EXHIBIT 10.1b
BUSINESS LOAN AGREEMENT BETWEEN APOLLO GROUP, INC.
AND XXXXX FARGO BANK, NATIONAL ASSOCIATON
October 20, 1997
Xx. Xxxxx X. Xxxxxxx
Vice President Finance/CFO
Apollo Group, Inc.
0000 X. Xxxxxx Xxxxxx
Xxxxxxx, XX 00000
Dear Xxx:
This letter is to confirm that Xxxxx Fargo Bank, National
Association ("Bank"), subject to all terms and conditions
contained herein, has agreed to make available to Apollo Group,
Inc. a revolving line of credit under which Bank will make
advances to Borrower from time to time up to and including
January 1, 1999, not to exceed at any time the maximum principal
amount of Ten Million Dollars ($10,000,000.00) ("Line of
Credit"), the proceeds of which shall be used for general
corporate purposes.
LINE OF CREDIT:
LETTER OF CREDIT SUBFEATURE. As a subfeature under the Line of
Credit, Bank agrees from time to time during the term thereof to
issue standby letters of credit for the account of Borrower
(each, a "Letter of Credit" and collectively, "Letters of
Credit"); provided however, that the form and substance of each
Letter of Credit shall be subject to approval by Bank, in its
sole discretion; and provided further, that the aggregate undrawn
amount of all outstanding Letters of Credit shall not at any time
exceed Two Million Five Hundred Thousand Dollars($2,500,000.00).
Each Letter of Credit shall be issued for a term as designated by
Borrower; provided however, that no Letter of Credit shall have
an expiration date subsequent to the maturity date of the Line of
Credit. The undrawn amount of all Letters of Credit shall be
reserved under the Line of Credit and shall not be available for
borrowings thereunder.
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; 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.
INTEREST/FEES:
INTEREST. The outstanding principal balance of the Line of
Credit shall bear interest (i) at a rate per annum equal to the
Prime Rate in effect from time to time or (ii) at a fixed rate
per annum determined by Bank to be 1.25% above LIBOR in effect on
the day of advance and continuing for 1,2,3 or 6 months as
designated by Borrower.
COMPUTATION AND PAYMENT. Interest shall be computed on the basis
of a 360-day year, actual days elapsed, and shall be payable at
the times and place set forth in any promissory note or other
document executed by Borrower to evidence any extension of credit
by Bank.
UNUSED COMMITMENT FEE. Borrower shall pay to Bank a fee equal to
one eighth percent (.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, which fee shall be calculated on a
quarterly basis by Bank and shall be due and payable by Borrower
in arrears.
LETTER OF CREDIT FEES. Borrower shall pay to Bank (a) fees upon
the issuance of each Letter of Credit equal to one percent (1.0%)
per annum, computed on the basis of a 360-day year, actual days
elapsed, of the face amount thereof, ($500.00 minimum), and (b)
fees upon the payment or negotiation by Bank of each draft under
any Letter of Credit and 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.
CONDITIONS PRECEDENT:
Prior to Bank's extension to Borrower of any credit contemplated
by this letter, all of the following shall have occurred:
LOAN DOCUMENTS. Borrower shall have executed and delivered to
Bank, any and all promissory notes, contracts, instruments and
other documents, including without limitation a comprehensive
loan agreement, required by Bank to evidence Bank's extension of
credit pursuant to the terms and conditions of this letter, all
of which shall be in form and substance satisfactory to Bank and
shall include, in addition to the terms and conditions of this
letter, such representations, warranties, conditions, covenants,
events of default and other provisions as Bank deems appropriate.
FINANCIAL CONDITION. There shall have been no material adverse
change, as determined by Bank, in the financial condition or
business of Borrower, 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.
CREDIT CHECKS. Bank shall have conducted and shall be satisfied
with the results of credit checks on Borrower and all other
persons and entities which directly or indirectly own or control
Borrower.
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, and where required by Bank, with loss
payable endorsements in favor of Bank.
COVENANTS:
The loan agreement required by Bank shall include such covenants
as Bank may require, which may include, without limitation, (a)
covenants obligating Borrower, and all subsidiaries of Borrower,
to: provide financial statements; preserve and maintain its
facilities; maintain insurance; pay taxes and other indebtedness
when due; notify Bank of litigation; and maintain Borrower's
financial condition at levels and in accordance with standards
acceptable to Bank; and (b) covenants restricting the ability of
Borrower, and all subsidiaries of Borrower, to: invest in fixed
assets; incur lease obligations; borrow from others; create or
permit liens on assets; merge; change the nature of Borrower's
business; sell a substantial part of Borrower's assets; make
loans or investments; pay dividends or redeem stock; or guaranty
debts of others.
Without limiting the covenants which Bank may require in the loan
agreement with Borrower, Bank has determined that such document
will include Borrower's agreement:
FINANCIAL STATEMENTS. To provide to Bank all of the following,
in form and detail satisfactory to Bank:
(a) not later than 120 days after and as of the end of each
fiscal year, an audited financial statement of Borrower, prepared
by a certified public accountant acceptable to Bank, to include
balance sheet, income statement and statement of cash flows;
(b) not later than 120 days after and as of the end of each
fiscal year, a combining financial statement of Borrower,
prepared by Borrower, to include balance sheet and income
statement;
(c) not later than 45 days after and as of the end of each
fiscal quarter, a financial statement of Borrower, prepared by
Borrower, to include balance sheet, income statement and
statement of cash flows;
(d) contemporaneously with each annual and quarterly financial
statement of Borrower, a certificate of the president or chief
financial officer of Borrower that said financial statements are
accurate and that there exists no default nor any condition, act
or event which with the giving of notice or the passage of time
or both would constitute a default;
(e) from time to time such other information as Bank shall
reasonably request.
LITIGATION. To promptly give notice in writing to Bank of any
litigation pending or threatened against Borrower having a
material effect on the financial condition of Borrower.
FINANCIAL CONDITION. To maintain Borrower's financial condition
as follows using generally accepted accounting principles
consistently applied and used consistently with prior practices
(except to the extent modified by the definitions herein):
(a) Total Liabilities divided by Tangible Net Worth not at any
time greater than 1.25 to 1.0, with "Total Liabilities" defined
as the aggregate of current liabilities and non-current
liabilities less subordinated debt, and with "Tangible Net Worth"
defined as the aggregate of total stockholders' equity plus
subordinated debt less any intangible assets.
(b) Quick Ratio not at any time less than 1.2 to 1.0, with
"Quick Ratio" defined as the aggregate of cash, restricted cash,
short term investments and receivables convertible into cash
divided by total current liabilities.
(c) Net income after taxes not less than $1.00 on an annual
basis, determined as of each fiscal year end, and pre-tax profit
not less than $1.00 on a quarterly basis, determined as of each
fiscal quarter end.
DELIVERY OF CORRESPONDENCE BY AND BETWEEN BORROWER AND NORTH
CENTRAL ASSOCIATION OF COLLEGES AND SCHOOLS. To comply with all
"Obligations of Affiliation" as prescribed by the North Central
Association of Colleges and Schools with respect to the
University of Phoenix, Western International University and any
other subsidiary accredited by the North Central Association of
Colleges and Schools and promptly deliver to Bank a certified
copy of all correspondence regarding potential or actual
probationary actions taken by the North Central Association of
Colleges and Schools, or any other accreditation commission.
OTHER INDEBTEDNESS. Not to 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) trade payables incurred in the ordinary course of business,
(b) the liabilities of Borrower to Bank, (c) liabilities
resulting from guaranty associated with Union Bank Campus Card
Program, (d) Permitted Non-Bank Indebtedness, defined as purchase
money obligations in connection with the acquisition of real and
personal property, seller carryback financing and permitted
mergers and acquisitions, not to exceed $5,000,000.00 in the
aggregate in any fiscal year, and (e) any other existing
liabilities disclosed by Borrower to, and deemed acceptable by,
Bank prior to Bank's extension of any credit to Borrower.
MERGER, CONSOLIDATION, TRANSFER OF ASSETS. Not to merge into or
consolidate with any other entity; nor to make any substantial
change in the nature of Borrower's business as presently
conducted; nor to acquire all or substantially all of the assets
of any other entity; nor to 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, except that
(i) any subsidiary of Borrower may merge into or transfer assets
to Borrower, and (ii) Borrower may purchase or acquire the assets
or capital stock of an unrelated person , provided that: (a) the
total consideration paid by Borrower is not more than
$10,000,000.00 in the aggregate in any fiscal year and (b)
Borrower or wholly owned subsidiary is the surviving entity of
any such merger or acquisition.
GUARANTIES. Not to 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 to pledge
or hypothecate any assets of Borrower as security for, any
liabilities or obligations of any other person or entity, except
(a) any of the foregoing in favor of Bank and (b) guaranty
associated with Union Bank Campus Card Program.
LOANS, ADVANCES, INVESTMENTS. Not to make any loans or advances
to or investments in any person or entity, except any of the
foregoing disclosed by Borrower to, and deemed acceptable by,
Bank prior to Bank's extension of any credit to Borrower.
DIVIDENDS, DISTRIBUTIONS. Not to declare or pay any cash
dividends or distribution either in cash, stock or any other
property on Borrower's stock now or hereafter outstanding; nor to
redeem, retire, repurchase or otherwise acquire any shares of any
class of Borrower's stock now or hereafter outstanding.
Notwithstanding the foregoing, Borrower shall be permitted to pay
(i) intercompany dividends, provided said dividends have not
effect whatsoever on Borrower'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.
PLEDGE OF ASSETS. Not to mortgage, pledge, grant or permit to
exist a security interest in, or lien upon, all or any portion of
Borrower's assets now owned or hereafter acquired, except (a) any
of the foregoing in favor of Bank (b) purchase money security
interests in real or personal property to secure permitted
purchase money indebtedness incurred by Borrower (c) liens
incurred in connection with permitted seller carryback financing
of property acquired by Borrower (d) liens then existing and
relating to indebtedness assumed by Borrower in connection with
permitted mergers or acquisitions, and (e) any other liens
disclosed by Borrower to, and deemed acceptable by, Bank prior to
Bank's extension of any credit to Borrower.
CHANGE IN CONTROL. Not permit a change in control, defined as
the acquisition by any person of more than 20% of the aggregate
ordinary voting power represented by the issued and outstanding
capital stock of Borrower.
LOSS OF ACCREDITATION. Not permit any action that would cause
accreditation to be denied by the North Central Association of
Colleges and Schools with respect to the University of Phoenix,
Western International University and any other subsidiary
accredited by the North Central Association of Colleges and
Schools.
ADDITIONAL TERMS AND PROVISIONS:
Whether or not any credit is extended to Borrower or a loan
agreement or any other documents are agreed to and executed,
Borrower shall be liable for and 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 all allocated costs of Bank's
in-house counsel) expended or incurred by Bank in connection with
the negotiation and/or preparation of this letter, any such loan
agreement, and any other contracts, instruments and documents
required hereunder or thereunder, 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.
This letter shall be governed by and construed in accordance with
the laws of the State of Arizona. Upon the demand of any party,
any action, dispute, claim or controversy of any kind, whether in
contract or tort, statutory or common law, legal or equitable,
arising under or in any way pertaining to this letter or any
extensions of credit or other activities, transactions or
obligations of any kind related hereto, shall be resolved by
binding arbitration administered by the American Arbitration
Association ("AAA") in accordance with the AAA Commercial
Arbitration Rules and the Federal Arbitration Act (Title 9 of the
United States Code), notwithstanding any conflicting choice of
law provision herein. Bank's current standard provision
governing arbitration of disputes is deemed incorporated herein
as though set forth in full and shall be included in full in the
loan agreement and/or other contracts, instruments and documents
required hereby. Any party who fails or refuses to submit to
arbitration following a lawful demand by any other party shall
bear all costs and expenses incurred by such other party in
compelling arbitration.
The commitment set forth herein is personal to Borrower and may
not be transferred or assigned without the prior written consent
of Bank.
Bank reserves the right to terminate this commitment at any time
prior to receipt by Bank of a copy of this letter executed below
by Borrower.
Your acknowledgment of this letter shall constitute acceptance of
the foregoing terms and conditions. Unless accepted or
terminated, this commitment shall expire on October 31, 1997. If
the loan documentation required by Bank hereunder is not
completed and the credit contemplated hereby has not been
extended by Bank to Borrower for any reason by November 30, 1997,
then this commitment shall expire on said date.
Sincerely,
/s/ Xxxxx X. Xxxxx
Xxxxx X. Xxxxx
Vice President
Acknowledged and accepted as of October 21, 1997:
APOLLO GROUP, INC.
By: /s/ Xxxxx X. Xxxxxxx
--------------------
Title: Vice President of Finance and
Chief Financial Officer
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