Exhibit 10.1


 


	
  Loan Agreement

  	
  

  



 


THIS LOAN
AGREEMENT (the “Agreement”), is
entered into as of Ocotober 1, 2008, between NEW HORIZONS
WORLDWIDE, INC.  (the “Borrower”), with an address at 1 West Elm Street, Suite 125,
Conshohocken, PA, 19428, and PNC BANK, NATIONAL
ASSOCIATION (the  “Bank”), with an address at 1600 Market Street, 22nd
Floor, Philadelphia, PA 19103.


 


The Borrower
and the Bank, with the intent to be legally bound, agree as follows:


 


1.             Loan.  The Bank has agreed to make the following credit facility
available to the Borrower subject to the terms and conditions and in reliance
upon the representations and warranties of the Borrower set forth in this
Agreement:


 


1.1.         Facility.


 


(a)           Revolving Line
of Credit.


 


(i)            Commitment to
Advance.  The credit facility is a
committed revolving line of credit under which the Bank will, from time to
time, make advances to the Borrower and the Borrower may borrow, repay and
reborrow during the Revolving Line of Credit Commitment Period (as hereinafter
defined) in a principal amount in the aggregate at any time outstanding not to
exceed $6,000,000 or such lesser amount to the extent reduced by the Borrower
in accordance with Section 1.1(b) hereof (the “Revolving Line of Credit”).  The “Revolving
Line of Credit Commitment Period” means the period commencing with
the date hereof through and including the earlier of (A) the Expiration
Date (as defined herein), and (B) the date on which the Bank’s commitment
to make advances under the Revolving Line of Credit terminates under this
Agreement.  The “Expiration Date” means September 30,
2011, or such later date as may be designated by the Bank by written notice to
the Borrower.  The obligation of the
Borrower to repay the aggregate outstanding advances under the Revolving Line
of Credit (the “Revolving Advances”)  shall be evidenced by a promissory note of
the Borrower (the “Note”).  Advances under the Revolving Line of Credit
will be used by the Borrower for its working capital and other general business
purposes.


 


(ii)           Investment Sweep.  The Revolving Line of Credit will include an
investment and borrowing sweep feature on the terms and conditions of a Working
Cash®, Line of Credit, Investment Sweep Rider (the “Sweep Rider”) to be executed and delivered by the Borrower to
the Bank in form and substance satisfactory to the Bank, the terms of which are
hereby incorporated in this Agreement by reference.  The Sweep Rider will remain in effect until
such time (if any) as it is terminated in accordance with its terms.


 


(iii)          Letters of Credit.  From the date hereof through the date five (5) days
prior to the Expiration Date, the Borrower may request that the Bank, in lieu
of, or in combination with, cash advances, issue standby letters of credit
(individually, a “Letter of Credit”
and collectively, the “Letters of Credit”)
under the Revolving Line of Credit with no such Letter of Credit having an
expiration date later than twelve (12) months from the date of issuance; provided,
however, at no time shall the aggregate face amount of all Letters of
Credit issued and outstanding exceed $1,000,000; provided, further,
that if the expiration date for any Letter of Credit requested by the Borrower
is later than the Expiration Date, the Borrower shall on or before the day five
(5) days prior to the Expiration Date deposit with the Bank as collateral
for the Obligations (as hereinafter defined), cash or marketable securities
(acceptable to the Bank and margined in accordance with the Bank’s customary
requirements) in an amount equal to 105% of the maximum amount available to be
drawn at such time (determined without regard to whether any conditions to
drawing could be met at such time) under each outstanding Letter of Credit, and
the Borrower hereby pledges to the Bank, and grants to the Bank a security 


 

















 


interest in, all such cash and
securities as security for the such Obligations.  The availability of advances under the
Revolving Line of Credit shall be reduced by the face amount of each Letter of
Credit issued and outstanding (whether or not drawn).  Each payment by the Bank under a Letter of
Credit shall in the Bank’s discretion constitute an advance of principal under
the Revolving Line of Credit and shall be evidenced by the Note.  The Letters of Credit shall be governed by
the terms of this Agreement and by one or more reimbursement agreements, in
form and content satisfactory to the Bank and the Borrower, executed by the
Borrower in favor of the Bank (collectively, the “Reimbursement Agreement”).  Each request for the issuance of a Letter of
Credit must be accompanied by the Borrower’s execution of an application on the
Bank’s standard forms (each, an “Application”),
together with all supporting documentation. 
Each Letter of Credit will be issued in the Bank’s sole discretion and
in a form acceptable to the Bank and the Borrower.  The Borrower shall pay to the Bank the Bank’s
standard issuance fee, on the face amount of each Letter of Credit upon
issuance, together with such other customary fees, commissions and expenses
therefor as shall be required by the Bank. 
This letter is not a pre advice for the issuance of a letter of credit
and is not irrevocable.


 


(b)           Termination and
Reduction of the Commitment.  Upon at least five (5) days
prior irrevocable written notice to the Bank, the Borrower may at any time
prior to the Expiration Date, in whole permanently terminate, or from time to
time in part permanently reduce, the Revolving Line of Credit; provided,
however, that (i) each partial reduction of the Revolving Line of Credit
shall be in a minimum aggregate principal amount of $250,000 or in integral
multiples of $250,000 in excess thereof, and (ii) the Revolving Line of
Credit may not be reduced or terminated, if, after giving effect thereto and
any prepayments of the Revolving Advances made on the effective date thereof,
the aggregate amount of the Revolving Advances plus the face amount of each
Letter of Credit issued and outstanding (whether or not drawn) would exceed the
Revolving Line of Credit.


 


(c)           Unused Fee.  The Borrower agrees to pay to the Bank, on each January 1,
April 1, July 1 and October 1, commencing on January 1,
2009, during the Revolving Line of Credit Commitment Period, and on the date on
which the Revolving Line of Credit shall be permanently terminated or reduced
as provided herein, an unused fee (the “Unused
Fee”) at a rate per annum equal to twenty-five basis points (.25%)
on the average daily amount of the Unused Revolving Line of Credit (as
hereinafter defined) of the Bank during the preceding calendar quarter (or shorter
period commencing on the date hereof or ending on the last day of the Revolving
Line of Credit Commitment Period).  “Unused Revolving Line of Credit” means, at
any particular time during the Revolving Credit Commitment Period, an amount
equal to the excess, if any, of the Revolving Line of Credit over the sum of (a) the
Revolving Advances and (b) the face amount of each outstanding Letter of
Credit (whether or not drawn).  The
Unused Fee due to the Bank shall commence to accrue on the date hereof and
shall cease to accrue on the last day of the Revolving Line of Credit
Commitment Period.  The Unused Fee shall
be (a) computed on the basis of the actual days elapsed in a year of 365
days, and (b) paid on the dates due in immediately available funds to the
Bank.  Once paid the Unused Fee shall not
be refundable under any circumstances except in the case of manifest error by
the Bank in the computation of the Unused Fee, which error is raised by the
Borrower to the Bank within sixty (60) days of payment of such Unused Fee.


 


1.2.         Note.  The Note and renewals, extensions, amendments and
restatements thereof acceptable to the Bank shall set forth the interest rate,
repayment and other provisions, the terms of which are incorporated into this
Agreement by reference.


 


2.             Security.  The security for repayment of the Loan shall
include but not be limited to the collateral, guaranties and other documents
heretofore, contemporaneously or hereafter executed and delivered to the Bank
(the “Security Documents”), which shall
secure repayment of obligations under the Loan, the Note and the other Loan
Documents (as defined below), including any advances, debts, liabilities,
obligations, covenants and duties owing by the Borrower to the Bank under the
Loan Documents, of any kind or nature, present or future (including any
interest accruing thereon after maturity, or after the filing of any petition
in bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding relating to the Borrower, whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding), whether direct or
indirect, absolute or contingent, joint or several, due or to become due, now
existing or hereafter arising; and any amendments, 


 


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extensions, renewals and increases of or to any of the foregoing, and
all reasonable out-of-pocket costs and expenses of the Bank incurred in the
documentation, negotiation, modification, enforcement, collection and otherwise
in connection with any of the foregoing, including attorneys’ fees and expenses
(hereinafter referred to collectively as the “Obligations”).  Unless expressly provided to the contrary in
documentation for any other loan or loans, it is the express intent of the Bank
and the Borrower that all Obligations including those included in the Loan be
cross-collateralized and cross-defaulted, such that collateral securing any of
the Obligations shall secure repayment of all Obligations and a default under
any Obligation shall be a default under all Obligations.


 


This
Agreement, the Note, the Security Documents and all other agreements and
documents executed and/or delivered pursuant hereto, as each may be amended,
modified, extended or renewed from time to time, are collectively referred to
as the “Loan Documents.”  Capitalized terms not defined
herein shall have the meanings ascribed to them in the Loan Documents.


 


3.             Representations
and Warranties.  The Borrower hereby makes the
following representations and warranties, which shall be continuing in nature
and remain in full force and effect until the Obligations are paid in full, and
which shall be true and correct except as otherwise set forth on the Addendum
attached hereto and incorporated herein by reference (the “Addendum”):


 


3.1.         Existence,
Power and Authority.  Each of the Borrower and each
Subsidiary (as hereinafter defined) (individually, each a “Loan Party”, and
collectively, the “Loan Parties”) is duly organized, validly existing and in
good standing under the laws of the State of its incorporation or organization
and has the power and authority to own and operate its assets and to conduct
its business as now or proposed to be carried on, and is duly qualified,
licensed and in good standing to do business in all jurisdictions where its
ownership of property or the nature of its business requires such qualification
or licensing.  Each of the Loan Parties
is duly authorized to execute and deliver the Loan Documents to which it is a
party, all necessary action to authorize the execution and delivery of the Loan
Documents has been properly taken, and the Borrower is and will continue to be
duly authorized to borrow under this Agreement and to perform all of the other
terms and provisions of the Loan Documents.


 


3.2.         Financial
Statements.  The financial statement
contained in Borrower’s (i) Form 10-K filed with the Securities and
Exchange Commission (the “SEC”)
for the twelve month period ended December 31, 2007 (the “Form 10-K”); and (ii) Form 10-Q
filed with the SEC for the six-month period ended June 30, 2008 (the “Form 10-Q,” and collectively with the Form 10-K,
the “Historical Financial Statements”)
are true, complete and accurate in all material respects and fairly present the
financial condition, assets and liabilities, whether accrued, absolute,
contingent or otherwise and the results of the Borrower’s operations for the
period specified therein.  The Historical
Financial Statements have been prepared in accordance with generally accepted
accounting principles (“GAAP”)
consistently applied from period to period, subject in the case of interim
statements to normal year-end adjustments and to any comments and notes
acceptable to the Bank in its sole discretion.


 


3.3.         No Material
Adverse Change.  Since the date of the most
recent Financial Statements (as hereinafter defined), the Borrower and its
Subsidiaries, taken as a whole, have not suffered any damage, destruction or
loss, and no event or condition has occurred or exists, which has resulted or
is reasonably likely to result in a material adverse change in its business,
assets, operations, condition (financial or otherwise) or results of operation.


 


3.4.         Binding
Obligations.  Each of the Loan Parties has
full power and authority to enter into the transactions provided for in this
Agreement and has been duly authorized to do so by appropriate action of its
Board of Directors; and the Loan Documents, when executed and delivered by the
Loan Parties party thereto, will constitute the legal, valid and binding obligations
of the Loan Parties party thereto enforceable in accordance with their terms.


 


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3.5.         No Defaults or
Violations.  There does not exist any Event
of Default under this Agreement or any material default or violation by any
Loan Party of or under any of the terms, conditions or obligations of: (i) its
articles or certificate of incorporation, regulations or bylaws if such Loan
Party is a corporation or its other organizational documents as applicable; (ii) any
indenture, mortgage, deed of trust, franchise, permit, contract, agreement, or
other instrument to which it is a party or by which it is bound; or (iii) any
law, ordinance, regulation, ruling, order, injunction, decree, condition or
other requirement applicable to or imposed upon it by any law, the action of
any court or any governmental authority or agency; and the consummation of this
Agreement and the transactions set forth herein will not result in any such
default or violation or Event of Default.


 


3.6.         Title to Assets.  As of the date hereof, the Loan Parties have good and
marketable title to the assets reflected on the Historical Financial
Statements, free and clear of all liens and encumbrances, except for (i) current
taxes and assessments not yet due and payable, (ii) assets disposed of by
the Loan Parties in the ordinary course of business since the date of the most
recent Financial Statements, (iii) those liens or encumbrances, if any,
specified on the Addendum, and (iv) Permitted Liens (as defined below).


 


3.7.         Litigation.  As of the date hereof, there are no actions, suits,
proceedings or governmental investigations pending or, to the knowledge of the
Borrower, threatened against any Loan Party, which is reasonably likely to
result in a material adverse change in the business, assets, operations,
condition (financial or otherwise) or results of operations of the Loan Parties
when taken as a whole, and there is no basis known to the Borrower for any
action, suit, proceeding or investigation which could result in such a material
adverse change.  All pending and
threatened litigation against any Loan Party in which greater than $50,000 is
at issue is listed on the Addendum.


 


3.8.         Tax Returns.  Each Loan Party has filed all returns and reports that are
required to be filed by it in connection with any federal, state or local tax,
duty or charge levied, assessed or imposed upon it or its property or withheld
by it, including income, unemployment, social security and similar taxes, and
all of such taxes when due have been either paid or adequate reserve or other
provision has been made therefor.


 


3.9.         Employee
Benefit Plans.  Each employee benefit plan as to
which a Loan Party may have any liability complies in all material respects
with all applicable provisions of the Employee Retirement Income Security Act
of 1974 (as amended from time to time, “ERISA”),
including minimum funding requirements, and (i) no Prohibited Transaction
(as defined under ERISA) has occurred with respect to any such plan, (ii) no
Reportable Event (as defined under Section 4043 of ERISA) has occurred
with respect to any such plan which would cause the Pension Benefit Guaranty
Corporation to institute proceedings under Section 4042 of ERISA, (iii) no
Loan Party has withdrawn from any such plan or initiated steps to do so, and (iv) no
steps have been taken to terminate any such plan.


 


3.10.       Environmental
Matters.  Each Loan Party is in
compliance, in all material respects, with all Environmental Laws (as
hereinafter defined), including, without limitation, all Environmental Laws in
jurisdictions in which the Borrower owns or operates, or has owned or operated,
a facility or site, stores collateral, arranges or has arranged for disposal or
treatment of hazardous substances, solid waste or other waste, accepts or has
accepted for transport any hazardous substances, solid waste or other wastes or
holds or has held any interest in real property or otherwise.  Except as otherwise disclosed on the Addendum,
no litigation or proceeding arising under, relating to or in connection with
any Environmental Law is pending or, to the best of the Borrower’s knowledge as
of the date hereof, threatened against a Loan Party, any real property which a
Loan Party holds or has held an interest or any past or present operation of
the Borrower.  No release, threatened
release or disposal of hazardous waste, solid waste or other wastes is
occurring, or to the best of the Borrower’s knowledge has occurred, on, under
or to any real property in which the Borrower holds or has held any interest or
performs or has performed any of its operations, in violation of any
Environmental Law.  As used in this
Section, “litigation or proceeding”
means any demand, claim notice, suit, suit in equity, action, administrative
action, investigation or inquiry whether brought by a governmental authority or
other person, and “Environmental Laws”
means all 


 


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provisions of laws, statutes, ordinances, rules, regulations, permits,
licenses, judgments, writs, injunctions, decrees, orders, awards and standards
promulgated by any governmental authority concerning health, safety and
protection of, or regulation of the discharge of substances into, the
environment.


 


3.11.       Intellectual
Property.  Each Loan Party owns or is
licensed to use all patents, patent rights, trademarks, trade names, service
marks, copyrights, intellectual property, technology, know-how and processes
necessary for the conduct of its business as currently conducted that are material
to the condition (financial or otherwise), business or operations of such Loan
Party.


 


3.12.       Regulatory
Matters.  No part of the proceeds of the
Loan will be used for “purchasing” or “carrying” any “margin stock” within the
respective meanings of each of the quoted terms under Regulation U of the Board
of Governors of the Federal Reserve System as now and from time to time in
effect or for any purpose which violates the provisions of the Regulations of
such Board of Governors.


 


3.13.       Solvency.  As of the date hereof and after giving effect to the
transactions contemplated by the Loan Documents, (i) the aggregate value
of the Borrower’s assets will exceed its liabilities (including contingent,
subordinated, unmatured and unliquidated liabilities), (ii) each Loan
Party will have sufficient cash flow to enable it to pay its debts as they
become due, and (iii) no Loan Party will have unreasonably small capital
for the business in which it is engaged.


 


3.14.       Disclosure.  None of the Loan Documents contains or will contain any
untrue statement of material fact or omits or will omit to state a material
fact necessary in order to make the statements contained in this Agreement or
the Loan Documents not misleading.  There
is no fact known to the Borrower which materially adversely affects or, so far
as the Borrower can now reasonably foresee, is likely to materially adversely
affect the business, assets, operations, condition (financial or otherwise) or
results of operation of the Loan Parties, when taken as a whole, and which has
not otherwise been fully set forth in this Agreement or in the Loan Documents.


 


3.15.       Guaranty. 
As of the date hereof, each wholly-owned subsidiary of the Borrower
(each a “Subsidiary” and collectively the “Subsidiaries”) has guaranteed the
Obligations pursuant to a Guaranty and Suretyship Agreement, dated as of the
date hereof by and among the signatories thereto.  A list of each of the Borrower’s Subsidiaries
as of the date hereof is set forth on the Addendum.


 


4.             Affirmative
Covenants.  The Borrower agrees that from
the date of execution of this Agreement until all Obligations have been paid in
full and any commitments of the Bank to the Borrower have been terminated, the
Borrower will, and/or will cause each Subsidiary to:


 


4.1.         Books and
Records.  Maintain books and records in
accordance with GAAP and give representatives of the Bank access thereto at all
reasonable times, including permission to examine, copy and make abstracts from
any of such books and records and such other information as the Bank may from
time to time reasonably request, and the Borrower will make available, or cause
to be made available, to the Bank for examination copies of any reports,
statements and returns which a Loan Party may make to or file with any federal,
state or local governmental department, bureau or agency.


 


4.2.         Interim
Financial Statements; Certificate of No Default.  Furnish the Bank within forty-five (45) days after the
end of each quarter the Borrower’s Financial Statements for such period, in
reasonable detail, certified by an authorized officer of the Borrower and
prepared in accordance with GAAP consistently applied from period to
period.  The Borrower shall also deliver
a certificate as to its compliance with applicable financial covenants
(containing detailed calculations of all financial covenants) for the period
then ended and whether any Event of Default exists, and, if so, the nature
thereof and the corrective measures the Borrower proposes to take.  As used in this Agreement, “Financial Statements” means the Borrower’s
consolidated and, if required by the Bank in its sole discretion, consolidating
balance sheets, income statements and statements of cash flows for the year,
month or quarter together with year-to-date figures and comparative figures for
the corresponding periods of the prior year.


 


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4.3.         Annual
Financial Statements.  Furnish the Borrower’s Financial
Statements to the Bank within ninety (90) days after the end of each fiscal
year.  Those Financial Statements will be
prepared on an audited  basis in
accordance with GAAP by an independent certified public accountant selected by
the Borrower and satisfactory to the Bank. 
Audited Financial Statements shall contain the unqualified opinion of an
independent certified public accountant and all accountant examinations shall
have been made in accordance with GAAP consistently applied from period to
period.


 


4.4.         Payment of
Taxes and Other Charges.  Pay and discharge when due all
indebtedness and all taxes, assessments, charges, levies and other liabilities
imposed upon a Loan Party, its income, profits, property or business, except
those which currently are being contested in good faith by appropriate
proceedings and for which a Loan Party shall have set aside adequate reserves
or made other adequate provision with respect thereto acceptable to the Bank in
its reasonable discretion.


 


4.5.         Maintenance of
Existence, Operation and Assets.  Do all things necessary to (i) maintain,
renew and keep in full force and effect its organizational existence and all
rights, permits and franchises necessary to enable it to continue its business
as currently conducted; (ii) continue in operation in substantially the
same manner as at present; (iii) keep its properties in good operating
condition and repair; and (iv) make all necessary and proper repairs,
renewals, replacements, additions and improvements thereto.


 


4.6.         Covenant to
Guarantee Obligations and Give Security.  Upon the formation
or acquisition of any new Subsidiary, the Borrower shall, at the Borrower’s
expense:


 


(i)            within 30 days after
such formation or acquisition, cause such Subsidiary and cause each direct and
indirect parent of such Subsidiary (if it has not already done so), to duly execute
and deliver to the Bank a guaranty or guaranty supplement, in form and
substance satisfactory to the Bank, guaranteeing the Borrower’s Obligations;


 


(ii)           within 30 days after
such formation or acquisition, cause such Subsidiary and each direct and indirect
parent of such Subsidiary (if it has not already done so) to duly execute and
deliver to the Bank a security agreement, as specified by and in form and
substance satisfactory to the Bank, securing payment of all the Obligations;
and


 


(iii)          within 30 days after
such formation or acquisition, cause such Subsidiary and each direct and
indirect parent of such Subsidiary (if it has not already done so) to take
whatever action (including the filing of Uniform Commercial Code financing
statements, the giving of notices and the endorsement of notices on title
documents) may be necessary or advisable in the opinion of the Bank to vest in
the Bank valid and subsisting liens on the properties purported to be subject
to the security agreement delivered pursuant to this Section 4.6
enforceable against all third parties in accordance with their terms.


 


4.7.         Insurance.  Maintain, with financially sound and reputable insurers,
insurance with respect to its property and business against such casualties and
contingencies, of such types and in such amounts, as is customary for
established companies engaged in the same or similar business and similarly
situated.  In the event of a conflict
between the provisions of this Section and the terms of any Security
Documents relating to insurance, the provisions in the Security Documents will
control.


 


4.8.         Compliance with
Laws.  Comply with all laws applicable
to each Loan Party and material to the operation of its business (including
without limitation any statute, ordinance, rule or regulation relating to
employment practices, pension benefits or environmental, occupational and
health standards and controls).


 


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4.9.         Bank Accounts.  Establish and maintain at the Bank the Borrower’s primary
depository accounts.


 


4.10.       Financial
Covenants.  Comply with all of the financial
and other covenants, if any, set forth on the Addendum.


 


4.11.       Additional
Reports.  Provide prompt written notice to
the Bank of the occurrence of any of the following (together with a description
of the action which the Borrower proposes to take with respect thereto):  (i) any Event of Default or any event,
act or condition which, with the passage of time or the giving of notice, or
both, would constitute an Event of Default (a “Default”), (ii) any
litigation filed by or against a Loan Party in which greater than $50,000 is at
issue, (iii) any Reportable Event or Prohibited Transaction with respect
to any Employee Benefit Plan(s) (as defined in ERISA) and (iv) any event
which might result in a material adverse change in the business, assets,
operations, condition (financial or otherwise) or results of operation of the
Loan Parties, when taken as a whole.


 


5.             Negative
Covenants.  The Borrower covenants and
agrees that from the date of this Agreement until all Obligations have been
paid in full and any commitments of the Bank to the Borrower have been
terminated, except as set forth in the Addendum, the Borrower will not, and
will not allow any Subsidiary to, without the Bank’s prior written consent:


 


5.1.         Indebtedness.  Create, incur, assume or suffer to exist any indebtedness
for borrowed money other than: (i) with respect to the Revolving Line of
Credit and any subsequent indebtedness to the Bank; (ii) open account trade
debt incurred in the ordinary course of business and not past due; (iii) indebtedness
in respect of purchase money financings of personal property and indebtedness
in respect of capital leases in an aggregate principal amount not to exceed
$500,000 at any time outstanding; and (iv) indebtedness secured by
Permitted Liens.


 


5.2.         Liens and
Encumbrances.  Except as provided in Section 3.6,
create, assume, incur or permit to exist any mortgage, pledge, encumbrance,
security interest, lien or charge of any kind upon any of its property, now
owned or hereafter acquired, or acquire or agree to acquire any kind of
property subject to any conditional sales or other title retention agreement,
except for the following (collectively, “Permitted
Liens”):  (i) taxes and
assessments not yet due and payable or being contested in good faith by
appropriate proceedings and for which a Loan Party has set aside adequate
reserves or made other adequate provision with respect thereto acceptable to
the Bank in its reasonable discretion; (ii) those liens or encumbrances
specified on the Addendum; (iii) liens securing indebtedness permitted by Section 5.1(iii) above;
(iv) statutory liens of landlords, and of carriers, warehousemen,
mechanics and/or materialmen, and other liens that arise by operation of law,
in each case only for amounts not yet due or that are being contested in good
faith by appropriate proceedings and for which a Loan Party has set aside
adequate reserves or made other adequate provision with respect thereto acceptable
to the Bank in its reasonable discretion; (v) liens incurred or deposits
made in the ordinary course of business in connection with workers’
compensation, unemployment insurance and other types of benefits, statutory
obligations and other similar obligations; (vi) zoning, building codes and
other land use laws regulating the use or occupancy of real property or the
activities conducted thereon and easements, covenants, conditions, restrictions
and other similar matters of record affecting title to real property which
taken in the aggregate do not interfere with the ordinary course of business of
a Loan Party; (vii) judgment liens, so long as such liens do not
constitute an Event of Default; (viii) any right of set-off granted in
favor of any financial institution in respect of any deposit accounts opened
and maintained in the ordinary course of business or pursuant to the
requirements of this Agreement; and (ix) liens securing the Obligations.


 


5.3.         Guarantees.  Guarantee, endorse or become contingently liable for the
obligations of any person, firm, corporation or other entity, except in
connection with the endorsement and deposit of checks in the ordinary course of
business for collection.


 


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5.4.         Loans or
Advances.  Purchase or hold beneficially
any stock, other securities or evidences of indebtedness of, or make or have
outstanding, any loans or advances to, or otherwise extend credit to, or make
any investment or acquire any interest whatsoever in, any other person, firm,
corporation or other entity, except for the following: (i) advances to
officers, directors and employees for business travel and similar temporary
advances made in the ordinarily course of business and loans to officers,
directors and employees for general purposes not to exceed $100,000 in the
aggregate outstanding at any time; (ii) deposit accounts opened and
maintained in the ordinary course of business or pursuant to the requirements
of this Agreement; (iii) investments in Cash Equivalents (as defined
herein); and (iv) debt obligations or investments received by Borrower in
connection with the bankruptcy or reorganization of its customers.  For purposes of this Agreement “Cash Equivalents” means (a) securities
with maturities of 90 days or less from the date of acquisition issued or fully
guaranteed or insured by the United States or any agency thereof, (b) certificates
of deposit with maturities of 90 days or less from the date of acquisition and
overnight bank deposits of any commercial bank having capital, surplus and
undivided profits aggregating at least $500,000,000, (c) repurchase
obligations of any commercial bank satisfying the requirements of clause (b) of
this definition, (d) commercial paper of a domestic issuer rated at least
A-1 or better by Standard & Poor’s Ratings Group, a division of The
McGraw-Hill Companies, Inc.  (“S&P”) or P-1 or better by Moody’s
Investors Service, Inc.  (“Moody’s”) and in either case maturing
within 90 days after the date of acquisition, (e) securities with
maturities of 90 days or less from the date of acquisition issued or fully
guaranteed by any state, commonwealth or territory of the United States or by
any political subdivision or taxing authority of any such state, commonwealth
or territory, and such securities of such state commonwealth, territory,
political subdivision or taxing authority, as the case may be, are rated at
least A by S&P or A by Moody’s, (f) securities with maturities of 90
days or less from the date of acquisition backed by standby letters of credit
issued by any commercial bank satisfying the requirements of clause (b) of
this definition, or (g) shares of money market, mutual or similar funds
which invest exclusively in assets satisfying the requirements of clauses (a) through
(f) of this definition.


 


5.5.         Merger or
Transfer of Assets.  Liquidate or dissolve, or merge
or consolidate with or into any person, firm, corporation or other entity, or
sell, lease, transfer or otherwise dispose of all or any substantial part of
its property, assets, operations or business, whether now owned or hereafter
acquired, except for the following: (i) the sale of obsolete, worn out or
replaced equipment or excess equipment no longer needed in the ordinary course
of business, including the sale and replacement of trucks in the ordinary
course of business; (ii) the sale of inventory in the ordinary course of
business; and (iii) the sale of doubtful accounts receivable for
collection purposes in the ordinary course of business.  In the event a Loan Party disposes of assets
as permitted by this Section 5.5, such assets shall automatically be
released from the lien granted to the Bank under the Loan Documents.


 


5.6.         Change in
Business, Management or Ownership.  Make or permit any change in (i) its
form of organization without 30 days’ prior written notice to Bank; (ii) the
nature of its business as carried on as of the date hereof, if such change
is material; or (iii) with respect to the Borrower, its equity ownership
giving rise to Change of Control (as herein defined).  For purposes of this Agreement, “Change of Control” shall mean any of the
following events: (a) the sale, lease, transfer or other disposition
(other than by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the assets of
Borrower and its Subsidiaries taken as a whole to any “person” or “group”
(within the meaning of Sections 13(d) and 14(d)(2) of the Securities
Exchange Act), (b) Borrower shall fail to own, directly or indirectly,
100% of the outstanding Capital Stock of any Subsidiary of Borrower, (c) any
person or two or more persons acting in concert shall have acquired beneficial
ownership, directly or indirectly, of, or shall have acquired by contract or
otherwise, or shall have entered into a contract or arrangement that, upon
consummation, will result in its or their acquisition of, control over, [50%] or more of the capital stock or other
equity interests of Borrower or (d) during any period of up to 24
consecutive months, commencing after the date hereof, individuals who at the
beginning of such 24-month period were directors of Borrower (together with any
new director whose election by Borrower’s Board of Directors or whose
nomination for election by Borrower’s shareholders was approved by a vote of at
least two-thirds of the directors then still in office who either were
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of 


 


8

















 


the directors of Borrower then in office.  As used herein, “beneficial ownership” shall
have the meaning provided in Rule 13d-3 of the Securities and Exchange
Commission under the Securities Exchange Act. 
For purposes hereof, “Capital Stock”
means any and all shares, interests, participations or other equivalents
(however designated) of capital stock of a corporation, any and all
partnerships interests in a partnership (general or limited), any and all
equivalent in an entity, including interests in a limited liability company and
any and all warrants or options to purchase any of the foregoing.


 


5.7.         Dividends.  Declare or pay any dividends on or make any distribution
with respect to any class of its equity or ownership interest, or purchase,
redeem, retire or otherwise acquire any of its equity.


 


5.8.         Acquisitions.  Make acquisitions of all or substantially all of the
property or assets of any person, firm, corporation or other entity.


 


6.             Events of
Default.  The occurrence of any of the
following will be deemed to be an  “Event of Default”:


 


6.1.         Covenant
Default.  The Borrower shall default in
the performance of any of the covenants or agreements contained in this
Agreement.


 


6.2.         Breach of Warranty.  Any Financial Statement, representation, warranty or
certificate made or furnished by the Borrower to the Bank in connection with
this Agreement shall be false, incorrect or incomplete in a material respect
when delivered or made.


 


6.3.         Other Default.  The occurrence of an Event of Default as defined in the Note
or any of the Loan Documents.


 


Upon the
occurrence and during the continuance of an Event of Default, the Bank will
have all rights and remedies specified in the Note and the Loan Documents and
all rights and remedies (which are cumulative and not exclusive) available
under applicable law or in equity.


 


7.             Conditions.


 


7.1.         Initial Advance.  The Bank’s obligation to make the initial advance under the
Revolving Line of Credit is subject to the conditions that as of the date of
making such initial advance:


 


(a)           No Event of
Default.  No Event of Default or event
which with the passage of time, the giving of notice or both would constitute
an Event of Default shall have occurred and be continuing;


 


(b)           Corporate
Proceedings.  The Bank shall have received a
certificate of the Secretary of the Borrower dated as of the date hereof
certifying (i) that attached thereto is a true and complete copy of the
resolutions, in form and substance satisfactory to the Bank, of its members
authorizing the execution, delivery and performance of this Agreement, the
Notes, and each of the other Loan Documents to which it is a party, and that
such resolutions have not been amended, modified, revoked or rescinded in any
manner and are in full force and effect, (ii) that attached thereto is a
true and complete copy of its certificate of incorporation, certified by the
Secretary of State of the state in which it is formed and bylaws and that such
certificate of incorporation and bylaws have not been amended, modified,
revoked or rescinded and are in full force and effect, (iii) as to the
incumbency and specimen signatures of each officer executing the Loan Documents
on its behalf, and (iv) that (A) the representations made by it
contained in the Loan Documents to which it is a party are true and correct in
all material respects, (B) it is in compliance with all of its covenants
contained in the Loan Documents to which it is a party, (C) there exists
no Event of Default after giving effect to the initial advance under the
Revolving Line of Credit, (D) there has been no material adverse change in
the financial condition, operations, properties, assets or prospects of the
Borrower since the date of the most recent Financial Statements and (E) to
the Borrower’s knowledge, there exist no (1) material actions, suits,
proceedings or government investigations pending or 


 


9

















 


threatened against the Borrower, or (2) material contingent obligations
of the Borrower not previously disclosed in writing to the Bank or in this
Agreement or the other Loan Documents;


 


(c)           Receipt of Loan
Documents.  The Bank shall have received the
duly executed Loan Documents required to be delivered on the date hereof and
such other instruments and documents which the Bank may reasonably request in
connection with the transactions provided for in this Agreement;


 


(d)           Good Standing.  The Bank shall have received certificates of good standing,
subsistence and/or status dated a recent date from the Secretary of State or
appropriate taxing or other authorities in the jurisdiction of incorporation or
organization of the Borrower and in other locations reasonably requested by the
Bank where Borrower is authorized to do business;


 


(e)           Opinion of
Borrower’s Counsel.  The Bank shall have received a
written opinion of counsel for the Borrower addressed to the Bank and covering
such matters as the Bank may reasonably require;


 


(f)            Existing Credit
Agreement.  The Bank shall have received (i) evidence
that the existing Credit Facility has been terminated and all indebtedness
thereunder has been paid in full; and (ii) evidence of the termination of
all existing liens in favor of Camden Strategic Partners III, LLC.  “Credit
Facility” shall mean the Credit Agreement, dated as of July 19,
2006, by and among the Company, Camden Partners Strategic III, LLC and the
other lenders named therein.


 


(g)           10-Q.  The Bank shall have received the Borrower’s most recently
filed Form 10-Q, which shall contain Financial Statements which are
consistent in all material respects with the Borrower’s budget for the six (6) month
period ended June 30, 2008, which budget was previously supplied to the
Bank by the Borrower.


 


(h)           Initial Draw.  The initial Revolving Advance on the date hereof under the
Revolving Line of Credit shall not exceed $2,500,000.


 


(i)            Preferred Stock
Agreements.  The Bank shall have received
evidence of the Borrower’s ability to enter into this Agreement and the
transactions contemplated hereby under the terms and conditions of the
Preferred Stock Agreements.  “Preferred
Stock Agreements” shall mean, collectively, (i) the Series C
Stock and Warrant Purchase Agreement, dated as of July 2, 2007, by and
among the Company and the Series C Stockholders, (ii) the Certificate
of Designation, Preferences and Rights of Series B Convertible Preferred
Stock of the Company, (iii) the Certificate of Designation, Preferences
and Rights of Series C Convertible Preferred Stock of the Company, (iv) the
Second Amended and Restated Stockholders’ Agreement, dated as of July 3,
2007, by and among the Company, the Series B Stockholders, the Series C
Stockholders and the Warrant Holders, and (v) the Voting Agreement, dated
as of July 3, 2007, by and among the Company and the stockholders of the
Company named therein.


 


(j)            Material
Adverse Change.  There shall have been no
material adverse change in the financial condition, operations, properties, or
assets of the Borrower since the date of the most recent Financial Statements;


 


(k)           Material
Litigation or Contingent Obligations.  There shall be no (i) material
actions, suits, proceedings or government investigations pending or, to its
knowledge, threatened against the Borrower; or (ii) undisclosed material
contingent obligations of the Borrower;


 


(l)            Security
Interest.  The Bank shall have received, to
its satisfaction, evidence, including, without limitation, UCC, judgment and
tax lien searches for the Borrower, that the Bank has a first priority lien in
the collateral for the Obligations, subject only to Permitted Liens;


 


10
















 


(m)          Filings.  The Bank shall have
received evidence satisfactory to it that all necessary actions to perfect
and protect the security interests created by the Security Documents,
including, without limitation, the filing of UCC-1 Financing Statements in the
appropriate jurisdictions, have been taken; and


 


(n)           Insurance.  The Bank shall have received evidence to
its reasonable satisfaction that the Borrower has obtained certificates of
insurance of the type required by Section 4.7 hereof and the Security Agreement,
with the appropriate lender loss payee/mortgagee endorsements.


 


7.2.         Subsequent
Advances.  The Bank’s obligation to make
the subsequent advances under the Revolving Line of Credit is subject to the
conditions that as of the date of each such subsequent advance:


 


(a)           Representations and
Warranties.  Each of the
representations and warranties (i) made by the Borrower under this
Agreement or under any other Loan Document to which it is a party or (ii) which
are contained in any certificate, document, financial or other statement
furnished at any time in connection with the Loan Documents, shall be true and
correct in all material respects on and as of such date as if made on and as of
such date;


 


(b)           No Event of Default.  No Event of Default or event which with
the passage of time, the giving of notice or both would constitute an Event of
Default shall have occurred and be continuing; and


 


(c)           Additional Matters.  All corporate and other proceedings, and
all documents, instruments and other legal matters in connection with the
transactions contemplated by this Agreement, the other Loan Documents shall be
reasonably satisfactory in form and substance to the Bank, and the Bank shall
have received such other documents in respect of any aspect or consequence of
the transactions contemplated hereby or thereby as it shall reasonably request.


 


Each borrowing by the Borrower hereunder shall constitute a
representation and warranty by the Borrower as of the date of such borrowing
that the conditions contained in this Section 7.2 have been satisfied.


 


8.             Expenses.  The Borrower agrees to pay the Bank, upon the
execution of this Agreement, and otherwise on demand, all reasonable
out-of-pocket costs and expenses incurred by the Bank in connection with the
preparation, negotiation and delivery of this Agreement and the other Loan
Documents, and any modifications thereto, and the collection of all of the
Obligations, including but not limited to enforcement actions, relating to the
Loan, whether through judicial proceedings or otherwise, or in defending or
prosecuting any actions or proceedings arising out of or relating to this
Agreement, including fees
and expenses of counsel, auditors, appraisers and environmental consultants,
lien searches, recording and filing fees and taxes.


 


9.             Increased Costs.  On written demand, together with written evidence
of the justification therefor, the Borrower agrees to pay the Bank an amount
sufficient to fairly compensate the Bank for any unforeseen increase in its
costs to provide the Loan or decrease in its return on the Loan, which increase
or decrease, as the case may be, is directly attributable to, subsequent to the
date hereof, a change in law or regulation, or the official interpretation and
enforcement thereof, imposing any reserve, deposit, allocation of capital or similar requirement (including
without limitation, any such subsequent change to Regulation D of the Board of
Governors of the Federal Reserve System) on the Bank, its holding company or
any of their respective assets.


 


10.          Miscellaneous.


 


10.1.       Notices: All notices, demands,
requests, consents, approvals and other communications required or permitted
hereunder (“Notices”) must be in
writing and will be effective upon receipt. 
Notices may be given in any manner to which the parties may separately
agree, including electronic mail. 
Without limiting the foregoing, first-class mail, facsimile transmission
and commercial courier service are hereby agreed to as acceptable methods for giving
Notices.  Regardless of the manner in
which provided, Notices may be sent to a


 


11

















 


party’s address as set forth above or to such other address as any
party may give to the other for such purpose in accordance with this section.


 


10.2.       Preservation of
Rights.  No delay or omission on the Bank’s
part to exercise any right or power arising hereunder will impair any such
right or power or be considered a waiver of any such right or power, nor will
the Bank s action or inaction impair any such right or power.  The Bank’s rights and remedies hereunder are
cumulative and not exclusive of any other rights or remedies which the Bank may
have under other agreements, at law or in equity.


 


10.3.       Illegality.  If any provision contained in this Agreement should be
invalid, illegal or unenforceable in any respect, it shall not affect or impair
the validity, legality and enforceability of the remaining provisions of this
Agreement.


 


10.4.       Changes in
Writing.  No modification, amendment or
waiver of, or consent to any departure by the Borrower from, any provision of
this Agreement will be effective unless made in a writing signed by the party
to be charged, and then such waiver or consent shall be effective only in the
specific instance and for the purpose for which given.  No notice to or demand on the Borrower will
entitle the Borrower to any other or further notice or demand in the same,
similar or other circumstance.


 


10.5.       Entire
Agreement.  This Agreement (including the
documents and instruments referred to herein) constitutes the entire agreement
and supersedes all other prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter hereof.


 


10.6.       Counterparts.  This Agreement may be signed in any number of counterpart
copies and by the parties hereto on separate counterparts, but all such copies
shall constitute one and the same instrument. 
Delivery of an executed counterpart of a signature page to this
Agreement by facsimile transmission shall be effective as delivery of a
manually executed counterpart.  Any party
so executing this Agreement by facsimile transmission shall promptly deliver a
manually executed counterpart, provided that any failure to do so shall not
affect the validity of the counterpart executed by facsimile transmission.


 


10.7.       Successors and
Assigns.  This Agreement will be binding
upon and inure to the benefit of the Borrower and the Bank and their respective
heirs, executors, administrators, successors and assigns; provided, however,
that the Borrower may not assign this Agreement in whole or in part without the
Bank’s prior written consent and the Bank at any time may assign this Agreement
in whole or in part.


 


10.8.       Interpretation.  In this Agreement, unless the Bank and the Borrower
otherwise agree in writing, the singular includes the plural and the plural the
singular; words importing any gender include the other genders; references to
statutes are to be construed as including all statutory provisions
consolidating, amending or replacing the statute referred to; the word “or”
shall be deemed to include “and/or”, the words “including”, “includes” and “include”
shall be deemed to be followed by the words “without limitation”; references to
articles, sections (or subdivisions of sections) or exhibits are to those of
this Agreement; and references to agreements and other contractual instruments
shall be deemed to include all subsequent amendments and other modifications to
such instruments, but only to the extent such amendments and other
modifications are not prohibited by the terms of this Agreement.  Section headings in this Agreement are
included for convenience of reference only and shall not constitute a part of
this Agreement for any other purpose. 
Unless otherwise specified in this Agreement, all accounting terms shall
be interpreted and all accounting determinations shall be made in accordance
with GAAP.  If this Agreement is executed
by more than one party as Borrower, the obligations of such persons or entities
will be joint and several.


 


10.9.       No
Consequential Damages, Etc.  The Bank will not be
responsible for any consequential, incidental, special, or punitive damages
that may be incurred or alleged by any person or entity, including the Borrower
and any Guarantor, as a result of this Agreement, the other Loan Documents, the
transactions contemplated hereby or thereby, or the use of the proceeds of the
Loan.


 


12

















 


10.10.     Assignments and
Participations.  At any time, without any notice
to the Borrower, the Bank may sell, assign, transfer, negotiate, grant
participations in, or otherwise dispose of all or any part of the Bank’s
interest in the Loan.  The Borrower
hereby authorizes the Bank to provide, without any notice to the Borrower, any
information concerning the Borrower, including information pertaining to the
Borrower’s financial condition, business operations or general
creditworthiness, to any person or entity which may succeed to or participate
in all or any part of the Bank’s interest in the Loan; provided, however, that
before Bank provides any confidential information of Borrower to any third
party, Bank will require such third party to execute a confidentiality
agreement in form reasonably satisfactory to Borrower.


 


10.11.     Governing Law
and Jurisdiction.  This Agreement has been
delivered to and accepted by the Bank and will be deemed to be made in the
Commonwealth of Pennsylvania (the “Commonwealth”).  THIS
AGREEMENT WILL BE INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE PARTIES
HERETO DETERMINED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH, EXCLUDING
ITS CONFLICT OF LAWS RULES.  The
Borrower hereby irrevocably consents to the exclusive jurisdiction of any state
or federal court in the Commonwealth; provided that nothing contained in this
Agreement will prevent the Bank from bringing any action, enforcing any award
or judgment or exercising any rights against the Borrower individually, against
any security or against any property of the Borrower within any other county,
state or other foreign or domestic jurisdiction.  The Bank and the Borrower agree that the
venue provided above is the most convenient forum for both the Bank and the
Borrower.  The Borrower waives any
objection to venue and any objection based on a more convenient forum in any
action instituted under this Agreement.


 


10.12.     WAIVER OF JURY TRIAL. 
EACH OF THE BORROWER AND THE BANK IRREVOCABLY WAIVES ANY AND ALL RIGHT
IT MAY HAVE TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR CLAIM OF ANY
NATURE RELATING TO THIS AGREEMENT, ANY DOCUMENTS EXECUTED IN CONNECTION WITH
THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED IN ANY OF SUCH DOCUMENTS.  THE BORROWER AND THE BANK ACKNOWLEDGE THAT
THE FOREGOING WAIVER IS KNOWING AND VOLUNTARY.


 


The
Borrower acknowledges that it has read and understood all the provisions of
this Agreement, including the waiver of jury trial, and has been advised by
counsel as necessary or appropriate.


 


13

















 


WITNESS
the due execution hereof as a document under seal, as of the date first written
above.


 


	
   

  	
  NEW HORIZONS
  WORLDWIDE INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PNC BANK,
  NATIONAL ASSOCIATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Print Name:

  
	
   

  	
  Title:

  



 

















 


ADDENDUM to
that certain Loan Agreement dated October 1, 2008 between New Horizons
Worldwide, Inc. as the Borrower and PNC Bank, National Association, as the
Bank.  Capitalized terms used in this
Addendum and not otherwise defined shall have the meanings given them in the
Agreement.  Section numbers below
refer to the sections of the Agreement.


 


3.6 Title
to Assets.  Describe
additional liens and encumbrances below:


 


 


3.7 Litigation.  Describe pending and
threatened litigation, investigations, proceedings, etc.  below:


 


 


3.15 Subsidiaries.  List existing Subsidiaries
below:


 


 

















 


CONTINUATION
OF ADDENDUM


 


FINANCIAL COVENANTS


 


(1)           The Borrower will
maintain, on a consolidated, rolling four quarter basis, as of the end of each
fiscal quarter ending during the periods set forth below, a Funded Debt to
EBITDA Ratio of less than that set forth opposite such periods:


 


	
  Period

  	
   

  	
  Funded Debt to EBITDA Ratio

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  The date
  hereof through and including December 30, 2009

  	
   

  	
  1.5 to 1.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  December 31,
  2009 and thereafter

  	
   

  	
  1.25 to 1.00

  	
   

  



 


(2)           The Borrower will
maintain, on a consolidated, rolling four quarter basis, as of the end of each
fiscal quarter ending during the periods set forth below, a Fixed Charge
Coverage Ratio of at least that set forth opposite such periods:


 


	
  Period

  	
   

  	
  Fixed Charge Coverage Ratio

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  The date
  hereof through and including June 29, 2009

  	
   

  	
  1.25 to 1.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  June 30,
  2009 and thereafter

  	
   

  	
  1.50 to 1.00

  	
   

  



 


As used
herein:


 


“Current Maturities” means the
scheduled payments of principal on all indebtedness for borrowed money having
an original term of more than one year (including but not limited to
amortization of capitalized lease obligations), as shown on the Borrower’s
Financial Statements as of one year prior to the date of determination.


 


“EBITDA” means net
income plus interest expense plus income tax expense plus
depreciation plus amortization plus any non-cash charges for employee
equity awards plus any one-time charges up to a maximum of $500,000 in
connection with termination of the Borrower’s lease of real property located in
Anaheim, California and the costs of exiting therefrom.


 


“Fixed Charge Coverage
Ratio” means (i) EBITDA, divided by (ii) the sum of Current
Maturities plus cash interest expense plus cash taxes paid plus
dividends plus capital expenditures.


 


“Funded Debt” means all indebtedness
for borrowed money having an original term of more than one year, including but
not limited to capitalized lease obligations, reimbursement obligations in
respect of letters of credit, and guaranties of any such indebtedness.


 


All of the above financial
covenants shall be computed and determined in accordance with GAAP applied on a
consistent basis (subject to normal year-end adjustments).