EEEE Emachines (MM)

BALTIMORE, March 23 /PRNewswire-FirstCall/ -- Educate, Inc. (NASDAQ:EEEE) announced that on March 15, 2007, the Company obtained a waiver from its bank syndicate for violations of certain financial covenants within its term loan and revolving credit facility for the December 31, 2006 and March 31, 2007 reporting periods. The Company also noted that its financial statements for the fiscal year ended December 31, 2006, included in the Company's Annual Report on Form 10-K ("Form 10-K") filed on March 16, 2007 contain a going concern modification to the audit opinion from its independent accounting firm, Ernst & Young, LLP. As disclosed in Note 17 to the consolidated financial statements in the Form 10-K, the going concern modification is based upon the Company's belief that it will not comply with these same financial covenants for quarterly reporting periods subsequent to March 31, 2007, and accordingly, will need to obtain waivers or amend the terms of the credit facility to avoid triggering the facility's demand repayment provisions. As a result, the Company classified all of the outstanding debt under the facility of $175.8 million as a current liability in the consolidated balance sheet as of December 31, 2006. Management considered attempting to negotiate revised financial covenants to allow for compliance in the June 30 and subsequent quarterly reporting periods in 2007 based on projected operating results. However, because the Company has entered into a definitive merger agreement for the sale of the Company and expects to close that transaction by June 30, 2007, the Company determined that it was not prudent to negotiate new terms and incur additional costs to amend its credit facility. Instead the Company chose to obtain a waiver for the December 2006 and March 2007 periods without negotiating amendments for future periods since it expects to replace the existing credit facility with new financing when the merger transaction closes. On January 28, 2007, Educate entered into a definitive Agreement and Plan of Merger (the "Merger Agreement") with Edge Acquisition, LLC, a company affiliated with Sterling Partners and Citigroup Private Equity, and with Christopher Hoehn-Saric, Educate's Chairman and Chief Executive Officer. Under the terms of the Merger Agreement, Educate's stockholders will receive $8.00 in cash for each share of Educate common stock they own. Completion of the Merger is subject to customary closing conditions, including, among others, (i) approval by Educate's stockholders, and (ii) the absence of any order or injunction prohibiting the consummation of the Merger. Educate expects the Merger to close in the second quarter of 2007. The Merger Agreement was filed on a Current Report on Form 8-K filed with the Securities and Exchange Commission on January 29, 2007. The foregoing description of the Merger Agreement is qualified in its entirety by reference to the full text of the Merger Agreement. In connection with the proposed merger, Educate filed a preliminary proxy statement with the Securities and Exchange Commission on March 9, 2007. Investors and security holders are advised to read the preliminary proxy statement, and the final proxy statement when it becomes available, because they contain important information. Investors and security holders may obtain a free copy of the preliminary proxy statement, and the final proxy statement when it becomes available, and other documents filed by Educate at the Securities and Exchange Commission's web site at http://www.sec.gov/. Educate and its directors, executive officers and other members of its management and employees may be deemed to be participants in the solicitation of proxies from its stockholders in connection with the proposed merger. Information concerning the interests of Educate's participants in the solicitation is set forth in Educate's proxy statements and Annual Reports on Form 10-K, previously filed with the Securities and Exchange Commission, and in the proxy statement relating to the merger. About Educate, Inc. Educate, Inc. (NASDAQ:EEEE) is a leading pre-K-12 education company delivering supplemental education services and products to students and their families. Sylvan Learning, North America's best-known and most trusted tutoring brand, operates the largest network of tutoring centers, providing supplemental, remedial and enrichment instruction. Catapult Learning, its school partnership business unit, is a leading provider of educational services to public and non-public schools. Its Educate Products business delivers educational products including the highly regarded Hooked on Phonics early reading, math and study skills programs. In its 25-year history, Educate has provided trusted, personalized instruction to millions of students improving their academic achievement and helping them experience the joy of learning. More information on Educate, Inc. can be found at http://www.educate-inc.com/. Forward-looking Statements This release includes information that could constitute forward-looking statements made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve risks and uncertainties. Although the Company believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions, the Company's actual results could differ materially from those described in the forward-looking statements. The following factors might cause such a difference: the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement; the outcome of any legal proceedings that have been or may be instituted against the Company and others following announcement of the proposal or the merger agreement; the inability to complete the merger due to the failure to obtain stockholder approval or the failure to satisfy other conditions to the completion of the merger, including the receipt of required regulatory approvals; risks that the proposed transaction disrupts current plans and operations and the potential difficulties in employee retention as a result of the merger; the amount of the costs, fees, expenses and charges related to the merger and the actual terms of certain financings that will be obtained for the merger; the development and expansion of the Sylvan Learning franchise system; changes in the relationships among Sylvan Learning and its franchisees; the Company's ability to effectively manage business growth; increased competition from other educational service providers; changes in laws and government policies and programs; changes in the acceptance of the Company's services and products by institutional customers and consumers; changes in customer relationships; acceptance of new programs, services, and products by institutional customers and consumers; the seasonality of operating results; global economic conditions, including interest and currency rate fluctuations, and inflation rates. Additional information regarding these and other risk factors and uncertainties are set forth from time to time in the Company's filings with the Securities and Exchange Commission, available for viewing on the Company's website at http://www.educate-inc.com/. (To access this information on the Company's website, click on "Investor Relations" and then "SEC Filings".) All forward-looking statements are based on information available to the Company on the date of this Release. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. DATASOURCE: Educate, Inc. CONTACT: Kevin E. Shaffer, Educate, Inc., +1-410-843-8000 Web site: http://www.educate-inc.com/

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