WEST PALM BEACH, FL–Apr 25, 2007 — ComVest Group Holdings, LLC announced today that it has entered into a definitive agreement with EVCI Career Colleges Holding Corp. (NasdaqCM:EVCI – News) and participating management of EVCI that will provide gross proceeds to EVCI of $10,100,000 and the ability to secure letters of credit of up to $6,700,000 (the “Financing”). The agreement with ComVest provides for a closing by May 24, 2007, with no conditions other than the wiring of funds and the issuance of the securities. EVCI will restructure its bank debt (the “April 2007 Debt Restructuring”) at the same time as the Financing is closed.
EVCI also announced that Robert F. Kennedy Jr., the son of the late Senator Robert F. Kennedy, and a professor at Pace School of Law has joined the EVCI board of directors to head up a new Educational Oversight Committee.
Michael Falk, Chairman of the ComVest Group, stated, “ComVest’s extensive due diligence over the last several months has convinced us that EVCI Career Colleges are high quality institutions run with integrity. We are pleased that the EVCI board has taken the steps to institute an Educational Oversight Committee and appointed Bobby Kennedy to lead it.”
Dr. John J. McGrath, CEO and President of EVCI, stated, “I am pleased to announce to our investors that the financing transaction provides EVCI with the capital resources to enhance the academic, administrative and financial integrity of our colleges. This financing is great news for our students, faculty and college administration at Technical Career Institutes, Interboro Institute and the Pennsylvania School of Business.”
Dr. Arol I. Buntzman, Chairman of EVCI, commented, “I am absolutely delighted that Bobby Kennedy has joined EVCI’s Board of Directors. His integrity and commitment to economically disadvantaged minorities is a perfect fit for our vision and mission.”
Bobby Kennedy commented, “More than 50% of the students that start in the New York City public schools do not graduate from high school. Technical Career Institutes and Interboro Institute are a life-raft to thousands of New Yorkers who are most vulnerable. EVCI’s colleges lift many economically disadvantaged minorities from hopelessness to harbors of hope and opportunity. I am thrilled with the idealism, pragmatism and professionalism of EVCI’s executive leadership. I am also very impressed with the faculty and administration at the colleges, and their embracing commitment to providing higher education opportunity to those most in need.”
Dr. Buntzman reported that Inder Tallur, and Brian Fluck, partners of ComVest, will join the EVCI board upon the closing of the Financing. Mr. Kennedy replaced Elie Housman, and Messrs. Tallur and Fluck will replace Royce Flippin and Richard Goldenberg as directors. None of the departing directors are leaving EVCI over any disagreement with management or other Board member.
Brian Fluck brings nearly 30 years of executive financial and operational leadership experience to EVCI, formerly serving as Chief Financial Officer of ATT Universal Services and Chairman of the Board of the independent bank through which this business was conducted. Mr. Fluck more recently was President and board member of several CNL Financial Group, Inc. companies, one of which was acquired by Lehman Brothers. Mr. Fluck brings strong executive management and board of directors experience to the EVCI board. Mr. Fluck is scheduled to join ComVest Investment Partners III as a full-time operating partner at about the time of the closing of this transaction.
Inder Tallur brings 12 years of investment experience in various roles at ComVest, including researching the educational sector during his tenure as Director of Research at Commonwealth Associates, an affiliate of the ComVest Group.
The Financing has been structured so that it will not result in a change of control of EVCI until such time as all required preapprovals have been obtained under applicable rules and regulations of the governmental agencies regulating the operation of EVCI’s colleges and the non-governmental entities that accredit our colleges.
The terms of the Financing, including the agreements with EVCI management, have been approved by EVCI’s Board of Directors based upon the unanimous recommendations of a Special Committee of EVCI’s Board that was formed on February 2, 2007, and consists of EVCI’s four independent directors. Seidman & Co., Inc., financial advisor to the Special Committee, has rendered an opinion to the Special Committee that concludes the Financing is fair to EVCI’s stockholders.
At the Closing, EVCI will issue 2,525,234 shares of common stock at $0.54 per share (the “Shares”), $8,736,374 in face amount of 12% secured convertible notes, which will be convertible into EVCI’s common stock if the Notes are not repaid within 12 months, at $0.60 per share, subject to adjustment, and will mature in 36 months (the “Notes”).
The net proceeds of approximately $8,000,000 from issuance of the Notes and Shares, after payment of transaction fees estimated to be approximately $2.0 million, will be used to repay EVCI’s term loan bank debt. Under the restructuring of the bank agreement, EVCI will have access to $11.0 million of future borrowing using a $5.0 million revolver and by increasing the term loan to $6.0 million.
ComVest will be required to assist EVCI in obtaining a one year letter of credit of up to $6.7 million in favor of the U.S. Department of Education and, if required, the New York State Education Department or its designee. ComVest will either provide a corporate guaranty to the provider of the letter of credit or procure the letter of credit. For agreeing to assist EVCI, ComVest will receive a cash fee of $234,500 that will accrue until the senior debt is paid. To the extent EVCI is required to provide the letter of credit, EVCI will accrue a monthly fee of 1.37% of the face amount of the outstanding letter of credit. The letter of credit would be used to satisfy financial responsibility standards of regulators of our schools. In connection with issuance of the Notes and agreeing to assist EVCI to obtain the letter of credit, three year warrants to purchase up to 27,500,000 shares of EVCI’s common stock at $0.54 per share, subject to adjustment (the “Warrants”),will also be issued to ComVest.
The Warrants and most of the Notes will not be exercisable and convertible unless EVCI’s stockholders approve an increase in EVCI’s authorized common stock. If stockholders do not approve the Notes become due and payable, subject to an intercreditor agreement with EVCI’s bank that subordinates the Notes to the bank’s senior debt.
Dr. Arol I. Buntzman, EVCI’s chairman, Dr. John J. McGrath, EVCI’s chief executive officer and president, Joseph D. Alperin, EVCI’s general counsel and vice president for corporate affairs and Stephen K. Schwartz, EVCI’s vice president of operations (collectively “Participating Management”) have agreed to participate in the Financing. Drs. Buntzman and McGrath and Mr. Alperin entered into amendments to their employment agreements and Mr. Schwartz entered into a new employment agreement.
Participating Management will invest $1,000,000 on a pari passu basis with ComVest Investment Partners III, L.P., as follows: Dr. Arol I. Buntzman, $500,000; Dr. John J. McGrath, $250,000; Joseph D. Alperin, $125,000 and Stephen Schwartz, $125,000.
The employment agreements with Participating Management provide for:
— the surrender of options to purchase 916,484 shares that are
exercisable at $1.00 per share.
— reductions in salary aggregating $350,000 per annum.
— a cash bonus pool of 10% of EBITDA (as defined), subject to a cap of
100% of their salaries.
— a grant of options on April 24, 2007 to purchase 2,157,113 shares of
EVCI’s common stock at $0.583 per share.
— a grant of options on April 24, 2007, subject to stockholder approval,
to purchase 4,376,559 shares of EVCI’s common stock at $0.54 per share.
Additional information regarding the terms of the Financing will be disclosed in EVCI’s form 10-K for its year ended December 31, 2006 that it plans to file with the SEC by April 27, 2007.
About EVCI Career Colleges Holding Corp.
EVCI is the holding company for Interboro Institute, Technical Career Institutes and the Pennsylvania School of Business.
Founded in 1888, Interboro offers degree programs leading to the Associate in Occupational Studies degree and Associate in Applied Sciences degree. Its programs include accounting, business management, ophthalmic dispensing, paralegal studies, office technologies and security services and management. Interboro has a main campus in mid-town Manhattan, an extension center in each of Flushing, New York and in the Washington Heights section of Manhattan, New York. EVCI acquired Interboro in January 2000.
Founded in 1909, TCI offers two-year associate degree and certificate programs. With an emphasis on technology, TCI offers programs within three major divisions: business and new media technology, computer and electronics technology and climate control technology. TCI’s main campus is on 31st Street diagonally across from Penn Station, and is supported by a nearby annex facility. EVCI acquired TCI in September 2005.
PSB is authorized to offer two Associate in Specialized Business degree programs and two diploma programs in information technology as well as three recently authorized business diploma programs. As permitted by the Pennsylvania State Education Department, after six months of teaching the three business diploma programs, PSB plans to seek authorization to award the Associate in Special Business degree for those programs. PSB relocated to downtown Allentown, Pennsylvania. EVCI acquired PSB in January 2005.
For more information on EVCI, please visit www.evcinc.com.
About ComVest
The ComVest Group is a Leading Private Equity Firm focused on investing in small and mico-cap companies. Since 1988, ComVest has invested more than $2 billion of capital in over 200 public and private companies worldwide. Through our extensive financial resources and broad network of industry experts, we are able to offer our companies total financial sponsorship, critical strategic support, and business development assistance. Our focus is centered on building industry leading companies and creating long term value for equity holders. For more information on ComVest, please visit www.comvest.com.