operations and cash flows for such fiscal month, of the
\n Borrower and its Subsidiaries;<\/p>\n
(ii) a statement as at the close of each such fiscal
\n month showing aging and reconciliation of the Net Revenues
\n Receivable of the Borrower and its Subsidiaries as at the
\n close of such fiscal month; and<\/p>\n
(iii) a schedule identifying each Financial Asset
\n Account (other than Excluded Accounts) opened by or for the
\n Borrower or any of its Subsidiaries during such fiscal month,
\n and a Borrowing Base Report as at the close of each such
\n fiscal month setting forth the amount of each of Eligible
\n Trailing Revenues and the Eligible Projected Revenues of the
\n Borrower and its Subsidiaries for the Collection Period ending
\n as at the last day of such fiscal month and for the Projected
\n Collection Period ending as at the last day of the third
\n fiscal month following such fiscal month, attached to which
\n shall be all reports and supporting information required by
\n the Bank to confirm the Borrowing Base calculations as of the
\n last day of such fiscal month;<\/p>\n
(d) promptly upon receipt thereof, copies of all detailed
\n financial and management reports, if any, submitted to the Borrower or
\n any of its Subsidiaries by any independent public accountant in
\n connection with any annual or interim audit made by any such
\n independent public accountant of the books of the Borrower or of any of
\n its Subsidiaries;<\/p>\n
(e) promptly upon completion thereof, and in any event not
\n later than June 15 of each fiscal year of the Borrower, a copy of the
\n budget for the following fiscal year for the Borrower and its
\n Subsidiaries, including, in each case, budgeted results for each fiscal
\n quarter and for the fiscal year as a whole, together with an
\n explanation of any differences between the sum of the individual
\n budgets and the consolidated totals, and upon the delivery of any
\n financial statements relating to any period included in such budget, a
\n summary comparing the actual financial performance of the Borrower and
\n its Subsidiaries during such period to that provided for in such
\n budget; and<\/p>\n
(f) promptly, such additional financial and other information
\n with respect to the Borrower or any of its Subsidiaries as the Bank may
\n from time to time reasonably request.<\/p>\n
SECTION 8.1.2. MAINTENANCE OF EXISTENCE; ETC. <\/p>\n
Maintain and preserve its separate existence as a limited liability
\ncompany, limited partnership or (as the case may be) corporation and maintain
\nand preserve its material rights and franchises and continue to own and hold,
\nlegally and beneficially, free and clear of all Liens (except Liens permitted by
\nSection 8.2.3 or by any of the other Loan Documents), all of the
\n 68
\n -54-<\/p>\n
Equity Interests of each of its Subsidiaries; provided, however, that the
\nforegoing shall not prohibit the Borrower or any of its Subsidiaries from
\nentering into or implementing any Permitted Disposition or any other arrangement
\nor transaction permitted by Section 8.2.7.<\/p>\n
SECTION 8.1.3. FOREIGN QUALIFICATION. <\/p>\n
Cause to be done at all times all things necessary to be duly qualified
\nto do business and to be in good standing as a foreign organization in each
\njurisdiction where the nature of its business makes such qualification necessary
\nor appropriate and where the failure to so qualify has or could reasonably be
\nexpected to have any Materially Adverse Effect.<\/p>\n
SECTION 8.1.4. PAYMENT OF TAXES; ETC. <\/p>\n
Pay and discharge, as the same become due and payable, all material
\nfederal, state and local taxes, assessments and other governmental charges or
\nlevies against or on any of its income, profits or Property, as well as all
\nclaims of any kind, including all claims for labor, materials and supplies,
\nwhich, if unpaid, will become a Lien upon any of its Property (other than Liens
\nexpressly permitted by this Agreement or any of the other Loan Documents), and
\npay before they become delinquent all other material obligations and
\nliabilities; provided, however, that the foregoing shall not require the
\nBorrower or any of its Subsidiaries to pay or discharge any such tax,
\nassessment, charge, levy, claim, obligation or liability (a) which is not yet
\ndue and payable, or (b) so long as it shall contest the validity thereof in good
\nfaith by appropriate proceedings and shall have set aside on its books, to the
\nextent required by GAAP, adequate reserves in accordance with GAAP with respect
\nthereto. Nothing in this Section 8.1.4 shall be construed so as to diminish or
\nimpair the absolute and unconditional Obligations of the Borrower to pay to the
\nBank all of the Obligations as and when the same shall become due and payable.<\/p>\n
SECTION 8.1.5. MAINTENANCE OF PROPERTY. <\/p>\n
Keep all Property owned by it that is useful and necessary in its
\nbusinesses in good working order and condition (ordinary wear and tear
\nexcepted), and maintain or cause to be maintained insurance with respect to
\nProperty owned by it and with respect to its businesses against such casualties
\nand contingencies and of such types and in such amounts and with such
\ndeductibles as are customary in the case of similar businesses, including,
\nwithout limitation, property and casualty insurance complying with the foregoing
\nprovisions and naming the Bank as loss payee and additional insured; and, upon
\nthe reasonable request of the Bank at any time and from time to time (which
\nrequest, however, shall not be made by the Bank more than once in any fiscal
\nyear of the Borrower unless any Defaults shall be continuing), furnish to the
\nBank a certificate of an Authorized Officer of the Borrower setting forth the
\nnature and extent of all insurance maintained by the Borrower or by any of its
\nSubsidiaries in accordance with this Section 8.1.5.<\/p>\n
SECTION 8.1.6. NOTICE OF DEFAULT; ETC. <\/p>\n
Give written notice (accompanied by a reasonably detailed written
\nexplanation with respect thereto) promptly, and in any event within five (5)
\nBusiness Days after the Borrower or any of its Subsidiaries shall have first
\nobtained knowledge thereof, to the Bank of:
\n 69
\n -55-<\/p>\n
(a) the occurrence of<\/p>\n
(i) any Default,<\/p>\n
(ii) the receipt by the Borrower from or on behalf of
\n any holder of any Capital Stock or other Equity Interests of
\n the Borrower of any notice, demand or request for redemption,
\n purchase, repurchase or other acquisition by the Borrower of
\n any of the Capital Stock or other Equity Interests of the
\n Borrower, and<\/p>\n
(iii) any material default or event of default under
\n any Ancillary Document on the part of any Person bound
\n thereby, or any other material breach by any Person bound by
\n any Ancillary Document of any of its or his material
\n obligations thereunder;<\/p>\n
(b) any litigation, arbitration or governmental investigation
\n or proceeding not previously disclosed by the Borrower to the Bank
\n which has been instituted or, to the best knowledge of the Borrower
\n (after due inquiry), is threatened against the Borrower or any of its
\n Subsidiaries, or to which any of their respective Properties is
\n subject, which<\/p>\n
(i) has had and continues to have, or (as the case
\n may be) could reasonably be expected to have, any Materially
\n Adverse Effect, or<\/p>\n
(ii) relates to this Agreement, any other Loan
\n Document, any Collateral or any Ancillary Document;<\/p>\n
(c) any material adverse development which shall occur in any
\n litigation, arbitration or governmental investigation or proceeding
\n previously disclosed by the Borrower to the Bank and which has had and
\n continues to have, or (as the case may be) could reasonably be expected
\n to have, any Materially Adverse Effect;<\/p>\n
(d) any development in the business, operations, Property,
\n financial condition or prospects of the Borrower or any of its
\n Subsidiaries which has had and continues to have, or (as the case may
\n be) could reasonably be expected to have, any Materially Adverse
\n Effect;<\/p>\n
(e) the receipt by the Borrower or any of its Subsidiaries of
\n written notice of the intention of any Governmental Authority or any
\n other Person to terminate or renegotiate a Management Agreement, or the
\n delivery by the Borrower or any of its Subsidiaries to any Governmental
\n Authority or any other Person of written notice of the intention of the
\n Borrower or of any of its Subsidiaries to terminate or renegotiate any
\n Management Agreement, if (in any such case) the termination or
\n renegotiation thereof has had or could reasonably be expected to have a
\n Materially Adverse Effect; and<\/p>\n
(f) any termination, cancellation or rescission or any
\n material amendment or modification of any Management Agreement or other
\n Ancillary Document, which written notice shall include a copy (if in
\n writing) or a description (if not in writing) of any such termination,
\n cancellation, rescission, amendment or modification of any such
\n Management Agreement or Ancillary Document; provided, however, that the
\n Borrower
\n 70
\n -56-<\/p>\n
shall have no obligation to give notices or other information or
\n documents under this clause (f) unless the subject event or arrangement
\n has had or could reasonably be expected to have a Materially Adverse
\n Effect.<\/p>\n
SECTION 8.1.7. BOOKS AND RECORDS. <\/p>\n
Keep proper books and records reflecting all of its material business affairs
\nand transactions in accordance with GAAP, and permit the Bank or any of its
\nrepresentatives, upon reasonable notice at reasonable times and intervals during
\nordinary business hours, to visit and inspect any of its offices and Properties,
\ndiscuss financial matters relating to the Borrower or any of its Subsidiaries
\nwith any of their officers and the Independent Public Accountant (and the
\nBorrower hereby irrevocably authorizes the Independent Public Accountant to
\ndiscuss its financial matters with the Bank or any of the Bank’s
\nrepresentatives), and examine and make abstracts or photocopies from any of its
\nbooks or other corporate records, all at the cost and expense of the Borrower
\nfor any charges imposed by such accountant or for making such abstracts or
\nphotocopies. The Borrower acknowledges and agrees that the Bank shall have the
\nright to perform a collateral audit at the offices and at the business and
\nProperty locations of the Borrower and each of its Subsidiaries twice during
\neach fiscal year of the Borrower so long as no Defaults shall be continuing,
\nand, if any Defaults shall be continuing, at such additional time or times
\nduring each fiscal year of the Borrower as the Bank shall in its sole discretion
\ndetermine to be necessary or appropriate. All of the reasonable out-of-pocket
\ncosts and expenses incurred or sustained by the Bank in connection with the
\nconduct of such collateral audits shall be for the account of the Borrower;
\nprovided, however, that the Borrower shall not be responsible for the costs and
\nexpenses of more than one (1) such collateral audit per fiscal year conducted by
\nthe Bank while no Defaults are continuing.<\/p>\n
SECTION 8.1.8. COMPLIANCE WITH LAWS; ETC. <\/p>\n
(a) Obtain all such Approvals and take all such other action with
\nrespect to any Governmental Authority as shall from time to time be required for
\nthe execution, delivery or performance of this Agreement and the other Loan
\nDocuments and duly perform and comply in all material respects with all of the
\nmaterial terms and conditions of all Approvals so obtained.<\/p>\n
(b) Comply in all material respects with all Applicable Laws, including
\nall Environmental Laws and all material provisions of ERISA, except to the
\nextent that any failure so to comply does not have and could not reasonably be
\nexpected to have any Materially Adverse Effect.<\/p>\n
SECTION 8.1.9. IDENTIFICATION OF SUBSIDIARIES; PROVISION OF COLLATERAL.<\/p>\n
If and whenever any direct or indirect Subsidiary of the Borrower shall
\nbe created or acquired by the Borrower or by any of its Subsidiaries at any time
\nafter the date hereof:<\/p>\n
(a) furnish promptly to the Bank a written notice identifying such
\nSubsidiary and setting forth with respect to such Subsidiary the information
\nrequired by Section 7.14 with respect to the Borrower; and
\n 71
\n -57-<\/p>\n
(b) promptly comply with, and cause such Subsidiary to comply with, the
\napplicable terms of Section 3.10.<\/p>\n
SECTION 8.1.10. LANDLORD LIEN WAIVERS. <\/p>\n
If and when requested by the Bank with respect to any particular Real
\nEstate Lease or warehouse contract, continue to use commercially reasonable
\nefforts, including making written requests and follow-up telephone calls, to
\nobtain a Landlord Lien Waiver reasonably satisfactory to the Bank in form and
\nsubstance with respect to each Real Estate Lease or (as the case may be)
\nwarehouse contract which is negotiated, completed, renewed or extended by the
\nBorrower or any of its Subsidiaries at any time or from time to time after the
\nClosing Date; and, in any event, use all commercially reasonable efforts to
\nobtain by December 15, 1999 a Landlord Lien Waiver reasonably satisfactory to
\nthe Bank in form and substance with respect to each warehouse contract to which
\nthe Borrower is a party on the date hereof. Anything in the foregoing provisions
\nof this Section 8.1.10 to the contrary, the Borrower shall have no obligation to
\nobtain any Landlord Lien Waivers with respect to any Real Estate Leases of
\nSchool facilities.<\/p>\n
SECTION 8.1.11. YEAR 2000 COMPLIANCE. <\/p>\n
Perform all commercially reasonable acts necessary to ensure that the
\nBorrower and its Subsidiaries (a) shall become Year 2000 Compliant in a timely
\nmanner, and (b) shall not be materially adversely affected as a consequence of
\nthe failure by any supplier, vendor or customer of the Borrower or its
\nSubsidiaries to become Year 2000 Compliant in a timely manner, except (in each
\ncase) to the extent that any failure to do so will not have and could not
\nreasonably be expected to have any Materially Adverse Effect. Such acts will
\ninclude, as and to the extent determined by the Borrower on a reasonable basis
\nto be reasonably necessary and appropriate considering the nature of the
\nbusiness and operations conducted by the Borrower and its Subsidiaries,
\nperforming a comprehensive review and assessment of all material systems of the
\nBorrower and its Subsidiaries and, if and as reasonably necessary or
\nappropriate, adopting a plan, with itemized budget, if appropriate, for the
\nremediation, monitoring and testing of such systems. As used in this Section
\n8.1.11, the term “YEAR 2000 COMPLIANT” means, with respect to any Person, that
\nall software, hardware, firmware, equipment, goods or systems utilized by or
\nmaterial to the business, operations or financial condition of such Person will
\nproperly perform date sensitive functions before, during and after the year
\n2000. The Borrower will, promptly upon request by the Bank, provide to the Bank
\nsuch evidence of compliance by the Borrower and its Subsidiaries with the terms
\nof this Section 8.1.11 as the Bank may from time to time reasonably require.<\/p>\n
SECTION 8.1.12. BANKING ARRANGEMENTS. <\/p>\n
(a) The Borrower will, from and after December 15, 1999, continue to
\nmaintain with the Bank all primary banking and transaction accounts established
\nby the Borrower with the Bank by December 15, 1999, all upon terms and
\nconditions reasonably satisfactory to the Bank and the Borrower. By December 15,
\n1999 and continuing thereafter, the Borrower will (i) direct and instruct in
\nwriting all account debtors and other obligors of the Borrower or any of its
\n 72
\n -58-<\/p>\n
Subsidiaries, to make all payments and remit all cash proceeds of Net Revenues
\nReceivable solely to the Collection Lockbox, (ii) establish a depository account
\n(the “BORROWER’S CONCENTRATION ACCOUNT”) under the control of the Bank, in the
\nname of the Borrower, (iii) except as and to the extent otherwise provided by
\nparagraph (b) or otherwise expressly permitted by the Bank from time to time,
\nmake subject to an agency account agreement in form and substance reasonably
\nsatisfactory to the Bank (each, an “AGENCY ACCOUNT AGREEMENT”) each bank account
\nand other Financial Asset Account held or maintained by the Borrower or any of
\nits Subsidiaries with any bank or other financial institution other than the
\nBank, (iv) except as and to the extent otherwise expressly permitted by the Bank
\nfrom time to time, direct each Agency Account Institution, pursuant to the
\nAgency Account Agreement to which it is a party (whereby such Agency Account
\nInstitution shall, among other things, waive all rights of set-off, other than
\nfor service charges and returns incurred in connection therewith), to cause all
\nfunds held by such Agency Account Institution in its Agency Accounts to be
\ntransferred (with such frequency as shall be required by such Agency Account
\nAgreement) to, and only to, the Bank for deposit in the Borrower’s Concentration
\nAccount, and (v) at all times ensure that immediately upon the Borrower’s or any
\nof its Subsidiaries’ receipt of any funds constituting cash proceeds of Net
\nRevenues Receivable, cause such amounts to be immediately transferred to and
\ndeposited in the Borrower’s Concentration Account. All cash proceeds of Net
\nRevenues Receivable received in the Collection Lockbox will be transferred daily
\nto, and only to, the Borrower’s Concentration Account. The Bank hereby agrees
\nwith the Borrower that, unless any Event of Default is continuing, the Bank will
\nnot give to any Agency Account Institution any written “Notice” of the kind
\ndescribed in paragraph 4 of the form of Agency Account Agreement.<\/p>\n
(b) The Borrower shall not be required to make subject to an Agency
\nAccount Agreement any of the following Financial Asset Accounts (each, an
\n“EXCLUDED ACCOUNT”): (i) any Financial Asset Account (A) the cash balances or
\nthe Cash Equivalents or other Property of which at no time exceed $50,000, and
\n(B) the aggregate amount of all sums or Cash Equivalents or other Property
\ncredited to which in any calendar month do not exceed $200,000; or (ii) any
\nFinancial Asset Account identified in Section 7.7 of the Disclosure Schedule as
\nbeing subject to Liens or other restrictions on the date hereof; provided,
\nhowever, that the Borrower shall not at any time after December 14, 1999 cause
\nor permit (1) the aggregate amount of all cash balances, Cash Equivalents and
\nother Property of all Excluded Accounts of the kind described in clause (i)
\nabove to exceed $1,500,000 in the aggregate, or (2) the aggregate amount of all
\nsums, Cash Equivalents and other Property credited to Excluded Accounts of the
\nkind described in clause (i) above in any calendar month to exceed $4,000,000.<\/p>\n
SECTION 8.1.13. COMPLIANCE WITH TERMS OF MANAGEMENT AGREEMENTS; ETC.<\/p>\n
Make all payments and otherwise perform in all material respects all
\nmaterial obligations in respect of all Management Agreements, Subordinated Debt
\nDocuments and Real Estate Leases, keep such Instruments in full force and effect
\nand not allow such Instruments to lapse or be terminated or any rights to renew
\nsuch Instruments to be forfeited or canceled, notify the Bank of any material
\ndefault by any party with respect to such Instruments, and cooperate with the
\nBank in all respects to cure any such default, except, in any case, where the
\nfailure to do so, either individually or in the aggregate, does not have and
\ncould not reasonably be expected to have a Materially Adverse Effect.
\n 73
\n -59-<\/p>\n
SECTION 8.2. CERTAIN NEGATIVE COVENANTS. <\/p>\n
The Borrower agrees with the Bank and warrants that, from and after the
\ndate of this Agreement and until the Commitment shall have terminated in full
\nand all of the Obligations shall have been paid in full, the Borrower will not,
\nand the Borrower will not cause or permit any of its Subsidiaries to:<\/p>\n
SECTION 8.2.1. LIMITATION ON LINES OF BUSINESS. <\/p>\n
At any time undertake, conduct or transact, directly or indirectly, any
\nbusinesses except businesses that are in the Line of Business.<\/p>\n
SECTION 8.2.2. INDEBTEDNESS. <\/p>\n
Incur or permit or suffer to exist, or otherwise become or be liable in
\nrespect of or be responsible for, any Indebtedness; except:<\/p>\n
(a) Indebtedness of the Borrower or of any of its Subsidiaries
\n under any of the Loan Documents or in respect of any of the Credit
\n Extensions or any of the Obligations;<\/p>\n
(b) Permitted Indebtedness of the Borrower or of any of its
\n Subsidiaries; and<\/p>\n
(c) Permitted Subordinated Debt of the Borrower.<\/p>\n
SECTION 8.2.3. LIENS. <\/p>\n
Create, incur or assume, or permit or suffer to exist, any Liens upon
\nany of its Property (including any Equity Interests in any of its Subsidiaries),
\nwhether now owned or hereafter created, arising or acquired; except:<\/p>\n
(a) Liens in favor of the Bank securing the payment or
\n performance of any of the Credit Extensions or any of the Obligations
\n under or in respect of any of the Loan Documents; and<\/p>\n
(b) Permitted Liens.<\/p>\n
SECTION 8.2.4. FINANCIAL COVENANTS. <\/p>\n
(a) MAXIMUM ADJUSTED CONSOLIDATED CAPITAL EXPENDITURES. Permit the
\nAdjusted Consolidated Capital Expenditures for any period identified in the
\ntable set forth in Section 8.2.4(a) of the First Schedule to be greater than the
\nmaximum Adjusted Consolidated Capital Expenditures set forth opposite such
\nperiod.<\/p>\n
(b) MAXIMUM CHARTER SCHOOL CAPITAL EXPENDITURES. Permit the Charter
\nSchool Capital Expenditures for any period identified in the table set forth in
\nSection 8.2.4(b) of the First Schedule to be greater than the maximum Charter
\nSchool Capital Expenditures set forth opposite such period.
\n 74
\n -60-<\/p>\n
(c) MINIMUM STUDENT ENROLLMENT. Permit the Student Enrollment on any
\ndate identified in the table set forth in Section 8.2.4(c) of the First Schedule
\nto be less than the minimum Student Enrollment set forth opposite such date.<\/p>\n
SECTION 8.2.5. INVESTMENTS AND ACQUISITIONS. <\/p>\n
(a) Make, incur or assume, or permit or suffer to exist, or
\n make any offer or commitment to make, or enter into any agreement to
\n make, any Investments in any other Person or any Acquisitions; EXCEPT:<\/p>\n
(i) Permitted Investments;<\/p>\n
(ii) Investments by the Borrower made by way of
\n short-term loans to Schools; provided, however, that (A) the
\n aggregate outstanding principal amount of all of such loans
\n shall not at any time exceed $30,000,000, and (B) no such
\n loans shall be made by the Borrower while any Events of
\n Default shall be continuing;<\/p>\n
(iii) Acquisitions by the Borrower or by any of its
\n Subsidiaries, in a single transaction or in a series of
\n related transactions, for total consideration paid in an
\n Amount not exceeding $200,000 in the aggregate for any such
\n single transaction or series of related transactions;
\n provided, however, that: (A) each such Acquisition shall be
\n made in the ordinary course of business and on terms and
\n conditions that are in all material respects consistent with
\n the Borrower’s usual and customary business practices; (B) the
\n aggregate Amount of all of the consideration paid in any
\n fiscal year of the Borrower for all of such Acquisitions
\n pursuant to this clause (iii) shall not exceed $500,000 in any
\n such fiscal year; and (C) no Default shall be continuing at
\n the time of any such Acquisition or shall result therefrom;
\n and<\/p>\n
(iv) Acquisitions by the Borrower or by any of its
\n Subsidiaries, if and to the extent that the consideration
\n payable therefor is Permitted Equity Interests of the
\n Borrower.<\/p>\n
(b) During the continuation of any Event of Default:<\/p>\n
(i) make, incur or assume any Investments that are
\n related to the acquisition or improvement by the Borrower, any
\n of its Subsidiaries or any other Person or Persons of any
\n Property, plant or equipment or other facilities
\n (collectively, “SCHOOL FACILITIES”) for any charter school,
\n managed school or other similar school that is not at the time
\n of the occurrence of such Event of Default a School (any
\n charter school, managed school or other similar school that is
\n not a School at the time of the occurrence of such Event of
\n Default being herein called a “TARGET SCHOOL”);<\/p>\n
(ii) make, incur or assume any Capital Expenditures
\n for or in
\n 75
\n -61-<\/p>\n
connection with any Target School or any School Facilities
\n relating to such Target School;<\/p>\n
(iii) incur any Permitted Indebtedness of the kind
\n described in clause (f) of the definition of the term
\n “PERMITTED INDEBTEDNESS” for the purpose of acquiring,
\n leasing, constructing or improving any Property used or to be
\n used for or in connection with any Target School or any School
\n Facilities relating thereto; or<\/p>\n
(iv) make any offer or commitment to make or incur,
\n or enter into any agreement or undertaking to make or incur,
\n any Investments, Capital Expenditures or Indebtedness of the
\n kind described in clause (i), (ii) or (iii) of this paragraph
\n (b).<\/p>\n
SECTION 8.2.6. RESTRICTED PAYMENTS. <\/p>\n
Make, extend or enter into any offer or commitment to make, or enter
\ninto any agreement to make, any Restricted Payments; EXCEPT:<\/p>\n
(a) the declaration and payment by the Borrower of dividends
\n or other distributions on its Equity Interests in the form of Permitted
\n Equity Interests of the Borrower; and<\/p>\n
(b) payments, not otherwise expressly permitted by any of the
\n other clauses of this Section 8.2.6 and not otherwise prohibited by any
\n of the other covenants in this Section 8.2 or by any of the other
\n provisions contained in this Agreement, by the Borrower or any of its
\n Subsidiaries to any Affiliates of the Borrower, but, in each case, only
\n to the extent permitted by Section 8.2.13.<\/p>\n
SECTION 8.2.7. MERGERS; SALES OF PROPERTY. <\/p>\n
Consolidate or merge with or into any Person, engage in any Sale of all
\nor any substantial part of its Property (either in a single transaction or in a
\nseries of related transactions), make any offer or commitment to do so, or enter
\ninto any agreement to do so; EXCEPT:<\/p>\n
(a) any Permitted Dispositions; and<\/p>\n
(b) the consolidation or merger of any Subsidiary of the
\n Borrower with or into, or the Sale or other transfer by any such
\n Subsidiary of all or substantially all of its Property to, the
\n Borrower; provided, however, that, in the event of any merger or other
\n similar transaction involving the Borrower, the Borrower shall be the
\n Person surviving such merger or other transaction; and, provided,
\n further, that, prior to or in connection with the consolidation or
\n merger of any Subsidiary of the Borrower with or into, or the transfer
\n of all of the Property of any Subsidiary of the Borrower to, the
\n Borrower, (i) true and complete copies of all of the Instruments
\n evidencing such transactions shall have been furnished to the Bank and
\n shall be reasonably satisfactory to the Bank in form and substance, and
\n (ii) the Borrower shall execute and deliver to the Bank all such
\n Instruments (including Instruments of assumption) as shall be requested
\n by the Bank in
\n 76
\n -62-<\/p>\n
order to protect and preserve all of its rights and remedies under the
\n Loan Documents and in relation to the Collateral.<\/p>\n
SECTION 8.2.8. LIMITATIONS ON OPTIONAL PAYMENTS; ETC. <\/p>\n
(a) Make or offer to make any optional or voluntary payment,
\nprepayment, repurchase or redemption of, or otherwise voluntarily or optionally
\ndefease any Permitted Subordinated Debt or any other Indebtedness governed or
\notherwise evidenced by any Ancillary Documents, or segregate funds for any such
\npayment, prepayment, repurchase, redemption or defeasance, provided that the
\nBorrower may in any fiscal year make such payments or other prepayments in a
\nmaximum aggregate amount not exceeding $1,000,000, (b) amend, modify or
\notherwise change, or consent or agree to any amendment, modification, waiver or
\nother change to, any of the terms governing the payment, prepayment, repurchase
\nor redemption of any Permitted Subordinated Debt or any other Indebtedness
\ngoverned or otherwise evidenced by any Ancillary Documents (other than any such
\namendment, modification, waiver or other change (i) which affects or relates to
\nthe Guarantee, dated November 25, 1997, in favor of BankBoston, N.A., or (ii)
\nwhich (A) would extend the maturity or reduce the amount of any payment of
\nprincipal thereof, reduce the rate or extend the date for payment of interest
\nthereon or relax any covenant or other restriction applicable to the Borrower or
\nany of its Subsidiaries, and (B) does not involve the payment of a consent fee),
\nor (c) designate any Indebtedness (other than the Obligations) as “senior
\nindebtedness” or “senior debt” for the purposes of any Instrument or Instruments
\ngoverning or otherwise evidencing any Permitted Subordinated Debt.<\/p>\n
SECTION 8.2.9. MODIFICATION OF OTHER ANCILLARY DOCUMENTS; ETC. <\/p>\n
Consent to or enter into or permit any material amendment, supplement
\nor other modification of any of the Governing Documents of the Borrower or any
\nof its Subsidiaries or any of the other Ancillary Documents, if such amendment,
\nsupplement or modification (a) shall have, or (as the case may be) could
\nreasonably be expected to have, any Materially Adverse Effect, or (b) shall
\ninclude any term, covenant or other provision, or shall otherwise effect any
\nchange, that conflicts with or otherwise contravenes any of the terms, covenants
\nor other provisions of this Agreement or any of the other Loan Documents. The
\ncovenant of the Borrower in Section 8.2.8 is separate from and in addition to
\nthe covenant in this Section 8.2.9.<\/p>\n
SECTION 8.2.10. LIMITATION ON CHANGES IN FISCAL PERIODS. <\/p>\n
Permit the fiscal year of the Borrower to end on a day other than June
\n30 or change the Borrower’s method of determining fiscal quarters.<\/p>\n
SECTION 8.2.11. LIMITATION ON NEGATIVE PLEDGE CLAUSES. <\/p>\n
Enter into or suffer to exist or become effective any Instrument which
\nprohibits or limits the ability of the Borrower or any of its Subsidiaries to
\ncreate, incur, assume or suffer to exist any Lien upon any of its Property or
\nrevenues, whether now owned or hereafter acquired, other than (a) this Agreement
\nand the other Loan Documents, and (b) any agreements governing any Purchase
\nMoney Liens or Capitalized Lease Obligations otherwise permitted hereby (in
\nwhich case, any prohibition or limitation shall only be effective against the
\nassets financed thereby).
\n 77
\n -63-<\/p>\n
SECTION 8.2.12. LIMITATION ON RESTRICTIONS ON SUBSIDIARY DISTRIBUTIONS.<\/p>\n
Enter into or suffer to exist or become effective any consensual
\nencumbrance or restriction on the ability of any Subsidiary of the Borrower to
\n(a) make any dividends or other distributions in respect of any Capital Stock of
\nsuch Subsidiary held by, or pay any Indebtedness owed to, the Borrower or any of
\nits Subsidiaries, (b) make Investments in the Borrower or any of its
\nSubsidiaries, or (c) transfer any of its Property to the Borrower or any of its
\nSubsidiaries, EXCEPT for such encumbrances or restrictions existing under or by
\nreason of (i) any restrictions existing under the Loan Documents, and (ii) any
\nrestrictions on the ability of the Borrower or any of its Subsidiaries to
\ntransfer any asset imposed by the provisions of the documentation pursuant to
\nwhich there shall have been created a Lien on such asset expressly permitted by
\nSection 8.2.3.<\/p>\n
SECTION 8.2.13. TRANSACTIONS WITH AFFILIATES. <\/p>\n
Enter into, engage in or perform any Affiliate Transaction, make any
\noffer or commitment to do so, or enter into any agreement to do so, EXCEPT:<\/p>\n
(a) Restricted Payments by the Borrower, if and only to the
\n extent expressly permitted by Section 8.2.6;<\/p>\n
(b) loans or advances to any director, manager, officer or
\n employee of the Borrower or any of its Subsidiaries made in the
\n ordinary course of business and on terms and conditions that are in all
\n material respects consistent with the Borrower’s usual and customary
\n business practices; provided, however, that the aggregate principal
\n amount of all of such loans or advances from time to time outstanding
\n shall not exceed $250,000 at any time;<\/p>\n
(c) the payment by the Borrower of management or transaction
\n fees to any of its Affiliates; provided, however, that: (i) the
\n aggregate amount of all of such fees so paid in any fiscal year of the
\n Borrower shall not exceed $100,000 in any such fiscal year; and (ii) no
\n such fees shall be paid so long as any Default shall be continuing;<\/p>\n
(d) Permitted Investments of the kind described in paragraph
\n (f) of the definition of the term “PERMITTED INVESTMENTS”;<\/p>\n
(e) each of the Affiliate Transactions described in Section
\n 7.21 of the Disclosure Schedule; and<\/p>\n
(f) any other Affiliate Transaction not otherwise permitted by
\n any of the other provisions of this Section 8.2.13; provided, however,
\n that (i) such Affiliate Transaction is not otherwise prohibited by the
\n terms of this Agreement or any of the other Loan Documents; (ii) such
\n Affiliate Transaction is made or undertaken in the ordinary course of
\n business by the Borrower or by any of its Subsidiaries and on terms and
\n conditions that are in all material respects consistent with the
\n Borrower’s usual and customary business practices; (iii) the terms of
\n such Affiliate Transaction, taken as a whole, are no less favorable to
\n the Borrower or its Subsidiaries than would be the case if such
\n Affiliate Transaction had been entered into on an arm’s length basis
\n with a Person that is not an
\n 78
\n -64-<\/p>\n
Affiliate of the Borrower; and (iv) at the time of the completion of
\n such Affiliate Transaction, and after giving effect thereto, no Default
\n shall occur or be continuing.<\/p>\n
SECTION 8.2.14. SALE OF CAPITAL STOCK; ETC.<\/p>\n
Issue, sell, transfer or otherwise dispose of any shares of any Capital
\nStock or other Equity Interests of the Borrower or any of its Subsidiaries;
\nEXCEPT:<\/p>\n
(a) the pledge to the Bank from time to time of Capital Stock
\n and other Equity Interests now owned or from time to time hereafter
\n acquired by the Borrower or by any of its Subsidiaries, all in
\n accordance with the terms of this Agreement and the Collateral
\n Documents;<\/p>\n
(b) the issuance and Sale by the Borrower or by any of its
\n Subsidiaries of Permitted Equity Interests of the Borrower as
\n consideration in, or in connection with the formation of any
\n acquisition vehicle to be used in, any Acquisition permitted by
\n paragraph (iii) of Section 8.2.5(a); and<\/p>\n
(c) the issuance and Sale by the Borrower of shares of its
\n Permitted Equity Interests; provided, however, that no breach of
\n Section 8.2.16 shall occur as a result of such Sale.<\/p>\n
SECTION 8.2.15. CHANGE OF LOCATION OR NAME. <\/p>\n
Change (a) the location of its principal place of business, chief
\nexecutive office, major executive office, chief place of business or records
\nconcerning its business and financial affairs, or (b) its name or the name under
\nor by which it conducts its business, in each case, without first giving the
\nBank written notice thereof and having taken any and all action reasonably
\nrequired by the Bank to maintain and preserve the perfected first-priority Liens
\nin favor of the Bank created by the Collateral Documents.<\/p>\n
SECTION 8.2.16. FINANCIAL ASSET ACCOUNTS. <\/p>\n
Except as and to the extent otherwise expressly permitted by the Bank,
\nestablish, at any time after December 14, 1999, any bank accounts or other
\nFinancial Asset Accounts other than those with the Bank or with any Agency
\nAccount Institution that is party to an Agency Account Agreement and other than
\nas otherwise expressly permitted by Section 8.1.12(b).<\/p>\n
ARTICLE IX<\/p>\n
EVENTS OF DEFAULT<\/p>\n
SECTION 9.1. EVENTS OF DEFAULT. <\/p>\n
The term “EVENT OF DEFAULT” shall mean any of the following events set
\nforth in this Section 9.1 occurring or existing at any time on or after the date
\nof this Agreement:<\/p>\n
SECTION 9.1.1. NON-PAYMENT OF OBLIGATIONS.
\n 79
\n -65-<\/p>\n
The Borrower shall default:<\/p>\n
(a) in the payment or prepayment when due under this Agreement
\n or the Note of any principal of any of the Loans, and such default
\n shall continue unremedied for a period of more than one (1) Business
\n Day;<\/p>\n
(b) in the payment or prepayment when due under this
\n Agreement, the Note or any other Loan Documents of any interest on any
\n of the Loans or on any other Obligations or any Fees payable under
\n Section 3.5, and such default shall continue unremedied for a period of
\n more than three (3) Business Days; or<\/p>\n
(c) in the payment when due under this Agreement or any of the
\n other Loan Documents of any other sum (other than any sum referred to
\n in clause (a) or (b)), and such default shall continue unremedied for a
\n period of more than five (5) Business Days.<\/p>\n
SECTION 9.1.2. NON-PERFORMANCE OF CERTAIN OBLIGATIONS. <\/p>\n
The Borrower shall default in the due performance or observance of any
\nof its Obligations under Section 3.10, Section 8.1.6, Section 8.1.9, Section
\n8.1.12, Section 8.1.13, or Section 8.2 (including Sections 8.2.1 through 8.2.16,
\ninclusive).<\/p>\n
SECTION 9.1.3. NON-PERFORMANCE OF OTHER OBLIGATIONS. <\/p>\n
The Borrower shall default in the due performance or observance of any
\nof its Obligations under any of the Loan Documents (other than the Obligations
\nspecified in Section 9.1.1 or 9.1.2), and such default shall continue unremedied
\nfor more than thirty (30) days after written notice thereof shall have been
\ngiven to the Borrower by the Bank.<\/p>\n
SECTION 9.1.4. BREACH OF WARRANTY. <\/p>\n
Any representation or warranty of the Borrower under any of the Loan
\nDocuments is or shall be untrue or incorrect in any material respect when made
\nor deemed made.<\/p>\n
SECTION 9.1.5. DEFAULT UNDER OTHER INSTRUMENTS; ETC. <\/p>\n
At any time after the date hereof,<\/p>\n
(a) the Borrower or any of its Subsidiaries shall fail to make
\n any payments, when due, of any Indebtedness of the Borrower or of any
\n of its Subsidiaries (other than the Obligations), such payments shall
\n exceed $2,000,000 in the aggregate, and such failure shall continue
\n beyond the periods of grace, if any, provided in the Instruments under
\n or by which such Indebtedness is governed or evidenced;<\/p>\n
(b) the Borrower or any of its Subsidiaries shall fail to
\n perform or observe the terms of any Instruments governing or evidencing
\n any Indebtedness of the Borrower or of any of its Subsidiaries, and
\n such failure of the kind described in this clause (b) shall permit any
\n one or more holders of such Indebtedness to declare immediately due and
\n payable or otherwise to immediately accelerate Indebtedness of the
\n Borrower or of any of
\n 80
\n -66-<\/p>\n
its Subsidiaries in an aggregate amount exceeding $4,000,000;<\/p>\n
(c) any Lien on any Property of the Borrower or of any of its
\n Subsidiaries securing any Indebtedness of the Borrower or of any of its
\n Subsidiaries in an aggregate amount exceeding $2,000,000, or any Lien
\n created under or in connection with the Real Estate Lease in effect on
\n the date hereof, shall be foreclosed or otherwise enforced;<\/p>\n
(d) during any fiscal year of the Borrower, the aggregate
\n Student Enrollment of all Schools, determined after deducting the
\n aggregate Student Enrollment of all Schools covered by Management
\n Agreements in respect of which the Borrower or any of its Subsidiaries
\n shall have received written notices of termination or of intention to
\n terminate, shall be less than ninety percent (90%) of the minimum
\n Student Enrollment required to be maintained during such fiscal year
\n pursuant to Section 8.2.4(c).<\/p>\n
SECTION 9.1.6. BANKRUPTCY, INSOLVENCY; ETC. <\/p>\n
The Borrower or any Subsidiary of the Borrower shall:<\/p>\n
(a) generally fail to pay its debts as they become due, or
\n admit in writing its inability to pay its debts as they become due;<\/p>\n
(b) apply for, consent to, or acquiesce in, the appointment of
\n a trustee, receiver, sequestrator, or other custodian for the Borrower
\n or any such Subsidiary or any Property of any thereof, or make a
\n general assignment for the benefit of creditors;<\/p>\n
(c) in the absence of such application, consent or
\n acquiescence, permit or suffer to exist the involuntary appointment of
\n a trustee, receiver, sequestrator or other custodian for the Borrower
\n or any such Subsidiary or for a substantial part of the Property of any
\n thereof, and such trustee, receiver, sequestrator or other custodian
\n shall not be discharged within sixty (60) days;<\/p>\n
(d) permit or suffer to exist the involuntary commencement of,
\n or voluntarily commence, any bankruptcy, reorganization, debt
\n arrangement, or other case or proceeding under any bankruptcy or
\n insolvency laws, or permit or suffer to exist the involuntary
\n commencement of, or voluntarily commence, any dissolution, winding up
\n or liquidation proceeding, in each case, by or against the Borrower or
\n any such Subsidiary; provided that if not commenced by the Borrower or
\n any such Subsidiary, such proceeding shall be consented to or
\n acquiesced in by the Borrower or any such Subsidiary, or shall result
\n in the entry of an order for relief or shall remain undismissed or
\n shall not be stayed, bonded or vacated for more than sixty (60) days;<\/p>\n
(e) permit or suffer to exist the commencement of any case,
\n proceeding or other action seeking the issuance of a warrant of
\n attachment, execution, distraint or similar process against all or any
\n material part of its Property (except for any such attachment or
\n similar process that would constitute a Permitted Lien); or<\/p>\n
(f) take any corporate action authorizing, or in furtherance
\n of, any of the foregoing.
\n 81
\n -67-<\/p>\n
SECTION 9.1.7. JUDGMENTS. <\/p>\n
A final judgment which, with all other such outstanding final judgments
\nagainst the Borrower or any of its Subsidiaries, exceeds an aggregate of
\n$1,000,000 shall be rendered against the Borrower or any of its Subsidiaries,
\nand, within thirty (30) days after entry thereof, such judgment shall not have
\nbeen discharged or execution thereof stayed pending appeal, or within thirty
\n(30) days after the expiration of any such stay, such judgment shall not have
\nbeen discharged.<\/p>\n
SECTION 9.1.8. IMPAIRMENT OF SECURITY; ETC. <\/p>\n
Any Loan Document, or any Lien on any material portion of the
\nCollateral granted thereunder, shall (except in accordance with its terms), in
\nwhole or in part, terminate, cease to be effective, or cease to be the legally
\nvalid, binding and enforceable obligation of the Borrower or (as the case may
\nbe) any of its Subsidiaries; or the Borrower or any of its Subsidiaries shall,
\ndirectly or indirectly, contest in any manner such effectiveness, validity,
\nbinding nature or enforceability; or any Lien on any material portion of the
\nCollateral securing any of the Obligations shall, in whole or in part, cease to
\nbe a perfected first-priority Lien, subject only to the exceptions permitted by
\nthe Loan Documents.<\/p>\n
SECTION 9.2. ACTION IF BANKRUPTCY. <\/p>\n
If any Default or Event of Default described in Section 9.1.6 shall
\noccur, the Commitment shall automatically be terminated in full and the
\noutstanding principal amount of all Loans and the outstanding amount of all
\nother Obligations shall automatically be and become immediately due and payable,
\nand the Borrower shall automatically become obligated to provide cash Collateral
\nto the Bank in an amount equal to the undrawn amount under all Letters of
\nCredit, all without notice, demand, presentment or other action of any kind.<\/p>\n
SECTION 9.3. ACTION IF OTHER EVENT OF DEFAULT. <\/p>\n
If any Event of Default (other than an Event of Default described in
\nSection 9.1.6) shall occur for any reason, whether voluntary or involuntary, and
\nbe continuing, the Bank may, by giving written notice to the Borrower, declare
\n(a) the Commitment to be terminated in full, whereupon the Commitment shall be
\nimmediately terminated in full, and\/or (b) all or any portion of the outstanding
\nprincipal amount of the Loans or the outstanding amount of any other Obligations
\nto be immediately due and payable, whereupon the Commitment shall terminate
\nforthwith in full and such Loans and other Obligations, or, as the case may be,
\nsuch portion thereof, shall be and become immediately due and payable, and the
\nBorrower shall automatically become obligated to provide cash Collateral to the
\nBank in an amount equal to the undrawn amount under all Letters of Credit, in
\neach case under clause (a) or clause (b), without further notice, demand,
\npresentment or other action of any kind.<\/p>\n
ARTICLE X<\/p>\n
MISCELLANEOUS
\n 82
\n -68-<\/p>\n
SECTION 10.1. WAIVERS, AMENDMENTS; ETC. <\/p>\n
The provisions of this Agreement and the other Loan Documents may from
\ntime to time be amended, modified or waived, and all or any Collateral may be
\nreleased, if such amendment, modification, waiver or release is consented to in
\nwriting by the Bank and, in the case of any amendment or modification, the
\nBorrower. No waiver or approval by the Bank under this Agreement, the Note or
\nany other Loan Documents shall, except as may be otherwise stated in such waiver
\nor approval, be applicable to subsequent transactions. No waiver or approval
\nhereunder shall require any similar or dissimilar waiver or approval thereafter
\nto be granted hereunder.<\/p>\n
SECTION 10.2. NOTICES. <\/p>\n
(a) All notices and other communications pursuant to this
\n Agreement or any of the other Loan Documents shall be in writing,
\n either delivered in hand or sent by first-class mail, postage prepaid,
\n or sent by facsimile transmission, addressed as follows:<\/p>\n
(i) if to the Borrower, at 521 Fifth Avenue, 15th
\n Floor, New York, NY 10175, marked Attention: James L. Starr,
\n Chief Financial Officer; telecopy: (212) 419-1706, with a copy
\n of each such notice or other communication given
\n simultaneously to Hale and Dorr, 1455 Pennsylvania Avenue,
\n N.W., Washington, D.C. 20004, marked Attention: William
\n Winslow, Esq., telecopy: (202)942-8484; or<\/p>\n
(ii) if to the Bank, at 9920 South La Cienega
\n Boulevard, 8th Floor, Inglewood, California 90301, marked
\n “Attention: Richard M. Baker, Esq., Senior Vice President,
\n General Counsel and Secretary”, with a copy of each such
\n notice or other communication given simultaneously to Diane H.
\n Russell, Senior Vice President, Imperial Bank Merchant Banking
\n Division, 225 Franklin Street, 29th Floor, Boston,
\n Massachusetts 02110, and also to Bingham Dana LLP, 150 Federal
\n Street, Boston, Massachusetts 02110, marked “Attention: Louis
\n J. Duval, Esq.”, telecopy: (617) 951-8736; or<\/p>\n
(iii) to such other addresses as any party hereto
\n shall have designated in a written notice to the other parties
\n hereto.<\/p>\n
(b) Any notice or other communication pursuant to this
\n Agreement or any of the other Loan Documents shall be deemed to have
\n been duly given or made and to have become effective when delivered in
\n hand to the party to which it is directed, or, if sent by first-class
\n mail, postage prepaid, or by facsimile transmission, and properly
\n addressed in accordance with paragraph (a) of this Section 10.2, when
\n received by the addressee.<\/p>\n
SECTION 10.3. COSTS AND EXPENSES. <\/p>\n
The Borrower agrees to pay to the Bank upon demand all reasonable
\nout-of-pocket costs and expenses incurred by the Bank in connection with the
\nstructuring, preparation, negotiation, review, execution or delivery of this
\nAgreement or any of the other Loan Documents, including
\n 83
\n -69-<\/p>\n
all Schedules and Exhibits, or in connection with any amendments, consents or
\nwaivers to this Agreement, any of the other Loan Documents or any related
\ndocuments (whether or not any of the same become effective), including (in each
\ncase) all reasonable fees and expenses of counsel (including all local and
\nspecial counsel) for the Bank from time to time incurred in connection
\ntherewith, whether or not any of the transactions contemplated hereby or thereby
\nare consummated, and to pay all reasonable costs and expenses of the Bank
\n(including reasonable fees and expenses of counsel to the Bank) incurred in
\nconnection with the preparation, negotiation, review, execution or delivery of
\nthe form of any Instrument relevant to this Agreement or any of the other Loan
\nDocuments, the consideration of legal questions relevant hereto and thereto, and
\nthe consideration and\/or conduct of any proposed or actual restructuring or
\n“workout” of any of the Obligations. The Borrower also agrees to reimburse the
\nBank upon demand for all Uniform Commercial Code and U.S. Patent and Trademark
\nOffice and U.S. Copyright Office filing fees and all stamp or other taxes
\npayable in connection with the execution, delivery or enforcement of this
\nAgreement, any of the other Loan Documents or any Instrument related hereto or
\nthereto and for all reasonable out-of-pocket expenses (including reasonable
\nattorneys’ fees and legal expenses) incurred by the Bank in enforcing any of the
\nObligations of the Borrower under this Agreement or any other Loan Documents and
\nthe consideration and\/or conduct of any proposed or actual restructuring or
\n“workout” of any Obligations.<\/p>\n
SECTION 10.4. INDEMNIFICATION. <\/p>\n
In consideration of the execution and delivery of this Agreement by the
\nBank and the extension of the Commitment by the Bank, the Borrower hereby
\nindemnifies and holds free and harmless the Bank and its shareholders, officers,
\ndirectors, employees, agents and Affiliates (collectively, the “INDEMNIFIED
\nPARTIES” and, individually, an “INDEMNIFIED PARTY”) from and against any and all
\nactions, causes of action, suits, losses, costs, liabilities, damages and
\nexpenses actually incurred in connection with any of the Loan Documents or any
\nof the transactions contemplated thereby (irrespective of whether such
\nIndemnified Party is a party to the action for which indemnification hereunder
\nis sought), including all reasonable fees and disbursements of counsel, all
\namounts paid in settlement and all court costs (the “INDEMNIFIED LIABILITIES”),
\nincurred from time to time by the Indemnified Parties or any of them as a result
\nof, or arising out of, or relating to, or as a direct or indirect result of:<\/p>\n
(a) any transactions financed or to be financed in whole or in
\n part or directly or indirectly with the proceeds of any of the Credit
\n Extensions; or<\/p>\n
(b) the entering into or performance of this Agreement or any
\n of the other Loan Documents by any of the Indemnified Parties or the
\n Borrower or any of its Subsidiaries; or<\/p>\n
(c) the enforcement by any of the Indemnified Parties of any
\n of its rights or remedies under any of the Loan Documents or in respect
\n of any of the Collateral; or<\/p>\n
(d) the presence on or under, or the escape, seepage, leakage,
\n spillage, discharge, emission, discharging or release from, any real
\n Property owned or operated by the Borrower or any of its Subsidiaries
\n of any Hazardous Material (including, without
\n 84
\n -70-<\/p>\n
limitation, any losses, liabilities, damages, injuries, costs, expenses
\n or claims asserted or arising under any Environmental Laws), regardless
\n of whether or not caused by, or within the control of, the Borrower or
\n any of its Subsidiaries.<\/p>\n
except for any portion of such Indemnified Liabilities which a court of
\ncompetent jurisdiction has found resulted by reason of such Indemnified Party’s
\nfraud, gross negligence or willful misconduct or the breach by such Indemnified
\nParty of its obligations under the Loan Documents. If and to the extent that the
\nforegoing undertaking may be unenforceable for any reason, the Borrower hereby
\nagrees to make the maximum contribution to the payment and satisfaction of each
\nof the Indemnified Liabilities which is permissible under Applicable Law, except
\nas aforesaid to the extent not payable by reason of the Indemnified Party’s
\nfraud, negligence or willful misconduct or breach of such obligations.<\/p>\n
SECTION 10.5. SURVIVAL. <\/p>\n
The Obligations of the Borrower under each of Sections 10.3, 10.4 and
\n10.5 shall in each case survive any termination of this Agreement and the
\npayment of any of the other Obligations. The representations and warranties made
\nby the Borrower in this Agreement or in any of the other Loan Documents, or in
\nany document, certificate or statement delivered pursuant hereto or thereto or
\nin connection herewith or therewith, shall survive the execution and delivery of
\nthis Agreement and each of the other Loan Documents and the making of the Loans.<\/p>\n
SECTION 10.6. SEVERABILITY. <\/p>\n
Any provision of this Agreement, the Note or any of the other Loan
\nDocuments which is prohibited or unenforceable in any jurisdiction shall, as to
\nsuch jurisdiction, be ineffective to the extent only of such prohibition or
\nunenforceability without invalidating any of the remaining provisions of this
\nAgreement, the Note or any of the other Loan Documents or the enforceability of
\nany such provision in any other jurisdiction.<\/p>\n
SECTION 10.7. HEADINGS. <\/p>\n
The various headings of this Agreement and of each of the other Loan
\nDocuments are inserted for convenience only and shall not affect the meaning or
\ninterpretation of this Agreement or any of such other Loan Documents or any
\nprovisions hereof or thereof.<\/p>\n
SECTION 10.8. COUNTERPARTS; ENTIRE AGREEMENT.<\/p>\n
This Agreement may be executed by the parties hereto in several
\ncounterparts, each of which shall be deemed to be an original and all of which
\nshall constitute together but one and the same agreement. This Agreement, the
\nNote and the other Loan Documents constitute the entire understanding among the
\nparties hereto with respect to the subject matter hereof and supersede any prior
\nagreements, written or oral, with respect thereto, including, without
\nlimitation, all engagement letters, commitment letters and term sheets.<\/p>\n
SECTION 10.9. CHOICE OF LAW. <\/p>\n
THIS AGREEMENT, THE NOTES AND THE OTHER LOAN DOCUMENTS
\n 85
\n -71-<\/p>\n
SHALL IN ALL RESPECTS BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
\nINTERNAL SUBSTANTIVE LAWS OF THE STATE OF CALIFORNIA, AND, IN THE CASE OF
\nPROVISIONS RELATING TO INTEREST RATES, ANY APPLICABLE LAWS OF THE UNITED STATES
\nOF AMERICA.<\/p>\n
SECTION 10.10. SUCCESSORS AND ASSIGNS. <\/p>\n
This Agreement shall be binding upon and shall inure to the benefit of
\nthe parties hereto and their respective successors and assigns; provided,
\nhowever, that the Borrower may not assign or transfer any of its rights or
\nobligations hereunder or under any other Loan Documents without the prior
\nwritten consent of the Bank.<\/p>\n
SECTION 10.11. FURTHER ASSURANCES. <\/p>\n
The Borrower hereby agrees that it will, from time to time at its own
\nexpense, promptly execute and deliver all such further Instruments and take all
\nsuch further action that may be necessary or appropriate, or that the Bank may
\nreasonably request, in order to perfect, preserve or protect any Liens granted
\nor purported to be granted under the Collateral Documents, to enable the Bank to
\nexercise and enforce any of its rights or remedies under this Agreement or any
\nof the other Loan Documents or otherwise to carry out the intent of this
\nAgreement or any of the other Loan Documents.<\/p>\n
SECTION 10.12. CONSENT TO JURISDICTION. <\/p>\n
THE BORROWER BY ITS EXECUTION HEREOF (A) HEREBY IRREVOCABLY SUBMITS TO
\nTHE NONEXCLUSIVE JURISDICTION OF THE STATE COURTS OF THE STATE OF CALIFORNIA AND
\nTO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE
\nDISTRICT OF CALIFORNIA FOR THE PURPOSE OF ANY SUIT, ACTION OR OTHER PROCEEDING
\nARISING OUT OF OR BASED UPON THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE
\nSUBJECT MATTER HEREOF OR THEREOF, AND (B) HEREBY WAIVES TO THE EXTENT NOT
\nPROHIBITED BY APPLICABLE LAW, AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A
\nDEFENSE OR OTHERWISE, IN ANY SUCH PROCEEDING, ANY CLAIM THAT IT IS NOT SUBJECT
\nPERSONALLY TO THE JURISDICTION OF THE ABOVE-NAMED COURTS, THAT ITS PROPERTY IS
\nEXEMPT OR IMMUNE FROM ATTACHMENT OR EXECUTION, THAT ANY SUCH PROCEEDING BROUGHT
\nIN ONE OF THE ABOVE-NAMED COURTS IS IMPROPER, OR THAT THIS AGREEMENT OR ANY
\nOTHER LOAN DOCUMENT, OR THE SUBJECT MATTER HEREOF OR THEREOF MAY NOT BE ENFORCED
\nIN OR BY SUCH COURT. THE BORROWER HEREBY CONSENTS TO SERVICE OF PROCESS IN ANY
\nSUCH PROCEEDING IN ANY MANNER PERMITTED BY THE LAWS OF THE STATE OF CALIFORNIA,
\nAND AGREES THAT SERVICE OF PROCESS BY REGISTERED OR CERTIFIED MAIL, RETURN
\nRECEIPT REQUESTED, TO THE BORROWER IS REASONABLY CALCULATED TO GIVE ACTUAL
\nNOTICE.<\/p>\n
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]<\/p>\n
86
\n -72-<\/p>\n
SECTION 10.13. WAIVER OF JURY TRIAL. <\/p>\n
TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW WHICH CANNOT BE WAIVED,
\nEACH OF THE BANK AND THE BORROWER HEREBY WAIVES, AND COVENANTS THAT IT WILL NOT
\nASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE), ANY RIGHT TO TRIAL BY
\nJURY IN ANY FORUM IN RESPECT OF ANY ISSUE, CLAIM, DEMAND, ACTION OR CAUSE OF
\nACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT TO
\nWHICH SUCH PERSON IS PARTY OR THE SUBJECT MATTER HEREOF OR THEREOF OR ANY
\nOBLIGATION OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS
\nOF THE BANK OR THE BORROWER IN CONNECTION WITH ANY OF THE ABOVE, IN EACH CASE
\nWHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER IN CONTRACT OR TORT OR
\nOTHERWISE. THE BORROWER ACKNOWLEDGES THAT THE PROVISIONS OF THIS SECTION 10.13
\nCONSTITUTE A MATERIAL INDUCEMENT UPON WHICH THE BANK IS RELYING AND WILL RELY IN
\nENTERING INTO THIS AGREEMENT AND ANY OTHER LOAN DOCUMENT. THE BANK OR THE
\nBORROWER MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 10.13 WITH
\nANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF EACH OF THE BANK AND THE
\nBORROWER TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY.<\/p>\n
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]<\/p>\n
87
\n -73-<\/p>\n
SECTION 10.14. TERMINATION OF LOAN DOCUMENTS. Upon the latest
\nto occur of the reduction or termination in full of the Commitment (whether at
\nthe option of the Borrower pursuant to Section 2.2 or otherwise in accordance
\nwith the terms hereof), the payment in full of the unpaid principal of all of
\nthe Loans, the payment in full or (as the case may be) the termination of all
\nLetter of Credit Outstandings, or the payment in full of all other Obligations
\nunder this Agreement and the other Loan Documents, this Agreement and all of the
\nother Loan Documents shall (except as and to the extent otherwise expressly
\nprovided by Section 10.5 hereof) be for all purposes terminated and of no
\nfurther force or effect whatsoever, and, in accordance with the terms of Section
\n2.10 of the Security Agreement, all Liens granted to the Bank to secure payment
\nof all of the Obligations shall terminate and shall be of no further force or
\neffect.<\/p>\n
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]<\/p>\n
88
\n -74-<\/p>\n
IN WITNESS WHEREOF, the parties hereto have caused this REVOLVING
\nCREDIT AGREEMENT to be executed by their respective officers hereunto duly
\nauthorized on and as of the day and in the year first above written.<\/p>\n
THE BORROWER:<\/p>\n
EDISON SCHOOLS INC.<\/p>\n
By:_________________________________
\n Name:
\n Title:<\/p>\n
THE BANK:<\/p>\n
IMPERIAL BANK<\/p>\n
By:_________________________________
\n Name:
\n Title:<\/p>\n","protected":false},"template":"","meta":{"_acf_changed":false,"_stopmodifiedupdate":true,"_modified_date":"","_cloudinary_featured_overwrite":false},"corporate_contracts_companies":[7412,7840],"corporate_contracts_industries":[9415],"corporate_contracts_types":[9561,9560],"class_list":["post-41265","corporate_contracts","type-corporate_contracts","status-publish","hentry","corporate_contracts_companies-edison-schools-inc","corporate_contracts_companies-imperial-bank","corporate_contracts_industries-financial__banks","corporate_contracts_types-finance__credit","corporate_contracts_types-finance"],"acf":[],"_links":{"self":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts\/41265","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts"}],"about":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/types\/corporate_contracts"}],"wp:attachment":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/media?parent=41265"}],"wp:term":[{"taxonomy":"corporate_contracts_companies","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_companies?post=41265"},{"taxonomy":"corporate_contracts_industries","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_industries?post=41265"},{"taxonomy":"corporate_contracts_types","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_types?post=41265"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}