LOAN AGREEMENT
BY THIS LOAN AGREEMENT (the "Agreement"), made and entered
into as of this 17th day of November, 1997, XXXXX FARGO BANK,
NATIONAL ASSOCIATION, whose address is 000 Xxxx Xxxxxxxxxx, Post
Office Box 29742, MAC #4101-251, Xxxxxxx, Xxxxxxx 00000-0000
(hereinafter, together with any successors and assigns, called
"Lender"), and APOLLO GROUP, INC., an Arizona corporation (the
"Borrower"), whose address is 0000 Xxxx Xxxxxx Xxxxxx, Xxxxx 000,
Xxxxxxx, Xxxxxxx 00000, in consideration of the mutual covenants
herein contained and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, hereby
confirm and agree as follows:
ARTICLE 1
RECITALS
Section 1.1 Borrower has requested that Lender establish a
revolving line of credit (the "RLC") with Borrower in the amount
of $10,000,000.00, under which revolving line of credit advances
(each an "RLC Advance") shall be made to Borrower for general
corporate purposes.
Section 1.2 Lender has agreed to do so upon the terms,
conditions and provisions set forth herein. Effective as of the
delivery of this Agreement, the Business Loan Agreement dated
March 22, 1996 between Borrower, certain of its Subsidiaries and
First Interstate Bank of Arizona, N.A., predecessor in interest
to Lender (the "1996 Agreement") will be terminated and replaced
by this Agreement.
ARTICLE 2
DEFINITIONS
Section 2.1 DEFINITIONS. Although terms may be defined in
other sections of this Agreement, as used herein the following
terms shall have the meanings defined below:
"Adjusted LIBOR Rate" means, for each LIBOR Advance, the
rate per annum determined by Lender to be equal to (i) LIBOR plus
(ii) 125 basis points.
"Advance" means an RLC Advance and includes a Prime Advance
or a LIBOR Advance (each of which shall be a "Type" of Advance).
"Agreement" means this Loan Agreement, as amended, modified,
supplemented and/or restated from time to time.
"Authorized Officer" means the chief executive officer or
chief financial officer of Borrower, or such other individual who
is from time to time designated to Lender in writing by said
officer as authorized to act for Borrower with respect to the
Loan.
"Base LIBOR" means the rate per annum for United States
dollar deposits quoted by Lender as the Inter-Bank Market Offered
Rate, with the understanding that such rate is quoted by Lender
for the purpose of calculating effective rates of interest for
loans making reference thereto, on the first day of an Interest
Period for delivery of funds on said date for a period of time
approximately equal to the number of days in such Interest Period
and in an amount approximately equal to the principal amount to
which such Interest Period applies. Borrower understands and
agrees that Lender may base its quotation of the Inter-Bank
Market Offered Rate upon such offers or other market indicators
of the Inter-Bank Market as Lender in its discretion deems
appropriate including, but not limited to, the rate offered for
U.S. dollar deposits on the London Inter-Bank Market.
"Borrower": See the Preamble.
"Business Day" means a day of the year on which commercial
banks are not required or authorized to close in Phoenix, Arizona
and, if the applicable Business Day relates to any LIBOR Advance,
a day on which dealings are carried on in the London Inter-Bank
Market.
"Convert," "Conversion," and "Converted" each refers to a
conversion of Advances of one Type into Advances of another Type
pursuant to Section 3.4.
"Event of Default": See Section 9.1.
"Generally Accepted Accounting Principles" or "GAAP" means
those generally accepted accounting principles and practices
which are recognized as such by the American Institute of
Certified Public Accountants acting through its Accounting
Principles Board or by the Financial Accounting Standards Board
or through other appropriate boards or committees thereof and
which are consistently applied for all periods after the date
hereof so as to properly reflect the financial condition, and the
results of operations and changes in cash flows, of Borrower and
its Subsidiaries, except that any accounting principles or
practices required to be changed by the said Accounting
Principles Board or Financial Accounting Standards Board (or
other appropriate board or committee of the said Boards) in order
to continue as a generally accepted accounting principle or
practice may so be changed.
"Guaranty" of any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any
Indebtedness or other obligation of any other Person (other than
a Subsidiary) or in any manner providing for the payment,
purchase, or acquisition of any Indebtedness or other obligation
of any other Person (other than a Subsidiary) or otherwise
protecting the holder of Indebtedness of any other Person (other
than a Subsidiary) against loss (whether by virtue of
endorsements, assumptions, partnership arrangements, agreements
to keep well, to supply funds, to purchase assets, goods,
securities, or services, or to take-or-pay or otherwise),
provided that the term "Guaranty" shall not include endorsements
for collection or deposits in the ordinary course of business.
"Indebtedness" means, with respect to any Person, the
following (without duplication): (i) obligations for borrowed
money, including the current portion thereof; (ii) monetary
obligations representing the deferred purchase price of real
and/or personal property, other than trade accounts payable
arising in, and on terms customary in, the ordinary course of
that Person's business; (iii) monetary obligations under
conditional sale agreements; (iv) the present value of all
obligations of such Person in respect of any capital lease,
discounted in accordance with GAAP; and (v) matured obligations
with respect to any Guaranty.
"Interest Period" means, with respect to any LIBOR Advance,
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 the Note bears interest at the Adjusted LIBOR Rate;
provided however, that no Interest Period may be selected for a
principal amount less than One Hundred Thousand and No/100
Dollars ($100,000.00); and provided further, that no Interest
Period shall extend beyond the Maturity Date. If any Interest
Period would end on a day which is not a Business Day, then such
Interest Period shall be extended to the next succeeding Business
Day.
"Interest Rate Option" means either (i) the Adjusted LIBOR
Rate for the chosen Interest Period, or (ii) the Prime Rate.
"Lender": See the Preamble.
"Letter of Credit" means any letter of credit issued at the
request of Borrower.
"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
"LIBOR Advance" means an Advance that bears interest at the
Adjusted LIBOR Rate.
"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 Lender for expected changes in such reserve
percentage during the applicable Interest Period.
"Lien" means any lien, mortgage, security interest, tax
lien, pledge, encumbrance, conditional sale or title retention
arrangement, or any other interest in property designed to secure
the repayment of Indebtedness or performance under any Guaranty,
whether arising by agreement or under any statute or law, or
otherwise.
"Loan" means the RLC.
"Maturity Date" means January 1, 1999.
"Maximum Letter of Credit Balance" means $2,500,000.00.
"NCA" means the North Central Association of Colleges and
Schools.
"1934 Act" means the United States Securities Exchange Act
of 1934, as amended.
"1996 Agreement": See Section 1.2.
"Note" means the RLC Note.
"Outstanding RLC Balance" means the aggregate amount of RLC
Advances and the face amount of Letters of Credit, outstanding
from time to time in either case.
"Permitted Liens" means:
(a) Liens incurred to secure Permitted Non-Bank
Indebtedness, the aggregate amount of which shall not exceed
$5,000,000.00;
(b) Pledges or deposits made to secure payment of
workers' compensation (or to participate in any fund in
connection with workers' compensation insurance),
unemployment insurance, pensions or social security
programs;
(c) Liens imposed by mandatory provisions of law such
as for materialmen's, mechanics', warehousemen's and other
like Liens arising in the ordinary course of business,
securing Indebtedness or other liabilities whose payment is
not yet due;
(d) Liens for taxes, assessments and governmental
charges or levies imposed upon a Person or upon such
Person's income or profits or property, if the obligation
secured by such Lien is not in violation of Section 7.7;
(e) Liens arising from the good faith deposits in
connection with tenders, leases, real estate bids or
contracts (other than contracts involving the borrowing of
money), pledges or deposits to secure public or statutory
obligations, deposits to secure (or in lieu of) surety,
stay, appeal or customs bonds and deposits to secure the
payment of taxes, assessments, custom duties or other
similar charges; or
(f) Encumbrances consisting of zoning restrictions,
easements, or other restrictions on the use of real
property, provided that such do not impair the use of such
property for the uses intended, and none of which is
violated by existing or proposed structures or land use.
"Permitted Non-Bank Indebtedness" means Indebtedness,
whether direct, indirect or contingent, with respect to any of
the following:
(a) Purchase money obligations in connection with the
acquisition of real and personal property;
(b) Seller carryback financing; and
(c) Mergers and acquisitions permitted pursuant to
Section 8.1.
"Person" means any natural person, corporation, business
trust, joint venture, association, company, partnership or
government, or any agency or political subdivision thereof.
"Prepayment Fee": See Section 3.8.
"Prime Advance" means an Advance that bears interest at the
Prime Rate.
"Prime Rate" means at any time the rate of interest most
recently announced within Lender at its principal office as its
Prime Rate, with the understanding that the Prime Rate is one of
Lender'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
Lender may designate.
"RLC": See Section 1.1.
"RLC Advance" means an Advance by Lender to Borrower under
the RLC pursuant to Article 3.
"RLC Commitment Amount" means Lender's total commitment to
make RLC Advances under the RLC not to exceed $10,000,000.00,
reduced by the aggregate of (1) all issued and undrawn Letters of
Credit issued for the account of Borrower and (2) all drawn
Letters of Credit which have not been repaid.
"RLC Note" means that Revolving Promissory Note of even date
herewith in the face amount equal to the RLC Commitment Amount
from Borrower, evidencing the RLC.
"SEC" means the United States Securities and Exchange
Commission.
"Subsidiary" means any business association directly or
indirectly controlled by Borrower.
"Termination Date" means the earliest to occur of (1) the
Maturity Date, or (2) the date Lender exercises any option to
declare the Loan fully due and payable after the occurrence of an
Event of Default, or (3) such other date as may be agreed upon in
writing by Lender and Borrower.
"Type": See the definition of Advance.
Section 2.2 TERMS GENERALLY. The definitions in Section
2.1 shall apply equally to both the singular and plural forms of
the terms defined. Whenever the context may require, any pronoun
shall include the corresponding masculine, feminine and neuter
forms. All references herein to Articles, Sections, Exhibits and
Schedules shall be deemed references to Articles and Sections of,
and Exhibits and Schedules to, this Agreement unless the context
shall otherwise require.
Section 2.3 ACCOUNTING TERMS. Except as otherwise
expressly provided herein, all terms of an accounting or
financial nature shall be construed in accordance with GAAP;
provided, however, that, for purposes of determining compliance
with any covenant set forth herein, such terms shall be construed
in accordance with GAAP as in effect on the date of this
Agreement applied on a consolidated basis consistent with the
application used in preparing Borrower's consolidated audited
financial statements referred to herein.
ARTICLE 3
RLC
Section 3.1 RLC COMMITMENT AMOUNT. Subject to the
conditions set forth herein, Lender, from time to time, shall
make such RLC Advances as Borrower may request and shall issue
such Letters of Credit as Borrower may request, provided that (a)
the Outstanding RLC Balance shall not exceed the RLC Commitment
Amount, and (b) the aggregate amount of the face amount of
Letters of Credit outstanding at any one time shall not exceed
the Maximum Letter of Credit Balance. The RLC shall be a
revolving credit, against which RLC Advances may be made to
Borrower, repaid by Borrower, and readvances made to Borrower and
Letters of Credit issued, terminated or repaid by Borrower and
reissued, provided that (i) no Event of Default shall exist, (ii)
no RLC Advance shall be made or Letter of Credit issued that
would cause the outstanding principal balance of the RLC to
exceed the RLC Commitment Amount, (iii) no Letter of Credit shall
be issued that would cause the aggregate amount of the face
amount of Letters of Credit outstanding at any one time to exceed
the Maximum Letter of Credit Balance, and (iv) no RLC Advance
shall be made on or after the Maturity Date.
Section 3.2 RLC NOTE. The RLC shall be evidenced by the
RLC Note in the form approved by Lender, payable to the order of
Lender upon the terms and conditions therein contained, and
executed and delivered simultaneously with the execution of this
Agreement.
Section 3.3 RLC ADVANCES.
(a) Lender may from time to time make RLC Advances in
such sums as Borrower shall request.
(b) Borrower shall give Lender written notice, or
telephonic notice confirmed immediately in writing, of the
request for any RLC Advances under this Agreement.
(c) At such time as Borrower requests an RLC Advance
or wishes to select a LIBOR option for all or a portion of
the outstanding principal balance of the RLC, and at the end
of each interest period, Borrower shall give Lender 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
Interest Period. Any such notice may be given by telephone
so long as, with respect to each LIBOR selection, (A) Lender
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 Lender prior to 10:00
a.m., California time, on the first day of the Interest
Period. For each LIBOR option requested, Lender will quote
the applicable rate to Borrower at approximately 10:00 a.m.,
California time, on the first day of the Interest Period.
If Borrower does not immediately accept the rate quoted by
Lender, any subsequent acceptance by Borrower shall be
subject to a redetermination by Lender of the applicable
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 Lender shall have no obligation to permit a
LIBOR option to be selected on such day.
(d) If no specific designation of interest is made at
the time any RLC Advance is requested hereunder or at the
end of any Interest Period, Borrower shall be deemed to have
made a Prime Rate interest selection for such RLC Advance.
Section 3.4 CONVERSION AND RENEWAL OF RLC ADVANCES.
(a) At any time any portion of the Note bears interest
determined in relation to LIBOR, it may be continued by
Borrower at the end of the Interest Period applicable
thereto so that all or a portion thereof bears interest
determined in relation to the Prime Rate or to LIBOR for a
new Interest Period designated by Borrower.
(b) At any time any portion of the 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 an Interest Period
designated by Borrower.
Section 3.5 RLC FACILITY FEE. Borrower agrees to pay to
Lender in arrears on the first day of each calendar quarter,
commencing January 1, 1998, a non-refundable facility fee at a
rate per annum equal to 12.5 basis points on the average daily
unused amount of the RLC Commitment Amount during the preceding
calendar quarter or, if applicable, shorter period.
Section 3.6 RLC PAYMENTS.
(a) Interest on the RLC shall accrue daily on the full
principal balance of the RLC at the Interest Rate Option
selected by Borrower, on the basis of the actual number of
days elapsed over a year of 360 days.
(b) All accrued interest on each RLC Advance shall be
due and payable as billed by Lender each month. In
addition, the principal amount of each LIBOR Advance,
together with all accrued interest, shall be due and payable
each month, and the balance, if any, at the end of each
respective Interest Period.
(c) The entire outstanding principal balance of the
RLC Note, all accrued and unpaid interest and all other sums
which may have become payable thereunder shall be due and
payable in full on the Termination Date.
(d) Default interest shall be due and payable as set
forth in the RLC Note.
(e) When interest is determined in relation to the
Prime Rate, each change in the rate of interest shall become
effective on the date each Prime Rate change is announced
within Lender. With respect to each LIBOR selection, Lender
is hereby authorized to note the date, principal amount,
interest rate and Interest Period applicable thereto and any
payments made thereon on Lender's books and records (either
manually or by electronic entry), which notations shall be
prima facie evidence of the accuracy of the information
noted.
Section 3.7 ADDITIONAL PROVISIONS FOR LIBOR ADVANCES.
(a) INABILITY TO ASCERTAIN LIBOR. If Lender at any
time shall determine that for any reason adequate and
reasonable means do not exist for ascertaining LIBOR, the
Lender shall promptly give notice thereof to Borrower. If
such notice is given and until such notice has been
withdrawn by Lender, then (A) no new LIBOR option may be
selected by Borrower, and (B) any portion of the outstanding
principal balance of the Loan which bears interest
determined in relation to LIBOR, subsequent to the end of
the Interest Period applicable thereto, shall bear interest
determined in relation to the Prime Rate.
(b) ILLEGALITY. 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 to
Lender (A) to make LIBOR options available hereunder, or
(B) to maintain interest rates based on LIBOR, then in the
former event, any obligation of Lender 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
Lender'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
Interest Period applicable thereto, then such permitted
LIBOR-based interest rates shall continue in effect until
the expiration of such Interest Period. Upon the occurrence
of any of the foregoing events, Borrower shall pay to Lender
immediately upon demand such amounts as may be necessary to
compensate Lender for any fines, fees, charges, penalties or
other costs incurred or payable by Lender as a result
thereof and which are attributable to any LIBOR options made
available to Borrower hereunder, and any reasonable
allocation made by Lender among its operations shall be
conclusive and binding upon Borrower.
(c) INCREASED COSTS. If any Change in Law or
compliance by Lender with any request or directive (whether
or not having the force of law) from any central bank or
other governmental authority shall: (A) subject Lender to
any tax, duty or other charge with respect to any LIBOR
options, or change the basis of taxation of payments to
Lender of principal, interest, fees or any other amount
payable hereunder (except for changes in the rate of tax on
the overall net income of Lender); 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
Lender; or (C) impose on Lender any other condition; and the
result of any of the foregoing is to increase the cost to
Lender of making, renewing or maintaining any LIBOR options
hereunder and/or to reduce any amount receivable by Lender
in connection therewith, then in any such case, Borrower
shall pay to Lender immediately upon demand such amounts as
may be necessary to compensate Lender for any additional
costs incurred by Lender and/or reductions in amounts
received by Lender which are attributable to such LIBOR
options. In determining which costs incurred by Lender
and/or reductions in amounts received by Lender are
attributable to any LIBOR options made available to Borrower
hereunder, any reasonable allocation made by Lender among
its operations shall be conclusive and binding upon
Borrower.
(d) DISCRETION OF LENDER AS TO MANNER OF FUNDING.
Notwithstanding any provision of this Agreement to the
contrary, Lender shall be entitled to fund and maintain its
funding of all or any part of any Advance in any manner it
sees fit.
(e) NO PREPAYMENT FEE UNDER SECTION 3.7(b). Borrower
shall not be liable for the Prepayment Fee upon repayment
under paragraph (b) of this Section 3.7.
Section 3.8 PREPAYMENT
(a) PRIME RATE. Borrower may prepay principal on any
portion of the RLC 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 the Loan 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 the RLC is less than said amount, the
minimum prepayment amount shall be the entire outstanding
principal balance thereof. In consideration of Lender
providing this prepayment option to Borrower, or if any such
portion of the RLC shall become due and payable at any time
prior to the last day of the Interest Period applicable
thereto by acceleration or otherwise, except pursuant to
Section 3.7(b), Borrower shall pay to Lender immediately
upon demand a fee (the "Prepayment Fee") which is the sum of
the discounted monthly differences for each month from the
month of prepayment through the month in which such Interest
Period 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 Interest Period
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 Interest Period at LIBOR in
effect on the date of 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 Lender 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,
except due to a prepayment pursuant to Section 3.7(b), and agrees
that said amount represents a reasonable estimate of the
prepayment costs, expenses and/or liabilities of Lender. 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 (4.0%) 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 Lender.
Section 3.9 REQUIREMENT THAT CONDITIONS BE SATISFIED.
Lender shall have no obligation to make any RLC Advances unless
and until all of the conditions and requirements of this
Agreement are fully satisfied. However, Lender, at its sole and
absolute discretion, may elect to make one or more RLC Advances
prior to full satisfaction of one or more such conditions and/or
requirements. Notwithstanding that such an RLC Advance or RLC
Advances are made, such unsatisfied conditions and/or
requirements shall not be waived or released thereby. Borrower
shall be and continue to be obligated to fully satisfy such
conditions and requirements.
ARTICLE 4.
LETTERS OF CREDIT
Section 4.1 ISSUANCE.
(a) Provided that Borrower has satisfied the
conditions precedent contained in Section 4.2 hereof, Lender
agrees, from time to time, to issue and/or renew Letters of
Credit on behalf of Borrower or, at the written request of
Borrower, on behalf of any Subsidiary so long as upon such
issuance or renewal (i) upon the issuance of each Letter of
Credit, a fee is paid by Borrower to Lender in an amount equal to
the greater of $500.00 or one percent (1%) per annum of the face
amount of such Letter of Credit, based on a 360-day year, actual
days elapsed, (ii) fees upon the payment or negotiation by Lender
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 Lender's standard fees and charges then in effect for such
activity, (iii) in accordance with the terms and conditions of
Section 3.1 hereof, the Outstanding RLC Balance would not exceed
the RLC Commitment Amount, and (iv) the aggregate amount of the
face amount of Letters of Credit outstanding at such time would
not exceed the Maximum Letter of Credit Balance.
(b) In the event that a Letter of Credit is issued at
the written request of Borrower on behalf of any Subsidiary,
Lender may include therein the following statement:
"This Letter of Credit is being issued at
the request of Apollo Group, Inc., an Arizona
corporation, on behalf of ________________________,
a subsidiary of Apollo Group, Inc."
Section 4.2 CONDITIONS PRECEDENT. The obligation of Lender
to issue and/or renew any Letters of Credit on behalf of Borrower
or, at the written request of Borrower, on behalf of any
Subsidiary shall be subject to the following conditions precedent
on the date of issuance or renewal of each such Letter of Credit:
(a) Borrower shall execute and deliver to Lender an
application for letter of credit, specifying the amount of
the requested letter of credit, the requested term thereof,
which term may not exceed the Maturity Date, the beneficiary
thereof and, if applicable, the Subsidiary on whose behalf
the Letter of Credit is to be issued; and
(b) No Event of Default shall exist and no event or
condition shall exist that after notice or lapse of time, or
both would constitute an Event of Default.
Section 4.3 DRAWING.
(a) Should any Letter of Credit be drawn upon by the
beneficiary thereof, such draw shall be deemed to be a Prime
Advance.
(b) With respect to any Letter of Credit issued at the
written request of Borrower on behalf of a Subsidiary,
Borrower agrees that should such Letter of Credit be drawn
upon by the beneficiary thereof, Borrower agrees such draw
shall be deemed to be a Prime Advance and an obligation of
Borrower hereunder. Borrower waives and agrees not to assert
(i) any right to require Lender to proceed against such
Subsidiary, and (ii) the benefits of any statutory
provisions limiting the liability of a surety including
without limitation the provisions of Sections 12-1641, et
seq. of the Arizona Revised Statutes.
ARTICLE 5
CONDITIONS PRECEDENT
Section 5.1 Conditions Precedent. The obligation of Lender
to make the initial Advance hereunder is subject to the
fulfillment of the following conditions:
(a) Borrower shall have executed (or obtained the
execution or issuing of) and delivered to Lender the
following documents or information, all in form satisfactory
to Lender:
(i) The Note;
(ii) A corporate resolution of Borrower
authorizing (i) the Loan, and (ii) the execution and
delivery by Borrower of all documents to be executed by
Borrower, and the performance by Borrower of all acts
and things to be performed by Borrower, pursuant to
this Agreement; and
(iii) A copy of its current Articles of
Incorporation and Bylaws, so certified by the Secretary
of the corporation, together with a copy of a current
Certificate of Good Standing in the state of incorpora-
tion for Borrower and evidence of qualification to do
business and good business in all states in which
Borrower conducts business; and such other documents as
Lender may require relating to the existence and good
standing of Borrower and the authority of any person
acting or executing documents on behalf of Borrower.
(b) All representations and warranties by Borrower
contained in this Agreement shall remain true and
correct and Borrower has performed or complied with all
agreements of Borrower made in this Agreement that Borrower
is to have performed or complied with by the date of the
first Advance.
(c) No Event of Default shall exist and no event or
condition shall exist that after notice or lapse of time, or
both would constitute an Event of Default.
(d) Lender shall have received evidence to its
satisfaction that there are no Liens, other than those
permitted pursuant to Section 8.4, on the property or assets
of Borrower.
Section 5.2 Conditions Precedent to All Future Advances.
The obligation of Lender to make any Advances to Borrower
following the initial Advance under Section 5.1 hereof shall be
subject to the condition precedent that on the date of each such
Advance no Event of Default shall exist and no event or condition
shall exist that, after notice or lapse of time or both, would
constitute an Event of Default.
ARTICLE 6
GENERAL REPRESENTATIONS AND WARRANTIES
Borrower hereby represents and warrants to Lender as
follows:
Section 6.1 RECITALS. The recitals and statements of
intent appearing in this Agreement are true and correct.
Section 6.2 ORGANIZATION. Borrower is duly organized,
validly existing and in good standing under the laws of the state
of its organization. Borrower is qualified to do business and is
in good standing in the State of Arizona and in each state in
which it is required by law to do so.
Section 6.3 POWER. Borrower has full power and authority
to own its properties and assets and to carry on its business as
presently being conducted.
Section 6.4 ENFORCEABLE. Borrower is fully authorized and
permitted to enter into this Agreement, to execute any and all
documentation required herein, to borrow the amounts contemplated
herein upon the terms set forth herein and to perform the terms
of this Agreement, none of which conflicts with any provision of
law or regulation applicable to Borrower. This Agreement and the
Note are valid and binding legal obligations of Borrower, and
each is enforceable in accordance with its terms.
Section 6.5 NO CONFLICT. The execution, delivery and
performance by Borrower of this Agreement, the Note and all other
documents and instruments relating to the Loan are not in
material conflict with any provision of law applicable to
Borrower or with the Articles of Incorporation and Bylaws of
Borrower and will not result in any breach of the terms or
conditions or constitute a default under any agreement or
instrument under which Borrower is a party or is obligated.
Borrower is not in default in the performance or observance of
any obligations, covenants or conditions of any such agreement or
instrument.
Section 6.6 NO ACTIONS. There are no actions, suits or
proceedings pending or threatened against Borrower or any
Subsidiary which materially and adversely affect the repayment of
the Loan, the performance by Borrower under this Agreement or the
financial condition, business or operations of Borrower.
Section 6.7 FINANCIAL STATEMENTS. All financial
statements and profit and loss statements, all statements as to
ownership and all other statements or reports previously or
hereafter given to Lender by Borrower are and shall be true and
correct as of the date thereof. There has been no material
adverse change in the business, properties or condition
(financial or otherwise) of Borrower since the date of the latest
financial statements given to Lender.
Section 6.8 TAX PAYMENTS. Borrower and each Subsidiary
have filed all federal, state and local tax returns by the due
date as extended and have paid all federal, state and local taxes
shown due thereon by such extended due date and all other
payments required under federal, state or local law.
Section 6.9 MARGIN STOCK. No part of the proceeds of any
financial accommodation made by Lender in connection with this
Agreement will be used to purchase or carry "margin stock," as
that term is defined in Regulation U of the Board of Governors of
the Federal Reserve System, or to extend credit to others for the
purpose of purchasing or carrying such margin stock.
Section 6.10 AFFIRMATION. Each request by Borrower for an
Advance hereunder shall constitute an affirmation on the part of
Borrower that the representations and warranties of Section 6.7
are true and correct with respect to any financial statements
submitted by Borrower to Lender between the date of this
Agreement and the date of such request, that the representations
and warranties of all other sections of this Article 6 hereof are
true and correct as of the time of such request and that the
condition precedents set forth in Article 5 hereof are fully
satisfied. All representations and warranties made herein shall
survive the execution of this Agreement, any and all Advances or
proceeds of the Loan and the execution and delivery of all other
documents and instruments in connection with the Loan, so long as
Lender has any commitment to lend to Borrower hereunder and until
the Loan and all indebtedness hereunder have been paid in full
and all of Borrower's obligations hereunder have been fully
discharged.
Section 6.11 OBLIGATIONS OF AFFILIATION. Neither Borrower
nor any Subsidiary is currently under any probationary action
instituted by the NCA, and to the best of its knowledge, Borrower
and each Subsidiary, to the extent applicable, have fully and
completely complied with all "Obligations of Affiliation" as
prescribed by the NCA.
Section 6.12 SUBSIDIARIES. All Subsidiaries of Borrower
are correctly identified on Schedule 6.12.
ARTICLE 7
AFFIRMATIVE COVENANTS
Borrower hereby covenants and agrees that so long as Lender
has any commitment to lend to Borrower hereunder and until the
Loan and all other indebtedness hereunder have been paid in full
and all of Borrower's obligations hereunder have been fully
discharged:
Section 7.1 EXISTENCE. Except as otherwise permitted by
Section 8.1, Borrower shall maintain its existence with no
amendments or changes in its Articles of Incorporation without
the prior written consent of Lender, which consent shall not be
unreasonably withheld.
Section 7.2 MAINTAIN PROPERTY. Borrower and each
Subsidiary shall maintain in full force and effect all
agreements, rights, trademarks, patents and licenses necessary to
carry out their respective businesses, shall keep all of their
respective properties in good condition and repair, and shall
make all needed and proper repairs and improvements to their
respective properties in order to properly conduct their
respective businesses.
Section 7.3 INSURANCE. To the extent Borrower and its
Subsidiaries are not self-insured, Borrower shall at all times
maintain and/or cause its Subsidiaries to maintain insurance
coverages in scope and amount not less than, and not less
extensive than, the scope and amount of insurance coverages
customary for companies of comparable size and financial strength
in the trades or businesses in which Borrower and its
Subsidiaries are from time to time engaged. Upon Lender's
request, Borrower shall provide evidence satisfactory to Lender
that required coverage in required amounts is in effect.
Section 7.4 PAYMENTS. Borrower shall make all payments of
interest and principal on the Loan as and when the same become
due and payable and shall keep and comply with all covenants,
terms and provisions of the Note.
Section 7.5 FINANCIAL REPORTS. Borrower shall maintain a
standard system of accounting in accordance with good business
practices, that reflects the application of GAAP and Borrower
shall furnish to Lender the following:
(a) CPA FULLY AUDITED FINANCIAL STATEMENTS. Annual
consolidated financial statements, combined and combining,
including balance sheet, income statement and statement of
cash flows, within one hundred twenty (120) days of
Borrower's fiscal year end together with a copy of the Form
10-K as filed with the SEC and an opinion on said combined
financial statements (which shall not be limited by reason
of any limitation imposed by Borrower) of independent
certified public accountants acceptable to Lender, to the
effect that such financial statements have been prepared in
accordance with generally accepted accounting principles
consistently maintained and applied (except for changes in
which such accountants concur) and that their examination of
such accounts in connection with such financial statements
has been made in accordance with generally accepted auditing
standards).
(b) QUARTERLY FINANCIAL STATEMENTS. Fully
consolidated Borrower prepared balance sheets and profit and
loss statements as of the end of each of its first three
fiscal quarters, within forty-five (45) days after the end
of each fiscal quarter, together with a copy of the Form 10-
Q as filed with the SEC.
(c) COMPLIANCE CERTIFICATE. With each statement
submitted by Borrower under subparagraphs (a) and (b) above,
a certificate signed by an Authorized Officer of Borrower
stating that such statements are accurate and that no Event
of Default exists and no event has occurred and no condition
exists that, after notice or passage of time, or both, would
constitute an Event of Default.
(d) OTHER INFORMATION. Such other information as
Lender shall reasonably request.
Section 7.6 RECORDS. Borrower shall maintain, and cause
each Subsidiary to maintain, in a safe place, proper and accurate
books, ledgers, correspondence and other records relating to its
operations and business affairs. Lender shall have the right
from time to time to examine and audit and to make abstracts from
and photocopies of Borrower's books, ledgers, correspondence and
other records and those of its Subsidiaries.
Section 7.7 CURRENT OBLIGATIONS. Except for tax protests
made in good faith and, the posting, if required, of any and all
bonds therewith, Borrower and each Subsidiary shall pay all of
its current obligations before they become delinquent, including
all federal, state and local taxes, assessments, levies and
governmental charges and all other payments required under any
federal, state or local law.
Section 7.8 DELIVERY OF CORRESPONDENCE BY AND BETWEEN
BORROWER, ANY APPLICABLE SUBSIDIARY AND THE NCA. Borrower shall
comply, if applicable, and cause each Subsidiary accredited by
the NCA, at all times with all "Obligations of Affiliation" as
prescribed by the NCA and promptly deliver to Lender a certified
copy of all correspondence regarding: (i) potential or actual
probationary actions taken by the NCA, or any other accreditation
commission; and (ii) written notification from the NCA that
Borrower and/or such Subsidiary has not fulfilled one more of its
"Obligations of Affiliation" as prescribed by the NCA. Borrower
shall also promptly deliver any other accreditation-related
information as reasonably requested by Lender from time to time,
including but not limited to the NCA's final team report prepared
after any evaluation visit.
Section 7.9 [Intentionally left blank.]
Section 7.10 OTHER DOCUMENTS. Borrower shall execute and
deliver to Lender such other instruments and documents and do
such other acts as Lender may reasonably require in connection
with the Loan.
Section 7.11 LITIGATION. Borrower shall promptly give
notice in writing to Lender of any litigation pending or
threatened against Borrower or any Subsidiary having a material
effect on the financial condition of Borrower.
Section 7.12 FINANCIAL CONDITION. Borrower shall maintain
its consolidated 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 and pre-tax
profit not less than $1.00 on a quarterly basis, determined
as of each fiscal quarter end.
ARTICLE 8
NEGATIVE COVENANTS
Borrower hereby covenants and agrees that so long as Lender
has any commitment to lend to Borrower hereunder and until the
Loan and all other indebtedness hereunder have been paid in full
and all of Borrower's obligations hereunder have been fully
discharged, it shall not without receiving the prior written
consent of Lender:
Section 8.1 NO MERGERS, ACQUISITIONS AND CONSOLIDATIONS.
Dissolve or liquidate, or become a party to any merger or
consolidation, or sell, transfer, lease or otherwise dispose of
all or substantially all of its property or assets, or purchase
or acquire the assets or capital stock of an unrelated Person, or
allow any Subsidiary to do so, except that (i) any Subsidiary of
Borrower may merge into or transfer assets to Borrower or any
other Subsidiary, and (ii) Borrower and any of its Subsidiaries
may undertake mergers and acquisitions so long as (a) the
aggregate consideration paid by Borrower and all its Subsidiaries
with respect to all merger and acquisitions is not more than
$10,000,000.00 per fiscal year and (b) Borrower or any of its
Subsidiaries is the surviving entity of any such merger or
acquisition.
Section 8.2 FISCAL YEAR. Change the times of commencement
or termination of its fiscal year or other accounting periods; or
change its method of accounting other than to conform to GAAP.
Section 8.3 MARGIN STOCK. Use any proceeds of the Loan,
or any proceeds of any other or future financial accommodation
from Lender to Borrower, directly or indirectly, for the purpose,
whether immediate, incidental or ultimate, of purchasing or
carrying any "margin stock" as that term is defined in Regulation
U of the Board of Governors of the Federal Reserve System, and
will not use such proceeds in a manner that would involve
Borrower in a violation of Regulation T, U or X of such Board,
nor use such proceeds for any purpose not permitted by Section 7
of the 1934 Act or any of the rules or regulations respecting the
extensions of credit promulgated thereunder.
Section 8.4 LIENS; NEGATIVE PLEDGE. Create or suffer to
exist Liens upon its property or assets, or the property or
assets of any of its Subsidiaries, real or personal, now owned or
hereafter acquired, EXCEPT (i) Liens in favor of Lender, (ii)
purchase money security interests in, or purchase money mortgages
on, real or personal property to secure purchase money
Indebtedness incurred by Borrower, (iii) Liens incurred in
connection with permitted seller carryback financing of property,
plant and equipment acquired by Borrower or any Subsidiary, and
Liens then existing and relating to indebtedness assumed by
Borrower or any of its Subsidiaries in connection with any such
acquisition, PROVIDED that: (a) any property subject to any of
the foregoing is acquired by Borrower or any Subsidiary in the
ordinary course of its respective business and the Lien on any
such property attaches to such assets concurrently or within
thirty (30) days after the acquisition thereof; and (b) each such
Lien shall attach only to the property so acquired and fixed
improvements thereon; (iv) Permitted Liens; and (v) Liens
otherwise permitted hereunder which were granted by any Person
which has been merged into, consolidated with or acquired by
Borrower in a transaction permitted by the terms of this
Agreement.
Section 8.5 INDEBTEDNESS. Incur or permit any Subsidiary
to incur, Indebtedness from any Person, except (i) trade payables
incurred in the ordinary course of business; (ii) Indebtedness
with the Lender; (iii) Indebtedness resulting from its guaranty
associated with the Union Bank Campus Card Program; and
(iv) Permitted Non-Bank Indebtedness not to exceed $5,000,000.00
in the aggregate in any fiscal year.
Section 8.6 PAYMENT OF DIVIDENDS. 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
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 dividend(s) has (have)
no 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.
Section 8.7 [Intentionally left blank
Section 8.8 LOSS OF ACCREDITATION. Permit any action that
would cause accreditation to be denied by the NCA with respect to
any Subsidiary that is accredited by the NCA.
Section 8.9 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 or any Subsidiary as security
for, any liabilities or obligations of any other Person or
entity, nor permit any Subsidiary to do any of the foregoing,
except (a) any of the foregoing in favor of Lender and (b)
guaranty associated with Union Bank Campus Card Program.
ARTICLE 9
DEFAULT AND REMEDIES
Section 9.1 EVENT OF DEFAULT. The occurrence of any of
the following events or conditions shall constitute an "Event of
Default" under this Agreement:
(a) Failure to pay any installment of principal or
interest under the Note as and when the same become due and
payable, or the failure to pay any other sum due under the
Note or this Agreement when the same shall become due and
payable;
(b) Any failure or neglect to perform or observe any
of the terms, provisions, or covenants of this Agreement
(other than a failure or neglect described in one or more of
the other provisions of this Section 9.1);
(c) Any warranty, representation or statement
contained in this Agreement, or made or furnished to the
Lender by or on behalf of Borrower, that shall be or shall
prove to have been materially false when made or furnished;
(d) The filing by Borrower and any Subsidiary (or
against Borrower or any Subsidiary in which Borrower or said
Subsidiary acquiesces or which is not dismissed within
ninety (90) days of the filing thereof) of any proceeding
under the federal bankruptcy laws now or hereafter existing
or any other similar statute now or hereafter in effect; the
entry of an order for relief under such laws with respect to
Borrower and any Subsidiary; or the appointment of a
receiver, trustee, custodian or conservator of all or any
part of the assets of Borrower or any Subsidiary;
(e) The insolvency of Borrower or any Subsidiary; or
the execution by Borrower or any Subsidiary of an assignment
for the benefit of creditors; or the convening by Borrower
or any Subsidiary of a meeting of its creditors, or any
class thereof, for purposes of effecting a moratorium upon
or extension or composition of its debts; or the failure of
Borrower or any Subsidiary to pay its debts as they mature;
or if Borrower or any Subsidiary is generally not paying its
debts as they mature;
(f) The admission in writing by Borrower or any
Subsidiary that it is unable to pay its debts as they mature
or that it is generally not paying its debts as they mature;
(g) The liquidation, termination or dissolution of
Borrower or any Subsidiary except as otherwise permitted in
this Agreement; or
(h) The occurrence of any default under the Note or
any document or instrument given by Borrower or any
Subsidiary in connection with any other indebtedness of
Borrower or any Subsidiary to Lender and the expiration of
any grace period provided therein.
Section 9.2 REMEDIES. Upon the occurrence of any Event of
Default and at any time thereafter while such Event of Default is
continuing, subject to the provisions of subparagraphs (b) and
(c) hereof, Lender may do one or more of the following:
(a) Cease making Advances or extensions of financial
accommodations in any form to or for the benefit of Borrower
and declare the entire Loan immediately due and payable,
without notice or demand;
(b) Proceed to protect and enforce its rights and
remedies under this Agreement and the Note; and
(c) Avail itself of any other relief to which Lender
may be legally or equitably entitled.
Section 9.3 NOTICE AND CURE PROVISION. Prior to exercising
any right of acceleration of the Indebtedness or other right or
remedy by Lender, unless a different grace period is provided in
this Agreement, Lender shall give written notice of any default
upon which such right or remedy is dependent and, if such default
is of a nature that can be corrected by Borrower, allow the
following time period for such correction:
(a) If the default relates to the nonpayment of money:
ten (10) days;
(b) If the default relates to the non-performance of
any covenant herein made by Borrower, or to the existence of
any condition or state of affairs that may be corrected by
Borrower other than the nonpayment of money: sixty (60)
days.
No notice need be given or period for correction allowed by
Lender in the event of insolvency, or in the event of
administration of property in any legal or equitable proceeding
of any kind, including, without limitation, any proceeding under
federal bankruptcy law or any other similar statute now or
hereafter in effect, or in the event of any other default that
Lender reasonably determines to be of a nature beyond Borrower's
reasonable power to correct.
ARTICLE 10
ACTION UPON AGREEMENT
Section 10.1 THIRD PARTY. This Agreement is made for the
sole protection and benefit of the parties hereto, their
successors and assigns, and no other person or organization shall
have any right of action hereon. No representation of any kind
is made to third parties by the execution hereof, by the
existence or form of the indebtedness treated herein, or by any
performance, or failure or waiver thereof, by any party of the
terms hereof. Specifically, without limitation of the foregoing,
the Lender makes no representation to any third party as to the
solvency of Borrower or of the commercial practicability of any
business enterprise to which or for which the Loan is made.
Section 10.2 ENTIRE AGREEMENT. This Agreement embodies
the entire Agreement of the parties with regard to the subject
matter hereof. There are no representations, promises,
warranties, understandings or agreements express or implied, oral
or otherwise, in relation thereto, except those expressly
referred to or set forth herein. Borrower acknowledges that the
execution and the delivery of this Agreement is its free and
voluntary act and deed, and that said execution and delivery have
not been induced by, nor done in reliance upon, any
representations, promises, warranties, understandings or
agreements made by Lender, its agents, officers, employees or
representatives.
Section 10.3 WRITING REQUIRED. No promise,
representation, warranty or agreement made subsequent to the
execution and delivery hereof by either party hereto, and no
revocation, partial or otherwise, or change, amendment, addition,
alteration or modification of this Agreement shall be valid
unless the same shall be in writing signed by all parties hereto.
Section 10.4 NO PARTNERSHIP. Lender and Borrower each have
separate and independent rights and obligations under this
Agreement. Nothing contained herein shall be construed as
creating, forming or constituting any partnership, joint venture,
merger or consolidation of Borrower and Lender for any purpose or
in any respect.
ARTICLE 11
GENERAL
Section 11.1. SURVIVAL. This Agreement shall survive the
making of the Loan and shall continue so long as any part of the
Loan, or any extension or renewal thereof, or any Letter of
Credit remains outstanding.
Section 11.2 CONTEXT. This Agreement shall apply to the
parties hereto according to the context hereof, and without
regard to the number or gender of words or expressions used
herein.
Section 11.3 TIME. Time is expressly made of the essence
of this Agreement.
Section 11.4 NOTICES. All notices required or permitted
to be given hereunder shall be in writing, and shall become
effective immediately if personally delivered or effective
twenty-four (24) hours after such are deposited in the United
States mail, certified or registered, postage prepaid, addressed
as shown above, or to such other address as such party may from
time to time designate in writing. Any notice sent to Borrower
shall be sent to the attention of its chief financial officer.
Section 11.5 COSTS. Borrower shall pay all reasonable
costs and expenses arising from the preparation of this
Agreement, the Note, the closing of the Loan, the making of
Advances thereunder, and the enforcement of Lender's rights
hereunder, including but not limited to, accounting fees,
appraisal fees, attorneys' fees and any charges that may be
imposed on Lender as a result of this transaction. At the option
of Lender and upon written notice to Borrower, RLC Advances may
be made and disbursed from time to time by Lender directly in
payment of such costs and expenses.
Section 11.6 COLLECTION OF PAYMENTS. Borrower authorizes
Lender to collect principal, interest and fees due under this
Agreement by charging Borrower's demand deposit account
number 4159502319 with Lender, or any other demand deposit
account maintained by Borrower with Lender, for the full amount
thereof. Should there be insufficient funds in any such demand
deposit account to pay all such sums when due, the full amount of
such deficiency shall be immediately due and payable by Borrower.
Section 11.7 SUCCESSORS. This Agreement shall, except as
herein otherwise provided, be binding upon and inure to the
benefit of the successors and assigns of the parties, hereto.
Section 11.8 HEADINGS. The headings or captions of
sections in this Agreement are for convenience and reference
only, and in no way define, limit or describe the scope or intent
of this Agreement or the provisions of such sections.
Section 11.9 ARBITRATION.
(a) ARBITRATION. Upon the demand of any party, any
Dispute shall be resolved by binding arbitration (except as set
forth in (e) below) in accordance with the terms of this
Agreement. A "Dispute" shall mean any action, dispute, claim or
controversy of any kind, whether in contract or tort, statutory
or common law, legal or equitable, now existing or hereafter
arising under or in connection with, or in any way pertaining to,
any of the Loan Documents, or any past, present or future
extensions of credit and other activities, transactions or
obligations of any kind related directly or indirectly to any of
the Loan Documents, including without limitation, any of the
foregoing arising in connection with the exercise of any self-
help, ancillary or other remedies pursuant to any of the Loan
Documents. Any party may by summary proceedings bring an action
in court to compel arbitration of a Dispute. 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 of any Dispute.
(b) GOVERNING RULES. Arbitration proceedings shall be
administered by the American Arbitration Association ("AAA") or
such other administrator as the parties shall mutually agree upon
in accordance with the AAA Commercial Arbitration Rules. All
Disputes submitted to arbitration shall be resolved in accordance
with the Federal Arbitration Act (Title 9 of the United States
Code), notwithstanding any conflicting choice of law provision in
any of the Loan Documents. The arbitration shall be conducted at
a location in Arizona selected by the AAA or other administrator.
If there is any inconsistency between the terms hereof and any
such rules, the terms and procedures set forth herein shall
control. All statutes of limitation applicable to any Dispute
shall apply to any arbitration proceeding. All discovery
activities shall be expressly limited to matters directly
relevant to the Dispute being arbitrated. Judgment upon any
award rendered in an arbitration may be entered in any court
having jurisdiction; provided however, that nothing contained
herein shall be deemed to be a waiver by any party that is a bank
of the protections afforded to it under 12 U.S.C. Section 91 or any
similar applicable state law.
(c) NO WAIVER; PROVISIONAL REMEDIES, SELF-HELP AND
FORECLOSURE. No provision hereof shall limit the right of any
party to exercise self-help remedies such as setoff, foreclosure
against or sale of any real or personal property collateral or
security, or to obtain provisional or ancillary remedies,
including without limitation injunctive relief, sequestration,
attachment, garnishment or the appointment of a receiver, from a
court of competent jurisdiction before, after or during the
pendency of any arbitration or other proceeding. The exercise of
any such remedy shall not waive the right of any party to compel
arbitration hereunder.
(d) ARBITRATOR QUALIFICATIONS AND POWERS; AWARDS.
Arbitrators must be active members of the Arizona State Bar or
retired judges of the state or federal judiciary of Arizona with
expertise in the substantive law applicable to the subject matter
of the Dispute. Arbitrators are empowered to resolve Disputes by
summary rulings in response to motions filed prior to the final
arbitration hearing. Arbitrators (i) shall resolve all Disputes
in accordance with the substantive law of the state of Arizona,
(ii) may grant any remedy or relief that a court of the state of
Arizona could order or grant within the scope hereof and such
ancillary relief as is necessary to make effective any award, and
(iii) shall have the power to award recovery of all costs and
fees, to impose sanctions and to take such other actions as they
deem 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. Any Dispute in which the
amount in controversy is $5,000,000 or less shall be decided by a
single arbitrator who shall not render an award of greater than
$5,000,000 (including damages, costs, fees and expenses). By
submission to a single arbitrator, each party expressly waives
any right or claim to recover more than $5,000,000. Any Dispute
in which the amount in controversy exceeds $5,000,000 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.
(e) JUDICIAL REVIEW. Notwithstanding anything herein
to the contrary, in any arbitration in which the amount in
controversy exceeds $25,000,000, the arbitrators shall be
required to make specific, written findings of fact and
conclusions of law. In such arbitrations (i) the arbitrators
shall not have the power to make any award which is not supported
by substantial evidence or which is based on legal error, (ii) an
award shall not be binding upon the parties unless the findings
of fact are supported by substantial evidence and the conclusions
of law are not erroneous under the substantive law of the state
of Arizona, and (iii) the parties shall have in addition to the
grounds referred to in the Federal Arbitration Act for vacating,
modifying or correcting an award the right to judicial review of
(A) whether the findings of fact rendered by the arbitrators are
supported by substantial evidence, and (B) whether the
conclusions of law are erroneous under the substantive law of the
state of Arizona. Judgment confirming an award in such a
proceeding may be entered only if a court determines the award is
supported by substantial evidence and not based on legal error
under the substantive law of the state of Arizona.
(f) MISCELLANEOUS. To the maximum extent practicable,
the AAA, the arbitrators and the parties shall take all action
required to conclude any arbitration proceeding within 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, by applicable law or regulation, or to the extent
necessary to exercise any judicial review rights set forth
herein. 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.
Section 11.10 LAW. This Agreement shall be construed
according to the laws of the State of Arizona.
IN WITNESS WHEREOF, these presents have been executed as of
the day and year first set forth above and each party hereby
acknowledges that it has read the Arbitration provisions
contained in Section 11.9 of this Agreement.
XXXXX FARGO BANK, National Association
By: /s/ Xxxxx Xxxxx
Name: Xxxxx Xxxxx
Title: Vice President
LENDER
APOLLO GROUP, INC., an Arizona corporation
By: /s/ Xxxx X. Xxxxxxxx
Name: Xxxx X. Xxxxxxxx
Title: President and CEO
BORROWER
SCHEDULE 6.12
Subsidiaries
Apollo Press, Inc.
Apollo Online, Inc.
Apollo Education Corporation
Institute for Professional Development, Inc.
Computer Aided Learning Corporation, Inc.
The University of Phoenix, Inc.
Western International University, Inc.
UOP-Michigan
College For Financial Planing, Inc.
Apollo Training Corporation
Apollo Development Corporation
LOAN AGREEMENT
by and between
XXXXX FARGO BANK, NATIONAL ASSOCIATION
as Lender
and
APOLLO GROUP, INC.
as Borrower
Dated as of November 17, 1997
TABLE OF CONTENTS
PAGE
ARTICLE 1 RECITALS. . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2 DEFINITIONS . . . . . . . . . . . . . . . . . . . . 1
Section 2.1 Definitions. . . . . . . . . . . . . . . . . 1
Section 2.2 Terms Generally. . . . . . . . . . . . . . . 6
Section 2.3 Accounting Terms . . . . . . . . . . . . . . 6
ARTICLE 3 RLC . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.1 RLC Commitment Amount. . . . . . . . . . . . 6
Section 3.2 RLC Note . . . . . . . . . . . . . . . . . . 6
Section 3.3 RLC Advances . . . . . . . . . . . . . . . . 7
Section 3.4 Conversion and Renewal of RLC Advances . . . 7
Section 3.5 RLC Facility Fees. . . . . . . . . . . . . . 8
Section 3.6 RLC Payments . . . . . . . . . . . . . . . . 8
Section 3.7 Additional Provisions for LIBOR Advances . . 8
Section 3.8 Prepayment . . . . . . . . . . . . . . . . .10
Section 3.9 Requirement that Conditions be Satisfied . .11
ARTICLE 4 LETTER OF CREDIT
Section 4.1 Issuance . . . . . . . . . . . . . . . . . .11
Section 4.2 Conditions Precedent . . . . . . . . . . . .12
Section 4.3 Drawing. . . . . . . . . . . . . . . . . . .12
ARTICLE 5 CONDITIONS PRECEDENT. . . . . . . . . . . . . . . .12
Section 5.1 Conditions Precedent . . . . . . . . . . . .12
Section 5.2 Conditions Precedent to All
Future Advances. . . . . . . . . . . . . . 13
ARTICLE 6 GENERAL REPRESENTATIONS AND WARRANTIES . . . . . . 13
Section 6.1 Recitals . . . . . . . . . . . . . . . . . .13
Section 6.2 Organization . . . . . . . . . . . . . . . .13
Section 6.3 Power. . . . . . . . . . . . . . . . . . . .14
Section 6.4 Enforceable. . . . . . . . . . . . . . . . .14
Section 6.5 No Conflict. . . . . . . . . . . . . . . . .14
Section 6.6 No Actions . . . . . . . . . . . . . . . . .14
Section 6.7 Financial Statements . . . . . . . . . . . .14
Section 6.8 Tax Payment. . . . . . . . . . . . . . . . .14
Section 6.9 Margin Stock . . . . . . . . . . . . . . . .14
Section 6.10 Affirmation. . . . . . . . . . . . . . . . .14
Section 6.11 Obligations of Affiliation . . . . . . . . 15
Section 6.12 Subsidiaries . . . . . . . . . . . . . . . 15
ARTICLE 7 AFFIRMATION COVENANTS. . . . . . . . . . . . . . . 15
Section 7.1 Existence . . . . . . . . . . . . . . . . . 15
Section 7.2 Maintain Property . . . . . . . . . . . . . 15
Section 7.3 Insurance . . . . . . . . . . . . . . . . . 15
Section 7.4 Payment . . . . . . . . . . . . . . . . . . 16
Section 7.5 Financial Reports . . . . . . . . . . . . . 16
Section 7.6 Records . . . . . . . . . . . . . . . . . . 16
Section 7.7 Current Obligation. . . . . . . . . . . . . 16
Section 7.8 Delivery of Correspondence By and
Between Borrower, any Applicable
Subsidiary and the NCA. . . . . . . . . . . 17
Section 7.9 [Intentionally left blank]. . . . . . . . . 17
Section 7.10 Other Documents . . . . . . . . . . . . . . 17
Section 7.11 Litigation. . . . . . . . . . . . . . . . . 17
Section 7.12 Financial Condition. . . . . . . . . . . . 17
ARTICLE 8 NEGATIVE COVENANTS . . . . . . . . . . . . . . . . 18
Section 8.1 No Mergers, Acquisitions and Consolidations. 18
Section 8.2 Fiscal Year. . . . . . . . . . . . . . . . . 18
Section 8.3 Margin Stock. . . . . . . . . . . . . . . . 18
Section 8.4 Liens; Negative Pledge. . . . . . . . . . . 18
Section 8.5 Indebtedness. . . . . . . . . . . . . . . . 19
Section 8.6 Payment of Dividends. . . . . . . . . . . . 19
Section 8.7 [Intentionally left blank.] . . . . . . . . 19
Section 8.8 Loss of Accreditation . . . . . . . . . . . 19
Section 8.9 Guaranties . . . . . . . . . . . . . . . . 19
ARTICLE 9 DEFAULT AND REMEDIES . . . . . . . . . . . . . . . 19
Section 9.1 Event of Default. . . . . . . . . . . . . . 19
Section 9.2 Remedies. . . . . . . . . . . . . . . . . . 20
Section 9.3 Notice and Cure Provision . . . . . . . . . 21
ARTICLE 10 ACTION UPON AGREEMENT. . . . . . . . . . . . . . .21
Section 10.1 Entire Party. . . . . . . . . . . . . . . .21
Section 10.2 Entire Agreement. . . . . . . . . . . . . .21
Section 10.3 Writing Required. . . . . . . . . . . . . .22
Section 10.4 No Partnership. . . . . . . . . . . . . . .22
ARTICLE 11 GENERAL. . . . . . . . . . . . . . . . . . . . . .22
Section 11.1 Survival. . . . . . . . . . . . . . . . . .22
Section 11.2 Context . . . . . . . . . . . . . . . . . .22
Section 11.3 Time. . . . . . . . . . . . . . . . . . . .22
Section 11.4 Notices . . . . . . . . . . . . . . . . . .22
Section 11.5 Costs . . . . . . . . . . . . . . . . . . .22
Section 11.6 Collection of Payments. . . . . . . . . . .22
Section 11.7 Successors. . . . . . . . . . . . . . . . .23
Section 11.8 Headings. . . . . . . . . . . . . . . . . .23
Section 11.9 Arbitration . . . . . . . . . . . . . . . .23
Section 11.10 Law . . . . . . . . . . . . . . . . . . . .23
SCHEDULES
6.12 Subsidiaries
