EXHIBIT 10.29
AMENDMENT TO THE
SUBORDINATED NOTE AND WARRANT PURCHASE AGREEMENT
This is an Amendment dated November __, 1997 ("Amendment") to the
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Subordinated Note and Warrant Purchase Agreement dated October 17, 1996
("Agreement"), by and among Corinthian Colleges, Inc. ("Company"), Primus
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Capital Fund III Limited Partnership ("Primus") and Banc One Capital Partners
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II, LLC ("BOCP II"), as successor by merger to Banc One Capital Partners II,
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Ltd., pursuant to which (A) the Company issued and sold, and BOCP II purchased,
the Company's Subordinated Notes due October 17, 2004 in the original principal
amount of $4,000,000 ("BOCP Note"), and (B) the Company issued and sold, and
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Primus purchased, the Company's Subordinated Notes due October 17, 2004 in the
original principal amount of $1,000,000 ("Primus Note"). The BOCP Note and the
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Primus Note are referred to collectively as the "Notes". BOCP II and Primus are
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referred to collectively as the "Purchasers" and individually as a
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("Purchaser").
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Unless otherwise defined herein, capitalized terms used herein which
are defined in the Agreement shall have the meanings as given in the Agreement.
Certain Defaults or Events of Default exist under the Agreement which
are more particularly described in Attachment A hereto (the Defaults and Events
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of Default described in Attachment A hereto being herein called the "Specified
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Defaults"). Subject to the satisfaction of the conditions set forth in Section 3
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below and to the Company's agreement to the amendments to the Agreement and
Notes set forth below, the Purchasers are willing to waive the Specified
Defaults and agree to the amendments.
Pursuant to paragraph 13(b) of the Agreement, and subject to and
effective only upon the satisfaction of the conditions set forth in Section 3
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below, the Purchasers and the Company agree as follows:
Section 1. WAIVER OF DEFAULTS.
The Purchasers hereby waive the Specified Defaults through the
Effective Date (as hereinafter defined). Once effective, such waiver is intended
to be effective as of and retroactive to June 30, 1997, and in the case of the
Specified Default relating to Section 9(j)(v) of the Agreement, March 31, 1997.
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Section 2. AMENDMENTS TO THE AGREEMENT AND NOTES.
The Purchasers and the Company agree that the Agreement and the Notes be
amended as follows:
(a) Any reference to "Banc One Capital Partners II, Ltd." is amended
to refer to "Banc One Capital Partners II, LLC", the successor by merger to
Banc One Capital Partners II, Ltd.
(b) Any reference to "Class A Preferred", except as provided for in
this Amendment is amended to refer to "Class A Series 1 Preferred".
(c) The following definitions in the Agreement are deleted in their
entirety and replaced with the following:
1.7 "Agreement" means this Amended Subordinated Note and Warrant
Purchase Agreement originally dated as of October 17, 1996 and
amended November __, 1997.
1.66 "Maturity Date" means with respect to the Notes, October 17,
2005.
1.73 "Notes" means $4,000,000 aggregate principal amount
Subordinated Notes issued and sold by CCI to BOCP II and the
$1,000,000 aggregate principal amount of Subordinated Notes issued
and sold to Primus, pursuant to this Agreement, each due October 17,
2005, and "Note" means any one of such Notes. The Notes are in the
form of Exhibit A.
1.96 "Related Documents" means the Warrant Certificates, Rights
Agreements, the Registration Rights Agreement, and the Purchase
Agreement.
1.105 "Senior Credit Agreement" means the Note Purchase and Revolving
Credit Agreement by and between Prudential and CCI providing for the
issue and sale of $22,500,000 principal amount of Senior Notes and up
to $5,000,000 of Senior Advances, as amended November __, 1997,
including all extensions, renewals and refinancings thereof.
1.108 "Senior Notes" means the $22,500,000 aggregate principal amount
of 11.02% Senior Secured Term Notes due October 17, 2004, issued
pursuant to the Senior Credit Agreement, including all extensions,
renewals and refinancings thereof.
(d) The following definitions are added to Section 1:
"Class A Series 1 Preferred" means the 6% Redeemable Class A
Series 1 preferred stock, $1.00 par value, $100 liquidation
value.
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"Class A Series 2 Preferred" means the 6% Convertible Class
A Series 2 preferred stock, $1.00 par value, $100
liquidation value.
"Class A Series I Preferred" means the 6% Redeemable Class
A preferred stock, $1.00 par value, $100 liquidation value.
"Class A Preferred" means collectively the Class A Series 1
Preferred, the Class A Series 2 Preferred, and the Class A
Series 3 Preferred .
(e) Section 2.2(c) of the Agreement is deleted in its entirety and
replaced with:
(c) Interest Payment Dates. The Interest on each Note
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accrued through March 31, 1998 shall be due and payable on
October 18, 1998, the Interest on each Note accrued from
April 1, 1998 through September 30, 1998 shall be due and
payable on September 30, 1998, and thereafter Interest
shall be payable quarterly in arrears on the last Business
Day of each Quarter.
(f) Section 2.2(d) of the Agreement is deleted in its entirety and
replaced with:
(d) Principal Payments. The unpaid principal amount of the
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Notes shall be due and payable pro-rata between the Notes
in quarterly installments of $281,250 beginning October
17, 2001, with the outstanding balance due on the Maturity
Date.
(g) Section 9(j) of the Agreement is deleted in its entirety and
replaced with the following:
Restricted Payments. CCI covenants that it shall not, and shall
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not permit any Subsidiary to, make, pay or declare, or commit to
make, pay or declare, any Restricted Payment, other than:
(a) dividends paid in cash by CCI on the Class A
Preferred, provided that the dividend rate on the
Class A Preferred shall not exceed 6% (or to the
extent shares of Class A Preferred have not been
optionally redeemed by CCI on or prior to the fifth
anniversary of the Closing Date, 12%);
(b) optional redemption of the Class A Preferred as
provided in the Second Restated Certificate of
Incorporation of the Company.
(c) mandatory redemption of the Class A Preferred as
provided in the Second Restated Certificate of
Incorporation of the Company;
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(d) repurchase Common Stock from employees of the
Company upon termination of employment pursuant to
arrangements approved by the Board of Directors;
and
(e) Restricted Payments made by any Subsidiary to CCI
provided, however, that no Restricted Payment shall be declared, ordered, paid
or made, or committed for, nor shall any sum or property be set aside for any
Restricted Payment, unless at the time thereof and immediately after giving
effect thereto (i) no default or Event of Default is in existence and (ii) the
sum of all Restricted Payments made after October 31, 1997 does not exceed an
amount equal to the sum of (a) 40% (or, in the case of a loss or deficit, minus
100%) of Company Net Income for each Quarter ending after September 30, 1997 and
prior to the date of such proposed Restricted Payment and (b) all interest paid
on the Notes after September 30, 1997 and prior to the date of such proposed
Restricted Payment (including the proposed Restricted Payment if it is an
interest payment on the Notes).
(h) Section 10 of the Agreement is deleted in its entirety and
replaced with the following:
Section 10. Financial Tests.
Until payment in full of the Notes and the performance by CCI of
all its obligations hereunder, CCI shall, unless each Purchaser
waives compliance therewith in writing, meet the following
Financial Tests.
10.1 Quick Ratio. The ratio (expressed as a percentage)
of the Company's Quick Assets to Company current liabilities to
be less than:
i. 55% at any time from October 31, 1997 through March 31,
2000;
ii. 75% at any time from April 1, 2000 through September 30,
2000; and
iii. 90% at all times after September 30, 2000.
10.2 Maximum Ratio of Senior Debt to Cash Flow. The ratio
(expressed as a percentage) of Company Senior Indebtedness as at
the end of any Quarter to Company Cash Flow (a) for the two
Quarter period ending December 31, 1997 to exceed 1,150%, (b) for
the three Quarter period ending March 31, 1998, to exceed 525%,
or (c) for the four Quarter period ended at the end of each
Quarter ending after March 31, 1998 to exceed (i) 400% from
April 1, 1998 through September 30, 1998; (ii) 275% from
October 1, 1998 through March 31, 1999; (iii) 225% from April 1,
1999 through June 30, 1999; (iv) 200% from July 1, 1999 through
September 30, 1999; and (v) 165% after September 30, 1999.
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10.3 Maximum Ratio of Senior Debt to Capitalization. The
ratio (expressed as a percentage) of Company Senior Indebtedness
to Company Capitalization to exceed:
i. 95% at any time from October 31, 1997 through June 30,
1998;
ii. 85% at any time from July 1, 1998 through September 30,
1998;
iii. 80% at any time from October 1, 1998 through March 31,
1999;
iv. 75% at any time from April 1, 1999 through September 30,
1999;
v. 65% at any time from October 1, 1999 through March 31,
2000;
vi. 60% at any time from April 1, 2000 through September 30,
2000, and
vii. 50% at all times after September 30, 2000.
10.4 Maximum Ratio of Total Indebtedness to
Capitalization. The ratio (expressed as a percentage) of Company
total Indebtedness to Company Capitalization to exceed:
i. 100% at any time from October 1, 1997 through
December 31, 1997;
ii. 100% at any time from January 1, 1998 through March 31,
1998;
iii 95% at any time from April 1, 1998 through December 31,
1998;
iv. 90% at any time from January 1, 1999 through June 30,
1999;
v. 85% at any time from July 1, 1999 through December 31,
1999;
vi. 70% at any time from January 1, 2000 through
September 30, 2000; and
vii. 65% at all times after September 30, 2000.
10.5 Minimum Ratio of Cash Flow and Operating Lease
Payments to Fixed Charges. The ratio (expressed as a percentage)
of (i) the sum of Company Cash Flow and Company Operating Lease
Payments to (ii) Company Fixed Charges, in each case for (A) the
two Quarter period ending December 31, 1997 to be less than 90%,
(B) the three Quarter period ending March 31, 1998 to be less
than 110% or (C) the four Quarter period ending at the end of any
Quarter ending after March 31, 1998 to be less than (a) 110%
through June 30, 1999 (b) 115% from July 1, 1999 through
September 30, 2000, (c) 135% from October 1, 2000 through
December 31, 2000 and (d) 150% at any time after December 31,
2000.
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10.6 Maximum Ratio of EBIT and Operating Lease Payments
to Interest Expense and Operating Lease Payments. The ratio
(expressed as a percentage) of (i) the sum of EBIT and Company
Operating Lease Payments to (ii) Company Interest Expense and
Company Operating Lease Payments, in each case for (A) the two
Quarter period ending December 31, 1997 to be less than 75%, (B)
the three Quarter period ending March 31, 1998 to be less than
95%, or (C) the four Quarter period ending after March 31, 1998
to be less than (a) 95% through June 30, 1998; (b) 110% from
July 1, 1998 through September 30, 1998; (c) 125% from October 1,
1998 through June 30, 1999; (d) 135% from July 1, 1999 through
March 31, 2000 and (e) 155% after March 31, 2000.
10.7 Minimum Company Cash Flow. Company Cash Flow From
Operations for the Fiscal Year set forth below to be less than
the amount set forth in the table opposite such Fiscal Year:
Fiscal Year Minimum Company
Ending June 30 Cash Flow From Operations
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1998 ($1,100,000)
1999 $4,000,000
2000 $7,500,000
2001 $13,000,000
2002 and each
Fiscal Year thereafter $14,500,000
For purposes of determining the Company's compliance with
paragraphs 10.2, 10.4 and 10.5, (i) the Company may include the
financial results of the Xxxxxxxx Schools as though the Xxxxxxxx
Schools had been acquired by the Company on July 1, 1996 and (ii)
prior to June 30, 1997, the Company may annualize the financial
results of the Quarters ending prior to such date and after the
Closing Date.
(i) The Notes shall be amended to provide that the Interest on each
Note accrued through March 31, 1998 shall be due and payable on
October 18, 1998, the Interest on each Note accrued from April 1,
1998 through September 30, 1998 shall be due and payable on
September 30, 1998, and thereafter Interest shall be payable
quarterly in arrears on the last Business Day of each Quarter.
(j) The Notes shall be amended to provide that the payments of
principal shall begin on October 17, 2001, rather than
October 17, 2000.
(k) The Notes shall be amended to provide that the Maturity Date
shall be October 17, 2005 rather than October 17, 2004.
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Section 3. CONDITIONS TO EFFECTIVENESS.
The (i) amendment of the Note Purchase and Revolving Credit Agreement dated
as of October 17, 1996 ("Prudential Agreement") by and between the Company and
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The Prudential Insurance Company of America ("Prudential"), (ii) the purchase by
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Prudential of a common stock purchase warrant ("New Warrant"), (iii) the
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amendment of the Term Note payable to Prudential ("Prudential Note"), (iv) the
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purchase of preferred stock by the Purchasers pursuant to the Purchase Agreement
dated as of this date ("Purchase Agreement"), (v) the reissuance of the Notes,
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(vi) the amendment of the Rights Agreement dated October 17, 1996 ("Rights
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Agreement") by and among the Company the Purchasers and certain shareholders of
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the Company, and (vii) the amendment of the Amended and Restated Registration
Agreement dated October 17, 1996 ("Registration Agreement") by and among the
Company, the Purchasers and certain shareholders of the Company shall be deemed
to have occurred simultaneously. The effectiveness of the waivers and amendments
herein is subject to satisfaction of the following conditions (the date upon
which such conditions are satisfied being called the "Effective Date"):
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(a) The Purchasers shall have received counterparts to this Amendment
executed by the Company.
(b) BOCP II shall have received an amended BOCP Note in the form of Exhibit
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A-1 hereto in the aggregate principal amount of $4,000,000, registered in the
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name of BOCP II, dated the date as of which the last interest payment on the
BOCP Note has been made and duly executed and delivered by the Company, in
replacement for a like principal amount of the existing BOCP Note. Promptly
after the Effective Date BOCP II will xxxx the existing BOCP Note "Replaced" and
return it to the Company.
(c) Primus shall have received an amended Primus Note in the form of
Exhibit A-1 hereto in the aggregate principal amount of $1,000,000, registered
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in the name of Primus, dated the date as of which the last interest payment on
the Primus Note has been made and duly executed and delivered by the Company, in
replacement for a like principal amount of the existing Primus Note. Promptly
after the Effective Date Primus will xxxx the existing Primus Note "Replaced"
and return it to the Company.
(d) The Prudential Agreement shall have been executed and delivered.
(e) The Prudential Note shall have been amended and a replacement
Prudential Note issued.
(f) The Rights Agreement shall have been amended.
(g) The Registration Agreement shall have been amended.
(h) The Company's Restated Certificate of Incorporation shall have been
amended and
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restated in a manner satisfactory to the Purchasers, shall be in full force and
effect under the laws of Delaware as of the Effective Date as so amended and
shall not have been further amended or modified.
The representations and warranties of the Company contained in Section 3
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hereto shall be true on and as of the Effective Date after giving effect to the
waivers, amendments and other transactions contemplated by this Amendment, and,
after giving effect to such waivers, amendments and other transactions, there
shall exist no Default or Event of Default; no material adverse change in the
business, condition (financial or otherwise), operations or prospects of the
Company and its subsidiaries shall have occurred or, to the Company's best
knowledge, be threatened since August 31, 1997, except that in September 1997,
the Company received notice that the access of three of the Company's schools to
Title IV loan funds had been terminated because of noncompliance with cohort
default rate requirements, and the Company shall have delivered to the
Purchasers an Officer's Certificate, dated the Effective Date, to both such
effects.
The transactions contemplated by this Amendment shall not violate any
applicable law or governmental regulation and shall not subject the Purchasers
to any tax, penalty, liability or other onerous condition under or pursuant to
any applicable law or governmental regulation, and the Purchasers shall have
received such certificates or other evidence as may be requested to establish
compliance with this condition.
All corporate and legal proceedings and all instruments and agreements in
connection with the transactions contemplated by this Amendment shall be
reasonably satisfactory in form and substance to the Purchasers and its counsel,
and the Purchasers shall have received all information and copies of all
documents and papers, including records of corporate and governmental
proceedings, which the Purchasers may reasonably have requested in connection
therewith, such documents and papers when appropriate to be certified by proper
corporate or governmental authorities.
Section 4. REPRESENTATIONS AND WARRANTIES.
The Company represents and warrants as follows: (a) it has all necessary
power and authority to execute and deliver this Amendment and the instruments
delivered to the Purchasers hereunder; (b) the execution, delivery and
performance of this Amendment and the instruments delivered to the Purchasers
hereunder have been duly authorized by it; (c) this Amendment has been duly
executed and delivered by the Company and constitutes the legal, valid and
binding obligation of the Company, enforceable against it in accordance with the
terms, and, on the Effective Date, the Agreement, as amended hereby, and the
instruments delivered to the Purchasers hereunder shall have been duly executed
and delivered by the Company and will constitute the legal, valid and binding
obligations of the Company, enforceable against it in accordance with their
terms; (d) the approval, execution, delivery and performance of the terms of
this letter amendment and the instruments delivered to the Purchasers hereunder
and the consummation of the transactions contemplated hereby do not violate any
contractual provision to which it is a party or by which it is or its properties
are
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bound or any law applicable to it; (e) all consents, notices, waivers and other
actions by or of the Company or any other Person that are necessary in
connection with the execution, delivery and performance by the Company of this
Amendment and the instruments delivered to the Purchasers hereunder and the
consummation by the Company of the transactions contemplated hereby have been
obtained or taken; and (f) after given effect to the foregoing waivers and
amendments and the transactions contemplated hereby no Default or Event of
Default will be in existence.
Section 5. MISCELLANEOUS.
(a) Upon the Effective Date, each reference in the Agreement to "this
Agreement," "hereunder," "hereof," "herein" or words of like import shall mean
and be a reference to the Agreement as amended hereby and each reference to the
Agreement in the Notes shall mean and be a reference to the Agreement, as
amended hereby.
(b) This letter shall be construed and enforced in accordance with, and
the rights of the parties shall be governed by, the internal law of the State of
Ohio.
(c) Except as specifically amended above, the Agreement, the Notes and the
other Related Documents shall remain in full force and effect and are hereby
ratified and confirmed. The execution, deliver and effectiveness of this
Amendment shall not, except as expressly provided herein, operate as an
amendment to any provision of the Agreement or any other Related Document nor a
waiver of any right, power or remedy of any holder of a Note, nor constitute a
waiver of, or consent to any departure from, any provision of the Agreement, any
Note or any other Related Document. The willingness of the Purchasers to agree
to the waivers and amendments herein under the circumstances described herein
shall not be taken as a commitment by or an indication of a standard for
willingness of the Purchasers to grant waivers or agree to amendments under the
same or similar circumstances.
(d) This Amendment may be executed by one or more of the parties to this
Amendment on any number of separate counterparts and all of said counterparts
taken together shall be deemed to constitute one and the same instrument.
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WITNESS the due execution hereof with intent to be legally bound hereby.
PRIMUS CAPITAL FUND III LIMITED PARTNERSHIP
By: Primus Venture Partners, Inc.
By
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Loyal X. Xxxxxx
Its
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BANC ONE CAPITAL PARTNERS II, LLC
By: Banc One Capital Partners Holdings, Ltd., Manager
By: BOCP Holdings Corporation, Manager
By
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Its: Authorized Signer
CORINTHIAN COLLEGES, INC.
By: /s/ Xxxxx X. XxXxxx
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Name: Xxxxx X. XxXxxx
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Title: Vice President & Treasurer
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WITNESS the due execution hereof with intent to be legally bound hereby.
PRIMUS CAPITAL FUND III LIMITED PARTNERSHIP
By: Primus Venture Partners, Inc.
By
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Loyal X. Xxxxxx
Its
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BANC ONE CAPITAL PARTNERS II, LLC
By: Banc One Capital Partners Holdings, Ltd., Manager
By: BOCP Holdings Corporation, Manager
By /s/ Xxxxx X. Xxxxxxx
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Its: Authorized Signer
CORINTHIAN COLLEGES, INC.
By:
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Name:
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Title:
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WITNESS the due execution hereof with intent to be legally bound hereby
PRIMUS CAPITAL FUND III LIMITED PARTNERSHIP
By : Primus Venture Partners, Inc.
By /s/ Loyal X. Xxxxxx
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Loyal X. Xxxxxx
Its President
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BANC ONE CAPITAL PARTNERS II LLC
By: Banc One Capital Partners Holdings Ltd., Manager
By: BOCP Holdings Corporation, Manager
By:
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Its: Authorized Signer
CORINTHIAN COLLEGES, INC.,
By:
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Name:
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Title:
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Attachment A
SPECIFIED DEFAULTS
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Section Description Date of Default
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7.1(a) Annual Financial Statements September 30, 1997
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9(j)(v) Restricted Payments March 31, 1997
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10.1 Quick Ratio June 30, 1997
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10.2 Maximum Ratio of Senior Debt to June 30, 1997 and
Cash Flow continuing
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10.3 Maximum Ratio of Senior Debt to June 30, 1997 and
Capitalization continuing
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10.4 Maximum Ratio of Total Indebtedness June 30, 1997 and
to Capitalization continuing
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10.5 Minimum Ratio of Cash Flow and June 30, 1997 and
Operating Lease Payments to continuing
Fixed Charges
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10.6 Maximum Ratio of EBIT and Operating June 30, 1997 and
Lease Payments to Interest Expense continuing
and Operating Lease Payments
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11(a) Event of Default - Failure to Pay June 30, 1997 and
continuing
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