EX-10.1



 





Exhibit 10.1




EXECUTION COPY




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”).



W I T N E S S E T H:




     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



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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’ prior written notice to Administrative Agent terminate the Revolving Loan
Commitment; provided that upon such termination, the entire portion of the principal
amount of the Revolving Loan then outstanding and all Obligations related thereto
shall be immediately due and payable in full. Notwithstanding the above, with
respect to any New Commitment, the Borrower must provide ten (10) days notice prior
to any such repayment. Any such voluntary prepayment and any such reduction or
termination of the Revolving Loan Commitment must be accompanied by the payment of
the fee required by Section 2.9(c), if any, plus the payment of any LIBOR
funding breakage costs in accordance with Section 2.13(b). Upon any such
prepayment and reduction or termination of the Revolving Loan Commitment, Borrower’s
right to request Revolving Credit Advances shall simultaneously be permanently
reduced or terminated, as the case may be. For the avoidance of doubt, no voluntary
repayment of all or part of the Revolving Loan shall be deemed to be a prepayment
under this Section 2.3 unless accompanied by a notice of permanent reduction
of the Revolving Loan Commitment.”




(iv) Section 2.3(b)(i) of the Credit Agreement is hereby deleted in its entirety and the
following is substituted therefor:




“If (A) at any time prior to the Revolver Reduction Date, the outstanding balance of
the aggregate Revolving Loan exceeds the Maximum Amount and (B) at any time
thereafter, the outstanding balance of the aggregate Revolving Loan exceeds the
lesser of (I) the Maximum Amount and (II) the Borrowing Base, Borrower shall, within
five (5) days, repay the aggregate outstanding Revolving Credit Advances to the
extent required to eliminate such excess; provided, that to the extent the
Revolving Loan exceeds ten million dollars ($10,000,000) on the Revolver Reduction
Date, then on such date the excess shall be repaid in full or converted to a term
loan on terms reasonably acceptable to the Agent and the Lenders, as more fully
provided in the term sheet attached hereto as Exhibit 2.3(b)(i).”




(v) Section 2.9(a) of the Credit Agreement is hereby deleted in its entirety and the
following is substituted therefor:




“(a) Borrower shall have paid to Administrative Agent on the Closing Date a closing
fee in an amount equal to 1.00% of the aggregate amount of the Commitments on such
date (i.e. $60,000) and shall have paid to Administrative Agent on the First
Amendment Effective Date a closing fee in an amount equal to 1.00% of the aggregate
increase in the Commitments on such date (i.e. $40,000) and further shall pay to
Administrative Agent on the Second Amendment Effective Date a closing fee in an
amount equal to 2.00% of the New Commitment (i.e. $100,000).”



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(vi) Section 2.9(c) of the Credit Agreement is hereby deleted in its entirety and the
following is substituted therefor:




“(c) Borrower shall pay to Administrative Agent on the Second Amendment Effective
Date an administrative fee in connection with the administration of the Loans in an
amount equal to $6,250.00. For each year beginning on the first anniversary of the
Closing Date, the Borrower shall be required to pay Administrative Agent an
administration fee in an amount equal to $35,000.00 payable in advance, for so long
as any of the Obligations shall remain outstanding.”




(vii) A new Section 2.9(e) is hereby inserted into the Credit Agreement:




“(e) In the event that the New Commitment is not converted to a term loan in
accordance with Section 2.3(b)(i) on the Revolver Reduction Date (as a result of
prepayment, repayment, failure to request Revolving Advances thereunder, or
otherwise), Borrower shall pay to Administrative Agent an exit fee equal to 3.00% of
the New Commitment (i.e. $150,000) on the Revolver Reduction Date.”




(vii) A new Section 5.1(g) is hereby inserted into the Credit Agreement:




“(g) Weekly Rolling Cash Flow Forecast. Commencing on the Second Amendment
Effective Date, and at all times prior to January 31, 2007, to Administrative Agent
and Lenders, no later than Wednesday of each week, a 13-week cash flow monitoring
report, in form and substance acceptable to the Administrative Agent.”



     4. Conditions. The effectiveness of this Second Amendment is subject to the following
conditions:




a. The execution and delivery of this Second Amendment by Borrower and the other
Loan Parties, Lenders and Administrative Agent;




b. Borrower shall have paid the closing Fees in the respective amounts specified in
Section 2.9(a) of the Credit Agreement, and shall have reimbursed
Administrative Agent and Lenders for all other fees, costs and expenses as of the
Second Amendment Effective Date.



     5. Representations and Warranties. Each Loan Party hereby represents and warrants to
Administrative Agent and each Lender as follows:




a. Except as provided on Exhibit 5A hereto, the representations and
warranties made by such Loan Party contained in the Loan Documents are true and
correct in all material respects as of the date hereof (except to the extent such
representations and warranties expressly refer to an earlier date, in which case



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they shall be true and correct as of such earlier date, and except to the extent
such representations and warranties are qualified by materiality, contain dollar
thresholds or have Material Adverse Effect qualifiers, in which case, such
representations and warranties shall be true and correct in all respects);




b. such Loan Party is a corporation or limited liability company, duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or formation, as applicable;




c. such Loan Party has the power and authority to execute, deliver and perform its
obligations under this Second Amendment and the Credit Agreement, as amended hereby;




d. the execution, delivery and performance by such Loan Party of this Second
Amendment and the Credit Agreement, as amended hereby, have been duly authorized by
all necessary action;




e. this Second Amendment and the Credit Agreement, as amended hereby, constitutes
the legal, valid and binding obligation of such Loan Party, enforceable against such
Person in accordance with their terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, or similar laws affecting the enforcement of
creditor’s rights generally or by equitable principles relating to enforceability;
and




f. no Default or Event of Default exists, except those which are being waived
pursuant to Section 2 hereof (and the Loan Parties specifically acknowledge that any
misrepresentation of the provisions of this Section 5 shall constitute such an Event
of Default).



     6. No Modification. Except as amended hereby, the Credit Agreement and the other Loan
Documents remain unmodified and in full force and effect. All references in the Loan Documents to
the Credit Agreement shall be deemed to be references to the Credit Agreement as amended hereby.



     7. Counterparts. This Second Amendment may be executed by one or more of the parties
to this Second Amendment and any number of separate counterparts, each of which when so executed,
shall be deemed an original and all said counterparts when taken together shall be deemed to
constitute but one and the same instrument.



     8. Successors and Assigns. This Second Amendment shall be binding upon and inure to
the benefit of Borrower and each Loan Party and their successors and assigns and Administrative
Agent and Lenders and their successors and assigns.



     9. Further Assurance. Borrower hereby agrees from time to time, as and when requested
by Administrative Agent or any Lender, to execute and deliver or cause to be executed and
delivered, all such documents, instruments and agreements and to take or cause to be taken such
further or other action as Administrative Agent or such Lender may reasonably deem



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necessary or desirable in order to carry out the intent and purposes of this Second Amendment,
the Credit Agreement and the Loan Documents.



     10. GOVERNING LAW. THIS SECOND AMENDMENT SHALL BE GOVERNED BY AND SHALL BE CONSTRUED
AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
CONFLICTS OF LAW PRINCIPLES.



     11. Severability. Wherever possible, each provision of this Second Amendment shall be
interpreted in such manner as to be effective and valid under applicable law, but if any provision
of this Second Amendment shall be prohibited by or invalid under such law, such provision shall be
ineffective to the extent of such prohibition or invalidity without invalidating the remainder of
such provision or the remaining provisions of this Second Amendment.



     12. Reaffirmation. Each of the Loan Parties as debtor, grantor, pledgor, guarantor,
assignor, or in any other similar capacity in which such Loan Party grants liens or security
interests in its property or otherwise acts as accommodation party or guarantor, as the case may
be, hereby (i) ratifies and reaffirms all of its payment and performance obligations, contingent or
otherwise, under each of the Loan Documents to which it is a party (after giving effect hereto) and
(ii) to the extent such Loan Party granted liens on or security interests in any of its property
pursuant to any such Loan Document as security for or otherwise guaranteed Borrower’s Obligations
under or with respect to the Loan Documents, ratifies and reaffirms such guarantee and grant of
security interests and liens and confirms and agrees that such security interests and liens
hereafter secure all of the Obligations as amended hereby. Each of the Loan Parties hereby
consents to this Second Amendment and acknowledges that each of the Loan Documents remains in full
force and effect and is hereby ratified and reaffirmed. Except as set forth in Section 2 of this
Second Amendment, the execution of this Second Amendment shall not operate as a waiver of any
right, power or remedy of Administrative Agent or Lenders, constitute a waiver of any provision of
any of the Loan Documents or serve to effect a novation of the Obligations.



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     13. Release. The Borrower hereby remises, releases, acquits, satisfies and forever
discharges the Lenders and Administrative Agent, their agents, employees, officers, directors,
predecessors, attorneys and all others acting or purporting to act on behalf of or at the direction
of the Lenders and Administrative Agent (“Releasees”), of and from any and all manner of
actions, causes of action, suit, debts, accounts, covenants, contracts, controversies, agreements,
variances, damages, judgments, claims and demands whatsoever, in law or in equity, which any of
such parties ever had, now has or, to the extent arising from or in connection with any act,
omission or state of facts taken or existing on or prior to the date hereof, may have after the
date hereof against the Releasees, for, upon or by reason of any matter, cause or thing whatsoever
through the date hereof. Without limiting the generality of the foregoing, the Borrower waives and
affirmatively agrees not to allege or otherwise pursue any defenses, affirmative defenses,
counterclaims, claims, causes of action, setoffs or other rights they do, shall or may have as of
the date hereof, including, but not limited to, the rights to contest any conduct of the Lenders
and Administrative Agent or other Releasees on or prior to the date hereof.



[Remainder of Page Intentionally Left Blank; Signature Page Follows]





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     IN WITNESS WHEREOF, each of the undersigned has executed this Second Amendment as of the
date set forth above.



	 	 	 	 	 	 	 	 	 
	 	 	BORROWER:
	 
	 	 	 	 	 	 	 	 
	 	 	THE PRINCETON REVIEW, INC., a Delaware corporation
	 
	 	 	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Andrew J. Bonanni	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	Name:
	 	Andrew J. Bonanni	 	 	 	 
	 

	 	Title:
	 	Chief Financial Officer and Treasurer	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	GUARANTORS:
	 
	 	 	 	 	 	 	 	 
	 	 	PRINCETON REVIEW OPERATIONS, L.L.C., a 
Delaware limited
liability company
	 
	 	 	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Andrew J. Bonanni	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	Name:

Title:
	 	Andrew J. Bonanni


Chief Financial Officer and Treasurer	 	 	 	 





 [Signature Page to Second Amendment to Credit Agreement]



 









 






	 	 	 	 	 	 	 	 	 
	 	 	ADMINISTRATIVE AGENT:
	 
	 	 	 	 	 	 	 	 
	 	 	GOLUB CAPITAL INCORPORATED
	 
	 	 	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Greg Cashman	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	Name:
	 	Greg Cashman	 	 	 	 
	 

	 	Title:
	 	Chief Investment Officer	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	LENDERS:
	 
	 	 	 	 	 	 	 	 
	 	 	GOLUB CAPITAL CP FUNDING LLC
	 
	 	 	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Greg Cashman	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	Name:
	 	Greg Cashman	 	 	 	 
	 

	 	Title:
	 	Chief Investment Officer	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	Revolving Loan Commitment:	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	Prior to the Revolver Reduction Date:	 	$	15,000,000	 
	 
	 	 	 	 	 	 	 	 
	 	 	On and After the Revolver Reduction Date:	 	$	10,000,000	 






[Signature Page to Second Amendment to Credit Agreement]