EXHIBIT 10.1
LOAN AGREEMENT
by and between
FIRST INTERSTATE BANK OF ARIZONA, N.A.
--------------------------------------
as Lender
and
APOLLO GROUP, INC.
and
ITS OPERATING SUBSIDIARIES
(as hereinafter defined)
-----------------------------
as Borrower
Dated as of March 22, 1996
TABLE OF CONTENTS
Page
ARTICLE 1 RECITALS 1
ARTICLE 2 DEFINITIONS 1
Section 2.1 Definitions 1
Section 2.2 Terms Generally 8
Section 2.3 Accounting Terms 8
ARTICLE 3 RLC 8
Section 3.1 RLC Commitment Amount 8
Section 3.2 RLC Note 8
Section 3.3 RLC Advances 8
Section 3.4 Conversion and Renewal of RLC Advances 9
Section 3.5 RLC Commitment Fee 9
Section 3.6 RLC Payments 9
Section 3.7 Additional Provisions for LIBOR Advances 10
Section 3.8 Mandatory Prepayment 11
Section 3.9 Requirement that Conditions be Satisfied 11
ARTICLE 4 LETTERS OF CREDIT 11
Section 4.1 Issuance 11
Section 4.2 Conditions Precedent 12
Section 4.3 Drawing 12
ARTICLE 5 CONDITIONS PRECEDENT 12
Section 5.1 Conditions Precedent 12
Section 5.2 Conditions Precedent to All Future Advances 13
ARTICLE 6 GENERAL REPRESENTATIONS AND WARRANTIES 13
Section 6.1 Recitals 13
Section 6.2 Organization 13
Section 6.3 Power 14
Section 6.4 Enforceable 14
Section 6.5 No Conflict 14
Section 6.6 No Actions 14
Section 6.7 Financial Statements 14
Section 6.8 Tax Payments 14
Section 6.9 Margin Stock 14
Section 6.10 Affirmation 14
Section 6.11 Obligations of Affiliation 15
Section 6.12 Operating Subsidiaries 15
Section 6.13 Subsidiaries 15
ARTICLE 7 AFFIRMATIVE COVENANTS 15
Section 7.1 Existence 15
Section 7.2 Maintain Property 15
Section 7.3 Insurance 15
Section 7.4 Payments 16
Section 7.5 Financial Reports 16
Section 7.6 Records 17
Section 7.7 Current Obligations 17
Section 7.8 Delivery of Correspondence By And Between
Borrower And The NCA 17
Section 7.9 New Operating Subsidiaries 17
Section 7.10 Other Documents 17
ARTICLE 8 NEGATIVE COVENANTS 18
Section 8.1 No Mergers, Acquisitions and Consolidations 18
Section 8.2 Fiscal Year 18
Section 8.3 Margin Stock 18
Section 8.4 Liens; Negative Pledge 18
Section 8.5 Indebtedness 19
Section 8.6 Debt/Tangible Net Worth Ratio 19
Section 8.7 Adjusted Current Ratio 19
Section 8.8 Payment of Dividends 19
Section 8.9 Change in Control 19
Section 8.10 Loss of Accreditation 19
ARTICLE 9 DEFAULT AND REMEDIES 19
Section 9.1 Event of Default 19
Section 9.2 Remedies 20
Section 9.3 Notice and Cure Provision 21
ARTICLE 10 ACTION UPON AGREEMENT 21
Section 10.1 Third Party 21
Section 10.2 Entire Agreement 21
Section 10.3 Writing Required 22
Section 10.4 No Partnership 22
ARTICLE 11 GENERAL 22
Section 11.1 Survival 22
Section 11.2 Context 22
Section 11.3 Time 22
Section 11.4 Notices 22
Section 11.5 Costs 22
Section 11.6 Law 23
Section 11.7 Successors 23
Section 11.8 Headings 23
Section 11.9 Arbitration 23
EXHIBITS
"A" Borrowing Base Certificate
"B" Assumption Agreement
SCHEDULES
6.12 Operating Subsidiaries
6.13 Subsidiaries
LOAN AGREEMENT
BY THIS LOAN AGREEMENT (the "Agreement"), made and entered into as of this
22nd day of March, 0000, XXXXX XXXXXXXXXX XXXX XX XXXXXXX, X.X., whose
address is 000 Xxxx Xxxxxxxxxx, Xxxx Xxxxxx Xxx 00000, Xxxxxxx, Arizona
85072-3456 (hereinafter, together with any successors and assigns, called
"Lender"), and APOLLO GROUP, INC., an Arizona corporation (the "Company") and
the Operating Subsidiaries (as hereinafter defined) (with the Company, the
"Borrower," and each a "Borrower"), whose address is 0000 Xxxx Xxxxxx Xxxxxx,
Xxxxx 000, Xxxxxxx, Xxxxxxx 00000, in consideration of the mutual covenants
herein contained and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, hereby confirm and agree as
follows:
ARTICLE 1
RECITALS
SECTION 1.1
Borrower has requested that Lender establish a revolving line of credit (the
"RLC") with Borrower in the amount of $4,000,000.00, under which revolving
line of credit advances (each an "RLC Advance") shall be made to Borrower for
general corporate purposes.
SECTION 1.2
Lender has agreed to do so upon the terms, conditions and provisions set
forth herein. Effective as of the delivery of this Agreement, the Business
Loan Agreement dated December 20, 1994 between Company and Lender (the "1994
Agreement") will be terminated and replaced by this Agreement. Lender hereby
agrees to release any security interest and liens granted to and for the
benefit of Lender with respect to the 1994 Agreement upon satisfaction of
those conditions set forth in Section 5.1.
ARTICLE 2
DEFINITIONS
SECTION 2.1 DEFINITIONS.
Although terms may be defined in other sections of this Agreement, as used
herein the following terms shall have the meanings defined below:
"Adjusted Current Ratio" means, as to the Company, the ratio of (a) its total
current assets minus its deferred tax assets to (b) its total current
liabilities minus its student deposits and deferred tuition, all as shown on
the Company's consolidated financial statements.
"Adjusted LIBOR Rate" means, for each LIBOR Advance, the rate per annum
(rounded upward, if necessary, to the nearest .01 of 1%) determined by Lender
to be equal to the sum of (1) the quotient of (a) the Interbank Offered Rate
for such LIBOR Advance for the relevant Interest Period divided by (b) the
remainder of 1.00 minus the Eurodollar Reserve Requirement for such Interest
Period, plus (2) 150 basis points.
"Advance" means a RLC Advance and includes a Prime Advance or a LIBOR Advance
(each of which shall be a "Type" of Advance).
"Agreement" means this Loan Agreement, as amended, modified, supplemented
and/or restated from time to time.
"Assumption Agreement" means an assumption agreement substantially in the
form of Exhibit "B", executed by any new Operating Subsidiary.
"Authorized Officer" means the chief executive officer or chief financial
officer of a Borrower, or such other individual who is from time to time
designated to Lender in writing by said officer as authorized to act for a
Borrower with respect to the Loan.
"Borrower": See the Preamble.
"Borrowing Base" means an amount equal to seventy percent (70%) of the
outstanding amount of all "eligible" accounts of Borrower.
An account shall be an "eligible" account for the purposes of this Agreement
so long as, at the time of any Advance: (i) the original invoices or other
statements or agreements comprising the account(s) require payment in full
within ninety (90) days of the date of delivery of the respective goods or
services; (ii) no invoice or other statement or agreement comprising that
account remains unpaid for more than ninety (90) days after the original
invoice date for payment specified therein; and (iii) it consists of a
"student receivable," i.e. an account relating to a student's tuition
obligation with respect to one or more courses to be held by an Operating
Subsidiary other than IPD.
"Business Day" means a day of the year on which commercial banks are not
required or authorized to close in Phoenix, Arizona and, if the applicable
Business Day relates to any LIBOR Advance, a day on which dealings are
carried on in the London interbank eurodollar market.
"Change in Control" shall be deemed to have occurred if, after the date
hereof, any person or group (within the meaning of Rule 13d-3, as in effect
on the date hereof, promulgated by the SEC under the 0000 Xxx) shall acquire,
directly or indirectly, beneficially or of record, shares representing more
than 20% of the aggregate ordinary voting power represented by the issued and
outstanding capital stock of the Company.
"Company": See the Preamble.
"Consequential Loss" with respect to Borrower's payment of all or any portion
of the then outstanding principal amount of any Advance bearing interest at
the Adjusted LIBOR Rate on a day other than the last day of the related
Interest Period, means any loss, cost or expense incurred by Lender as a
result of the timing of such payment or in redepositing such principal
amount, including the sum of (i) if a positive amount, the aggregate present
value of the interest which, but for such payment, Lender would have earned
in respect of such principal amount so paid, for the remainder of the
Interest Period applicable to such sum, reduced if Lender is able to
redeposit or reinvest such principal amount so paid for the balance of such
Interest Period by the aggregate present value of the interest earned by
Lender as a result of so redepositing or reinvesting such principal amount,
with such present values determined using a discount rate per anum equal to
the Liquidation Rate, plus (ii) any expense or penalty incurred by Lender in
redepositing or reinvesting such amount.
"Convert," "Conversion," and "Converted" each refers to a conversion of
Advances of one Type into Advances of another Type pursuant to Section 3.4.
"Debt/Tangible Net Worth Ratio" means the ratio of the Company's total
liabilities to tangible net worth, where "total liabilities" is defined as
the aggregate of all liabilities of Company as recognized and valued for
financial reporting purposes, and where "tangible net worth" is defined as
stockholder's equity less the net book value of all intangible assets, all as
determined in accordance with GAAP. In the determination of tangible net
worth, educational program production costs shall be considered tangible
assets.
"Eurocurrency Liabilities" has the meaning assigned to that term in
Regulation D by the Board of Governors of the Federal Reserve System, 12
C.F.R. Part 204 as in effect from time to time.
"Eurodollar Reserve Requirement" means, for any LIBOR Advance for any
Interest Period thereof, the daily average of the stated maximum rate
(expressed as a decimal) at which reserves (including without limitation,
basic, supplemental, marginal and emergency reserves) are required to be
maintained during such Interest Period under Regulation D by Lender against
Eurocurrency Liabilities but without benefit of credit or proration,
exemptions or offsets that might otherwise be available to Lender from time
to time under Regulation D. Without limiting the effect of the foregoing,
the Eurodollar Reserve Requirement shall reflect any other reserves required
to be maintained by Lender against (1) any category of liabilities that
included deposits by reference to which the Adjusted LIBOR Rate for LIBOR
Advances is determined, or (2) any category of extension of credit or other
assets that include LIBOR Advances.
"Event of Default": See Section 9.1.
"Generally Accepted Accounting Principles" or "GAAP" means those generally
accepted accounting principles and practices which are recognized as such by
the American Institute of Certified Public Accountants acting through its
Accounting Principles Board or by the Financial Accounting Standards Board or
through other appropriate boards or committees thereof and which are
consistently applied for all periods after the date hereof so as to properly
reflect the financial condition, and the results of operations and changes in
cash flows, of the Company and its Operating Subsidiaries, except that any
accounting principles or practices required to be changed by the said
Accounting Principles Board or Financial Accounting Standards Board (or other
appropriate board or committee of the said Boards) in order to continue as a
generally accepted accounting principle or practice may so be changed.
"Guaranty" of any Person means any obligation, contingent or otherwise, of
such Person directly or indirectly guaranteeing any Indebtedness or other
obligation of any other Person (other than a Subsidiary) or in any manner
providing for the payment, purchase, or acquisition of any Indebtedness or
other obligation of any other Person (other than a Subsidiary) or otherwise
protecting the holder of Indebtedness of any other Person (other than a
Subsidiary) against loss (whether by virtue of endorsements, assumptions,
partnership arrangements, agreements to keep well, to supply funds, to
purchase assets, goods, securities, or services, or to take-or-pay or
otherwise), provided that the term "Guaranty" shall not include endorsements
for collection or deposits in the ordinary course of business.
"Indebtedness" means, with respect to any Person, the following (without
duplication): (i) obligations for borrowed money, including the current
portion thereof; (ii) monetary obligations representing the deferred purchase
price of real and/or personal property, other than trade accounts payable
arising in, and on terms customary in, the ordinary course of that Person's
business; (iii) monetary obligations under conditional sale agreements; (iv)
the present value of all obligations of such Person in respect of any capital
lease, discounted in accordance with GAAP; and (v) matured obligations with
respect to any Guaranty.
"Interbank Offered Rate" with respect to any LIBOR Advance, means the
prevailing rate of interest per annum (rounded upward, if necessary, to the
nearest .01 of 1%) at which deposits in immediately available funds in U.S.
Dollars are offered two Business Days prior to the first day of such Interest
Period by major financial institutions active in the London interbank
eurodollar market to first class banks for delivery on the first day of the
Interest Period, such deposits being for a period of time equal or comparable
to the Interest Period and in an amount comparable to the principal amount of
the LIBOR Advance, as reasonably determined by Lender.
"Interest Period" means, with respect to any LIBOR Advance, the Interest
Period Option for such Advance duly selected by Borrower, provided, however,
that if the Interest Period would otherwise end after the Maturity Date, the
Interest Period shall end on the Maturity Date.
"Interest Period Option" means, with respect to any LIBOR Advance, 30, 60, 90
or 180 day time periods.
"Interest Rate Option" means either (i) the Adjusted LIBOR Rate for the
chosen Interest Period, or (ii) the Prime Rate.
"IPD" means Institute for Professional Development, Inc., a California
corporation.
"Lender": See the Preamble.
"Letter of Credit" means any letter of credit issued at the request of the
Company or an Operating Subsidiary.
"LIBOR Advance" means an Advance that bears interest at the Adjusted LIBOR
Rate.
"Lien" means any lien, mortgage, security interest, tax lien, pledge,
encumbrance, conditional sale or title retention arrangement, or any other
interest in property designed to secure the repayment of Indebtedness or
performance under any Guaranty, whether arising by agreement or under any
statute or law, or otherwise.
"Liquidation Rate" means the rate of interest per annum equal to the yields
to maturity of eurodollar deposits in U.S. Dollars in the London interbank
eurodollar market, maturing on, or within one month of, the last day of the
relevant Interest Period, as reasonably determined by Lender.
"Loan" means the RLC.
"Maturity Date" means December 31, 1997.
"Maximum Letter of Credit Balance" means $250,000.00.
"NCA" means the North Central Association of Colleges and Schools.
"1934 Act" means the United States Securities Exchange Act of 1934, as
amended.
"Note" means the RLC Note.
"Operating Subsidiaries" means any Subsidiary of the Company that meets one
or more of the following criteria: (i) accounted for ten percent (10%) or
more of the total consolidated revenue of the Company in its most recent
fiscal year; (ii) accounted for ten percent (10%) or more of the total
consolidated assets of the Company as of the end of its most recent fiscal
quarter; or (iii) accounted for ten percent (10%) or more of the total
consolidated current assets of the Company as of the end of its most recent
fiscal quarter. The Subsidiaries of the Company that are from time to time
"Operating Subsidiaries" shall be listed on Schedule 6.12.
"Outstanding RLC Balance" means the aggregate amount of RLC Advances and the
face amount of Letters of Credit, outstanding from time to time in either
case.
"Permitted Liens" means:
(a) Liens incurred to secure Permitted Non-Bank Indebtedness, the aggregate
amount of which shall not exceed $3,000,000.00;
(b) Pledges or deposits made to secure payment of workers' compensation (or
to participate in any fund in connection with workers' compensation
insurance), unemployment insurance, pensions or social security
programs;
(c) Liens imposed by mandatory provisions of law such as for materialmen's,
mechanics', warehousemen's and other like Liens arising in the ordinary
course of business, securing Indebtedness or other liabilities whose
payment is not yet due;
(d) Liens for taxes, assessments and governmental charges or levies
imposed upon a Person or upon such Person's income or profits or
property, if the obligation secured by such Lien is not in violation of
Section 7.7;
(e) Liens arising from the good faith deposits in connection with tenders,
leases, real estate bids or contracts (other than contracts involving
the borrowing of money), pledges or deposits to secure public or
statutory obligations, deposits to secure (or in lieu of) surety, stay,
appeal or customs bonds and deposits to secure the payment of taxes,
assessments, custom duties or other similar charges; or
(f) Encumbrances consisting of zoning restrictions, easements, or other
restrictions on the use of real property, provided that such do not
impair the use of such property for the uses intended, and none of which
is violated by existing or proposed structures or land use.
"Permitted Non-Bank Indebtedness" means Indebtedness, whether direct,
indirect or contingent, with respect to any of the following:
(a) Purchase money obligations in connection with the acquisition of real
and personal property;
(b) Seller carryback financing; and
(c) Mergers and acquisitions permitted pursuant to Section 8.1.
"Person" means any natural person, corporation, business trust, joint
venture, association, company, partnership or government, or any agency or
political subdivision thereof.
"Prime Advance" means an Advance that bears interest at the Prime Rate.
"Prime Rate" means the interest rate per annum equal to the fluctuating rate
of interest announced publicly by Lender from time to time as its "prime
rate".
"Request for Borrowing": See Section 3.3(b).
"RLC": See Section 1.1.
"RLC Advance" means an Advance by Lender to the Borrower under the RLC
pursuant to Article 3.
"RLC Commitment Amount" means the Lender's total commitment to make RLC
Advances under the RLC not to exceed $4,000,000.00, reduced by the aggregate
of (1) all issued and undrawn Letters of Credit issued for the account of the
Company or its Operating Subsidiaries and (2) all drawn Letters of Credit
which have not been repaid.
"RLC Note" means that Revolving Promissory Note of even date herewith in the
face amount equal to the RLC Commitment Amount from Borrower, evidencing the
RLC.
"SEC" means the United States Securities and Exchange Commission.
"Student Deposits" means any and all funds prepaid to the Company or its
Operating Subsidiaries by an individual, or any other entity, for the purpose
of satisfying tuition obligations in advance of the start date of a course or
courses, as determined in accordance with GAAP.
"Subsidiaries" means all business associations directly or indirectly
controlled by the Company.
"Termination Date" means the earliest to occur of (1) the Maturity Date, or
(2) the date Lender exercises any option to declare the Loan fully due and
payable after the occurrence of an Event of Default, or (3) such other date
as may be agreed upon in writing by Lender and Borrower.
"Type": See the definition of Advance.
"UOP" means The University of Phoenix, Inc., an Arizona corporation.
SECTION 2.2 TERMS GENERALLY.
The definitions in Section 2.1 shall apply equally to both the singular and
plural forms of the terms defined. Whenever the context may require, any
pronoun shall include the corresponding masculine, feminine and neuter forms.
All references herein to Articles, Sections, Exhibits and Schedules shall be
deemed references to Articles and Sections of, and Exhibits and Schedules to,
this Agreement unless the context shall otherwise require.
SECTION 2.3 ACCOUNTING TERMS.
Except as otherwise expressly provided herein, all terms of an accounting or
financial nature shall be construed in accordance with GAAP; provided,
however, that, for purposes of determining compliance with any covenant set
forth herein, such terms shall be construed in accordance with GAAP as in
effect on the date of this Agreement applied on a consolidated basis
consistent with the application used in preparing the Borrower's consolidated
audited financial statements referred to herein.
ARTICLE 3
RLC
SECTION 3.1 RLC COMMITMENT AMOUNT.
Subject to the conditions set forth herein, Lender, from time to time, shall
make such RLC Advances as Borrower may request and shall issue such Letters
of Credit as Borrower shall request, provided that (a) the Outstanding RLC
Balance shall not exceed the lesser of (i) the Borrowing Base, or (ii) the
RLC Commitment Amount, and (b) the aggregate amount of the face amount of
Letters of Credit outstanding at any one time shall not exceed the Maximum
Letter of Credit Balance. The RLC shall be a revolving credit, against which
RLC Advances may be made to Borrower, repaid by Borrower, and readvances made
to Borrower and Letters of Credit issued, terminated or repaid by Borrower
and reissued, provided that (i) no Event of Default shall exist, (ii) no RLC
Advance shall be made or Letter of Credit issued that would cause the
outstanding principal balance of the RLC to exceed the lesser of the
Borrowing Base or the RLC Commitment Amount, (iii) no Letter of Credit shall
be issued that would cause the aggregate amount of the face amount of Letters
of Credit outstanding at any one time to exceed the Maximum Letter of Credit
Balance, and (iv) no RLC Advance shall be made on or after the Maturity Date.
SECTION 3.2 RLC NOTE.
The RLC shall be evidenced by the RLC Note in the form approved by Lender,
payable to the order of Lender upon the terms and conditions therein
contained, and executed and delivered simultaneously with the execution of
this Agreement.
SECTION 3.3 RLC ADVANCES.
(a) Lender may from time to time make RLC Advances in such sums as Borrower
shall request.
(b) Borrower shall give Lender written notice, or telephonic notice
confirmed immediately in writing, of the request for any RLC Advances
under this Agreement, which request (the "Request for Borrowing") shall
be received by Lender not later than 12:00 noon (Phoenix, Arizona local
time) on the same Business Day as the date of the proposed RLC Advance.
If no Interest Rate Option is selected by Borrower, interest shall
accrue at the Prime Rate.
SECTION 3.4 CONVERSION AND RENEWAL OF RLC ADVANCES.
(a) The Borrower may, upon written notice to, and received by, the Lender
not later than 12:00 noon (Phoenix, Arizona local time) on the Business
Day before the requested Conversion or renewal, Convert any RLC Advances
of one Type into Advances of another Type; provided, however, that any
Conversion of a LIBOR Advance may only be made upon the last day of
said Advance's Interest Period. Each such notice of a Conversion shall
be irrevocable and binding on the Borrower. Each such notice of a
Conversion shall, within the restrictions specified above, specify (w)
the date of such Conversion, (x) the amount of the Advance to be
Converted, (y) the Type of Advance into which the Advance is to be
Converted, and (z) if such Conversion is into a LIBOR Advance, the
duration of the Interest Period.
(b) If the Borrower should fail to give the Lender any notice of Conversion
upon the termination of the Interest Period for a LIBOR Advance, such
RLC Advance, upon the termination of the Interest Period, shall
automatically become a Prime Advance.
SECTION 3.5 RLC COMMITMENT FEE.
Borrower agrees to pay to Lender a non-refundable fee equal to 17.5 basis
points times the face amount of the Note.
SECTION 3.6 RLC PAYMENTS.
(a) Interest on the RLC shall accrue daily on the full principal balance of
the RLC at the Interest Rate Option selected by Borrower, on the basis
of the actual number of days elapsed over a year of 360 days.
(b) All accrued interest on each RLC Advance shall be due and payable as
billed by Lender each month. In addition, the principal amount of each
LIBOR Advance, together with all accrued interest, shall be due and
payable each month, and the balance, if any, at the end of each
respective Interest Period.
(c) The entire outstanding principal balance of the RLC Note, all accrued
and unpaid interest and all other sums which may have become payable
thereunder shall be due and payable in full on the Termination Date.
(d) Default interest shall be due and payable as set forth in the RLC Note.
SECTION 3.7 ADDITIONAL PROVISIONS FOR LIBOR ADVANCES.
(a) Unavailability of Deposits or Inability to Ascertain the Rates.
Notwithstanding any other provision of this Agreement, if prior to the
commencement of any Interest Period, Lender shall determine (i) that
United States dollar deposits in the amount of any LIBOR Advance to be
outstanding during such Interest Period are not readily available to
Lender in the London interbank market, or (ii) by reason of
circumstances affecting the London interbank market, adequate and
reasonable means do not exist for ascertaining the Adjusted LIBOR Rate,
then Lender shall promptly give notice thereof to the Borrower and the
obligation of Lender to create, or effect by Conversion any LIBOR
Advance in such amount and for such Interest Period shall terminate
until United States dollar deposits in such amount and for the Interest
Period selected by the Borrower shall again be readily available in the
market and adequate and reasonable means exist for ascertaining the
Adjusted LIBOR Rate.
(b) Increased Costs. Borrower shall pay to Lender from time to time such
amounts as Lender may determine to be necessary to compensate Lender for
any costs incurred by Lender which Lender determines are attributable to
its making any LIBOR Advances hereunder or its obligation to make such
Advances hereunder, or any reduction in any amount receivable by Lender
under this Agreement or the Note in respect of any such Advances or
such obligation (such increases in costs and reductions in amounts
receivable being herein called "Additional Costs"), resulting from any
change after the date of this Agreement in U.S. federal, state,
municipal, or foreign laws or regulations (including Regulation D)
imposed specifically on financial institutions such as Lender. Lender
will promptly notify Borrower of an event of which it has knowledge
occurring after the date hereof, that will entitle Lender to
compensation pursuant to this paragraph (b).
(c) Illegality. Notwithstanding any other provision of this Agreement, if
Lender determines that an applicable law, rule or regulation, or any
change therein, or any change in the interpretation or administration
thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or
compliance by the Lender (or its lending office) with any request or
directive (whether or not having the force of law) or any such
authority, central bank or comparable agency shall make it unlawful or
impossible for Lender (or its lending office) to maintain or fund its
LIBOR Advances, Lender shall forthwith give notice thereof to Borrower.
Borrower shall not be liable for Consequential Loss upon repayment under
this paragraph (c).
(d) Discretion of Lender as to Manner of Funding. Notwithstanding any
provision of this Agreement to the contrary, Lender shall be entitled to
fund and maintain its funding of all or any part of any Advance in any
manner it sees fit.
(e) Consequential Loss Indemnification. Borrower shall pay to Lender such
amount or amounts as shall be sufficient to compensate for any
Consequential Losses which Lender may incur as a result of payment or
Conversion of any LIBOR Advance other than on the last Business Day of
the Interest Period for such Advance, whether due to prepayment,
Conversion, acceleration of the Maturity Date or for any other reason,
except with respect to illegality (pursuant to Section 3.7(c) above).
SECTION 3.8 MANDATORY PREPAYMENT.
There shall be due and payable from Borrower to Lender, and Borrower shall
immediately repay to Lender, without notice or demand, from time to time, any
amount by which the Outstanding RLC Balance exceeds the Borrowing Base.
SECTION 3.9 REQUIREMENT THAT CONDITIONS BE SATISFIED.
Lender shall have no obligation to make any RLC Advances unless and until all
of the conditions and requirements of this Agreement are fully satisfied.
However, Lender, at its sole and absolute discretion, may elect to make one
or more RLC Advances prior to full satisfaction of one or more such
conditions and/or requirements. Notwithstanding that such an RLC Advance or
RLC Advances are made, such unsatisfied conditions and/or requirements shall
not be waived or released thereby. Borrower shall be and continue to be
obligated to fully satisfy such conditions and requirements.
ARTICLE 4
LETTERS OF CREDIT
SECTION 4.1 ISSUANCE.
Provided that Borrower has satisfied the conditions precedent contained in
Section 4.2 hereof, Lender agrees, from time to time, to issue and/or renew
Letters of Credit on behalf of Borrower so long as upon such issuance or
renewal (i) a fee is paid by Borrower to Lender in an amount equal to
Lender's current stated rate for the issuance of all other types of Letters
of Credit and for other Letter of Credit services, (ii) in accordance with
the terms and conditions of Section 3.1 hereof, the Outstanding RLC Balance
would not exceed the lesser of (i) the Borrowing Base, or (ii) the RLC
Commitment Amount, and (iii) the aggregate amount of the face amount of
Letters of Credit outstanding at such time would not exceed the Maximum
Letter of Credit Balance.
SECTION 4.2 CONDITIONS PRECEDENT.
The obligation of the Lender to issue and/or renew any Letters of Credit on
behalf of the Borrower shall be subject to the following conditions precedent
on the date of issuance or renewal of each such Letter of Credit:
(a) Borrower shall execute and deliver to Lender an application for letter
of credit, specifying the amount of the requested letter of credit, the
requested term thereof, which term may not exceed the Maturity Date, and
the beneficiary thereof; and
(b) No Event of Default shall exist and no event or condition shall exist
that after notice or lapse of time, or both would constitute an Event of
Default.
SECTION 4.3 DRAWING.
Should any Letter of Credit be drawn upon by the beneficiary thereof, such
draw shall be deemed to be a Prime Advance.
ARTICLE 5
CONDITIONS PRECEDENT
SECTION 5.1 CONDITIONS PRECEDENT.
The obligation of Lender to make the initial Advance hereunder is subject to
the fulfillment of the following conditions:
(a) Each Borrower shall have executed (or obtained the execution or issuing
of) and delivered to Lender the following documents or information, all
in form satisfactory to Lender:
(i) The Note;
(ii) A corporate resolution of each Borrower authorizing (i) the Loan,
and (ii) the execution and delivery by said Borrower of all
documents to be executed by said Borrower, and the performance by
said Borrower of all acts and things to be performed by said
Borrower, pursuant to this Agreement; and
(iii) A copy of its current Articles of Incorporation and Bylaws, so
certified by the Secretary of the corporation, together with a
copy of a current Certificate of Good Standing in the state of
incorporation for said Borrower and evidence of qualification to
do business and good business in all states in which said Borrower
conducts business; and such other documents as Lender may require
relating to the existence and good standing of said Borrower and
the authority of any person acting or executing documents on
behalf of said Borrower.
(b) All representations and warranties by each Borrower contained in this
Agreement shall remain true and correct and each Borrower has performed
or complied with all agreements of said Borrower made in this Agreement
that said Borrower is to have performed or complied with by the date of
the first Advance.
(c) No Event of Default shall exist and no event or condition shall exist
that after notice or lapse of time, or both would constitute an Event of
Default.
(d) Lender shall have received evidence to its satisfaction that there are
no Liens, other than those permitted pursuant to Section 8.4, on the
property or assets of the Borrower.
SECTION 5.2 CONDITIONS PRECEDENT TO ALL FUTURE ADVANCES.
The obligation of the Lender to make any Advances to the Borrower following
the initial Advance under Section 5.1 hereof shall be subject to the
condition precedent that on the date of each such Advance no Event of Default
shall exist and no event or condition shall exist that, after notice or lapse
of time or both, would constitute an Event of Default.
ARTICLE 6
GENERAL REPRESENTATIONS AND WARRANTIES
Each Borrower hereby represents and warrants to Lender as follows:
SECTION 6.1 RECITALS.
The recitals and statements of intent appearing in this Agreement are true
and correct.
SECTION 6.2 ORGANIZATION.
Borrower is duly organized, validly existing and in good standing under the
laws of the state of its organization. Borrower is qualified to do business
and is in good standing in the State of Arizona and in each state in which it
is required by law to do so.
SECTION 6.3 POWER.
Borrower has full power and authority to own its properties and assets and to
carry on its business as presently being conducted.
SECTION 6.4 ENFORCEABLE.
Borrower is fully authorized and permitted to enter into this Agreement, to
execute any and all documentation required herein, to borrow the amounts
contemplated herein upon the terms set forth herein and to perform the terms
of this Agreement, none of which conflicts with any provision of law or
regulation applicable to Borrower. This Agreement and the Note are valid and
binding legal obligations of Borrower, and each is enforceable in accordance
with its terms.
SECTION 6.5 NO CONFLICT.
The execution, delivery and performance by Borrower of this Agreement, the
Note and all other documents and instruments relating to the Loan are not in
material conflict with any provision of law applicable to Borrower or with
the Articles of Incorporation and Bylaws of Borrower and will not result in
any breach of the terms or conditions or constitute a default under any
agreement or instrument under which Borrower is a party or is obligated.
Borrower is not in default in the performance or observance of any
obligations, covenants or conditions of any such agreement or instrument.
SECTION 6.6 NO ACTIONS.
There are no actions, suits or proceedings pending or threatened against
Borrower which materially and adversely affect the repayment of the Loan, the
performance by Borrower under this Agreement or the financial condition,
business or operations of Borrower.
SECTION 6.7 FINANCIAL STATEMENTS.
All financial statements and profit and loss statements, all statements as to
ownership and all other statements or reports previously or hereafter given
to Lender by Borrower are and shall be true and correct as of the date
thereof. There has been no material adverse change in the business,
properties or condition (financial or otherwise) of Borrower since the date
of the latest financial statements given to Lender.
SECTION 6.8 TAX PAYMENTS.
Borrower has filed all federal, state and local tax returns by the due date
as extended and has paid all federal, state and local taxes shown due thereon
by such extended due date and all other payments required under federal,
state or local law.
SECTION 6.9 MARGIN STOCK.
No part of the proceeds of any financial accommodation made by Lender in
connection with this Agreement will be used to purchase or carry "margin
stock," as that term is defined in Regulation U of the Board of Governors of
the Federal Reserve System, or to extend credit to others for the purpose of
purchasing or carrying such margin stock.
SECTION 6.10 AFFIRMATION.
Each request by Borrower for an Advance hereunder shall constitute an
affirmation on the part of the Borrower that the representations and
warranties of Section 6.7 are true and correct with respect to any financial
statements submitted by Borrower to Lender between the date of this Agreement
and the date of such request, that the representations and warranties of all
other sections of this Article 6 hereof are true and correct as of the time
of such request and that the condition precedents set forth in Article 5
hereof are fully satisfied. All representations and warranties made herein
shall survive the execution of this Agreement, any and all Advances or
proceeds of the Loan and the execution and delivery of all other documents
and instruments in connection with the Loan, so long as Lender has any
commitment to lend to Borrower hereunder and until the Loan and all
indebtedness hereunder have been paid in full and all of Borrower's
obligations hereunder have been fully discharged.
SECTION 6.11 OBLIGATIONS OF AFFILIATION.
Borrower is not currently under any probationary action instituted by the
NCA, and to the best of its knowledge, Borrower has fully and completely
complied with all "Obligations of Affiliation" as prescribed by the NCA.
SECTION 6.12 OPERATING SUBSIDIARIES.
All Operating Subsidiaries of the Company are correctly identified on
Schedule 6.12.
SECTION 6.13 SUBSIDIARIES.
All Subsidiaries of the Company are correctly identified on Schedule 6.13.
ARTICLE 7
AFFIRMATIVE COVENANTS
Each Borrower to the extent applicable hereby covenants and agrees that so
long as Lender has any commitment to lend to Borrower hereunder and until the
Loan and all other indebtedness hereunder have been paid in full and all of
Borrower's obligations hereunder have been fully discharged:
SECTION 7.1 EXISTENCE.
Except as otherwise permitted by Section 8.1, Borrower shall maintain its
existence with no amendments or changes in its Articles of Incorporation
without the prior written consent of the Lender, which consent shall not be
unreasonably withheld.
SECTION 7.2 MAINTAIN PROPERTY.
Borrower shall maintain in full force and effect all agreements, rights,
trademarks, patents and licenses necessary to carry out its business, shall
keep all of its properties in good condition and repair, and shall make all
needed and proper repairs and improvements to its properties in order to
properly conduct its business.
SECTION 7.3 INSURANCE.
To the extent Borrower is not self-insured, Borrower shall at all times
maintain insurance coverages in scope and amount not less than, and not less
extensive than, the scope and amount of insurance coverages customary for
companies of comparable size and financial strength in the trades or
businesses in which Borrower is from time to time engaged. Upon Lender's
request, Borrower shall provide evidence satisfactory to Lender that required
coverage in required amounts is in effect.
SECTION 7.4 PAYMENTS.
Borrower shall make all payments of interest and principal on the Loan as and
when the same become due and payable and shall keep and comply with all
covenants, terms and provisions of the Note.
SECTION 7.5 FINANCIAL REPORTS.
Borrower shall maintain a standard system of accounting in accordance with
good business practices, that reflects the application of GAAP and the
Company shall furnish to Lender the following:
(a) CPA Fully Audited Financial Statements. Annual consolidated financial
statements within one hundred twenty (120) days, of the Company's fiscal
year end together with a copy of the Form 10-K as filed with the SEC and
an opinion on said financial statements (which shall not be limited by
reason of any limitation imposed by the Company) of independent
certified public accountants acceptable to Lender, to the effect that
such financial statements have been prepared in accordance with
generally accepted accounting principles consistently maintained and
applied (except for changes in which such accountants concur) and that
their examination of such accounts in connection with such financial
statements has been made in accordance with generally accepted auditing
standards).
(b) Quarterly Financial Statements. Fully consolidated company prepared
balance sheets and profit and loss statements as of the end of each of
its first three fiscal quarters, within forty-five (45) days after the
end of each fiscal quarter, together with a copy of the Form 10-Q as
filed with the SEC.
(c) Borrowing Base Certificate. A borrowing base certificate in the form of
Exhibit "A" attached hereto as of the end of each month, within thirty
(30) days after the end of each month; provided however that such
borrowing base certificate shall not be required should the Outstanding
RLC Balance as of the last day of the month be zero.
(d) Aging and Listing of Accounts Receivable. A summary aging of the
Company's and the Operating Subsidiaries accounts and contracts
receivable as of the last day of that month, together with an
explanation of any adjustments made at the end of that month, all in a
form acceptable to Lender within thirty (30) days after the end of each
month; provided however that such aging report shall not be required
should the Outstanding RLC Balance as of the last day of the month be
zero.
(e) Compliance Certificate. With each statement submitted by the Company
under subparagraphs (a) and (b) above, a certificate signed by an
Authorized Officer of the Company, (i) stating that no Event of Default
exists and no event has occurred and no condition exists that, after
notice or passage of time, or both, would constitute an Event of
Default, and (ii) either stating that there is no new Operating
Subsidiary or, if there is, identifying such new Operating Subsidiary
and enclosing an Assumption Agreement executed by such new Operating
Subsidiary.
SECTION 7.6 RECORDS.
Borrower shall maintain, in a safe place, proper and accurate books, ledgers,
correspondence and other records relating to its operations and business
affairs. Lender shall have the right from time to time to examine and audit
and to make abstracts from and photocopies of Borrower's books, ledgers,
correspondence and other records.
SECTION 7.7 CURRENT OBLIGATIONS.
Except for tax protests made in good faith and, the posting, if required, of
any and all bonds therewith, Borrower shall pay all of its current
obligations before they become delinquent, including all federal, state and
local taxes, assessments, levies and governmental charges and all other
payments required under any federal, state or local law.
SECTION 7.8 DELIVERY OF CORRESPONDENCE BY AND BETWEEN BORROWER AND THE NCA.
Borrower shall comply at all times with all "Obligations of Affiliation" as
prescribed by the NCA with respect to UOP, and to the extent applicable any
other Operating Subsidiary that is accredited by the NCA and promptly deliver
to Lender a certified copy of all correspondence regarding: (i) potential or
actual probationary actions taken by the NCA, or any other accreditation
commission; and (ii) written notification from the NCA that Borrower has not
fulfilled one more of its "Obligations of Affiliation" as prescribed by the
NCA. Borrower shall also promptly deliver any other accreditation related
information as reasonably requested by Lender from time to time, including
but not limited to the NCA's final team report prepared after any evaluation
visit.
SECTION 7.9 NEW OPERATING SUBSIDIARIES.
Within thirty (30) days of any Subsidiary qualifying as an Operating
Subsidiary, the Company shall (i) so notify the Lender, (ii) cause Schedule
6.12 to be amended and (iii) cause such new Operating Subsidiary to deliver
to Lender an executed Assumption Agreement, whereby such new Operating
Subsidiary shall become a "Borrower" for all purposes of this Agreement.
SECTION 7.10 OTHER DOCUMENTS.
Borrower shall execute and deliver to Lender such other instruments and
documents and do such other acts as Lender may reasonably require in
connection with the Loan.
ARTICLE 8
NEGATIVE COVENANTS
Each Borrower hereby covenants and agrees that so long as Lender has any
commitment to lend to Borrower hereunder and until the Loan and all other
indebtedness hereunder have been paid in full and all of the Borrower's
obligations hereunder have been fully discharged, it shall not without
receiving the prior written consent of Lender:
SECTION 8.1 NO MERGERS, ACQUISITIONS AND CONSOLIDATIONS.
Dissolve or liquidate, or become a party to any merger or consolidation, or
sell, transfer, lease or otherwise dispose of all or substantially all of its
property or assets, except that (i) any Subsidiary of any Borrower may merge
into or transfer assets to any Borrower, and (ii) any Borrower may purchase
or acquire the assets or capital stock of an unrelated Person, provided that:
(a) the total consideration paid by such Borrower is not more than
$3,000,000.00 and (b) the Company or any of its Operating Subsidiaries is the
surviving entity of any such merger or acquisition; for this purpose,
consideration shall include anything of value paid by such Borrower,
including without limitation money, personal services and any form of
property.
SECTION 8.2 FISCAL YEAR.
Change the times of commencement or termination of its fiscal year or other
accounting periods; or change its method of accounting other than to conform
to GAAP.
SECTION 8.3 MARGIN STOCK.
Use any proceeds of the Loan, or any proceeds of any other or future
financial accommodation from Lender to Borrower, directly or indirectly, for
the purpose, whether immediate, incidental or ultimate, of purchasing or
carrying any "margin stock" as that term is defined in Regulation U of the
Board of Governors of the Federal Reserve System, and will not use such
proceeds in a manner that would involve Borrower in a violation of Regulation
T, U or X of such Board, nor use such proceeds for any purpose not permitted
by Section 7 of the 1934 Act or any of the rules or regulations respecting
the extensions of credit promulgated thereunder.
SECTION 8.4 LIENS; NEGATIVE PLEDGE.
Create or suffer to exist Liens upon its property or assets or the property
or assets of any of its Operating Subsidiaries, real or personal, now owned
or hereafter acquired, except (i) Liens in favor of Lender, (ii) purchase
money security interests in, or purchase money mortgages on, real or personal
property to secure purchase money Indebtedness incurred by Borrower, (iii)
Liens incurred in connection with permitted seller carryback financing of
property, plant and equipment acquired by Borrower or any Operating
Subsidiary, and Liens then existing and relating to indebtedness assumed by
Borrower or any of its Subsidiaries in connection with any such acquisition,
provided that: (a) any property subject to any of the foregoing is acquired
by the Borrower or any Subsidiary in the ordinary course of its respective
business and the Lien on any such property attaches to such assets
concurrently or within thirty (30) days after the acquisition thereof; and
(b) each such Lien shall attach only to the property so acquired and fixed
improvements thereon; (iv) Permitted Liens; and (v) Liens otherwise permitted
hereunder which were granted by any Person which has been merged into,
consolidated with or acquired by Borrower in a transaction permitted by the
terms of this Agreement.
SECTION 8.5 INDEBTEDNESS.
Incur or permit any Subsidiary to incur, Indebtedness from any Person, except
(i) trade payables incurred in the ordinary course of business; (ii)
Indebtedness with the Lender; and (iii) Permitted Non-Bank Indebtedness not
to exceed $3,000,000.00 in the aggregate.
SECTION 8.6 DEBT/TANGIBLE NET WORTH RATIO.
Permit the Debt/Tangible Net Worth Ratio at the end of any fiscal quarter of
the Company to exceed 1.5 to 1.0.
SECTION 8.7 ADJUSTED CURRENT RATIO.
Permit the Adjusted Current Ratio at the end of any fiscal quarter of the
Company to be less than 3.0 to 1.0.
SECTION 8.8 PAYMENT OF DIVIDENDS.
Permit the payment of cash dividends on its capital stock. Notwithstanding
the foregoing, Borrower shall be permitted to pay (i) intercompany dividends,
provided said dividend(s) has(have) no effect whatsoever on the Company's
consolidated stockholder's equity, and (ii) non-cash dividends including but
not limited to intercompany non-cash dividends and non-cash dividends to
facilitate stock splits.
SECTION 8.9 CHANGE IN CONTROL.
Permit a Change in Control to occur with respect to the Company.
SECTION 8.10 LOSS OF ACCREDITATION.
Permit any action that would cause accreditation to be denied by the NCA with
respect to UOP, and to the extent applicable any other Operating Subsidiary
that is accredited by the NCA.
ARTICLE 9
DEFAULT AND REMEDIES
SECTION 9.1 EVENT OF DEFAULT.
The occurrence of any of the following events or conditions shall constitute
an "Event of Default" under this Agreement:
(a) Failure to pay any installment of principal or interest under the Note
as and when the same become due and payable, or the failure to pay any
other sum due under the Note or this Agreement when the same shall
become due and payable;
(b) Any failure or neglect to perform or observe any of the terms,
provisions, or covenants of this Agreement (other than a failure or
neglect described in one or more of the other provisions of this
Section 9.1);
(c) Any warranty, representation or statement contained in this Agreement,
or made or furnished to the Lender by or on behalf of the Borrower,
that shall be or shall prove to have been materially false when made or
furnished;
(d) The filing by any Borrower (or against any Borrower in which said
Borrower acquiesces or which is not dismissed within ninety (90) days of
the filing thereof) of any proceeding under the federal bankruptcy laws
now or hereafter existing or any other similar statute now or hereafter
in effect; the entry of an order for relief under such laws with
respect to said Borrower; or the appointment of a receiver, trustee,
custodian or conservator of all or any part of the assets of any
Borrower;
(e) The insolvency of any Borrower; or the execution by any Borrower of an
assignment for the benefit of creditors; or the convening by any
Borrower of a meeting of its creditors, or any class thereof, for
purposes of effecting a moratorium upon or extension or composition of
its debts; or the failure of any Borrower to pay its debts as they
mature; or if any Borrower is generally not paying its debts as they
mature;
(f) The admission in writing by any Borrower that it is unable to pay its
debts as they mature or that it is generally not paying its debts as
they mature;
(g) The liquidation, termination or dissolution of any Borrower except as
otherwise permitted in this Agreement; or
(h) The occurrence of any default under the Note or any document or
instrument given by Borrower in connection with any other indebtedness
of Borrower to Lender and the expiration of any grace period provided
therein.
SECTION 9.2 REMEDIES.
Upon the occurrence of any Event of Default and at any time thereafter while
such Event of Default is continuing, subject to the provisions of
subparagraphs (b) and (c) hereof, Lender may do one or more of the following:
(a) Cease making Advances or extensions of financial accommodations in any
form to or for the benefit of Borrower and declare the entire Loan
immediately due and payable, without notice or demand;
(b) Proceed to protect and enforce its rights and remedies under this
Agreement and the Note; and
(c) Avail itself of any other relief to which Lender may be legally or
equitably entitled.
SECTION 9.3 NOTICE AND CURE PROVISION.
Prior to exercising any right of acceleration of the Indebtedness or other
right or remedy by Lender, unless a different grace period is provided in
this Agreement, Lender shall give written notice of any default upon which
such right or remedy is dependent and, if such default is of a nature that
can be corrected by the Borrower, allow the following time period for such
correction:
(a) If the default relates to the nonpayment of money: ten (10) days;
(b) If the default relates to the non-performance of any covenant herein
made by the Borrower, or to the existence of any condition or state of
affairs that may be corrected by the Borrower other than the nonpayment
of money: sixty (60) days.
No notice need be given or period for correction allowed by Lender in the
event of insolvency, or in the event of administration of property in any
legal or equitable proceeding of any kind, including, without limitation, any
proceeding under federal bankruptcy law or any other similar statute now or
hereafter in effect, or in the event of any other default that Lender
reasonably determines to be of a nature beyond the Borrower's reasonable
power to correct.
ARTICLE 10
ACTION UPON AGREEMENT
SECTION 10.1 THIRD PARTY.
This Agreement is made for the sole protection and benefit of the parties
hereto, their successors and assigns, and no other person or organization
shall have any right of action hereon. No representation of any kind is made
to third parties by the execution hereof, by the existence or form of the
indebtedness treated herein, or by any performance, or failure or waiver
thereof, by any party of the terms hereof. Specifically, without limitation
of the foregoing, the Lender makes no representation to any third party as to
the solvency of the Borrower or of the commercial practicability of any
business enterprise to which or for which the Loan is made.
SECTION 10.2 ENTIRE AGREEMENT.
This Agreement embodies the entire Agreement of the parties with regard to
the subject matter hereof. There are no representations, promises,
warranties, understandings or agreements express or implied, oral or
otherwise, in relation thereto, except those expressly referred to or set
forth herein. Borrower acknowledges that the execution and the delivery of
this Agreement is its free and voluntary act and deed, and that said
execution and delivery have not been induced by, nor done in reliance upon,
any representations, promises, warranties, understandings or agreements made
by Lender, its agents, officers, employees or representatives.
SECTION 10.3 WRITING REQUIRED.
No promise, representation, warranty or agreement made subsequent to the
execution and delivery hereof by either party hereto, and no revocation,
partial or otherwise, or change, amendment, addition, alteration or
modification of this Agreement shall be valid unless the same shall be in
writing signed by all parties hereto.
SECTION 10.4 NO PARTNERSHIP.
Lender and Borrower each have separate and independent rights and obligations
under this Agreement. Nothing contained herein shall be construed as
creating, forming or constituting any partnership, joint venture, merger or
consolidation of Borrower and Lender for any purpose or in any respect.
ARTICLE 11
GENERAL
SECTION 11.1 SURVIVAL.
This Agreement shall survive the making of the Loan and shall continue so
long as any part of the Loan, or any extension or renewal thereof, or any
Letter of Credit remains outstanding.
SECTION 11.2 CONTEXT.
This Agreement shall apply to the parties hereto according to the context
hereof, and without regard to the number or gender of words or expressions
used herein.
SECTION 11.3 TIME.
Time is expressly made of the essence of this Agreement.
SECTION 11.4 NOTICES.
All notices required or permitted to be given hereunder shall be in writing,
and shall become effective immediately if personally delivered or effective
twenty-four (24) hours after such are deposited in the United States mail,
certified or registered, postage prepaid, addressed as shown above, or to
such other address as such party may from time to time designate in writing.
Any notice sent to Borrower shall be sent to the attention of its chief
financial officer.
SECTION 11.5 COSTS.
Borrower shall pay all reasonable costs and expenses arising from the
preparation of this Agreement, the Note, the closing of the Loan, the making
of Advances thereunder, and the enforcement of Lender's rights hereunder,
including but not limited to, accounting fees, appraisal fees, attorneys'
fees and any charges that may be imposed on Lender as a result of this
transaction. At the option of Lender and upon written notice to Borrower,
RLC Advances may be made and disbursed from time to time by Lender directly
in payment of such costs and expenses.
SECTION 11.6 LAW.
This Agreement shall be construed according to the laws of the State of
Arizona.
SECTION 11.7 SUCCESSORS.
This Agreement shall, except as herein otherwise provided, be binding upon
and inure to the benefit of the successors and assigns of the parties,
hereto.
SECTION 11.8 HEADINGS.
The headings or captions of sections in this Agreement are for convenience
and reference only, and in no way define, limit or describe the scope or
intent of this Agreement or the provisions of such sections.
SECTION 11.9 ARBITRATION.
(a) Binding Arbitration. Upon the demand of Borrower or Lender
(collectively, the "parties"), whether made before the institution of
any judicial proceeding or not more than 60 days after service of a
complaint, third party complaint, cross-claim or counterclaim or any
answer thereto or any amendment to any of the above, any Dispute (as
defined below) shall be resolved by binding arbitration in accordance
with the terms of this arbitration clause. A "Dispute" shall include
any action, dispute, claim, or controversy of any kind, whether founded
in contract, tort, statutory or common law, equity, or otherwise, now
existing or hereafter occurring between the parties arising out of,
pertaining to or in connection with this Agreement or any related
agreements, documents, or instruments (the "Documents"). The parties
understand that by this Agreement they have decided that the Disputes
may be submitted to arbitration rather than being decided through
litigation in court before a judge or jury and that once decided by an
arbitrator the claims involved cannot be brought, filed or pursued in
court.
(b) Governing Rules. Arbitrations conducted pursuant to this Agreement,
including selection of arbitrators, shall be administered by the
American Arbitration Association ("Administrator") pursuant to the
Commercial Arbitration rules of the Administrator. Arbitrations
conducted pursuant to the terms hereof shall be governed by the
provisions of the Federal Arbitration Act (Title 9 of the United States
Code), and to the extent the foregoing are inapplicable, unenforceable
or invalid, the laws of the State of Arizona. Judgment upon any award
rendered hereunder may be entered in any court having jurisdiction;
provided, however, that nothing contained herein shall be deemed to be
a waiver by any party that is a Lender of the protections afforded to it
under 12 U.S.C. section 91 or similar governing state law. Any party who
fails to submit to binding arbitration following a lawful demand by the
opposing party shall bear all costs and expenses, including reasonable
attorney's fees, incurred by the opposing party in compelling
arbitration of any Dispute.
(c) No Waiver, Preservation of Remedies, Multiple Parties. No provision of,
nor the exercise of any rights under, this arbitration clause shall
limit the right of any party to (1) foreclose against any real or
personal property collateral or other security, (2) exercise self-help
remedies (including repossession and setoff rights) or (3) obtain
provisional or ancillary remedies such as injunctive relief,
sequestration, attachment, replevin, garnishment, or the appointment of
a receiver from a court having jurisdiction. Such rights can be
exercised at any time except to the extent such action is contrary to a
final award or decision in any arbitration proceeding. The institution
and maintenance of an action as described above shall not constitute a
waiver of the right of any party, including the plaintiff, to submit
the Dispute to arbitration, nor render inapplicable the compulsory
arbitration provisions hereof. Any claim or Dispute related to exercise
of any self-help, auxiliary or other exercise of rights under this
section (c) shall be a Dispute hereunder.
(d) Arbitrator Powers and Qualifications; Awards. Arbitrator(s) shall
resolve all Disputes in accordance with the applicable substantive law.
Arbitrator(s) may make an award of attorneys' fees and expenses if
permitted by law or the agreement of the parties. All statutes of
limitation applicable to any Dispute shall apply to any proceeding in
accordance with this arbitration clause. Any arbitrator selected to act
as the only arbitrator in a Dispute shall be required to be a
practicing attorney with not less than 10 years practice in commercial
law in the State of Arizona. With respect to a Dispute in which the
claims or amounts in controversy do not exceed five hundred thousand
dollars ($500,000), a single arbitrator shall be chosen and shall
resolve the Dispute. In such case the arbitrator shall have authority
to render an award up to but not to exceed five hundred thousand
dollars ($500,000) including all damages of any kind whatsoever, costs,
fees and expenses. Submission to a single arbitrator shall be a waiver
of all parties' claims to recover more than five hundred thousand
dollars ($500,000). A dispute involving claims or amounts in
controversy exceeding five hundred thousand dollars ($500,000) shall be
decided by a majority vote of a panel of three arbitrators
("Arbitration Panel"). An Arbitration Panel shall be composed of one
arbitrator who would be qualified to sit as a single arbitrator in a
Dispute decided by one arbitrator, one who has at least ten years
experience in commercial lending and one who has at least ten years
experience in the Borrower's industry. Arbitrator(s) may, in the
exercise of their discretion, at the written request of a party in any
Dispute, (1) consolidate in a single proceeding any multiple party
claims that are substantially identical and all claims arising out of a
single loan or series of loans including claims by or against
borrower(s) guarantors, sureties and or owners of collateral if
different from the Borrower, and (2) administer multiple arbitration
claims as class actions in accordance with Rule 23 of the Federal Rules
of Civil Procedure. The arbitrator(s) shall be empowered to resolve any
dispute regarding the terms of this Agreement or the arbitrability of
any Dispute or any claim that all or any part (including this
provision) is void or voidable but shall have no power to change or
alter the terms of this Agreement. The award of the arbitrator(s)
shall be in writing and shall specify the factual and legal basis for
the award.
(e) Miscellaneous. To the maximum extent practicable, the Administrator,
the Arbitrator(s) and the parties shall take any action necessary to
require that an arbitration proceeding hereunder be concluded within 180
days of the filing of the Dispute with the Administrator. The
Arbitrator(s) shall be empowered to impose sanctions for any party's
failure to proceed within the times established herein. Arbitration
proceedings hereunder shall be conducted in Arizona at a location
determined by the Administrator. In any such proceeding a party shall
state as a counterclaim any claim which arises out of the transaction or
occurrence or is in any way related to the Documents which does not
require the presence of a third party which could not be joined as a
party in the proceeding. The provisions of this arbitration clause
shall survive any termination, amendment, or expiration of the
Documents and repayment in full of sums owed to Lender by Borrower
unless the parties otherwise expressly agree in writing. Each party
agrees to keep all Disputes and arbitration proceedings strictly
confidential, except for disclosures of information required in the
ordinary course of business of the parties or as required by applicable
law or regulation.
IN WITNESS WHEREOF, these presents have been executed as of the day and year
first set forth above and each party hereby acknowledges that it has read the
Arbitration provisions contained in Section 11.9 of this Agreement.
FIRST INTERSTATE BANK OF ARIZONA, N.A.
By: /s/ Xxxxxx X. Xxxxxxxx
-------------------------------
Name: Xxxxxx X. Xxxxxxxx
-------------------------------
Title: Vice President
-------------------------------
LENDER
APOLLO GROUP, INC., an Arizona corporation
By: /s/ Xxxx X. Xxxxxxxx
-------------------------------
Name: Xxxx X. Xxxxxxxx
-------------------------------
Title: Chairman
-------------------------------
THE UNIVERSITY OF PHOENIX, INC., an
Arizona corporation
By: /s/ Xxxx X. Xxxxxxxx
-------------------------------
Name: Xxxx X. Xxxxxxxx
-------------------------------
Title: Chairman
-------------------------------
INSTITUTE FOR PROFESSIONAL
DEVELOPMENT, INC., a California corporation
By: /s/ Xxxx X. Xxxxxxxx
-------------------------------
Name: Xxxx X. Xxxxxxxx
-------------------------------
Title: Chairman
-------------------------------
BORROWER
EXHIBIT "A"
Borrowing Base Certificate
Month Ended _______________
1. Student Receivables Of The Operating
Subsidiaries (Except IPD) $_______________
2. Less: Student Receivables Of The
Operating Subsidiaries (Except IPD)
Over 90 Days From Invoice $_______________
3. Eligible Accounts $_______________
4. Times: 70% Advance Rate X .70
5. Subtotal $_______________
6. Less: Outstanding Letters of Credit $_______________
7. Borrowing Base $_______________
8. Loan Balance (Not To Exceed Line 7) $_______________
APOLLO GROUP, INC.
By: ______________________________________
Its: ______________________________________
Date: ______________________________________
EXHIBIT "B"
ASSUMPTION AGREEMENT
BY THIS ASSUMPTION AGREEMENT (the "Agreement") made and entered into as of
the date indicated below by the undersigned (hereinafter called "Added
Borrower") whose chief executive address is located as indicated below, in
favor of FIRST INTERSTATE BANK OF ARIZONA, N.A., whose address is 000 Xxxx
Xxxxxxxxxx Xxxxxx, Xxxx Xxxxxx Xxx 00000, Xxxxxxx, Arizona 85072-3456
(hereinafter, together with any successors and assigns, called "Lender"), in
consideration of the recitals herein contained and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
Added Borrower confirms and agrees as follows:
SECTION 1. RECITALS.
1.1 Added Borrower is an Operating Subsidiary (as that term is defined in
the Loan Agreement hereinafter defined) of Apollo Group, Inc., an
Arizona corporation (the "Company").
1.2 As such, Added Borrower is benefitted by the financial accommodations
(the "Loan") advanced by Lender to Company and its then existing
Operating Subsidiaries (collectively with Company, the "Borrower")
pursuant to that Loan Agreement dated March 22, 1996 between
Lender and Borrower (as amended from time to time, the "Loan
Agreement").
1.3 A condition for the continuation of the Loan specified in the Loan
Agreement is that any subsequently acquired or created Operating
Subsidiary of the Company assume as a "Borrower" within the meaning of
Section 7.11 of the Loan Agreement the obligations of the Borrower under
the Loan Agreement, and agree to be bound by all of the terms,
conditions and provisions thereof, and agree to be jointly liable with
the Borrower for the full payment and satisfaction of the Loan and all
other obligations of the Borrower under the Loan Agreement.
1.4 Because of the benefits derived by the Added Borrower from said
financial accommodations, which consideration is acknowledged by Added
Borrower as sufficient for its agreements herein, Added Borrower desires
to so agree.
SECTION 2. ASSUMPTION.
2.1 Added Borrower hereby assumes as a "Borrower" and agrees to perform as a
"Borrower" all of the duties, obligations and promises of Borrower as
set forth in or arising under the Loan Agreement, to be bound as a
Borrower by all of the terms, conditions and provisions of the Loan
Agreement and to do as a Borrower any and all acts and things required
under the Loan Agreement to be done by Borrower.
SECTION 3. MISCELLANEOUS.
3.1 Added Borrower shall execute such additional documents and do such other
acts as may be reasonably necessary to fully implement the intent of
this Agreement including without limitation the delivery to Lender of
such other documents as Lender may reasonably request.
3.2 This Agreement shall be governed by and construed according to the laws
of the State of Arizona.
3.3 This Agreement shall be binding upon, and shall inure to the benefit of,
the parties hereto and their heirs, personal representatives, successors
and assigns.
IN WITNESS WHEREOF, these presents are executed as of March 22, 1996.
By: /s/ Xxxx X. Xxxxxxxx
-------------------------------
Its: Chairman
-------------------------------
Chief Executive Office:
0000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
ADDED BORROWER
SCHEDULE 6.12
Operating Subsidiaries
1. The University of Phoenix, Inc., an Arizona corporation.
2. Institute for Professional Development, Inc., a California corporation.
SCHEDULE 6.13
Subsidiaries
Apollo Development Corp.
Apollo Press, Inc.
Apollo Online, Inc.
Alta Business and Technical Schools, Inc.
Apollo Business and Technical Schools, Inc.
Apollo Education Corporation
Institute for Professional Development, Inc.
Computer Aided Learning Corporation, Inc.
The University of Phoenix, Inc.
Western International University, Inc.
UOP-Michigan
REVOLVING PROMISSORY NOTE
$4,000,000.00
Phoenix, Arizona
March 22, 1996
FOR VALUE RECEIVED, each of the undersigned (collectively, "Maker"), promises
to pay to the order of FIRST INTERSTATE BANK OF ARIZONA, N.A. (the "Payee";
Payee and each subsequent successor, transferee and/or owner of this Note,
whether taking by endorsement or otherwise, are herein successively called
"Holder"), at 000 Xxxx Xxxxxxxxxx, Xxxx Xxxxxx Xxx 00000, Xxxxxxx, Arizona
85072-3456, or at such other place as Holder may from time to time designate
in writing, the principal sum of FOUR MILLION AND NO/100 DOLLARS
($4,000,000.00) or so much thereof as Holder may advance to or for the
benefit of Maker plus interest calculated on a daily basis (based on a 360-day
year) from the date hereof on the principal balance from time to time
outstanding as hereinafter provided, principal, interest and all other sums
payable hereunder to be paid in lawful money of the United States of America
as follows:
(a) INTEREST. Interest shall accrue on the unpaid principal of each RLC
Advance:
(i) At the Prime Rate if it is a Prime Advance.
(ii) At the Adjusted LIBOR Rate if it is a LIBOR Advance.
(b) PAYMENTS. All accrued interest on each RLC Advance shall be due and
payable as billed by Holder each month. In addition, the principal
amount of each LIBOR Advance together with all accrued interest, shall
be due and payable each month, and the balance, if any, at the end of
each respective Interest Period.
(c) FINAL PAYMENT. The entire outstanding principal balance outstanding
hereunder, all accrued and unpaid interest and all other sums which may
have become payable hereunder shall be due and payable in full on the
Termination Date.
(d) DEFINITIONS. The capitalized terms used and not otherwise defined
herein shall have the same meanings as defined in the Loan Agreement
(defined below).
The principal balance of this Note represents a revolving credit all or any
part of which may be advanced to Maker, repaid by Maker, and readvanced to
Maker from time to time, subject to the other terms hereof and the
conditions, if any, contained in the Loan Agreement and provided that the
principal balance outstanding at any one time shall not exceed the face
amount hereof.
Maker's indebtedness under this Note shall be further evidenced by the
balance of Maker's loan account with Holder to which charges and credits
shall be entered in accordance with Holder's standard accounting practices in
effect from time to time. Holder, at its discretion, from time to time, may
render statements of account to Maker setting forth the outstanding principal
amount of the Loan and amounts of interest, costs and fees due and payable
with respect thereto. Each such statement, if and as so rendered, shall be
deemed correct and accepted by Maker, and shall be conclusively binding upon
Maker, unless Maker notifies Holder of any discrepancy within thirty (30)
days after the date of the statement. If such statements are rendered
periodically by Holder and provide that accrued interest and other amounts
shown thereon are due and payable on receipt, all such interest and amounts
shall be so due and payable.
Maker agrees to an effective rate of interest that is the rate stated above
plus any additional rate of interest resulting from any other charges in the
nature of interest paid or to be paid by or on behalf of Maker, or any
benefit received or to be received by Holder, or any benefit received or to
be received by Holder, in connection with this Note.
All payments on this Note shall be applied to the payment of any costs, fees
or other charges incurred in connection with the indebtedness evidenced
hereby, the payment of accrued interest and the reduction of the principal
balance, in the order and manner Holder, in its sole and absolute discretion,
shall determine from time to time.
This Note is issued pursuant to that Loan Agreement dated of even date
herewith between Maker and Payee (the "Loan Agreement").
Time is of the essence of this Note. At the option of Holder, the entire
unpaid principal balance, all accrued and unpaid interest and all other
amounts payable hereunder shall become immediately due and payable without
notice upon the failure to pay any sum due and owing hereunder as provided
herein or upon the occurrence of any event of default under the Loan
Agreement.
After maturity, including maturity upon acceleration, the unpaid principal
balance, all accrued and unpaid interest and all other amounts payable
hereunder shall bear interest at that rate that is five percent (5%) above
the rate that would otherwise be payable under the terms hereof. Maker shall
pay all costs and expenses, including reasonable attorneys' fees and court
costs, incurred in the collection or enforcement of all or any part of this
Note. Such court costs and attorney's fees shall be set by the court and not
by jury, shall be included in any judgment obtained by Holder.
Maker shall have the option to prepay this Note, in full or in part, at any
time. Maker shall pay to Holder such amount or amounts as shall be
sufficient to compensate for any Consequential Loss which Holder may
reasonably incur as a result of payment or Conversion of any LIBOR Advance
other than on the last Business Day in the Interest Period for such LIBOR
Advance.
Failure of Holder to exercise any option hereunder shall not constitute a
waiver of the right to exercise the same in the event of any subsequent
default or in the event of continuance of any existing default after demand
for strict performance hereof.
Maker (a) waives any and all formalities in connection with this Note to the
maximum extent allowed by law, including (but not limited to) demand,
diligence, presentment for payment, protest and demand, and notice of
extension, dishonor, protest, demand and nonpayment of this Note; and (b)
consents that Holder may extend the time of payment or otherwise modify the
terms of payment of any part or the whole of the debt evidenced by this Note,
at the request of any other person liable hereon, and such consent shall not
alter nor diminish the liability of any person hereon.
In addition, Maker waives and agrees not to asset: (a) any right to require
Holder to proceed against Maker to proceed against or exhaust any security
for the Note, to pursue any other remedy available to Holder, or to pursue
any remedy in any particular order or manner; (b) the benefit of any statute
of limitations affecting its liability hereunder or the enforcement hereof;
(c) the benefits of any legal or equitable doctrine or principle of
marshaling; (d) notice of the existence, creation or incurring of new or
additional indebtedness of Maker to Holder; (e) the benefits of any statutory
provision limiting the liability of a surety, including without limitation
the provisions of Sections 12-1641, et seq., of the Arizona Revised Statutes;
and (f) any defense arising by reason of any disability or other defense of
Maker or by reason of the cessation from any cause whatsoever (other than
payment in full) of the liability of Maker for payment of the Note.
Maker agrees that to the extent Maker makes any payment to Holder in
connection with the indebtedness evidenced by this Note, and all or any part
of such payment is subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid by Holder or paid over to a
trustee, receiver or any other entity, whether under any bankruptcy act or
otherwise (any such payment is hereinafter referred to as a "Preferential
Payment"), then the indebtedness of Maker under this Note shall continue or
shall be reinstated, as the case may be, and, to the extent of such payment
or repayment by Holder, the indebtedness evidenced by this Note or part
thereof intended to be satisfied by such Preferential payment shall be
revived and continued in full force and effect as if said Preferential
Payment had not been made.
Without limiting the right of Holder to bring any action or proceeding
against Maker or against any property of Maker (an "Action") arising out of
or relating to this Note or any indebtedness evidenced hereby in the courts
of other jurisdictions, Maker hereby irrevocable submits to the jurisdiction,
process and venue of any Arizona State or Federal court sitting in Phoenix,
Arizona, and hereby irrevocably agrees that any Action may be heard and
determined in such Arizona State court or in such Federal court. Maker
hereby irrevocably waives, to the fullest extent it may effectively do so,
the defenses of lack of jurisdiction over any person, inconvenient forum or
improper venue, to the maintenance of any Action in any jurisdiction.
This Note shall be binding upon Maker and its successors and assigns and
shall inure to the benefit of Payee, and any subsequent holders of this Note,
and their successors and assigns.
All notices required or permitted in connection with this Note shall be given
at the place and in the manner provided in the Loan Agreement for the giving
of notices.
This Note shall be construed according the laws of the State of Arizona.
IN WITNESS WHEREOF, this Revolving Promissory Note has been executed as of
the date first written above.
APOLLO GROUP, INC.
an Arizona corporation
By: /s/ Xxxx X. Xxxxxxxx
---------------------------
Its: President
---------------------------
THE UNIVERSITY OF PHOENIX, INC.
an Arizona corporation
By: /s/ Xxxxxxx X. Xxxxx
---------------------------
Its: President
---------------------------
INSTITUTE FOR PROFESSIONAL DEVELOPMENT, INC.
a California corporation
By: /s/ Xxxxx X. Xxxxx
---------------------------
Its: President
---------------------------
