EXHIBIT 10.1
CREDIT AGREEMENT
THIS CREDIT AGREEMENT ("Agreement") is entered into as of October 26,
2004, by and between UNIVERSAL TECHNICAL INSTITUTE, INC., a Delaware corporation
("Borrower"), dba UNIVERSAL TECHNICAL INSTITUTE OF DELAWARE, and XXXXX FARGO
BANK, NATIONAL ASSOCIATION ("Bank").
RECITALS
Borrower has requested that Bank extend or continue credit to Borrower as
described below, and Bank has agreed to provide such credit to Borrower on the
terms and conditions contained herein.
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Bank and Borrower hereby agree as follows:
ARTICLE I.
CREDIT TERMS
SECTION 1.1 LINE OF CREDIT.
(a) Line of Credit. Subject to the terms and conditions of this
Agreement, Bank hereby agrees to make advances to Borrower from time to time
under a line of credit ("Line of Credit"), up to and including the Line of
Credit Maturity Date, not to exceed at any time the aggregate principal amount
of the Line of Credit Commitment, the proceeds of which shall be used for
working capital and other general corporate purposes. Borrower's obligation to
repay advances under the Line of Credit shall be evidenced by a promissory note
substantially in the form of Exhibit "B" attached hereto ("Line of Credit
Note"), all terms of which are incorporated herein by this reference.
(b) Limitation on Borrowings. Outstanding borrowings under the Line
of Credit shall not at any time exceed an aggregate of the Line of Credit
Commitment.
(c) Letter of Credit Subfeature. As a subfeature under the Line of
Credit, Bank agrees from time to time during the term thereof up to and
including the Line of Credit Maturity Date to issue or cause an affiliate to
issue standby letters of credit for the account of Borrower to finance its
operating and business requirements or those of its Subsidiaries (each, a
"Letter of Credit" and collectively, "Letters of Credit"); provided, however,
that the aggregate undrawn amount of all outstanding Letters of Credit shall not
at any time exceed the amount of the Line of Credit Commitment. The form and
substance of each Letter of Credit shall be subject to approval by Bank, in its
sole discretion. Each Letter of Credit shall be issued for a term not to exceed
three hundred sixty-five (365) days, as designated by Borrower and, if no Event
of Default has occurred and is continuing, Bank agrees to extend the term of any
Letter of Credit for up to another three hundred sixty-five (365) days upon
receipt from Borrower of a written request to do so not later than thirty (30)
days before the expiration date; provided, however, that no Letter of Credit
shall have an expiration date subsequent to the Line of Credit Maturity Date.
The undrawn amount of all Letters of Credit shall be reserved under the Line of
Credit and shall not be available for borrowings thereunder. Each Letter of
Credit shall be subject to the additional terms and conditions of the Letter of
Credit agreements, applications and any related documents required by Bank in
connection with the issuance thereof. Each draft paid under a Letter of Credit
shall be deemed an advance under the Line of Credit and shall be repaid by
Borrower in accordance with the terms and conditions of this Agreement
applicable to such advances; provided, however, that if advances under the Line
of Credit are not available, for any reason, at the time any draft is paid, then
Borrower shall immediately pay to Bank the full amount of such draft, together
with interest thereon from the date such draft is paid to the date such amount
is fully repaid by Borrower, at the rate of interest applicable to advances
under the Line of Credit. In such event Borrower agrees that Bank, in its sole
discretion, may debit any account maintained by Borrower with Bank (other than
any financial aid trust account maintained by Borrower with Bank) for the amount
of any such draft; at the time of said debit, Bank agrees to notify Borrower of
said debit.
(d) Borrowing and Repayment. Borrower may from time to time during
the term of the Line of Credit borrow, partially or wholly repay its outstanding
borrowings, and reborrow, subject to all of the limitations, terms and
conditions contained herein or in the Line of Credit Note; provided, however,
that the total outstanding borrowings under the Line of Credit shall not at any
time exceed the maximum principal amount available thereunder, as set forth
above. If at any time the total outstanding borrowings under the Line of Credit
exceed the Line of Credit Commitment, such excess shall be immediately due and
payable.
SECTION 1.2 STANDBY LETTER OF CREDIT.
(a) Standby Letter of Credit. Subject to the terms and conditions of
this Agreement, in addition to any Letter of Credit issued pursuant to Section
1.1(c) hereof, Bank hereby agrees up to and including the Line of Credit
Maturity Date to issue or cause an affiliate to issue one or more standby
letters of credit for the account of Borrower to finance any corporate purpose
(collectively, as amended, modified and/or supplemented from time to time, the
"Standby Letter of Credit") in the aggregate principal amount not to exceed
TWENTY MILLION AND NO/100 DOLLARS ($20,000,000.00). The form and substance of
each Standby Letter of Credit shall be subject to approval by Bank, in its sole
discretion. Each Standby Letter of Credit shall be issued for a term not to
exceed three hundred sixty-five (365) days, as designated by Borrower and, if no
Event of Default has occurred and is continuing, Bank agrees to extend the term
of any Standby Letter of Credit for up to another three hundred sixty-five (365)
days upon receipt from Borrower of a written request to do so not later than
thirty (30) days before the expiration date; provided, however, that no Standby
Letter of Credit shall have an expiration date subsequent to the Line of Credit
Maturity Date. Each Standby Letter of Credit shall be subject to the additional
terms of the Letter of Credit agreement, application and any related documents
required by Bank in connection with the issuance thereof (the "Standby Letter of
Credit Agreement").
(b) Repayment of Drafts. Each drawing paid under the Standby Letter
of Credit shall be repaid by Borrower in accordance with the provisions of the
Standby Letter of Credit Agreement.
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SECTION 1.3 INTEREST/FEES.
(a) Interest. The outstanding principal balance of the Line of
Credit shall bear interest, and the amount of each drawing paid under any Letter
of Credit shall bear interest from the date such drawing is paid to the date
such amount is fully repaid by Borrower, at the rate of interest set forth in
the Line of Credit Note or other instrument or document executed in connection
therewith. The amount of each drawing paid under the Standby Letter of Credit
shall bear interest from the date such delivery is paid to the date such amount
is fully repaid by Borrower at a rate per annum provided in the Standby Letter
of Credit Agreement.
(b) Prime Rate. The term "Prime Rate" shall mean at any time the
rate of interest most recently announced within Bank at its principal office as
its Prime Rate, with the understanding that the Prime Rate is one of Bank's base
rates and serves as the basis upon which effective rates of interest are
calculated for those loans making reference thereto, and is evidenced by the
recording thereof in such internal publication or publications as Bank may
designate. Each change in the rate of interest shall become effective on the
date each Prime Rate change is announced within Bank.
(c) Computation and Payment. Interest shall be computed on the basis
of a 360-day year, actual days elapsed. Interest shall be payable at the times
and place set forth in each promissory note or other instrument required hereby.
(d) Standby Letter of Credit Fee. Borrower shall pay to Bank
quarterly in advance a non-refundable fee for each Standby Letter of Credit
equal to three-eighths percent (0.375%) per annum of the face amount thereof,
which fee shall be due and payable quarterly in advance.
(e) Unused Commitment Fee. Borrower shall pay to Bank a fee equal to
one-eighth percent (0.125%) per annum (computed on the basis of a 360-day year,
actual days elapsed) on the average daily unused amount of the Line of Credit,
and shall be due and payable by Borrower in arrears on the last day of the
pertinent quarter by a debit to the Borrower's deposit account. For purposes of
the fee calculation, Letters of Credit issued under the Line of Credit shall be
considered outstanding.
(f) Letter of Credit Fees. Borrower shall pay to Bank (i) fees for
each Letter of Credit equal to five-eighths percent (0.625%) per annum (computed
on the basis of a 360-day year, actual days elapsed) of the face amount thereof
quarterly in advance and, upon any increase in the amount of a Letter of Credit,
a fee equal to five-eighths percent (0.625%) per annum on the amount of such
increase, and (ii) fees upon the payment or negotiation of each draft under any
Letter of Credit and fees upon the occurrence of any other activity with respect
to any Letter of Credit (including without limitation, the transfer, amendment
or cancellation of any Letter of Credit) determined in accordance with Bank's
standard fees and charges then in effect for such activity.
SECTION 1.4 COLLECTION OF PAYMENTS. Borrower authorizes Bank to collect
all principal, interest and fees due under each credit subject hereto by
charging Borrower's deposit account number 4121052344 with Bank, or any other
deposit account maintained by
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Borrower with Bank (other than any financial aid trust account maintained by
Borrower with Bank), for the full amount thereof. Should there be insufficient
funds in any such deposit account to pay all such sums when due, the full amount
of such deficiency shall be immediately due and payable by Borrower.
SECTION 1.5 COLLATERAL. As security for all indebtedness of Borrower to
Bank under the Standby Letter of Credit issued pursuant to Section 1.2(a),
Borrower hereby grants to Bank security interests of first priority in that
certain L/C Collateral Account No. 1281-1865 account maintained by Borrower (the
"Collateral Account") with Bank acting through Xxxxx Fargo Brokerage Services,
LLC. All amounts held therein shall be valued periodically by Bank (the
"Collateral Value") based on the Advance Rates that are generally in effect
within the Bank from time to time. At no time shall the Collateral Value of the
Collateral Account be less than the aggregate face amount of the Standby Letter
of Credit.
All of the foregoing shall be evidenced by and subject to the terms of such
security agreements, financing statements and other documents as Bank shall
reasonably require, all in form and substance satisfactory to Bank. Borrower
shall reimburse Bank immediately upon demand for all costs and expenses incurred
by Bank in connection with any of the foregoing security, including without
limitation, filing and recording fees and costs of appraisals and audits.
SECTION 1.6 GUARANTIES. All indebtedness of Borrower to Bank under the
Loans shall be guaranteed jointly and severally by the Guarantors, as evidenced
by and subject to the terms of guaranties in form and substance satisfactory to
Bank.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES
Borrower makes the following representations and warranties to Bank, which
representations and warranties shall survive the execution of this Agreement and
shall continue in full force and effect until the full and final payment, and
satisfaction and discharge, of all obligations of Borrower to Bank subject to
this Agreement.
SECTION 2.1 LEGAL STATUS. Borrower is a corporation, duly organized and
existing and in good standing under the laws of the State of Delaware, and is
qualified or licensed to do business (and is in good standing as a foreign
corporation, if applicable) in all jurisdictions in which such qualification or
licensing is required or in which the failure to so qualify or to be so licensed
could have a material adverse effect on Borrower.
SECTION 2.2 AUTHORIZATION AND VALIDITY. This Agreement and each promissory
note, contract, instrument and other document required hereby or at any time
hereafter delivered to Bank in connection herewith (collectively, the "Loan
Documents") have been duly authorized, and upon their execution and delivery in
accordance with the provisions hereof will constitute legal, valid and binding
agreements and obligations of Borrower or the party which executes the same,
enforceable in accordance with their respective terms.
SECTION 2.3 NO VIOLATION. The execution, delivery and performance by
Borrower of each of the Loan Documents do not violate any provision of any law
or regulation, or contravene any provision of the Certificate of Incorporation
or By-Laws of Borrower, or result in
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any breach of or default under any contract, obligation, indenture or other
instrument to which Borrower is a party or by which Borrower may be bound.
SECTION 2.4 LITIGATION. There are no pending, or to the best of Borrower's
knowledge threatened, actions, claims, investigations, suits or proceedings by
or before any governmental authority, arbitrator, court or administrative agency
which could have a material adverse effect on the financial condition or
operation of Borrower other than those disclosed by Borrower to Bank in writing
prior to the date hereof.
SECTION 2.5 CORRECTNESS OF FINANCIAL STATEMENT. The financial statement of
Borrower dated June 30, 2004, a true copy of which has been delivered by
Borrower to Bank prior to the date hereof, (a) has been prepared in accordance
with generally accepted accounting principles consistently applied and presents
fairly the financial condition of Borrower, and (b) discloses all liabilities of
Borrower that are required to be reflected or reserved against under generally
accepted accounting principles, whether liquidated or unliquidated, fixed or
contingent. Since the date of such financial statements there has been no
material adverse change in the financial condition of Borrower, nor has Borrower
mortgaged, pledged, granted a security interest in or otherwise encumbered any
of its assets or properties except in favor of Bank, or as disclosed to Bank, or
as permitted pursuant to Section 5.9, or as otherwise permitted by Bank in
writing.
SECTION 2.6 INCOME TAX RETURNS. Borrower has no knowledge of any pending
material assessments or adjustments of its income tax payable with respect to
any year.
SECTION 2.7 NO SUBORDINATION. There is no agreement, indenture, contract
or instrument to which Borrower is a party or by which Borrower may be bound
that requires the subordination in right of payment of any of Borrower's
obligations subject to this Agreement to any other obligation of Borrower.
SECTION 2.8 PERMITS, FRANCHISES. Borrower possesses, and will hereafter
possess, all material permits, consents, approvals, franchises and licenses
required and rights to all trademarks, trade names, patents, and fictitious
names, if any, necessary to enable it to conduct the business in which it is now
engaged in compliance with applicable law.
SECTION 2.9 ERISA. Borrower is in compliance in all material respects with
all applicable provisions of the Employee Retirement Income Security Act of
1974, as amended or recodified from time to time ("ERISA"); Borrower has not
violated any provision of any defined employee pension benefit plan (as defined
in ERISA) maintained or contributed to by Borrower (each, a "Plan"); no
Reportable Event as defined in ERISA has occurred and is continuing with respect
to any Plan initiated by Borrower; Borrower has met its minimum funding
requirements under ERISA with respect to each Plan; and each Plan will be able
to fulfill its benefit obligations as they come due in accordance with the Plan
documents and under generally accepted accounting principles.
SECTION 2.10 OTHER OBLIGATIONS. Borrower is not in default on any
obligation for borrowed money, any purchase money obligation or any other
material lease, commitment, contract, instrument or obligation.
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SECTION 2.11 ENVIRONMENTAL MATTERS. Except as disclosed by Borrower to
Bank in writing prior to the date hereof, Borrower is in compliance in all
material respects with all applicable federal or state environmental, hazardous
waste, health and safety statutes, and any rules or regulations adopted pursuant
thereto, which govern or affect any of Borrower's operations and/or properties,
including without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act of 1986, the Federal Resource Conservation and Recovery Act
of 1976, and the Federal Toxic Substances Control Act, as any of the same may be
amended, modified or supplemented from time to time. None of the operations of
Borrower is the subject of any federal or state investigation evaluating whether
any remedial action involving a material expenditure is needed to respond to a
release of any toxic or hazardous waste or substance into the environment.
Borrower has no material contingent liability in connection with any release of
any toxic or hazardous waste or substance into the environment.
SECTION 2.12 SUBSIDIARIES. Attached as Exhibit "C" hereto is a complete
list of all Subsidiaries of Borrower.
ARTICLE III.
CONDITIONS
SECTION 3.1 CONDITIONS OF INITIAL EXTENSION OF CREDIT. The obligation of
Bank to extend any credit contemplated by this Agreement is subject to the
fulfillment to Bank's satisfaction of all of the following conditions:
(a) Approval of Bank Counsel. All legal matters incidental to the
extension of credit by Bank shall be satisfactory to Bank's counsel.
(b) Documentation. Bank shall have received, in form and substance
satisfactory to Bank, each of the following, duly executed:
(i) This Agreement.
(ii) The Line of Credit Note.
(iii) With respect to the Standby Letter of Credit issued
pursuant to Section 1.2(a) hereof, Security Agreement: Securities Account,
Securities Account Control Agreement and UCC-1 Financing Statement as to
the Collateral Account.
(iv) The Guaranties executed by the Guarantors.
(v) Authorizations as to the Loan Documents for Borrower and
Guarantors to the extent required by Bank.
(vi) A completed compliance certificate as of June 30, 2004.
(vii) Evidence that the loan from GE to Borrower has been
fully paid and terminated and all UCC financing statements for the benefit
of GE have
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been released, other than with respect to the outstanding letter of credit
issued by GE for the account of UTI Holdings, Inc.
(viii) Such other documents as Bank may require under any
other Section of this Agreement.
(c) Financial Condition. There shall have been no material adverse
change, as determined by Bank, in the financial condition or business of
Borrower or any Guarantor, nor any material decline, as determined by Bank, in
the market value of any collateral required hereunder or a substantial or
material portion of the assets of Borrower or any such guarantor.
(d) Insurance. Borrower shall have delivered to Bank evidence of
insurance coverage on all Borrower's property, in form, substance, amounts,
covering risks and issued by companies satisfactory to Bank.
(e) Legal Opinions. A legal opinion from counsel to Borrower and
each Guarantor delivered to Bank in such form as reasonably requested by Bank.
SECTION 3.2 CONDITIONS OF EACH EXTENSION OF CREDIT. The obligation of Bank
to make each extension of credit requested by Borrower hereunder shall be
subject to the fulfillment to Bank's satisfaction of each of the following
conditions:
(a) Compliance. The representations and warranties contained herein
and in each of the other Loan Documents shall be true on and as of the date of
the signing of this Agreement and on the date of each extension of credit by
Bank pursuant hereto, with the same effect as though such representations and
warranties had been made on and as of each such date, and on each such date, no
Event of Default as defined herein, and no condition, event or act which with
the giving of notice or the passage of time or both would constitute such an
Event of Default, shall have occurred and be continuing or shall exist.
(b) Documentation. Bank shall have received all additional documents
which may be required in connection with such extension of credit.
ARTICLE IV.
AFFIRMATIVE COVENANTS
Borrower covenants that so long as Bank remains committed to extend credit
to Borrower pursuant hereto, or any liabilities (whether direct or contingent,
liquidated or unliquidated) of Borrower to Bank under any of the Loan Documents
remain outstanding, and until payment in full of all obligations of Borrower
subject hereto, Borrower shall, unless Bank otherwise consents in writing:
SECTION 4.1 PUNCTUAL PAYMENTS. Punctually pay all principal, interest,
fees or other liabilities due under any of the Loan Documents at the times and
place and in the manner specified therein, and immediately upon demand by Bank,
the amount by which the outstanding principal balance of any credit subject
hereto at any time exceeds any limitation on borrowings applicable thereto.
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SECTION 4.2 ACCOUNTING RECORDS. Maintain adequate books and records in
accordance with generally accepted accounting principles consistently applied,
and permit any representative of Bank, at any reasonable time after a two week
notice, to inspect, audit and examine such books and records, to make copies of
the same, and to inspect the properties of Borrower.
SECTION 4.3 FINANCIAL STATEMENTS. Provide to Bank all of the following:
(a) not later than one hundred twenty (120) days after and as of the
end of each fiscal year, a copy of Borrower's annual 10K as filed with the SEC;
(b) not later than forty-five (45) days after and as of the end of
each fiscal quarter, a copy of Borrower's 10Q as filed with the SEC;
(c) contemporaneously with each annual and quarterly financial
statement of Borrower required hereby, a compliance certificate (substantially
in the form of Exhibit "D") of the chief financial officer of Borrower,
certifying that said financial statements are accurate and have been prepared in
accordance with generally accepted accounting principles and that there exists
no Event of Default nor any condition, act or event which with the giving of
notice or the passage of time or both would constitute an Event of Default and
showing Borrower's compliance with Section 4.9; and
(d) from time to time such other information as Bank may reasonably
request.
SECTION 4.4 COMPLIANCE. Preserve and maintain all material licenses,
permits, governmental approvals, rights, privileges and franchises necessary for
the conduct of its business; cause its Subsidiaries to retain their state
accreditations and their qualifications for Title IV Programs; and comply with
the provisions of all documents pursuant to which Borrower is organized and/or
which govern Borrower's continued existence and with the requirements of all
laws, rules, regulations and orders of any governmental authority applicable to
Borrower and/or its business.
SECTION 4.5 INSURANCE. Maintain and keep in force insurance of the types
and in amounts customarily carried in lines of business similar to that of
Borrower, including but not limited to fire, extended coverage, public
liability, flood, property damage and workers' compensation, with all such
insurance carried with companies and in amounts customarily carried in lines of
business similar to that of Borrower, and deliver to Bank from time to time at
Bank's request schedules setting forth all insurance then in effect.
SECTION 4.6 FACILITIES. Keep all properties useful or necessary to
Borrower's business in good repair and condition, and from time to time make
necessary repairs, renewals and replacements thereto so that such properties
shall be reasonably preserved and maintained.
SECTION 4.7 TAXES AND OTHER LIABILITIES. Pay and discharge when due any
and all indebtedness, obligations, assessments and taxes, both real or personal,
including without limitation federal and state income taxes and state and local
property taxes and assessments, except such (a) as Borrower may in good faith
contest or as to which a bona fide dispute may arise, and (b) for which Borrower
has made provision, consistent with generally accepted
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accounting principles, for eventual payment thereof in the event Borrower is
obligated to make such payment.
SECTION 4.8 LITIGATION. Promptly give notice in writing to Bank of any
litigation pending against Borrower with a claim in excess of $2,500,000.00 that
is not covered by insurance.
SECTION 4.9 FINANCIAL CONDITION. Maintain Borrower's financial condition
at the end of each fiscal quarter as follows using generally accepted accounting
principles consistently applied and used consistently with prior practices
(except to the extent modified by the definitions herein), with compliance
determined commencing with Borrower's financial statements for the period ending
June 30, 2004:
(a) Net income after taxes determined for any fiscal quarter of not
less than $3,500,000.00 for such quarter.
(b) Total Liabilities divided by Tangible Net Worth determined for
any fiscal quarter of not greater than the DNW Ratio, with "Total Liabilities"
defined as the aggregate of current liabilities and non-current liabilities
excluding EITF 97-10 Liabilities up to $30,000,000.00 less subordinated debt,
with "Tangible Net Worth" defined as total assets less Total Liabilities and
less any intangible assets, and with "DNW Ratio" defined as 3.50 to 1.00 on
December 31, 2004 to June 30, 2005, as 2.00 to 1.00 on September 30, 2005 to
June 30, 2006, and as 1.50 to 1.00 on September 30, 2006 and thereafter.
(c) Current Ratio determined for any fiscal quarter of less than the
CR Requirement. "Current Ratio" is defined as total current assets (excluding
any cash in the Collateral Account and any cash of Borrower held by GE in a
controlled account) divided by total current liabilities which shall include
without limitation any outstanding balance on the Line of Credit, outstanding
surety bonds and any outstanding Letters of Credit under the Line of Credit
Commitment), with "CR Requirement" defined as 0.40 to 1.0 on December 31, 2004
to June 30, 2005, 0.50 to 1.00 on September 30, 2005 to June 30, 2006, and 0.60
to 1.0 on September 30, 2006 and thereafter.
(d) Tangible Net Worth (as defined in Paragraph (b) above)
determined as of any fiscal quarter of not less than the greater of (i) Tangible
Net Worth as of September 30, 2004, as published in Borrower's 10K as filed with
the SEC, or (ii) $33,000,000.00.
SECTION 4.10 NOTICE TO BANK. Promptly (but in no event more than five (5)
days after the occurrence of each such event or matter) give written notice to
Bank in reasonable detail of: (a) the occurrence of any Event of Default, or any
condition, event or act which with the giving of notice or the passage of time
or both would constitute an Event of Default; (b) any change in the name or the
entity structure of Borrower; (c) the occurrence and nature of any Reportable
Event or Prohibited Transaction, each as defined in ERISA, or any funding
deficiency with respect to any Plan; or (d) any termination or cancellation of
any insurance policy which Borrower is required to maintain.
SECTION 4.11 TITLE IV PROGRAMS. Cause all Subsidiaries eligible for Title
IV Programs to maintain as to themselves and their operating institutions any
and all state
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accreditations and all other requirements necessary to maintain their
eligibility for Title IV Programs; provided that if any operating institution is
a new campus intended to participate in Title IV Programs, this requirement
shall not be applicable for the first twelve (12) months of its operation.
SECTION 4.12 FUTURE SUBSIDIARIES. Cause any Subsidiary not a Guarantor to
execute and deliver, within thirty (30) days of its becoming a Subsidiary, to
Bank a Guaranty together with such organizational documents and resolutions as
Bank may reasonably request.
SECTION 4.13 OPERATING ACCOUNTS. Maintain, no later than ninety (90) days
after the Closing Date and thereafter, its primary operating accounts with the
Bank.
ARTICLE V.
NEGATIVE COVENANTS
Borrower further covenants that so long as Bank remains committed to
extend credit to Borrower pursuant hereto, or any liabilities (whether direct or
contingent, liquidated or unliquidated) of Borrower to Bank under any of the
Loan Documents remain outstanding, and until payment in full of all obligations
of Borrower subject hereto, Borrower will not, and will not allow any Guarantor,
without Bank's prior written consent:
SECTION 5.1 USE OF FUNDS. Use any of the proceeds of any credit extended
hereunder except for the purposes stated in Article I hereof.
SECTION 5.2 [Intentionally left blank].
SECTION 5.3 NEGATIVE PLEDGE AGREEMENT. Covenant with another creditor not
to pledge any portion of its assets to Bank.
SECTION 5.4 OTHER INDEBTEDNESS. Create, incur, assume or permit to exist
any indebtedness or liabilities resulting from borrowings, loans or advances,
whether secured or unsecured, matured or unmatured, liquidated or unliquidated,
joint or several, except (a) the liabilities of Borrower to Bank, (b) purchase
money obligations up to $10,000,000.00, (c) EITF 97-10 Liabilities up to
$30,000,000.00, and (d) any other material liabilities of Borrower existing as
of, and disclosed to, and deemed acceptable by, Bank prior to, the Closing Date
hereof.
SECTION 5.5 MERGER, CONSOLIDATION, TRANSFER OF ASSETS. Merge into or
consolidate with, or be totally acquired by, any other entity that is not a
Subsidiary of Borrower or a Guarantor; make any substantial change in the nature
of Borrower's business as conducted as of the date hereof; acquire all or
substantially all of the assets of any other entity except as permitted pursuant
to Section 5.7 hereof; nor sell, lease, transfer or otherwise dispose of all or
a substantial or material portion of Borrower's assets except in the ordinary
course of its business.
SECTION 5.6 GUARANTIES. Guarantee or become liable in any way as surety,
endorser (other than as endorser of negotiable instruments for deposit or
collection in the ordinary course of business), accommodation endorser or
otherwise for, nor pledge or hypothecate any assets of Borrower as security for,
any liabilities or obligations of any other
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person or entity, except for guaranties of operating leases, guaranties for
liabilities or obligations of a Subsidiary, guaranties to bonding agents as
required to obtain the necessary surety bonds to license Borrower's sales
representatives, or guaranties of student loans up to $4,000,000.00 to Xxxxxx
Xxx.
SECTION 5.7 LOANS, ADVANCES, INVESTMENTS, ACQUISITIONS. Make any loans or
advances to or investments in any person or entity, except for (i) any of the
foregoing existing as of, and disclosed to, and deemed acceptable to, Bank prior
to the Closing Date, (ii) acquisitions not exceeding $10,000,000.00 in any
fiscal year, (iii) any investment in a joint venture not exceeding
$10,000,000.00 in cash and/or non-cash value, but without limit as to the amount
of any intellectual property owned and contributed to the joint venture by
Borrower (which property may be licensed to such joint venture without
transferring Borrower's ownership rights thereto), (iv) loans or advances to
employees in the ordinary course of business, and (v) loans to students not
exceeding $23,000,000.00 in the aggregate outstanding at any time.
SECTION 5.8 PLEDGE OF ASSETS. Mortgage, pledge, grant or permit to exist a
security interest in, or lien upon, all or any material portion of Borrower's
assets now owned or hereafter acquired, except for Permitted Liens.
ARTICLE VI.
EVENTS OF DEFAULT
SECTION 6.1 EVENTS OF DEFAULT. The occurrence of any of the following
shall constitute an "Event of Default" under this Agreement:
(a) Borrower shall fail to pay when due any principal, interest,
fees or other amounts payable under any of the Loan Documents and such failure
shall continue for a period of five (5) Business Days from its occurrence.
(b) Any financial statement or certificate furnished to Bank in
connection with, or any representation or warranty made by Borrower or any other
party under this Agreement or any other Loan Document shall prove to be
incorrect, false or misleading in any material respect when furnished or made.
(c) Any default in the performance of or compliance with any
obligation, agreement or other provision contained herein or in any other Loan
Document (other than those referred to in other subsections of this Section
6.1), and with respect to any such default which by its nature can be cured,
such default shall continue for a period of thirty (30) days from its
occurrence.
(d) A default or event of default shall occur (and continue beyond
any applicable grace period) under any note, agreement or instrument evidencing
any other indebtedness of the Borrower or any of its Subsidiaries, which default
or event of default permits the acceleration of its maturity, provided that the
aggregate principal amount of all such indebtedness for which the default or
event of default has occurred exceeds $750,000.00.
(e) The filing of a notice of judgment lien against Borrower or any
guarantor hereunder; or the recording of any abstract of judgment against
Borrower or any guarantor
-11-
hereunder in any county in which Borrower or such guarantor has an interest in
real property; or the service of a notice of levy and/or of a writ of attachment
or execution, or other like process, against the assets of Borrower or any
guarantor hereunder; or the entry of a judgment against Borrower or any
guarantor hereunder; in each case for an amount in excess of $750,000.00 and
that is not dismissed or stayed within thirty (30) days.
(f) Borrower or any guarantor hereunder shall become insolvent, or
shall suffer or consent to or apply for the appointment of a receiver, trustee,
custodian or liquidator of itself or any of its property, or shall generally
fail to pay its debts as they become due, or shall make a general assignment for
the benefit of creditors; Borrower or any guarantor hereunder shall file a
voluntary petition in bankruptcy, or seeking reorganization, in order to effect
a plan or other arrangement with creditors or any other relief under the
Bankruptcy Reform Act, Title 11 of the United States Code, as amended or
recodified from time to time ("Bankruptcy Code"), or under any state or federal
law granting relief to debtors, whether now or hereafter in effect; or any
involuntary petition or proceeding pursuant to the Bankruptcy Code or any other
applicable state or federal law relating to bankruptcy, reorganization or other
relief for debtors is filed or commenced against Borrower or any guarantor
hereunder that is not dismissed within sixty (60) days of its institution, or
Borrower or any such guarantor shall file an answer admitting the jurisdiction
of the court and the material allegations of any involuntary petition; or
Borrower or any such guarantor shall be adjudicated a bankrupt, or an order for
relief shall be entered against Borrower or any such guarantor by any court of
competent jurisdiction under the Bankruptcy Code or any other applicable state
or federal law relating to bankruptcy, reorganization or other relief for
debtors.
(g) The occurrence of any adverse change in the financial condition
of Borrower that Bank, in its reasonable discretion, deems material.
(h) The dissolution or liquidation of Borrower or, without the
consent of Bank, any Guarantor or Borrower or any such guarantor, or any of
their directors, stockholders or members, shall take action seeking to effect
the dissolution or liquidation of Borrower or such guarantor.
(i) Borrower shall fail to comply with the financial covenants in
Section 4.9.
(j) Borrower shall fail to maintain the Collateral Value equal to or
greater than the face amount of the Standby Letter of Credit in accordance with
Section 1.5 and such failure shall continue for a period of five (5) Business
Days from its occurrence.
(k) Borrower shall fail to maintain its primary operating accounts
with Bank in accordance with Section 4.13.
(l) Borrower or any Guarantor shall fail to comply with Section 4.11
hereof.
SECTION 6.2 REMEDIES. Upon the occurrence of any Event of Default: (a) all
indebtedness of Borrower under each of the Loan Documents, any term thereof to
the contrary notwithstanding, shall at Bank's option and without notice become
immediately due and payable without presentment, demand, protest or notice of
dishonor, all of which are hereby expressly waived by each Borrower; (b) the
obligation, if any, of Bank to extend any further credit under
-12-
any of the Loan Documents shall immediately cease and terminate; and (c) Bank
shall have all rights, powers and remedies available under each of the Loan
Documents, or accorded by law, including without limitation the right to resort
to any or all security for any credit subject hereto and to exercise any or all
of the rights of a beneficiary or secured party pursuant to applicable law. All
rights, powers and remedies of Bank may be exercised at any time by Bank and
from time to time after the occurrence of an Event of Default, are cumulative
and not exclusive, and shall be in addition to any other rights, powers or
remedies provided by law or equity.
ARTICLE VII.
MISCELLANEOUS
SECTION 7.1 NO WAIVER. No delay, failure or discontinuance of Bank in
exercising any right, power or remedy under any of the Loan Documents shall
affect or operate as a waiver of such right, power or remedy; nor shall any
single or partial exercise of any such right, power or remedy preclude, waive or
otherwise affect any other or further exercise thereof or the exercise of any
other right, power or remedy. Any waiver, permit, consent or approval of any
kind by Bank of any breach of or default under any of the Loan Documents must be
in writing and shall be effective only to the extent set forth in such writing.
SECTION 7.2 NOTICES. All notices, requests and demands which any party is
required or may desire to give to any other party under any provision of this
Agreement must be in writing delivered to each party at the following address:
BORROWER: UNIVERSAL TECHNICAL INSTITUTE, INC.
00000 Xxxxx 00xx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: Chief Financial Officer
Fax #: 623/000-0000
Attention: Vice President - Corporate Legal Counsel
Fax #: 623/000-0000
BANK: XXXXX FARGO BANK, NATIONAL ASSOCIATION
Commercial Banking
MAC S4101-251, 000 Xxxx Xxxxxxxxxx
Xxxxxxx, Xxxxxxx 00000
or to such other address as any party may designate by written notice to all
other parties. Each such notice, request and demand shall be deemed given or
made as follows: (a) if sent by hand delivery, upon delivery; (b) if sent by
mail, upon the date of receipt as evidenced by U.S. mail return receipt; and (c)
if sent by telecopy, upon receipt (with confirmation to be sent by U.S. mail,
first class).
SECTION 7.3 COSTS, EXPENSES AND ATTORNEYS' FEES. Borrower shall pay to
Bank immediately upon demand the full amount of all payments, advances, charges,
costs and expenses, including reasonable attorneys' fees (to include outside
counsel fees and, except for the initial negotiation and preparation of this
Agreement and the other Loan Documents, all allocated costs of Bank's in-house
counsel), expended or incurred by Bank in connection with (a) the
-13-
initial negotiation and preparation of this Agreement and the other Loan
Documents in excess of $10,000.00, Bank's continued administration hereof and
thereof, and the preparation of any amendments and waivers hereto and thereto,
(b) the enforcement of Bank's rights and/or the collection of any amounts which
become due to Bank under any of the Loan Documents, and (c) the prosecution or
defense of any action in any way related to any of the Loan Documents, including
without limitation, any action for declaratory relief, whether incurred at the
trial or appellate level, in an arbitration proceeding or otherwise, and
including any of the foregoing incurred in connection with any bankruptcy
proceeding (including without limitation, any adversary proceeding, contested
matter or motion brought by Bank or any other person) relating to any Borrower
or any other person or entity.
SECTION 7.4 SUCCESSORS, ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the heirs, executors, administrators, legal
representatives, successors and assigns of the parties; provided, however, that
Borrower may not assign or transfer its interest hereunder without Bank's prior
written consent. Bank reserves the right to sell, assign, transfer, negotiate or
grant participations in all or any part of, or any interest in, Bank's rights
and benefits under each of the Loan Documents. In connection therewith, Bank may
disclose all documents and information which Bank now has or may hereafter
acquire relating to any credit subject hereto, Borrower or its business, any
guarantor hereunder or the business of such guarantor, or any collateral
required hereunder.
SECTION 7.5 ENTIRE AGREEMENT; AMENDMENT; DEFINITIONS.
(a) This Agreement and the other Loan Documents constitute the
entire agreement between Borrower and Bank with respect to each credit subject
hereto and supersede all prior negotiations, communications, discussions and
correspondence concerning the subject matter hereof. This Agreement may be
amended or modified only in writing signed by each party hereto.
(b) All defined terms shall have the meaning given them in Exhibit
"A" attached hereto.
SECTION 7.6 REDUCTION; TERMINATION.
(a) Borrower may permanently reduce the Line of Credit Commitment in
whole or in part in integral multiples of $500,000.00 upon at least five (5)
business days written notice to Bank which notice shall specify the amount of
any such reduction; provided, however, that the amount of the Letter of Credit
Commitment may not be reduced below the aggregate amount of advances and Letters
of Credit outstanding thereunder.
(b) This Agreement shall terminate upon full payment by Borrower of
all obligations owed to Bank hereunder.
SECTION 7.7 NO THIRD PARTY BENEFICIARIES. This Agreement is made and
entered into for the sole protection and benefit of the parties hereto and their
respective permitted successors and assigns, and no other person or entity shall
be a third party beneficiary of, or have any direct or indirect cause of action
or claim in connection with, this Agreement or any other of the Loan Documents
to which it is not a party.
-14-
SECTION 7.8 TIME. Time is of the essence of each and every provision of
this Agreement and each other of the Loan Documents.
SECTION 7.9 SEVERABILITY OF PROVISIONS. If any provision of this Agreement
shall be prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or any remaining provisions of this
Agreement.
SECTION 7.10 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when executed and delivered shall be deemed to be an
original, and all of which when taken together shall constitute one and the same
Agreement.
SECTION 7.11 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Arizona.
SECTION 7.12 ARBITRATION.
(a) Arbitration. The parties hereto agree, upon demand by any party,
to submit to binding arbitration all claims, disputes and controversies between
or among them (and their respective employees, officers, directors, attorneys,
and other agents), whether in tort, contract or otherwise arising out of or
relating to in any way (i) the loan and related Loan Documents which are the
subject of this Agreement and its negotiation, execution, collateralization,
administration, repayment, modification, extension, substitution, formation,
inducement, enforcement, default or termination; or (ii) requests for additional
credit.
(b) Governing Rules. Any arbitration proceeding will (i) proceed in
a location in Arizona selected by the American Arbitration Association ("AAA");
(ii) be governed by the Federal Arbitration Act (Title 9 of the United States
Code), notwithstanding any conflicting choice of law provision in any of the
documents between the parties; and (iii) be conducted by the AAA, or such other
administrator as the parties shall mutually agree upon, in accordance with the
AAA's commercial dispute resolution procedures, unless the claim or counterclaim
is at least $1,000,000.00 exclusive of claimed interest, arbitration fees and
costs in which case the arbitration shall be conducted in accordance with the
AAA's optional procedures for large, complex commercial disputes (the commercial
dispute resolution procedures or the optional procedures for large, complex
commercial disputes to be referred to, as applicable, as the "Rules"). If there
is any inconsistency between the terms hereof and the Rules, the terms and
procedures set forth herein shall control. Any party who fails or refuses to
submit to arbitration following a demand by any other party shall bear all costs
and expenses incurred by such other party in compelling arbitration of any
dispute. Nothing contained herein shall be deemed to be a waiver by any party
that is a bank of the protections afforded to it under 12 U.S.C. Section.91 or
any similar applicable state law.
(c) No Waiver of Provisional Remedies, Self-Help and Foreclosure.
The arbitration requirement does not limit the right of any party to (i)
foreclose against real or personal property collateral; (ii) exercise self-help
remedies relating to collateral or proceeds of collateral such as setoff or
repossession; or (iii) obtain provisional or ancillary remedies such as
replevin, injunctive relief, attachment or the appointment of a receiver, before
during or after the
-15-
pendency of any arbitration proceeding. This exclusion does not constitute a
waiver of the right or obligation of any party to submit any dispute to
arbitration or reference hereunder, including those arising from the exercise of
the actions detailed in sections (i), (ii) and (iii) of this paragraph.
(d) Arbitrator Qualifications and Powers. Any arbitration proceeding
in which the amount in controversy is $5,000,000.00 or less will be decided by a
single arbitrator selected according to the Rules, and who shall not render an
award of greater than $5,000,000.00. Any dispute in which the amount in
controversy exceeds $5,000,000.00 shall be decided by majority vote of a panel
of three arbitrators; provided, however, that all three arbitrators must
actively participate in all hearings and deliberations. The arbitrator will be a
neutral attorney licensed in the State of Arizona or a neutral retired judge of
the state or federal judiciary of Arizona, in either case with a minimum of ten
years experience in the substantive law applicable to the subject matter of the
dispute to be arbitrated. The arbitrator will determine whether or not an issue
is arbitratable and will give effect to the statutes of limitation in
determining any claim. In any arbitration proceeding the arbitrator will decide
(by documents only or with a hearing at the arbitrator's discretion) any
pre-hearing motions which are similar to motions to dismiss for failure to state
a claim or motions for summary adjudication. The arbitrator shall resolve all
disputes in accordance with the substantive law of Arizona and may grant any
remedy or relief that a court of such state could order or grant within the
scope hereof and such ancillary relief as is necessary to make effective any
award. The arbitrator shall also have the power to award recovery of all costs
and fees, to impose sanctions and to take such other action as the arbitrator
deems necessary to the same extent a judge could pursuant to the Federal Rules
of Civil Procedure, the Arizona Rules of Civil Procedure or other applicable
law. Judgment upon the award rendered by the arbitrator may be entered in any
court having jurisdiction. The institution and maintenance of an action for
judicial relief or pursuit of a provisional or ancillary remedy shall not
constitute a waiver of the right of any party, including the plaintiff, to
submit the controversy or claim to arbitration if any other party contests such
action for judicial relief.
(e) Discovery. In any arbitration proceeding discovery will be
permitted in accordance with the Rules. All discovery shall be expressly limited
to matters directly relevant to the dispute being arbitrated and must be
completed no later than twenty (20) days before the hearing date and within one
hundred eighty (180) days of the filing of the dispute with the AAA. Any
requests for an extension of the discovery periods, or any discovery disputes,
will be subject to final determination by the arbitrator upon a showing that the
request for discovery is essential for the party's presentation and that no
alternative means for obtaining information is available.
(f) Class Proceedings and Consolidations. The resolution of any
dispute arising pursuant to the terms of this Agreement shall be determined by a
separate arbitration proceeding and such dispute shall not be consolidated with
other disputes or included in any class proceeding.
(g) Payment Of Arbitration Costs And Fees. The arbitrator shall
award all costs and expenses of the arbitration proceeding.
-16-
(h) Miscellaneous. To the maximum extent practicable, the AAA, the
arbitrators and the parties shall take all action required to conclude any
arbitration proceeding within one hundred eighty (180) days of the filing of the
dispute with the AAA. No arbitrator or other party to an arbitration proceeding
may disclose the existence, content or results thereof, except for disclosures
of information by a party required in the ordinary course of its business or by
applicable law or regulation. If more than one agreement for arbitration by or
between the parties potentially applies to a dispute, the arbitration provision
most directly related to the Loan Documents or the subject matter of the dispute
shall control. This arbitration provision shall survive termination, amendment
or expiration of any of the Loan Documents or any relationship between the
parties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day and year first written above.
BORROWER:
UNIVERSAL TECHNICAL INSTITUTE, INC., a
Delaware corporation, dba UNIVERSAL
TECHNICAL INSTITUTE OF DELAWARE
By: _____________________________________________
Name: Xxxxxxxx X. Xxxxxx
Title: Chief Financial Officer
BANK:
XXXXX FARGO BANK, NATIONAL
ASSOCIATION
By: _____________________________________________
Name: Xxxx Xxxxxxx
Title: Vice President
-17-
EXHIBIT "A"
DEFINITIONS
"Advance Rate" means those Advance Rates that are generally in effect as
to marketable securities within the Bank from time to time pursuant to its
Commercial Banking Credit Policies, copies of which current Advance Rates may be
obtained upon request from the Bank.
"Agreement" means this Credit Agreement.
"Bank" means XXXXX FARGO BANK, NATIONAL ASSOCIATION.
"Borrower" means UNIVERSAL TECHNICAL INSTITUTE, INC., a Delaware
corporation.
"Business Day" means any day other than a Saturday, Sunday or a day on
which banking institutions are generally authorized or obligated by law or
executive order to close in Phoenix, Arizona.
"Closing Date" means the date this Agreement is executed and delivered by
Borrower to Bank.
"Collateral Account": See Section 1.5.
"Collateral Account Agreement" means that Investment Account Agreement
dated September 24, 2004 between Borrower and Xxxxx Fargo Brokerage Services,
LLC.
"Collateral Value: See Section 1.5.
"EITF 97-10 Liabilities" means those liabilities subject to the Financial
Accounting Standards Board (FASB) Emerging Issues Task Force 97-10 rule.
"Excess Collateral" means the amount by which the Collateral Value of the
Collateral Account exceeds the aggregate face amount of the Standby Letter of
Credit.
"GAAP" means accounting principles generally accepted in the United
States.
"GE" means XXXXXX FINANCIAL, INC., as agent and lender.
"Guaranties," each a "Guaranty," means those guaranties delivered to Bank
by the Guarantors.
"Guarantors," each a Guarantor, means all Subsidiaries of Borrower and
their Subsidiaries.
"Letter of Credit": See Section 1.1(c).
"Line of Credit Commitment" means THIRTY MILLION AND NO/100 DOLLARS
($30,000,000.00).
"Line of Credit Maturity Date" means October 26, 2007.
"Line of Credit Note": See Section 1.1(a).
"Loan Documents": See Section 2.2.
"Loans," each a "Loan," means the Line of Credit and the Standby Letter of
Credit.
"Permitted Liens" means the following types of liens:
(1) any liens in favor of Bank;
(2) liens existing as of and disclosed to Bank in writing
prior to, the Closing Date;
(3) cash held by GE for collateral on the existing GE letter
of credit issued for the benefit of the Department of Education;
(4) liens for taxes, assessments or governmental charges or
claims either (1) not delinquent or (b) contested in good faith by
appropriate proceedings and as to which the Borrower or its Subsidiaries
shall have set aside on its books such reserves as may be required
pursuant to GAAP;
(5) statutory liens of landlords and liens of carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen and other liens
imposed by law incurred in the ordinary course of business for sums not
yet delinquent or being contested in good faith, if such reserve or other
appropriate provision, if any, as shall be required by GAAP shall have
been made in respect thereof;
(6) liens incurred or deposits made in the ordinary course
of business in connection with workers' compensation, unemployment
insurance and other types of social security, or to secure the performance
of tenders, statutory obligations, surety and appeal bonds, bids, leases,
government contracts, performance and return-of-money bonds and other
similar obligations (exclusive of obligations for the payment of borrowed
money);
(7) judgment liens not giving rise to an Event of Default so
long as such lien is adequately bonded and any appropriate legal
proceedings which may have been duly initiated for the review of such
judgment shall not have been finally terminated or the period within which
such proceedings may be initiated shall not have expired;
(8) liens securing purchase money indebtedness incurred or
in the ordinary course of business, provided, however, that such purchase
money
-2-
indebtedness shall not exceed $10,000,000 in the aggregate at any time
outstanding;
(9) banker's liens, rights of setoff and similar liens with
respect to cash and cash equivalents on deposit in one or more bank
accounts in the ordinary course of business; and
(10) extensions and renewals of any of the foregoing so long
as the aggregate amount of extended or renewed liens are not increased and
are on terms and conditions no more restrictive than the terms and
conditions of the liens extended or renewed.
"Prime Rate": See Section 1.3(b).
"Xxxxxx Xxx" means Student Loan Marketing Association.
"SEC" means the Securities and Exchange Commission.
"Standby Letter of Credit": See Section 1.2(a).
"Standby Letter of Credit Agreement: See Section 1.2(a).
"Subsidiary" of an entity means (i) any corporation more than 50% of the
outstanding securities having ordinary voting power of which shall at the time
be owned or controlled, directly or indirectly, by such Entity or by one or more
of its Subsidiaries or by such Entity and one or more of its Subsidiaries, or
(ii) any partnership, limited liability company, association, joint venture or
similar business organization more than 50% of the ownership interests having
ordinary voting power of which shall at the time be so owned or controlled.
"Tangible Net Worth": See Section 4.9(b).
"Title IV Programs" means the programs administered by the U.S. Department
of Education under Title IV of the Higher Education Act of 1965, as amended.
-3-
EXHIBIT "B"
NOTE
REVOLVING LINE OF CREDIT NOTE
$30,000,000.00 Phoenix, Arizona
____________, 2004
FOR VALUE RECEIVED, the undersigned UNIVERSAL TECHNICAL INSTITUTE, INC., a
Delaware corporation ("Borrower"), promises to pay to the order of XXXXX FARGO
BANK, NATIONAL ASSOCIATION ("Bank") at its office at MAC S4101-251, 000 Xxxx
Xxxxxxxxxx, Xxxxxxx, Xxxxxxx 00000, or at such other place as the holder hereof
may designate, in lawful money of the United States of America and in
immediately available funds, the principal sum of THIRTY MILLION AND NO/100
DOLLARS ($30,000,000.00), or so much thereof as may be advanced and be
outstanding, with interest thereon, to be computed on each advance from the date
of its disbursement as set forth herein.
1. DEFINITIONS:
As used herein, the following terms shall have the meanings set forth
after each, and any other term defined in this Note shall have the meaning set
forth at the place defined:
(a) "Business Day" means any day except a Saturday, Sunday or any other
day on which commercial banks in Arizona are authorized or required by law to
close.
(b) "Fixed Rate Term" means a period commencing on a Business Day and
continuing for one (1), two (2), three (3) or six (6) months, as designated by
Borrower, during which all or a portion of the outstanding principal balance of
this Note bears interest determined in relation to LIBOR; provided, however,
that no Fixed Rate Term may be selected for a principal amount less than Five
Hundred Thousand Dollars ($500,000.00) and provided further that no Fixed Rate
Term shall extend beyond the scheduled maturity date hereof. If any Fixed Rate
Term would end on a day which is not a Business Day, then such Fixed Rate Term
shall be extended to the next succeeding Business Day.
(c) "LIBOR" means the rate per annum (rounded upward, if necessary, to the
nearest whole 1/8 of 1%) and determined pursuant to the following formula:
LIBOR = Base LIBOR
-------------------------------
100% - LIBOR Reserve Percentage
(i) "Base LIBOR" means the rate per annum for United States dollar
deposits quoted by Bank as the Inter-Bank Market Offered Rate, with the
understanding that such rate is quoted by Bank for the purpose of
calculating effective rates of interest for loans making reference
thereto, on the first day of a Fixed Rate Term for delivery of funds on
said date for a period of time
approximately equal to the number of days in such Fixed Rate Term and in
an amount approximately equal to the principal amount to which such Fixed
Rate Term applies. Borrower understands and agrees that Bank may base its
quotation of the Inter-Bank Market Offered Rate upon such offers or other
market indicators of the Inter-Bank Market as Bank in its discretion deems
appropriate including, but not limited to, the rate offered for U.S.
dollar deposits on the London Inter-Bank Market.
(ii) "LIBOR Reserve Percentage" means the reserve percentage
prescribed by the Board of Governors of the Federal Reserve System (or any
successor) for "Eurocurrency Liabilities" (as defined in Regulation D of
the Federal Reserve Board, as amended), adjusted by Bank for expected
changes in such reserve percentage during the applicable Fixed Rate Term.
(d) "Loan Documents" means this Note and each other contract, instrument
or document required hereby or now or hereafter executed in connection with or
delivered to Bank pursuant to the terms of this Note by any person or entity.
(e) "Prime Rate" means at any time the rate of interest most recently
announced within Bank at its principal office as its Prime Rate, with the
understanding that the Prime Rate is one of Bank's base rates and serves as the
basis upon which effective rates of interest are calculated for those loans
making reference thereto, and is evidenced by the recording thereof after its
announcement in such internal publication or publications as Bank may designate.
(f) "Third Party Obligor" means any person or entity, other than Borrower,
obligated to Bank under any of the Loan Documents, including without limitation,
any guarantor hereof, any trustor of any Borrower which is a trust, or any
general partner or joint venturer in any Borrower which is a partnership or a
joint venture.
2. INTEREST:
(a) Interest. The outstanding principal balance of this Note shall bear
interest (computed on the basis of a 360-day year, actual days elapsed) either
(i) at a fluctuating rate per annum one-half percent (0.5%) below the Prime Rate
in effect from time to time, or (ii) at a fixed rate per annum determined by
Bank to be five-eighths percent (0.625%) above LIBOR in effect on the first day
of the applicable Fixed Rate Term. When interest is determined in relation to
the Prime Rate, each change in the rate of interest hereunder shall become
effective on the date each Prime Rate change is announced within Bank. With
respect to each LIBOR selection hereunder, Bank is hereby authorized to note the
date, principal amount, interest rate and Fixed Rate Term applicable thereto and
any payments made thereon on Bank's books and records (either manually or by
electronic entry) and/or on any schedule attached to this Note, which notations
shall be prima facie evidence of the accuracy of the information noted.
(b) Selection of Interest Rate Options. At any time any portion of this
Note bears interest determined in relation to LIBOR, it may be continued by
Borrower at the end of the Fixed Rate Term applicable hereto so that all or a
portion thereof bears interest determined in relation to the Prime Rate or to
LIBOR for a new Fixed Rate Term designated by Borrower. At
-2-
any time any portion of this Note bears interest determined in relation to the
Prime Rate, Borrower may convert all or a portion thereof so that it bears
interest determined in relation to LIBOR for a Fixed Rate Term designated by
Borrower. At such time as Borrower requests an advance hereunder or wishes to
select a LIBOR option for all or a portion of the outstanding principal balance
hereof, and at the end of each Fixed Rate Term, Borrower shall give Bank notice
specifying: (i) the interest rate option selected by Borrower; (ii) the
principal amount subject thereto; and (iii) for each LIBOR selection, the length
of the applicable Fixed Rate Term. Any such notice may be given by telephone so
long as, with respect to each LIBOR selection, (A) Bank receives written
confirmation from Borrower not later than three (3) Business Days after such
telephone notice is given, and (B) such notice is given to Bank prior to 10:00
a.m., California time, on the first day of the Fixed Rate Term. For each LIBOR
option requested hereunder, Bank will quote the applicable fixed rate to
Borrower at approximately 10:00 a.m., California time, on the first day of the
Fixed Rate Term. If Borrower does not immediately accept the rate quoted by
Bank, any subsequent acceptance by Borrower shall be subject to a
redetermination by Bank of the applicable fixed rate; provided however, that if
Borrower fails to accept any such rate by 11:00 a.m., California time, on the
Business Day such quotation is given, then the quoted rate shall expire and Bank
shall have no obligation to permit a LIBOR option to be selected on such day. If
no specific designation of interest is made at the time any advance is requested
hereunder or at the end of any Fixed Rate Term, Borrower shall be deemed to have
made a Prime Rate interest selection for such advance or the principal amount to
which such Fixed Rate Term applied. At no time shall more than five (5) advances
bear interest determined in relation to LIBOR.
(c) Additional LIBOR Provisions.
(i) If Bank at any time shall determine that for any reason
adequate and reasonable means do not exist for ascertaining LIBOR, then
Bank shall promptly give notice thereof to Borrower. If such notice is
given and until such notice has been withdrawn by Bank, then (A) no new
LIBOR option may be selected by Borrower, and (B) any portion of the
outstanding principal balance hereof which bears interest determined in
relation to LIBOR, subsequent to the end of the Fixed Rate Term applicable
thereto, shall bear interest determined in relation to the Prime Rate.
(ii) If any law, treaty, rule, regulation or determination of a
court or governmental authority or any change therein or in the
interpretation or application thereof (each, a "Change in Law") shall make
it unlawful for Bank (A) to make LIBOR options available hereunder, or (B)
to maintain interest rates based on LIBOR, then in the former event, any
obligation of Bank to make available such unlawful LIBOR options shall
immediately be cancelled, and in the latter event, any such unlawful
LIBOR-based interest rates then outstanding shall be converted, at Bank's
option, so that interest on the portion of the outstanding principal
balance subject thereto is determined in relation to the Prime Rate;
provided however, that if any such Change in Law shall permit any
LIBOR-based interest rates to remain in effect until the expiration of the
Fixed Rate Term applicable thereto, then such permitted LIBOR-based
interest rates shall continue in effect until the expiration of such Fixed
Rate Term. Upon the occurrence of
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any of the foregoing events, Borrower shall pay to Bank immediately upon
demand such amounts as may be necessary to compensate Bank for any fines,
fees, charges, penalties or other costs incurred or payable by Bank as a
result thereof and which are attributable to any LIBOR options made
available to Borrower hereunder, and any reasonable allocation made by
Bank among its operations shall be conclusive and binding upon Borrower.
(iii) If any Change in Law or compliance by Bank with any request or
directive (whether or not having the force of law) from any central bank
or other governmental authority shall:
(A) subject Bank to any tax, duty or other charge with
respect to any LIBOR options, or change the basis of taxation of
payments to Bank of principal, interest, fees or any other amount
payable hereunder (except for changes in the rate of tax on the
overall net income of Bank); or
(B) impose, modify or hold applicable any reserve, special
deposit, compulsory loan or similar requirement against assets held
by, deposits or other liabilities in or for the account of, advances
or loans by, or any other acquisition of funds by any office of
Bank; or
(C) impose on Bank any other condition;
and the result of any of the foregoing is to increase the cost to Bank of
making, renewing or maintaining any LIBOR options hereunder and/or to reduce any
amount receivable by Bank in connection therewith, then in any such case,
Borrower shall pay to Bank immediately upon demand such amounts as may be
necessary to compensate Bank for any additional costs incurred by Bank and/or
reductions in amounts received by Bank which are attributable to such LIBOR
options. In determining which costs incurred by Bank and/or reductions in
amounts received by Bank are attributable to any LIBOR options made available to
Borrower hereunder, any reasonable allocation made by Bank among its operations
shall be conclusive and binding upon Borrower.
(d) Payment of Interest. Interest accrued on this Note shall be payable on
the 1st day of each calendar quarter, commencing January 1, 2005.
(e) Default Interest. From and after the maturity date of this Note, or
such earlier date as all principal owing hereunder becomes due and payable by
acceleration or otherwise, the outstanding principal balance of this Note shall
bear interest until paid in full at an increased rate per annum (computed on the
basis of a 360-day year, actual days elapsed) equal to four percent (4%) above
the rate of interest from time to time applicable to this Note.
3. BORROWING AND REPAYMENT:
(a) Borrowing and Repayment. Borrower may from time to time during the
term of this Note borrow, partially or wholly repay its outstanding borrowings,
and reborrow, subject to
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all of the limitations, terms and conditions of this Note and each other Loan
Document; provided however, that the total outstanding borrowings under this
Note shall not at any time exceed the principal amount set forth above or such
lesser amount as shall at any time be available hereunder. The unpaid principal
balance of this obligation at any time shall be the total amounts advanced
hereunder by the holder hereof less the amount of principal payments made hereon
by or for Borrower, which balance may be endorsed hereon from time to time by
the holder. The outstanding principal balance of this Note shall be due and
payable in full on the Line of Credit Maturity Date (as defined in the Credit
Agreement).
(b) Advances. Advances hereunder, to the total amount of the principal sum
stated above, may be made by the holder at the oral or written request of anyone
acting alone who is authorized to request advances, written notice of which
authorization has been provided by Borrower to the holder, and direct the
disposition of any advances until written notice of the revocation of such
authority is received by the holder at the office designated above.
(c) Application of Payments. Each payment made on this Note shall be
credited first, to any interest then due and second, to the outstanding
principal balance hereof. All payments credited to principal shall be applied
first, to the outstanding principal balance of this Note which bears interest
determined in relation to the Prime Rate, if any, and second, to the outstanding
principal balance of this Note which bears interest determined in relation to
LIBOR, with such payments applied to the oldest Fixed Rate Term first.
4. PREPAYMENT:
(a) Prime Rate. Borrower may prepay principal on any portion of this Note
which bears interest determined in relation to the Prime Rate at any time, in
any amount and without penalty.
(b) LIBOR. Borrower may prepay principal on any portion of this Note which
bears interest determined in relation to LIBOR at any time and in the minimum
amount of ONE HUNDRED THOUSAND AND NO/100 DOLLARS ($100,000.00); provided,
however, that if the outstanding principal balance of such portion of this Note
is less than said amount, the minimum prepayment amount shall be the entire
outstanding principal balance thereof. In consideration of Bank providing this
prepayment option to Borrower, or if any such portion of this Note shall become
due and payable at any time prior to the last day of the Fixed Rate Term
applicable thereto by acceleration or otherwise, Borrower shall pay to Bank
immediately upon demand a fee which is the sum of the discounted monthly
differences for each month from the month of prepayment through the month in
which such Fixed Rate Term matures, calculated as follows for each such month:
(i) Determine the amount of interest which would have accrued each
month on the amount prepaid at the interest rate applicable to such amount
had it remained outstanding until the last day of the Fixed Rate Term
applicable thereto.
(ii) Subtract from the amount determined in (i) above the amount of
interest which would have accrued for the same month on the amount prepaid
for the remaining term of such Fixed Rate Term at LIBOR in effect on the
date of
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prepayment for new loans made for such term and in a principal amount
equal to the amount prepaid.
(iii) If the result obtained in (ii) for any month is greater than
zero, discount that difference by LIBOR used in (ii) above.
Borrower acknowledges that prepayment of such amount may result in Bank
incurring additional costs, expenses and/or liabilities, and that it is
difficult to ascertain the full extent of such costs, expenses and/or
liabilities. Borrower, therefore, agrees to pay the above-described prepayment
fee and agrees that said amount represents a reasonable estimate of the
prepayment costs, expenses and/or liabilities of Bank. If Borrower fails to pay
any prepayment fee when due, the amount of such prepayment fee shall thereafter
bear interest until paid at a rate per annum four percent (4%) above the Prime
Rate in effect from time to time (computed on the basis of a 360-day year,
actual days elapsed). Each change in the rate of interest on any such past due
prepayment fee shall become effective on the date each Prime Rate change is
announced within Bank.
5. EVENTS OF DEFAULT:
This Note is made pursuant to and is subject to the terms and conditions
of that certain Credit Agreement between Borrower and Bank dated as of October
26, 2004, as amended from time to time (the "Credit Agreement"). Any default in
the payment or performance of any obligation under this Note, or any defined
event of default under the Credit Agreement, shall constitute an "Event of
Default" under this Note.
6. MISCELLANEOUS:
(a) Remedies. Upon the occurrence of any Event of Default, the holder of
this Note, at the holder's option, may declare all sums of principal and
interest outstanding hereunder to be immediately due and payable without
presentment, demand, notice of nonperformance, notice of protest, protest or
notice of dishonor, all of which are expressly waived by each Borrower, and the
obligation, if any, of the holder to extend any further credit hereunder shall
immediately cease and terminate. Borrower shall pay to the holder immediately
upon demand the full amount of all payments, advances, charges, costs and
expenses, including reasonable attorneys' fees (to include outside counsel fees
and all allocated costs of the holder's in-house counsel), expended or incurred
by the holder in connection with the enforcement of the holder's rights and/or
the collection of any amounts which become due to the holder under this Note,
and the prosecution or defense of any action in any way related to this Note,
including without limitation, any action for declaratory relief, whether
incurred at the trial or appellate level, in an arbitration proceeding or
otherwise, and including any of the foregoing incurred in connection with any
bankruptcy proceeding (including without limitation, any adversary proceeding,
contested matter or motion brought by Bank or any other person) relating to
Borrower or any other person or entity.
(b) Obligations Joint and Several. Should more than one person or entity
sign this Note as a Borrower, the obligations of each such Borrower shall be
joint and several.
(c) Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of Arizona.
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IN WITNESS WHEREOF, the undersigned has executed this Note as of the date
first written above.
UNIVERSAL TECHNICAL INSTITUTE, INC., a
Delaware corporation
By: _______________________________
Name: _____________________________
Title: ____________________________
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EXHIBIT "C"
SUBSIDIARIES
1. UTI Holdings, Inc. (AZ)
2. Universal Technical Institute of Arizona, Inc. (DE) [AZ, NC]
3. U.T.I. of Illinois, Inc. (IL) [NC]
4. Universal Technical Institute of California, Inc. (CA) [NC]
5. Universal Technical Institute of North Carolina, Inc. (DE) d/b/a: NASCAR
Technical Institute [IL, MS, NC, LA]
6. Universal Technical Institute of Texas, Inc. (TX) [FL, IL, WV]
7. Universal Technical Institute of Pennsylvania, Inc. (DE) [AZ, PA]
8. Universal Technical Institute of Massachusetts, Inc. (DE) [AZ, PA]
9. The Xxxxxxx Xxxxxx Corporation (DE) d/b/a: Clinton Technical Institute;
Motorcycle/ Marine Mechanics Institute [AZ, FL, IL, MS, NJ, WA]
10. Clinton Education Group, Inc. (DE) Inactive Entity [AZ]
11. Custom Training Group, Inc. (CA)
EXHIBIT "D"
COMPLIANCE CERTIFICATE FOR
PERIOD ENDING
_____________, 20___
("REPORTING PERIOD")
Xxxxx Fargo Bank, National Association
MAC S4101-251
000 Xxxx Xxxxxxxxxx
Xxxxxxx, Xxxxxxx 00000
Date: ____________ (1)
Dear Ladies and Gentlemen:
This Compliance Certificate refers to the Credit Agreement dated as of
October 26, 2004 (as it may hereafter be amended, modified, extended or restated
from time to time, the "Credit Agreement"), between Universal Technical
Institute, Inc., a Delaware corporation ("Borrower"), and Xxxxx Fargo Bank,
National Association ("Bank"). Capitalized terms used and not otherwise defined
herein shall have the meanings assigned to such terms in the Credit Agreement.
Pursuant to Section 4.3(c) of the Credit Agreement, the undersigned, the
chief financial officer of Borrower, hereby certifies that:
Enclosed are the required financial statements for the [fiscal quarter]
[fiscal year] ending for the Borrower as required under Section 4.3 of the
Credit Agreement, which fairly and accurately present in all material respects
the financial condition and results of the operation of the Borrower.
To the best of the undersigned's knowledge, no "Event of Default" and/or
other event that with the passing of time or the giving of notice or both would
become an Event of Default has occurred [or if so, specifying the nature and
extent thereof and any corrective actions taken or to be taken].
As of the last day of the Reporting Period, the computations below were
true and correct:
----------------
(1) To be submitted within forty-five (45) days after the end of each fiscal
quarter (120 days after the end of each fiscal year).
I. Section 4.9(a) - NET INCOME AFTER TAXES
Net Income After Taxes $__________
Net Income After Taxes Minimum Requirement $ 3,500,000
II. Section 4.9(b) - TOTAL LIABILITIES TO TANGIBLE NET WORTH
Liabilities:
Current Liabilities $__________
Plus: Noncurrent Liabilities $__________
Less: EITF 97-10 Liabilities up to $30,000,000 ($__________)
Less: Subordinated Debt ($__________)
Equals: Total Liabilities $__________A
Tangible Net Worth:
Total Assets $__________
Less: Total Liabilities ($__________)
Less: Intangible Assets ($__________)
Equals: Tangible Net Worth $__________B
DNW Ratio (A divided by B) Equals :1.00
DNW Ratio Maximum Requirement
December 31, 2004
to June 30, 2005 3.50:1.00
September 30, 2005
to June 30, 2006 2.00:1.00
September 30, 2006
and thereafter 1.50:1.00
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III. Section 4.9(c) - CURRENT RATIO
Numerator: Current Assets (excluding cash $_________A
in the Collateral Account and
cash controlled by GE)
divided by
Denominator: Current Liabilities (including $_________B
Line of Credit balance
outstanding surety bonds and
outstanding Letters of Credit under
The Line of Credit Commitment)
Current Ratio equals _________A/B
Current Ratio Minimum Requirement
December 31, 2004
to June 30, 2005 0.40:1.00
September 30, 2005
to June 30, 2006 0.50:1.00
September 30, 2006
and thereafter 0.60:1.00
IV. Section 4.9(d) - TANGIBLE NET WORTH
Amount $__________
Minimum Requirement $__________
UNIVERSAL TECHNICAL INSTITUTE, INC., a
Delaware corporation
By: _____________________________________
Name: ___________________________________
Title: __________________________________
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