LIMITED WAIVER AND SECOND
AMENDMENT TO CREDIT AGREEMENT
THIS LIMITED
WAIVER AND SECOND AMENDMENT TO CREDIT AGREEMENT (this “
Second Amendment ”) is entered into as of
November 3, 2006 (the “ Second Amendment Effective
Date ”) among THE PRINCETON REVIEW, INC., a Delaware
corporation (“ Borrower ”), the other Loan
Parties signatory hereto, the Lenders a party hereto and Golub
Capital Incorporated, a New York corporation, as administrative
agent for the Lenders (“ Administrative Agent
”).
WHEREAS, Borrower,
the other Loan Parties, Lenders and Administrative Agent are
parties to that certain Credit Agreement dated as of April 10,
2006, pursuant to which Lenders extended a revolving credit
facility to Borrower in the amount of Six Million Dollars
($6,000,000), as amended by that certain First Amendment to Credit
Agreement dated as of May 25, 2006, pursuant to which Lenders
increased the revolving credit facility to Borrower to the amount
of Ten Million Dollars ($10,000,000) (the “ Credit
Agreement ”);
WHEREAS, Borrower,
the Lenders and the Administrative Agent have agreed to amend the
Credit Agreement to waive compliance with and modify certain
provisions of the Credit Agreement, all on the terms and subject to
the conditions set forth herein;
WHEREAS, Borrower
desires that Lenders increase the Revolving Loan Commitment to an
amount of Fifteen Million Dollars ($15,000,000) for a period not to
exceed sixty (60) days to fund working capital;
WHEREAS, the
parties to the Credit Agreement agree that after sixty
(60) days from the Second Amendment Effective Date, the amount
by which Revolving Loan exceeds ten million dollars will be repaid,
or converted to a term loan as more fully provided
herein;
WHEREAS, the
parties to the Credit Agreement desire to amend the terms of the
Credit Agreement to, among other things, increase the Revolving
Loan Commitment upon the terms and subject to the conditions set
forth herein.
NOW, THEREFORE, in
consideration of the mutual agreements, provisions and covenants
contained herein, the parties agree as follows:
1.
Defined Terms . Capitalized terms used but not defined
herein shall have the meanings ascribed to them in the Credit
Agreement.
2.
Waiver . The Borrower has advised the Administrative Agent
of circumstances that could (i) constitute violations of the
covenants contained in Sections 5.1(a), 5.1(b), 5.1(d), 6.3,
6.5 and 7.10 of the Credit Agreement and (ii) cause the
representations and warranties
contained in
Sections 4.4, 4.5, 4.16 and 4.28 of the Credit Agreement to be
untrue or incorrect in a material respect as of the date when made
or deemed made, as a result of the following:
On
October 24, 2006, the Borrower determined that a restatement
of its annual reports for 2005 and 2004 and quarterly reports for
2006, 2005 and the second and third quarters of 2004 was necessary
in light of the Borrower’s review of its accounting for
embedded derivatives under Statement of Financial Accounting
Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities , as amended, related to the
Borrower’s Series B-1 Convertible Redeemable Preferred Stock.
Accordingly, the Borrower’s consolidated financial statements
included in the Borrower’s annual reports for 2005 and 2004
and quarterly reports for 2006, 2005 and the second and third
quarters of 2004 should no longer be relied upon. The Borrower will
file appropriate amendments to prior reports to effect these
restatements. (the “Disclosed Event”)
At the
Borrower’s request, the Lenders hereby waive the
Borrower’s violation of the covenants and breaches of
representations and warranties described above and the resulting
Events of Default therefrom as a result of the Disclosed
Event.
3.
Amendments to Credit Agreement . Upon satisfaction of the
conditions set forth in Section 4 hereof, the Credit Agreement
is hereby amended as follows:
(i) Schedule 1.1 (Definitions) of the
Credit Agreement is hereby amended by:
(a) deleting the definition of
“Commitments” in its entirety and replacing it as
follows:
“ ‘
Commitments ’ shall mean (a) as to any Lender,
the aggregate of such Lender’s Revolving Loan Commitment as
set forth on the signature page to the Second Amendment (as
adjusted to reflect any assignments as permitted hereunder) and
(b) as to all Lenders, the aggregate of all Lenders’
Revolving Loan Commitments which aggregate commitment shall be
(i) fifteen million dollars ($15,000,000) beginning on the
Second Amendment Effective Date and ending on the day immediately
preceding the Revolver Reduction Date and (ii) ten million
dollars ($10,000,000) beginning on the Revolver Reduction Date and
at all times thereafter.”
(b) inserting the following definitions in
appropriate alphabetical order:
“ ‘
New Commitment ’ shall mean the aggregate increase in
Commitments on the Second Amendment Effective Date, which shall be
five million dollars ($5,000,000).’ ”
“ ‘
Revolver Reduction Date ’ shall mean the date sixty
(60) days after the Second Amendment Effective Date.’
”
“ ‘
Second Amendment ’ shall mean that certain Limited
Waiver and Second Amendment to Credit Agreement, by and among
Borrower, the
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other Loan
Parties thereto, Administrative Agent and Lenders, dated as of
November 3, 2006.’ ”
“ ‘
Second Amendment Effective Date ’ has the meaning
given to such term by the Second Amendment.’
”
(c) deleting the definition of
“Revolving Loan Commitment” in its entirety and
replacing it as follows:
“ ‘
Revolving Loan Commitment ’ shall mean (a) as to
any Lender, the aggregate commitment of such Lender to make
Revolving Credit Advances as set forth in the signature page to the
Second Amendment (as adjusted to reflect any assignments as
permitted hereunder) and (b) as to all Lenders, the aggregate
commitment of all Lenders to make Revolving Credit Advances, which
aggregate commitment shall be (i) fifteen million dollars
($15,000,000) beginning on the Second Amendment Effective Date and
ending on the day immediately preceding the Revolver Reduction Date
and (ii) ten million dollars ($10,000,000) beginning on the
Revolver Reduction Date and at all times
thereafter.”
(ii) Section 2.5(a) of the Credit
Agreement is hereby deleted in its entirety and the following is
substituted therefor:
“Borrower
shall pay interest to Administrative Agent, for the ratable benefit
of Lenders in accordance with the Loans being made by each Lender,
in arrears on each applicable Interest Payment Date, with respect
to the Revolving Credit Advances, the Index Rate plus the Revolver
Index Margin per annum or, at the election of Borrower, the
applicable LIBOR Rate plus the Revolver LIBOR Margin per annum,
based on the aggregate Revolving Credit Advances outstanding from
time to time. The Revolver Index Margin will be 1.95% per annum and
the Revolver LIBOR Margin will be 4.00% per annum; provided
, that with respect to the aggregate Revolving Credit Advances
outstanding in excess of ten million dollars ($10,000,000), the
Revolver Index Margin will be 4.00% per annum and the Revolver
LIBOR Margin will be 5.00% per annum. For clarification purposes,
nothing in this section 2.5(a) shall permit the aggregate Revolving
Credit Advances outstanding to exceed ten million dollars
($10,000,000) on or after the Revolver Reduction
Date.”
(iii) Section 2.3(a) of the Credit
Agreement is hereby deleted in its entirety and the following is
substituted therefor:
“
Voluntary Prepayments . Borrower may at any time on at least
five (5) days’ prior written notice to Administrative
Agent voluntarily prepay all or part of the Revolving Loan and
permanently reduce (but not terminate) the Revolving Loan
Commitment; provided that (i) any such prepayments or
reductions shall be in a
3
minimum amount
of $250,000 and integral multiples of $100,000 in excess of such
amounts, and (ii) the Revolving Loan Commitment shall not be
reduced to an amount less than $3,000,000. In addition, Borrower
may at any time on at least five (5) days
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